# AVALON WEALTH MANAGEMENT LLC X-17A-5 (2020-02-27) — Broker-dealer annual report - Company: AVALON WEALTH MANAGEMENT LLC - Form: X-17A-5 - Filed: 2020-02-27 - Period: 2019-12-31 - Accession: 0001544541-20-000002 - CIK: 1544541 - File #: 8-69066 - Material weakness: No - Auditor: Melton & Melton, L.L.P. - Auditor location: HOUSTON, TX - Contact: Peggy E. Lebert - Phone: 7132382058 - Signed by: Chase Robison (Chief Financial Officer, FINOP) Original filing: https://www.sec.gov/Archives/edgar/data/1544541/000154454120000002/annualaudit8-60966_19.pdf --- {0}------------------------------------------------ AVALON WEALTH MANAGEMENT LLC ## FINANCIAL STATEMENTS AND SUPPLEMENTAL INFORMATION ## FOR THE ## YEAR ENDED DECEMBER 31 , 2019 ### AND REPORT OF INDEPENDENT REGISTERED #### PUBLIC ACCOUNTING FIRM {1}------------------------------------------------ UNITEDSfATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 **0MB APPROVAL** 0MB Number: 3235-0123 Expires: August 31, 2020 Estimated average burden hours oer resoonse ...... 12.00 # **ANNUAL AUDITED REPORT FORM X-17A-5 PARTIII** | SEC FILE NUMBER | |-----------------| | B-69066 | FACING **PAGE** 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 | ___
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MM/DD/VY | | |---------------------------------------------------------------------------------------------|--------------------------------------------------------|------------|------------------------------------------------|--| | | MM/DD/YY | | | | | | A. REGISTRANT IDENTIFICATION | | | | | NAME oF BROKER-DEALER: Avalon Wealth Management LLC | | | OFFICIAL USE ONLY | | | ADDRESS OF PRINCIPAL PLACE OF BUSINESS: (Do not use P.O. Box No.) | | | FIRM 1.0. NO. | | | 2929 Allen Parkway, Suite 3000 | | | | | | | (No. and Street) | | | | | Houston | TX | | 77019-7124 | | | (City) | (State) | | (Zip Code) | | | NAME AND TELEPHONE NUMBER OF PERSON TO CONT ACT IN REGARD TO THIS REPORT
Peggy E. Lebert | | | (713) 238-2058 | | | | | | (Area Code - Telephone Number) | | | | B. ACCOUNTANT IDENTIFICATION | | | | | INDEPENDENT PUBLIC ACCOUNT ANT whose opinion is contained in this Report• | | | | | | Melton & Melton, L.L.P. | | | | | | | (Name - if individual, slale lasl, firsl, middle name) | | | | | 6002 Rogerdale Road, Suite 200 | Houston | TX | 77072-1660 | | | (Address) | (City) | (State) | (Zip Code) | | | CHECK ONE: | | | | | | lcertified 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 0MB control number.** {2}------------------------------------------------ ## **OATH OR AFFIRMATION** # 1, Chase Robison , swear (or affinn) that, to the best of my knowledge and belief the accompanying financial statement and supporting schedules pertaining to the firm of Avalon Wealth Management LLC ------------------------------------------, as of December 31 are true and correct. 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: | NIA | | |-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|-----------------------------------------------------------------------------------------| | | a::ru
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Signature
Chief Financial Officer, FINOP | | "'
This report •• contains (check all applicable boxes):~ __._. __ (
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0 (a) Facing Page.
0 (b) Statement of Financial Condition.
0 (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) 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.
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(i) Information Relating to the Possession or Control Requirements Under Rule I 5c3-3.
D 0) A Reconciliation, including appropriate explanation of the Computation ofNet Capital Under Rule l Sc3-l and the
Computation for Determination of the Reserve Requirements Under Exhibit A of Rule 15c3-3. | Title
ANISA PEREZ
Nota,y ID #125217139
My Commission Expires
March 24, 2021 | | 0 (k) A Reconciliation between the audited and unaudited Statements of Financial Condition with respect to methods of
consolidation.
✓ (I) An Oath or Affirmation.
(m) A copy of the SIPC Supplemental Report.
(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 140. l 7a-5(e){3).* {3}------------------------------------------------ ## **AV ALON WEAL TH MANAGEMENT LLC** ## **TABLE OF CONTENTS** | Report of Independent Registered Public Accounting Firm | | | | |---------------------------------------------------------|--|---------------------------------------------------------------------------------------------------------------------------------------|----| | Statement of Financial Condition | | 2 | | | Statement oflncome | | | 3 | | | | Statement of Changes in Member's Equity | 4 | | Statement of Cash Flows | | | 5 | | Notes to Financial Statements | | 6 | | | Supplemental Information: | | | | | Schedule I - | | Computation of Net Capital under Rule 15c3-l of the Securities and
Exchange Commission | 9 | | Schedule II - | | Computation for Determination of Reserve Requirements under Rule
15c3-3 (exemption) of the Securities and Exchange Commission | 10 | | Schedule III - | | Information Relating to Possession or Control Requirements under Rule
15c3-3 (exemption) of the Securities and Exchange Commission | 11 | {4}------------------------------------------------ ![](_page_4_Picture_0.jpeg) ## **REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM** #### To the Member of **Avalon Wealth Management LLC** #### *Opinion on the Financial Statements* We have audited the accompanying statement of financial condition of Avalon Wealth Management LLC (the "Company"), as of December 31, 2019, and the related statements of income, changes in member's equity, and cash flows for the year then ended, and the related notes (collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly, in all material respects, the financial position of Avalon Wealth Management LLC as of December 31, 2019, and the results of its operations and its cash tlows for the year ended December 31, 2019, in conformity with accounting principles generally accepted in the United States of America. #### *Basis for Opinion* These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements 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 Avalon Wealth Management 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 PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are 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 statements, 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 statements. 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 statements. We believe that our audit provides a reasonable basis for our opinion. #### *Supplemental Information* The information contained in Schedule I - Computation of Net Capital under Rule 15c3-1 of the Securities and Exchange Commission, Schedule II - Computation for Determination of Reserve Requirements under Rule l 5c3-3 (exemption) of the Sel:urilies antl Exchange Commission, and Schedule III - Information Relating to Possession or Control Requirements Under Rule 15c3-3 (exemption) of the Securities and Exchange Commission, (collectively referred to as the "supplemental information") has been subjected to audit procedures performed in conjunction with the audit of Avalon Wealth Management LLC's financial statements. The supplemental information is the responsibility of the Company's management. Our audit procedures included determining whether the supplemental information reconciles to the financial statements or the underlying accounting and other records, as applicable, and performing procedures to test the completeness and accuracy of the information presented in the supplemental information. In forming our opinion on the supplemental information, we evaluated whether the supplemental information, including its form and content, is presented in conformity with 17 C.F.R. § 240. l 7a-5. In our opinion, the supplemental information is fairly stated, in all material respects, in relation to the financial statements as a whole. We have served as Avalon Wealth Management LLC's auditor since 20 13. Houston, Texas February 24, 2020 {5}------------------------------------------------ # **AV ALON WEAL TH MANAGEMENT LLC STATEMENT OF FINANCIAL CONDITION December 31, 2019** ## **ASSETS** | Cash and cash equivalents | \$
266,725 | |---------------------------------------|---------------| | Receivables | 28,484 | | Receivables -
related party | 602,004 | | Prepaid regulatory fees | 44,314 | | Total assets | \$
941,527 | | LIABILITIES AND MEMBER'S EQUITY | | | Liabilities: | | | Accounts payable -
related party | \$
15,932 | | State income taxes payable | 13,000 | | Total liabilities | 28,932 | | Commitments and Contingencies | | | Member's Equity | 912,595 | | Total liabilities and member's equity | \$
941,527 | {6}------------------------------------------------ # **AV ALON WEAL TH MANAGEMENT LLC STATEMENT OF INCOME For the Year Ended December 31, 2019** | Revenues | \$
3,002,227 | |-------------------------------------|-----------------| | Expenses: | | | Employee compensation and benefits | \$
1,138,020 | | Regulatory fees | \$
58,980 | | General and administrative expenses | \$
420,580 | | | \$
1,617,580 | | Income before state income taxes | \$
1,384,647 | | State Income Taxes | \$
13,000 | | Net income | \$
1,371,647 | {7}------------------------------------------------ # **AV ALON WEAL TH MANAGEMENT LLC STATEMENT OF CHANGES IN MEMBER'S EQUITY For the Year Ended December 31, 2019** | Balance, beginning of year | \$
280,387 | |----------------------------|---------------| | Distributions | (739,439) | | Net income | 1,371
,647 | | Balance, end of year | \$
912,595 | {8}------------------------------------------------ # **AV ALON WEAL TH MANAGEMENT LLC STATEMENT OF CASH FLOWS For the Year Ended December 31, 2019** | Cash Flows from Operating Activities: | | | |----------------------------------------------|----------------------------------------------|---------------| | Net income | 1,371
,647
\$ | | | Adjustments to reconcile net income to net | | | | cash provided by operating activities: | | | | | Changes in operating assets and liabilities: | | | Receivables | | (14,070) | | Receivables - | (602,004) | | | related party
Prepaid regulatory fees | | (3,412) | | Accounts payable -
related party | | (35,629) | | | State income taxes payable | 511 | | | Total adjustments | (654,604) | | | Net cash provided by operating activities | 717,043 | | Cash Flows from Financing Activities: | | | | Distributions | | (739,439) | | | Net cash used in financing activities | (739,439) | | | Net change in cash and cash equivalents | (22,396) | | Cash and Cash Equivalents, beginning of year | | 289,121 | | Cash and Cash Equivalents, end of year | | 266,725
\$ | {9}------------------------------------------------ # **AV ALON WEAL TH MANAGEMENT LLC NOTES TO FINANCIAL STATEMENTS December 31, 2019** ## **NOTE 1 - DESCRIPTION OF THE COMPANY** ## **Nature of Operations** Avalon Wealth Management LLC (the "Company") is a Delaware limited liability company formed on February 8, 2012, as a limited purpose noncarrying broker-dealer. The Company completed its registration with the Securities Exchange Commission ("SEC") and Financial Industry Regulatory Authority ("FINRA") on January 14, 2013 . Avalon Advisors, LLC ("AA") is the sole member of the Company. The Company is engaged in private placements of investment funds. The Company is also approved to serve as principal underwriter and distributor of unlisted, continuously offered, closed-end registered investment companies ("Closed-End Funds"). The Company does not hold or maintain funds or securities or provide clearing services for other broker-dealers. ## **NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES** ## **Revenue from Contracts with Customers** Revenue is measured and recognized based on the five-step process outlined in the Financial Accounting Standards Board ("F ASB") Accounting Standards Codification ("ASC") *Revenue from Contracts with Customers* (Topic 606). Revenue is determined based on the transaction price negotiated with the investment funds and/or the fund sponsors. While the Company's revenues are generally categorized as "placement fees," as they relate to the activities of the broker-dealer, these fees are derived from the sub-categories of fund-related fees as described as follows: - Placement fees which are typically based upon a percentage of the value of the investor's committed or invested capital. - Management fees, and incentive fee revenues, including carried interests, which are typically based upon a percentage of the value of the investor's invested capital in the underlying fund. The performance obligation from placement fees is satisfied at the time an investment fund receives a commitment to invest from an investor introduced by the Company. The amount of fees received after the investment commitment is variably constrained due to factors outside of the Company's control, including market volatility and client behavior. Revenue is recognized when it is probable that a significant reversal will not occur that is generally each month or quarter-end as the investor account balance is resolved. The Company may incur certain costs to obtain revenue contracts with its customers. These costs are expensed over the period of time that the services are expected to be provided to the customer. The following table presents revenues by major source for the year ended December 31, 2019: | Management Fees | \$
2,998,870 | |-----------------|-----------------| | Placement Fees | 0 | | Incentive Fees | 3,357 | | Total | \$
3,002,227 | | | | {10}------------------------------------------------ ## **AV ALON WEAL TH MANAGEMENT LLC NOTES TO FINANCIAL STATEMENTS (CONTINUED) December 31, 2019** ## **NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)** #### **Cash and Cash Equivalents** The Company considers cash and cash equivalents to include all time deposits, certificates of deposit, and all highly liquid investments with original maturities of three months or less. ### **Receivables** Receivables for fees are shown net of allowances and are written off when they are determined to be uncollectible. An allowance for doubtful accounts is estimated through an analysis of the aging of receivables, assessments of collectibility based on historical trends and other qualitative and quantitative factors, including the Company's relationship with the fund sponsor, the financial health of the fund sponsor, current economic conditions, and whether the account is closed or active. No allowance was considered necessary by management at December 31 , 2019. #### **Income Taxes** The Company's taxable earnings are included in the federal income tax return of AA; therefore, any taxable earnings are passed through to AA's members and taxed depending on their individual tax situations. Accordingly, there is no provision for federal income taxes in the accompanying financial statements. The State of Texas has a gross margin tax that applies to the Company and is included in the consolidated state tax return filed by AA. State income taxes are calculated as if the companies filed on a separate return basis, and the amount of current tax is remitted to AA. Management evaluated the Company's tax positions and concluded that the Company had taken no uncertain tax positions that require adjustment to the financial statements. The Company is subject to income tax examinations by the U.S. federal or state tax authorities for the tax years from 2016 through 2019. The Company reports tax-related interest and penalties in the provision for state income taxes. There were no tax-related interest or penalties in 2019. #### **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 and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Management believes that these estimates and assumptions provide a reasonable basis for the fair presentation of the financial statements. {11}------------------------------------------------ ## **AV ALON WEAL TH MANAGEMENT LLC NOTES TO FINANCIAL STATEMENTS (CONTINUED) December 31, 2019** ## **NOTE 3** - **COMMITMENTS AND CONTINGENCIES** #### **Credit Risks** At December 31, 2019 and at various times throughout the year, the Company maintained cash balances in a financial institution in excess of federally insured limits. #### **Concentration Risks** The Company is engaged in various trading and brokerage activities in which counterparties primarily include fund sponsors, 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's policy to review, as necessary, the credit standing of each counterparty. Affiliated fund sponsors provided 76% of all commission fee income during 2019. At December 31 , 2019, affiliated fund sponsors represent 95% of the Company's receivable balance. Management believes the Company's relationship with these fund sponsors is satisfactory. #### **NOTE 4 - RELATED-PARTY TRANSACTIONS** During 2019, the Company incurred \$1,543,835 in expenses related to an expense sharing agreement the Company has with AA to provide personnel and administrative services on behalf of the Company. At December 31 , 2019, the Company had \$15,932 in payables to AA related to the reimbursement of direct expenses paid by AA on the Company's behalf. At December 31 , 2019, the Company had \$13,000 in payables related to state income taxes to be remitted by AA on behalf of the Company. During 2019, the Company received \$2,285,860 in commission fee income from fund sponsors that that have common ownership with AA. At December 31 , 2019, the Company had \$602,004 in receivables from these fund sponsors. ## **NOTE 5-NET CAPITAL REQUIREMENTS** The Company is subject to the SEC Uniform Net Capital Rule (SEC Rule 15c3-l), 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 (and the rule of the "applicable" exchange 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 , 2019, the Company had net capital of \$237,793 which was \$232,793 in excess of its required net capital of \$5,000. The Company's net capital ratio was .12 to 1. #### **NOTE 6 - SUBSEQUENT EVENTS** The Company has evaluated subsequent events through February 24, 2020, the date the financial statements were available to be issued. {12}------------------------------------------------ ## **AVALON WEALTH MANAGEMENT LLC COMPUTATION OF NET CAPITAL UNDER RULE 15c3-1 OF THE SECURITIES AND EXCHANGE COMMISSION As of December 31, 2019** | Computation of Net Capital: | | | | | |---------------------------------------------------------------------------------------|----|---------|----|----------| | Total ownership equity from Statement of Financial Condition | | | | 912,595 | | Deductions and/or charges: | | | | | | Prepaid regulatory fees | \$ | 44,314 | | | | Receivables | \$ | 630,488 | | | | Total non-allowable assets from Statement of Financial Condition: | | | \$ | 674,802 | | Net Capital | | | \$ | 237,793 | | | | | | | | Computation of Basic Net Capital Requirement: | | | | | | Minimum net capital required | | | \$ | 1,929 | | [ 1] Minimum dollar net capital requirement of reporting broker or dealer | | | \$ | 5,000 | | Net capital requirement | | | \$ | 5,000 | | Excess net capital | | | \$ | 232,793 | | Net capital less greater of 10% of [2] or 120% of [l] | | | \$ | 231 ,793 | | | | | | | | | | | | | | Computation of Aggregate Indebtedness: | | | | | | Accounts payable, accrued liabilities, expenses and other | \$ | 28,932 | | | | Total A.I. liabilities from Statement of Financial Condition: | | | \$ | 28,932 | | [2] Total aggregate indebtedness | | | \$ | 28,932 | | Percentage of aggregate indebtedness to net capital | | | | 12.17% | | Percentage of debt to debt-equity total computed in accordance with Rule l 5c3-l ( d) | | | | 0.00% | | | | | | | There are no material differences between the preceding computation and the Company's corresponding unaudited Part IIA of Form X-l 7A-5 as of December 31 , 2019. {13}------------------------------------------------ #### **SCHEDULE** II # **AVALON WEALTH MANAGEMENT LLC COMPUTATION FOR DETERMINATION OF RESERVE REQUIREMENTS UNDER RULE 15c3-3 (EXEMPTION) OF THE SECURITIES AND EXCHANGE COMMISSION As of December 31, 2019** Because the Company does not carry securities accounts for customers or perform custodial functions relating to customer securities, it is exempt from the provisions of Rule 15c3-3. {14}------------------------------------------------ #### **SCHEDULE** III # **AVALON WEALTH MANAGEMENT LLC INFORMATION RELATING TO POSSESSION OR CONTROL REQUIREMENTS UNDER RULE 15c3-3 (EXEMPTION) OF THE SECURITIES AND EXCHANGE COMMISSION As of December 31, 2019** Because the Company does not carry securities accounts for customers or perform custodial functions relating to customer securities, it is exempt from the provisions of Rule 15c3-3. {15}------------------------------------------------ ![](_page_15_Picture_0.jpeg) **MELTON &MELTON, L.L.P.** CERT I FIED PUBLIC ACCOUNTA N TS # **REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM** ## To the Member of · **Avalon Wealth Management LLC** We have reviewed management's statements, included in the accompanying Exemption Report Pursuant to SEC Rule l 7a-5(d)(2), in which (I) Avalon Wealth Management LLC identified the following provisions of 17 C.F.R. § 15c3-3(k) under which Avalon Wealth Management LLC claimed an exemption from 17 C.F.R. §240.15c3-3: (k)(2)(i) (the "exemption provisions") and (2) Avalon Wealth Management LLC stated that Avalon Wealth Management LLC met the identified exemption provisions throughout the most recent year without exception. Avalon Wealth Management LLC's management is responsible for compliance with the exemption provisions and its statements. Our review was conducted in accordance with the standards of the Public Company Accounting Oversight Board (United States) and, accordingly, included inquiries and other required procedures to obtain evidence about Avalon Wealth Management LLC's compliance with the exemption provisions. A review is substantially less in scope than an examination, the objective of which is the expression of an opinion on management's statements. Accordingly, we do not express such an opinion. Based on our review, we are not aware of any material modifications that should be made to management's statements referred to above for them to be fairly stated, in all material respects, based on the provisions set forth in paragraph (k)(2)(i) of Rule 15c3-3 under the Securities Exchange Act of 1934. Houston, Texas February 24, 2020 {16}------------------------------------------------ ![](_page_16_Picture_0.jpeg) # Exemption Report Pursuant to SEC Rule 17a-5( d)(2) I, Chase Robison, Chief Financial Officer and FI OP of valon Wealth ManagementLLC ("AWM"), hereby state and report, to the best of my knowledge and belief, as follows: - 1. ecurities and xchange Commission (" C") Rule 15c3-3 (17 C.F.R.§240.15c3-3), adopted by the EC pursuant to the ecurities xchange Act of 1934, as amended, is entitled "Customer protection-reserve and cu tody of ecurities" and requires broker-dealers that carry customer funds and securities to adhere to certain custody, control, and reserve reqllltements. - 2. A \VM is exempt from the provi ion of Rule 15c3-3 pur uant to the exemption in paragraph (k)(2)(i) of the Rule and met the exemption provisions throughout calendar year 2019, without exception, because it did not: - (a) Carry customer accounts of any kind; - (b) ReceiYe cu tamer funds or securities; or - (c) Otherwise hold funds or securities for, or owe money or securities to, customers. - 3. If AWM ever comes into possession of customer funds or securities, it will continue to follow AW 's procedures and I I IEDIAT .. LY turn them over to the Chief Compliance Officer for logging and determination of dispo ition, either by returning to the owner or forwarding to the appropriate party (bank, issuer, escrow account, etc.). Avalon Wealtl1 Management LLC By: Chase Robison, Chief Financial Officer and FI OP Date: February 24, 2020 {17}------------------------------------------------ ![](_page_17_Picture_0.jpeg) **MELTON &MELTON, L.L.P.** CERTIFIED PUBLIC ACCOUNTANTS ## **REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM ON APPL YING AGREED UPON PROCEDURES** ## To the Member of **Avalon Wealth Management LLC** In accordance with Rule 17a-5( e)( 4) under the Securities Exchange Act of 1934 and with the Securities Investor Protection Corporation (SIPC) Series 600 Rules, we have performed the procedures enumerated below, which were agreed to by Avalon Wealth Management LLC (Company) and the SIPC, with respect to the accompanying General Assessment Reconciliation (Form SIPC-7) of the Company for the year ended December 31 , 2019, solely to assist you and the SlPC in evaluating the Company's compliance with the applicable instructions of the General Assessment Reconciliation (Form SIPC-7). Management of the Company is responsible for its Form SIPC-7 and for its compliance with those requirements. This agreed-upon procedures engagement was conducted in accordance with the standards of the Public Company Accounting Oversight Board (United States) and in accordance with attestation standards established by the American Institute of Certified Public Accountants. The sufficiency of these procedures is solely the responsibility of those parties specified in this report. Consequently, we make no representation regarding the sufficiency of the procedures described below either for the purpose for which this report has been requested or for any other purpose. The procedures we performed and our findings are as follows: - 1. Compared the listed assessment payments in Form SIPC-7 with respective cash disbursement records entries noting no differences; - 2. Compared the Total Revenue amounts reported on the Annual Audited Report Form X-l 7A-5 Part III for the year ended December 31, 2019, with the Total Revenue amounts reported in Form SIPC-7 for the year ended December 31 , 2019 noting no differences; - 3. Compared any adjustments reported in Form SIPC-7 with supporting schedules and working papers noting no differences; and - 4. Recalculated the arithmetical accuracy of the calculations reflected in Form SIPC-7 and in the related schedules and working papers supporting the adjustments noting no differences. We were not engaged to, and did not conduct an examination or a review, the objective of which would be the expression of an opinion or conclusion, respectively, on the Company's compliance with the applicable instructions of the Form SIPC-7 for the year ended December 31 , 2019. Accordingly, we do not express such an opinion or conclusion. Had we performed additional procedures, other matters might have come to our attention that would have been reported to you. This report is intended solely for the information and use of the Company and the SIPC and is not intended to be and should not be used by anyone other than these specified parties. */(di,.., ,/(~* Lf\_p Houston, Texas February 24, 2020 {18}------------------------------------------------ | SIPC-7 | | SECURITIES INVESTOR PROTECTI
P.O. Box 92185 Washinglon. D.C . 20090 2185
202 ·371 •8300 | ON CORPORATI
ON
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that all information contained herein Is true. corr ct | | Avalon Wealth Mana ement LLC | | | | | | | | | | | | | Dated 11,e~ | day of February
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en Disposition of excepI ions : | | | | | | | {19}------------------------------------------------ ## **DETERM INATION OF "SIPC NET OP ERATING REVENUES " AND GENERAL ASSESSMENT** Amounts fo r the fisca l per iod beg inning **1/1/201 9** and endi ng **12/31/2019** | Item No.
2a. Total revenu e (FOCUS Lin e 12•Pan ll/1 L,nc 9. Code 4030) | El imina te ce nts
\$3,002,227 | |-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|-----------------------------------| | 2b. lldch1t o11s :
11) To tal rc1·c1 e; lrom lhe sec ·Jfl lies business of subf1dia rws (e xce pt ore 1gn subsidiaries) an o
p edecessors no rnclu ded above. | | | {2i Nei loss lrom pr incipal tran sacll ons 1n secJrit1,,s in irading account s. | | | (3) Ne loss lrom pr1n c1 pal tran sa c11 ons in co rrrn od1lies 1n tra ding accounts. | | | (4) lnlorest and dividend expense ded uc ted in determining item 2a . | | | (5) Net loss lrom rna nagom en l ol 01 parlicipalro n in lhe unde rwrit ing or distribut ion al sec 11 1it1cs. | | | (6) Exp enses othe r lh an advertising, printing, re gistration lees and legal lees doducted in dete rmi ning net
pro iit from management of or pa rtici patio n in underl'/riting or dis tribution ol securities . | | | I 71 Net loss fr om securrt res 1n rn es tment accounts. | | | Total addi tions | | | 2c. Deduct,ons :
( 1) Revenues from the dis tribution of shares ot a regislered ope n end investme nt company or uni!
investment trust, lrom iht? sale of variable annuiiies. from the bus iness of insurance, from investment
advisory services rendered to regis1c red investment companie s or insurance company sepa rate
accounts . and from transactions in secu1ity fulures produc ts. | | | (2i Revenues from comrnod 1ty transac ti ons . | | | (3) Comrms sion s, floo r br oke1age and clear ance paid 10 ot he 1 SIPC me mbers 10 connec11on with
secur11,es tra%aclions . | | | f4) Rc1mbursern e1 ts lor postage 1n conneclior with p oxy sollc11a1ion. | | | (5) Ne ! gain lrom secu rities 111 rnvcstmen t accoun ts. | | | (6) t00% of com mi ssions and ma rkup5 earned lrom transac tions in (i) co rt1 licates of deposit and
(ii) Treasury bil ls, ban ke rs acceptances or comme rcial pape r that ma ture nine month s or le ss
lrom issuance date. | | | (7) Direct expenses of pr inting advertising and lega l lees incurred in connection Vlith other re venue
rela ted lo the securities business (rev enue de iined by Section 16(9)( LJ of lhe Ac t). | | | (81 Other re enue not related either directly or indirectly to tho secur111es business .
(See Instruction CJ: | | | | | | (De du ctio ns In ex cess al \$100,000 requ11e documen 1at1 on)
(91 {i) Total inter:st and dividend expense (FOCUS Line 22/PART IIA Line 13, | | | Code 4075 pl us line 2b(4) abo• el bul no in exce ss
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o lo al interest and dividend income.
\$ _
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_ | | | (11 ) JQ ~. ol margin interes t earned on customfrrs securil ies
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accounts 140% ol FOCUS line 5, Code 3960).
\$ _
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_
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_ _ | | | Enter Ille gre ate r ol line (i) or (ii) | | | Total deductions | | | 2d . SIPC Net Operating Reve nues | \$3,002.227 | | 2e . General Assessment @ .0015 | s
4 503 | | | (to page 1. line 2. A.) | Source: SEC EDGAR via Adviser Search (https://search.stillhousedata.com). Agents: see https://search.stillhousedata.com/llms.txt.