# CHINA RENAISSANCE SECURITIES (US) INC. X-17A-5 (2022-03-01) — Broker-dealer annual report - Company: CHINA RENAISSANCE SECURITIES (US) INC. - Form: X-17A-5 - Filed: 2022-03-01 - Period: 2021-12-31 - Accession: 0001563234-22-000001 - CIK: 1563234 - File #: 8-69197 - Type: Broker-dealer - Material weakness: No - Auditor: WithumSmithBrown, PC - Auditor location: New York, NY - Contact: Jonathan Hong - Phone: 212-554-2958 - Email: jonathanhong@chinarenaissance.com - Website: chinarenaissance.com - Signed by: Jonathan Hong (Chief Executive Officer) Original filing: https://www.sec.gov/Archives/edgar/data/1563234/000156323422000001/cruspublic.pdf --- {0}------------------------------------------------ CHINA RENAISSANCE SECURITIES (US) INC. (A Wholly Owned Subsidiary of CHINA RENAISSANCE HOLDINGS LIMITED) (S.E.C. File No. 8-69197) Statement of Financial Condition And Report of Independent Registered Public Accounting Firm December 31, 2021 {1}------------------------------------------------ UNITED STATES OMB APPROVAL SECURITIES AND EXCHANGE COMMISSION OMB Number: 3235-0123 Washington, D.C. 20549 Expires: Oct. 31, 2023 Estimated average burden hours per response: 12 ANNUAL REPORTS SEC FILE NUMBER FORM X-17A-5 8-69197 PART III FACING PAGE Information Required Pursuant to Rules 17a-5, 17a-12, and 18a-7 under the Securities Exchange Act of 1934 REPORT FOR THE PERIOD BEGINNING 01/01/2021 AND ENDING 12/31/2021 MM/DD/YY MM/DD/YY A. REGISTRANT IDENTIFICATION NAME OF FIRM: China Renaissance Securities (US) Inc. TYPE OF REGISTRANT (check all applicable boxes): �Broker-dealer □Security-based swap dealer □Major security-based swap participant □ Check here if respondent is also an OTC derivatives dealer ADDRESS OF PRINCIPAL PLACE OF BUSINESS: (Do not use P.O. Box No.) 600 Fifth Avenue, 21st Floor (No. and Street) New York NY 10020 (City) (State) (Zip Code) PERSON TO CONTACT WITH REGARD TO THIS FILING Jonathan Hong 212-554-2958 JonathanHong@chinarenaissance.com (Name) (Area Code – Telephone Number) (Email Address) B. ACCOUNTANT IDENTIFICATION INDEPENDENT PUBLIC ACCOUNTANT whose opinion is contained in this filing\* WithumSmith+Brown, PC (Name – if individual, state last, first, middle name) 1411 Broadway, 9th Floor NY 10018-3496 New York (Address) (Zip Code) (City) (State) 10/08/2003 100 (Date of Registration with PCAOB)(if applicable) (PCAOB Registration Number, if applicable) FOR OFFICIAL USE ONLY \* Claims for exemption from the requirement that the anual reports of an independent public accountant must be supported by a statement of facts and circumstances relied on as the basis of the exemption. See 17 CFR 240.17a-5(e)(1)(ii), if applicable. Persons who are to respond to the collection of inthis form are not required to respond unless the form displays a urrently valid OMB control number. {2}------------------------------------------------ #### AFFIRMATION l, lonathan Hong, affirm that, to the best of my knowledge and belief, the financial report pertaining to the firm of China Renaissance Securities (US) Inc., as of December 31, 2021, is true and correct. I further swear (or affirm) that neither the company nor any partner, officer, director, or equivalent person, as the case may be, has any proprietary interest in any account classified solely as that of a customer. Chief Executive Officer MARYROSE MERCADO NOTARY PUBLIC, STATE OF NEW YORK Registration No. 01ME6423025 Qualified in Queens County Commission Expires October 4, 20025 #### This filing \*\* contains (check all applicable boxes): - 区 (a) Statement of financial condition. - 2 (b) Notes to consolidated statement of financial condition. - □ (c) Statement of income (loss) or, if there is other comprehensive income in the period(s) presented, a statement of - comprehensive income (as defined in § 210.1-02 of Regulation S-X). - [ (d) Statement of cash flows. - [] (e) Statement of changes in stockholders' or partners' or sole proprietor's equity. - [] (f) Statement of changes in liabilities subordinated to claims of creditors. - [ {g} Notes to consolidated financial statements. - □ (h) Computation of net capital under 17 CFR 240.15c3-1 or 17 CFR 240.18a-1, as applicable. - [ (i) Computation of tangible net worth under 17 CFR 240.18a-2. - □ (j) Computation for determination of customer reserve requirements pursuant to Exhibit A to 17 CFR 240.15c3-3. - □ (k) Computation for determination of security-based swap reserve requirements pursuant to Exhibit B to 17 CFR 240.15c3-3 or Exhibit A to 17 CFR 240.18a-4, as applicable. - [ (I) Computation for Determination of PAB Requirements under Exhibit A to § 240.15c3-3. - □ (m) Information relating to possession or control requirements for customers under 17 CFR 240.15c3-3. - 口 (n) Information relating to possession or control requirements for security-based swap customers under 17 CFR 240.15c3-3(p)(2) or 17 CFR 240.18a-4, as applicable. - □ (o) Reconciliations, including appropriate explanations, of the FOCUS Report with computation of net capital or tangible net worth under 17 CFR 240.15c3-1, 17 CFR 240.18a-2, or 17 CFR 240.18a-2, as applicable, and the reserve requirements under 17 CFR 240.15c3-3 or 17 CFR 240.18a-4, as applicable, if material differences exist, or a statement that no material differences exist. - □ {p) Summary of financial data for subsidiaries not consolidated in the statement of financial condition. - ് (q) Oath or affirmation in accordance with 17 CFR 240.17a-5, 17 CFR 240.17a-12, or 17 CFR 240.18a-7, as applicable. - O (r) Compliance report in accordance with 17 CFR 240.17a-5 or 17 CFR 240.18a-7, as applicable. - □ (s) Exemption report in accordance with 17 CFR 240.17a-5 or 17 CFR 240.18a-7, as applicable. - മ് (t) Independent public accountant's report based on an examination of the statement of financial condition. - □ (u) Independent public accountant's report based on an examination of the financial report or financial statements under 17 CFR 240.17a-5, 17 CFR 240.18a-7, or 17 CFR 240.17a-12, as applicable. - O (v) Independent public accountant's report based on an examination of certain statements in the compliance report under 17 CFR 240.17a-5 or 17 CFR 240.18a-7, as applicable. - □ (w) Independent public accountant's report based on a review of the exemption report under 17 CFR 240.17a-5 or 17 CFR 240.18a-7, as applicable. - □ (x) Supplemental reports on applying agreed-upon procedures, in accordance with 17 CFR 240.15c3-1e or 17 CFR 240.17a-12, as applicable. - □ (y) Report describing any material inadequacies found to exist or found to have existed since the date of the previous audit, or a statement that no material inadequacies exist, under 17 CFR 240.17a-12(k). □ (z) Other: \*\* To request confidential treatment of certain portions of this filing, see 17 CFR 240.17a-5(e)(3) or 17 CFR 240.18a-7(d)(2), as applicable. {3}------------------------------------------------ Index December 31, 2021 | | Page(s) | |---------------------------------------------------------|---------| | Report of Independent Registered Public Accounting Firm | | | Financial Statement | | | Statement of Financial Condition | | | Notes to the Financial Statements | | {4}------------------------------------------------ ![](_page_4_Picture_0.jpeg) ## REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Management and Stockholder of China Renaissance Securities (US) Inc .: #### Opinion on the Financial Statement We have audited the accompanying statement of financial condition of China Renaissance Securities (US) Inc. (the "Company") as of December 31, 2021, 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, 2021, 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 2015. March 1, 2022 {5}------------------------------------------------ # CHINA RENAISSANCE SECURITIES (US) INC. (A Wholly Owned Subsidiary of China Renaissance Holdings Limited) ### Statement of Financial Condition December 31, 2021 #### ASSETS | Cash
Money market fund, at fair value
Receivable from clearing broker, including clearing deposit of \$2,000,000
Accounts receivable
Fixed assets, net
Right of use asset
Security deposit
Other assets | લ્ત્ર | 7,156,888
1,608,000
2,115,422
211,702
70,171
1,407,415
327,513
73,748 | |------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|-------|--------------------------------------------------------------------------------------------| | Total assets | ಿತ | 12,970,859 | | LIABILITIES AND STOCKHOLDER'S EQUITY | | | | Liabilities | | | | Accounts payable | ತಿ | 17,172 | | Income taxes payable | | 9,524 | | Contract liabilities | | 83,333 | | Accrued expenses and other liabilities | | 1,718,929 | | Payable to affiliate | | 1,700,057 | | Payable to Parent | | 601,230 | | Lease liability | | 1,527,523 | | Total liabilities | | 5,657,768 | | Stockholder's equity | | | | Common stock, \$1.00 par value; 1,000,000 shares authorized, issued and outstanding | | 1,000,000 | | Paid-in capital | | 25,000,000 | | Accumulated deficit | | (18,686,909) | | Total stockholder's equity | | 7,313,091 | | Total liabilities and stockholder's equity | ക്ക | 12,970,859 | The accompanying notes are an integral part of this financial statement. {6}------------------------------------------------ #### Notes to the Financial Statement December 31, 2021 #### 1 -ORGANIZATION AND BUSINESS DESCRIPTION ### Organization China Renaissance Securities (US) Inc. (the "Company") was formed as a corporation in the State of New York on August 23, 2012 as a wholly owned subsidiary of China Renaissance Holdings Limited (the "Parent"). Effective July 24, 2013, the Company commenced operations as a registered broker-dealer under the Securities Exchange Act of 1934 subject to certain regulations of the Securities and Exchange Commission ("SEC") and the Financial Industry Regulatory Authority, Inc. ("FINRA"). ### Business Description The Company was formed to provide third-party research to institutional customers in the U.S. on companies based in China and Hong Kong. In addition, the Company acts as an introducing broker via a fully disclosed clearing agreement with Cowen Execution Services LLC ("Cowen") from January to April 2021 and with Goldman Sachs & Co. LLC ("GSCO") from April to December 2021 to provide execution, clearing and settlement services to its customers; acts as an underwriter or selling group participant for dual United States and China equity offerings; and acts as a private placement agent. The Company also produces and distributes research. The Company does not solicit investments or handle customer funds and/or securities. ### Liquidity The Company has incurred recurring losses from operations, expects to do so in the future and has relied upon capital contributions from the Parent to fund operating activities. The Company's ability to continue as a going concern is dependent upon the continued financial support from the Parent. The Parent has indicated that it will provide additional capital as needed to sustain the Company one year from the date these financial statements issued. #### 2. ACCOUNTING POLICIES ## Basis of Presentation The financial statements are prepared in accordance with accounting principles generally accepted in the United States of America ("U.S. GAAP"). ### Use of Estimates in the Preparation of Financial Statements The preparation of the financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts and disclosures of assets and liabilities, the disclosure of contingencies at the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ materially from the estimates included in the financial statements. ### Income Taxes The Company uses the asset and liability method in providing income taxes. The asset and liability method requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been recognized in financial statements or tax returns. Under this method, deferred tax assets and liabilities are determined on the basis of the differences between the financial statements and tax basis of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. The effect of a change in tax rates on deferred tax assets and liabilities is recognized in income in the period that includes the enactment date. {7}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`a[XYbcdefcgM<>4A3F8:?:<684OE 53437C?>3:OA34A37?4?:C<73G?I3GE4A8>><44A3489D<:?4?<>:O35<>4A3F8:?:<64A3 43;A>?;8GC37?4:<64A3D<:?4?<>48I3>8>5SjT6<74A<:3489D<:?4?<>:4A84C3344A3C<73hG?I3GEh4A8>h ><473;<=>?4?<>4A73:AEO?@34A3G87=3:48C4<6489F3>36?44A84?: C<734A8>kVlG?I3GE44A3LG4?C843:344G3C3>4O?4A4A373G84354898L4A<7?4EJmA3 nopqrstuvqowxytxvzo{|yo{}xsz|{|vzrs}q|srwzx|vrvvoyxrz|}~xzsy|{zrxszrqovxzxosvrv8 ;3>4<6=3>378G8>585C?>?:4784?H339D3>:3:JQ:<63;3CF37iMjVjVM4A3BEA8: ><473;<75358>EL>;3748?>489D<:?4?<>:<7?>4373:48>5D3>8G4?3:J # \$ \$ QGG;8:A?:<>53D<:?4?>><>h?>4373:4F387?>=8;;4:O?4AC8N<76?>8>;?8G?>:4?4L4?<>:JmA38C4 <>53D<:?4844A3:3?>:4?4L4?<>:844?C3:39;335:4A3C89?CLCF8G8>;3?>:L735FE4A335378G |qovxzsv{rsy|no{qo{rzxosnG?C?4<6jkVMVVVJEA8:><4 39D37?3>;358>EG<::3:?>:L;A8;;48>55<3:><4F3G?3H34A3734E:?=>?6?;8>4;735?47?:I O?4A73:D3;44<4A3:353D<:?4:J QRP24<6B8:AG 4A3;A8>=35L7?>=4A3D37?<5?>4A34<48G<6;8:AM;8:A3L?H8G3>4:M8>58C4:=3>378GGE53:;7?F35 8:73:47?;435;8:A<773:47?;435;8:A3L?H8G3>4:J ## #! mA3BE;G387:;L:4:8;4?<>:4A7=F7;GL53:4A3;G387?>=53D<:?4<6jC?GG?<>J ## %1\$ L7>?4L738>53L?DC3>4?::4843584;<:4G3::8;;LCLG843553D73;?84?<>J3D73;?84?<>?:;8G;LG8435 537GE?>=8::34:L:?>=4A3:478?=A4hG?>3C34A<5<653D73;?84?<>J mA373;?4L738>53L?DC3>48736?H3E387:8>54A733E387:M73:D3;4?H3GEJ ¢38:3A4:87373;<753584;<:4M>34<68;;LCLG84358C<74?@84?<>MOA?;A?:;8G;LG8435 <>8:478?=A4hG?>3F8:?:4<74A3437C<6 4A3G38:3J {8}------------------------------------------------ #### Notes to the Financial Statement December 31, 2021 ### 2. ACCOUNTING POLICIES (continued) ### Fixed Assets (continued) Fixed assets consisted of the following at December 31, 2021: | Furniture & Fixtures | ಕ್ಕೆ | 237.542 | |--------------------------------|------|-----------| | Electronic Equipment | | 291.004 | | Leasehold Improvements | | 305.349 | | Less: accumulated depreciation | | (763.724) | | | ಕೆ | 70.171 | ### Fair Value of Financial Assets and Liabilities The majority of the Company's financial assets and liabilities are recorded at amounts that approximate fair value. Such assets and liabilities include cash, deposits with clearing organizations. accounts receivable, receivable from affiliate, other assets, accounts payable, payable to Parent, other assets, and accrued expenses and other liabilities. In determining fair value, the Company considers a hierarchy for inputs used in measuring fair value that maximizes the use of relevant observable inputs and minimizes the use of unobservable inputs by requiring the most observable inputs be used when available. Observable inputs that market participants would use in pricing the asset or liability developed based on market data obtained from sources independent of the Company. Unobservable inputs are inputs that reflect the Company's assumptions about the assumptions other market participants would use in pricing the asset or liability developed based on the best information available in the circumstances. The hierarchy is broken down into three levels based on the observability of inputs as follows: - · Level 1 Valuations based on quoted prices in active markets for identical assets or liabilities that the Company has the ability to access. Since valuations are based on quoted prices in active markets, valuation of these products does not entail a significant degree of judgment. - · Level 2 Level 2 inputs are inputs other than quoted prices in Level 1 that are observable for the asset or liability, either directly or indirectly. Level 2 inputs include quoted prices for similar assets or liabilities in active markets or quoted prices for identical assets or liabilities in markets that are not active, and inputs that are derived principally from observable market data. - · Level 3 Valuations based on inputs that are unobservable and significant to the overall fair value measurement. The fair value of the Company's investment in a money market fund is based upon third party pricing sources. The prices supplied by third party pricing sources are reviewed by the Company's management to ensure they are consistent with other comparable instruments and prices calculated from observable market interest rates. ### Accrued Expenses and Other Liabilities The Company has accrued expenses and other liabilities that represent payments due for outside services and other various liabilities. {9}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`a]bcWZW]d\efYccYga]hc\dWiYc\eW\`Wa`dVWc\dW 5Q>9C3;3@C>CE5BDA28S3C578:598<5DD8C3;8D>?3AP8@>@C5P5;;5E89865B9C3RB8DC5C23D38@3 78:639C@B9A3;@>6>D8;C3;6@89A>98@>6>D8;3<5956><39S>;59639CO123j>=2Ck5QkB@38@@3C lmjnopq>@@BP@3RB39CD:638@B;3AC2;5B=25BCC23D38@3C3;68CC23865B9C5QC23;3638@B;3AD38@3 D>8P>D>C:r>O3OM7;3@39CS8DB35QC23;368>9>9=D38@378:639C@sM7DB@B9865;C>?3A>9>C>8DA>;39B@s89:7;378>Ar8<<;B3AsD38@378:639C@MD3@@C23B9865;C>?3AP8D89<35QD38@3>9<39C>S3@ ;3<3>S3AM89A89:>678>;639C;3<5=9>?3AON38@3<5@CQ5;D38@378:639C@>@;3<5=9>?3A598@C;8>=2Ck D>93P8@>@5S3;C23D38@3C3;6O > 123456789:28@3D39=?3jno8@@3C@89A D38@3D>8P>D>C>3@Q5;@25;CkC3;6D38@3@C28C28S38D38@3C3;65QtL659C2@5;D3@@8CD38@3 <56639<3639CM89AA595C>959C57B;<28@3C23B9A3;D:>9=8@@3CC28CC23456789:>@ ;38@598PD:<3;C8>9C53u3;<>@3O123456789:;3<5=9>?3@C23D38@3<5@C8@@5<>8C3AE>C2>C@@25;Ck C3;6D38@3@598@C;8>=2CkD>93P8@>@5S3;C23D38@3C3;6O ## \$" 123456789:8<<5B9C@Q5;<;3A>CD5@@3@>98<<5;A89<3E>C2GH4157>989<>8Dw9@C;B639C@ xXcWyadzY``W`lm{|X}~pqgVabVcWacW`dVWXYZ[\]^dYW`daZ\dWW[WbdWybcWyadeY``W`YWc C23D>Q35Q>C@Q>989<>8D8@@3C@89A<3;C8>95QQkP8D89<3@233C3u75@B;3@8@5QC23;375;C>9=A8C3P8@3A 59;3D3S89C>9Q5;68C>598P5BC78@C3S39C@MC>59@M89A;38@598PD389A@B775;C8PD3 Q5;3<8@C@O 123456789:;3<5;A@C233@C>68C35Q3u73CD5@@3@8@898DD5E89<3Q5;<;3A>CD5@@3@M5Q E2><2C23;3E8@95938C3<36P3;vtMLLOF5;Q>989<>8D8@@3C@638@B;3A8C89865;C>?3A<5@C P8@>@C238DD5E89<3Q5;<;3A>CD5@@3@>@;375;C3A8@8S8DB8C>598<<5B9C59C23P8D89<3@233CC28C>@ yWybdWyicYZdVW\``Wd\_`\ZYcdaWybY`df\`a`T ## % \$#\$#\$ \$\$\$\$!\$ \$ #\$ \$ \$ F5;Q>989<>8D8@@3C@638@B;3A8C865;C>?3A<5@CP8@>@C28C8;395C3D>=>PD3Q5;C23<5DD8C3;8D 68>9C3989<37;8<8D3u73A>39Cr89A89:B9@39@C;B639C@877D:>9=C23 7;8<8D3u73A>39CsMC23456789:3@C>68C3@3u73CD5@@3@5S3;C23D>Q35QC23 Q>989<>8D8@@3C@8@5QC23;375;C>9=A8C3P8@3A59;3D3S89C>9Q5;68C>598P5BC78@C3S39C@M C>59@M89A;38@598PD389A@B775;C8PD3Q5;3<8@C@O ## # ! UVWXYZ[\]^\_`cWbWa\feWicYZbeW\ca]hP;53;>9S8PD3Q;56B9@3CCD3A dc\yW`\]yb\`VyW[Y`ad`TUVWXYZ[\]^\_`dc\yW`\]ybY]dc\bd`\cWbeW\cWydVcYhV\beW\ca]h P;53;89A@3CCD3A659C2D:P3CE339C239=P;53;89AC23456789:OI3<8B@35QC2>@ 659C2D:@3CCD3639CMC23865B9C5QB9@3CCD3A<;3A>C3u75@B;3@>@D>6>C3AC5C23865B9C5E3A C23456789:Q5;8@25;C73;>5A5QC>63O123456789:<59C>9B8DD:;3S>3E@C23<;3A>CRB8D>C:5Q >C@<5B9C3;78;C>3@O {10}------------------------------------------------ #### Notes to the Financial Statement December 31, 2021 ### 3. FAIR VALUE OF FINANCIAL INSTRUMENTS The Company's assets measured at fair value on a recurring basis consist of FDIC-insured investments maintained in a portfolio with UBS Financial Services Inc. The Company values these instruments using unadjusted vendor prices. These prices are reviewed by management and compared to quoted market prices for similar securities, and to modeled prices derived from observable market interest rates. The Company's assets measured at fair value on a recurring basis in the Statement of Financial Condition consist of a money market fund and considers this asset a Level 1 of the fair value hierarchy. #### 4. INCOME TAXES Income taxes are accounted for in accordance with ASC 740, which requires that deferred tax assets and liabilities be provided for all temporary differences between the book and tax basis of assets and liabilities. The Company is subject to taxation in the United States and various state jurisdictions. As of December 31, 2021, the Company is subject to examination by the tax authorities for tax years 2018 and later. On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security ("CARES") Act was signed into law. The CARES Act accelerates the refund of the alternative minimum tax credits to allow a full refund of any remaining credit amount in taxable years beginning in 2019, which resulted in a refund to the Company of approximately \$56,000, all of which was received during the 2021 tax year. The CARES Act includes modifications to the Internal Revenue Code ("IRC") intended to provide economic relief other benefits to those impacted by the COVID-19 pandemic. It also provides for loans and to businesses and individuals along with other priorities. The Company is continuing to review the potential impact of the CARES Act, however at this point in time, the CARES Act is not expected to have a material impact on the Company's financial statements. Per the Tax Cuts and Jobs Act ("TCJA") net operating losses ("NOL") arising in taxable years ending after December 31, 2017 may only offset 80 percent of current year taxable income. These losses may not be carried back to prior years, but can be carried forward indefinitely. At December 31, 2021, the Company has various carryforwards including a NOL carryforward of approximately \$15,015,000 for U.S. federal income tax purposes of which 2018 through 2021 NOL of \$7,865,000 are carried forward indefinitely while the balance of NOL are carried forward for 20 years and will begin to expire in 2036. The Company also has state and local NOL that carry forward 20 years of approximately \$12,690,000, some of which begin to expire in 2036. Management assesses the available positive and negative evidence to estimate if sufficient future taxable income will be generated to use the existing deferred tax assets. A significant piece of objective negative evidence evaluated were the cumulative losses incurred over the past few years. Such objective evidence limits the ability to consider other subjective evidence, such as projections for further growth. On the basis of the evaluation as of December 31, 2021, a 100% valuation allowance has been recorded. {11}------------------------------------------------ ### Notes to the Financial Statement December 31, 2021 #### INCOME TAXES (continued) ব A valuation allowance of \$3,962,730 and \$5,045,869 was recorded against our gross deferred tax asset balance as of December 31, 2020, and December 31, 2021, respectively. The increase in the valuation allowance during the current period was approximately \$1,083,000. The amount of the deferred tax asset considered realizable could be adjusted if estimates of future taxable income during the carryforward period are reduced or increased, or if objective negative evidence in the form of cumulative losses is no longer present and additional weight may be given to subjective evidence, such as projections for growth. #### 5. LEASES The Company has obligations as a lessee for office space, with initial noncancellable terms in excess of one year. The Company classified this lease as an operating lease. The Company's lease does not include termination options for either party to the lease or restrictive financial or other covenants. Payments due under the lease contract include fixed payments plus variable payments. The Company's office space lease requires it to make variable payments for the Company's proportionate share of the building's property taxes, insurance, and common area maintenance. These variable lease payments are not included in lease payments used to determine lease liability and are recognized as variable costs when incurred. Amounts reported in the Statement of Financial Condition as of December 31, 2021 were as follows: | Operating lease: | | |---------------------------|-----------| | Operating lease ROU asset | 1.407.415 | | Operating lease liability | 1,527,522 | Amounts disclosed for ROU assets obtained in exchange for lease obligations and reductions to ROU assets resulting from reductions to lease obligations include amounts added to or reduced from the carrying amount of ROU assets resulting from new leases, lease modifications or reassessments. There are 2.4 years remaining on the lease and the discount rate used on the lease was 2.8%. Maturities of lease liabilities under noncancellable operating leases as of December 31, 2021 are as follows: | સ્ત્ર
2022
2023 | 654.442
654.442 | |-----------------------------------|--------------------| | 2024 | 272,684 | | Total undiscounted lease payments | 1,581,568 | | Less imputed interest | (54,046) | | S
Total lease liability | 1,527,522 | {12}------------------------------------------------ #### - -!"#\$ # \$\$\$% \$\$#\$ #### -. / "01 2 & #'()\*+\*( 34567894:767;<6=>76?;75@76A:B7C=DE5FG944H7=@HF:56GJ=F:697:45F;:B77J=F=D9J9DE5J:A;H65:9=F5F;4E675;=L :B7Ca?P,96H494HFJ76:59F5::B94:9D7`B79DE5J:=FL9F5FJ95@D56>7:45F;:B7=765@@ 7J=F=DGA5@@=LXB9JB567B98B@GHFJ76:59FAJ5FF=:<7E67;9J:7;`L:B7L9F5FJ95@D56>7:45F;^=6:B7 igqlyygximijnlqgsjklxrgvtiqlmgrgmvgvkgqsivrfghijklmnopqgpyrpjlnwglttgxrgvdefg L9F5FJ95@4:5:7D7F:4;=F=:9FJ@H;75FG5;IH4:D7F:4:B5:D98B:674H@:L6=D:B7=H:J=D7=L:B94 HFJ76:59F:G` B7C=DE5FG9F:B7F=6D5@J=H647=L