# GREGORY J. SCHWARTZ & CO., INC. X-17A-5 (2021-06-16) — Broker-dealer annual report - Company: GREGORY J. SCHWARTZ & CO., INC. - Form: X-17A-5 - Filed: 2021-06-16 - Period: 2021-03-31 - Accession: 0000203129-21-000001 - CIK: 203129 - File #: 8-20955 - Material weakness: No - Auditor: DeMarco Sciaccotta Wilkens & Dunleavy, LLP - Auditor location: Tinley Park, IL - Contact: Laura Powers - Phone: 248-644-2701 - Signed by: Edward A Schwartz (President) Original filing: https://www.sec.gov/Archives/edgar/data/203129/000020312921000001/public.pdf --- {0}------------------------------------------------ # STATEMENT OF FINANCIAL CONDITION AND REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM MARCH 31 , 2021 {1}------------------------------------------------ **UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549** 0MB APPROVAL OMBNumber: 3235-0123 Expires: October 31 , 2023 Estimated average burden hours per response .. . .. . 12.00 # **ANNUAL AUDITED REPORT FORM X-17A-5 PART Ill** | SEC FILE NUMBER | |-----------------| | | | 8-20955 | **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 04/01/2020
AND ENDING 03/31/2021
MM/DD/YY | | | | |----------------------------------------------------------------------------------------------------------------|------------------------------------------------------------------------------------------------|---------|--------------------------------|--| | | | | MM/DD/YY | | | | A. REGISTRANT IDENTIFICATION | | | | | NAME OF BROKER-DEALER: Gregory J. Schwartz & Co. Inc. | | | OFFICIAL USE ONLY | | | ADDRESS OF PRINCIPAL PLACE OF BUSINESS: (Do not use P.O. Box No.) | | | FIRM I.D. NO. | | | 3707 West Maple Rd. | | | | | | | (No. and Street) | | | | | Bloomfield Hills | Ml | | 48301 | | | (City) | (State) | | (Zip Code) | | | NAME AND TELEPHONE NUMBER OF PERSON TO CONTACT IN REGARD TO THIS REPORT
Edward A, Schwartz
(248)644-2701 | | | | | | | | | (Area Code - Telephone Number) | | | | B. ACCOUNTANT IDENTIFICATION | | | | | INDEPENDENT PUBLIC ACCOUNTANT whose opinion is contained in this Report* | | | | | | DeMarco Sciaccotta Wilkens & Dunleavy, LLP | (Name - if individual, state last, firs/, middle name) | | | | | 9501 W. 171st St. H-103 | Tinley Park | IL | 60487 | | | (Address) | (City) | (State) | (Zip Code) | | | CHECK ONE:
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certified Public Accountant
Public Accountant | | | | | | B
Accountant not resident in United States or any of its possessions. | | | | | *\*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.** {2}------------------------------------------------ # **OATH OR AFFIRMATION** | I, _E_d_w_a_rd_A_. S_c_h_w_a_rtz | ________________________
, swear ( or affirm) that, to the best of | |-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------| | Gregory J. Schwartz & Co. Inc. | my knowledge and belief the accompanying financial statement and supporting schedules pertaining to the firm of
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as | | of March 31 | are true and correct. I further swear ( or affirm) that | | classified solely as that of a customer, except as follows: | neither the company nor any partner, proprietor, principal officer or director has any proprietary interest in any account | | GABFIIEL BESHARA
Notary Public, State of Michigan | | | County of Oakland
My Commission Expires 03-24-2028
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ublic | Title | | This report** contains (check all applicable boxes):
0 (a) Facing Page.
[2] (b) Statement of Financial Condition.
of Comprehensive Income (as defined in §210.1-02 of Regulation S-X).
D ( d) Statement of Changes in Financial Condition.
D (t) Statement of Changes in Liabilities Subordinated to Claims of Creditors.
§ (g) Computation of Net Capital. | D (c) Statement of Income (Loss) or, if there is other comprehensive income in the period(s) presented, a Statement
D (e) Statement of Changes in Stockholders' Equity or Partners' or Sole Proprietors' Capital.
(h) Computation for Determination of Reserve Requirements Pursuant to Rule l 5c3-3.
(i) Information Relating to the Possession or Control Requirements Under Rule l 5c3-3.
D (j) A Reconciliation, including appropriate explanation of the Computation of Net Capital Under Rule 15c3-l and the
Computation for Determination of the Reserve Requirements Under Exhibit A of Rule l 5c3-3.
D (k) A Reconciliation between the audited and unaudited Statements of Financial Condition with respect to methods of | | consolidation.
[2] (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. !7a-5(e)(3).* {3}------------------------------------------------ ![](_page_3_Picture_0.jpeg) # REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM Board of Directors Gregory J. Schwartz & Co., Inc. # **Opinion on the Financial Statement** We have audited the accompanying statement of financial condition of Gregory J. Schwartz & Co., Inc. (the "Company") as of March 31 , 2021 , and the related notes ( collectively referred to as the "financial statement"). In our opinion, the statement of financial condition presents fairly, in all material respects, the financial position of Gregory J. Schwartz & Co., Inc. as of March 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 the Company's 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 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 our audit provides a reasonable basis for our opinion. We have served as Gregory J. Schwartz & Co., Inc. 's auditor since 1995. *~~t«~4.* **~!~ltd al** Tinley Park, Illinois June 2, 2021 {4}------------------------------------------------ # STATEMENT OF FINANCIAL CONDITION # MARCH 31, 2021 #### **ASSETS** | Cash and cash equivalents | \$ 1,093,687 | |--------------------------------|--------------| | Commissions receivable | 1,490,589 | | Receivable from broker/dealers | 1,335,144 | | Related party receivables | 274,898 | | Other assets | 21,905 | | | | | TOTAL ASSETS | \$ 4[216[223 | # LIABILITIES AND SHAREHOLDER'S EQUITY | LIABILITIES | 14,075 | |--------------------------------------------|--------------| | Accounts payable and accrued expenses | \$ | | Commissions and other compensation payable | 2,163,523 | | Profit sharing contribution payable | 241,216 | | Deferred revenue | 15,000 | | Total Liabilities | \$ 2,433,814 | | SHAREHOLDER'S EQUITY | 14,000 | | Common stock | \$ | | Additional paid-in capital | 696,000 | | Retained earnings | 1,072,409 | | Total Shareholder's Equity | \$1,782,409 | | TOTAL LIABILITIES AND SHAREHOLDER'S EQUITY | \$ 4[216[223 | The accompanying notes are an integral part of this financial statement. {5}------------------------------------------------ # NOTES TO STATEMENT OF FINANCIAL CONDITION ## YEAR ENDED MARCH 31, 2021 #### NOTE 1 - NATURE OF ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES Organization - Gregory J. Schwartz & Co., Inc. (the "Company") was incorporated in the state of Michigan on August 4, 1976. The Company is a wholly-owned subsidiary of Schwartz Holdings, LLC. The Company is registered with the Securities and Exchange Commission and is a member of the Financial Industry Regulatory Authority (FINRA). The Company's principal business activities are the sale of securities and providing investment advice. Basis of Presentation - The financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America ("GAAP"). Recognition of Revenue - The Company follows the revenue recognition guidance that 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 the performance obligation. Revenues are recognized when control of the promised services is transferred to customers, in an amount that reflects the consideration the Company expects to be entitled to in exchange for those services. Revenues are analyzed to determine whether the Company is the principal (i.e., reports revenue on a gross basis) or agent (i.e., reports revenues on a net basis) in the contract. Principal or agent designations depend primarily on the control an entity has over the product or service before control is transferred to a customer. The indicators of which party exercises control include primary responsibility over performance obligations, inventory risk before the good or service is transferred and discretion in establishing the price. {6}------------------------------------------------ ## NOTES TO STATEMENT OF FINANCIAL CONDITION # YEAR ENDED MARCH 31, 2021 # NOTE 1 - NATURE OF ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES - *(Continued)* Significant Judgments - The recognition and measurement of revenue is based on the assessment of individual contract terms. Significant judgment is required to determine whether performance obligations are satisfied at a point in time or over time; how to allocate transaction prices where multiple performance obligations are identified; when to recognize revenue based on the appropriate measure of the Company's progress under the contract; and whether constraints on variable consideration should be applied due to uncertain future events. Securities Transactions - Commission revenue and related expense arising from securities transactions are recorded on a trade date basis, which is the same business date as the transaction date. Revenue derived from the sale of limited partnership units on contingent offerings is recognized at the time the limited partnership's escrow agent distributes sales commissions to the Company. Advisory and Investment Banking Fees - Revenue for advisory and investment banking arrangements is generally recognized at the point in time that performance under the arrangement is completed or the contract is cancelled. Retainers and other fees received from customers prior to recognizing revenue are reflected as deferred revenue on the Statement of Financial Condition. Concentrations of Credit Risk - The Company is engaged in various brokerage activities in which the counterparties primarily include broker/dealers, banks, other financial institutions and the Company's own customers. In the event the counterparties do not fulfill their obligations, the Company may be exposed to risk. The risk of default depends on the creditworthiness of the counterparty or issuer of the instrument. It is the Company's policy to review, as necessary, the credit standing of each counterparty. In addition, the Company's cash is on deposit at three financial institutions and the balances at times may exceed the federally insured limit. The Company has not experienced any losses as a result. Cash Equivalents - For purposes of the Statement of Cash Flows, 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. {7}------------------------------------------------ # NOTES TO STATEMENT OF FINANCIAL CONDITION # YEAR ENDED MARCH 31, 2021 # NOTE 1 - NATURE OF ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES - *(Continued)* Receivables - The Company reviews the receivables for collectability on a regular basis. The allowance for doubtful accounts reflects management's best estimate of probable losses determined principally on the basis of historical experience. The allowance for doubtful accounts was \$0 at March 31 , 2021 . Leases - The Company recognizes and measures its leases in accordance with F ASB ASC 842, Leases. At March 31 , 2021 , the Company **did** not have any lease obligations, as any potential leased assets are covered through a management fee agreement (See Note 7). 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 reporting period. Actual results could differ from those estimates. #### NOTE 2 - NET CAPITAL REQUIREMENTS As a registered broker/dealer and member of the FINRA, the Company is subject to the U.S. 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 aggregated indebtedness to net capital, both as defined, shall not exceed 1500%. At March 31 , 2021 , the Company's net capital and required net capital were \$889,370 and \$162,254, respectively. The ratio of aggregate indebtedness to net capital was 274%. #### NOTE 3 - INCOME TAXES The Company accounts for any potential interest or penalties related to possible future liabilities for unrecognized income tax benefits as other expense. The Company is no longer subject to examination by tax authorities for federal, state or local income taxes for periods before 2018. {8}------------------------------------------------ # NOTES TO STATEMENT OF FINANCIAL CONDITION # YEAR ENDED MARCH 31, 2021 ### NOTE 4 - CAPITAL STOCK The authorized, issued, and outstanding shares of capital stock at March 31 , 2021 , were as follows: Preferred stock, \$100 par value, non-voting, cumulative, and redeemable at \$100 per share; 500 shares authorized: none issued and outstanding. Common stock, \$1 par value; 50,000 shares authorized; 14,000 shares issued and outstanding. #### NOTE 5 - PROFIT-SHARING PLAN The Company has a discretionary profit-sharing plan, which is integrated with social security, covering substantially all of its employees. The plan includes a provision under Internal Revenue Code Section 401(k) whereby participants may contribute to the plan. The Company makes a 3% minimum safe harbor contribution based on participant eligibility and gross wages. The plan is on a calendar year end. The Company contributions for the profit-sharing and safe harbor plan for the calendar year 2020 is \$176,684, which is included in profit sharing contribution payable on the Statement of Financial Condition. #### NOTE 6 - OFF-BALANCE-SHEET RISK AND CLEARING AGREEMENT The Company's customers enter into various transactions involving derivatives and other off-balance-sheet financial instruments. These financial instruments include exchange-traded and over-the-counter options. These derivative financial instruments are used to meet the needs of customers and are, therefore, subject to varying degrees of market and credit risk. Since the Company enters into the aforementioned transactions solely for the benefit of its customers, the Company does not bear any of the credit or market risk of those customers, with the exception of the risk to the Company should its customers fail to honor their obligations related to these derivative and other off-balance sheet financial instruments, as mentioned below. {9}------------------------------------------------ ## NOTES TO STATEMENT OF FINANCIAL CONDITION # YEAR ENDED MARCH 31, 2021 # NOTE 6- OFF-BALANCE-SHEET RISK AND CLEARING AGREEMENT- *(Continued)* In order to execute and process the aforementioned, as well as other securities transactions, the Company, in March 2021 , renewed an agreement with another broker/dealer (Clearing Broker/Dealer) which stays in effect through July 2027 (initial term), whereby the Company forwards (introduces) customer securities transactions to the Clearing Broker/Dealer, fully disclosing the customer name and other information. The processing and, if applicable, any financing pertaining to the introduced transactions are performed by the Clearing Broker/Dealer. The customer accounts are therefore maintained and recorded in the books and records of the Clearing Broker/Dealer on the Company's behalf Under the terms of the agreement, the Company is prohibited from entering into a similar agreement with another broker/dealer without prior approval from the Clearing Broker/Dealer. The Company has deposited \$25,000 with the Clearing Broker/Dealer to ensure the Company's performance under the agreement. This amount is included in "Receivable from broker/dealers" on the statement of financial condition. The agreement also states that the minimum revenue requirement per calendar quarter to the Clearing Broker/Dealer is \$9,000 and, should the Company terminate the agreement, the Company must pay \$3,000 for every month remaining in the initial term or any renewal term. Further provisions of the agreement state that the Company is to be held responsible for any losses arising when the customers introduced by the Company to the Clearing Broker/Dealer fail to meet their contractual commitments pertaining to the purchase, sale and possible financing of securities transactions. The Company may therefore be exposed to off-balance-sheet risk in the event the customer is unable to fulfill its contracted obligations and it is necessary for the Clearing Broker/Dealer to purchase or sell the securities at a loss. The Company's exposure to risk would consist of the amount of the loss realized on the purchase or sale and any additional expenses incurred pertaining to the transaction or other customer activity. {10}------------------------------------------------ ### NOTES TO STATEMENT OF FINANCIAL CONDITION # YEAR ENDED MARCH 31, 2021 # NOTE 7-RELATED PARTY TRANSACTIONS As mentioned in Note 1, the Company is a wholly owned subsidiary of Schwartz Holdings, LLC (SHLLC). Through common ownership the Company is also affiliated with Bloomfield Town Center, LLC (BTC), Schwartz Land Company, LLC D/B/ A Offices at Maple/Lahser (SLC), Schwartz Investment Banking, LLC (SIB), Schwartz Financial Group, Inc. (SFG), AHSFGI, LLC, Schwartz Benefit Services, LLC (SBS), Stag Group, LLC, AGW Associates, The B.A.C.O.N. Investment Club L.L.C. and Mi Community Bancorp PP (Mi Bank - a registered bank). In addition, SFG and an officer of the Company are the general partners or managing members of several limited partnerships and limited liability companies. The Company paid an officer and shareholder of the Company \$12,000 for the use of office space during the year ended March 31 , 2021. The lease terms are month-to-month. The Company received \$159,081 from affiliated companies for reimbursements of clerical and other payroll related expenses incurred on their behalf during the year ended March 31 , 2021 . These reimbursements are included in the statement of operations in compensation expense and other expense. At March 31 , 2021 , \$274,898 was receivable regarding the aforementioned arrangement, from these affiliated companies. The Company earned \$4,240 in fees from The Stag Group LLC. Of that amount, \$4,240 was receivable at March 31 , 2021 and is included in "Commissions receivable" on the statement of financial condition. {11}------------------------------------------------ ## NOTES TO STATEMENT OF FINANCIAL CONDITION # YEAR ENDED MARCH 31, 2021 #### NOTE 7 -RELATED PARTY TRANSACTIONS - *(Continued)* Effective March 1, 2010 (and amended June 26, 2014), the Company entered into an expense sharing agreement with SHLLC. According to terms of the agreement, SHLLC will provide the Company with certain management and consulting services. In addition, SHLLC will pay certain overhead expenses on behalf of the Company. In return for these services, the Company has agreed to pay fees and other reimbursements to SHLLC. This agreement may be terminated with or without cause by either party with written notification. Included on the Statement of Operations is \$1,400,253 paid to SHLLC under this agreement, as follows: | Occupancy | \$
304,708 | |----------------------|---------------| | Communications | ,081
161 | | Travel and promotion | ,509
91 | | Management fees | 512,514 | | Other | 330 441 | | Total | \$ 1400253 | #### NOTE 8 - CONTINGENCIES The Company, from time to time, is involved in certain claims and arbitrations incidental to its business. Management is of the opinion that any claims, either individually or in the aggregate, to which the Company is a party will not have a material adverse effect on the Company's financial position or operations. {12}------------------------------------------------ # NOTES TO STATEMENT OF FINANCIAL CONDITION # YEAR ENDED MARCH 31, 2021 #### NOTE 9 - PPP LOAN On April 20, 2020, the Company entered into a Promissory Note (the "PPP Note") with Huntington Bank as the lender (the "Lender"), pursuant to which the Lender agreed to make a loan to the Company under the Paycheck Protection Program (the "PPP Loan") offered by the U.S. Small Business Administration (the "SBA") in a principal amount of \$582,100 pursuant to Title 1 of the Coronavirus Aid, Relief and Economic Security Act (the "CARES Act"). The Note was forgiven in full on March 21 , 2021 , and is included in Other income on the Statement of Operations. # NOTEl0-SUBSEQUENTEVENT The Company has evaluated subsequent events for potential recognition and/or disclosure through the date the financial statements were issued, noting none. #### NOTE 11 - REVENUE FROM CONTRACTS WITH CUSTOMERS In regard to ASC Topic 606, revenue has been disaggregated on the Statement of Income. For presentation purposes, revenue on the Statement of Operations is disaggregated further than what was presented on the FOCUS filings. No further disaggregation is warranted at March 31 , 2021 . Source: SEC EDGAR via Adviser Search (https://search.stillhousedata.com). Agents: see https://search.stillhousedata.com/llms.txt.