# HARBOR FINANCIAL SERVICES, LLC X-17A-5 (2019-03-01) — Broker-dealer annual report - Company: HARBOR FINANCIAL SERVICES, LLC - Form: X-17A-5 - Filed: 2019-03-01 - Period: 2018-12-31 - Accession: 0000857602-19-000001 - CIK: 857602 - File #: 8-41965 - Material weakness: No - Auditor: Goldman & Company, CPA's - Auditor location: Marietta, GA - Contact: Marc Whitehead - Phone: 251-445-2427 - Signed by: Marc Whitehead (President & CEO) Original filing: https://www.sec.gov/Archives/edgar/data/857602/000085760219000001/X17A5Pub.pdf --- {0}------------------------------------------------ ### HARBOR FINANCIAL SERVIGES, LLC FINANCIAL STATEMENTS December 31,2018 {1}------------------------------------------------ #### UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C.20549 OMB APPROVAL OMB Number: 3235-0123 Expires: August 31,2020 Estimated average burden hours oerresoonse. . . . . . . 12.00 # ANNUAL AUDITED REPORT FORM X-17A-5 PART III | SEC FILE NUMBER | | | | | |-----------------|--|--|--|--| | 84't965 | | | | | 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 | u,/20l8 | AND ENDING | | 1213U2018 | | |---------------------------------------------------------------------------|--------------------------------------------------------|------------|---------------|--------------------------------|--| | | MM/DD,TYY | | | MM/DD/YY | | | | A. REGISTRANT IDENTIF'ICATION | | | | | | NAME OF BROKER-DEALER: | Harbor Financial Services, LLC | | | | | | ADDRESS OF PRINCIPAL PLACE OF BUSINESS: (Do not use P.O. Box No.) | | | FIRM I.D. NO. | | | | RSA Battle House Tower, ll North Water Street, Ste 21290 | | | | | | | | (No. and Street) | | | | | | | AL | | | | | | (city) | (state) | | (Zip code) | | | | NAME AND TELEPHONE NUMBER OF PERSON TO CONTACT IN RECARD TO THIS REPORT | | | | | | | Thomas Hopkins | | | | 603-216-8933 | | | | | | | (Area Code - Telephone Number) | | | | B. ACCOUNTANT I DENTIFICATION | | | | | | TNDEPENDENT PUBLIC ACCOLINTANT whose opinion is contained on this Report* | | | | | | | | Goldman & Company CPAs PC | | | | | | | (Name - if individual, state last, first, middle name) | | | | | | 3535 Roswell Road - Suite 32 | | | | | | | (Address) | (City) | | (State) | (Zip Code) | | | CHECKONE: | | | | | | | tr
Certified Public Accountant | | | | | | | tr
PublicAccountant | | | | | | | tr
Accountant not resident in United States or any ofis possessions. | | | | | | | | FOR OFFIGTAL | | | | | | | | | | | | | | | | | | | Claimslor exemptionfrom the requirement fuat the annual report be covered by the opinion ofan independent public accountant must be supported by a statement offocts and circumstances relied on as the basisfor the exemption. See 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 SEC 1410 (06-02) unless the form displays a currently valid OMB control number. {2}------------------------------------------------ #### OATTI ORAFFIRil'IATION | | Marc Whitchesd | | , slcur (or aflirnl) that, to thc bcst of | | | |----|-------------------|-------------------------------------------------------------------------------------------------------------------------------------|-------------------------------------------|--|--| | | | my knorvtcdge and lxlief, the accompanying'financial s{ltcmcnts and supporting sclredulcs pertairrirrg to thc firn of | | | | | | | Harbor Financial Scnices, LLC | rllt | | | | of | Decembcr 31. 2018 | . ate lrue and correct I funlrer srycar (or afiirm) | | | | | | | that ncithcr the cotnprny nor ony partner, propriclor, principal otficcr, or director has any proprietar;v irrterest in any account | | | | classified sole\$ 0s that ofa ctstomer, cxctpt rut follorvs: Subscribed and srvorn Title This repon\* cootairr (check all applicable boxes): - [l (a) Facingprge. Fll tul statementofFinanciatCondition. - E (e) ststenrcntoflncome(Loss). - E (d) slotcmentofCash.Flows - E (e) Statement of Changcs in Stockholders' Equity or Parfiers'or Solc Proprictot's Cupital. - - - [ (h) Computation tbr dctermination of reserve requirements pursuant to Rulc l5c3-3. - il (D lofonratioo rc.tating lo the posscssion or conrrot requircments for brokers and denlcrs undcr Rulc l5c3-3. - D 0) Areconciliaaion, including appoprialc explenation, ofthe computation ofnet capital undsr Rule l5c3-l and rhe computation for.determination of the rcscrvc rcquirements undur exhibif A ofRule l5c3-3. - [--l Al A rcconciliation bctrvuen r]rc auditcd und unaudited Statemcrrts of Financial Condition rvith rcspecr to rncthods of consolidation. - [-il| 0) A\*oath orallirmution' - I-l trl Acopy ofthe Securities lrvcstor Protcction Corporatioo (SIPC) supplcmental report. - l-l Ot ExemptionReport \*tt For conditiotts of co4lfulential lrealtnont of ceualn portions af fiis./iling, see section 270.17a-5(a)(3). {3}------------------------------------------------ # HARBOR FINANCIAL SERVICES, LLC Financial Statements for the Year Ended December 31,2018 Table of Gontents Report of lndependent Registered Public Accounting Firm Financial Statements Statement of Financial Condition Notes to Financial Statements {4}------------------------------------------------ #### REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM # To the Members of dffi{ # Opinion on the Financial Statement Fercq Z We have audited the accompanying statement of financial condition of Harbor Financial Services, LLC as of &sr{ o-December 31, 2018, and the related notes (collectively referred to as the financial statement). In our opinion, rqrffi# <. the statement of financial condition presents fairly, in all material respects, the financial position of Harbor { \ = Financial Services, LLC as of December 31, 2018 in conformity with accounting principles generally accepted \. ji O in the United States of America. kF qJ Basis for Opinion /&. This financial statement is the responsibility of Harbor Financial Services, LLC's management. Our rt \ responsibility is to express an opinion on Harbor Financial Services, LLC's financial statement based on our t ) "f uodit. W" 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 Harbor Financial Services, LLC Lfr f\. in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities I I I I and Exchange Commission and the PCAOB. %d%/ 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 stat€ments, Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall preseutation of the financial statements. We believe that our audit provides a reasonable basis for our opinion. /fu\*1,r7 c/trrd<- We have served as the Company's auditor since 2015. Goldman & Company, CPA's, P.C. Marietta, Georgia February 27,2019 3535 Roswell Road . Suite 32 . Marietta, GA 30062 . 770.499.a55a . Fax 770.425.36,83 {5}------------------------------------------------ # HARBOR FINANCIAL SERVICES, LLC STATEIiENT OF FINANCIAL CONDITION As of December 31,2018 #### ASSETS | Cash and cash equivalents
Commissions receivable
Receivables from reps
Accounts receivables
Property and equipment, at cost, less accumulated | \$ | 1,334,727
197,646
91,022
73,161 | |-----------------------------------------------------------------------------------------------------------------------------------------------------------|-----|------------------------------------------| | depreciation and amortization of 80,499 | | 12,982 | | Prepaid expenses and other assets | | 102,984 | | Total assets | ^\$ | 1,812,522 | | LIABILTTIES AND MEMBERS' EQUITY | | | | Liabilities
Commissions payable
Accounts payable and accrued expenses | | 408,331
147,220 | | Total liabilities | | 555.551 | | Members'equity | | 1,256,971 | | Total liabilities and members' equity | \$ | 1,812,522 | The accompanying notes are an integral part of these financial statements. {6}------------------------------------------------ # NOTE A . SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Organization and Description of Business: Harbor Financial Services, LLC (the "Company"), an Alabama limited liability company organized in December 2004, is a securities broker-dealer registered with the Securities and Exchange Commission ("SEC") and is a member of the Financial lndustry Regulatory Authority ("FlNRq"; and other various exchanges. The Company acts primarily as a broker in municipal securities, government securities, corporate debt and equity securities, equity trading on a fully disclosed basis, options, life insurance and annuities, mutual funds and investment advisory services. The Company's office is located in Mobile, Alabama. Basis of Presentation: The Company's financial statements are prepared in accordance with accounting principles generally accepted in the United States of America. lncome Taxes: The Company is taxed as a partnership. Therefore the income or losses of the Company flow through to the members and no income taxes are recorded in the accompanying financial statements. The Company has adopted the provisions of FASB Accounting Standards Codification 74O-1O, Accounting for Uncertainty in lncome Taxes. Under ASC 740-10, the Company is required to evaluate each of its tax positions to determine if they are more likely than not to be sustained if the taxing authority examines the respective position. A tax position includes an entity's status, including its status as a passthrough entity, and the decision not to file a tax return. The Company has evaluated each of its tax positions and has determined that it has no uncertain tax positions. Estimates: Management uses estimates and assumptions in preparing financial statements in accordance with generally accepted accounting principles. Those estimates and assumptions affect the reported amounts of assets, liabilities, revenues and expenses. Actual results could vary from the estimates that were assumed in preparing the financial statements. Cash and Cash Equivalents: The Company considers all cash and money market instruments with a maturity of ninety days or less to be cash and cash equivalents. The Company maintains its cash and cash equivalents deposits in high credit quality financial institutions. Balances at times may exceed federally insured limits. {7}------------------------------------------------ #### NOTE A - SUMMARY OF SIGN]FICANT ACCOUNTING POLICIES CONTINUED Revenue Recognition: On January 1,2018, the Company adopted ASU 2014-09 Revenue from Contracts with Customers and all subsequent amendments to the ASU (collectively, 'ASC 606") using the modifl7 retrospective method of adoption. ASC 606 created a single framework for recognizing revenue from contracts with customers that fall within its scope. Under ASC 606 revenue is recognized upon satisfaction of performance obligations by transferrlng control over goods or service to a customer. The adoption od ASC 606 did not result in any changes to beginning retained earnings for the year ended December 31, 2018or net income for the preceding year-end. Services within the scope of ASC 606 include, a. lnvestment Advisory, lnvestment Brokerage (including income earned on riskless principal transaction) b. Mutual fund and 12b-1fees Refer to Revenue Recognition Note: Revenue from Contracts with Customers for further discussion on the Company's accounting policies for revenue sources within the scope of ASC 606. #### Revenue from Contracts with Customers: #### lnvestment Advisory Fees: The Company earns lnvestment Advisory Fees from its contracts with brokerage customers to manage assets for investment, and/or to tranact on their accounts. The lnvestment Advisory Fees are primarily earned over time as the Company provides the contracted quarterly services and are generally assessed based on a tiered scale of the market value od assets under management (AUM) at month-end. #### lnvestment Brokerage Fees (Gross): The Company earns brokerage fees from its contracts with brokerage customers to transact on their account. Fees are transaction based, including trade execution services, are recognized at the point in time that the transaction is executed, i.e., the trade date. This includes riskless principal (government and corporate bonds) transactions in which the company receives a buy order from a customer and the Company purchases the security from another person or entity to offset the sale to the customer. Company buys the bond at a lower price than it sells it. The riskless principal revenue is earned at the time the transaction is executed. # Mutual Fund (pooled investment vehicles) and l2bi fees: Mutual Funds or pooled investment vehicles (collectively,'Tunds") have entered into agreements with the Company to distribute/sell its shares to investors. Fees are paid up front and over time (12b-1 fees) on the basis of a contractual rate applied to the monthly or quarterly market value of the fund (that is, net asset value [NAVI), the fund may also pay, upon investor exit from the fund (that is, a contingent deferred sales charge [CDSC]), or as a combination thereof. Revenue is recognized monthly as services are provided. {8}------------------------------------------------ #### NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES CONTINUED Receivables from Representatives: The Company records receivables from representatives at net realizable value. The Company regularly reviews its accounts receivable for any bad debts. The review for bad debts is based on an analysis of the Company's collection experience, customer worthiness, and current economic trends. At December 31 , 2018 the Company did not have an allowance for doubtful accounts as all receivable amounts are deemed to be fully collectible. Commissions Receivables: Represents amount due from its clearing broker, 12b-1 fees, and insurance commissions, all of which is considered collectible. Accounts Receivables: Represents receivable from an insurance claim, registered representatives for rent, and overhead, all of which is considered collectible. Gompensated Absences: Employees of the Company are entitled to paid absences based on length of service. lt is impractical to estimate the amount of compensation for future absenses, and, accordingly, no liability has been recorded in the accompanying financial statements. The Company's policy is to recognize the costs of compensated absences when actually paid to employees and that all accrued compensatory time is non-vested upon termination. Property and Equipment Property and equipment are canied at cost and depreciated using the straight-line method over the estimated useful lives of the asset which is estimated to be between three and seven years. \$ubsequent Events: The Company has performed an evaluation of subsequent events through February 27,2019, the date the financial statements were issued. The evaluation did not result in any subsequent events that required disclosures and/or adjustments. #### NOTE B - NET CAPITAL AND AGGREGATE INDEBTEDNESS 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 15 to 1. At December 31, 2018, the Company had net capital of \$888,042, which was \$788,042 more than its required net capital of \$100,000 and the ratio of aggregate indebtedness to net capital was .63 to 1.0. {9}------------------------------------------------ ### NOTE C - CONCENTRATIONS OF CREDIT RISK The Company is engaged in various trading and brokerage activities in which counterparties primarily include broker-dealers, banks, and other financial institutions. ln the event 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. lt is the Company's policy to review, as necessary, the credit standing of each counterparty. #### NOTE D - FURNITURE AND EQUIPMENT A summary of the cost and accumulated depreciation of premises and equipment follows: | December 31.2018 | | | |--------------------------------|--------------|--| | Furniture and otfice equipment | \$
93,481 | | | Accumulated depreciation | (80,499) | | | Property and equipment, net | \$
12,982 | | Depreciation expense for the year ended December 31, 2018 was \$1,121. #### NOTE E - COMMITMENTS AND CONTINGENT LIABILITIES The Company has obligations under operating leases with initial noncancelable terms in excess of one year. | 2A19 | 91,746 | | |------|------------|--| | 2020 | 92,881 | | | 2021 | 94,016 | | | 2022 | 95,151 | | | 2023 | 96.286 | | | 2024 | 16.079 | | | | \$ 486,159 | | Rent expense for 2018 totaled \$123,858 and is included in the occupancy expense line item on the Statement of Operations. The Company is involved in an arbitration matter that it feels has no merit and no accrual has been made recorded on the financial statements Rental income is from rent charged to the Company's registered representatives. lt is included in other income on the statement of operations. {10}------------------------------------------------ #### NOTE F - PROFIT SHARING PIAN The Company has a defined contribution 401(k) plan, open to all employees who have at least one year of service and are age twenty one or older, subject to a minimum threshold of one thousand hours worked per calendar year. The Plan provides for a 100% match on the first 3% of employee compensation contributed, then 50% match on the next 2o/o of compensation contributed as defined by the Plan document. The Company's matching contribution to the Plan totaled approximately \$17,630 in 2018 and is included in compensation and benefits of the statement of operations. Additional amounts may be Source: SEC EDGAR via Adviser Search (https://search.stillhousedata.com). Agents: see https://search.stillhousedata.com/llms.txt.