# ARENA FINANCIAL SERVICES, LLC X-17A-5 (2024-03-13) — Broker-dealer annual report - Company: ARENA FINANCIAL SERVICES, LLC - Form: X-17A-5 - Filed: 2024-03-13 - Period: 2023-12-31 - Accession: 0001654411-24-000002 - CIK: 1654411 - File #: 8-69682 - Type: Broker-dealer - Material weakness: No - Auditor: Withum Smith Brown PC - Auditor location: New York, NY - Contact: Lawrence Cutler - Phone: 212-612-3204 - Signed by: Lawrence Cutler (President & CEO) Original filing: https://www.sec.gov/Archives/edgar/data/1654411/000165441124000002/arenaauditpublic.pdf --- {0}------------------------------------------------ UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 OMB APPROVAL OMB Number: Expires: Estimated average burden hours per response: SEC FILE NUMBER ## ANNUAL REPORTS FORM X-17A-5 PART III FACING PAGE Information Required Pursuant to Rules 17a-5, 17a-12, and 18a-7 under the Securities Exchange Act of 1934 FILING FOR THE PERIOD BEGINNING \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_ AND ENDING \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_ A. REGISTRANT IDENTIFICATION MM/DD/YY MM/DD/YY # NAME OF FIRM: \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_ | NAME OF FIRM: _______________________________________________________________________ | | | | | | |---------------------------------------------------------------------------------------------------------------------------------|----------------------------|------------------------------------------------------------|---------------------------------------|---------------------------------------------------------------------------------------|--| | TYPE OF REGISTRANT (check all applicable boxes):
Broker-dealer
Check here if respondent is also an OTC derivatives dealer | Security-based swap dealer | | Major security-based swap participant | | | | ADDRESS OF PRINCIPAL PLACE OF BUSINESS: (Do not use a P.O. box no.) | | | | | | | _____________________________________________________________________________________ | | | | | | | | | (No. and Street) | | | | | _____________________________________________________________________________________ | | | | | | | (City) | (State) | | | (Zip Code) | | | PERSON TO CONTACT WITH REGARD TO THIS FILING | | | | | | | | | | | _____________________________________________________________________________________ | | | (Name) | | (Area Code – Telephone Number) | | (Email Address) | | | | B. | ACCOUNTANT IDENTIFICATION | | | | | INDEPENDENT PUBLIC ACCOUNTANT whose reports are contained in this filing* | | | | | | | | | | | | | | _____________________________________________________________________________________ | | (Name – if individual, state last, first, and middle name) | | | | | _____________________________________________________________________________________ | | | | | | | (Address) | | (City) | (State) | (Zip Code) | | | _____________________________________________________________________________________ | | | | | | | (Date of Registration with PCAOB)(if applicable) | | | | (PCAOB Registration Number, if applicable) | | | | | FOR OFFICIAL USE ONLY | | | | | | | | | | | \* Claims for exemption from the requirement that the annual reports be covered by the 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 information contained in this form are not required to respond unless the form displays a currently valid OMB control number. {1}------------------------------------------------ - - - - - - - - - - - - - - - - - - - - - - - - - {2}------------------------------------------------ # ARENA FINANCIAL SERVICES, LLC (A Delaware Limited Liability Company) Financial Statements as of and for the year ended December 31, 2023, and Report of Independent Registered Public Accounting Firm Public Document {3}------------------------------------------------ ### ARENA FINANCIAL SERVICES, LLC (A Delaware Limited Liability Company) TABLE OF CONTENTS | | Page | |---------------------------------------------------------------------|------| | Report of Independent Registered Public Accounting Firm | 1 | | Financial Statements as of and for the year ended December 31, 2023 | | | Statement of Financial Condition | 2 | | Notes to the Financial Statements | 3-7 | {4}------------------------------------------------ ![](_page_4_Picture_0.jpeg) #### REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Member and Management of Arena Financial Services, LLC: #### Opinion on the Financial Statement We have audited the accompanying statement of financial condition of Arena Financial Services, LLC (the "Company") as of December 31, 2023, 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, 2023, 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 2022. New York, New York February 29, 2024 {5}------------------------------------------------ ### ARENA FINANCIAL SERVICES, LLC (A Delaware Limited Liability Company) STATEMENT OF FINANCIAL CONDITION AS OF DECEMBER 31, 2023 | Assets | | |---------------------------------------------------------------------|-----------------| | Cash at bank | \$
1,055,063 | | Accounts receivable, net of allowance for credit losses of \$15,000 | 120,000 | | Due from affiliate | 454,195 | | Prepaid expenses | 32,323 | | Total assets | \$
1,661,581 | | Liabilities | | | Accounts payable and accrued liabilities | \$
105,859 | | Discretionary bonus payable | 331,000 | | Due to affiliate | 319,141 | | Total liabilities | 756,000 | | | | | Member's Capital | 905,581 | | Total liabilities and member's capital | \$
1,661,581 | The accompanying notes are an integral part of these financial statements. {6}------------------------------------------------ #### ARENA FINANCIAL SERVICES, LLC (A Delaware Limited Liability Company) NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2023 #### 1. ORGANIZATION Arena Financial Services, LLC (the "Company"), a Delaware limited liability company, was formed on June 4, 2015, and commenced operations on August 31, 2015. The Company's principal office is located at 405 Lexington Avenue, 59th Floor, New York, New York. The Company is wholly owned by Arena Investors Group Holdings, LLC ("AIGH"). The Westaim Corporation of America ("WCA"), a wholly-owned Delaware registered subsidiary of The Westaim Corporation ("Westaim"), holds a majority stake (51%) in AIGH. Westaim is a Canadian company specializing in providing long-term capital to businesses operating primarily within the financial services industry. Westaim is listed on the Canada's TSX Venture Exchange under the symbol WED. Bernard Partners LLC ("BP LLC"), a US-domiciled limited liability company controlled by certain members of the AIGH's management team holds the remaining (49%) interest in AIGH. The Company is a registered broker dealer with the U.S. Securities and Exchange Commission ("SEC") and is a member of the Financial Industry Regulatory Authority ("FINRA"). The Company was accepted as a registered broker dealer by FINRA on October 12, 2016. The Company is registered to conduct activities as a finder of investors to invest in private placements for funds advised by an affiliate of the Company, Arena Investors, LP ("AI"). AI is a registered investment adviser with the SEC. Activities in which the Company intends to engage, involve securities that are not registered with SEC pursuant to the Securities Act of 1933 and that are eligible for the exemptions offered under Regulation D. #### 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The significant accounting policies used to prepare these financial statements are as follows: #### Basis of preparation The Company's financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America ("U.S. GAAP") and are stated in United States dollars. #### Use of estimates The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that may 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 increases and decreases in member's capital during the reporting period. Actual results could differ from these estimates. #### Cash at bank The Company holds significant cash balances at financial institutions which throughout the year may regularly exceed the federally insured limit of \$250,000. Any loss incurred or a lack of access to such funds could have a significant adverse impact on the Company's financial condition, results of operations, and cash flows. #### Revenue recognition Distribution fees, advisory fees and placement fees are recognized in the periods during which the related services are performed, and the amounts have been contractually earned in line with Accounting Standards Update ("ASU") 2014-09 "Revenue from Contracts with Customers (Topic 606)". {7}------------------------------------------------ #### 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) #### Current Expected Credit Losses The Company accounts for estimated credit losses in accordance with ASC 326-20, which requires the Company to estimate expected credit losses over the life of its financial assets as of the reporting date based on pertinent information about past events, current conditions, and reasonable forecasts. The Company records the estimate of expected credit losses as an allowance for credit losses. The Company has an allowance for credit losses of \$15,000. #### Income taxes The Company is a single member limited liability company, organized in Delaware, that is wholly owned by AIGH. The Company is not subject to United States Federal, New York State or New York City income tax. Instead, all of the Company's distributable shares of income, gain, loss and deductions are allocable to AIGH. AIGH is considered a partnership for United States Federal income tax purposes. AIGH is not subject to United States Federal New York State or New York City income tax. Each member is individually liable for its distributable share of all items of income, gain, loss, and deduction for such taxable year of AIGH. #### 3. REVENUE FROM CONTRACTS WITH CUSTOMERS #### Significant Judgments Revenue from contracts with customers includes fees from investment banking services. The recognition and measurement of revenue is based on the assessment of individual contract terms. Significant judgment is required to determine whether performance obligations are satisfied at a point in time or over time; how to allocate transaction prices where multiple performance obligations are identified; when to recognize revenue based on the appropriate measure of the Company's progress under the contract; whether revenue should be presented gross or net of certain costs; and whether constraints on variable consideration should be applied due to uncertain future events. #### Distribution Fees The Company has been engaged by AI to provide distribution services on behalf of AI, and each of the AI funds. The Company employs two individuals whose sole role is the provision of distribution and private placement services. Distribution services primarily include the identification of prospective qualified clients. Revenue is accrued monthly in accordance with the terms of the agreement, as the ongoing services provided to AI are performed and performance obligations are satisfied. On October 1, 2023, the service agreement was amended and from that date the Company earned \$250,000 per month for the provision of distribution services. Prior to this date, the Company earned \$300,000 per month. #### Advisory Fees The Company provides advisory services on mergers and acquisitions (M&A). Revenue for advisory arrangements is generally recognized at the point in time that performance under the arrangement is completed (the closing date of the transaction) or the contract is cancelled. However, for certain contracts, revenue is recognized over time for advisory arrangements in which the performance obligations are simultaneously provided by the Company and consumed by the customer. In certain circumstances, significant judgment is required 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. {8}------------------------------------------------ #### 3. REVENUE FROM CONTRACTS WITH CUSTOMERS (CONTINUED) #### Private Placements The Company acts as a placement agent on behalf of the AI funds. Unlike the distribution services detailed above, in order to earn revenue, the Company must secure qualified investors. The agreement states that a fee will only be earned once a certain sales threshold has been reached which occurs at a point in time when the amounts are reasonably determinable. Once reached, the Company is remunerated on a cost-plus basis. The cost is derived from the compensation payable to the staff responsible for the successful sale (above the agreed threshold) and is calculated as a set percentage of the revenues generated by the AI funds from the new investors. #### Contract assets and liabilities The Company presents a contract liability if the customer has paid consideration, or if payment is due as of the reporting date but the entity has not yet satisfied its performance obligation by transferring goods or service. The Company had no contract liabilities as of December 31, 2023 (\$62,500 as of December 31, 2022). The Company presents a contract asset if the customer is yet to pay consideration or if payment is due as of the reporting date for already satisfied performance obligations by transferring goods or service. The Company had contract assets of \$120,000 as of December 31, 2023 (none as of December 31, 2022). #### Costs to Obtain a Contract with a Customer The Company had no assets from costs to obtain contracts from customers at December 31, 2023 and December 31, 2022. #### 4. RELATED PARTY TRANSACTIONS The Company has entered into an expense sharing agreement with an affiliate company, Arena Management Co., LLC ("AMC"), from which it receives the services of shared personnel and certain operating services. AMC settles expenses in line with the expense sharing agreement and is reimbursed by the Company based on their allocable share. The Company is charged for these services based upon (a) actual costs incurred when attributed directly to the Company (direct expenses), (b) an allocation of general office space, overhead, and non-employee resources based on the percentage of space used for the period incurred (shared expenses), and (c) salaries and benefits based on the percentage of time spent for direct employees that are shared between the Company and AMC (salaries and benefits of shared employees). For the year ended December 31, 2023, the Company was charged \$550,080 of direct and shared expenses and a further \$348,458 of salaries and benefits of shared employees by AMC. As of December 31, 2023, the direct and shared expenses payable to AMC were \$239,321, while salaries and benefits of shared employees outstanding were \$79,820. Both balances are included in "due to affiliate" on the statement of financial condition. The outstanding balance due to AMC was fully repaid in January 2024. The Company has entered into a service agreement with its registered investment advisor affiliate whereby the Company provides services acting as a placement agent to prospective qualified investors. The Company also performs certain investor relations to support marketing and promotional activities of the proprietary funds offered by the affiliate. The performance obligation is met at the point in time the Company performs the aforementioned duties, which occur throughout the month as the services are performed and consumed by the registered investment advisor. Under the terms of the contract, which was entered into in August of 2022 and amended on December 1, 2023 (effective October 1, 2023), the registered investment advisor will pay the Company \$250,000 previously \$300,000 per month. The Company earned revenues of \$3,450,000 during the period from these services which are separately disclosed on the accompanying statement of operations. The Company has also earned a placement fee income of \$4,195 as per the distribution agreement. For the year ended December 31, 2023, the Company has a receivable of \$454,195 from the registered investment advisor. {9}------------------------------------------------ #### 4. RELATED PARTY TRANSACTIONS (CONTINUED) The Company has entered into advisory service agreements with Paribus Park, LLP and Wi-LAN, Inc., both of which are affiliated to AI. For the year ended December 31, 2023, the Company has a receivable balance of \$10,000 each from both affiliates. The activities of the Company include significant transactions with related parties and may not necessarily be indicative of the conditions that would have existed or the results of operations if the Company had operated as an unaffiliated business. #### 5. REGULATORY REQUIREMENTS The Company is subject to the SEC Uniform Net Capital Rule (SEC Rule 15c3-1), which requires the maintenance of a minimum net capital balance and requires that the ratio of aggregate indebtedness to net capital, both as defined by the SEC, shall not exceed 15 to 1. Under this rule, the Company is required to maintain net capital equivalent to the greater of \$5,000 or 6 2/3% of aggregate indebtedness. Aggregate indebtedness excludes a discretionary liability for discretionary bonus accruals in the amount of \$331,000 as of December 31, 2023. At December 31, 2023, the Company had net capital after deduction for non-allowable assets of \$630,063 which was \$601,730 in excess of its minimum required net capital of \$28,333. At December 31, 2023, the Company's ratio of aggregate indebtedness to net capital was 0.67 to 1. #### 6. MEMBER'S CAPITAL The Company's authorized member's capital consists of an unlimited number of membership interests. Changes to the Company's membership interests are as follows: | Membership Interests | Capital | |------------------------------|-------------| | Balance at January 1, 2023 | \$5,412,100 | | Distribution to member | 500,000 | | Balance at December 31, 2023 | \$4,912,100 | All the issued and outstanding membership interests of the Company are held by AIGH. The Company made a capital distribution of \$500,000 to its parent company on November 15, 2023. #### 7. ACCOUNTS RECEIVABLE The Company's accounts receivable balance is comprised of below: | | Advisory fees | |---------------------------------------|---------------| | Total receivable at December 31, 2023 | \$135,000 | | Less: Allowance for credit losses | (15,000) | | Balance at December 31, 2023 | \$120,000 | The Company's contract assets at the end of the year were \$120,000. #### 8. COMMITMENTS AND CONTINGENT LIABILITIES The Company may be involved in legal matters that arise from time to time in the ordinary course of the Company's business. At this time, the Company is not aware of any legal matters of this type that are believed to be material to the Company's results of operations, liquidity or financial condition. {10}------------------------------------------------ ### ARENA FINANCIAL SERVICES, LLC (A Delaware Limited Liability Company) NOTES TO THE FINANCIAL STATEMENTS (CONTINUED) FOR THE YEAR ENDED DECEMBER 31, 2023 #### 9. INDEMNIFICATIONS In the normal course of business, the Company enters or may enter into contracts which provide a variety of general indemnifications. The Company's maximum exposure under these indemnifications is unknown, as this would involve future claims that may be made against the Company that have not yet occurred. Management expects that the risk of material loss associated with such indemnifications to be remote. Therefore, the Company has not accrued any liability with such indemnifications. #### 10. CAPITAL AND LIQUIDITY The Company has significant liquidity at December 31, 2023. As demonstrated in Note 5, all of the Company's regulatory requirements are satisfied. With regards to Management's assessment of going concern, they have determined that the Company has sufficient capital and liquidity to ensure operations for at least 12 months from the date these financial statements were approved. In the unlikely event the Company had insufficient liquidity to meet its financial obligations, Management believes that they could access additional funds from the parent entity. #### 11. SUBSEQUENT EVENTS Management has evaluated subsequent events through the date that the financial statements were issued and has not identified any additional events that require adjustments or disclosures in these financial statements as of February 29, 2024. Source: SEC EDGAR via Adviser Search (https://search.stillhousedata.com). Agents: see https://search.stillhousedata.com/llms.txt.