# FOLLA CAPITAL, LLC X-17A-5 (2022-03-31) — Broker-dealer annual report - Company: FOLLA CAPITAL, LLC - Form: X-17A-5 - Filed: 2022-03-31 - Period: 2021-12-31 - Accession: 0001786669-22-000002 - CIK: 1786669 - File #: 8-70399 - Type: Broker-dealer - Material weakness: No - Auditor: Withum Smith & Brown, PC - Auditor location: New York, NY - Contact: Christopher L Franklin - Phone: 401-527-0746 - Email: cfranklin@follacapital.com - Website: follacapital.com - Signed by: Christopher L Franklin (Member) Original filing: https://www.sec.gov/Archives/edgar/data/1786669/000178666922000002/follaShortfinal2021.pdf --- {0}------------------------------------------------ UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 OMB APPROVAL OMB Number: 3235-0123 Expires: Oct. 31, 2023 Estimated average burden hours per response: 12 # ANNUAL REPORTS FORM X-17A-5 PART III | | SEC FILE NUMBER | | |--|-----------------|--| | Information Required Pursuant to Rules 17a-5, 17a-12, and 18a-7 under the Securities Exchange Act of 1934 | FACING PAGE | | | | |-------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------------------------------------------------------|-------------------------------------------|--------------------------------------------|--| | | | | | | | FILING FOR THE PERIOD BEGINNING 11/05/2020 AND ENDING 12/31/2021
MM/DD/YY | | | MM/DD/YY | | | | A. REGISTRANT IDENTIFICATION | | | | | NAME OF FIRM: Folla Capital LLC | | | | | | TYPE OF REGISTRANT (check all applicable boxes):
_ Security-based swap dealer
Broker-dealer
□ Check here if respondent is also an OTC derivatives dealer | | ‍ Major security-based swap participant | | | | ADDRESS OF PRINCIPAL PLACE OF BUSINESS: (Do not use a P.O. box no.) | | | | | | 3722 Shipyard Boulevard | | | | | | | (No. and Street) | | | | | Wilmington | NC | | 27403 | | | (City) | (State) | | (Zip Code) | | | PERSON TO CONTACT WITH REGARD TO THIS FILING | | | | | | Christopher L Franklin | 401-527-0746 | | cfranklin@follacapital.com | | | (Name) | (Area Code - Telephone Number) | (Email Address) | | | | | B. ACCOUNTANT IDENTIFICATION | | | | | INDEPENDENT PUBLIC ACCOUNTANT whose reports are contained in this filing*
Withum Smith & Brown | | | | | | | (Name - if individual, state last, first, and middle name) | | | | | 1411 Boradway, 9th Floor | New York | NY | 10018 | | | (Address) | (City) | (State) | (Zip Code) | | | 10/08/2003 | | 100 | | | | (Date of Registration with PCAOB)(if applicable) | FOR OFFICIAL USE ONLY | | (PCAOB Registration Number, if applicable) | | | * Claims for exemption from the requirement that the annual 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}------------------------------------------------ #### OATH OR AFFIRMATION | Christopher L Franklin | | | swear (or affirm) that, to the best of my knowledge and belief, the | |--------------------------------------------------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|------------------------------------------------------------------------------------------------------------------------------------| | tinancial report pertaining to the firm of Folla Capital LLC | | | as of | | 12/31 | | | , 2021 | | | | | partner, officer, director, or equivalent person, as the case may be, has any proprietary interest in any account,classfied solely | | as that of a customer. | amminimumumun, an | | | | | 11/11/11/11/11/11/11/11/11/11/11/11/11/11/11/11/11/11/11/11/11/11/11/11/11/11/11/11/11/11/11/11/11/11/11/11/11/11/11/11/11/11/11/11/11/11/11/11/11/11/11/11/11/11/11/11/11/11/
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JOTAR | Signature: | | | | | Title: | | | Notary Public | "UBITC
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", OF RHODE " | Member | | #### This filing\*\* contains (check all applicable boxes): - = (a) Statement of financial condition. - (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). - 0 (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. - [] (i) Computation for determination of customer 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. - [ ( ) 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. - □ (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 capible net worth under 17 CFR 240.15c3-1, 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 240.18a-7, as applicable. - □ (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. - (t) Independent public accountant's report based on an examination of the statement of financial condition. - 口 (u) Independent public accountant's report based on an examination of the financial statements under 17 CFR 240.17a-5, 17 CFR 240.18a-7, or 17 CFR 240.17a-12, as applicable. - □ (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 240.17a-12, as applicable. - □ (y) Report describing any material inadequacies 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. {2}------------------------------------------------ Financial Report Period Ended December 31, 2021 With Report of Independent Registered Public Accounting Firm SEC ID 8 - **70399** This report is deemed CONFIDENTIAL in accordance with Rule 17a-5(e)(3) under the Securities Exchange Act of 1934. A Statement of Financial Condition bound separately has been filed with the Securities and Exchange Commission simultaneously herewith as a PUBLIC DOCUMENT. {3}------------------------------------------------ ![](_page_3_Picture_0.jpeg) ## **REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM** To the Members of Folla Capital, LLC: #### **Opinion on the Financial Statement** We have audited the accompanying statement of financial condition of Folla Capital, LLC (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. March 31, 2022 {4}------------------------------------------------ #### Statement of Financial Condition December 31, 2021 | Assets | | |-------------------------|--------------| | Current Assets: | | | Cash & Cash Equivalents | \$
9,966 | | Accounts Receivable | 22,660 | | Prepaid Expenses | 2,371 | | Other Assets | 945 | | Total Current Assets | \$
35,942 | #### Liabilities and Members' Equity | Total Liabilities and Members' Equity | \$
35,942 | |---------------------------------------|--------------| | Members' Equity | 32,608 | | Total Liabilities | 3,334 | | Due to Related Party | 1,411 | | Accounts Payable | \$
1,923 | | Liabilities: | | See Accompanying Notes to Financial Statements {5}------------------------------------------------ #### Notes to Financial Statements #### **1. Summary of Significant Accounting Policies:** **Nature of Business:** Folla Capital LLC is a North Carolina based Limited Liability Company engaged in the business of assisting Companies prepare for and raise capital under various provisions of the JOBS Act of 2012. Effective November 5, 2020, the Company became a member of the Financial Industry Regulatory Authority (FINRA"). **Basis of Accounting:** The accompanying financial statements have been prepared on the accrual basis of accounting in accordance with accounting principles generally accepted in the United States of America ("GAAP"). **Going Concern and Liquidity:** The Company does not have sufficient liquidity to meet its anticipated obligations over the next year from the date of issuance of these financial statements. In connection with the Company's assessment of going concern considerations in accordance with FASB's Accounting Standards Update ("ASU") 201-15, "Disclosures of Uncertainties about an Entity's Ability to Continue as a Going Concern," management has determined that the Company has access to funds from the Members that are sufficient to fund the working capital needs of the Company through one year from the date of the issuance of these financial statements. **Use of Estimates:** The preparation of financial statements in conformity with GAAP 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 period reported. Actual results could differ from those estimates. **Risks and Uncertainties:** Financial instruments which potentially expose the Company to concentrations of credit risk consist primarily of cash and cash equivalents and receivables from customers. The Company maintains cash and cash equivalents in broker-dealers and banks offering protection for cash by the Securities Investor Protection Corporation ("SIPC") or Federal Depository Insurance Corporation ("FDIC") up to \$250,000. **Cash and Cash Equivalents:** The Company considers all highly liquid debt instruments purchased with an original maturity of three months or less to be cash equivalents. At December 31, 2021 the Company did not hold any cash equivalents. **Fair Value of Financial Instruments:** The Company follows FASB guidance with respect to fair value measurements. This guidance provides a framework for measuring fair value under GAAP, for all financial assets and liabilities measured at fair value on a recurring basis (see Note 2). **Allowance for Credit Losses:** The Company follows ASC Topic 326, Financial Instruments – Credit Losses ("ASC 326"). ASC 326 impacts the impairment model for certain assets measured at amortized cost by requiring a current expected credit loss ("CECL") methodology to estimate expected credit losses {6}------------------------------------------------ #### Notes to Financial Statements, Continued ### **1. Summary of Significant Accounting Policies, Continued** #### **Allowance for Credit Losses, Continued:** over the entire life of the financial asset, recorded at inception or purchase. The Company records the estimate of expected credit losses as an allowance for credit losses. For financial assets measured at an amortized cost basis, the allowance for credit losses is reported as a valuation account on the statement of financial condition that is deducted from the asset's amortized cost basis. Changes in the allowance for credit losses are reported in credit loss expense. The allowance for credit losses is based on the Company's expectation of the collectability of financial instruments carried at amortized cost, including fees receivable utilizing CECL framework. The Company considers factors such as historical experience, credit quality, age of balances and current and future economic conditions that may affect the Company's expectation of the collectability in determining the allowance for credit losses. The Company's expectation is that credit risk associated with fees receivable is not significant until they are 90 days past due on the contractual arrangement and expectation of collection in accordance with industry standards. Management does not believe that an allowance is required as of December 31, 2021. For the period ended December 31, 2021 there was no credit loss expense relate to the allowance for credit losses or any recoveries of amounts previously charged reflected on the statement of operations. **Concentrations**: The Company maintains it cash balance in one financial institution. The Company does not consider itself to be at risk with respect to its cash. The Company earned 47% of its revenues from 2 customers. #### **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. 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. *Consulting Fees:* The Company provides marketing and business consulting services to customers. Consulting fees are billed monthly and the Company believes the performance obligation for providing advisory services is satisfied over time because the customer is receiving and consuming the benefits as they are provided by the Company. For the period from November 5, 2020 through December 31, 2021, the Company earned consulting fee income of \$38,400. {7}------------------------------------------------ ### Notes to Financial Statements, Continued #### **1. Summary of Significant Accounting Policies, Continued** #### **Revenue Recognition, Continued:** *Success Fee Income:* The Company also earns revenue through securing investors to purchase equity securities and other financial instruments for their customers. Revenue is recognized at a point in time upon closing of the equity raise. In 2021, the Company earned revenue through the sale of certain client financial instruments. Revenue is recognized at the point in time upon transfer of the financial instruments to the purchaser. For the period from November 5, 2020 through December 31, 2021, the Company earned success fee income of \$8,660. *Private Placement Fees:* The Company provides advisory services in raising capital. Revenue earned for successful closings of raising capital are recognized at the point in time that performance under the arrangement is completed (the closing date of the transaction). For the period from November 5, 2020 through December 31, 2021 the Company did not earn any private placement fees. The Company had no outstanding receivables at November 5, 2020 and \$22,600 at December 31, 2021. The Company had no contract assets at November 5, 2020 and December 31, 2021. Disaggregation can be found on statement of operations for the period ended December 31, 2021. **Income Taxes:** The Company has elected to be treated as a partnership under the provisions of the Internal Revenue Code, which provides that the members are taxed on the Company's taxable income or loss. Similar provisions apply for state and local income tax reporting. Accordingly, no provision for income taxes is provided in the accompanying financial statements. **Income Tax Uncertainties:** The Company follows the FASB guidance for how uncertain tax positions should be recognized, measured, disclosed and presented in the financial statements. This requires the evaluation of tax positions taken or expected be taken in the course of preparing the Company's tax returns to determine whether the tax positions are "more-likely-than-not" of being sustained "when challenged" or "when examined" by the applicable tax authority. Tax positions not deemed to meet the more-likely-than-not threshold would be recorded as a tax expense and liability in the current year. Management has evaluated the Company's tax positions and concluded that the Company has taken no uncertain tax positions that require adjustment to the financial statements to comply with the provisions of this guidance as of December 31, 2021. The Company is not currently under audit by any tax jurisdiction. **New Accounting Guidance:** In February 2016, the FASB issued ASU 2016-02 - Leases (Topic 842). The update requires that all leasing activity with initial terms in excess of twelve months be recognized on the statement of financial position with a right of use asset and a lease liability. The standard requires entities to classify leases as either a finance or operating lease based upon the contractual terms. Lessees record a right of use asset with a corresponding liability based on the net present value of rental payments. The Company adopted the standard during 2020, under the modified retrospective approach to the earliest period presented. {8}------------------------------------------------ #### Notes to Financial Statements, Continued ### **2. Indemnifications:** The Company has certain obligations to indemnify its managers and officers for certain events or occurrences while the manager or officers are, or were, serving at the Company's request in such capacities. The maximum liability under these obligations is limited by the Code of North Carolina; however, the Company's insurance policies serve to further limit its exposure. ### **3. Regulatory Requirements:** The Company is subject to the Securities and Exchange Commission Uniform Net Capital Rule (Rule 15c3-1), 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 12.5 to 1. At December 31, 2021, the Company had net capital of \$ 6,632 which was \$ 1,632 in excess of required minimum net capital of \$ 5,000. The Company's net capital ratio was 50.27%. The Company does not handle cash or securities on behalf of customers and accordingly has no obligation under SEC Rule 15c3-3. ### **4. Subsequent Events:** The Company has evaluated subsequent events through the date of this report and has determined there have been no events that have occurred that would require adjustments to or disclosures in the financial statements. #### **5. Related Party Transactions:** At December 31, 2021 a Member of the Company was owed \$1,411 for expenses incurred on behalf of the Company. This amount was paid by the Company on February 8, 2022. The Company leases office space from a Member of the Company on a month-to-month basis. The monthly rent is \$1,400 and totaled \$4,200 for the period ended December 31, 2021. The Company compensates one of its members in the form of Guaranteed Payments. Guaranteed Payments totaled \$87,744 for the period ended December 31, 2021. Source: SEC EDGAR via Adviser Search (https://search.stillhousedata.com). Agents: see https://search.stillhousedata.com/llms.txt.