# FOROS SECURITIES LLC X-17A-5 (2021-02-26) — Broker-dealer annual report - Company: FOROS SECURITIES LLC - Form: X-17A-5 - Filed: 2021-02-26 - Period: 2020-12-31 - Accession: 0001462100-21-000001 - CIK: 1462100 - File #: 8-68233 - Material weakness: No - Auditor: WITHUMSMITH&BROWN PC - Auditor location: WHIPPANY, NJ - Contact: SCOTT DANIELS - Phone: 212-751-4422 - Signed by: SCOTT DANIELS (FINOP) Original filing: https://www.sec.gov/Archives/edgar/data/1462100/000146210021000001/forospublic2020.pdf --- {0}------------------------------------------------ | UNITED STATES | |------------------------------------| | SECURITIES AND EXCHANGE COMMISSION | | Washington, D.C. 20549 | ## ANNUAL AUDITED REPORT FORM X-17A-5 PART III | OMB APPROVAL | | | |---------------------------|-----------|-----------------| | OMB Number: | | 3235-0128 | | Expires: October 31, 2023 | | | | Estimated average burden | | | | hours per response 12.00 | | | | | | SEC FILE NUMBER | | | 8 - 68233 | | | | | | #### FACING PAGE I nformation 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 | 1/1/2020 | AND ENDING | 12/31/2020 | | |------------------------------------------------------------------------------------------------------------|------------------------------|------------|------------------------------|--| | | MM/DD/YY | | MM/DD/YY | | | A. REGISTRANT IDENTIFICATION | | | | | | NAME OF BROKER-DEALER: | | | | | | | | | OFFICIAL USE ONLY | | | Foros Securities LLC | | | FIRM ID, NO. | | | ADDRESS OF PRINCIPAL PLACE OF BUSINESS: (Do not use P.O. Box No.)
461 Fifth Ave - 17th Floor | | | | | | | (No. and Street) | | | | | New York | NY | | 10017 | | | (City) | (State) | | (Zip Code) | | | NAME AND TELEPHONE NUMBER OF PERSON TO CONTACT IN REGARD TO THIS REPORT
Scott Daniels
(212) 751-4422 | | | | | | | | | | | | | | | (Area Code -- Telephone No.) | | | | B. ACCOUNTANT IDENTIFICATION | | | | | INDEPENDENT PUBLIC ACCOUNTANT whose opinion is contained in this Report* | | | | | | WithumSmith+Brown | | | | | | (Name -- if individual, state last, first, middle name) | | | | | | 200 Jefferson Park #400 | Whippany | NJ | 7981 | | | (Address) | (City) | (State) | (Zip Code) | | | CHECK ONE:
x 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 must be supported by a statement of facts and circumstances relied on as the basis for the exemption. See section 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 OMB control number. SEC 1410 (06-02) {1}------------------------------------------------ #### OATH OR AFFIRMATION | Scott Daniels | , swear (or affirm) that, to the | |---------------------------------------------------------------------------------------------|------------------------------------------------------------------------------------------------------------------------------------| | Foros Securities LLC | best of my knowledge and belief the accompanying financial statement and supporting schedules pertaining to the firm of | | December 31 | 20 20 a e true and correct. I further swear (or affirm) that neither the company | | a customer, except as follows: | nor any patner, proprietor, principal officer or director has any proprietary interest in any account classified solely as that of | | | | | | | | | | | | Agnature | | | FINOP | | | Title
CLAUDIA TAYLOR | | | NOTARY PUBLIC, State of New York
No. 01TA5068172 | | Notary Public | Qualified in Kings County
Commission Expires 10/28/_00 a | | This report** contains (check all applicable boxes): | | | (a) Facing page. | | | (b) Statement of Financial Condition. | | | (c) Statement of Income (Loss). | | | (d) Statement of Cash Flows | | | (e) Statement of Changes in Stockholders' Equity or Partners' or Sole Proprietor's 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 1563-3. | | | (i) Information Relating to the Possession or control Requirements Under Rule 15c3-3. | | | | (j) A Reconciliation, including appropriate explanation, of the Computation of Net Capital Under Rule 15c3-1 and the | | | Computation for Determination of the Reserve Requirements Under Exhibit A of Rule 1563-3. | | solidation. | (k) A Reconciliation between the audited and unaudited Statements of Financial Condition with respect to methods of con- | | (I) An Oath or Affirmation. | | | (m) A copy of the SIPC Supplemental Report. | | | | (n) A report dessribing any material inadequacies found to exist or found to have existed since the date of the previous audit. | | | (o) Report of Independent Auditor on Internal Control Pursuant to Commodity Futures Trading Commission Regulation 1.16 | | Exchange Act of 1934. | (p) Report of Registered Public Accounting Firm on the Exemption Report Required by Rule 17a-5 Under the Securities & | | (q) Exemption Report | | | | ** For conditions of confidential treatment of certain portions of this filing, see section 240.17a-5(e)(3). | {2}------------------------------------------------ STATEMENT OF FINANCIAL CONDITION AND REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM DECEMBER 31, 2020 {3}------------------------------------------------ # **CONTENTS** **December 31, 2020** | 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 Faros Securities LLC #### **Opinion on the Financial Statement** We have audited the accompanying statement of financial condition of Faros Securities LLC (the "Company") as of December 31 , 2020, 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 , 2020, 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 26, 2021 {5}------------------------------------------------ # **STATEMENT OF FINANCIAL CONDITION** | December 31, 2020 | | |-----------------------------------------------------------------------------------------------|---------------------------------------| | | | | ASSETS | | | Cash | \$
8,687,263 | | Other assets | 1,539,502 | | | \$
10,226,765 | | LIABILITIES AND MEMBER'S EQUITY | | | Liabilities
Accounts payable and accrued expenses
Contract liabilities
Due to Parent | \$
171,104
239,583
4,221,311 | | Total liabilities | 4,631 ,998 | | Member's equity | 5,594,767 | | | \$
10,226,765 | {6}------------------------------------------------ # **NOTES TO STATEMENT OF FINANCIAL CONDITION** **December 31, 2020** ### **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 Faros 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 \$8,687,000 consists of cash, money market accounts and certificate of deposits which are held by financial institutions. #### Other Assets Included in other assets on the Statement of Financial Condition are fees receivable of \$1 ,507,921 and contract assets of \$25,965 which are carried at the amount expected to be received, and miscellaneous other assets of \$5,616. ## Revenue Recognition The company recognizes revenue in accordance with ASC Topic 606, Revenue from Contracts with Customers ("ASC Topic 606") which 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. Our principal sources of revenue are derived from two segments: **M&A** advisory fees and opinion fees , 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, 2020** ## **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 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. *Opinion fees.* The Company earns fees for related advisory work by providing fairness opinions. The Company records opinion fee revenues at the point in time, gross of related expenses, when the performance obligation for the services are completed or the contract is canceled under the terms of each assignment or engagement. *Transaction success fees:* The company provides merger and acquisition advisory services whereby the fees for such services are dependent on the success of the transaction. Therefore, revenue for these arrangements is generally recognized at the point in time that performance under the arrangement is completed and the transaction has closed. ## Receivables and Contract Balances The Company had outstanding fees receivables related to revenue from contracts with customers totaling \$2,083,888 and \$1 ,507,921 as of January 1, 2020 and December 31 , 2020, respectively. The Company had contract assets totaling \$27,157 and \$25,965 as of January 1, 2020 and December 31 , 2020, respectively. As of January 1, 2020 and December 31 , 2020, the Company had contract liabilities of \$0 and \$239,583, respectively. ## Disaggregated Revenue Disaggregation of revenue is presented on the face of the Statement of Operations by type of revenue streams the Company earns. ## Risks and Uncertainties? The outbreak of the novel coronavirus ("COVID-19") in many countries continues to adversely impact global commercial activity and has contributed to significant volatility in financial markets. The World Health Organization has declared COVID-19 a "Public Health Emergency of International Concern." The Global impact of the outbreak continue to evolve, and as cases of the virus have continued to be identified, many countries have reacted by instituting quarantines and restrictions on travel. Such actions are creating disruption in global supply chains , and adversely impacting a number of industries. The outbreak could have a continued adverse impact on economic and market conditions and trigger a period of global economic slowdown. The rapid development and fluidity of this situation precludes any prediction as to the ultimate adverse impact of COVID-19. Nevertheless, COVID-19 could have a material impact on the Company's financial statements. {8}------------------------------------------------ # **NOTES TO STATEMENT OF FINANCIAL CONDITION** **December 31, 2020** # **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 , 2020, the UBT tax expense was a debit of \$98,575, which relates to a change in estimates, of which \$73,671 is included in accrued expenses as of December 31 , 2020. At December 31 , 2020, 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 , 2020, the balance due to the Parent under these arrangements was approximately \$316,000. ## **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 , 2020, the Company's net capital was approximately \$3,976,000 which was approximately \$3,683,000 in excess of its minimum net capital requirement of \$293,000. {9}------------------------------------------------ # **NOTES TO STATEMENT OF FINANCIAL CONDITION** **December 31, 2020** ## **5. Exemption from Rule 15c3-3** The Company limits its business activities pursuant to footnote 74 to SEC Release 34-70073, and as discussed in Q & A 8 of the related FAQ issued by SEC staff. Accordingly, there are no items to report under the requirements of this Rule ## **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 , 2020, the Company received approximately 90% of its total revenue from four clients. As of December 31 , 2020, revenue from one of these clients was still outstanding. ## **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.