# PETRO CAPITAL SECURITIES, LLC X-17A-5 (2020-02-28) — Broker-dealer annual report - Company: PETRO CAPITAL SECURITIES, LLC - Form: X-17A-5 - Filed: 2020-02-28 - Period: 2019-12-31 - Accession: 0001292134-20-000001 - CIK: 1292134 - File #: 8-66529 - Material weakness: No - Auditor: Turner, Stone & Company, L.L.P. - Auditor location: Dallas, TX - Contact: Rosser Newton - Phone: 214-661-7761 - Signed by: Rosser Newton (Managing Member) Original filing: https://www.sec.gov/Archives/edgar/data/1292134/000129213420000001/2019auditreportpetro.pdf --- {0}------------------------------------------------ UNITEDSTATES SECURITIESANDEXCHANGECOMMISSION Washington, D.C. 20549 # **ANNUAL AUDITED REPORT** hours per response 12.00 **FORM X-17A-5 PART III SEC FILE NUMBER** | | OMB APPROVAL | | | |-------------|--------------------------|--|--| | OMB Number: | 3235-0123 | | | | Expires: | August 31,2020 | | | | | Estimated average burden | | | | | | | | | 8-66529 | | |---------|--| #### FACING PAGE **Information Required of Brokers and Dealers Pursuant to Section 17 of the Securities Exchange Act of 1934 and Rule 17a-5 Thereunder** | AND ENDING 12/31/2019
IDENTIFICATION
LLC
,
use P.O. Box No.) | MM/DD/YY
OFFICIAL USE
ONLY
FIRM I.D. NO. | |--------------------------------------------------------------------------|---------------------------------------------------| | | | | | | | | | | | | | | | | | 75219 | | | (Zip Code) | | IDENTIFICATION
whose opinion is contained in this
Report* | (Area Code -
Telephone Number) | | (Name -if individual, state last, first, middle name ) | | | TX | 75251 | | (State) | (Zip Code) | | States or any of its possessions.
USE ONLY | | | | IN REGARD TO THIS
REPORT
214-661-7761 | *\*Claimsfor exemption from the requirement that the annual report be covered by the opinion of an independent public accountant must be supported by a statement of facts and circumstances relied on as the basis for the exemption. See Section 240.17a-5(e)(2)* **Potential persons who are to respond to the collection of information containedin this form arenot required torespond unlesstheform displays a currently valid OMB controlnumber. SEC 1410 (06-02)** {1}------------------------------------------------ #### **OATH OR AFFIRMATION** | Rosser Newton
i | | , swear (or affirm) that, to the | |----------------------------------------------------------|------------------------------------------------------------------|--------------------------------------| | my knowledge and belief
Petro Capital Securities, LLC | the accompanying financial
statement and supporting schedules | best of
pertaining to the firm of | | 0f December 31 | , 20
19 | , as | *,* are true and correct. I further swear (or affirm) that neither the company nor any partner, proprietor, principal officer or director has any proprietary interest in any account classified solely as that of a customer, except as follows: V **LI.VIA JAIMES Notary ID #10060051** */' j* Mv Commission Expires August 21, 2023 *&* Managing Member Titl tary Public a This report \*\* contains (check all applicable boxes): - 0 (a) Facing Page. - 0 (b) Statement of Financial Condition. - 0 (c) Statement of Income (Loss). - 0 (d ) Statement of Changes in Financial Condition. - 0 (e) Statement of Changes in Stockholders' Equity or Partners' or Sole Proprietors\* Capital. - (0 Statement of Changes in Liabilities Subordinated to Claims of Creditors. - 0 (g) Computation of Net Capital. - 0 (h) Computation for Determination of Reserve Requirements Pursuant to Rule 15c3-3. - 0 (i) Information Relating to the Possession or Control Requirements Under Rule 15c3-3. - 0 (j) A Reconciliation, including appropriate explanation of the Computation of Net Capital Under Rule 15c3-1 and the Computation for Determination of the Reserve Requirements Under Exhibit A of Rule 15c3-3. - (k) A Reconciliation between the audited and unaudited Statements of Financial Condition with respect to methods of consolidation. - 0 (1) An Oath or Affirmation. - (m) A copy of the SIPC Supplemental Report. - (n ) A report describing any material inadequacies found to exist or found to have existed since the date of the previous audit. *\*\*For conditions of confidential treatment of certain portions of this filing, see section 240.17a-5(e)(3).* {2}------------------------------------------------ **Petro Capital Securities, LLC** **Financial Statements** **and** **Report of Independent Registered Public Accounting Firm** **For the Year Ended December 31, 2019** {3}------------------------------------------------ # **TABLE OF CONTENTS** | REPORT
OF
INDEPENDENT
REGISTERED
PUBLIC
ACCOUNTING
FIRM | 1-2 | |---------------------------------------------------------------------------|--------| | STATEMENT
OF
FINANCIAL
CONDITION | 3 | | MEMBER'S
STATEMENT
CAPITAL
OF
OPERATIONS
AND | 4 | | STATEMENT
OF
CASH
FLOWS | 5 | | NOTES
TO
FINANCIAL
STATEMENTS | 6-9 | | SCHEDULE
I | 10 | | REPORT
OF
INDEPENDENT
REGISTERED
PUBLIC
ACCOUNTING
FIRM | I
I | | EXEMPTION
REPORT | 12 | {4}------------------------------------------------ *Your Vision Our Focus* ![](_page_4_Picture_1.jpeg) # Report of Independent Registered Public Accounting Firm To the Member of Petro Capital Securities, LLC ## Opinion on the Financial Statements We have audited the accompanying statement of financial condition of Petro Capital Securities, LLC (the "Company") as of December 31, 2019 and the related statements of operations and member's capital 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 include 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. Turner, Stone & Company,L.L.P. Accountants and Consultants 12700 ParkCentral Drive, Suite 1400 Dallas,Texas 75251 Telephone:972-239-1660/Facsimile: 972-239-1665 Toll Free:877-853-4195 Web site: turnerstone.com ![](_page_4_Picture_12.jpeg) {5}------------------------------------------------ #### Opinion on Supplemental Information Our audit was conducted for the purpose of forming an opinion on the financial statements taken as a whole. The supplementary information contained in Schedule I (Schedules II, III and IV are not applicable) required by Rule 17a-5 under the Securities Exchange Act of 1934 is presented for purposes of additional analysis and is not a required part of the financial statements. Such information is the responsibility of management and was derived from and relates directly to the underlying accounting and other records used to prepare the financial statements. 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 Rule 17a-5 under the Securities Exchange Act of 1934. In our opinion, Schedule I is fairly stated, in all material respects, in relation to the financial statements as a whole. Certified Public Accountants February 21, 2020 We have served as the Company's auditor since 2006. {6}------------------------------------------------ # **PETRO CAPITAL SECURITIES, LLC STATEMENT OF FINANCIAL CONDITION DECEMBER 31. 2019** #### Assets ## Current assets: | Cash
Accounts
Receivable
Prepaid
expenses | \$
154,291
185,000
9,777 | |-------------------------------------------------------|-----------------------------------| | current
assets
Total | \$
349,068 | #### **Liabilities and Member's Capital** | liabilities:
Current | | |---------------------------------------------------|---------------| | Accounts
and
accrued
expenses
payable | \$
105,473 | | Total
current
liabilities | 105,473 | | Member's
capital | 243,595 | | | \$
349,068 | The accompanying notes are an integral part of the financial statements. {7}------------------------------------------------ ## **STATEMENT OF OPERATIONS AND MEMBER'S CAPITAL FOR THE YEAR ENDED DECEMBER 31 , 2019** | Revenues: | | |-------------------------------------------------------------|---------------| | Revenues | \$
720,500 | | | | | | | | expenses:
Operating | | | fee
Incremental
services
(Note
2)
allocation | 1,173,224 | | fees
Registration | 19,748 | | General
and
administrative | 29,469 | | | 1,222,441 | | | | | Net
operating
income | (501,940) | | Other
(expense)
income | | | Interest
income | 106 | | Total
other
income | 106 | | | | | Net
loss | (501,834) | | | | | at
year
Member's
capital
of
beginning | 245,939 | | Contributions | 499,490 | | | | | Distributions | | | Member's
at
end
year
capital
of | \$
243,595 | | | | The accompanying notes are an integral part of the financial statements. {8}------------------------------------------------ # **PETRQ CAPITAL SECURITIES, LLC STATEMENT OF CASH FLOWS FOR THE YEAR ENDED DECEMBER 31 , 2019** Cash flows from operating activities: | Net
loss | \$
(501,834) | |----------------------------------------------------------------------------------------------|-----------------| | cash
Adjustments
to
reconcile
net
to
net
loss | | | activities:
used
in operating | | | fee
Incremental
services
to
capital
member
allocation
contributed
by | 499,490 | | Changes
assets
in operating
and
liabilities: | | | Accounts
receivable | 185,000)
( | | fees
Prepaid
management
Parent
to | | | expenses
Prepaid | 1,018 | | and
accrued
expenses
Accounts
payable | 103,077 | | Accrued
state
income
tax | (8,068) | | Net
cash
used
in operating
activities | (91,317) | | activities:
Cash
from
flows
investing | | | cash
Net
used
in investing
activities: | | | activities:
Cash
flows
from
financing | | | activities:
cash
Net
used
financing
in | | | Decrease
in cash | (91,317) | | Cash
at
year
of
beginning | 245,608 | | Cash
at
of
year
end | \$
154,291 | | Investing
Financing
Non-cash
Supplemental
Disclosure
of
and
Activities | | | fee
Incremental
services
contributed
to
capital
member
allocation
by | \$
499,490 | The accompanying notes are an integral part of the financial statements. {9}------------------------------------------------ #### **1 . SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES** #### Business and operations Petro Capital Securities, LLC (Company) is a limited liability company organized in the State of Texas, on March 26, 2004 and is a wholly-owned subsidiary of Petro Capital Securities Holdings, LLC (Parent). The Company is a broker-dealer registered with the Securities and Exchange Commission (SEC) and the Financial Industry Regulatory Authority (FINRA). The Company provides private placement of debt and equity securities as well as providing advisory services for mergers and acquisitions and corporate finance. #### Revenue Recognition Revenue from contracts with customers includes fees from investment banking services. 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. The Company earns fees, commissions and receives financial instruments in exchange for the services it provides and recognizes revenue when the Company has completed its contractual obligations and collection is reasonably assured. #### Customer concentrations For the year ended December 31, 2019, the Company had the following customer concentrations with respect to its revenues: | | %
of
Rev. | %
of
AR | |---------------|-----------------|---------------| | Customer
1 | 33% | 68% | | Customer
2 | 28% | * | | Customer
3 | 17% | * | | Customer
4 | * | 32% | \*amount below 10% #### Management estimates The preparation of financial statements in conformity with U.S. generally accepted accounting principles 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. {10}------------------------------------------------ #### Cash flows The Company maintains deposits in one financial institution. At December 31, 2019, the Federal Deposit Insurance Corporation (FDIC) provided insurance coverage of up to \$250,000, per depositor, per institution. At December 31, 2019, none of the Company's cash was in excess of federally insured limits. For purposes of the statement of cash flows, cash includes demand deposits, time deposits and short-term cash equivalent investments with maturities of less than three months at the date of purchase. At December 31, 2019, the Company had no such cash equivalents included in cash. None of the Company's cash is restricted. ### Fair value measurements The Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) Topic 820, *Fair Value Measurement*, definesfair value, establishes a framework for measuring fair value in accordance with U.S. generally accepted accounting principles, and requires certain disclosures about fair value measurements. In general, fair values of financial instruments are based upon quoted market prices, where available. If such quoted market prices are not available, fair value is based upon internally developed models that primarily use, as inputs, observable market-based parameters. Valuation adjustments may be made to ensure that financial instruments are recorded at fair value.These adjustments may include amounts to reflect counterparty credit quality and the customer's creditworthiness, among other things, as well as unobservable parameters. Any such valuation adjustments are applied consistently over time. #### Fair value of financial instruments In accordance with the reporting requirements of ASC Topic 825, *Financial Instruments*, the Company calculates the fair value of its assets and liabilities which qualify as financial instruments under this standard and includes this additional infonnation in the notes to the financial statements when the fair value is different than the carrying value of those financial instruments. The estimated fair value of cash and accounts payable approximate their carrying amounts due to the nature and short maturity of these instruments. {11}------------------------------------------------ ## Recent accounting pronouncements During the year ended December 31, 2019 and through February 21, 2020, there were several new accounting pronouncements issued by the FASB. Each of these pronouncements, as applicable, has been or will be adopted by the Company. Management does not believe the adoption of any of these accounting pronouncements has had or will have a material impact on the Company's financial statements. In February 2016, the FASB issued ASU 2016-02, Leases, which replaces the existing guidance in ASC 840, Leases. The new standard establishes a right-of-use model that requires a lessee to record a right-ofuse asset and a lease liability on the balance sheet for all leases with terms longer than twelve months. Leases will be classified as either finance or operating, with classification affecting the pattern of expense recognition in the statement of income. The company adopted the new standard on January 1 ,2019 using the modified retrospective method described within ASC 842. The adoption did not have a material effect on the Company's beginning retained earnings but di have a material impact on the way leases are recorded, presented and disclosed on the Company's financial statements. #### Subsequent events In preparing the financial statements, the Company has reviewed, as determined necessary by the Company's management, events that have occurred after December 31, 2019, up until the issuance of the financial statements, which occurred on February 21, 2020. # 2. **TRANSACTIONS WITH RELATED PARTY** ## Office and administrative services agreement The Company paid a monthly incremental allocation services fee to the Parent through the Office and Administrative Services Agreement of \$91,882 per month for January through April, \$96,641 for May through August and \$104,783 per month for September through December 2019. Such fees amounted to \$1,173,224 during the year ended December 31, 2019 and which are reflected in the "Incremental allocation services fee" line item on the accompanying statement of operations and member's capital. During the year ended December 31, 2019, the Company's member contributed \$499,490, of such services to capital under the terms of the Office and Administrative Services agreement. #### Related Party Revenue Entities controlled by the parent of the Company were shareholders in a client that generated revenue of \$50,000 in revenue for the Company. {12}------------------------------------------------ # 3. **INCOME TAXES** The Company is organized as a limited liability company under the provisions of the Internal Revenue Code of 1986 as amended. Accordingly, the financial statements do not include a provision for federal income taxes because the Company does not incur federal income tax liabilities. Instead, its earnings and losses are included in the member's income tax return and are taxed based on the member's income tax rate. As a Texas limited liability company, the Company is subject to a state franchise tax based on the lower of either the cost of goods sold margin, compensation margin or 70% of gross revenues. The Company's franchise tax liability will be included in the member's state franchise tax return. # 4. **NET CAPITAL REQUIREMENTS** The Company is subject to the Securities and Exchange Commission Unifonn Net Capital Rule (SEC Rule 15c3-1 ), which requires the maintenance of minimum net capital and requires that the ratio of aggregate indebtedness to net capital, both as defined, shall not exceed 15 to 1 (and the rule of the "applicable" exchange also provides that equity capital may not be withdrawn or cash dividends paid if the resulting net capital ratio would exceed 10 to 1). At December 31, 2019, the Company was in compliance with aggregate indebtedness of \$7,032 and net capital of \$48,818. # 5. **RULE 15c3-3 EXEMPTION** The Company does not hold customer funds or securities and is, therefore, exempt under Rule 15c3- 3(k)(2)(i) from preparing the Computation for Determination of Reserve Requirements Pursuant to Rule 15c3-3. {13}------------------------------------------------ # **PETRO CAPITAL SECURITIES, LLC SCHEDULE I COMPUTATION OF NET CAPITAL UNDER RULE 15c3-l OF THE SECURITIES AND EXCHANGE COMMISSION AS OF DECEMBER 31, 2019** | Requirement,
Capital
the
Greater
Net
of: | | | | \$
7,032 | |-------------------------------------------------------------------------------|-------------|-------|---------------|---------------| | 1/15
of
Aggregate
Indebtedness | \$ | 7,032 | | | | Minimum
Dollar
Requirement | \$ | 5,000 | | | | Net
Capital | | | | \$
48,818 | | Excess
Capital
Net | | | | \$
41,786 | | (Al):
Aggregate
Indebtedness | | | | \$
105,473 | | Capital:
to
Ratio
of
Aggregate
Indebtedness
Net | | | | 216.05% | | Ratio
to
Debt/Equity
of
Subordinated
Indebtedness | Total: | | | N/A | | Al
120%
Capital
10%
of
Net
requirement
or
of | | | | \$
10,547 | | Capital
in
Excess
120%
Capital
Net
of
of Required
Net | | | | \$
38,271 | | Assets
(Cash
on
Market
Accounts)
Total
Hand,
Money | | | | \$
349,068 | | Less:
Total
Liabilities | | | | 105,473 | | (Exclusive
of
subordinated
debt) | | | | | | Worth
Net | | | | 243,595 | | Worth:
to
Deductions
from
and/or
charges
Net | | | | | | non-allowable
assets
Total | | | \$
194,777 | | | (Excess
Fidelity
Bond
deductible) | | | | | | Total
Deductions
Net
Worth
from | | | | 194,777 | | securities
Net
Capital
before
haircuts
on
positions | | | | \$
48,818 | | securities:
Haircuts
on | | | | | | Certificates
of
Deposit
and
Commercial | Paper | | \$ | | | U.S.
and
Canadian
government
obligations | | | | | | State
municipal
and
government
and | obligations | | | | | Corporate
obligations | | | | | | Stock
and
warrants | | | | | | Options | | | | | | Arbitrage | | | | | | Securities
Other | | | | | | haircuts
securities
Total
of | | | | | | Net
Capital | | | | \$
48,818 | There are no material differences between the amounts presented above and the amounts reported on the Company's unaudited FOCUS report as of December 31, 2019. {14}------------------------------------------------ *Your Vision Our Focus* ![](_page_14_Picture_1.jpeg) ## Report of Independent Registered Public Accounting Firm To the Member of Petro Capital Securities, LLC We have reviewed management's statements, included in the accompanying Exemption Report, in which (1) Petro Capital Securities, LLC identified the following provisions of 17 C.F.R. §15c3-3(k) under which Petro Capital Securities, LLC claimed an exemption from 17 C.F.R. §240.15c3-3, specifically 17 C.F.R. §240.15c3-3(k)(2)(i) (the exemption provisions) and (2) Petro Capital Securities, LLC stated that Petro Capital Securities, LLC met the identified exemption provisions throughout the most recent fiscal year without exception. Petro Capital Securities, LLC'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 Petro Capital Securities LLC'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) of Rule 15c3-3 under the Securities Exchange Act of 1934. **VA/VV\£/L** Certified Public Accountants February 21, 2020 > Turner, Stone & Company,L.L.P. Accountants and Consultants 12700 Park Central Drive, Suite 1400 Dallas,Texas 75251 Telephone: 972-239-1660/Facsimile: 972-239-1665 Toll Free: 877-853-4195 Web site: turnerstone.com ![](_page_14_Picture_11.jpeg) {15}------------------------------------------------ # **Petro Capital Securities, LLC 3710 Rawlins Street / Dallas, Texas 75219 214-661-7761** ## **Petro Capital Securities, LLC. Assertions** **Petro Capital Securities, LLC.** (the "Company") is a registered broker-dealer subject to Rule 17a-5 promulgated by the Securities and Exchange Commission (17 C.F.R. §240.17a-5, "Reports to be made by certain brokers and dealers"). This Exemption Report was prepared as required by 17 C.F.R. § 240.17a-5(d)(l) and (4). To the best of its knowledge and belief, the Company states the following: - (1) The Company claimed an exemption from 17 C.F.R. § 240.15c3-3 under the following provisions of 17 C.F.R. § 240.15c3-3(k)(2)(i). - (2) The Company met the identified exemption provision in 17 C.F.R. § 240.15c3-3(k)(2)(i) throughout the most recent fiscal year without exception. #### **Petro Capital Securities, LLC.** I, Rosser Newton, swear (or affirm) that, to my best knowledge and belief, this Exemption Report is true and correct. Rosser Newton. January 4, 2020 , Managing Member Source: SEC EDGAR via Adviser Search (https://search.stillhousedata.com). Agents: see https://search.stillhousedata.com/llms.txt.