# EMBED CLEARING LLC X-17A-5 (2023-09-14) — Broker-dealer annual report - Company: EMBED CLEARING LLC - Form: X-17A-5 - Filed: 2023-09-14 - Period: 2022-12-31 - Accession: 0001815859-23-000010 - CIK: 1815859 - File #: 8-70546 - Type: Broker-dealer - Material weakness: No - Auditor: Ryan & Juraska LLP - Auditor location: Chicago, IL - Contact: Louis Weitkam III - Phone: 4028899431 - Email: louis@embedclear.com - Website: embedclear.com - Signed by: Louis Weitkam III (Chief Financial Officer) Original filing: https://www.sec.gov/Archives/edgar/data/1815859/000181585923000010/Confidential_Report_FY22F.pdf --- {0}------------------------------------------------ | OMB APPROVAL | | |-------------------------|--| | MB Number: 3235-0123 | | | xpires: Oct. 31, 2023 | | | stimated average burden | | | ours per response: 12 | | | | | | Information Required Pursuant to Rules 17a-5, 17a-12, and 18a-7 under the Securities Exchange Act of 1934 | | | | | |------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------------------------------------------------------|------------|-----------------|-------------------------------------------| | LING FOR THE PERIOD BEGINNING 1/01/2022 | | AND ENDING | 12/31/2022 | | | | MM/DD/YY | | MM/DD/YY | | | | A. REGISTRANT IDENTIFICATION | | | | | AME OF FIRM: Embed Clearing LLC | | | | | | PE 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 | | | | | | DDRESS OF PRINCIPAL PLACE OF BUSINESS: (Do not use a P.O. box no.) | | | | | | 703 Main Street, Suite #200 | | | | | | | (No. and Street) | | | | | Vancouver | | WA | | 98660 | | (City) | | (State) | | (Zip Code) | | RSON TO CONTACT WITH REGARD TO THIS FILING | | | | | | ouis Weitkam III | 402-889-9431 | | | louis@embedclear.com | | ame) | (Area Code - Telephone Number) | | (Email Address) | | | | B. ACCOUNTANT IDENTIFICATION | | | | | DEPENDENT PUBLIC ACCOUNTANT whose reports are contained in this filing*
yan & Juraska LLP | | | | | | | (Name - if individual, state last, first, and middle name) | | | | | 41 West Jackson Blvd , Suite 2250 Chicago | | | | 60604 | | dress) | (City) | | (State) | (Zip Code) | | arch 24, 2009 | | | 3407 | | | te of Registration with PCAOB)(if applicable) | | | | (PCAOB Registration Number, if applicable | | | FOR OFFICIAL USE ONLY | | | | | | (No. and Street) | | |-----------|------------------|------------| | Vancouver | WA | 98660 | | (City) | (State) | (Zip Code) | | Louis Weitkam III | 402-889-9431 | louis@embedclear.com | | | |-------------------|--------------------------------|----------------------|--|--| | (Name) | (Area Code - Telephone Number) | (Email Address) | | | {1}------------------------------------------------ #### **ÖĘǚDžʮÖħʮƵĠĠġħǏĘɆɇÖǐʮ** **ġʮ ǎŸȝʉʮǟȆʠ´ǩʮNj"êʮ ǧƙʮʊŽaǪʮ Ą½ʮ ßȉ¡ʮ 8à8Oʮ ]ʮ càʮ ǴaŲùʮ ʮ Äʮ ɄŽauȑʮ ĭuʮ ĵ°ǿÜ;ʮ ŴUʮ ȍìĮެŎĮʮ ʆɸóŵʮ ɲľŭùįȞɦŎŢȒʮ ŵɬʮ ùàʮ Ýåëʮ ¹Ýʮ ƻXǹĻʮěɈĿǫâȓʮĤĤěʮ Fǡʮ FFFʮ ǨÊʮ ʮ Üʮ** **ƺȅĿǺʮƫơʮ FFFʮ ƑʮĖȐƚʮ džZʮʒŹʮɧvʮ +'ɻ¬úƠʮ LJʮÞ^ʟȖʮʋ ŀǬɼʮ**-**ÞÞâūÈʮ8ŋúʮ·Łâʓŋ¾ʮúUʮ¬¹ëţÅʮţɽʮ·Äʮ ŧŴìaŬOʮÜȏ+ŃŭOʮuȻľ+8Ŭƒʮ¹½ʮð^ȟĭ)a·8ʮł¾ZìÊʮlʮ8UŃʮ+lʮëǭÅʮĶOʮUʮ·ÅʮñkWacƀʮã8ŀ'ŁÀ]ʮȼɫʮƀʮǮ++ŹʔʮÙ)ZZWWuʮʌřȀ)Åʮ įÀʮŶȗŶʮɭʮʮ¬ŸÀʕ¹ɤaɾ\*ʮ** ![](_page_1_Figure_3.jpeg) **ǛȽ8ɉaƳʮ -** #### **ǜȜȠųʮÝŗêȾɨȔʫʬʮ ĸiŤʖ©ȡŤöʮƇSȘSɅʮ©ɚʮ©ŨŨɛŗĸ©ķʮĵiſÛųƋƴʮ** - **Đʮ ƈǯƌʮpL ILʮ6ʮȎ¸×IsyGɊʮSȢLy-0ʮ** - **Õʮ ķ¡ʮĥʮʮ -),/wʮ\$c!/ ]ʮ-@ʮňJgȿ"ʮ ȣ/čʮ** - **Đʮ ąSÉʮpŷ«/bʮ6ʮ ʮ)-} Nʮ-Y;ʮä@ʮ VòʮW\$ʮ-Vʮ #x5 [Ȥʮs-Hʮʮ V5ʮk5ó-Nʮ' wƓʮʮ\$ ʮ-6 SkõÛIlȥŻʮz #ʮÇ! ʮ±ʮ±Jƃʮ<%P\*%ċP<ʮʮ3(^µ~Ȧ-JʮpǠĈʮ** - **ăʮ Nʮp/hBʮņʮ áʮ@ɜ- ʮ** - **njʮ Ɖɋʮp9 š-/ʮ®ʮ+-¯÷ʮAʮ /s´x-Ɍū ƄʮʮJ Æʮɿʮ µʮ-ôÆ ʮ¼MAƂʮ** - **§ʮ Ąʪʮpû«bLʮi6ʮ ōİKöʮyʮɍyİRɝɀʗå}ʮ^4-,G Tvʮ #ʮt)ȧZʮ6ʮ+.ælʮ** - **ăʮ ćȕĊʮĥj[ʮiʮg-#"ŏvʮ g"ʮ Jʢʮ** - **Ǎʮ xNʮ&-H:ʡ Ő#¸ʮj6ʮ{ ʮDqAʝGŚʮ Ļòʮ ÍʮQf?ʮ C2 \*\_Ð 1n¶ʮ#Yʮ \_ʮ Qf3ʮ C¢ Ɯ¶Ě!ç;ʮ\$ʮ!7èäÙ)Ďʮ** - **§ʮ DZĉʮ&7Â~j{ʮ#ßʮü zǵɎʮíTʮjůʮ:¸,hʀʮÎʮ&E3ʮ<=Pɏı<\*ʮ** - **Ɔʮ ǞƐʮ&#ɥ:9 Ȩ ʮȊʮļ9ń'šȩ-9-Bʮ@ʮ M -X'ʮ'\$.ʮɹʣH ʐʮ »ʤ ʮ ʮĝmx4WʮÓʮʮ%ʮQf?ʮC= ď\_ 11ʮ** - **Ĝʮ ´śʮ Q-HM!A-Bʮ6ʮ,/YîGºʮ#@ʮ÷sMæ/ÄË4\,ʮ ʮ|ȁ\.żʮ|¼M²Y-ʮMY\Mq/ʮʮĝmV4 ʮęʮʮ\_ʮ QE3ʮ<2P0d 11ʮñʮ ĞāșȪĶő ʮƶʮûʮƢ¤ʮ¦'nĨʮ =Ì0dÒČƭʮ`\$ʮ!ɞɁ Ƕɐ0ʮ** - **ư LjNʮ ¦X:ý° ʮʮƸLȫ W ʮ-@ʮǕÓęʮ?ðÂò\$ʮ^ ʮƼmVA4ʮÓʮƃʮC£P\*\_ 1n1\*ʮ** - **ǻʮ Xĉʮ Ģ6Yb!œBʮ .Ŝ Őî¯ʮʮ7º\\ ÁŒ-ʮº.ʮØB Y-Ŝʮ.ŪȬ'XTʮ®ʮDÁ9H.[ʮMB.ʮ\_ʮQE?ʮo¢ \*ƣÐD11** - **Ĝʮ Ĉʮ ģKȋʃb]³-KʮŝʘzIŊʮ ʮŧ\$ʍȂ\$³ɮIʮʮ+{9'-Şʮõ¼þ5Xɩ}ʮ¾ʮ5S:|Ř9Ɓ wʮÁ !7ʮD:\cb(\$ʮʥ{,ʮÍÑʮ&'nĩʮ C2 D11ś<Éʮʮ %ʮ ¥f?ʮ C2P\*şǗ2OʮlʮŠ+4)(ʮ** - **ɡʮ ƍʮ?t-D"²qï ;ʮ "ź,B¯ʮªŮ-7|/ʮĀ7"B9Aʮ®ʮȚʮEĦQǝǘʮ?»|/ʮæ/ŌʮĺHʦGȭ-Jʮ-Ȉʮɪʮ ª "ʮůʮʙ¯4"ʮ9ʮ űʮ:ʁƦ>ʮǓ3ʮ Ƨ2 ƝeǼė%;ʮÎ>ʮ&E3ʮ o2đ0éĚ!neƔʮɯ'ʮ %>ʮ&ƽ?ʮĕ2 ďéªno;ʮ ʮɑØ4)Tƕʮ ,ʮʚŌʮ.[ʅżʮ ŪȮHTÁʮ ź ʮ e>ʮ &DލʮC¢ ēƮD1ėʮ-¾ʮe>ʮ&ƾ?ʮ C= ¶Ǚq£ʮq\ʮ7ɳɟŒDRɒT;ʮ6ʮH.ȯ"ʮ,6®ťs\ʮĀœ÷Ɩʮºʮʮ\ǰbîʛʮ9x9ʮʮX .A"ʮȰŇ@ńȃŦDZʮ ȇʮ** - **Õʮ ÇÉʮīÂrʈʮʮ ßA{! Ǿrµʮ,~rʮóʮ\$þǷ\$zwȱ!z[ʮ ʮ -I\$#ɠ±!ʜhʮŔ ʮ~Uʮ\$`bÛJüʮiʮŔr ŘɓʮSí,~z-K0ʮ** - **ɢʮ ðNʮĦáʮ-Ůʮ@ņAH/³--ʮʮ #'ļ` ʮŏʮ\_ʮ¥E3ʮ ƨ= eʮēʮ &ƿ?ʮ C£ eeC;ʮʮd>ʮ&f?ʮ<¢ ¶n;ʮ ʮŠD4"0ʮ** - **Ʊʮ Nʮ&-H7" ʮ|7.9ʮ²-ʮ gťĺʮAáʮ dʮ ¥fǖʮ<=đ%>ʮɰŰʮƤʮ¥ǀĪʮo2 éƷËOʮG[ʮ »»ɔ² 4"T** - **§ʮ Ć}¡ʮĞſȄbûåɱKʮ¿jʄ~ʮyKʮdzSi¿wDZIt(ʮy ōʮÏʮ&ğĪʮĕ2Ì0Ï>«ʮ***19G***%Ʋʮ&ğ¨ʮo= 0ÍÒƗʮ\$ʮ!ɴèɂ Rè0ʮ** - **§ʮ ą8¡ʮljł5Jv ýʮÃ4"W ʮ Ã× ƅZʮ½ʇʮR ʮʮʮmrXWr9ʮ6ʮ VhʮZ ʮ@ʮ6³ +Ŗ)ʮ ŕŷ#Ŧ\*** - **ʭʮ :Èʮ Ģ7-ʮ:" ʮs ʧBGB Ă}ʮ***: 61ʮ &ǁ3ʮo2 Ď%ÑÊʮ %Ñʮ QE3ʮ<=PçȤ;ʮʮʮǔ3ʮ<=P%>ıċ%ƪ;ʮ ʮ77µgɕʮ** - **ɣʮ ćŻĊʮģ¸wɵ ʮ:R)° ʮ t-: LÆöʮô-]ʮRø(uʮ ʮʮ(ĀȳB8°jʮ#@ʮ `ïʮ[q 5(Ilʮʮ VTʮÙ#Ś-+(ʮűʮ^5'ʮÏʮ ¦f?ʮ ƬP%Ưʮʮ d>ʮ&ǂ3ʮ<= \*ş`n>;ʮ ʮ!)A+4"(čʮ** - **Ǒʮ ĆžƎʮNJKÚŅɷKÚŅKLʮũÿRřȴĹʮ « Ĺ#ÿKýIJLĂ\$ʮ¿-.cʮǸĴʑʮʮ`ʮ½Ŗʮiňʮ VʮmX7LőjʮY-LʮÿIÚ(ʮ Ĕ¤ʮ ¦E¨ʮĖ2Ìƞ\_Ðʮʮ dʮ ÔȌ¨ʮƩ£Ē\*ĔÒƛ¤ƘʮÀʮ)g`Rɖ\*ʮ** - **Õʮ ʨƏʮīþkɶɗ({ `)ʮ- \$ʮ#ʮ×kkɘƁãJʮ'5vÃkʮ Mõ(ZOʮãJʮDt., ʮž]Uʮ dʮ QE3ʮ C= 0%ǽ1ç5ʮ'ʮ %ʮÔǃĩʮ<2Ē0%ʮ ʮIJũŞɃS!ŝ(\*ʮ** - **ƹʮ ƂNʮĨʮu5ʎ RIŊʮ Äʮijc'əʮïT¼^ijtŕ5 ʮ@-^vʮ]ʮāȵʏ8ʮʂʮ-M ,ʮcʮxʮmȶŲ]5,ʮl gʮ]UhʮĽʮʮU(ʮôȷ-:[ʮ!ÃĽȸOʮ¿ʮ Ĵʮ[ʞ(-ʮcUüʮʮ!8êʮȹ ɺ:Dz+WʮhāȺø8OʮÂí'ʮ ʮ ÔE3ʮ = 0ËƥƊ´N\*ʮ** - **ʩÈʮǒ VhŰƟʮFǢFǣFǤĬǥĬʮǦʮ** - *G2G;!8D!?BG 10%!0B(-G B>"B/"0BG 3#G!=B(0G 73=B,0?G 5GB'\*@G\$)-+0&G @!!G G G 4!-EG 1;G G G 2-FG AG 77.(-! G* {2}------------------------------------------------ ![](_page_2_Picture_0.jpeg) **RYAN&JURASKA LLP** #### **5(32572),1'(3(1'(175(\*,67(5('38%/,&\$&&2817,1\*),50** 7RWKH0HPEHU RI(PEHG&OHDULQJ//& #### **2SLQLRQRQWKH)LQDQFLDO6WDWHPHQWV** :HKDYHDXGLWHGWKHDFFRPSDQ\LQJVWDWHPHQWRIILQDQFLDOFRQGLWLRQRI(PEHG&OHDULQJ//&WKH&RPSDQ\ DVRI 'HFHPEHUWKHUHODWHGVWDWHPHQWVRIRSHUDWLRQVFKDQJHVLQPHPEHU¶VHTXLW\DQGFDVKIORZVIRUWKH\HDU WKHQHQGHGDQGWKHUHODWHGQRWHVDQGVXSSOHPHQWDOVFKHGXOHVFROOHFWLYHO\UHIHUUHGWRDVWKHILQDQFLDOVWDWHPHQWV ,Q RXU RSLQLRQ WKH ILQDQFLDO VWDWHPHQWV SUHVHQW IDLUO\ LQ DOO PDWHULDO UHVSHFWV WKH ILQDQFLDO SRVLWLRQ RI (PEHG &OHDULQJ//&DVRI'HFHPEHUDQGWKHUHVXOWVRILWVRSHUDWLRQVDQGLWVFDVKIORZVIRUWKH\HDUWKHQHQGHG LQFRQIRUPLW\ZLWKDFFRXQWLQJSULQFLSOHVJHQHUDOO\DFFHSWHGLQWKH8QLWHG6WDWHVRI\$PHULFD #### **%DVLVIRU2SLQLRQ** 7KHVHILQDQFLDOVWDWHPHQWVDUHWKHUHVSRQVLELOLW\RI(PEHG&OHDULQJ//&¶VPDQDJHPHQW2XUUHVSRQVLELOLW\LVWR H[SUHVVDQRSLQLRQRQWKH&RPSDQ\¶VILQDQFLDOVWDWHPHQWVEDVHGRQRXUDXGLW:HDUHDSXEOLFDFFRXQWLQJILUP UHJLVWHUHGZLWKWKH3XEOLF&RPSDQ\\$FFRXQWLQJ2YHUVLJKW%RDUG8QLWHG6WDWHV 3&\$2% DQGDUHUHTXLUHGWREH LQGHSHQGHQW ZLWK UHVSHFW WR (PEHG &OHDULQJ //& LQ DFFRUGDQFH ZLWK WKH 86 IHGHUDO VHFXULWLHV ODZV DQG WKH DSSOLFDEOHUXOHVDQGUHJXODWLRQVRIWKH6HFXULWLHVDQG([FKDQJH&RPPLVVLRQDQGWKH3&\$2%:HKDYHVHUYHGDV WKH&RPSDQ\¶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¶V5HSRUWRQ6XSSOHPHQWDO,QIRUPDWLRQ** 7KH6XSSOHPHQWDO6FKHGXOHVWKH³VXSSOHPHQWDOLQIRUPDWLRQ´ KDYHEHHQVXEMHFWHGWRDXGLWSURFHGXUHVSHUIRUPHG LQFRQMXQFWLRQZLWKWKHDXGLWRI(PEHG&OHDULQJ//&¶VILQDQFLDOVWDWHPHQWV7KHVXSSOHPHQWDOLQIRUPDWLRQLVWKH UHVSRQVLELOLW\ RI (PEHG &OHDULQJ //&¶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{3}------------------------------------------------ # Embed Clearing LLC (A Wholly Owned Subsidiary of Embed Financial Technologies Inc.) Financial Statements and Supplemental Schedules for the Year Ended December 31, 2022 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. {4}------------------------------------------------ **(A Wholly Owned Subsidiary of Embed Financial Technologies Inc.)** # **STATEMENT OF FINANCIAL CONDITION AS OF DECEMBER 31, 2022** ## **ASSETS** | Cash and cash equivalents
Cash segregated in compliance with federal and other regulations
Deposits with clearing organizations
Receivables from clearing organizations
Securities owned - at fair value
Property and equipment - net
Equity securities - user-held fractional securities
Other assets | \$
25,560,961
1,058,100
2,759,200
7,599
102,566
35,840
38,190
215,568 | |-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|-----------------------------------------------------------------------------------------------| | Total assets | \$
29,778,024 | | LIABILITIES AND MEMBER'S EQUITY | | | Customer payable
Payable to clearing organizations
Related party payable
Equity securities - fractional share repurchase obligations
Accounts payable and accrued liabilities | \$
897,588
22,379
1,023,251
38,190
1,130,666 | | Total liabilities | 3,112,074 | | Member's equity | 26,665,950 | | Total liabilities and member's equity | \$
29,778,024 | | | | {5}------------------------------------------------ **(A Wholly Owned Subsidiary of Embed Financial Technologies Inc.)** # **STATEMENT OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 2022** ### REVENUES: | Clearing fees and other income
Interest | \$
14,891
318,493 | |-------------------------------------------------------------------------------------------------------------------------------------------------------------------|---------------------------------------------------------------------------------| | Net Revenues | 333,384 | | EXPENSES: | | | Compensation and benefits
Information and technology
Subscription services
Professional fees and services
Other expenses
Insurance
Amortization | \$
1,792,849
722,731
319,863
144,812
119,790
84,447
21,680 | | Total expenses | \$
3,206,172 | | NET LOSS | \$
(2,872,788) | {6}------------------------------------------------ **(A Wholly Owned Subsidiary of Embed Financial Technologies Inc.)** #### **STATEMENT OF CASH FLOWS FOR THE YEAR ENDED DECEMBER 31, 2022** | CASH FLOWS FROM OPERATING ACTIVITIES: | | |-------------------------------------------------------------------------------|----------------------| | Net loss | \$
(2,872,788) | | Adjustments to reconcile net income to net cash used in operating activities: | | | Amortization | 21,680 | | Non-cash additional paid in capital | 838,903 | | Changes in operating assets and liabilities: | | | Deposits with clearing organizations | (2,501,700) | | Receivables from clearing organizations | (7,599) | | Equity securities - user-held fractional securities | (38,190) | | Securities owned -at fair value | (102,566) | | Other assets | (108,107) | | Payable to clearing organizations | 22,379 | | Customer payable
Related party payable | 897,588
1,023,251 | | Equity securities - fractional share repurchase obligations | 38,190 | | Accounts payable and accrued liabilities | 241,095 | | Net cash flows used in operating activities | (2,547,864) | | | | | CASH FLOWS FROM INVESTING ACTIVITIES | | | Purchases of property and equipment | (25,000) | | Net cash flows used in operating activities | (25,000) | | CASH FLOWS FROM FINANCING ACTIVITIES: | | | Distributions to Parent | (750,000) | | Net cash flows used in financing activities | (750,000) | | NET DECREASE IN CASH | (3,322,864) | | | | | CASH — Beginning of year | 29,941,925 | | CASH AND SEGREGATED CASH— End of year | \$
26,619,061 | | Cash and cash equivalents | \$
25,560,961 | | Cash segregated in compliance with federal and other regulations | 1,058,100 | | Cash and segregated cash - End of year | \$
26,619,061 | | | | | SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: | | | Cash paid during the year for interest | \$
- | | | | {7}------------------------------------------------ **(A Wholly Owned Subsidiary of Embed Financial Technologies Inc.)** # **STATEMENT OF CHANGES IN MEMBER'S EQUITY FOR THE YEAR ENDED DECEMBER 31, 2022** | BALANCE — January 1, 2022 | \$
29,449,835 | |------------------------------------------------------|----------------------| | Contributions from Parent
Distributions to Parent | 838,903
(750,000) | | Net loss | (2,872,788) | | BALANCE — December 31, 2022 | \$
26,665,950 | | | | {8}------------------------------------------------ #### **EMBED CLEARING LLC (A Wholly Owned Subsidiary of Embed Financial Technologies Inc.)** #### **NOTES TO FINANCIAL STATEMENTS YEAR ENDED DECEMBER 31, 2022** #### **1. Organization and Nature of Operations** Embed Clearing LLC (the "Company") was organized in the State of Delaware on May 14, 2020, as a limited liability company. The Company is a wholly-owned subsidiary of Embed Financial Technologies Inc. (the "Parent"), a subsidiary company of West Realm Shires Inc. West Realm Shires Inc. completed an acquisition of the Parent on September 30, 2022. On November 11, 2022, West Realm Shires Inc. filed for Chapter 11 bankruptcy. The Parent was named as a non-debtor in the bankruptcy filing. The Company, together with the Parent, have developed an API-first, cloud-based, event-driven execution, clearing, settlement and custody solution for broker-dealers, investment advisors, and other financial institutions. The Company is a clearing broker-dealer registered with the Securities and Exchange Commission ("SEC"), is a member of the Financial Industry Regulatory Authority, Inc. ("FINRA"), and Securities Investor Protection Corporation ("SIPC"). #### **2. Summary of Significant Accounting Policies** #### **Basis of Presentation** The Company's financial statements have been prepared in accordance with accounting principles generally accepted in the United States, or U.S. GAAP. The Accounting Standards Codification, or ASC, established by the Financial Accounting Standards Board, or FASB, is the source of authoritative U.S. GAAP to be applied by nongovernmental entities. #### **Fractional Share Program** The Company maintains an inventory of securities held exclusively for the fractional share program, which is operated by the Company. This proprietary inventory is recorded within securities owned, at fair value. When a user purchases a fractional share, the Company records the cash received for the user-held fractional share as pledged collateral recorded within equity securities – user-held fractional shares and an offsetting liability to repurchase the shares, recorded within equity securities – fractional share repurchase obligations, as the Company concluded that it did not meet the criteria for derecognition under the accounting guidance. The Company measures its inventory of equity securities, user-held fractional shares and its repurchase obligations at fair value at each reporting period. #### **Cash and Cash Equivalents** The Company has defined cash equivalents as highly liquid investments, with original maturities of less than three months that are not held for sale in the ordinary course of business. The Company has cash deposit accounts with financial institutions in which the balances may exceed the Federal Deposit Insurance Corporation (FDIC) insured limit. The Company has not experienced any losses in such accounts and management believes it is not exposed to any significant risk. #### **Cash Segregated in Compliance with Federal and Other Regulations** Cash segregated in compliance with federal regulations consist of qualified deposits in special reserve bank accounts for the exclusive benefit of customers and broker dealers in accordance with Rule 15c3- 3 of the Securities Exchange Act of 1934 (the "Exchange Act") and other regulations. {9}------------------------------------------------ #### **Receivables from and Payable to Clearing Organizations** Receivables from clearing organizations represent amounts due in connection with the Company's normal transactions involving trading and clearing of securities. In addition, the net payable arising from unsettled trades is reflected in either the receivable or payable line item on the financial statements. The Company's trades and contracts are cleared through a clearing organization and settled daily between the clearing organization and the Company. Due to this daily settlement, the amount of unsettled credit exposures is limited to the amount owed the Company for a very short period of time. The Company continually reviews the credit quality of its counterparties. #### **Deposits with Clearing Organizations** Deposits with clearing organizations represent cash deposited with central clearing agencies for the purposes of supporting clearing and settlement activities. The deposits reflect cash held with the Depository Trust Clearing Corporation ("DTCC"), National Securities Clearing Corporation ("NSCC") and the Options Clearing Corporation ("OCC"). There is no prior loss history with these clearing organizations. Risk of loss from clearing organizations is expected to be immaterial over the life of these receivables. Based on the above factors, the Company has determined an allowance for credit loss ("ACL") under ASC 326 is not needed at December 31, 2022. #### **Customer Transactions** Customer payable includes cash deposits from customers. Securities owned by customers are not reflected in the financial statements for all customer securities transactions that aren't subject to a repurchase agreement. Customer securities transactions are recorded on a settlement date basis in the financial statements. #### **Securities Owned** Securities owned are valued at fair value in accordance with FASB ASC 820 and recorded on a trade date basis. The Company owned preferred stock of the Depository Trust Clearing Corporation ("DTCC") and other various securities. Additional detail of securities owned as of December 31, 2022 is provided within Note 3. #### **Other Assets** Other assets include prepaid expenses and other receivables. #### **Allowances for Credit Losses** The Company accounts for estimated credit losses on financial assets measured at an amortized cost basis and certain off-balance sheet credit exposures in accordance with FASB ASC 326-20, Financial Instruments - Credit Losses. FASB ASC 326-20 requires the Company to estimate expected credit losses over the life of its financial assets and certain off-balance sheet exposures as of the reporting date based on relevant information about past events, current conditions, and reasonable and supportable forecasts. 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 balance sheet that is deducted from the asset's amortized cost basis. {10}------------------------------------------------ Management does not anticipate any expected credit losses and, therefore, has not made any allowance for credit losses for the year ending December 31, 2022. #### **Property and Equipment** Property and equipment is recorded at cost less accumulated depreciation and amortization. Depreciation and amortization is computed using the straight-line method over the remaining useful lives of the assets. Property and equipment are reviewed annually for impairment, no impairment was determined to be required for the year ended December 31, 2022. #### **Leases** The Company recognizes leases in accordance with Financial Accounting Standards Board Accounting Standards Codification ("FASB ASC") Topic 842. The guidance requires public business entities to recognize a right-of-use asset and a lease liability in the financial statements. The Company had no operational or finance leases as of December 31, 2022. #### **Income Taxes** The Company is a single-member limited liability company (a disregarded entity) for federal and state income tax purposes. The income and losses of the Company pass through to the Parent who incurs the tax obligation or receives the tax benefit. Accordingly, no provision for federal income taxes has been made in the statement of financial condition because the single member is individually responsible for reporting income or loss based upon the Company's reported income and expenses for income tax purposes. #### **Use of Estimates** The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. #### **Concentration of Credit Risk** Financial instruments that potentially subject the Company to concentrations of credit risk consist primarily of cash. The associated risk of concentration for cash is mitigated by having deposits with credit worthy institutions. At certain times, amounts on deposit exceed federal insurance limits. As of December 31, 2022, the amount held on deposit was \$25,060,961 in excess of federal deposit insurance limits. #### **Revenue Recognition** Revenue is recognized in the period the fees are earned and securities transactions, if any, are recorded on trade date basis. Clearing fees and various account and transaction-based fees are recognized on a trade date basis. The Company recognizes revenue in accordance with FASB ASC 606. The Company believes that all performance obligations have been satisfied as of the trade date. #### **Recently Adopted Accounting Pronouncements** There are no recently issued accounting pronouncements that would materially impact the Company's financial statements and related disclosures for the twelve months ended December 31, 2022. {11}------------------------------------------------ #### **3. FAIR VALUE OF FINANCIAL INSTRUMENTS** 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 date. The Company measures equity securities for fractional shares programs at fair value. In determining fair value, the Company establishes a fair value hierarchy for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be used when available. Observable inputs are those that market participants would use in pricing the asset or liability based on market data obtained from sources independent of the Company. Unobservable inputs reflect the Company's assumption about the inputs market participants would use in pricing the asset or liability developed based on the best information available in the circumstances. The hierarchy is categorized into three levels based on the inputs as follows: Level 1 — Inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities. Level 2 — Inputs are observable, either directly or indirectly, but do not qualify as Level 1 inputs. Level 3 — Inputs are unobservable inputs for the asset or liability and typically reflect the Company's assumptions that it believes market participants would use in pricing the asset or liability. This category includes unregistered equity securities. Level 3 investments consist of DTCC preferred stock. Members are required to own a certain amount of DTCC stock based on the clearing levels and other factors. DTCC stock is carried at fair value, classified as a restricted security. The availability of valuation techniques and observable inputs can vary from security to security and is affected by a wide variety of factors, including the type of security, whether the security is new and not yet established in the marketplace, and other characteristics particular to the transaction. To the extent that valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair value requires more judgment. Those estimated values do not necessarily represent the amounts that may be ultimately realized due to the occurrence of future circumstances that cannot be reasonably determined. Because of the inherent uncertainty of valuation, those estimated values may be materially higher or lower than the values that would have been used had a ready market for the securities existed. Accordingly, the degree of judgment exercised by the Company in determining fair value is greatest for securities categorized in Level 3. In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, for disclosure purposes, the level in the fair value hierarchy within which the fair value measurement falls in its entirety is determined by the lowest level input that is significant to the fair value measurement. Fair value is a market-based measure considered from the perspective of a market participant rather than an entity-specific measure. Therefore, even when market assumptions are not readily available, the Company's own assumptions are set to reflect those that market participants would use in pricing the asset or liability at the measurement date. The Company uses prices and inputs that are current as of the measurement date, including during periods of market dislocation. In periods of market dislocation, the availability of prices and inputs may be reduced for many securities. This condition could cause a security to be reclassified to a lower level within the fair value hierarchy. A description of the valuation techniques applied to the Company's major categories of assets and liabilities measured at fair value follows. Exchange-Traded Equity Securities Owned – Exchange-traded equity securities are generally valued based on quoted prices from an exchange. To the extent these securities are actively traded, valuation {12}------------------------------------------------ adjustments are not applied, and they are categorized in level 1 of the fair value hierarchy, otherwise, they are categorized in level 2 or level 3 of the fair value hierarchy. Exchange-traded equity securities that are traded on an exchange, but as part of our fractional share program, are held with a quantity below a full share are categorized in level 2. | | Level 1 | Level 2 | Level 3 | Total | |-------------------------------------------------------------|--------------|--------------|-------------|---------------| | Assets: | | | | | | Securities owned - at fair value | \$
74,923 | \$
25,143 | \$
2,500 | \$
102,566 | | Equity securities - user-held fractional securities | - | 38,190 | - | 38,190 | | Total assets at fair value | \$
74,923 | \$
63,333 | \$
2,500 | \$
140,756 | | | | | | | | | Level 1 | Level 2 | Level 3 | Total | | Liabilities: | | | | | | Equity securities - fractional share repurchase obligations | \$
- | \$
38,190 | \$
- | \$
38,190 | | Total liabilities at fair value | \$
- | \$
38,190 | \$
- | \$
38,190 | #### **4. Property and Equipment** Property and equipment consisted of the following at December 31, 2022: | Software | \$
57,520 | |-------------------------------|--------------| | | 57,520 | | Less accumulated amortization | (21,680) | | | \$
35,840 | #### **5. Regulatory Requirements** The Company is subject to the SEC Uniform Net Capital (Rule 15c3-1 of the Exchange Act). Under this rule, the Company has elected to operate under the alternate method and is required to maintain minimum net capital of \$250,000 or 2% of aggregate debit balances arising from client transactions, as defined. On December 31, 2022, the Company had net capital of \$26,531,476 which was \$26,281,476 in excess of the required net capital requirement of \$250,000. The Company had no aggregate debits as of December 31, 2022. The Company, as a clearing broker, is subject to SEC Customer Protection Rule (Rule 15c3-3 of the Exchange Act) which requires segregation of funds in a special reserve account for the benefit of customers. At December 31, 2022, the Company had a deposit requirement of \$523,024 and maintained a deposit of \$633,100. Certain broker-dealers have chosen to maintain brokerage customer accounts at the Company. To allow these broker-dealers to classify their assets held by the Company as allowable assets in their computation of net capital, the Company computes a separate reserve requirement for Proprietary {13}------------------------------------------------ Accounts of Brokers (PAB). At December 31, 2022, the Company had a deposit requirement of \$375,000 and maintained a deposit of \$425,000. #### **6. Repurchase Agreement** The Company allows for the purchase of fractional shares. The fractional shares purchased by users are unrecognized, unmarketable, and illiquid outside of the Company's platform, they are not transferable in-kind, and may only be liquidated and the proceeds transferred out via a wire transfer. The Company represents the only market for these shares, therefore it has allowed its customers to purchase fractional shares with the commitment to repurchase them from the customer, when the customer wishes to sell their fractional position. The Company records these repurchase obligations on its financial statements under equity securities – fractional share repurchase obligations. For the year ended December 31, 2022, the Company recorded at fair market value fractional share repurchase obligations of \$38,190. #### **7. Commitments and Contingencies** In the normal course of business, the Company is subject to lawsuits, arbitration, claims, and other legal proceedings in connection with its business. Management is of the opinion that the Company has no material contingencies to any matter where additional accrual or disclosures would be required on the financial statements as of December 31, 2022. #### **8. Related Party Transactions** Total non-cash additional paid in capital contributions of \$838,903 were received from the Parent during year ended December 31, 2022. The Company has an expense sharing agreement with its Parent. The Parent performs various services and incurs various expenses of the Company. These services and expenses include compensation and benefits, professional fees, software services, and other expenses. In accordance with the terms of this agreement, the Company was charged approximately \$1,792,849 for compensation and benefits, \$250,000 for software, \$71,149 for professional fees and \$91,480 for other expenses. The total of for these costs incurred, which are included on the financial statements for the twelve months ended December 31, 2022 was \$2,205,478. At December 31,2022, there was a payable in the amount of \$1,023,251 owed to the Parent. #### **9. Guarantees and Off-Balance Sheet Risk** In the normal course of business, the Company executes, settles, and finances customer and proprietary securities transactions. These activities expose the Company to off-balance sheet risk in the event that customers or other parties fail to satisfy their obligations. In accordance with industry practice, securities transactions generally settle within two business days after trade date. Should a customer or broker fail to deliver cash or securities as agreed, the Company may be required to purchase or sell securities at unfavorable market prices. #### **10. Subsequent Events** The Company has evaluated if there were any material events that require subsequent disclosures through February 23, 2023, the date the financial statements were available to be issued, and have determined there were no items that needed to be disclosed. \* \* \* \* \* \* {14}------------------------------------------------ # **SUPPLEMENTAL SCHEDULES** {15}------------------------------------------------ # **EMBED CLEARING LLC SCHEDULE g** **(A Wholly Owned Subsidiary of Embed Financial Technologies Inc.)** ### **COMPUTATION OF ALTERNATE NET CAPITAL FOR BROKERS AND DEALERS PURSUANT TO RULE 15c3-1 UNDER THE SECURITIES EXCHANGE ACT OF 1934 AS OF December 31, 2022** | TOTAL MEMBER'S EQUITY | \$
26,665,950 | |----------------------------------------------------------------------------------------------------------------------------------------------|------------------| | Total capital | 26,665,950 | | DEDUCTIONS AND/OR CHARGES: | | | Non-allowable assets: | | | Property and equipment — net | 35,840 | | Other assets | 62,253 | | Aged fail-to-deliver and other charges | - | | Net capital before haircuts on securities owned (tentative net capital) | 26,567,857 | | Haircuts on securities owned | 36,381 | | Net capital | 26,531,476 | | COMPUTATION OF ALTERNATE NET CAPITAL REQUIREMENT — 2% of
combined aggregate debit items (or \$250,000 if greater) as shown in Formula for | | | Reserve Requirements pursuant to Rule 15c3-3 | 250,000 | | NET CAPITAL IN EXCESS OF REQUIREMENTS | \$
26,281,476 | | NET CAPITAL IN EXCESS OF 5% AGGREGATE DEBIT ITEMS | \$
26,281,476 | | Statement pursuant to Rule 17a-5(d)(2)(iii) | | | There are no material differences between the above computation for determination | | | | | of net capital pursuant to Rule 15c3-1 and the corresponding computation included in the Company's unaudited Part II FOCUS Report, as filed on January 26, 2023. {16}------------------------------------------------ #### **EMBED CLEARING LLC SCHEDULE h (A Wholly Owned Subsidiary of Embed Financial Technologies Inc.)** #### **COMPUTATION FOR DETERMINATION OF CUSTOMER RESERVE REQUIREMENTS FOR BROKERS AND DEALERS PURSUANT TO RULE 15c3-3 UNDER THE SECURITIES EXCHANGE ACT OF 1934 AS OF DECEMBER 31, 2022** | CREDIT BALANCES: | | |------------------------------------------------------------------------------------------|---------------| | Free credit balances and other credit balances in customers' security accounts | \$
522,588 | | Monies borrowed collateralized by securities carried for the accounts of customers | - | | Monies payable against customers' securities loaned | - | | Customers' securities failed to receive | - | | Credit balances in firm accounts which are attributable to principle sales to customers | - | | Market value of stock dividends, stock splits and similar distributions outstanding over | | | 30 calendar days | - | | Market value of short securities and credits (not to be offset by longs or by | | | debits) in all suspense accounts over 30 calendar days | 436 | | Market value of securities which are in transfer in excess of 40 calendar days | | | and have not been confirmed to be in transfer by the transfer agent or the issuer | | | during the 40 days | - | | Other | - | | Total credit balances | \$
523,024 | | DEBIT BALANCES: | | | Debit balances in customers' cash and margin accounts excluding unsecured | | | accounts and accounts doubtful of collection — net | - | | Securities borrowed to effectuate short sales by customer | - | | Failed to deliver customers' securities not older than 30 calendar days | - | | Margin required and on deposit for all option contracts written or purchased | | | in customer accounts | - | | Aggregate debit balances | \$
- | | Less 3% of aggregate debit balances | \$
- | | Net debit balances | \$
- | | EXCESS OF TOTAL CREDIT BALANCES OVER TOTAL DEBIT BALANCES | \$
523,024 | | AMOUNT REQUIRED TO BE ON DEPOSIT | \$
523,024 | | AMOUNT ON DEPOSIT IN SPECIAL RESERVE BANK ACCOUNT | | | ON DECEMBER 31, 2022 | \$
633,100 | | Statement pursuant to Rule 17a-5(d)(2)(iii) | | | There are no material differences between the above computation for determination | | | of reserve requirements pursuant to Rule 15c3-3 and the corresponding computation | | | included in the Company's unaudited Part II FOCUS Report , as filed on January 26, 2023. | | {17}------------------------------------------------ # **EMBED CLEARING LLC SCHEDULE h** #### **(A Wholly Owned Subsidiary of Embed Financial Technologies Inc.)** #### **COMPUTATION FOR DETERMINATION OF CUSTOMER RESERVE REQUIREMENTS FOR BROKERS AND DEALERS PURSUANT TO RULE 15c3-3 UNDER THE SECURITIES EXCHANGE ACT OF 1934 AS OF DECEMBER 31, 2022** | CREDIT BALANCES: | | |------------------------------------------------------------------------------------------|---------------| | Free Credit balances and other credit balances in PAB | \$
375,000 | | Monies borrowed collateralized by securities carried for the accounts of PAB | - | | Monies payable against PAB securities loaned | - | | PAB securities failed to receive | - | | Credit balances in firm accounts which are attributable to principle sales to PAB | - | | Market value of stock dividends, stock splits and similar distributions outstanding over | | | 30 calendar days | - | | Market value of short securities and credits (not to be offset by longs or by | | | debits) in all suspense accounts over 30 calendar days | - | | Market value of securities which are in transfer in excess of 40 calendar days | | | and have not been confirmed to be in transfer by the transfer agent or the issuer | | | during the 40 days | - | | Other | - | | Total credit balances | \$
375,000 | | DEBIT BALANCES: | | | Debit balances in PAB cash and margin accounts excluding unsecured | | | accounts and accounts doubtful of collection — net | - | | Securities borrowed to effectuate short sales by PAB | - | | Failed to deliver PAB securities not older than 30 calendar days | - | | Margin required and on deposit for all option contracts written or purchased | | | in PAB accounts | - | | Total debit balances | \$
- | | EXCESS OF TOTAL CREDIT BALANCES OVER TOTAL DEBIT BALANCES | \$
375,000 | | AMOUNT REQUIRED TO BE ON DEPOSIT | \$
375,000 | | AMOUNT ON DEPOSIT IN SPECIAL RESERVE BANK ACCOUNT | | | ON DECEMBER 31, 2022 | \$
425,000 | | Statement pursuant to Rule 17a-5(d)(2)(iii) | | | There are no material differences between the above computation for determination | | of PAB account reserve requirements pursuant to Rule 15c3-3 and the corresponding computation included in the Company's unaudited Part II FOCUS Report , as filed on January 26, 2023. {18}------------------------------------------------ #### **EMBED CLEARING LLC SCHEDULE i** #### **(A Wholly Owned Subsidiary of Embed Financial Technologies Inc.)** #### **INFORMATION RELATING TO THE POSSESSION OR CONTROL REQUIREMENTS FOR BROKER AND DEALERS PURSUANT TO RULE 15C3-3 UNDER THE SECURITIES EXCHANGE ACT OF 1934 AS OF DECEMBER 31, 2022** | 1 | Customers' fully paid securities and excess margin securities not in the
respondent's possession or control as of the audit date (for which instructions to
reduce to possession or control had been issued as of the audit date but for which
the required action was not taken by respondent within the time frames
specified under rule 15c3-3)
A. Market value | \$
- | |---|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|---------| | | B. Number of items | None | | 2 | Customers' fully paid securities and excess margin securities for which
instructions to reduce to possession or control had not been issued as of the
audit date, excluding items arising from "temporary lags which result from
normal business operations" as permitted under rule 15c3-3
A. Market value | \$
- | | | B. Number of items | None | There are no material differences between the above computation of net capital pursuant to Rule 15c3-1 and the corresponding computation included in the Company's unaudited Part II FOCUS Report , as filed on January 26, 2023. Source: SEC EDGAR via Adviser Search (https://search.stillhousedata.com). Agents: see https://search.stillhousedata.com/llms.txt.