# J.W. COLE FINANCIAL, INC. X-17A-5 (2020-03-30) — Broker-dealer annual report - Company: J.W. COLE FINANCIAL, INC. - Form: X-17A-5 - Filed: 2020-03-30 - Period: 2019-12-31 - Accession: 0001209212-20-000002 - CIK: 1209212 - File #: 8-65698 - Material weakness: No - Auditor: Marcum - Auditor location: Tampa, FL - Contact: Gary Haight - Phone: 813-337-0516 - Signed by: Robert J. Wood (President) Original filing: https://www.sec.gov/Archives/edgar/data/1209212/000120921220000002/jwcoleaudit2019.pdf --- {0}------------------------------------------------ UNITEDSTATES SECURITIESANDEXCHANGECOMMISSION WasJlington, 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 par response 12 .00 | | | SEC FILE NUMBER | |-----------------| | 8-65698 | **FACING PAGE** Information **Requfred** of **Brokers** and **Deniers Pursuant to Section** 17 of the **Securities** Exchange Act of 1934 and **Rule** 17a-S **Thereunder** | AND ENDING 12/31/2019
REPORT FOR THE PERIOD BEGINNINGQ1/Q1/2Q19 | | | | | |-----------------------------------------------------------------------------------------------------------|---------------------------------------------------------|-------------------|--------------------------------|--| | | MM/DD/YY | | MiWDD/YY | | | | A. REGISTRANT IDENTIFICATION | | | | | NAME OF BROKER-DEALER: JW COLE FINANCIAL! INC | | OFFICIAL USE ONLY | | | | ADDRESS OF PRINCIPAL PLACE OF BUSINESS: (Do not use P.O. Box No.)
4301 ANCHOR PLAZA PARKWAY SUITE #450 | | | FIRM 1.0. NO. | | | | (No. and Street) | | | | | | Fl | | 33634 | | | (City) | (Slate} | | (Zip Code) | | | NAME AND TELEPHONE NUMBER OF PERSON TO CONTACT IN REGARD TO THIS REPORT
GARY HAIGHT
813-337-0516 | | | | | | | | | (Arca Code - Telephone Number) | | | | B. ACCOUNTANT IDENTIFICATION | | | | | INDEPENDENT PUBLIC ACCOUNT ANT whose opinion is contained in this Report* | | | | | | MARCUM PA. | | | | | | | (N8me - if fndfi•idual, slate last. first, middle mmre) | | | | | 201 EAST KENNEDY BLVD, SUITE 1500 | TAMPA | FL | 33602 | | | (Addrasfl) | (City) | (State} | (Zip Code) | | | | | | | | | CHECK ONE: §
Certified Public Accountant | | | | | | Public Accountant | | | | | | Accountant not resident in United States or any of its possessions. | | | | | | | | | | | | | FOR OFFICIAL USE ONLY | | | | | | | | | | | | | | | | *\*Claims for exemption Ji-om the requiremenl that the ammal report be covered by the opinion of an independent public* acco11nta11t *must be supported by a statement of facts and* circumsfmtces *re{ied on as the basis/or the exemption. See Section 240.l7a-5(e)(2)* > Potential persons who are to respond to the coUectlon of Information contained In this form are not required to respond unless the form displays a currentlyvalld 0MB control number. SEC 1410 (11-05) {1}------------------------------------------------ #### **OATH OR AFFIRMATION** | I, _R_O_B_E_R_T_J_._W_O_O_D | _____________________ ,
swear (or affirm) that, to the best of | |-------------------------------------------------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------| | JW COLE FINANCIAL, INC | my knowledge and belief the accompanying financial statement and supporting schedules pertaining to the firm of
------------------------------------------, | | of DECEMBER 31 | as
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 | | | | | | | | Notary Public | PRESIDENT
Title | This report\*\* contains (check all applicable boxes): - EJ (a) Facing Page. - E] (b) 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 §2 I0.1-02 of Regulation S-X). - D (d) Statement of Changes in Financial Condition. - E] (e) Statement ofChimges in Stockholders' Equity or Partners' or Sole Proprietors' Capital. - - - 0(f) Stateme11t of Changes in Liabilities Subordinated to Claims of Creditors. § (g) Computation of Net Capital. (h) Computation for Determinatio11 of Reserve Requirements Pursuant to Rule 15c3-3. - (i) Information Relating to the Possession or Control Requirements Under Rule 15c3-3. - E::] U) A Reconciliation, including appropriate explanation of the Computation ofNet Capital Under Rule I 5c3-I and the Computation for Determination of the Reserve Requirements Under Exhibit A of Rule 15c3-3. •, - 0 (k) A Reconciliation between the audited and unaudited Statements of Financial Condition with respect to methods of consolidation. - 0 (I) An Oath or Affirmation, - E] (m) A copy of the SIPC Supplemental Report. - E] (11) A report describing any material inadequacies found to exist or found to have existed since the date of the previous audit. \*\* *For co11ditio11s of co11fide11tial treatment of certain portions of this filing, see section 240. l 7a-5 (e)(J).* {2}------------------------------------------------ #### J.W. COLE FINANCIAL, INC. FINANCIAL STATEMENTS WITH ADDITIONAL INFORMATION YEAR ENDED DECEMBER 31 , 2019 {3}------------------------------------------------ ## **J.W. COLE FINANCIAL, INC.** #### **YEAR ENDED DECEMBER 31, 2019** ### TABLE OF CONTENTS | REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM | 1 -
2 | |-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------------------------| | FINANCIAL STATEMENTS
Statement of Financial Condition
Statement of Income
Statement of Changes in Stockholder's Equity
Statement of Cash Flows
Notes to the Financial Statements | 3
4
5
6
7-12 | | SUPPLEMENTARY FINANCIAL INFORMATION | | | Schedule I Computation of Net Capital under Rule 15c3-1 and Aggregate
Indebtedness | 13 | | Schedule II Computation for Determination of Reserve Requirement under
Rule 15c3-3 | 14 | | Schedule Ill Information Relating to Possession and Control Requirements
under Rule15c3-3 | 15 | | Report of Independent Registered Public Accounting Firm | 16 | | Exemption Report | 17 | | | | {4}------------------------------------------------ ![](_page_4_Picture_0.jpeg) ### **REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM** ## To the Board of Directors and Stockholder of **J.W. Cole Financial, Inc.** ### *Opinion on the Financial Statements* We have audited the accompanying statement of financial condition of J.W. Cole Financial, Inc.(the "Company") as of December 31, 2019, the related statements of income, changes in stockholder's equity, and cash flows for the year then ended, 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, 2019, and the results of its operations and its cash flows for the year then ended in conformity with accounting principles generally accepted in the United States of America. #### *Basis for Opinion* These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. 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 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 our opinion. {5}------------------------------------------------ #### *Supplemental Information* The information contained in Schedules I, II, and III (the "supplemental information") has been subjected to audit procedures performed in conjunction with the audit of the Company's financial statements. The supplemental information is the responsibility of the Company's management. Our audit procedures included determining whether the supplemental information reconciles to the financial statements or the underlying accounting and other records, as applicable, and performing procedures to test the completeness and accuracy of the information presented in 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. §240.l 7a-5. In our opinion, the supplemental information is fairly stated, in all material respects, in relation to the financial statements as a whole. We are uncertain as to the year our predecessor firm began serving consecutively as the auditor of the Company's financial statements; however, we (and our predecessor finn) are aware that we have been the Company's auditor consecutively since at least 20 I 0. Tampa, FL March 29, 2020 {6}------------------------------------------------ ## **J.W. COLE FINANCIAL, INC. STATEMENT OF FINANCIAL CONDITION DECEMBER 31, 2019** #### **ASSETS** | ASSETS | | |-----------------------------------------------------------|------------------| | Cash and cash equivalents | \$
6,275,459 | | Deposits with clearing organizations | 75,000 | | Receivable from broker-dealers and clearing organizations | 909,776 | | Notes receivable | 445,501 | | Property and equipment, net | 272,203 | | Right of use assets | 1,987,325 | | Deposits | 44,023 | | TOTAL ASSETS | \$
10,009,287 | | | | | LIABILITIES AND STOCKHOLDER'S EQUITY | | | LIABILITIES | | | Accrued expenses | \$
11 5,036 | | Retirement plan payable | 229,515 | | Commissions payable | 1,578,884 | | Lease liabilities | 2,137,388 | | Note payable | 44,607 | | Deferred revenue | 31,268 | | Total Liabilities | 4,136,698 | | | | | STOCKHOLDER'S EQUITY | | | Common stock, \$12.902 par value, 100 shares | | | authorized, 77.5 shares issued and outstanding | 1,000 | | Additional paid-in capital | 76,500 | | Retained earnings | 5,795,089 | | Total Stockholder's Equity | 5,872,589 | | TOTAL LIABILITIES AND STOCKHOLDER'S EQUITY | \$
10,009,287 | | | | {7}------------------------------------------------ ## **J.W. COLE FINANCIAL, INC. STATEMENT OF INCOME FOR THE YEAR ENDED DECEMBER 31, 2019** | REVENUE | | |---------------------------------|----------------------| | Commissions | \$
26,261
,531 | | Trails | 22,279,329 | | Asset-based revenue | 3,077,685 | | Other | 912,765 | | Interest and dividends | 173,931 | | TOTAL REVENUE | 52,705,241 | | | | | OPERATING EXPENSES | | | Commissions expense | 37,023,198 | | Salaries and wages | 7,237,478 | | General and administrative | 2,322,418 | | Clearing expenses | 1,621,027 | | Computer support and technology | 810,055 | | Professional fees | 412,289 | | Lease expense | 380,236 | | Licenses, taxes, and fees | 327,601 | | Depreciation and amortization | 99,769 | | Insurance | 84,219 | | TOTAL OPERATING EXPENSES | 50,318,290 | | NET INCOME | \$
2,386,951 | {8}------------------------------------------------ ## **J.W. COLE FINANCIAL, INC. STATEMENT OF CHANGES IN STOCKHOLDER'S EQUITY FOR THE YEAR ENDED DECEMBER 31, 2019** | | ADDITIONAL
COMMON
PAID-IN
STOCK
CAPITAL | | RETAINED
EARNINGS | | TOTAL | | | |----------------------------|-----------------------------------------------------|-------|----------------------|----|-----------|----|-----------| | BALANCE, JANUARY 1, 2019 | \$ | 1,000 | \$
76,500 | \$ | 3,408,138 | \$ | 3,485,638 | | Net income | | | | | 2,386,951 | | 2,386,951 | | BALANCE, DECEMBER 31, 2019 | \$ | 1,000 | \$
76,500 | \$ | 5,795,089 | \$ | 5,872,589 | {9}------------------------------------------------ ### **J.W. COLE FINANCIAL, INC. STATEMENT OF CASH FLOWS FOR THE YEAR ENDED DECEMBER 31, 2019** | CASH FLOWS FROM OPERATING ACTIVITIES: | | |-------------------------------------------------------------|-----------------| | Net income | \$
2,386,951 | | Adjustments to reconcile net income to net cash provided by | | | operating activities: | | | Depreciation and amortization | 99,769 | | Forgiveness of notes receivable | 93,800 | | Amortization of right of use assets | 322,276 | | Change in assets and liabilities: | | | Receivable from broker-dealers and clearing organizations | (352,625) | | Prepaid expenses and other assets | 23,724 | | Accrued expenses | (69,371) | | Retirement plan payable | 4,515 | | Commissions payable | 767,116 | | Lease liabilities | (297,844) | | Deferred revenue | (159,333) | | Total adjustments | 432,027 | | | | | Net cash provided by operating activities | 2,818,978 | | | | | CASH FLOWS FROM INVESTING ACTIVITIES: | | | Purchases of property and equipment | (1 3,770) | | Issuance of notes receivable | (205,000) | | Collections of notes receivable | 99,844 | | | | | Net cash used in investing activities | (118,926) | | | | | CASH FLOWS FROM FINANCING ACTIVITIES: | | | Principal payments on notes payable | (11 ,875) | | Net cash used in financing activities | ,875)
(11 | | | | | NET INCREASE IN CASH AND CASH EQUIVALENTS | 2,688,177 | | | | | CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR | 3,587,
282 | | CASH AND CASH EQUIVALENTS, END OF YEAR | \$
6,275,459 | {10}------------------------------------------------ ### **J.W. COLE FINANCIAL, INC. NOTES TO THE FINANCIAL STATEMENTS DECEMBER 31, 2019** ### **NOTE A - SUMMARIES OF SIGNIFICANT ACCOUNTING POLICIES** #### Nature of Operations J. W. Cole Financial, Inc. (the "Company" or "JWC") is a retail stock brokerage firm that clears trades through a correspondent member of the New York Stock Exchange on a fully disclosed basis. The Company is a member of the Financial Industry Regulatory Authority (FINRA). Its customers are located throughout the United States and the principal office is located in Tampa, FL. The Company is licensed in several other states without having an office in those states. #### Cash and Cash Equivalents The Company considers amounts held by financial institutions and short-term investments with an original maturity of 90 days or less to be cash and cash equivalents. #### Deposit with Clearing Broker The clearing broker requires the Company to maintain a \$75,000 deposit to secure customers' accounts. #### Use of Estimates The preparation of financial statements in conformity with U.S. generally accepted accounting principles ("GAAP") requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. #### Revenue Recognition Revenue from contracts with customers is recognized following a five-step model to a) identify the contracts(s) with a customer, (b) identify the performance obligations in the contract, (c) determine the transaction price, (d) allocate the transaction price to the performance obligations in the contract, and recognize the revenue when(or as) the Company satisfies the performance obligation. #### Income Taxes The Company, with the consent of its stockholder, has elected to be taxed under the provisions of Subchapter S of the Internal Revenue Code. Under this election, the individual stockholder is taxed on their proportionate share of the Company's taxable income (loss). Therefore, no provision for Federal or state income taxes has been included in the financial statements. #### Property and Equipment Property and equipment are recorded at cost. Depreciation and amortization is calculated on the straightline method over the estimated useful lives of the assets (generally three, five or seven years). The costs of replacements, renewals and repairs which neither add materially to the value of the property nor appreciably prolong its life are charged to expense as incurred. {11}------------------------------------------------ ## **J.W. COLE FINANCIAL, INC. NOTES TO THE FINANCIAL STATEMENTS DECEMBER 31, 2019 NOTE A** - **SUMMARIES OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)** #### Leases The Company adopted ASC Topic 842, Leases, effective January 1, 2019 using the modifiedretrospective method and elected the package of transition practical expedients for expired or existing contracts. The Company is a lessee in several noncancelable leases for office space and automobile leases. 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 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 payments. Variable payments are included in the future lease payments where there variable payments depend on an index or a rate. The discount rate is the implicit rate in our leases if it is readily determinable or otherwise the Company uses its incremental borrowing rate. The implicit rates of our leases are not readily determinable and accordingly, the Company uses its incremental borrowing rate (4.39%) 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). 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 term 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. Lease costs for lease payments is recognized on a straightline basis over the lease term. ## **NOTE B** - **REVENUE FROM CONTRACTS WITH CUSTOMERS** #### Significant Judgments Revenue from contracts with customers includes commIssIon income from variable annuity trails, mutual fund trails, and asset-based revenue. The recognition and measurement of revenue is based on the assessment of individual contract terms. Significant judgment is required to determine whether performance obligations are satisfied at a point in time or over time; how to allocate transaction prices where multiple performance obligations are identified; when to recognize revenue based on the appropriate measure of the Company's progress under the contract; and whether constraints on variable consideration should be applied due to uncertain future events. #### Commissions Revenue The Company trades securities or purchases various types of investment products on behalf of its customers and reported commissions primarily represent gross commissions generated by independent representatives. Each time a customer enters into a buy or sell transaction, the Company receives a commission. Commissions related to clearing expenses are recorded on the trade date (the date that the Company fills the trade order by finding and contracting with a counterparty and confirms the trade with the customer). The Company believes that the performance obligation is satisfied on the trade date because that is when underlying financial {12}------------------------------------------------ #### **J.W. COLE FINANCIAL, INC. NOTES TO THE FINANCIAL STATEMENTS DECEMBER 31 , 2019** ### Commissions Revenue (continued) instrument or purchaser is identified, the pricing is agreed upon, and the risks and rewards of ownership and control and are transferred to/from the customer. The levels of commissions vary from period to period based on the overall economic environment, number of trading days in the reporting period, and the investment activity of the independent representatives' clients. #### Trails Revenue Trailing revenues are commissions that are paid over time, are recurring in nature and are earned based on the market value· of investment holdings in trail eligible assets. Trail revenues are primarily earned on variable annuities and mutual funds held by clients of the independent representatives. Such revenues are received monthly or quarterly and are recognized in the month or quarter that relates specifically to the services provided in that period, which are distinct from the services provided in other periods. #### Asset-Based Revenue Asset-based revenue is comprised of fees from the Company's core cash sweep programs, which consist of fees from money market sweep funds and FDIC insured cash sweep vehicles. Cash sweep fees are generated based on clients' cash sweep accounts. Uninvested cash balances are held in various cash accounts or money market funds for which the Company receives fees from the custodian based on the account type and balance held in the position. #### Disaggregation of Revenue | Commissions revenue: | | | |------------------------------------------------------------------------------------------|----------|---------------------------------------| | Variable annuities | \$ | 16,282,756 | | Brokerage | | 6,782,938 | | Mutual funds | | 2,327,897 | | Other | | 867,940 | | Total commission revenue | \$ | 26,261 531 | | Trails revenue:
Mutual fund trails
Variable annuity trails
Total trails revenue | \$
\$ | 8,438,207
13,841,122
22,279,329 | | Asset-based revenue:
Core sweep fees | \$ | 3,077,6.85 | #### **NOTE C** - **NOTES RECEIVABLE** Notes receivable consist of advances to financial advisors of a related party under written note agreements. Under the terms of the notes, outstanding balances are repaid either by periodic principal payments or by forgiveness, which is recorded as commissions expense in the accompanying statement of income, over a designated time period. Notes bear interest at rates ranging from 1.50% to 5.00%. These notes are secured by any outstanding commissions or compensation due from JWC to the borrowers. #### **NOTED** - **FINANCIAL INSTRUMENTS WITH OFF BALANCE SHEET RISK AND CONCENTRATIONS OF CREDIT RISK** {13}------------------------------------------------ #### **J.W. COLE FINANCIAL, INC. NOTES TO THE FINANCIAL STATEMENTS DECEMBER 31, 2019** In the normal course of business, the Company's activities may expose the Company to the risks of I6ss in the event customers, other brokers and dealers, banks, depositories or clearing organizations are unable to fulfill contractual obligations. The Company monitors the credit standing of counter parties with whom it conducts business on a continuous basis. ## **NOTE E - LEGAL MATTERS** From time to time, the Company is involved in litigation arising out of the ordinary course of business. ## **NOTE F - PROFIT SHARING PLAN** The Company sponsors a 401 (k) plan and a discretionary profit-sharing plan for all eligible employees at least 21 years of age with at least one year of employment. Participants may contribute a portion of their eligible compensation, up to 100%, to the 401 (k) plan. The Company makes discretionary contributions up to a maximum of 100% match of the employees' first 3% of compensation and a 50% match of the employees' next 2% of compensation. The Company's matching contribution to the 401 (k) plan was \$134,733 for the year ended December 31 , 2019. The profit-sharing plan also allows the Company to make discretionary contributions which were \$225,000 for year ended December 31 , 2019. The participant and Company contributions to both plans are limited to amounts allowed under provisions of the Internal Revenue Code. ### **NOTE G - LEASE COMMITMENTS** The Company leases office space in Tampa, FL and Carlsbad, CA through non-cancelable operating leases, expiring at various times through April 2026, the Company also has operating leases of automobiles, expiring at various times in 2021 . The Company classified these leases as operating leases. The Company's leases do not include restrictive financial or other covenants. Payments due under the lease contracts included fixed payments plus 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 were not included in lease payments used to determine lease liability and were recognized as variable costs when incurred. The components related to leases as of December 31, 2019 are as follows: | Operating lease cost | \$
413,636 | |----------------------------------------|---------------| | Variable lease cost | 55,100 | | Short-term lease cost | | | Total lease cost | 468,736 | | Less: reimbursement from related party | (88,500) | | Total lease cost, net | \$
380 236 | Supplemental cash flow information: | Cash paid for amounts included in the measurement of lease liabilities: | | |-------------------------------------------------------------------------|---------------| | Operating cash flow from operating leases | \$
389,204 | ## **NOTE G - LEASE COMMITMENTS (continued)** Reduction to ROU assets resulting from reductions to lease obligations: Operating leases \$ 322,276 {14}------------------------------------------------ #### **J.W. COLE FINANCIAL, INC. NOTES TO THE FINANCIAL STATEMENTS DECEMBER 31 , 2019** | ROU assets obtained in exchange for lease obligations:
Operating leases | \$ 2,309,601 | |----------------------------------------------------------------------------|--------------| | Weighted average remaining lease term:
Operating leases | 4.9 years | | Weighted average discount rate:
Operating Leases | 4.39% | Amounts disclosed for ROU assets obtained in exchange for lease obligations and reductions to ROU assets resulting from reductions to leases obligations included amounts added to or reduced from the carrying amount of ROU assets resulting from new leases, lease modifications or reassessments. Maturities of lease liabilities under noncancelable operating leases as of December 31 , 2019 are as follows: Year Ending December 31 , | 2020 | \$
405,763 | |-----------------------------------|---------------| | 2021 | 409,544 | | 2022 | 364,822 | | 2023 | 367,365 | | 2024 | 378,409 | | Thereafter | 522,900 | | Total undiscounted lease payments | 2,448,803 | | Less: imputed interest | (311,415) | | Total lease liabilities | \$ 2.137.388 | | | | #### **NOTE H - RELATED PARTY TRANSACTIONS** During the year, JWC allocated a portion of its lease expense for its office space, payroll costs of some of its employees, and a portion of computer expenses to a company, which is wholly owned by one of JWC's employees, for a total of \$783,534. There were no outstanding amounts due as of December 31, 2019. # **NOTE I- NET CAPITAL REQUIREMENT** Pursuant to the net capital provisions of Rule 15c3-1 of the Securities Exchange Act of 1934, the Company is required to maintain a minimum net capital balance, as defined, under such provisions. The Company's minimum capital requirement is the greater of \$100,000 or 6-2/3% of aggregate indebtedness, as defined, under Securities and Exchange Commission Rule 15c3-1 (a)(1 ), as it does not maintain customer accounts. Net capital may fluctuate on a daily basis. At December 31, 2019, the Company exceeded all net capital requirements by \$4,825,008. #### **NOTE J - SUBSEQUENT EVENT** The COVID-19 pandemic has created disruptions throughout the world and increased overall market volatility. Through the date the financial statements were issued, the Company has not identified any operational risks nor any potential material economic impact. The Company's business continuity plan {15}------------------------------------------------ ### **J.W. COLE FINANCIAL, INC. NOTES TO THE FINANCIAL STATEMENTS DECEMBER 31, 2019** was implemented in March 2020 to mitigate the risk of spreading the virus and all services and capabilities are fully operational. While the Company anticipates a temporary slowdown in business, currently no material change in volume has occurred. {16}------------------------------------------------ ## **J.W. COLE FINANCIAL, INC. COMPUTATION OF NET CAPITAL UNDER RULE 15c3-1 AND AGGREGATE INDEBTEDNESS SCHEDULE I DECEMBER 31, 2019** | Net capital: | | |---------------------------------------------------------------------|-----------------| | Total stockholder's equity | \$
5,872,589 | | Deductions: | | | Notes receivable | (445,501) | | Property and equipment, net | (272,203) | | Deposits | (44,023) | | | | | Haircuts on securities | (142,491) | | | (904,218) | | Net Capital | \$
4,968,371 | | | | | Aggregate indebtedness: | | | Total liabilities from statement of financial condition | \$
4,136,698 | | Less: lease liabilities to extent of the ROU assets | (1,987,325) | | Total aggregate indebtedness | \$
2,149,373 | | | | | Ratio of aggregate indebtedness to net capital | .43 to 1 | | | | | Computation of basic net capital requirement: | | | Minimum net capital requirement: the greater of \$100,000 or 6 2/3% | | | of aggregated indebtedness | \$
143,363 | | | | | Excess net capital | \$
4,825,008 | | | | | | | Statement pursuant to paragraph (d) of Rule 17a-5: There are no material differences between the amounts presented in the computation of net capital under Rule 15c3-1 and aggregate indebtedness set forth above and the amounts reported in the Company's unaudited Focus Report, Part IIA of Form X-17 A-5 as of December 31 , 2019. See the report of Independent Registered Public Accounting Firm. {17}------------------------------------------------ ## **J.W. COLE FINANCIAL, INC. COMPUTATION FOR DETERMINATION OF RESERVE REQUIREMENTS UNDER 15c3-3 SCHEDULE II DECEMBER 31, 2019** The Company is exempt from the provisions of Rule 15c3-3 under the Securities Exchange Act of 1934 as the Company's activities are limited to those set forth in the conditions for exemption appearing in paragraphs (k)(2)(i) and (ii) of Rule 15c3-3. See the report of Independent Registered Public Accounting Firm. {18}------------------------------------------------ ## **J.W. COLE FINANCIAL, INC. INFORMATION RELATING TO POSSESSION OR CONTROL REQUIREMENTS UNDER 15c3-3 SCHEDULE Ill DECEMBER 31, 2019** The Company is exempt from the provisions of Rule 15c3-3 under the Securities Exchange Act of 1934 as the Company's activities are limited to those set forth in the conditions for exemption appearing in paragraphs (k)(2)(i) and (ii) of Rule 15c3-3. See the report of Independent Registered Public Accounting Firm. {19}------------------------------------------------ ![](_page_19_Picture_0.jpeg) ### **REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM** We have reviewed management's statements, included in the accompanying Exemption Report, in which (I) J. W. Cole Financial, Inc. (the "Company") identified the following provisions of 17 C.F.R. § 15c3-3(k) under which the Company claimed an exemption from 17 C.F.R. § 240. l 5c3- 3: (2)(i) and (2)(ii) (the "exemption provisions") and (2) the Company stated that the Company met the identified exemption provisions throughout the most recent fiscal year without exception. The Company's management is responsible for compliance with the exemption provisions and its statements. Our review was conducted in accordance with the standards of the Public Company Accounting Oversight Board (United States) and, accordingly, included inquiries and other required procedures to obtain evidence about the Company's compliance with the exemption provisions. A review is substantially less in scope than an examination, the objective of which is the expression of an opinion on management's statements. Accordingly, we do not express such an opinion. Based on our review, we are not aware of any material modifications that should be made to management's statements referred to above for them to be fairly stated, in all material respects, based on the provisions set forth in paragraph (k)(2)(i) and (k)(2)(ii) of Rule l 5c3-3 under the Securities Exchange Act of 1934. Tampa, FL March 29, 2020 M.ARC:JMGROuP M EMBER {20}------------------------------------------------ #### REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM REQUIRED BY SEC RULE 17a-5 FOR A BROKER-DEALER CLAIMING AN EXEMPTION FROM SEC RULE 15c3-3 To the Board of Directors and Stockholder J.W. Cole Financial, Inc. Tampa, Florida We have reviewed management's statements, included in the accompanying Report of a Broker-Dealer Claiming Exemption from SEC Rule 15c3-3, in which (1) J. W. Cole Financial, Inc. (the Company), identified the following provisions of 17 C.F.R. § 15c3-3(k) under which the Company claimed an exemption from 17 C. F.R. § 240.15c3-3: paragraph (k)(2)(ii) (the "exemption provisions") and (2) the Company stated that the Company met the identified exemption provisions throughout the most recent fiscal year without exception. The Company's management is responsible for compliance with the exemption provisions and its statements. Our review was conducted in accordance with the standards of the Public Company Accounting Oversight Board (United States) and, accordingly, included inquiries and other required procedures to obtain evidence about the Company's compliance with the exemption provisions. A review is substantially less in scope than an examination, the objective of which is the expression of an opinion on management's statements. Accordingly, we do not express such an opinion. Based on our review, we are not aware of any material modifications that should be made to management's statements referred to above for them to be fairly stated, in all material respects, based on the provisions set forth in paragraph (k)(2)(ii) of Rule 15c3-3 under the Securities Exchange Act of 1934. Marcum, LLP Tampa, Florida February 28, 2020 {21}------------------------------------------------ # JW COLE **FINA N CIAL!** ## ASSERTIONS REGARDING EXEMPTION PROVISIONS I, as member of management of J.W. Cole Financial, Inc. ("we" or "the Company"), am responsible for compliance with the annual reporting requirements under Rule 17a-5 of the Securities Exchange Act of 1934. Those requirements compel a broker or dealer to file annual reports with the Securities Exchange Commission (SEC) and the broker or dealer's designated examining authority (DEA). Pursuant to that requirement, the management of the Company hereby makes the following assertions: #### **Identified Exemption Provision:** The Company claims exemption from the custody and reserve provisions of 17 C.F.R. § 15c3-3(k) by operating under the exemption provided by 17 C.F.R. § 240.15c3-3: paragraph (k)(2)(ii) (the "exemption provisions"). #### **Statement Regarding Meeting Exemption Provision:** We have met the identified exemption provisions throughout the most recent fiscal year ended December 31, 2019 without exception. **By:** ✓ **,.'/YL\_,,.,\_** ~\,.,,f- ~ ~1)J() · */~o{zo* **Date** 1 4301 ANcttoR P!AZA PARKWAY I Sum 450 I TAMPA, FLORIDA 33634 5937 DARWIN CouRT I Sum 102 I CARLSBAD, CALIFORNIA 92008 (813) 935-6776 I 1 (866) 592-6531 I FAX (813) 935-6775 > *Securities offered through].* W Cole Financial, Inc. MEMBER FINRA/SIPC *Advisory* Services *offered through* J. W Cole *Advisors,* Inc. Source: SEC EDGAR via Adviser Search (https://search.stillhousedata.com). Agents: see https://search.stillhousedata.com/llms.txt.