# FOROS SECURITIES LLC X-17A-5 (2019-02-26) — Broker-dealer annual report - Company: FOROS SECURITIES LLC - Form: X-17A-5 - Filed: 2019-02-26 - Period: 2018-12-31 - Accession: 0001462100-19-000001 - CIK: 1462100 - File #: 8-68233 - Material weakness: No - Auditor: withumsmith&brown,pc - Auditor location: whippany, NE - Contact: scott daniels - Phone: 212-751-4422 - Signed by: Robert Powell (CCO & GC) Original filing: https://www.sec.gov/Archives/edgar/data/1462100/000146210019000001/forospub2018v3.pdf --- {0}------------------------------------------------ ## STATEMENT OF FINANCIAL CONDITION AND REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM DECEMBER 31, 2018 {1}------------------------------------------------ **UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549** | | OMa APPROVAL | | | |---------------------------|--------------------------|-----------------|--| | 0MB Number: | | 3235-0123 | | | Expires: August 31, 2020 | | | | | | Estimated average burden | | | | hours per response 12.00 | | | | | | | SEC FILE NUMBER | | | | 8 - 68233 | | | ## **ANNUAL AUDITED REPORT FORM X-17A-5 PART** Ill ## **FACING PAGE Information Required** *cl* **Brokers and Dealers Pursuant to Section 17** *cl* **the** Securities Exchange Ad *cl* 1934 and Rule 17a-5 Thereunder | REPORT FOR THE PERIOD BEGINNING | 01/01/2018 | AND ENDING | 12/31/2018 | | |----------------------------------------------------------------------------------------------|-----------------------------------------------------|------------|---------------------------|--| | | MM/DD/YYYY | | MM/DD/YYYY | | | | A. REGISTRANT IDENTIFICATION | | | | | NAME OF BROKER-DEALER:
Foros Securities LLC | | | | | | | | | OFFICIAL USE ONLY | | | | | | FIRM ID. NO. | | | ADDRESS OF PRINCIPAL PLACE OF BUSINESS: (Do not use P.O. Box No.) | | | | | | 461 Fifth Ave - 17th Floor | | | | | | | (No. a, Street | | | | | New York | NY | | 10017 | | | (City) | | | (Zip Code) | | | | B. ACCOUNTANT IDENTIFICATION | | (Area Code-Telephone No.) | | | INDEPENDENT PUBLICACCOUNTANTwhoseopinion iscontaned in this Report* | | | | | | WithumSmith+Brown, PC | | | | | | | | | | | | | (Name-if individual, state/as/, first, rriddlename) | | | | | 200 Jefferson Park #400 | Whippany | NJ | 07981 | | | (Addre&l) | (City) | (Stite) | (Zip Code) | | | ~ Caiified PublicAcxx,untait | | | | | | 0 PublicAcxx,untait
0 ACXXJUntait not residait in United States or a,y of its possessions | | | | | | CHECK ONE: | FOR OFFICIAL USE ONLY | | | | \*Claims for exerrption from the requi rerrent that the annual report be covered by the opinion of an i ndep€rldmt public acoountant must be S1.Jpportoo by a stat001eflt off ads and ci rcum&ances relied on as the basis for the exemption. *SJe* ~ion 240. 17a-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.** SEC 1410 (06-02) {2}------------------------------------------------ #### **OATH OR AFFIRMATION** | I, | Robet~~I | ,SNea-(orlifirm)th.t,tothe | | |--------------------------------|----------------------------------------------------------------------------------------------------------------------------------------|----------------------------|--| | | best of my knowla;lge ood be i ef the a:xx:ll'll)lrlY i ng f 1iand al stmenmt a,d supporting !d,e:j ules pErtai ning to the firm of | | | | | ForosSeolrltimLLC | , a;of | | | De:lif'l'lbEr 31.2018 | , a-etruelrld correct. I furthe" SNS (or itfirm) Iha: neiths' thecorTlJaly | | | | a customer, exo;pt as follows: | nor a,y pa1118", propriaor, princip;i officer or director has r61Y proprieta-y interest in S'lY acx:ount classifia;I solely a; that of | | | | No ExfflJ)tions | | | | | AUBREE SULLIVAN | | | | | | | | | Ho 01 SU6377802 Ou1lified In Nassau County **My** Commission Expires 07-09-2022 rue This report\*\* contalns(check **all** £J!Plicaileboxes): IRJ (a) Facing~ IE! (b) StatE!T'8rt of Fina,dal Condition. d (cl Statanent of lncome(Loss). 0 (d) Staanent of Changes in Finmal Condition. 0 ( e) **Statsnent** of ChlllQ8S in Stockholda"S' Equity or PainEnl' or Sole Proprietors' ~ital. 0 (f) Staanent of Chaigesin Liscilities&Jbordina:a;I to Clelmsof Crajitors. 0 (g) Conl)uta:ion of **Net ~ital.** (h) Cofll)utstion for DEiEITTilmtion of Reeerve Requiranents F\Jrsuait to Rule 15c3-3. D (i) Information Relttlngtothe~on or control RequiranentsUndw Rule15c3-3. D D 0) A REmncili!iion, including £J1Propritteexp1S'laion, m theCorrputaion of Net ~ital Unda" Rule 15c3-1 aid the **Corrpliliion** for Daemimtlon of the Re98'Ve REGuiranents Under Exhibit **A** of Rule 15c3-3. D (k) A REalncllililon bawea, theaudita;I aid unaudita;I Stliarellsof Flnaidal Condition with r~ to methods of cx,nsdidaion. - 181 (I) An Oah or Affirmation. - D (m) Aropy of the SI PC &Jpplsnental Report. D (n) A report describing **111y mciS'ial** inalequacies found to exist or found to ha.ieexista;I sinc:ethedaeof theprS1ious a,dlt. D ( o) Exerrpti on report ~For conditions *of* confident/a/ treatrrmt of certain portions *of* this filing, **939** section 240. 17a-5(e)(3). {3}------------------------------------------------ ### **CONTENTS** ### **December** 31, **2018** | Report of Independent Registered Public Accounting Firm | | |---------------------------------------------------------|-----| | Financial Statement | | | Statement of Financial Condition | 2 | | Notes to Statement of Financial Condition | 3-6 | {4}------------------------------------------------ ![](_page_4_Picture_0.jpeg) ## **REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM** To the Member of Foros Securities LLC **Opinion on the Financial Statement** We have audited the accompanying statement of financial condition of Foros Securities LLC (the "Company"), as of December 31, 2018, and the related notes (collectively referred to as the "financial statement"). In our opinion, the financial statement presents fairly, in all material respects, the financial position of the Company as of December 31, 2018, in conformity with accounting principles generally accepted in the United States of America. **Basis for Opinion** This financial statement is the responsibility of the Company's management. Our responsibility is to express an opinion on this 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 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. Our audit included performing procedures to assess the risks of material misstatement of the financial statement, whether due to error or fraud, 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 2016. February 21, 2019 WithumSmith+Brown. PC ?00 Jrit0, :N, P:,r x ".,u;tc• !i!JO. Wh,pp,n; t,J,».v .IPt '.,•'V 0/Qi: 1 · 1 O'iO T [9'/'1) P,'!B 8,192,886 | | Other assets | 50,614 | | | 8,243,500
\$ | | LIABILITIES AND MEMBER'S EQUITY | | | Liabilities
Accounts payable and accrued expenses
Accrued taxes
Due to Parent | \$
217,801
66,000
5,337,218 | | Total liabilities | 5,621,019 | | Member's equity | 2,622,481 | | | 8,243,500
\$ | {6}------------------------------------------------ ## **NOTES TO STATEMENT OF FINANCIAL CONDITION** ### **December 31, 2018** #### **1. Nature of business** Faros Securities LLC (the "Company'') is an entity organized under the laws of the state of Delaware on May 5, 2009. The firm primarily provides consulting services on mergers, acquisitions, divestitures, joint ventures, restructurings, reorganizations, capital raising activities, private placements, defensive strategies and similar transactions. The Company is a wholly-owned subsidiary of Foros Advisors LLC (the "Parent"). The Company is a registered broker-dealer with the Securities and Exchange Commission ("SEC") and is a member of the Financial Industry Regulatory Authority ("FINRA"). #### **2. Summary of significant accounting policies** #### Basis of Presentation The accompanying financial statement is presented in U.S. Dollars and has been prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP"). #### Cash Cash aggregating approximately \$8,193,000 consists of cash and money market accounts which are held by a New York financial institution. ### Other Assets Included in other assets on the Statement of Financial Condition are unbilled client receivables which are carried at the amount expected to be received. On a periodic basis, the Company evaluates collectability and establishes an allowance for doubtful accounts. At December 31, 2018 other assets did not include an allowance for doubtful accounts. #### Revenue Recognition Effective January 1, 2018, the Company adopted 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 determining the transaction price, an entity may include variable consideration only to the extent that it is probably that a significant 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 cumulative adjustment to retained earnings as of January 1, 2018. Our principal sources of revenue are derived from two segments: M&A advisory fees and underwriting, as more fully described below. The new revenue recognition guidance does not apply to revenue associated with financial instruments, interest income and expense, leasing and insurance contracts. The following is a description of principal activities, separated by reportable segments, from which the Company generates its revenue. {7}------------------------------------------------ ## **NOTES TO STATEMENT OF FINANCIAL CONDITION** **December 31, 2018** ## **2. Summary of significant accounting policies (continued)** M&A advisory fees. The Company provides advisory services on mergers and acquisitions (M&A). Revenue for advisory arrangements is generally recognized at the point in time that performance under the arrangement is completed (the closing date of the transaction) or the contract is cancelled. However, for certain contracts, revenue is recognized over time for advisory arrangements in which the performance obligations are simultaneously provided by the Company and consumed by the customer. In some circumstances, significant judgment is needed to determine the timing and measure of progress appropriate for revenue recognition under a specific contract. Retainers and other fees received from customers prior to recognizing revenue are reflected as contract liabilities. Underwriting fees. The Company underwrites securities for business entities that want to raise funds through a sale of securities. Revenues are earned from fees arising from securities offerings in which the Company acts as an underwriter. Revenue is recognized on the trade date (the date on which the Company purchases the securities from the issuer) for the portion the Company is contracted to buy. The Company believes that the trade date is the appropriate point in time to recognize revenue for securities underwriting transactions as there are no significant actions which the Company needs to take subsequent to this date and the issuer obtains the control and benefit of the capital markets offering at that point. Underwriting costs that are deferred under the guidance in FASB ASC 940-340-25-3 are recognized in expense at the time the related revenues are recorded. In the event that transactions are not completed and the securities are not issued, the Company immediately expenses those costs. #### Contracts Assets and Liabilities The Company had outstanding receivables related to revenue from contracts with customers totaling \$5,923,648 as of January 1, 2018. All of these amounts were collected during the year. There were no outstanding receivables contract assets, or contract liabilities from contracts with customers as of December 31, 2018. #### Disaggregated Revenue Disaggregation of revenue is presented on the face of the Statement of Operations by type of revenue streams the Company earns. #### Recent Accounting Pronouncements #### Leases In February 2016, the FASB issued ASU No. 2016-02, Leases ("ASU 2016-02"). This update requires all leases with a term greater than 12 months to be recognized on the balance sheet through a right of use asset and a lease liability and the disclosure of key information pertaining to leasing arrangements. This new guidance is effective for years beginning after December 15, 2018, with early adoption permitted. The Company believes the impact of the ASU is are minimal. {8}------------------------------------------------ ## **NOTES TO STATEMENT OF FINANCIAL CONDITION** **December31,2018** ## **2. Summary of significant accounting policies (continued)** #### Income Taxes The Company is a single member limited liability company. Accordingly, it is a disregarded entity for tax purposes and is not subject to taxes on its income. The Company's Sole Member is subject to the New York City Unincorporated Business Tax ("UBT"). As the liability associated with the UBT is principally the result of the operations of the Company, the UBT, which is calculated using currently enacted tax laws and rates, is reflected on the books of the Company, in accordance with the provisions of the Income Taxes Topic of the Financial Accounting Standards Board Accounting Standards Codification. This Topic requires the consolidated current and deferred tax expense (benefit) for a group that files a consolidated tax return to be allocated among the members of the group when those members issue separate financial statements. For the year ended December 31, 2018, the UBT tax expense was \$83,000, of which \$66,000 is included in accrued taxes as of December 31, 2018. At December 31, 2018, management has determined that the Company had no uncertain tax positions that would require financial statement recognition. This determination will always be subject to ongoing reevaluation as facts and circumstances may require. ### Use of Estimates The preparation of financial statements in conformity with GAAP requires the Company's management to make estimates and assumptions that affect the amounts disclosed in the financial statement. Actual results could differ from those estimates. ## **3. Related party transactions** Pursuant to an administrative services agreement with its Parent, the Company recognizes rent and other general and administrative expenses based on the terms and conditions stipulated in the agreement. As of December 31, 2018, the balance due to the Parent under these arrangements was approximately \$337,000. ## **4. Net capital requirement** The Company, as a member of FINRA, is subject to the Securities and Exchange Commission Uniform Net Capital Rule 15c3-1. This Rule requires the maintenance of minimum net capital and that the ratio of aggregate indebtedness as defined to net capital, shall not exceed 15 to 1. The rule also provides that equity capital may not be withdrawn or cash dividends paid if the resulting net capital ratio would exceed 10 to 1. At December 31, 2018, the Company's net capital was approximately \$2,561 ,000 which was approximately \$2,186,000 in excess of its minimum net capital requirement of \$375,000. ## **5. Exemption From Rule 15c3-3** The Company is exempt from the Securities and Exchange Commission Rule 15c3-3 as it does not hold customer funds or safekeep customer securities. {9}------------------------------------------------ ## **NOTES TO STATEMENT OF FINANCIAL CONDITION** **December 31, 2018** ### **6. Concentrations of credit risk** The Company maintains its cash balances in bank accounts at financial institutions, and at times the balance may exceed the federally insured limit. The Company is subject to credit risk to the extent any financial institution with which it conducts business is unable to fulfill contractual obligations on its behalf. Due to the predominantly transactional nature of the Company's business, the revenues were attributable to a limited number of customers. During the year ended December 31, 2018, the Company received approximately 92% of its total revenue from three clients. As of December 31, 2018 all fees were collected from these clients. #### **7. Subsequent events** The Company has evaluated subsequent events. There are no subsequent events which require disclosure in the notes to the financial statements. Source: SEC EDGAR via Adviser Search (https://search.stillhousedata.com). Agents: see https://search.stillhousedata.com/llms.txt.