# DE PAOLA TRADING, INC. X-17A-5 (2021-11-23) — Broker-dealer annual report - Company: DE PAOLA TRADING, INC. - Form: X-17A-5 - Filed: 2021-11-23 - Period: 2021-09-30 - Accession: 0001393849-21-000003 - CIK: 1393849 - File #: 8-67586 - Type: Broker-dealer - Material weakness: No - Auditor: Raines and Fischer LLP - Auditor location: New York, NY - Contact: Alan Krim - Phone: 5165261586 - Signed by: Peter Julian DePaola (President) Original filing: https://www.sec.gov/Archives/edgar/data/1393849/000139384921000003/depaolapublic.pdf --- {0}------------------------------------------------ UNlTEDST ATES SECUIUTIES ANI> EXCHANGECOMM.ISSION Washington, D.C. 20549 # **ANNUAL AUDITED REPORT FORM X-17A-5 PART Il l** | Expires; | October 31, 20:::J3 | |----------|----------------------------| | | Estimated average burden | | | hours per response 12.00 | | | | OMB Number: 3235-0123 OMB APPROVAL I FACING PAGE Information Required of Brokers and Dealers Pursuant to Section **t** 7 of the Securities .Exchange Act of 1934 and RuJe 17a-5 Thereunder REPORT FOR THE PERIOD BEGINNING 10/01/20 AND ENDING 09/30/21 --------------------- MMIDD/YY MMIDDIYY # A. REGISTRANT IDENTIFICATION NAM.E or BROKER-DEALER: DE PAOLA TRADING INC. ADDRESS OF PRI NCIPAL PLACE OF BUSINESS: (Do not usc P.O. Bnx No.) C/0 BAY AT CONSULTING INC., 14 WALL STREET, 20TH FLOOR (No. and Street) (Zip Code) NAME AN D 'fELEPHON E NUMBER OF PERSON TO CONTACT IN REGARD TO THIS REPORT ---------------------------------------- ..... -........ ---·---.. ----- (A rc~ Code - Tclcjlhonc Number) # B. ACCOUNTANT IDENTIFICATION INDEPENDENT PUBL.!C ACCOUNTANT whose opinion is contai ned in this Report \* (City) (State) # RAINES AND FISCHER LLP | NEW YORK | NY | 10017 | |----------|-------------------------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------| | (City\ | (State) | (Zip Code) | | | | | | | _ | ________
____, | | | jcertified Public Accountant
___ | (Name -- i(indil,iduul. stat/! last. first, middle name)
Accountant not resident in 'United States or any of its possessions.
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_ :fOR OFFICI_AL USE ON~! | *\*Claimsfor exemptionfi·om Jhe requirement that the annual report be covered by the opinion* c~{an *independent pub/i.e account alit must be supported b\_v a statement o((acts and circumstances relied on as the hasisfbr the exemption. See Section 240.17a-5(e){2}* SEC 1410 (11-05) Potential persons who are to respond to the collection of information contained in this form are not required to respond unless the form displays a currently valid OMB control number. NEW YORK NY 10005 r-QfFICIAL USE ONLY FIRM I.D. NO. '------·---- - -' {1}------------------------------------------------ ## **OATH OR AFFIRMATION** | ----
------- ' s\vear (or affirm) that, to the best of
!, ~~! ~~~U~~~~ ~~~~~------- -------- | |---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------| | rny knowledge and belief the at:companying financial statement and supporting schedules pertaining to the firm of
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DE PAOLA TRADING INC. | | • as
of SE!:!~~!!ER o _______________________ ., 20_2_1 ___ _, are true and correct. J. 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 CllStomcr, except as follows: | | Signature | | ~~\
or\
T' tl ,
SIMON SAAMOlJN
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· 1 e
Notary Public-State of New York
No. 02SH6240477
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Qualified in Kings County
Commission Expires May 09, 20)6 J. 3
Notary Public | | This report ** contains (check all applicable boxes):
0 (a) Facing Page
Ej (b) Statement of Financial Condition.
0 (c) Statement of Income (Loss) or, If there is other comprehensive income in the pcriod(s) presented. a Statement
of Comprehensive Income (as defined in §21 0. 1-02 of Regulation S-X).
B (d) Statement of Changes in Financial Condition.
(e) Statement of Changes in Stockholders' Equity or Partners' or Sole Proprietors' Capital.
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(f) Statement of Changes in Liabilities Subordinated to Claims of Creditors.
§ (g) Computation of Net Capital.
(h) Computation for Determination of Reserve Requirements Pursuant to Rule .I 5c3-3
(i) lnfonmrtion Relating to the Possession or Control Requirements Under Rule 15c3-3 .
0 (j) A Reconciliation, including appropriate explanation oft he Computation of Net Capital Under Rule 15c3-
l 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.
(I) An Oath or Affirmation .
(m) A copy of the SIPC Supplemental Report.
(n) A report dcscribing.any material inadequacies found to exist or found to have existed since the date ofthc previous audit.
**For conditions of confidential treatment tJ{cel'tain portions of thisflling, see section 240.!7a-5(e)(3). | {2}------------------------------------------------ # **DE PAOLA TRADING** INC. ## STATEMENT OF FINANCIAL CONDITION FOR THE YEAR ENDED SEPTEMBER 30, 2021 {3}------------------------------------------------ ### SEPTEMBER 30,2021 ### TABLE OF CONTENTS | Independent Auditors' Report | | |----------------------------------|-----| | Statement of Financial Condition | 2 | | Notes to Financial Statement | 3-6 | {4}------------------------------------------------ 5;;;; FIFTH f.\VENUE **g TH** PLOOF~ NEW YOi~K. NY 10011 ## **REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM** To the Stockholder of De Paola Trading, Inc.: #### **Opinion on the Financial Statement** We have audited the accompanying statement of financial condition of De Paola Trading, Inc. (the "Company"), as of September 30, 2021 , and the related notes (collectively referred to as the financial statement). In our opinion, the statement of financial condition presents fairly, in all material respects, the financial position of the Company as of September 30, 2021 , in conformity with accounting principles generally accepted in the United States of America. #### **Basis for Opinion** This tlnancial statement is the responsibility of the Company 's management. Our responsibility is to express an opinion on the Company 's 11nancial statement based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statement is free of material misstatement, whether due to error or fraud . 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 statement, whether due to error or 11-aud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statement. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statement. We believe that our audit provides a reasonable basis for our opinion. We have served as the Company's auditor since 202 I. New York, New York November 23, 2021 {5}------------------------------------------------ **DE PAOLA TRADING INC.** ## **STATEMENT OF FINANCIAL CONDITION SEPTEMBER 30, 2021** | ASSETS | | | |-------------------------------------------------------|----|---------| | Cash | \$ | 38,317 | | Accounts recievable | | 659,769 | | Recievable form NYSE | | 3,684 | | Due from clearing firm | | 189,207 | | Other Assets | | 99,153 | | Total assets | \$ | 990,130 | | | | | | LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities : | | | | Accounts payable and accrued expenses | \$ | 300,545 | | Notes payable PPP loan | | 358,181 | | | | | | Total liabilities | | 658,726 | | STOCKHOLDERS' EQUITY: | | | | Common Stock, no par value, 200 shares | | | | authorized, 10 shares issued and outstanding | | 45,000 | | Additional paid-in capital | | 25,000 | | Retained earnings | | 261,404 | | TOTAL STOCKHOLDERS' EQUITY: | | 331,404 | | TOTAL LIABILITIES STOCKHOLDERS' EQUITY: | \$ | 990,130 | The accompanying notes are an integral part of this statement {6}------------------------------------------------ ## Note 1- Nature of Business De Paola Trading, Inc. (The "Company") is a New York corporation, formed on February 27, 2007, for the purpose of conducting business on the floor of the New York Stock Exchange ("NYSE"). The Company is registered as a broker-dealer with the Securities and Exchange Commission ("SEC") and is a member of the Securities Investors Protection Corporation ("SIPC"). The Company earns commissions as an introducing broker of securities transactions. #### Note 2- Summary of Significant Accounting Policies #### Basis of Presentation The accompanying financial statement has been prepared on the accrual basis of accounting in accordance with accounting principles generally accepted in the United States of America ("GAAP"). #### Use of Estimates The preparation of financial statements and related disclosures in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and li abilities, and the disclosure of contingent assets and li abi lities at the date of the financial statements, and the reported amounts of income and expenses during the reporting period. Accordingly, actual results could differ from those estimates. #### Accounts Receivable The Company carries its accounts receivable at cost less an allowance for doubtful accounts. On a periodic basis, the Company evaluates its accounts receivable and establishes an. allowance for doubtful accounts based on history of past write-offs and collections and current credit conditions. No allowance for doubtful accounts was required at September 30, 2021 . #### Revenue Recognition Securities transactions (and the recognition of related income and expenses) are recorded on a trade date basis. Effective July I, 2018, the Company adopted the new revenue recognition standard established by the Financial Accounting Standards Board ("FASB"): ASC Topic 606, Revenue from Contracts with Customers ("ASC Topic 606"). The new revenue recognition guidance requires that an entity recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The guidance requires an entity to follow a five step model to (a) identify the contract(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 (e) recognize revenue when (or as) the entity satisfies a performance obligation. In determini ng the transaction price, an entity may include variab le consideration only to the extent that it is probable that a signiticant reversal in the amount of cumulative revenue recognized would not occur when the uncertainty associated with the variable consideration is resolved. The Company applied the modified retrospective method of adoption which resulted in no adjustment as of July I, 2018. The new revenue recognition guidance does not apply to revenue associated with financial instruments, interest income and expense, leasing and insurance contracts. The Company has assessed the effect that Topic 606 (as amended) has had on its results of operations, financial position and cash flows and has determined that all revenues have been fully earned as of September 30, 2021 . The Company's execution transactions generally settle T+2, upon which no performance obligations remain to fulfill the Company's obligations to its customers. {7}------------------------------------------------ ## Note 2- Summary of Significant Accounting Policies (Continued): #### Income Taxes The Company has elected to be treated as an "S" Corporation under the provisions of the Internal Revenue Code and New York State tax regulations. Under the provisions, the Company does not pay federal or state corporate income taxes on its ta'Xable income. Instead the stockholders are liable for individual income taxes on their respective shares of the Company's taxable income. The Company continues to pay New York City general corporation taxes. #### Fair Value Measurements In accordance with ASC 820, Fair Value Measurements and Disclosures, the Company discloses the fair value of its investments in a hierarchy that prioritizes the inputs to valuation techniques used to measure the fair value. The hierarchy gives the highest priority to valuations based upon unadjusted quoted prices in active markets for identical assets or liabilities (Level I measurement) and the lowest priority to valuations based upon unobservable inputs that are significant to the valuation (Level3 measurements). This guidance provides three levels of the fair value hierarchy as follows: Level 1 - Inputs that reflect unadjusted quoted prices in active markets for identical assets or liabilities that the Company has the ability to access at the measurement date; Level 2 - Inputs other than quoted prices that are observable for the asset or liability either directly or indirectly, at the measurement date, including inputs in markets that are not considered to be active; Level 3 - Prices or valuations that require inputs that are both significant to the fair value measurement and unobservable. A financial instrument's level within the fair value hierarchy is based upon the lowest level of any input that is significant to the fair value measurement. However, the determination of what constitutes "observable" requires significant judgment by the Company. The Company considers observable data to be market data which is readily available, regularly distributed or updated, reliable and verifiable, not proprietary, and provided by independent sources that are actively involved in the relevant market. The Company has no investments as of September 30, 2021. ## Note 3- Related Party The Company made a loan with a related party in the amount of \$29,364 as of September 30, 2021 . ## Note 4- Concentrations of Credit Risk The Company maintains principally all cash balances in one financial institution which, at times may exceed the amount insured by the Federal Deposit insurance Corporation. The exposure to the Company is solely dependent upon daily bank balances and the respective strength of the financial institution. The Company has not incurred any losses on this account. At September 30, 2021, there is no amount in excess of insured limits. {8}------------------------------------------------ ### Note 5- Net Capital Requirement The Company is subject to the Securities and Exchange Commission Uniform Net Capital Rule (!5c3-I), 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 I. Rule 15c3-J also provides that equity cap ital may not be withdrawn or cash distributions paid if the resulting net capital ratio. would exceed I 0 to 1. At September 30, 2021 , the Company had net capital of \$227,132, which was \$207,096 in excess of its required minimum net capital of \$20,036. The Company's ratio of aggregate indebtedness to net capital was 132.32% as of September 30, 2021. ## Note 6- Financial Statements with Off-Balance Sheet Credit Risk As a securities broker, the Company is engaged in buying and selling securities for a diverse group of institutional and individual investors. The Company introduces these transactions for clearance to another broker-dealer on a fully disclosed basis. The Company's exposure to credit risk associated with non-performance of customers in fulfilling their contractual obligations pursuant to securities transactions can be directly impacted by volatile trading markets which may impair customers' ability to their obligations to the Company and the Company's ability to liquidate the collateral at an amount equal to the original contracted amount. The agreement between the Company and its clearing broker provides that the Company is obligated to assume any exposure related to such non-performance by its customers. The Company seeks to control the aforementioned risks by requiring customers to maintain margin collateral in compliance with various regulatmy requirements and the clearing broker's internal guidelines. The Company monitors its customer activity by reviewing information it receives from its clearing broker on a daily basis, and requiring customers to deposit additional collateral, or reduce positions, when necessary. #### Note 7 - Notes Payable #### **PPP** Loan The Company received a loan from Signature Bank in the amount of \$358, 181.20 under the Paycheck Protection Program established by the Coronavirus Aid, Relief. and Economic Security (CARES) Act. The loan is subject to a note dated January 27, 2021 and may be forgiven to the extent proceeds of the loan are used for eligible expenditures such as payroll and other expenses described in the CARES Act. No determination has been made as to whether the Company will be eligib le forgiveness in whole or in part. The loan bears interest at a rate of 1% and is payable in monthly installments of principal and interest over 24 months beginning 6 months from the date of the note. The loan may be repaid at any time with no prepayment penalty. The Company received the first PPP loan on April 29, 2020, and had the loan forgiven on August 31 , 2021 and accordingly has been repotied as other income on that date. {9}------------------------------------------------ ## Note 8- Recently Issued Accounting Pronouncements: The Financial Accounting Standards Board (the "F ASB" ) has established the Accounting Standards Codification ("Codification" or "ASC") as the authoritative source of generally accepted accounting principles ("GAAP") recognized by the FASB. The principles embodied in the Codification are to be applied by nongovernmental entities in the preparation of financial statements in accordance with GAAP in the United States. New accounting pronouncements are incorporated into the ASC through the issuance of Accounting Standards Updates ("ASUs"). For the year ending September 30, 2021 , various AS Us issued by the FASB were either newly issued or had effective implementation dates that would require their provisions to be reflected in the financial statements for the year then ended. The Company has either evaluated or is currently evaluating the implications, if any, of each of these pronouncements and the possible impact they may have on the Company's financial statements. In most cases, management has determined that the pronouncement has either limited or no application to the Company and, in all cases, implementation would not have a material impact on the financial statements taken as a whole. ## Note 9- Commitments **and** Contingencies: A FINRA arbitration has been commenced against the Company with respect to claims of unpaid compensation and an improperly filed form U-5. The matter is in discovery stages and the outcome of any arbitration is inherently uncertain and any determination regarding a possible material adverse effect this case may have on the Company's financial position, liquidity or results of operations is premature. The Company intends to vigorously defend this action. #### Note **10-** Subsequent Events The Company has evaluated subsequent events through November23, 2021 , the date this financial statement was available to be issued, and has determined there are no subsequent events to be reported. A coronavirus (COVID-19) was first reported in China. In January 2020, the World Health Organization declared it a Pub! ic Health Emergency of International Concern. This contagious disease outbreak, which has continued to spread to additional countries, and any related adverse public health developments, could adversely affect the Company's customers, service providers and suppliers as a result of quarantines, facility closures, and travel and logistics restrictions in connection with the outbreak. More broadly, the outbreak could affect workforces, economies and financial markets globally, potentially leading to an economic downturn. The ultimate impact of the COVTD-19 is uncertain. Management continues to monitor the outbreak, however, as of the date of these consolidated financial statements the potential impact of such on the Company's busi ness and operations cannot be reasonably estimated. The U.S. enacted the CARES Act which is an economic stimulus package to assist eligible small businesses to cover certain operational costs due to the adverse impact of COVID- I 9. In addition, the CARES Act includes temporary tax law changes to provide additional reliefto U.S. businesses and individual taxpayers. Source: SEC EDGAR via Adviser Search (https://search.stillhousedata.com). Agents: see https://search.stillhousedata.com/llms.txt.