# FENNEL FINANCIALS LLC X-17A-5 (2024-09-09) — Broker-dealer annual report - Company: FENNEL FINANCIALS LLC - Form: X-17A-5 - Filed: 2024-09-09 - Period: 2024-06-30 - Accession: 0002013816-24-000055 - CIK: 1878821 - File #: 8-70779 - Type: Broker-dealer - Material weakness: No - Auditor: Brian W. Anson, CPA - Auditor location: Tarzana, CA - Contact: Keith George - Phone: 212-668-8700 - Email: kgeorge@acisecure.com - Website: acisecure.com - Signed by: Lindsey Knepper (CCO) Original filing: https://www.sec.gov/Archives/edgar/data/1878821/000201381624000055/fennelaudit.pdf --- {0}------------------------------------------------ UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 # **ANNUAL REPORTS FORM X-17A-5 PART** Ill 0MB APPROVAL 0MB Number: 3235-0123 Expires: Nov. 30, 2026 Estimated **average** burden hours per response: 12 | SEC FILE NUMBER | | |-----------------|--| | 8-70779 | | **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 **07 /01 /23** AND ENDING **06/30/24** MM/00/YY MM/00/YY **A. REGISTRANT IDENTIFICATION** # NAME OF FIRM: FENNEL FINANCIALS LLC TYPE OF REGISTRANT (check all applicable boxes): [!] Broker-dealer □ Security-based swap dealer D 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 .0. box no.) # 450 LEXINGTON AVENUE, 4TH FLOOR | | | (No. and Street) | | | | |------------------------------------------------------------|------------------------------------------------------------|---------------------------------------|-----------------|--------------------------------------------|--| | NEW
YORK | | NY | | 10017 | | | (City) | | (State) | | (Zip Code) | | | PERSON TO CONTACT WITH REGARD TO | THIS FILING | | | | | | Keith
George | (212) | 668-8700 | | kgeorge@acisecure.com | | | (Name) | (Area Code -Telephone Number) | | (Email Address) | | | | | B. ACCOUNTANT IDENTIFICATION | | | | | | INDEPENDENT PUBLIC ACCOUNTANT whose
BRIAN
W
ANSON | CPA
, | reports are contained in this filing* | | | | | | (Name - if individual, state last, first, and middle name) | | | | | | 18455
BURBANK | BLVD
#404 | TARZANA | CA | 91356 | | | (Address} | (City) | | (State) | (Zip Code) | | | September
15
2005
, | | | 2370 | | | | (rte of Registration with PCAOB}(lf applicable) | | FOR OFFICIAL USE ONLY | | (PCAOB Registration Number, if applicable) | | | | | | | | | •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 24o.17a-S(e}(l}(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 0MB control number.** {1}------------------------------------------------ # **OATH OR AFFIRMATION** | I, LINDSEY KNEPPER | swear (or affirm) that, to the best of my knowledge and belief, the | | |-----------------------------------------------------------------------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|---------| | financial report pertaining to the firm of FENNEL FINANCIALS LLC
6/30
2 024 | is true and correct. 1 further swear (or affirm)that neither the company nor any | / as of | | MONI
as that of a customer. | partner, officer, director~~~~~~~~,a.5;.ttl.ec;:~~wW.be, has any proprietary interest in any account classified solely
UE ROMERO
NOTARY PUBLIC, STATE OF NEW YORK
Registration No. 01 R06308967
Signature:
Qualified in New Yor1c County
L~
Commission Expires August 4, 2026
Title: | | | | cco | | ~~~ NotaryPu;J # **This filing\*\* contains (check all applicable boxes):** - ~ (a) Statement of financial condition. - D (b) Notes to consolidated statement of financial condition. - iii (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). - ~ (d) Statement of cash flows. - **liiil** (e) Statement of changes in stockholders' or partners' or sole proprietor's equity. - D (f) Statement of changes in liabilities subordinated to claims of creditors. - **liiil {g)** Notes to consolidated financial statements. - iii {h) Computation of net capital under 17 CFR 240.15c3-1 or 17 CFR 240.18a-1, as applicable. - 0 (i) Computation of tangible net worth under 17 CFR 240.18a-2. - □ 0) Computation for determination of customer reserve requirements pursuant to Exhibit A to 17 CFR 240.1Sc3-3. - □ (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. - □ (I) Computation for Determination of PAB Requirements under Exhibit A to§ 240.1Sc3-3. - □ (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 240.1Sc3-3(p)(2) or 17 CFR 240.18a-4, as applicable. - **(iii!** (o) Reconciliations, including appropriate explanations, of the FOCUS Report with computation of net capital or tangible net worth under 17 CFR 240.15c3-1, 17 CFR 240.18a-l, or 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. - iii (q) Oath or affirmation in accordance with 17 CFR 240.17a-5, 17 CFR 240.17a-12, or 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. - **(iii!** (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. - Iii (u) Independent public accountant's report based on an examination of the financial report or 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. . - Iii (w) Independent public accountant's report based on a review of the exemption report under 17 CFR 240.17a-5 or 17 CFR 240.lSa-7, as applicable. - □ (x) Supplemental reports on applying agreed-upon procedures, in accordance with 17 CFR 240.15c3-le or 17 CFR 240.17a-12, as applicable. - □ (y) Report describing any material inadequacies found to exist or found to have existed since the date of the previous audit, or astatement 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-S(e)(3) or 17 CFR 240.18a-7(d}{2), as applicable. {2}------------------------------------------------ **Report on Audit of Financial Statements and Supplementary Information** **As of and for the Period July 1, 2023 Through June 30, 2024** {3}------------------------------------------------ ### As of and for the Period July 1, 2023 Through June 30, 2024 ## **Contents** | Report of Independent Registered Public Accounting Firm | 1 | |------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|-------| | Financial Statements | | | Statement of Financial Condition | 2 | | Statement of Operations | 3 | | Statement of Changes in Member's Equity | 4 | | Statement of Cash Flows | 5 | | Notes to Financial Statements | 6 - 8 | | Supplementary Information | | | Schedule I - Computation of Net Capital Under Rule 15c3-1 of
the Securities and Exchange Commission | 9 | | Schedule II - Computation for Determination of Reserve Requirements and
Information Relating to Possession or Control requirements
under Rule 15c3-3 of the Securities and Exchange Commission | 10 | | Schedule III - Information Relating to the Possession or Control Requirements
under Rule 15c3-3 of the Securities and Exchange Commission | 10 | | Report of Independent Registered Public Accounting Firm | 11 | | Exemption Report | 12 | {4}------------------------------------------------ {5}------------------------------------------------ ### Statement of Financial Condition As of June 30, 2024 ### **ASSETS** | Cash
Clearing deposit
Prepaid expenses and other assets
Intangible asset, net of accumulated amortization of \$17,030 | \$
89,177
125,175
12,208
46,631 | |--------------------------------------------------------------------------------------------------------------------------------|---------------------------------------------| | TOTAL ASSETS | \$
273,191 | | LIABILITIES AND MEMBER'S EQUITY | | | LIABILITIES | | | Accounts payable and accrued expenses
Deferred revenue | 72,644
26,671 | | TOTAL LIABILITIES | \$
99,315 | | MEMBER'S EQUITY | | | Member's Equity | \$
173,876 | | TOTAL MEMBER'S EQUITY | 173,876 | | TOTAL LIABILITIES AND MEMBER'S EQUITY | \$
273,191 | {6}------------------------------------------------ ### Statement of Operations As of and for the Period July 1, 2023 Through June 30, 2024 | REVENUE: | | |--------------------------------------------------------|-------------------| | Interest income | \$
3,740 | | Subscription revenue | 37,747 | | Other income | 2,399 | | Total revenue | \$
43,886 | | OPERATING EXPENSES: | | | Amortization of capitalized software development costs | \$
17,030 | | Compensation and benefits | 1,004,468 | | Professional fees | 159,422 | | Promotional fees | 130,914 | | Technology | 243,794 | | Occupancy and equipment | 20,706 | | Regulatory | 33,821 | | Travel and entertainment | 1,123 | | Market data fees | 278,839 | | Other expenses | 261,942 | | Total expenses | \$
2,152,059 | | NET LOSS | \$
(2,108,173) | | | | {7}------------------------------------------------ #### Statement of Changes in Member's Equity As of and for the Period July 1, 2023 Through June 30, 2024 | | Total Member's Equity | |-----------------------------------------------------|-----------------------| | Member's equity, beginning of period | \$
713,856 | | Member's contributions:
Cash
Debt forgiveness | 345,497
1,222,696 | | Net loss | (2,108,173) | | Member's equity, end of period | \$
173,876 | {8}------------------------------------------------ ### Statement of Cash Flows As of and for the Period July 1, 2023 Through June 30, 2024 | OPERATING ACTIVITIES: | | |--------------------------------------------------------------------------------------|-------------------| | Net loss | \$
(2,108,173) | | Adjustments to reconcile net income to net cash provided by
operating activities: | | | Amortization of capitalized software development costs | 17,030 | | Member's non-cash contributions-debt forgiveness | 1,222,696 | | Changes in operating assets and liabilities | | | Increase in clearing deposit | (70) | | Decrease in due from parent | 99,221 | | Decrease in right-of-use asset | 15,383 | | Decrease in prepaid expenses and other assets | 1,210 | | Increase in intangible asset | (63,661) | | Increase in accounts payable and accrued expenses | 39,106 | | Decrease in operating lease liability | (15,703) | | Increase in deferred revenue | 26,671 | | Net cash used by operating activities | (766,290) | | FINANCING ACTIVITIES: | | | Member's contributions | 345,497 | | Net cash provided by financing activities | 345,497 | | NET DECREASE IN CASH | (420,793) | | CASH AT BEGINNING OF YEAR | 509,970 | | CASH AT END OF YEAR | \$
89,177 | #### **SUPPLEMENTAL DISCLOSURE OF CASHFLOW INFORMATION:** The Company made no income tax or interest payments during the period. {9}------------------------------------------------ ### Notes to Financial Statements As of and for the Period July 1, 2023 Through June 30, 2024 # **1. Organization and Nature of Business** Fennel Financials LLC (The "Company"), incorporated under the laws of the state of Delaware on July 1, 2021 is a broker-dealer registered with the Securities and Exchange Commission ("SEC") and is a member of the Financial Industry Regulatory Authority ("FINRA"), effective April 6, 2022. The Company does not clear trades nor carry customer accounts. The Company provides a mobile investing application owned by its parent company to its customers to trade securities through its online platform. ### **2. Summary of Significant Accounting Policies** #### **Basis of Accounting** The financial statements are prepared using the accrual basis of accounting in accordance with accounting principles generally accepted in the United States of America. Revenue is recognized when earned, while expenses and losses are recognized when incurred. #### **Cash** The Company considers all highly liquid investments with a maturity of three months or less when purchased to be cash equivalents. Cash consist of funds maintained in a checking account held at a financial institution. The Company's cash is held principally at one financial institution and at times may exceed federally insured limits. The Company has placed these funds in a high quality institution in order to minimize risk relating to exceeding insured limits. The Company has not experienced any losses in such accounts. #### **Use of Estimates** The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities as of the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates. #### **Clearing Deposit** The Company, per the terms of its clearing agreement, is required to maintain a minimum restricted security deposits with its clearing broker. Such deposit amounts are refundable to the Company upon termination of the agreement. At June 30, 2024, the deposit balance was \$125,175, as reported on the accompanying statement of financial condition. #### **Income Taxes** The Company is a limited liability company and is treated as a disregarded entity for income tax reporting purposes. The Internal Revenue Code provides that any income or loss is passed through to the member for federal and state income tax purposes. Accordingly, the Company has not provided a tax provision for federal, state and local income taxes. Management is responsible for evaluating the Company's uncertain tax positions in accordance with the Financial Accounting Standards Board ("FASB") Accounting Standards Codification 740, Income Taxes. As of June 30, 2024, management has determined that the Company had no uncertain tax positions that would require financial statement recognition. This determination will be subject to ongoing reevaluation based upon facts and circumstances. {10}------------------------------------------------ #### Notes to Financial Statements As of and for the Period July 1, 2023 Through June 30, 2024 #### **Revenue Recognition** The Company follows Financial Accounting Standards Board (FASB) ASC Topic 606, Revenue from Contracts with Customers ("ASC Topic 606"). The revenue recognition guidance requires that an entity recognize 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. The Company generates revenues from subscription fees charged to customers for use of its online platform. The Company had no contract assets as of June 30, 2024. The Company had deferred revenue of \$26,671 as of June 30, 2024. #### **3. Capital and Liquidity** The Company might 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, management has determined that the Company will have access to funding from the parent company. The parent is committed to continuing to fund the ongoing operations of the Company. #### **4. Related Party Transactions** The Company has entered into an expense sharing agreement with its parent, Fennel Markets, LLC. The terms of the expense sharing agreement provide that any expenses paid on behalf of the Company, such as compensation, rent and various other operating expenses are to be allocated to the Company. Expenses recorded for the period for services provided on behalf of the Company were approximately \$1,754,000. #### **5. Commitments and Contingent Liabilities** The Company has issued no guarantees, had no underwriting commitments, no contingent liabilities, and had not been named as a defendant in any lawsuit as of June 30, 2024, or during the period July 1, 2023 through June 30, 2024. The Company is leasing office space in New York City for a six month term beginning July 1, 2024 through December 31, 2024, at a monthly rate of \$790. 7 {11}------------------------------------------------ Notes to Financial Statements As of and for the Period from July 1, 2023 Through June 30, 2024 # **6. Net Capital Requirement** The Company is subject to the Securities and Exchange Commission Uniform Net Capital 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 15 to 1. At June 30, 2024, the Company had net capital of \$115,037 which was \$108,416 in excess of its required net capital of \$6,621. The Company's aggregate indebtedness to net capital ratio was 86.33%. In May of 2024, the Company discovered that it was in net capital violation due to insufficient liquid assets. The Company notified FINRA of the capital deficiency on May 31, 2024, which spanned from April 30, 2024 through May 15, 2024. The deficiency was remediated through a contribution of capital of \$60,000 in the form of debt forgiveness on May 15, 2024. ## **7. Subsequent Events** The Company has evaluated events and transactions that occurred between July 1, 2024 and August 28, 2024, which is the date the financial statements were available to be issued, for possible disclosure and recognition in the financial statements. {12}------------------------------------------------ ### **SCHEDULE I** Computation of Net Capital Under Rule 15c3-1 of the Securities and Exchange Commission As of June 30, 2024 | MEMBER'S EQUITY | \$
173,876 | |------------------------------------------------------------|---------------| | | | | DEDUCTIONS AND/OR CHARGES: | | | Non-allowable assets:
Prepaid expenses and other assets | (58,839) | | NET CAPITAL | \$
115,037 | | | | | AGGREGATE INDEBTEDNESS: | | | Accounts payable and accrued expenses | \$
99,315 | | | | | COMPUTATION OF BASIC NET CAPITAL REQUIREMENT | | | Minimum net capital required | \$
6,621 | | Excess net capital | \$
108,416 | | | | | Net Capital less greater of 10% of aggregate indebtedness | | | or 120% of the minimum dollar amount required | \$
105,106 | | Percentage of aggregate indebtedness to net capital | 86.33% | | There are no material differences between the preceding | | computation and the Company's corresponding amended unaudited Part II of Form X-17A-5 as of June 30, 2024. {13}------------------------------------------------ #### **SCHEDULE II** ## **COMPUTATION FOR DETERMINATION OF RESERVE REQUIREMENTS UNDER RULE 15C3-3 OF THE SECURITIES AND EXCHANGE COMMISSION** The Company is exempt from the provisions of Rule 15c3-3 under the Securities Exchange Act of 1934 pursuant to paragraph (k)(2)(ii) of the rule. #### **SCHEDULE III** # **INFORMATION RELATING TO THE POSSESSION OR CONTROL REQUIREMENTS UNDER RULE 15c3-3 OF THE SECURITIES AND EXCHANGE COMMISSION** The Company is exempt from the provisions of Rule 15c3-3 under the Securities Exchange Act of 1934 pursuant to paragraph (k)(2)(ii) of the rule. The Company did not maintain possession or control of any customer funds or securities. {14}------------------------------------------------ {15}------------------------------------------------ Exemption Report Securities and Exchange Commission 100 First Street, NE Washington, D.C. 20549 To whom it may concern: **Fennel Financials LLC** (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) (1) and (4). To the best of its knowledge and belief, the Company states the following: - (1) The Company claimed an exemption from 17 C.F.R. § 240.15c3-3 under the following provisions of 17 C.F.R. § 240.15c3-3 *(*k*)*(2)(ii) for the period from July 1, 2023 to June 30, 2024. - a. All of the customer transactions are cleared through the following broker-dealer(s) on a fully disclosed basis: APEX - (2) The Company met the identified exemption provisions in Paragraph (k)(2)(ii) of Rule 15c3- 3 throughout the period from July 1, 2023 to June 30, 2024 without exception. - (3) The Company is also filing this exemption report because the Company's other business activities contemplated by Footnote 74 of SEC Release No. 34-70073 adopting amendments to 17 C.F.R. § 240.17a-5 are limited to effecting securities transactions by providing access to an online investing platform on a subscription basis. I, Lindsey Knepper , swear (or affirm) that, to my best knowledge and belief, we did not identify any exceptions to this exemption during this period. **\_\_\_\_** Title: CCO Source: SEC EDGAR via Adviser Search (https://search.stillhousedata.com). Agents: see https://search.stillhousedata.com/llms.txt.