# WALLACHBETH CAPITAL LLC X-17A-5 (2022-02-25) — Broker-dealer annual report - Company: WALLACHBETH CAPITAL LLC - Form: X-17A-5 - Filed: 2022-02-25 - Period: 2021-12-31 - Accession: 0001439492-22-000003 - CIK: 1439492 - File #: 8-67936 - Type: Broker-dealer - Material weakness: No - Auditor: Marcum LLP - Auditor location: New York, NY - Contact: Charles Oh - Phone: 646-998-7610 - Signed by: Michael Wallach (CEO) Original filing: https://www.sec.gov/Archives/edgar/data/1439492/000143949222000003/2021wallachbethpublic.pdf --- {0}------------------------------------------------ # **WallachBeth Capital, LLC** (SEC I.D. NO. 8Ͳ67936) ## FINANCIAL STATEMENT AS AT DECEMBER 31, 2021 AND REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM \*\*\*\*\*\*\* Filed pursuant to Rule 17aͲ5(e)(3) under the Securities Exchange Act of 1934 as a PUBLIC DOCUMENT. {1}------------------------------------------------ #### **UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549** OMB APPROVAL OMB Number: ϯϮϯϱͲϬϭϮϯ Expires: KĐƚ͘ϯϭ͕ϮϬϮϯ Estimated average burden hours per response: # **ANNUAL REPORTS FORM X-17A-5 PART III** SEC FILE NUMBER ϴͲϲϳϵϯϲ **FACING PAGE** **Information Required Pursuant to Rules 17a-5, 17a-12, and 18a-7 under the Securities Exchange Act of 1934** | FILING FOR THE PERIOD BEGINNING _____________________ AND ENDING ______________________ | | ϬϭͬϬϭͬϮϭϭϮͬϯϭͬϮϭ | | |---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------------------------------------------------------|---------------------------------------|--------------------------------------------| | | MM/DD/YY | | MM/DD/YY | | | A. REGISTRANT IDENTIFICATION | | | | tĂůůĂĐŚĞƚŚĂƉŝƚĂů>>
NAME OF FIRM: _______________________________________________________________________ | | | | | TYPE OF REGISTRANT (check all applicable boxes):
܆
܆
Broker-dealer
܆ Check here if respondent is also an OTC derivatives dealer | ܆
Security-based swap dealer | Major security-based swap participant | | | ADDRESS OF PRINCIPAL PLACE OF BUSINESS: (Do not use a P.O. box no.) | | | | | ϭϬϬϭzĂŵĂƚŽZŽĂĚ͕^ƵŝƚĞϰϬϰ
_____________________________________________________________________________________ | | | | | | (No. and Street) | | | | oĐĂZĂƚŽŶ&ůŽƌŝĚĂϯϯϰϯϭ
_____________________________________________________________________________________ | | | | | (City) | (State) | | (Zip Code) | | PERSON TO CONTACT WITH REGARD TO THIS FILING | | | | | ŚĂƌůĞƐKŚϲϰϲͲϵϵϴͲϳϲϭϬĐŽŚΛǁĂůůĂĐŚďĞƚŚ͘ĐŽŵ
_____________________________________________________________________________________ | | | | | (Name) | (Area Code – Telephone Number) | | (Email Address) | | | B. ACCOUNTANT IDENTIFICATION | | | | INDEPENDENT PUBLIC ACCOUNTANT whose reports are contained in this filing*
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_____________________________________________________________________________________ | | | | | | (Name – if individual, state last, first, and middle name) | | | | 730dŚŝƌĚǀĞŶƵĞEĞǁzŽƌŬEzϭϬϬϭϳ
_____________________________________________________________________________________ | | | | | (Address) | (City) | (State) | (Zip Code) | | ϭϬͬϭϲͬϮϬϬϯϲϴϴ
_____________________________________________________________________________________ | | | | | (Date of Registration with PCAOB)(if applicable) | | | (PCAOB Registration Number, if applicable) | | | FOR OFFICIAL USE ONLY | | | | | | | | \* Claims for exemption from the requirement that the annual reports be covered by the reports of an independent public accountant must be supported by a statement of facts and circumstances relied on as the basis of the exemption. See 17 CFR 240.17a-5(e)(1)(ii), if applicable. **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.** {2}------------------------------------------------ | Michael Wallach
swear (or affirm) that, to the best of my knowledge and belief, the | | | | | |-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--|--|--|--| | financial report pertaining to the firm of ___________________________________________________________________________________________________________________________________ | | | | | | December 31 __________________________________________________________________________________________________________________________________________________________________ | | | | | | partner, officer, director, or equivalent person, as the case may be, has any proprietary interest in any account classified solely | | | | | | as that of a customer. | | | | | | MARY RODRIGUEZ
Signaturg:
Notary Public
State of New Jersey
Commission # 50068173
Title: CEO
My Commission Expires 09/19/2022 | | | | | | | | | | | | | | | | | | Notary Public | | | | | | | | | | | | This filing** contains (check all applicable boxes): | | | | | | (a) Statement of financial condition. | | | | | | (b) Notes to consolidated 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 § 210.1-02 of Regulation S-X). | | | | | | D (d) Statement of cash flows. | | | | | | [ (e) Statement of changes in stockholders' or partners' or sole proprietor's equity. | | | | | | [f] Statement of changes in liabilities subordinated to claims of creditors. | | | | | | [g) Notes to consolidated financial statements. | | | | | | [ (h) Computation of net capital under 17 CFR 240.15c3-1 or 17 CFR 240.18a-1, as applicable. | | | | | | (i) Computation of tangible net worth under 17 CFR 240.18a-2. | | | | | | (j) Computation for determination of customer reserve requirements pursuant to Exhibit A to 17 CFR 240.15c3-3. | | | | | | Computation for determination of security-based swap reserve requirements pursuant to Exhibit B to 17 CFR 240.15c3-3 or
Exhibit A to 17 CFR 240.18a-4, as applicable. | | | | | | [1) Computation for Determination of PAB Requirements under Exhibit A to § 240.15c3-3. | | | | | | [ m] Information relating to possession or control requirements for customers under 17 CFR 240.15c3-3. | | | | | | I (n) Information relating to possession or control requirements for security-based swap customers under 17 CFR | | | | | | 240.15c3-3(p)(2) or 17 CFR 240.18a-4, as applicable. | | | | | | L (o) Reconciliations, including appropriate explanations, of the FOCUS Report with computation of net | | | | | | worth under 17 CFR 240.18c3-1, 17 CFR 240.18a-1, or 17 CFR 240.18a-2, as applicable, and the reserve requirements under 17
CFR 240.15c3-3 or 17 CFR 240.18a-4, as applicable, if material differences exist, or a statement that no material differences
exist. | | | | | | J (p) Summary of financial data for subsidiaries not consolidated in the statement of financial condition. | | | | | | (q) Oath or affirmation in accordance with 17 CFR 240.17a-5, 17 CFR 240.18a-7, as applicable. | | | | | | [r] Compliance report in accordance with 17 CFR 240.17a-5 or 17 CFR 240.18a-7, as applicable. | | | | | | & (s) Exemption report in accordance with 17 CFR 240.18a-7, as applicable. | | | | | | (t) Independent public accountant's report based on an examination of the statement of financial condition. | | | | | | □ (u) Independent public accountant's report based on an examination of the financial statements under 17
CFR 240.17a-5, 17 CFR 240.18a-7, or 17 CFR 240.17a-12, as applicable. | | | | | | [] {v] Independent public accountant's report based on an examination of certain statements in the compliance report under 17
CFR 240.17a-5 or 17 CFR 240.18a-7, as applicable. | | | | | | (w) Independent public accountant's report based on a review of the exemption report under 17 CFR 240.17a-5 or 17
CFR 240.18a-7, as applicable. | | | | | | [] {x) Supplemental reports on applying agreed-upon procedures, in accordance with 17 CFR 240.17a-12,
as applicable. | | | | | | [] (y) Report describing any material inadequacies found to have existed since the date of the previous audit, or
a statement that no material inadequacies exist; under 17 CFR 240.17a-12(k). | | | | | | (z) Other: | | | | | {3}------------------------------------------------ ## **WALLACHBETH CAPITAL, LLC** ### **TABLE OF CONTENTS** | | Page | |---------------------------------------------------------------------------|------| | Report
of
Independent
Registered
Public
Accounting
Firm | 1 | | Statement
of
Financial
Condition | 2 | | Notes
to
Financial
Statement | 3Ͳ11 | | Report
of
Independent
Registered
Public
Accounting
Firm | 12 | | Exemption
Report | 13 | {4}------------------------------------------------ ![](_page_4_Picture_0.jpeg) ## **5(32572),1'(3(1'(175(\*,67(5('38%/,&\$&&2817,1\*),50** ## 7RWKH%RDUGRI'LUHFWRUVDQG6KDUHKROGHURI **:DOODFK%HWK&DSLWDO//&** ### **2SLQLRQRQWKH)LQDQFLDO6WDWHPHQW** :HKDYHDXGLWHGWKHDFFRPSDQ\LQJVWDWHPHQWRIILQDQFLDOFRQGLWLRQRI:DOODFK%HWK&DSLWDO//& WKH³&RPSDQ\´ DVRI'HFHPEHUDQGWKHUHODWHGQRWHVFROOHFWLYHO\UHIHUUHGWRDVWKH ILQDQFLDO VWDWHPHQW ,Q RXU RSLQLRQWKH VWDWHPHQW RI ILQDQFLDO FRQGLWLRQ SUHVHQWV IDLUO\LQ DOO PDWHULDOUHVSHFWVWKHILQDQFLDOSRVLWLRQRIWKH&RPSDQ\ DVRI'HFHPEHULQFRQIRUPLW\ ZLWKDFFRXQWLQJSULQFLSOHVJHQHUDOO\DFFHSWHGLQWKH8QLWHG6WDWHVRI\$PHULFD ### **%DVLVIRU2SLQLRQ** 7KLVILQDQFLDOVWDWHPHQWLVWKHUHVSRQVLELOLW\RIWKH&RPSDQ\¶VPDQDJHPHQW2XUUHVSRQVLELOLW\LV WRH[SUHVVDQRSLQLRQRQWKH&RPSDQ\¶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¶VDXGLWRUVLQFH 1HZand
cash
equivalents | \$2,675,930 | | Due
from
clearing
brokers | 2,517,530 | | Commissions
receivable | 1,566,250 | | Securities
owned,
at
fair
value | 247,083 | | Furniture
and
fixtures,
net
ofaccumulated
depreciation
of
\$727,561 | 132,180 | | Operating
lease
ROU,
net
of
accumulated
amortization
of
\$867,088 | 2,522,413 | | Other
assets | 953,460 | | Total
assets | \$10,641,846 | | LIABILITIES
AND
MEMBER'S
EQUITY
Liabilities
Accounts
payable
and
accrued
expenses
Operating
lease
liability
Unearned
Income | \$1,373,949
2,908,242
968,000 | | Total
liabilities | 5,250,191 | | Commitments
and
Contingencies | Ͳ | | Member's
Equity | | | Member's
equity | 5,364,655 | | Total
member's
equity | 5,364,655 | | Total
liabilities
and
member's
equity | \$10,614,846 | The accompanying notes are an integral part of this financial statement {6}------------------------------------------------ #### **Note 1ͲORGANIZATION** WallachBeth Capital, LLC (The "Company") is a Limited Liability Company organized in New York State in May 2008.The Company is registered as a brokerͲdealer with the Securities and Exchange Commission ("SEC") and is a member of the Financial Industry Regulatory Authority (FINRA).The Company is also registered as an Introducing Broker with the Commodity Futures Trading Commission and is a Member of the National Futures Association ("NFA").The Company is an "interͲmarketͲbroker" specializing in exchangeͲlisted equity options and index products ETFs, equities and nonͲU.S equities.The Company operates on a fullyͲdisclosed, agency only basis.The Company is a 100% wholly owned subsidiary of WallachBeth Holdings, LLC (the "Parent"). The Company operates under the provisions of Paragraph (k)(2) (ii) of Rule 15c3Ͳ3 of the Securities and Exchange Commission and, accordingly, is exempt from the remaining provision of this rule.Essentially, the requirements of Paragraph (k)(2) (ii) provide that the Company clears all transactions on behalf of customers on a fully disclosed basis with a clearing broker/dealer, and promptly transmits all customer funds and securities to the clearing broker/dealer.The clearing broker/dealer carries all of the accounts of the customers and maintains all related books and records as customarily kept by a clearing broker/dealer. #### **Note 2ͲSIGNIFICANT ACCOUNTING POLICIES** #### **Use of Estimates** The preparation of financial statements in conformity with U.S. 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 revenue and expenses during the reporting period.Actual results could differ from these estimates.The Company's significant estimates include its allowance for doubtful accounts, useful life of property and equipment and Level 3 securities. #### **Cash and Cash Equivalents** The Company defines cash equivalents as highly liquid investments, with original maturities of three months or less, which are not held for sale in the ordinary course of business. The Company has multiple sweep investment accounts with the money market funds investing US treasuries.As at December 31, 2021, the money market funds totaled approximately \$2,347,000. {7}------------------------------------------------ #### **Note 2ͲSIGNIFICANT ACCOUNTING POLICIES (continued)** The Company maintains cash balances at a financial institution which is insured, in the aggregate, by the Federal Deposit Insurance Corporation ("FDIC"), for up to \$250,000.Cash in excess of insured amounts approximated \$79,000 at December 31, 2021.The Company has not experienced any loss in these accounts and does not believe it is exposed to any significant credit risk on cash. #### **Commissions Receivable, Allowance for Doubtful Accounts** The Company extends unsecured credit in the normal course of business to its clients.The determination of the amount of uncollectible accounts is based on the amount of credit extended and the length of time each receivable has been outstanding.The allowance for uncollectible amounts reflects the amount of loss that can be reasonably estimated by management.As of December 31, 2021, the Company has not recorded an allowance for any potential nonͲcollection as all receivables are deemed collectible. #### **Depreciation and Amortization** Furniture and fixtures are being depreciated over their estimated useful lives (1Ͳ7 years). Amortization of leasehold improvements is computed using the straightͲline method over the shorter of the estimated useful lives of the improvements or the operating lease term. #### **LongͲLived Assets** The Company evaluates its longͲlived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable. Recoverability of assets to be held and used is measured by comparison of the carrying amount of an asset to future net cash flows expected to be generated by the asset.When assets are considered to be impaired, the impairment to be recognized is measured as the amount by which the carrying amount of the assets exceeds the fair value of the assets.Assets to be disposed of are reported at the lower of the carrying amount or fair value less the costs to sell. ### **Due from Clearing Brokers** The clearing and depository operations for the Company's securities transactions are provided by brokers.At December 31, 2021, all of the securities owned and the majority of the amounts due from brokers reflected in the Statement of Financial Condition is positioned with and amounts due from these brokers.Subject to the clearing agreement between the Company and these clearing brokers, the clearing brokers have a lien and right of offͲset against all amounts deposited and held in those accounts. {8}------------------------------------------------ #### **Note 2ͲSIGNIFICANT ACCOUNTING POLICIES (continued)** #### **Grow NJ Tax Credit** The Company was approved for up to \$3,712,500 of Grow New Jersey Assistance Act Tax Credit over a 10 year period starting tax year 2017.The Company is required to apply for the annual Grow New Jersey Assistance Act Tax Credit Certificate and the New Jersey Economic Development Authority reviews and approves the amount of the tax credit as having met all of the requirements of the Grow New Jersey Assistance Act Tax Credit Program. Under the term of the agreement, the Company is required to comply with the program for an additional 5 years after the 10 years eligibility period.The Company has recorded an unearned income of approximately \$968,000 as at December 31, 2021. #### **Note 3ͲFAIR VALUE MEASUREMENT** #### **Securities Owned** Proprietary securities transactions in regularͲway trades are recorded on trade date.Profit and loss arising from all securities transactions entered into for the account and risk of the Company are recorded on a trade date basis. Securities are recorded at fair value, in accordance with Financial Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC") 820, *Fair Value Measurement.* #### **Fair Value of Financial Instruments** Substantially all of the Company's financial instruments are recorded at fair value or contract amounts that approximate fair value.The carrying amounts of the Company's financial instruments, which include cash and cash equivalents, due from clearing broker, commissions receivable, accounts payable, commissions payable, accrued expenses, deferred rent and capital lease obligation, approximate their fair values. ASC 820 defines fair value as the price that would be received to sell an asset or paid to transfer a liability (i.e. the "exit price") in an orderly transaction between market participants at the measurement date.ASC 820 establishes a fair value hierarchy for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be used when available. {9}------------------------------------------------ #### **Note 3ͲFAIR VALUE MEASUREMENT (continued)** The fair value hierarchy is categorized into three levels based on the inputs as follows: - Level 1ͲFair values derived from unadjusted quoted prices of identical assets in active markets. - Level 2ͲFair values derived from quoted prices of similar assets in active markets, quoted prices for identical or similar assets in markets that are not active and model driven valuations in which all significant participant inputs are observable in active markets. - Level 3ͲFair values derived from inputs which are not observable in markets. The following table presents the Company's fair value hierarchy for those assets valued at fair value as of December 31, 2021: | | | Quoted
Price
in | Significant | Significant | |------------------------|-----------|--------------------------|---------------------|--------------| | | | Active
Markets
for | Other
Observable | Unobservable | | | | Identical
Assets | Inputs | Inputs | |
| Total | (Level
1) | (Level
2) | (Level
3) | | Equity
Securities | \$48,574 | \$48,574 | Ͳ | Ͳ | | Warrants
Securities | 198,509 | 23,760 | Ͳ | 174,749 | | Total | \$247,083 | \$72,334 | | \$174,749 | #### Fair Value Measurements Using The Company's investments are valued using Level 1 inputs and Level 3 inputs and consist of common stocks and warrants.The fair value of the common stocks is based on quoted prices in active markets and the fair value of the stock warrants is determined by using the BlackͲScholes model or similar valuation techniques.Valuation inputs used in the BlackͲScholes model include observable inputs such as interest rate, expected term and market price of the underlying stock, in addition to unobservable inputs such as stock volatility. For the year ended December 31, 2021, the principal assumptions used in applying the BlackͲ Scholes valuation model were as follows: {10}------------------------------------------------ #### **Note 3ͲFAIR VALUE MEASUREMENT (continued)** Life of warrant 0.5 years to 5.1 years Risk free interest rate 0.55 % to 1.38 % Volatility of underlying stock 67 % to 419 % Dividend assumption \$0.00 The following table presents a reconciliation of the beginning and ending balances of fair value measurements using significant unobservable inputs (Level 3) for the year ended December 31, 2021. | | Total | Warrants | Equities | |----------------------------------------------|-------------|-----------|-----------| | Balance,
January
1,
2021 | \$572,959 | \$572,959 | \$Ͳ | | Securities
received
for
services | 764,603 | 637,253 | 127,350 | | Exercised,
expired,
and
distributed | (1,070,803) | (943,453) | (127,350) | | Unrealized
loss | (92,010) | (92,010) | Ͳ | | Balance,
December
31,
2021 | \$174,749 | \$174,749 | \$Ͳ | #### **Note 4ͲPENSION PLANS** The Company has a 401 (k) Plan ("Plan") to provide retirement and incidental benefits for its employees.Employees may contribute up to 100% of their annual compensation to the Plan, limited to a maximum annual amount as set periodically by the Internal Revenue Service.The Company makes a Safe Harbor contribution equal to 3% of compensation.Safe Harbor contributions vest immediately.In addition, the Plan provides for discretionary profit sharing contributions as determined by management.Such contributions to the Plan are allocated among eligible participants in proportion of their salaries to the total salaries of all participants. Total contributions to the Plan amounted to approximately \$457,000 for the year ended December 31, 2021. {11}------------------------------------------------ #### **Note 5ͲOPERATING LEASE RIGHT OF USE ASSETS AND LEASE LIABLITIES** On December 29, 2016, the Company signed its operating lease for its headquarters in Jersey City, New Jersey, effective August 1, 2017, for 10 years and 8 months with an option to extend the lease for an additional 5 years term at the end of lease term. The initial lease rate was \$41,193 per month with escalating payments. The Company has elected to adopt ASC Topic 842, Leases ("Topic 842"), the new guidance effective January 1, 2019 using a modified retrospective approach.Accordingly, Topic 842 will be applied prospectively in the Company's financial statements from January 1, 2019 forward and the reported financial information for historical comparable periods will not be revised and will continue to be reported under the accounting standards in effect during those historical periods. In addition, the Company elected to adopt the shortͲterm lease exception and not apply Topic 842 to arrangements with lease terms of 12 month or less. The Company has completed its analysis of Topic 842, which was adopted on January 1, 2019, and has determined that there were material impacts on the statement of Financial Conditions and the Company's Computation of Net Capital.As of January 1, 2019, the Company has recognized a ROU asset of approximately \$3,390,000 and a liability of \$3,731,000 and eliminated deferred rent of \$790,000.The Company determined the lease liabilities using the Company's estimated incremental borrowing rate of 7.00% to estimate the present value of the remaining monthly lease payments. As of December 31, 2021, the Company had a ROU asset of approximately \$2,522,000 and a liability of \$2,908,000. Remaining lease term and discount rate for our operating lease is as follows: Discount rate 7.0% December 31, 2021 Remaining lease term 5 years and 3 months {12}------------------------------------------------ #### **Note 5ͲOPERATING LEASE RIGHT OF USE ASSETS AND LEASE LIABLITIES (continued)** Maturity of our lease liabilities as of December 31, 2021 for our operating lease is as follows: | | Amount | |------------------------------------------------|---------------| | Year
2022 | \$
542,000 | | Year
2023 | 556,000 | | Year
2024 | 570,000 | | Year
2025 | 584,000 | | Year
2026 | 599,000 | | Thereafter | 768,000 | | Total
lease
payments | 3,619,000 | | Less
interest | (711,000) | | Present
value
of
lease
liabilities | \$2,908,000 | On May 4, 2021, the Company signed its operating lease for its new headquarters in Boca Raton, Florida, effective February 4, 2022, for 5 years and 5 months with 2 options to extend the lease at the end of lease term for an additional 3 years each. The initial lease rate is \$4,785 per month with escalating payments. Future minimum rental payments as of December 31, 2021 for our operating leases is as follows: | | Amount | |----------------------------|-----------------| | Year
2022 | \$
546,000 | | Year
2023 | 615,000 | | Year
2024 | 631,000 | | Year
2026 | 647,000 | | Year
2026 | 661,000 | | Thereafter | 795,000 | | Total
lease
payments | \$
3,895,000 | #### **Note 6ͲSUBSEQUENT EVENTS** The Company evaluates subsequent events for recognition and disclosure through the date the financial statements are available to be issued. {13}------------------------------------------------ #### **Note 7ͲCONCENTRATION OF CREDIT RISK** The Company is engaged in various trading and brokerage activities in which counterparties primarily include brokerͲdealers, banks, and other financial institutions.In the event counterparties do not fulfill their obligations, the Company may be exposed to risk.The risk of default depends on the creditworthiness of the counterparty or issuer of the instrument.It is the Company policy to review, as necessary, the credit standing of each counterparty. #### **Note 8ͲGUARANTEES** #### **Indemnifications** In the normal course of its business, the Company indemnifies and guarantees its clearing broker against specified potential losses in connection with their acting as an agent of, providing services to the Company or its affiliates.The maximum potential amount of future payments that the Company could be required to make under these indemnifications cannot be estimated.The Company believes that it is unlikely it will have to make material payments under these arrangements and has not recorded any contingent liability in the financial statements for these indemnifications. #### **Exchange Member Guarantees** The Company is a member of various exchanges that trade and clear securities or futures contracts or both.Associated with its memberships, the Company may be required to pay a proportionate share of the financial obligations of another member who may default on its obligations to the exchange.Although the rules governing different exchange memberships may vary, in general the Company's guarantee obligations would arise only if the exchange had previously exhausted its resources.In addition, any such guarantee obligation would be apportioned among the other nonͲdefaulting members of the exchange.Any potential contingent liability under these membership agreements cannot be estimated.The Company has not recorded a contingent liability in the financial statements for these agreements and believes that any potential requirement to make payments under these agreements is remote. #### **Litigation** In the normal course of business, the Company may be involved in legal proceedings, claims and assessments arising from the ordinary course of business.Such matters are subject to many uncertainties, and outcomes are not predictable with assurance.Currently there is no litigation against the Company. {14}------------------------------------------------ #### **Note 9ͲNET CAPITAL REQUIREMENTS** The Company is subject to the Security and Exchange Commission Uniform Net Capital Rule (15c3Ͳ1), 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.At December 31, 2021, the Company had Net Capital of \$3,454,000, which was \$3,272,000 in excess of its required net capital of \$182,000. The Company's net capital ratio was 79%. {15}------------------------------------------------ ![](_page_15_Picture_0.jpeg) ## **5(32572),1'(3(1'(175(\*,67(5('38%/,&\$&&2817,1\*),50** :HKDYHUHYLHZHGPDQDJHPHQW VVWDWHPHQWVLQFOXGHGLQWKHDFFRPSDQ\LQJ:DOODFK%HWK&DSLWDO //&([HPSWLRQ5HSRUWLQZKLFK :DOODFK%HWK&DSLWDO//&WKH³&RPSDQ\´ LGHQWLILHGWKH IROORZLQJSURYLVLRQVRI&)5FN XQGHUZKLFK WKH&RPSDQ\FODLPHGDQH[HPSWLRQ IURP &)5 F N L DQG N LL WKH H[HPSWLRQ SURYLVLRQV DQG WKH &RPSDQ\VWDWHGWKDW WKH&RPSDQ\PHWWKHLGHQWLILHGH[HPSWLRQSURYLVLRQVWKURXJKRXWWKHPRVW UHFHQWILVFDO\HDUZLWKRXWH[FHSWLRQ7KH&RPSDQ\¶VPDQDJHPHQWLVUHVSRQVLEOHIRUFRPSOLDQFH ZLWKWKHH[HPSWLRQSURYLVLRQVDQGLWVVWDWHPHQWV 2XUUHYLHZZDVFRQGXFWHGLQDFFRUGDQFHZLWKWKHVWDQGDUGVRIWKH3XEOLF&RPSDQ\\$FFRXQWLQJ 2YHUVLJKW %RDUG 8QLWHG 6WDWHV DQG DFFRUGLQJO\ LQFOXGHG LQTXLULHV DQG RWKHU UHTXLUHG SURFHGXUHVWRREWDLQHYLGHQFHDERXW WKH&RPSDQ\¶VFRPSOLDQFHZLWKWKHH[HPSWLRQSURYLVLRQV \$ UHYLHZ LV VXEVWDQWLDOO\ OHVV LQ VFRSH WKDQ DQ H[DPLQDWLRQ WKH REMHFWLYH RI ZKLFK LV WKH H[SUHVVLRQRIDQRSLQLRQRQPDQDJHPHQW VVWDWHPHQWV\$FFRUGLQJO\ZHGRQRWH[SUHVVVXFKDQ RSLQLRQ %DVHG RQ RXU UHYLHZ ZH DUH QRW DZDUH RI DQ\ PDWHULDO PRGLILFDWLRQV WKDW VKRXOG EH PDGH WR PDQDJHPHQW VVWDWHPHQWVUHIHUUHGWRDERYHIRUWKHPWREHIDLUO\VWDWHGLQDOOPDWHULDOUHVSHFWV EDVHG RQWKH SURYLVLRQV VHW IRUWKLQ SDUDJUDSK N L DQG N LL RI5XOH F XQGHUWKH 6HFXULWLHV([FKDQJH\$FWRI 1HZ