# PHARUS SECURITIES, LLC X-17A-5 (2020-03-02) — Broker-dealer annual report - Company: PHARUS SECURITIES, LLC - Form: X-17A-5 - Filed: 2020-03-02 - Period: 2019-12-31 - Accession: 0001440313-20-000001 - CIK: 1440313 - File #: 8-67948 - Material weakness: No - Auditor: RW Group LLC - Auditor location: Kennett Square, PA - Contact: Kenneth Harrell - Phone: 2129040101 - Signed by: Kenneth Harrell (Managing Member) Original filing: https://www.sec.gov/Archives/edgar/data/1440313/000144031320000001/pharuspublic19.pdf --- {0}------------------------------------------------ # PHARUS SECURITIES LLC STATEMENT OF FINANCIAL CONDITION DECEMBER 31, 2019 {1}------------------------------------------------ UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ## ANNUAL AUDITED REPORT FORM X-17A-5 PART Ill OMB APPROVAL OMS Number: 3235-0123 Expires: August 31, 2020 Estimated average burden hours oer resnnnse ...... 12.00 | SEC FILE NUMBER | |-----------------| | 8-67948 | FACING PAGE Information Required of Brokers and Dealers Pursuant to Section 17 of the Securities Exchange Act of 1934 and Rnle 17a-5 Thereunder | REPORT FOR THE PERIOD BEGINNING | __
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MMIDD/YY | | |----------------------------------------------------------------------------------------|-----------------------------------------------------|------------------------|-------------------------------------------------|--| | | MM/DDNY | | | | | | A. REGISTRANT IDENTIFICATION | | | | | NAME OF BROKER-DEALER: | | Pharus Securities, LLC | OFFICIAL USE ONLY | | | ADDRESS OF PRINCIPAL PLACE OF BUSINESS: (Do not use P.O. Box No.) | | | | | | 551 Fifth Avenue, Suite 1125 | | | | | | | (No. and Street) | | | | | New York | NY | | 10176 | | | (City) | (State) | | (Zip Code) | | | NAME AND TELEPHONE NUMBER OF PERSON TO CONTACT IN REGARD TO THIS REPORT
Ken Harrell | | | (212)004-0100 | | | | | | (Area Code - Telephone Number) | | | | B. ACCOUNTANT IDENTIFICATION | | | | | INDEPENDENT PUBLIC ACCOUNTANT whose opinion is contained in this Report* | | | | | | | RWGroup LLC | | | | | | (Name-ifi11dividua/, state last.first, middle name) | | | | | 400 Old Forge Lane, Suite 401 | Kennett Square | PA | 19348 | | | (Address} | (City) | {State) | (Zip Code) | | | CHECK ONE: | | | | | | Certified Public Accountant | | | | | | §
Public Accountant | | | | | | Accountant not resident in United States or any of its possessions. | | | | | | | | | | | | | FOR OFFICIAL USE ONLY | | | | *\*Claims for exemption from the requirement that the annual report be covered by the opinion of an independent public accountant 1nust be supported by a statement of/acts and circumstances relied on as the basis/or the exemption. See Section 240.J7a-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 di splays a currently valid OMB control number. SEC 1410 (11-05) {2}------------------------------------------------ #### OATH OR AFFIRMATION | I,
Kenneth Harrell | , swear (or affirm) that, to the best of | |-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------| | Pharus Securities, LLC | my knowledge and belief the accompanying financial statement and supporting schedules pertaining to the firm of
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~'as | | | are true and correct. I further swear (or affirm) that | | classified solely as that of a custo1ner, except as follows: | neither the company nor any partner, proprietor, principal officer or director has any proprietary interest in any account | | | | | KHATUNAIURCHENKO
Notary Public • State of New York
NO. 011U6372446
Qualified in Kings County
My Commission Expires Mar 19, 2022 | Title | | This report** contains (check all applicable boxes):
B (a) Facing Page.
0 (b) Statement of Financial Condition.
of Comprehensive Income (as defined in §210.1-02 of Regulation S-X).
§ (d) Statement of Changes in Financial Condition.
( e) Statement of Changes in Stockholders' Equity or Partners' or Sole Proprietors' Capital.
(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 15c3-3.
(i) Information Relating to the Possession or Control Requirements Under Rule l 5c3-3.
Computation for Determination of the Reserve Requirements Under Exhibit A of Rule l5c3-3.
consolidation. | D ( c) Statement of Income (Loss) or, if there is other comprehensive inco1ne in the period( s) presented, a Statement
D (j) A Reconciliation, including appropriate explanation of the Computation ofNet Capital Under Rule 15c3-l and the
0 (k) A Reconciliation between the audited and unaudited Statements of Financial Condition with respect to methods of | | § (l) An Oath or Affirmation.
(m) A copy of the SIPC Supplemental Report.
**For conditions of confidential treatment of certain portions of this filing, see section 240.17a-5(e)(3). | (n) A report describing any material inadequacies found to exist or found to have existed since the date of the previous audit. | {3}------------------------------------------------ ## **PHARUS SECURITIES, LLC** ## **DECEMBER31, 2019** ## **TABLE OF CONTENTS** | Report of Independent Registered Public Accounting Firm 1 | Page | |------------------------------------------------------------|------| | Statement of Financial Condition 2 | | | Notes to the Financial Statement 3-6 | | {4}------------------------------------------------ ![](_page_4_Picture_0.jpeg) ## **REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM** To the Board of Directors and Shareholders of Pharus Securities, LLC #### **Opinion on the Financial Statement** We have audited the accompanying statement of financial condition of Pharus Securities, LLC as of December 31, 2019, 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 Pharus Securities, LLC as of December 31, 2019 in conformity with accounting principles generally accepted in the United States of America. #### **Basis for Opinion** This financial statement is the responsibility of Pharus Securities, LLC's management. Our responsibility is to express an opinion on Pharus Securities, LLC's financial 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 Pharus Securities, LLC 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 Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the statement of financial condition is free of material misstatement. The company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, 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. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the statement of financial position, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall statement of financial position presentation. We believe that our audit provides a reasonable basis for our opinion. We have served as Pharus Securities, LLC's auditor since 2018. Kennett Square, Pennsylvania February 29, 2020 {5}------------------------------------------------ ## PHARUS SECURITIES, LLC STATEMENT OF FINANCIAL CONDITION DECEMBER 31, 2019 #### ASSETS | Cash
Accounts receivable
Investments at fair value
Prepaid expenses and other assets | \$
64,126
71,081
353,777
13,582 | |-----------------------------------------------------------------------------------------------|---------------------------------------------| | Total assets | \$
502,566 | | LIABILITIES AND MEMBER'S EQUITY
Liabilities: | | | Accrued expenses & accrued expenses | 8,877 | | Total liabilities | 8,877 | | Member's equity | 493,689 | | Total liabilities and member's equity | \$
502,566 | {6}------------------------------------------------ #### 1. ORGANIZATION AND DESCRIPTION OF BUSINESS Pharus Securities, LLC (the Company) is a privately held limited liability company formed in Delaware in 2007 for the purpose of conducting business, beginning in 2008, as a securities broker dealer (BD). As a BD, the Company is registered with the Financial Industry Regulatory Authority (FINRA) to market investments in registered securities. The Company is required to meet the rules and regulations of the Securities and Exchange Commission (SEC) and the Divisions of Securities in the states the Company is registered. The Company operates under the exemptive provisions of SEC Rules 15c30-3(k)(2)(i). ## 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES ## *Use of Estimates* The preparation of the financial statements in conformity with generally accepted accounting principles requires management to make reasonable estimates and assumptions that affect the reported amounts of the assets and liabilities and disclosure of contingent assets and liabilities and the reported amounts of revenues and expenses at the date of the financial statements and for the period they include. Actual results may differ from these estimates. ## *Cash* For the purpose of calculating changes in cash flows, cash includes all cash balances and highly liquid short-term investments with original maturity date of three months or less. ## *Investment in Preferred Units* In June of 2015, the Company purchased preferred units in a privately held company. This investment is carried at cost and has no readily determinable fair value. Management has determined that the investment has not been impaired at December 31, 2019. ## *Income taxes* The Company's taxable income is reported by the individual members and therefore, no provision for federal income taxes has been included in these financial statements. #### *Revenue Recognition* In accordance with ASU No. 2014-09, "Revenue from Contracts with Customers" ("ASC Topic 606") revenues from contracts with customers is recognized when, or as, the Company satisfies its performance obligations by transferring the promised services to the customers. A service is transferred to a customer when, or as, the customer obtains control of that service. A performance obligation may be satisfied at a point in time or over time. Revenue from a performance obligation satisfied at a point in time is recognized at the point in time that the Company determines the customer obtains control over the promised service. Revenue from a performance obligation satisfied over time is recognized by measuring the Company's progress in satisfying the performance obligation in a manner that depicts the transfer of the services to the customer. The amount of revenue recognized reflects the consideration the Company expects to receive in exchange for those promised services (i.e., the "transaction price"). In determining the transaction price, the Company considers {7}------------------------------------------------ ## **PHARUS SECURITIES, LLC NOTES TO THE FINANCIAL STATEMENTS DECEMBER 31, 2019** ## 2. **SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES** *(continued)* ## *Revenue Recognition (continued)* multiple factors, including the effects of variable consideration, if any. Revenue from contracts with customers is recognized when, or as, the Company satisfies its performance obligations by transferring the promised services to the customers. A service is transferred to a customer when, or as, the customer obtains control of that service. A performance obligation may be satisfied at a point in time or over time. Revenue from a performance obligation satisfied at a point in time is recognized at the point in time that the Company determines the customer obtains control over the promised service. Revenue from a performance obligation satisfied over time is recognized by measuring the Company's progress in satisfying the performance obligation in a manner that depicts the transfer of the services to the customer. The amount of revenue recognized reflects the consideration the Company expects to receive in exchange for those promised services (i.e., the "transaction price"). In determining the transaction price, the Company considers multiple factors, including the effects of variable consideration, if any. ## 3. **FAIR VALUE OF FINANCIAL INSTRUMENTS** *Fair Value Measurements* under generally accepted accounting principles clarifies the principle that fair value should be based on the assumptions market participants would use when pricing an asset or liability and establishes a fair value hierarchy that prioritizes the information used to develop those assumptions. Under the standard, fair value measurements are separately disclosed by level within the fair value hierarchy as follows. Level 1 - Quoted prices in active markets for identical assets or liabilities. Level 2 - Observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets with insufficient volume or infrequent transactions (less active markets); or model-derived valuations in which all significant inputs are observable or can be derived principally from or corroborated by observable market data for substantially the full term of the assets or liabilities. Level 3 - Unobservable inputs to the valuation methodology that are significant to the measurement of fair value of assets or liabilities. To the extent that valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair value requires more judgment. In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, for disclosure purposes, the level in the fair value hierarchy within which the fair value measurement is disclosed and is determined based on the lowest level input that is significant to the fair value measurement. {8}------------------------------------------------ ## 3. **FAIR VALUE OF FINANCIAL INSTRUMENTS** *(continued)* An entity may elect to measure an equity security without a readily determinable fair value that does not qualify for the practical expedient to estimate fair value in accordance with paragraph 820-10-35-59 at its cost munus impairment. If any, plus or minus changes resulting from observable price changes in orderly transactions for the identical or similar investment of the same issuer. The investment at fair value is classified as a Level 3 investment using the above hierarchy. The Company's investments measured at fair value at December 31, 2019 have been categorized in the table below based upon the fair value hierarchy. | | Level 1 | Level2 | Level 3 | Total | |-------------------|---------|--------|---------------|---------------| | Convertible debt | \$ | \$ | \$
10,230 | \$
10.230 | | Warrant | | | 1,805 | 1.805 | | Equity Investment | | | 341,742 | 341,742 | | Total Investments | | | \$
353 777 | \$
353 777 | The changes in investments measured at fair value for which the Company has used Level 3 inputs to determine fair value are as follows: | Balance, December 31, 2018, as previously reported | \$
156,153 | |----------------------------------------------------|---------------| | Prior period adjustment to correct fair value | 87,391 | | Balance, December 31, 2018, as restated | 243,544 | | Purchases | 110,230 | | Unrealized gain on investment | 3 | | Balance, December 31, 2019 | \$
353,777 | {9}------------------------------------------------ ## **PHARUS SECURITIES, LLC NOTES TO THE FINANCIAL STATEMENTS DECEMBER 31, 2019** #### **4. NET CAPITAL REQUIREMENTS** The Company is subject to the uniform net capital requirements of Rule 15c3-1 of the Securities and Exchange Act, as amended, which requires the Company to maintain, at all times, sufficient liquid assets to cover indebtedness. In accordance with the Rule, the Company is required to maintain defined minimum net capital of the greater of \$5,000 or 6 2/3% of aggregate indebtedness. At December 31, 2019, the Company had net capital, as defined, of \$55,248, which exceeded the required minimum net capital of \$5,000 by \$50,248. Aggregate indebtedness at December 31, 2019 totaled \$8,877. The Company's percentage of aggregate indebtedness to net capital was 16.07%. #### 5. **RELATED PARTY TRANSACTIONS** The Company has entered into an agreement to share various administrative expenses with a company related to the Company through common ownership. Under the terms of the agreement, the Company is obliged to pay the related party for administrative costs as defined by the agreement. For the year ended December 31, 2019, the expense sharing agreement required payment of \$6,000 per month to pay for occupancy costs. #### **6. PRIOR PERIOD ADJUSTMENT** The accompanying financial statements have been restated to correct an error made in prior years. The error relates to an understatement of option by \$87,391. The effect of the restatement was to increase investments at December 31, 2019 by \$87,391. Member's equity at the beginning of 2019 has been adjusted for the effect of the restatements. #### 7. **SUBSEQUENT EVENTS** Management of the Company has evaluated events and transactions that may have occurred since December 31, 2019 and through date of issuance and determined that there are no material events that would require disclosures in the Company's financial statements. Source: SEC EDGAR via Adviser Search (https://search.stillhousedata.com). Agents: see https://search.stillhousedata.com/llms.txt.