# PARSONEX SECURITIES, INC. X-17A-5 (2021-03-30) — Broker-dealer annual report - Company: PARSONEX SECURITIES, INC. - Form: X-17A-5 - Filed: 2021-03-30 - Period: 2020-12-31 - Accession: 0001402593-21-000002 - CIK: 1402593 - File #: 8-67652 - Material weakness: No - Auditor: Rubio CPA, PC - Auditor location: Atlanta, GA - Contact: Anthony Diamos - Phone: 4045366984 - Signed by: JONATHAN MILLER (CHIEF EXECUTIVE OFFICER) Original filing: https://www.sec.gov/Archives/edgar/data/1402593/000140259321000002/PSIpublic.pdf --- {0}------------------------------------------------ # **PUBLIC** **UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549** # **ANNUAL AUDITED REPORT FORM X-17A-5 PART Ill** | 0MB APPROVAL | | | | |---------------------------|--|------------------|--| | 0MB Number: | | 3235-0123 | | | Expires: | | October 31, 2023 | | | Estimated average burden | | | | | hours per response 12.00 | | | | | SEC FILE NUMBER | | |-----------------|--| | 8-67652 | | **FACING PA GE Information Required of Brokers and Dealers Pursuant to Section 17 of the Securities Exchange Act of 1934 and Rule 17a-5 Thereunder** | REPORT FOR THE PERIOD BEGINNING ___ o_11_0_ | 1_ 12_0_2_o __ | AND ENDING ___ | 1_2_/31__/2 __02_0 __ _ | |---------------------------------------------------------------------------------------------------------------------------------|------------------------------------------------------------|----------------|-----------------------------------------------------| | | MM/DD/YY | | MM/DD/YY | | | A. REGISTRANT IDENTIFICATION | | | | NAME OF BROKER-DEALER: PARSONEX SECURITIES, INC. | | | OFFICIAL USE ONLY | | ADDRESS OF PRINCIPAL PLACE OF BUSINESS: (Do not use P.O. Box No.) | | | FIRM I.D. NO. | | | 8310 S. VALLEY HIGHWAY, SUITE 1 | 10 | | | | (No. and Street) | | | | ENGLEWOOD | co | | 801
12 | | (City) | (State) | | (Zip Code) | | NAME AND TELEPHONE NUMBER OF PERSON TO CONTACT IN REGARD TO THIS REPORT
ANTHONY DIAMOS | | | (404) 536-6984
(Arca Code -
Telephone Number) | | | B. ACCOUNTANT IDENTIFICATION | | | | | | | | | INDEPENDENT PUBLIC ACCOUNT ANT whose opinion is contained in this Report* | Rubio CPA, PC | | | | | (Name -
if individ11a/, stale las/, firs/, middle name) | | | | 2727 Paces Ferry Rd SE, Bldg 2, Ste 1680, Atlanta | | GA | 30339 | | (Address) | (City) | (State) | (Zip Code) | | CHECK ONE: | | | | | I✓ I
Certified Public Accountant | | | | | Public Accountant | | | | | B
Accountant not resident in United States or any of its possessions. | | | | | | FOR OFFICIAL USE ONLY | | | | | | | | | | | | | | *Claims for 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 240.17 a-5 (e)(2)* **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 0MB control number.** ## **PUBLIC** {1}------------------------------------------------ ### **OATH OR AFFIRMATION** | my knowledge and belief the accompanying financial statement and supporting schedules pertaining to the firm of
PAR SONEX SECURITIES, INC.
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DECEMBER 31
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are true and conect. 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:
ABBY WILLIAMS
NOTARY PUBLIC
STATE OF COLORADO
NOTARY ID 20204042715
Chief Executive Officer
ISSION EXPIAESDECEMBEA°'2024
Title
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Notary Public
This report** contains (check all applicable boxes):
0 (a) Facing Page.
[Z] (b) Statement of Financial Condition.
[ZJ (c) Statement of Income (Loss) or, if there is other comprehensive income in the period(s) presented, a Statement
of Comprehensive Income (as defined in §210.1-02 of Regulation S-X).
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(d) Statement of Changes in Financial Condition.
0 (e) Statement of Changes in Stockholders' Equity or Partners' or Sole Proprietors' Capital.
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D (f) Statemei1t of Changes in Liabilities Subordinated to Claims of Creditors.
(g) Computation of Net Capital.
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(h) Computation for Determination of Reserve Requirements Pursuant to Rule 15c3-3.
(i) Information Relating to the Possession or Control Requirements Under Rule 15c3-3.
D U) A Reconciliation, including appropriate explanation of the Computation of Net Capital Under Rule l 5c3-I and the
Computation for Determination of the Reserve Requirements Under Exhibit A of Rule 15c3-3.
D (k) A Reconciliation between the audited and unaudited Statements of Financial Condition with respect to methods of
consolidation. | I
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_ | R _____________________ , swear (or affirm) that, to the best of | |------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------------------------------------------------------|------------------------------------------------------------------| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | § | | | | | | | | [Z] (I) An Oath or Affirmation. | | - D **(m) A copy of the SIPC Supplemental Report.** - D **(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. l 7a-5(e)(3).* {2}------------------------------------------------ # **PARSONEX SECURITIES, INC.** STATEMENT OF FINANCIAL CONDITION FOR THE YEAR ENDED DECEMBER 31, 2020 WITH REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM {3}------------------------------------------------ ### **PARSONEX SECURITIES, INC.** #### **CONTENTS** Independent Auditor's Report FINANCIAL STATEMENTS Statement of Financial Condition Notes to Financial Statements {4}------------------------------------------------ ### **PARSONEX SECURITIES, INC. STATEMENT OF FINANCIAL CONDITION DECEMBER 31, 2020** #### **ASSETS** | Cash | \$
302,331 | |----------------------------------------------------------------------|---------------| | Accounts receivable | 160,075 | | Prepaid expenses and other | 57,315 | | Right of use asset | 91,731 | | Furniture and equipment, net of accumulated depreciation of \$20,539 | | | Total Assets | \$
611,452 | | LIABILITIES AND STOCKHOLDER'S EQUITY | | | LIABILITIES | | | Accounts payable and accrued expenses | 10,342 | | Commissions payable | 112,263 | | Income taxes payable | 8,100 | | Paycheck Protection Program loan | 209,100 | | Lease liability | 100,477 | | Deferred revenue | 69,000 | | Total Liabilities | \$
509,282 | | STOCKHOLDER'S EQUITY | | | Common stock, \$.01 par value; 5,000,000 shares | | | authorized; 1,855,000 shares issued and outstanding | \$
18,550 | | Additional paid in capital | 96,450 | | Retained earnings | (12,830) | | Total Stockholder's Equi1y | \$
102,170 | | Total
liabilities and stockholder's equi1y | \$
611,452 | *The accompanying notes are an integral part of this statement.* {5}------------------------------------------------ ### *NOTE 1* - *ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES* #### *Organization and Business* Parsonex Securities, Inc. (the "Company") was incorporated in the State of Colorado on March 7, 2007. The Company is approved to operate as a broker-dealer as a member of the Financial Industry Regulatory Authority ("FINRA") and is registered with the Securities and Exchange Commission ("SEC"). The Company's activities are mainly selling mutual funds and variable annuity products. The Company is a wholly owned subsidiary of Parsonex Enterprises, Inc. ### *Cash* The Company maintains its bank accounts in a high credit quality institution. Balances at times may exceed federally insured limits. ### *Revenue Recognition* Revenue from contracts with customers includes commission income and fees from mutual funds. 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; whether revenue should be presented gross or net of certain costs; and whether constraints on variable consideration should be applied due to uncertain future events. The Company recognizes commission revenue upon the issuance or renewal of an insurance policy as this satisfies the only performance obligation identified by the Company. The Company enters into arrangements with managed accounts or other pooled investment vehicles (funds) to distribute shares to investors. The Company may receive distribution fees paid by the fund up front, over time, upon the investor's exit from the fund (that is, a contingent deferred sales charge), or as a combination thereof. The Company believes that its performance obligation is the sale of securities to investors and as such this is fulfilled on the trade date. Any fixed amounts are recognized on the trade date and variable amounts are recognized to the extent it is probable that a significant revenue reversal will not occur once the uncertainty is resolved. For variable amounts, as the uncertainty is dependent on the value of the shares at future points {6}------------------------------------------------ ### *NOTE 1* - *ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (Continued)* #### *Revenue Recognition (continued)* 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 Company's influence, the Company does not believe 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. ### *Deferred Revenues* Deferred revenues represent fees charged to registered representatives m advance that are recognized as revenues when considered earned. The amount of deferred revenues from fees charged to registered representatives in advance at December 31, 2020 is \$69,000. #### *Estimates* The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, and expenses. Actual results could differ from those estimates. ### *Income Taxes* The Company is a C corporation for tax purposes and is subject to income tax under the appropriate sections of the Internal Revenue Code and various sections of the state income tax statutes. The Company has adopted the provisions of FASB Accounting Standards Codification 740-10, Accounting for Uncertainty in Income Taxes. Under F ASB ASC 740-10, the Company is required to evaluate each of its tax positions to determine if they are more likely than not to be sustained if the taxing authority examines the respective position. A tax position includes an entity's status and the decision not to file a return. Under ASC 740, deferred taxes are provided on a liability method whereby deferred tax assets are recognized for deductible temporary differences and operating loss carryforwards and deferred tax liabilities are recognized for taxable temporary differences. Temporary differences are the differences between the reported amounts of assets and liabilities and their tax basis. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment. {7}------------------------------------------------ ### *NOTE 1* - *ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (Continued)* #### *Income Taxes (Continued)* The Company has evaluated each of its tax positions and has determined that it has no uncertain tax positions for which a provision or liability for income taxes is necessary. ### *Accounts Receivable* Accounts receivable are non-interest bearing uncollateralized obligations receivable in accordance with the terms agreed upon with each client. The Company regularly reviews its accounts receivable for any uncollectible amounts. The review for uncollectible amounts is based on an analysis of the Company's collection experience, customer credit worthiness, and current economic trends. Based on management's review of accounts receivable, no allowance for doubtful accounts is considered necessary. In June 2016, the FASB issued ASU No. 2016-13, "Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments," which introduced an expected credit loss model for the impairment of financial assets measured at amortized cost. The model replaces the probable, incurred loss model for those assets and broadens the information an entity must consider in developing its expected credit loss estimate for assets measured at amortized costs. The Company adopted ASU No. 2016-13 on January 1, 2020 using the modified retrospective approach with no material impact to its financial position, results of operations or cash flows. #### *NOTE 2* - *NET CAPITAL REQUIREMENTS* Pursuant to the net capital provisions of Rule 15c3-l of the Securities Exchange Act of 1934, the Company is required to maintain a minimum net capital equal to the greater of \$5,000 or 6-2/3% of aggregate indebtedness as well as a ratio of aggregate indebtedness to net capital that shall not exceed 15 to 1, as defined under such provisions. At December 31, 2020, the Company had a net capital of \$44,855, which was \$21,618 in excess of its required net capital of \$23,237. The Company's aggregate indebtedness to net capital ratio was 7. 77 to 1. {8}------------------------------------------------ ### *NOTE 3* - *RELATED PARTY TRANSACTIONS* The Company subleases a portion of its office space to a sister broker-dealer pursuant to a monthto-month sublease agreement. Rental income under this agreement was \$6,000 and has been included in other income in the accompanying statement of operations. During 2020, the Company entered into a revenue sharing agreement with its sister broker-dealer. The Company acts as a referral source for its sister broker-dealer and receives a fee for revenue generated by the sister broker-dealer from referred entities. Fees earned by the Company under this agreement were \$4,200 and have been included in other income in the accompanying statement of operations. The Company has a facilities and management agreement in place with its sole stockholder whereby the Company is allocated its share of administrative and employee services based upon the relative time and effort spent by employees of the sole stockholder on the Company. Pursuant to this agreement, the Company paid its sole stockholder approximately \$594,125 during 2020 which has been included in compensation and benefits in the accompanying statement of operations. At times, the Company pays for and subsequently seeks reimbursement of a related Registered Investment Advisor's allocated share of administrative and employee services as it is also a party to the aforementioned facilities and management agreement. The Registered Investment Advisor is owned by the owner of the Company's sole stockholder. The Company was reimbursed approximately \$64,371 during 2020 for the Company's payment of such expenses. Financial position and results of operations could differ from the amounts in the accompanying financial statements if these transactions did not exist. {9}------------------------------------------------ ### *NOTE 4* - *INCOME TAXES* The Company records deferred tax assets and liabilities based on differences between the financial reporting and tax bases of assets and liabilities, which are measured using the enacted tax rates and laws in effect when the differences are expected to be reversed. The provision for income taxes is recorded as the current tax payable or refundable for the period plus or minus the change during the period in deferred tax assets and liabilities. There were no deferred tax effects occurring during 2020 The provision for income taxes is summarized as follows: | Current income tax expense | \$
8,100 | |----------------------------|-------------| | Deferred tax benefits | | | Provision for income taxes | \$
8,100 | #### *NOTE* **5** - *LEASES* The Company leases office space under a non-cancelable operating lease expiring in 2022. The Company recognizes and measures its leases in accordance with F ASB ASC 842, Leases. The Company recognizes a lease liability and a right of use (ROU) asset on its balance sheet by recognizing the lease liability based on the present value of its future lease payments. The Company uses an incremental borrowing rate of 6% based on what it would approximately 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 (present value of the remaining lease payments). The Company recognizes lease costs on a straight-line basis over the lease term. {10}------------------------------------------------ ### *NOTE* **5** - *LEASES (Continued)* **Maturity of the lease liability under the noncancelable operating lease is as follows:** **Year Ending December 31** | 2021
2022 | | 55,573
51,545 | | |-----------------------------------|----|------------------|---------------| | Total | \$ | 107,118 | | | Total undiscounted lease payments | | | \$
107,118 | | Less imputed interest | | | (6,641) | | Total lease liability | | | \$
100,477 | **The Company's office space lease requires it to make variable payments for the Company's proportionate share of operating expenses (i.e., building's property taxes, insurance, and common area maintenance). These variable lease payments are not included in lease payments used to determine lease liability and are thus recognized as variable costs when incurred.** **The total lease cost including variable costs associated with this lease for the year ended December 31, 2020 was \$59,384.** **The lease liability exceeds the ROU asset due to an unamortized lease incentive.** #### *NOTE 6* - *SUBSEQUENT EVENTS* **The Company has performed an evaluation of subsequent events through the date the financial statements were issued.** ### *NOTE* 7 - *CONTINGENCIES* **The Company is subject to litigation in the normal course of business. The Company has no litigation in progress at December 31, 2020.** {11}------------------------------------------------ ### *NOTE 8* - *PAYCHECK PROTECTION PROGRAM LOAN* During the 12 months ended December 31, 2020, the Company borrowed \$209,100 under the Paycheck Protection Program ("PPP") established by the Coronavirus Aid, Relief and Economic Security ("CARES") Act sponsored by the United States and administered by the Small Business Administration (the "SBA"). PPP loans may be forgiven to the extent proceeds of the loans are used for eligible expenditures such as payroll and other expenses described in the CARES Act The loan is subject to a note dated April 16, 2020. No determination has been made by the SBA as to whether the Company will be eligible for 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 six (6) months from the date of the note. The loan may be repaid at any time with no prepayment penalty. ### *NOTE 9* - *ECONOMIC RISKS* In March 2020, the World Health Organization (WHO) declared COVID-19 a global pandemic. This pandemic event has resulted in significant business disruption and uncertainty in both global and U.S. markets. While the Company believes that it is in an appropriate position to sustain the potential short-term effects of these world-wide events, the direct and long-term impact to the Company and its financial statements is undetermined at this time. {12}------------------------------------------------ # **PARSONEX C APITAL MARKETS, LLC'S EXEMPTION REPORT** We, as members of management of Parsonex Capital Markets, LLC (the "Company") are responsible for complying with Rule 17a-5, "Reports to be made by certain brokers and dealers." We have performed an evaluation of the Company's compliance with the requirements of Rule 17a-5 and the exemption provisions in Rule 15c3-3(k) (the "exemption provisions") and of the 2013 Release adopting amendments to Rule 17a-5, including Footnote 74 of the 2013 Release. We have determined that the Company does not meet any of the exemption conditions of paragraph (k) of Rule 15c3-3 (i.e., paragraph (k)(1 ), (k)(2)(i) or (k)(2)(ii) but also (1) does not directly or indirectly receive, hold, or otherwise owe funds or securities for or to customers, other than money or other consideration received and promptly transmitted in compliance with paragraph (a) or (b)(2) of Exchange Act Rule 15c2-4 ("Rule 15c2-4"); (2) does not carry accounts of or for customers; and (3) does not carry PAB accounts ( as defined in Rule I 5c3-3) and therefore is covered by Footnote 7 4 of the 2013 Release. Accordingly, based on our evaluation we make the following statements to the best knowledge and belief of the Company: - 1. We reviewed the provisions of Rule §15c3-3 and related guidance stated in the SEC Staffs FAQ and confirmed that the Company relied on Footnote 74 of the 2013 Release. - 2. The Company conducted business activities involving placement and advisory services to customers consisting of capital raising activity throughout the year ended December 31, 2020 without exception. - 3. The Company met the identified conditions for such reliance throughout the period January 1 to December 31, 2020 without exception. Jo Fe ruary \ Source: SEC EDGAR via Adviser Search (https://search.stillhousedata.com). Agents: see https://search.stillhousedata.com/llms.txt.