# CROWDFUNDER FINANCIAL SERVICES INC. X-17A-5 (2020-05-06) — Broker-dealer annual report
- Company: CROWDFUNDER FINANCIAL SERVICES INC.
- Form: X-17A-5
- Filed: 2020-05-06
- Period: 2019-12-31
- Accession: 0001680133-20-000001
- CIK: 1680133
- File #: 8-69810
- Material weakness: No
- Auditor: Tuttle & Bond, PLLC
- Auditor location: China Spring, TX
- Contact: Daniel Beaton
- Phone: 603-379-2478
- Signed by: Daniel Beaton (FINOP)
Original filing: https://www.sec.gov/Archives/edgar/data/1680133/000168013320000001/CFIAudit2019.pdf
---
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## FINANCIAL STATEMENTS AND SUPPLEMENT ARY INFORMATION
Year Ended December 31, 2019
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UNITEDSTATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549
0MB APPROVAL 0MB Number: 3235-0123 Expires: August 31, 2020 Estimated average burden hours per response .... . . 12.00
# **ANNUAL AUDITED REPORT FORM X-17A-5 PARTIII**
| SEC FILE NUMBER |
|-----------------|
| 8-69810 |
**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 | Ol/Ol/l9 | AND ENDING | 12131119 | | | | |
|---------------------------------------------------------------------------------------------------------------------------------|--------------------------------------------------------|------------|--------------------------------|--|--|--|--|
| | MM/DD/YY | | MMIDDIYY | | | | |
| A. REGISTRANT IDENTIFICATION | | | | | | | |
| NAME OF BROKER-DEALER: CFI Securities | OFFICIAL USE ONLY | | | | | | |
| ADDRESS OF PRINCIPAL PLACE OF BUSINESS: (Do not use P.O. Box No.) | | | FIRM 1.0. NO. | | | | |
| 5757 Wilshire Boulevard, Suite 370 | | | | | | | |
| | (No. and Street) | | | | | | |
| Los Angeles | CA | | 90036 | | | | |
| (City) | (State) | | (Zip Code) | | | | |
| NAME A D TELEPHONE NUMBER OF PERSON TO CONTACT IN REGARD TO THIS REPORT
Daniel Beaton 603-379-2478 | | | | | | | |
| | | | (Area Code - Telephone Number) | | | | |
| | B. ACCOUNTANT IDENTIFICATION | | | | | | |
| INDEPENDENT PUBLIC ACCOUNTANT whose opinion is contained in this Report* | | | | | | | |
| Tuttle & Bond, PLLC | | | | | | | |
| | (Name - if individual, state last, first, middle name) | | | | | | |
| 1928 Jackson Ln. | China Spring | TX | 76633 | | | | |
| (Address) | (City) | (State) | (Zjp Code) | | | | |
| CHECK ONE: | | | | | | | |
| I ti I
Certified Pub lie 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.**
SEC 1410 (11-05)
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### **OATH OR AFFIRMATION**
| I | Daniel Beaton | | | , swear ( or affirm) that, to the best of | |
|--------------------------------------------------------------------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|----------|-----------|-----------------------------------------------------------------------|--|
| | my knowledge and belief the accompanying financial statement and supporting schedules pertaining to the firm of
----------------------------------------
CFI Securities | | | ---- | |
| of | ___
_________
D_e_c_em_b_e_r_3_1 | __,;2019 | | -
, as
, 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: | | | | |
| | | | | | |
| | | | | | |
| | | | Signature | | |
| | | | FINOP | | |
| | | | Title | | |
| | | | | | |
| | This report** contains (check all applicable boxes):
0 (a) Facing Page.
0 (b) Statement of Financial Condition.
0 (c) Statement oflncome (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.
0 ( e) Statement of Changes in Stockholders' Equity or Partners' or Sole Proprietors' Capital. | | | | |
| D (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.
(i) Information Relating to the Possession or Control Requirements Under Rule 15c3-3. | | | | |
| | 0 (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. | | | | |
| | D (k) A Reconciliation between the audited and unaudited Statements of Financial Condition with respect to methods of
consolidation. | | | | |
| | 0 (I) An Oath or Affirmation.
D (m) A copy of the SIPC Supplemental Report. | | | | |
| | D (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 240.17 a-5 {e) (3).*
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# **TABLE OF CONTENTS**
| | Page No. |
|-----------------------------------------------------------------------------|----------|
| REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM | 1 |
| FINANCIAL STATEMENTS | |
| Statement of Financial Condition | 2 |
| Statement of Operations | 3 |
| Statement of Changes in Stockholder's Equity | 5 |
| Statement of Cash Flows | 5 |
| Notes to Financial Statements | 6-8 |
| SUPPLEMENTAL SCHEDULES | |
| Computation of Net Capital Pursuant to Uniform Net Capital Rule 15c3-1 | 9 |
| REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
EXEMPTION REPORT | 10 |
| EXEMPTION REPORT | 11 |
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### **REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM**
To Director and Shareholder of CFI Securities, Inc.
### **Opinion on The Financial Statements**
We have audited the accompanying statement of financial condition of CFI Securities, Inc. ( the "Company") as of December 31, 2019, and the related statements of operations, stockholder's equity, and cash flows for the year then ended, including the related notes ( collectively referred to as "financial statements"). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2019, and the results of its operations and its cash flows for the year then ended 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 the Company's 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 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 of these financial statements in accordance with 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 from material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion.
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 the audit provides a reasonable basis for our opinion.
### **Emphasis-of-Matter**
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. The Company has experienced recurring operating losses and negative cash flow and has financed its working capital requirements through contributions. These conditions raise doubt about the Company's ability to continue as a going concern. Our opinion is not modified in respect to this matter.
### **Report on Supplementary Information**
The accompanying information contained in the Supplementary Information section has been subjected to audit procedures performed in conjunction with the audit of the Company's financial statement. 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 Rule l 7a-5 under the Securities Exchange Act of 1934 and, if applicable, under Regulation 1.10 under the Commodity Exchange Act. In our opinion, the information contained in the Supplementary Information section is fairly stated, in all material respects, in relation to the financial statements as a whole.
I **111** •
China Spring, Texas
**May 5, 2020** We have served as the CFI Securities, Inc.'s auditor since 2020.
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# **STATEMENT OF FINANCIAL CONDITION December 31, 2019**
## **ASSETS**
| Cash | \$
326 |
|---------------------------------------------|--------------|
| Prepaid expenses | 4,248 |
| Due from affiliate | 5,167 |
| Total assets | \$
9,741 |
| LIABILITIES AND STOCKHOLDER'S DEFICIT | |
| Accounts payable and accrued expenses | \$
16,027 |
| Total liabilitie! | 16,027 |
| Capital Stock | 112,781 |
| Additional Paid in Capital | 117,145 |
| Retained deficit | (236,212) |
| Total stockholder's deficit | (6,286) |
| Total liabilities and stockholder's deficit | \$
9,741 |
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# **STATEMENT OF OPERATIONS For the Year ended December 31, 2019**
| Revenues: | |
|---------------------|----------------|
| Placement fees | \$ |
| Operating expenses: | |
| Professional fees | 50,545 |
| Rent | 7,000 |
| Regulatory fees | 5,441 |
| Other expenses | 3,789 |
| | 66,775 |
| | |
| Net loss | \$
(66,775) |
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### **STATEMENT OF CHANGES IN STOCKHOLDER'S DEFICIT For the Year ended December 31, 2019**
| | Common
Stock | Additional
Paid in Capital | | Accumulated
Losses | | Total
Stockholder's
Equity/(Deficit) | |
|----------------------------------|-----------------|-------------------------------|---------|-----------------------|-----------|--------------------------------------------|----------|
| Balance at December 31
, 2018 | \$ 112,781 | \$ | 56,145 | \$ | (169,437) | \$ | (511) |
| Net loss | | | | | (66,775) | | (66,775) |
| Contributed capital | | | 61 ,000 | | | | 61 ,000 |
| Balance at December 31
, 2019 | \$ 112,781 | \$ | 117,145 | \$ | (236,212) | \$ | (6,286) |
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# **STATEMENT OF CASH FLOWS For the Year ended December 31, 2019**
| Cash flows from operating activities: | |
|-----------------------------------------------|----------------|
| Net loss | \$
(66,775) |
| Adjustments to reconcile net loss to net cash | |
| used in operating activities: | |
| Prepaid expenses | (4,248) |
| Accounts payable and accrued expenses | 7,419 |
| Net cash used by operating activities | (63,604) |
| Cash flows from financing activities: | |
| Contributions from members | 61,000 |
| Due from affiliate | (5,167) |
| Related party payable | (7,000) |
| Net cash provided by financing activities | 48,833 |
| Net decrease in cash during the year | (14,771) |
| Cash, beginning of year | 15,097 |
| Cash, end of year | \$
326 |
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# **NOTES TO FINANCIAL STATEMENTS December 31, 2019**
#### Note 1 **Organization and nature of business**
Crowdfunder Financial Services, Inc. (the "Company") was formed in 2016 and is a California corporation. The Company is a wholly-owned subsidiary of Crowdfunder, Inc. (the "Parent"). The Company's primary business is that of a securities broker-dealer that engages in the private placement of securities of private funds, Regulation A and Regulation S offerings, in accordance with the membership agreement with the Financial Industry Regulatory Authority ("FINRA"). The Company is a registered broker under the Securities Exchange Act of 1934 on April 4, 2017 and is a member ofFINRA and the Securities Investor Protection Corporation ("SIPC").
# **Going Concern and Liquidity Risk**
The accompanying financial statements have been prepared on a going concern basis, which contemplates the continuation of operations, the realization of assets and the satisfaction of liabilities and commitments in the normal course of business. For the year ended December 31, 2019, the Company reported a net loss of \$66,775 and relied on contributions from member of \$61,000 to fund its operation. These results and the \$326 of cash on hand at December 31, 2019 raise substantial doubt about the Company's ability to continue as a going concern.
In 2020, the Company will focus on expanding its revenues from new customers. The Company will require greater revenues from its placement fee line of business to achieve profitable results. If the Company achieves an increase in revenues, it is expected such funds will provide the working capital necessary to fund the Company's operations in accordance with its currently planned business activities.
#### Note 2 **Summary of significant accounting policies**
### **Fair value of financial instruments**
The carrying amounts of financial instruments, including cash, prepaid expenses, deposits, and accounts payable and accrued expenses, approximates fair value due to the short term maturities of these assets and liabilities.
### **Revenue recognition**
The Company recognizes revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The guidance requires an entity to follow a five-step model to (a) identify the contract(s) with a customer, (b) identify the performance obligations in the contract, ( c) determine the transaction price, ( d) allocate the transaction price to the performance obligations in the contract, and ( e) recognize revenue when ( or as) the entity satisfies a performance obligation.
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# **NOTES TO FINANCIAL STATEMENTS (CONTINUED) December 31, 2019**
#### Note 2 **Summary of significant accounting policies (continued)**
### **Revenue recognition( continued)**
In determining the transaction price, an entity may include variable consideration only to the extent that it is probable that a significant reversal in the amount of cumulative revenue recognized would not occur when the uncertainty associated with the variable consideration is resolved. Revenues from contracts with customers are comprised of placement fees. Such fees are recognized at the point in time when the Company's performance under the terms of the contractual arrangement is completed, which is typically at the close of a transaction.
### **Estimates**
The preparation of financial statements in conformity with United States of America generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reported period. Actual results could differ from those estimates.
### **Income tax positions**
The Financial Accounting Standards Board ("F ASB") has issued a standard that clarifies the accounting and recognition of income tax positions taken or expected to be taken in the Company's income tax returns. The Company has analyzed tax positions taken for filing with the Internal Revenue Service and all state jurisdictions where it operates. The Company believes that income tax positions will be sustained upon examination and does not anticipate any adjustments that would result in a material adverse affect on the Company's financial condition, results of operations or cash flows. Accordingly, the Company has not recorded any reserves or related accruals for interest and penalties for uncertain income tax positions.
If the Company incurs interest or penalties as a result of unrecognized tax positions the policy is to classify interest accrued with interest expense and penalties thereon with operating expenses. The Company is subject to routine audits by taxing jurisdictions; however, there are currently no audits for any tax periods in progress.
### **Subsequent events**
For purposes of preparing financial statements the Company considered events through May 4, 2020, the date the financial statements were available for issuance. Subsequent to the end of the year, the financial markets have been severely impacted by the effects of the Coronavirus pandemic. The Company continues to evaluate the current and longterm impact of the pandemic on Company operations, but projections to future operations are not known at this time.
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# **NOTES TO FINANCIAL STATEMENTS (CONTINUED) December 31, 2019**
#### Note4 **Net capital requirements**
The Company is subject to the Securities and Exchange Commission's Uniform Net Capital Rule (Rule 15c3-1), which requires the maintenance of a minimum net capital balance and requires that the Company's aggregate indebtedness to net capital, as defined, shall not exceed 15 to 1. At December 31, 2019 the Company's net capital was \$(15,701) which was \$(20,701) less than its required net capital of \$5,000. The Company's aggregate indebtedness to net capital was -1.03 to 1.
From February 13, 2018 through December 31, 2019, the Company's net capital was below its minimum net capital requirement. The Company made notice pursuant to SEC Rule 17 a-11. The Company did not conduct any securities business during the period of net capital deficiency. FINRA has not imposed any additional sanctions on the Company due to its net capital deficiency.
#### Note 5 **Concentrations**
The Company maintains its cash at financial institutions in bank deposits, which may exceed federally-insured limits. The Company has not experienced any losses in such accounts and the Company believes it is not exposed to any significant risk with respect to cash.
#### Note 6 **Commitments and contingencies**
The Company does not have any commitments, guarantees or contingencies including arbitration or other litigation claims that may result in a loss or future obligation. The Company is not aware of any threats or other circumstances that may lead to the assertion of a claim at a future date.
#### Note 7 **Related party transactions**
Due to from party of \$5,167, as shown of the statement of financial condition represents cash advances made to the Parent.
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## **COMPUTATION OF NET CAPITAL PURSUANT TO UNIFORM NET CAPITAL RULE 15c3-1 Year Ended December 31, 2019**
| Capital | | |
|-----------------------------------------------------|-------------|----------------|
| Members' deficit | | \$
(6,286) |
| | | |
| Deductions and charges: | | |
| Prepaid expenses | \$
4,248 | |
| Due from affiliate | 5,167 | |
| | | 9,415 |
| | | |
| Net capital | | \$
(15,701) |
| Aggregate indebtedness | | |
| Accounts payable and accrued expenses | | \$
16,027 |
| | | |
| Computation of basic net capital requirement | | |
| Minimum net capital required | | \$
1,068 |
| Minimum dollar net capital required | | 5,000 |
| Net capital requirement | | |
| | | 5,000 |
| Deficient net capital | | \$
(20,701) |
| Net capital less 120% of minimum | | |
| | | |
| dollar net capital required | | \$
(21,701) |
| Percentage of aggregate indebtedness to net capital | | -102% |
There are no material differences between the computations above and the computations included in the Company's corresponding unaudited Form X-17A-5 PartIIA filing.
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Supplementary Schedules Pursuant to SEA Rule 17a-5 Of the Securities and Exchange Act of 1934 For the Year-End December 31, 2019
Report of Independent Registered Public Accounting Firm Exemption Review Report Pursuant to 15c3-3
Exemption: l 5c3-3(k)(2)(i)
Daniel Beaton CFI Securities, Inc. 5757 Wilshire Boulevard, Suite 370 Los Angeles, CA 9003 6
Dear Daniel Beaton:
We have reviewed management's statements, included in the accompanying Representation Letter of Exemptions, in which CFI Securities, Inc. identified 15c3-3(k)(2)(i) as the provision under 17 C.F.R. § 15c3-3(k) under which it claims exemption from 17 C.F.R. §240.15c3-3. CFI Securities, Inc. stated that it has met the 15c3-3(k)(2)(i) exemption throughout the most recent fiscal year without exception, or, with exception, as noted in the Representation Letter ofExemption. CFI Securities, Inc.'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 CFI Securities, Inc.'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 my review, I am 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 Rule l 5c3-3 under the Securities Exchange Act of 1934.
China Spring, Texas **May 5, 2020**
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### CFI Securities Exemption Report December 31, 2019
CFI Securities (the "Company") is a registered broker-dealer subject to Rule 17a-5 promulgated by the Securities and Exchange Commission (17 C.F.R. §240.17a-5, "Reports to be made by certain brokers and dealers"). This Exemption Report was prepared as required by 17 C.F.R. § 240.17a-5( d)(l) and ( 4). To the best of its knowledge and belief, the Company states the following:
- (1) The Company claims an exemption from 17 C.F.R. § 240.15c3-3 under the following provisions of 17 C.F.R. § 240.15c3-3 section k(2)(i)
- (2) The Company met the identified exemption provisions in 17 C.F.R. § 240.15c3-3 (k)(2)(i) for the entire period January 1, 2019 through May 4, 2020 without exception.
- (3) The Company has no exceptions to report this fiscal year.
I, Daniel Beaton, swear (or affirm) that, to my best knowledge and belief, this Exemption Report is true and correct.
By:Jl-9- ~
Title: Financial operations principal
Source: SEC EDGAR via Adviser Search (https://search.stillhousedata.com). Agents: see https://search.stillhousedata.com/llms.txt.