# VELOCITY CAPITAL, LLC X-17A-5 (2019-03-01) — Broker-dealer annual report
- Company: VELOCITY CAPITAL, LLC
- Form: X-17A-5
- Filed: 2019-03-01
- Period: 2018-12-31
- Accession: 0001609516-19-000001
- CIK: 1609516
- File #: 8-69479
- Material weakness: No
- Auditor: RAICH ENDE MALTER & CO. LLP
- Auditor location: NEW YORK, NY
- Contact: MATTEO AMATO
- Phone: 646-837-0056
- Signed by: MATTEO AMATO (CFO)
Original filing: https://www.sec.gov/Archives/edgar/data/1609516/000160951619000001/auditedfinancials18Short.pdf
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# Velocity Capital LLC
FINANCIAL STATEMENT AND REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
DECEMBER 31, 2018
(PUBLIC DOCUMENT)
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UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549
OMB Number: OMB Number: 3235-0123 Expires: March 31, 2019 Estimated average burden hours per response ...........................................................................................................................................................
SEC FILE NUMBER
8-69479
# ANNUAL AUDITED REPORT FORM X-17A-5 PART III
FACING PAGE Information Required of Brokers and Dealers Pursuant to Section 17 of the Securities Exchange Act of 1934 and Rule 17a-5 Thereunder
| A. REGISTRANT IDENTIFICATION
NAME OF BROKER-DEALER:
OFFICIAL USE ONLY
Velocity Capital, LLC
FIRM I.D. NO.
ADDRESS OF PRINCIPAL PLACE OF BUSINESS: (Do not use P.O. Box No.)
110 W A Street, Suite 1100
(No. and Street)
San Diego, CA 92101
(State)
(Zip Code)
(City)
NAME AND TELEPHONE NUMBER OF PERSON TO CONTACT IN REGARD TO THIS REPORT
(646) 837-0056
Matteo Amato
(Area Code - Telephone No.)
B. ACCOUNTANT IDENTIFICATION
INDEPENDENT PUBLIC ACCOUNTANT whose opinion is contained in this Report*
Raich Ende Malter & Co. LLP
(Name - if individual, state last, first, middle name)
1375 Broadway
NY
New York
10018
(Address)
(City)
(State)
(Zip Code)
CHECK ONE:
7 Certified Public Accountant
Public Accountant
□ Accountant not resident in United States or any of its possessions. | REPORT FOR THE PERIOD BEGINNING | 1/1/2018
MM/DD/YY | AND ENDING | 12/31/2018
MM/DD/YY |
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## OATH OR AFFIRMATION
I, Matteo Amato, swear (or affirm) that, to the best of my knowledge and belief the accompanying financial statement and supporting schedules pertaining to the firm of Velocity Capital, LLC, as of December 31, 2018, 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:
| None | |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------|----------------------------------|
| ROBERT E MEMER
NOTARY PUBLIC, STATE OF NEW YORK
Registration No. 01ME6358188
Qualified in Richmond County
Commission Expires 05/08/2021
RSAE. 1721212 | Signature
Matteo Amato |
| | Chief Financial Officer
Title |
| ్రాగా
10/ /2019
Notary Public | |
This report \*\* contains (check all applicable boxes):
- র (a) Facing page.
- (b) Statement of Financial Condition. য়
- □ (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 of Determination of Reserve Requirements Pursuant to Rule 15c3-3.
- O (i) Information Relating to the Possession or Control Requirements Under Rule 15c3-3.
- O (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 15c3-3.
- □ (k) A Reconciliation between the audited and unaudited Statements of Financial Condition with respect to methods of consolidation.
- 2 (1) An Oath or Affirmation.
- □ (m) A copy of the SIPC Supplemental Report.
- O (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 240.17a-5(e)(3).
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#### **REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM**
To the Members of Velocity Capital, LLC San Diego, California
#### **Opinion on the Financial Statement**
We have audited the accompanying statement of financial condition of Velocity Capital, LLC as of December 31, 2018, and the related notes (collectively referred to as the financial statement). In our opinion, the statement of financial condition presents fairly, in all material respects, the financial position of Velocity Capital, LLC 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 Velocity Capital, LLC's management. Our responsibility is to express an opinion on Velocity Capital, LLC's financial statement based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to Velocity Capital, 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 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.
**RAICH ENDE MALTER & CO. LLP**
We have served as Velocity Capital, LLC's auditor since 2018. New York, New York March 1, 2019
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## Note 2- Summary of Significant Accounting Policies (continued)
Income Taxes. The Company is organized as a limited liability company and is taxed as
a partnership for federal and state income purposes. As a partnership, the Company itself is not subject to federal or state income taxes, each member is individually liable for federal and stated income taxes, if any, on its share of the Company's taxable income. However, the Company is subject to New York City Unincorporated Business Tax ("NYC UBT").
The Company adopted ASC 740 which clarified the accounting and disclosures for uncertain tax positions related to income taxes recognized in the financial statements and address the determination of whether tax benefits claimed or expected to be claimed on a tax return should be recorded in the financial statements. The Company may recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained upon examination by the taxing authorities based on the technical merits of the position.
The Company did not have unrecognized tax benefits as of December 31, 2018 and does not expect this to change significantly over the twelve months. The Company will recognize interest and penalties accrued on unrecognized tax benefits as a component of income tax expense. As of December 31, 2018, the Company has no accrued interest or penalties related to uncertain tax positions.
Receivable from other broker-dealers. Receivable from other broker-dealers consist of receivables from Service - locate and Service - BD services revenue. Receivables from Service - locate revenues were \$596,190 and \$971,195 at December 31, 2018 and 2017 respectively. Receivables from Service - BD services revenue were \$294,343 and \$320,586 at December 31, 2018 and 2017 respectively.
Concentration of Credit Risk. At December 31, 2018, the Company reviewed its receivables and determined that all are collectible. The Company maintains cash accounts with multiple financial institutions and, therefore, are subject to credit risk to the extent those balances exceed applicable Federal Deposit Insurance Corporation ("FDIC") limitations. The Company has cash balances in excess of FDIC limits of \$6.036.182 at December 31, 2018. The Company has not experienced any losses in such accounts and does not believe there to be any significant credit risk with respect to these accounts.
## Note 3- Clearing Arrangements
The Company currently has a clearing Agreement with Electronic Transaction Clearing, Inc. (ETC) and Lek Securities Corporation. (LEK) on a fully disclosed basis. As of December 31, 2018 ETC holds \$147,378 in deposit. LEK holds \$38,743 in deposit in the OP account and has a credit margin balance \$2,979,688 in the RC account.
## Note 4- Fair Value Measurements
The Company utilizes various methods to measure the fair value its investments on a recurring basis. US GAAP establishes a hierarchy that prioritizes inputs to valuation methods. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability (i.e., the "exit price") in an orderly transaction between market participants at the measurement dates. The three level of inputs are:
· Level 1 inputs are unadjusted quoted prices for identical assets or liabilities in active markets that the Company has the ability to access.
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# Velocity Capital LLC
## Notes to Financial Statement December 31, 2018
## Note 4- Fair Value Measurements (continued)
- · Level 2 inputs are inputs (other than quoted prices included with level 1) that are observable for the asset or liability, either directly or indirectly.
- · Level 3 are unobservable inputs for the asset or liability and rely on management's own assumptions about the assumptions that market participants would use in pricing the asset or liability. Securities owned and securities sold, not yet purchased, traded on national securities exchange are valued at the last sales price on the date of determination or, if no sales occurred on such day, at the last closing bid price if held long and the last closing asked price if held short. Securities for which market quotations are not readily available are valued at fair value as determined by or under the direction of the Company in accordance with US GAAP.
The Company owns Depository Trust & Clearing Corporation common stock. These shares are reflected as non-marketable securities. Management has determined these values to be Level 2 inputs because it has a quoted price in a market that is not active. There were no transfers of securities among levels 1, 2 or 3 during the year ended December 31, 2018
| | | Fair Value Measurement
December 31, 2018 | | | | | | |
|------------------------------------------------------|-----------|---------------------------------------------|-----|------------|-----------|-----------|-------------|-----------|
| | | Level 1 | | Level 2 | | Level 3 | Total | |
| ASSETS | | | | | | | | |
| Marketable Securities owned | | | | | | | | |
| Common stocks | | \$1,400,564 | | ക്ക | ക്ക | | \$1,400,564 | |
| Options | | 2,224,547 | | | | | 2,224,547 | |
| | | \$3,625,111 | | | | | \$3,625,111 | |
| Not readily marketable | | | | | | | | |
| security | | | | \$2,500 | | | \$ 2,500 | |
| Private company | | | | | | 136,579 | 136,579 | |
| | | \$3,625,111 | | \$2,500 | | \$136,579 | \$3,764,190 | |
| LIABILITIES
Securities sold, not yet
purchased | | | | | | | | |
| Common stocks | | \$ 21,050 | | સ્ક્ર | ക്ക | | \$ 21,050 | |
| Options | | 184,715 | | | | | 184,715 | |
| | | \$205,765 | | ಕೆ | ಕೆ | | \$205,765 | |
| | | | | | | | | |
| | Beginning | | | Net Gains | | | | Ending |
| | Balance | | | and Losses | Purchases | | Sales | Balance |
| | | | | | | | | |
| Assets | | | | | | | | |
| Investment - Private Company | ക്ക | | ക്ക | | \$136,579 | ക്ക | | \$136,579 |
| | ക | | ക്ക | | \$136,579 | ക്ക | | \$136,579 |
The following table sets forth by level, within the fair value hierarchy, the Company's assets and liabilities at fair value as of December 31, 2018:
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## Velocity Capital LLC
## Notes to Financial Statement December 31, 2018
## Note 4- Fair Value Measurements (continued)
The methods described above may produce a fair value calculation that may not be indicative of net realizable value or reflective of future fair values. Furthermore, while the Company believes its valuation methods are appropriate and consistent with other market participants, the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different fair value measurement at the reporting date.
## Note 5- Commitments and Contingencies
Operating Lease. The Company is obligated under multiple lease arrangements for office space in New York City expiring in December 2019 and January 2022. The Company also leases office space in San Diego, California on a month to month basis. Future minimum rental payments under the lease agreements are approximately as follows:
| December 31. | |
|--------------|-----------|
| 2019 | \$313,103 |
| 2020 | 218,508 |
| 2021 | 224,521 |
| 2022 | 19.226 |
| | \$775,358 |
Off Bulance Sheet Risk. As discussed in Note 1, the Company does not hold customer segregated cash or securities balances. Transactions are processed by a clearing firm on a fully disclosed basis. In conjunction with this arrangement, the Company is contingently liable for any unsecured debit balances in the customer accounts introduced by the Company. These customer activities may expose the Company to off-balance-sheet credit risk in the event the introduced customer is unable to fulfill its contracted obligations. The Company seeks to control such credit risk by monitoring its exposure to the risk of loss daily, on an account-by-account basis. At December 31, 2018, the Company was not responsible for any unsecured debits and did not have any open positions in its trading accounts.
## Note 6- Furniture and Equipment
| Furniture and equipment | \$73.426 |
|--------------------------------|----------|
| Less: Accumulated Depreciation | 16.649 |
| | \$56.777 |
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## Notes to Financial Statement December 31, 2018
# 7.
Under Rule 15c3-1 of the Securities Exchange Act of 1934, the Company is required to maintain a minimum net capital (as defined) and a ratio of aggregate indebtedness to net capital (as defined) not exceeding 15 to 1.
The Company's ratio at December 31, 2018 was 3.45 to 1. The basic concept of the Rule is liquidity, its object being to require a broker-dealer in securities to have at all times sufficient liquid assets to cover its current indebtedness. At December 31, 2018, the Company had net capital of \$6,637,462 which was \$6,387,462 in excess of the amount required by the SEC.
## 8. Secured Loan Agreement
The Company entered into an agreement with BMO Harris Bank to extend the Company up to \$10 million of secure loans on a revolving uncommitted basis. Loans bear interest at the established daily Fed Funds Rate plus 1.50%. Interest is computed on the basis of a year of 360 days. At December 31, 2018 there was no outstanding principal balance.
#### 9. Related Party Transactions
During the year ended December 31, 2018 the Company performed BD services for and entered into stock loan/stock borrow transactions with an entity that is partially owned by certain member's of the Company.
#### Subsequent Events 10.
The Company has evaluated subsequent events from the statement of financial condition date through March 1, 2019 the date these financial statements were available to be issued. There have been \$190,200 in capital distributions for the period January 1, 2019 through March 1, 2019.
Source: SEC EDGAR via Adviser Search (https://search.stillhousedata.com). Agents: see https://search.stillhousedata.com/llms.txt.