# CHAPIN DAVIS, INC. X-17A-5 (2022-03-01) — Broker-dealer annual report
- Company: CHAPIN DAVIS, INC.
- Form: X-17A-5
- Filed: 2022-03-01
- Period: 2021-12-31
- Accession: 0000872098-22-000001
- CIK: 872098
- File #: 8-43485
- Type: Broker-dealer
- Material weakness: No
- Auditor: Richard Kuczak
- Auditor location: Bel Air, MD
- Contact: Stephanie Elliott
- Phone: 410-435-3200
- Email: selliott@chapindavis.com
- Website: chapindavis.com
- Signed by: Stephanie N. Elliott (President & CEO)
Original filing: https://www.sec.gov/Archives/edgar/data/872098/000087209822000001/Public21.pdf
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#### UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549
OMB APPROVAL OMB Number: 3235-0123 Expires: Oct. 31, 2023 Estimated average burden hours per response: 12
SEC FILE NUMBER
8-43485
## ANNUAL REPORTS FORM X-17A-5 PART III
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 01/01/21 | | AND ENDING 12/31/21 | | | |
|------------------------------------------|----------|---------------------|----------|--|--|
| | MM/DD/YY | | MM/DD/YY | | |
| A. REGISTRANT IDENTIFICATION | | | | | |
# NAME OF FIRM: Chapin Davis, Inc.
TYPE OF REGISTRANT (check all applicable boxes):
O Check here if respondent is also an OTC derivatives dealer
@ Broker-dealer
ADDRESS OF PRINCIPAL PLACE OF BUSINESS: (Do not use a P.O. box no.)
## 1411 Clarkview Road
| | (No. and Street) | | |
|--------------------------------------------------|------------------------------------------------------------------------------------------------------------------------|--------------------------|--------------------------------------------|
| Baltimore | MD | | 21209 |
| (City) | (State) | | (Zip Code) |
| PERSON TO CONTACT WITH REGARD TO THIS FILING | | | |
| Stephanie Elliott | 410-435-3200 | selliott@chapindavis.com | |
| (Name) | (Area Code - Telephone Number) | (Email Address) | |
| | B. ACCOUNTANT IDENTIFICATION | | |
| Kuczak & Associates, P.A. | (Name - if individual, state last, first, and middle name) | | |
| 139 N. Main Street | Bel Air | MD | 21014 |
| (Address) | (City) | (State) | (Zip Code) |
| 02/23/2010 | | 5023 | |
| (Date of Registration with PCAOB)(if applicable) | | | (PCAOB Registration Number, if applicable) |
| | FOR OFFICIAL USE ONLY | | |
| | * 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 240.17a-5(e)(1)(ii), if applicable.
Persons who are to respond to the collection of information contained in this form are not required to respond unless the form displays a currently valid OMB control number.
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#### OATH OR AFFIRMATION
I Stephanie N. Elliott , swear (or affirm) that, to the best of my knowledge and belief, the
| financial report pertaining to the firm of Chapin Davis, Inc. | | | |
|---------------------------------------------------------------|--|-----------------------------------------------------------------------------------------|--|
| 12/31 | | 2021 is true and correct. I further swear (or affirm) that neither the company nor any | |
partner, officer, director, or equivalent person, as the case may be, has any proprietary interest in any account classified solely as that of a customer.
Signature: President & CFC
#### This filing\*\* contains (check all applicable boxes):
- (a) Statement of financial condition.
- □ (b) Notes to consolidated statement of financial condition.
- = (c) Statement of income (loss) or, if there is other comprehensive 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.
- = (e) Statement of changes in stockholders' or partners' or sole proprietor's equity.
- □ (f) Statement of changes in liabilities subordinated to claims of creditors.
- @ (g) Notes to consolidated financial statements.
- (h) Computation of net capital under 17 CFR 240.15c3-1 or 17 CFR 240.18a-1, as applicable.
- □ (i) Computation of tangible net worth under 17 CFR 240.18a-2.
- (j) Computation for determination of customer reserve requirements pursuant to Exhibit A to 17 CFR 240.15c3-3.
- □ (k) Computation for determination of security-based swap reserve requirements pursuant to Exhibit B to 17 CFR 240.15c3-3 or Exhibit A to 17 CFR 240.18a-4, as applicable.
- [ (I) Computation for Determination of PAB Requirements under Exhibit A to § 240.15c3-3.
- @ (m) Information relating to possession or control requirements for customers under 17 CFR 240.15c3-3.
- □ (n) Information relating to possession or control requirements for security-based swap customers under 17 CFR 240.15c3-3(p)(2) or 17 CFR 240.18a-4, as applicable.
- (o) Reconciliations, including appropriate explanations, of the FOCUS Report with computation of net capible net worth under 17 CFR 240.15c3-1, 17 CFR 240.18a-1, 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.
- @ (q) Oath or affirmation in accordance with 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.
- (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.
- (u) Independent public accountant's report based on an examination of the financial statements under 17 CFR 240.17a-5, 17 CFR 240.18a-7, or 17 CFR 240.17a-12, as applicable.
- □ (v) Independent public accountant's report based on an examination of certain statements in the compliance report under 17 CFR 240.17a-5 or 17 CFR 240.18a-7, as applicable.
- | (w) Independent public accountant's report based on a review of the exemption report under 17 CFR 240.17a-5 or 17 CFR 240.18a-7, as applicable.
- □ (x) Supplemental reports on applying agreed-upon procedures, in accordance with 17 CFR 240.17a-12, as applicable.
- □ (y) Report describing any material inadequacies found to exist or found to have existed since the date of the previous audit, or a statement that no material inadequacies exist, under 17 CFR 240.17a-12(k).
- □ (z) Other:
- \*\* To request confidential treatment of certain portions of this filing, see 17 CFR 240.17a-5(e)(3) or 17 CFR 240.18a-7(d)(2), as applicable.
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Chapin Davis, Inc. And Subsidiary Consolidated Financial Statements And Supplemental Schedules
(Pursuant to Rule 17a-5 of the Securities and Exchange Commission)
As of and for the year ended December 31, 2021
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#### Index
| | Page(s) |
|-------------------------------------------------------------------------------------------------------------------------------------------------|---------|
| Report of Independent Registered Public Accounting Firm | 1 - 2 |
| Consolidated Statement of Financial Condition
3 | |
| Consolidated Statement of Income
4 | |
| Consolidated Statement of Changes in Stockholders' Equity
5 | |
| Consolidated Statement of Cash Flows
6 | |
| Notes to Consolidated Financial Statements | 7 - 14 |
| Supplemental Schedules: | |
| Schedule of Computation of Aggregate Indebtedness and
Net Capital pursuant to Securities and Exchange
Commission Rule 15c3-1 | 15 |
| Schedule II - Computation for Determination of Reserve
Requirements Under Rule 15c3-3 of the Securities and
Exchange Commission | 16 |
| Schedule III - Information Relating to the Possession or
Control Requirements Under Rule 15c3-3 of the Securities
and Exchange Commission | 17 |
| Report of Independent Registered Public Accounting Firm
on Review of Management's Exemption Report Pursuant to
SEC rule 15c3-3 | 18 |
| Exemption Report | 19 |
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#### CERTIFIED PUBLIC ACCOUNTANTS
139 North Main Street, Suite 101 Bel Air, MD 21014
> The Board of Directors and Stockholders Chapin Davis, Inc. and Subsidiary Baltimore, Maryland
#### Report of Independent Registered Public Accounting Firm
#### Opinion on the Financial Statement
We have audited the accompanying consolidated statement of financial condition of Chapin Davis, Inc. and Subsidiary as of December 31, 2021, and the related consolidated statements of income, changes in stockholders' equity, and cash flows for the year then ended and the related notes (collectively referred to as the "financial statements"). In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of Chapin Davis, Inc. and Subsidiary as of December 31, 2021 and the results of its operations and its cash flows for the year then ended in conformity with accounting principles generally accepted in the United States of America.
#### Basis of Opinion
These financial statements are the responsibility of the Chapin Davis, Inc. and Subsidiary's management. Our responsibility is to express an opinion on Chapin Davis, Inc. and Subsidiary's financial statements based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board ("PCAOB") (United States) and are required to be independent with respect to Chapin Davis, Inc. and Subsidiary in accordance with the United States 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 statements are free of material misstatement, whether due to error or frauld. Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures include 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 evaluation the overall presentation of the financial statements. We believe that our audit to provides a reasonable basis for our opinion.
We have served as the Company's auditor since 2017.
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#### Auditor's Report on Supplemental Information
The supplemental information has been subjected to audit procedures performed in conjunction with the audit of Chapin Davis, Inc. and Subsidiary's financial statements. The supplemental information is the responsibility of the Chapin Davis, Inc. and Subsidiary's management. Our audit procedures included determining whether the supplemental information reconciles to the financial statements or the underlying accounting and other records, as applicable, and performing procedures to test the completeness and accuracy of the information presented in the supplemental information. In forming our opinion on the supplemental information, we evaluated whether the supplemental information, including its form and content, is presented in conformity with 17 C.F.R. § 240.17a-5. In our opinion, the supplemental information is fairly stated, in all material respects, in relation to the financial statements as a whole.
Kungen a. Assocrates, P.A.
Bel Air, Maryland February 26, 2022
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## CHAPIN DAVIS, INC. and SUBIDIARY CONSOLIDATED STATEMENT OF FINANCIAL CONDITION December 31, 2021
#### ASSETS
| Cash | S | 1,379,396 |
|----------------------------------------------------------------|----|-----------|
| Deposits with clearing organization | | 101,929 |
| Receivable from clearing organizations | | 363,477 |
| Receivables from employees | | 155,000 |
| Right of use asset | | 865,696 |
| Deferred tax assets | | 415,337 |
| Prepaid expenses | | 102,070 |
| Security deposits | | 23,858 |
| Leasehold improvements and office equipment, net | | 262,627 |
| TOTAL ASSETS | ಕಾ | 3,749,236 |
| LIABILITIES AND STOCKHOLDERS' EQUITY | | |
| LIABILITIES: | | |
| Accounts payable and accrued expenses | S | 1,381,742 |
| Obligations under operating leases | | 904,841 |
| Total liabilities | | 2,286,583 |
| STOCKHOLDERS' EQUITY: | | |
| Preferred stock, Class A 8-1/2%, \$100 par value; 3,000 shares | | |
| authorized and outstanding | | 300,000 |
| Common stock, \$.10 par value: 200,000 shares | | |
| authorized: 110,039 shares outstanding | | 11,039 |
| Additional paid-in capital | | 929,793 |
| Retained earnings | | 221,821 |
| Total stockholders' equity | | 1,462,653 |
| TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY | S | 3,749,236 |
The accompanying notes are an integral part of these financial statements.
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### CHAPIN DAVIS, INC. and SUBIDIARY CONSOLIDATED STATEMENT OF INCOME Year Ended December 31, 2021
| Revenues | |
|-----------------------------------|-----------------|
| Commissions | ಕಾ
1,836,518 |
| Principal transactions | 247,406 |
| Interest | 106,349 |
| Investment advisory fees | 2,760,872 |
| Mutual fund fees | 1,210,154 |
| Referral fees | 616,228 |
| Investment banking fees | 1,417,500 |
| Underwriting Fees | 3,188 |
| Other income | 47,563 |
| Total revenue | 8,245,778 |
| Expenses | |
| Compensation and benefits | 7,007,927 |
| Floor brokerage and clearing fees | 327,530 |
| Occupancy and equipment rental | 494,994 |
| Technology communications | 276,190 |
| Office supplies | 78,757 |
| Uncollectible accounts | (72) |
| Registration and licenses | 71,714 |
| Insurance | 2,154 |
| Depreciation and amortization | 32,843 |
| Legal and accounting | 301,916 |
| Other | 62,595 |
| Total expenses | 8,656,548 |
| Loss from operations | (410,770) |
| Other income-PPP Loan forgiveness | 785,447 |
| Income before income taxes | 374,677 |
| Benefit from income taxes | 110,600 |
| | |
| Net income | ಲ್ಲಿ
485,277 |
The accompanying notes are an integral part of these financial statements.
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| | | | | | | Additional | | | | Total |
|----------------------------|------|--------------------|---|-----------------|----|--------------------|---|------------------------|---|-------------------------|
| | | Preferred
Stock | | Common
Stock | | Paid-in
Capital | | Earnings
Retained | | Stockholders'
Equity |
| Balance, January 1, 2021 | ಕ್ಕಿ | 300,000 | S | 11,049 | S | 941,240 | S | (250,162) \$ 1,002,127 | | |
| Net income | | | | | | | | 485,277 | | 485,277 |
| Common stock issued | | | | C | | 12,959 | | | | 12,971 |
| Common stock repurchased | | | | 22 | | (24.406) | | (13,294) | | (37,722) |
| Balance, December 31, 2021 | S | 300.000 \$ | | 11.039 | ಳಿ | 929.793 | S | 221.821 | A | 1,462,653 |
| | | | | | | | | | | |
The accompanying notes are an integral part of these financial statements
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### CHAPIN DAVIS, INC. and SUBIDIARY CONSOLIDATED STATEMENT OF CASH FLOWS Year Ended December 31, 2021
| Cash flows from operating activities: | | |
|-----------------------------------------------|------|-----------|
| Net Income | A | 485,277 |
| Adjustments to reconcile net income | | |
| provided by operating activities: | | |
| Forgiveness of PPP loan payable | | (785,447) |
| Depreciation and amortization | | 32,843 |
| Deferred income tax provision | | (110,600) |
| (Increase) decrease in operating assets: | | |
| Deposits with clearing organization | | 485,010 |
| Receivable from clearing organizations | | 26,291 |
| Receivables from employees | | 104,625 |
| Prepaid expenses | | (9,679) |
| Security deposits | | 2,385 |
| Increase (decrease) in operating liabilities: | | |
| Accounts payable and accrued expenses | | 947,640 |
| Net cash provided by operating activities | | 1,178,345 |
| Cash flows from investing activities: | | |
| Purchase of office equipment | | (3,335) |
| Net cash used in investing activities | | (3,335) |
| Cash flows from financing activities: | | |
| Payments on finance leases | | (1,883) |
| Common stock-net | | (50,378) |
| Net cash used in financing activities | | (52,261) |
| Net increase in cash | | 1,122,749 |
| Cash at January 1, 2021 | | 256,647 |
| Cash at December 31, 2021 | ಕ್ಕಿ | 1,379,396 |
| Supplemental cash flow information: | | |
| Forgiveness of PPP loan | ಕ್ಕಿ | 485,277 |
The accompanying notes are an integral part of these financial statements
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#### 1. Nature of Business and Summary of Significant Accounting Policies
Significant accounting policies followed by Chapin Davis, Inc. and Subsidiary (the Company) as summarized below conform to accounting principles generally accepted in the Unites States of America (U.S. GAAP). The significant accounting policies are summarized as follows:
#### A. Nature of Operations
Chapin Davis, Inc. (Chapin Davis) is a broker-dealer registered with the Securities and Exchange Commission (SEC) and is a member of the Financial Industry Regulatory Authority (FINRA).
Chapin Davis was incorporated in Maryland using the name Patapsco Securities, Inc. on December 12, 1990. On March 22, 1991, Chapin Davis acquired the operation of Chapin Davis & Co., via an asset purchase agreement. Chapin Davis changed its name from Patapsco Securities, Inc. to Chapin Davis, Inc. in 2008. In 2013, Chapin Davis opened an office in Peoria, Illinois. In 2018, the Company opened an office in Philadelphia, Pennsylvania.
Chapin Davis is a registered securities broker-dealer, which comprises several classes of services including principal transactions, agency transactions and investment advisory and investment banking.
Chapin Davis forwards securities transactions to First Clearing, LLC, which carries and clears such transactions for Chapin Davis on a fully disclosed basis. The investment advisory fees are generated from various accounts that can be maintained at First Clearing, LLC or other brokerage firms.
Chapin Davis Insurance, Inc., a wholly-owned subsidiary of Chapin Davis, is licensed to sell life, property, and casualty insurance products.
#### B. Principles of Consolidation
The accompanying consolidated financial statements include the accounts of Chapin Davis and its whollyowned subsidiary, Chapin Davis Insurance, Inc. All significant intercompany balances and transactions have been eliminated in consolidation.
#### Use of Estimates C.
The preparation of consolidated 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 disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
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### 1. Nature of Business and Summary of Significant Accounting Policies - Continued
#### D. Revenue Recognition
Profit and loss arising from all securities transactions entered into for the account and risk of Chapin Davis are recorded on a trade date basis at fair value and are reflected in principal transactions in revenues in the consolidated statement of income. Trading gains and losses are recorded using the average cost method.
Commission revenue and related clearing expenses are recorded on a trade date basis. Investment advisory fees are received quarterly and recognized as earned. Investment banking fees are recognized as earned based on the underlying agreements.
#### E. Leasehold Improvements and Office Equipment
The Company's policy is to capitalize leasehold improvement and equipment expenditures of \$5,000 or more. Maintenance and repairs that do not significantly improve or extend the lives of the respective assets are charged to operations when incurred. When items of property are sold or retired, the related costs and accumulated depreciation are removed from the accounts and any gain or loss is included in operations.
Depreciation of leasehold improvements and office equipment is determined by use of a straight line method over the estimated useful life of the asset: leasehold improvements, 15 years and office equipment, five to seven years. Depreciation expense for the year was \$32,843. Leasehold improvements and office equipment consisted of the following at December 31, 2021:
| Leasehold improvements | \$414,651 |
|--------------------------|-----------|
| Office equipment | 343,248 |
| Accumulated depreciation | (495,272) |
| Net | \$262.627 |
#### F. Allowance for Doubtful Accounts
The carrying amount of receivables from the clearing organization and employees are stated net of an allowance for doubtful accounts. The Company estimates the allowance based on an analysis of the open transactions with the clearing organization and a review of each employee's outstanding balance and ability to pay. The allowance for doubtful accounts was \$0 at December 31, 2021.
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#### 1. Summary of Significant Accounting Policies - Continued
### G. Advertising
Advertising costs for 2021were \$19,015. These costs are expensed as incurred.
#### H. Income Taxes
Chapin Davis and its subsidiary file a consolidated federal income tax return, whereas each company files its own state income tax return. Provisions for income taxes are based on taxes payable or refundable for the current year and deferred taxes on temporary differences between the amount of taxable income and pretax income and between the tax bases of assets and liabilities and their reported amounts in the consolidated financial statements. Deferred tax assets and liabilities included in the consolidated financial statements are calculated utilizing currently enacted tax laws and rates applicable to the period in which the deferred tax assets and liabilities included in the consolidated financial statements are expected to be realized in accordance with Financial Accounting Standards Board (FASB) guidance.
The Company accounts for uncertainty in income taxes in accordance with FASB guidance. Using that guidance, tax positions initially need to be recognized in the consolidated financial statements when it is morelikely-than-not the positions will be sustained upon examination by the tax authorities.
As of December 31, 2021, the Company had no uncertain tax positions, or interest and penalties that qualify for either recognition or disclosure in the consolidated financial statements. With limited exceptions, the Company is no longer subject to income tax examination for any years prior to 2018 for federal and state tax purposes.
#### I. Statement of Cash Flows
For purposes of the statement of cash flows, the Company has defined cash equivalents as cash in checking accounts and held in cash accounts at brokerage firms. It does not include money market investments held at the clearing broker.
#### J. New Accounting Standards Adopted
In February 2016, the FASB amended the Leases topic of the Accounting Standards Codification to revise certain aspects of recognition, measurement, presentation, and disclosure of leasing transactions. The amendments are effective for fiscal years beginning after December 15, 2018. The Company has implemented the new standard and has reflected the impact of it on its financial position, results of operations, and cash flows.
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#### Fair Value Measurements 2
The FASB accounting topic on fair value measurements and disclosures provides the framework for measuring fair value. That framework provides a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted grices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). The three levels of the fair value hierarchy in accordance with FASB guidance are described as follows:
- · Level 1 Inputs to the valuation methodology are unadjusted quoted prices for identical assets or liabilities in an active market. This level includes common stocks, corporate bonds, mutual funds, or money market funds based on the closing price reported in the active market where the securities are traded.
- · Level 2 Inputs to the valuation methodology include quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in inactive markets, inputs other than quoted prices that are observable for the asset or liability, inputs that are derived principally from or corroborated by observable market data by correlation, or other means.
- · Level 3 Inputs to the valuation methodology are unobservable and significant to the fair value measurement.
The Company's assets recorded at fair value include certain investments segregated and on deposit with a clearing organization and securities owned. The Company uses prices obtained from an independent clearing firm to measure the fair value of certain investment securities. The Company validates prices received from the clearing firm using various methods including comparison to quoted market prices, where available, and review of other relevant market data including implied yields of major categories of securities. The Company does not adjust the prices received from the independent clearing firm unless such prices are inconsistent with FASB guidance and result in a material difference in the recorded amounts. At December 31, 2021, the Company did not adjust prices received from the independent clearing firm. All of the company's assets valued at fair value consisted of U.S. Treasury money market shares valued at level 1,
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#### 3. Receivables From Clearing Organization and Broker Dealer
Receivables from clearing organization represent commissions and fees.
#### 4. PPP Loan
On May 1, 2020, The Company secured \$785,447 with Bank of America (the "Lender") under the Small Business Administration's Paycheck Protection Program ("PPP") that authorized forgivable loans to small businesses. This loan was used to cover certain expenses during the COVID-19 crisis. During the current year the entire loan was forgiven by the Small Business Administration.
### 5. Employee Benefit Plan
The Company has a 401(k) savings-profit sharing plan ("the Plan"). Each participating employee may be permitted to contribute a portion of his compensation to the Plan. Within Plan limits, the Company may contribute on behalf of each eligible participant a matching percentage of the participant's contribution. In addition, the Company may make annual contributions on a discretionary basis. The Company contributed \$104,349 to the Plan for the year ended December 31, 2021.
#### 6. Income Taxes
The benefit for income taxes consists entirely of deferred taxes
The following represents the approximate tax effect of each significant type of temporary difference giving rise to the deferred tax assets and liability.
| Deferred Tax Asset | |
|--------------------|------------|
| Net operating loss | \$ 440.000 |
| Charitable | 2.850 |
| Depreciation | (11,400) |
| Total | \$ 431.450 |
At December 31, 2021, the Company had loss carry forwards totaling approximately \$1,385,000 that may be offset against future taxable income. These carry forwards expire through 2040.
In addition, there are charitable contribution deductions that can be carried forward totaling approximately \$6,050 that expire through 2023.
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#### 7. Leases
The Company has obligations under an operating leases with initial non-cancelable terms in excess of one year covering office facilities. This lease is included in right-of-use assets and lease liabilities on the company's Statement of Financial Condition. The company's current lease expires in 2024 and includes the option to renew or terminate. The company is not reasonably certain to renew or terminate, therefore renewal and termination options are not considered in the right-of-use asset and lease liabilities balances.
Right-of-use assets and lease liabilities are recognized at the lease commencement date based on the present value of future payments over the lease term. The discount rate used to determine the commencement date present value is the interest rate implicit in the lease, or when that is not readily determinable; the company uses its incremental borrowing rate. The company estimates its incremental borrowing rate of 5% over the remaining lease term of 7.7 years based on information available at the lease commencement in determining the present value of future payments. Lease expense for net present value of payments is recognized on a straight-line basis over the lease term.
Aggregate annual payments under this lease agreement at December 31, 2021 are approximately as listed in the table below:
Year Ending December 31,
Present value of lease payment
| 2022 | S
155,300 |
|------------|--------------|
| 2023 | 159,300 |
| 2024 | 163,100 |
| 2025 | 167.200 |
| 2026 | 171,400 |
| Thereafter | 295,200 |
| Total | 1,111,500 |
| | |
| | 904.841 |
The company also leases office space under short term leasing arrangements.
Chapin Davis has entered into finance leases for certain equipment. Obligations under finance leases have been recorded in the accompanying consolidated financial statements at the present value of future minimum lease payments. The capitalized cost of approximately \$138,000 and related accumulated depreciation of this equipment are included in office equipment, net.
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#### 8. Credit Risk
In the normal course of business, Chapin Davis's securities through its clearing firm involve execution, settlement and financing of various securities transactions for customers. These activities may expose Chapin Davis to risk in the event customers, other brokers and dealers, bank depositories or clearing organizations are unable to fulfill contractual obligations.
The Company does not have any significant concentration in the value of business with a particular customer, group of customers or products.
The Company has concentrated its credit risk by maintaining deposits in a financial institution and its clearing broker. The deposits at the financial institution may at times exceed amounts covered by the insurance provided by the U.S. Federal Deposit Insurance Company (FDIC). The deposits at the clearing broker may at times exceed amounts covered by insurance provided by the Securities Investment Protection Corporation (SIPC). The Company has not experienced a loss in such accounts and believes it is not exposed to any significant credit risk to cash.
#### 9. Guarantees and Indemnifications
FASB guidance requires the Company to disclose information about its obligations under certain guarantee arrangements. The guidance defines guarantees as contracts and indemnification agreements that contingently require a guarantor to make payments to the guaranteed party based on changes in an underlying that is related to an asset, liability or equity of a guaranteed party. The FASB guidance also defines guarantees as contracts that contingently require the guarantor to make payments to the guaranteed party based on another entity's failure to perform under an agreement as well as indirect guarantees of the indebtedness of others.
FASB guidance requires the Company to disclose information about its obligations under certain guarantee arrangements. The guidance defines guarantees as contracts and indemnification agreements that contingently require a guarantor to make payments to the guaranteed party based on changes in an underlying that is related to an asset, liability or equity of a guaranteed party. The FASB guidance also defines guarantees as contracts that contingently require the guarantor to make payments to the guaranteed party based on another entity's failure to perform under an agreement as well as indirect guarantees of the indebtedness of others.
Chapin Davis guarantees all of the customer margin account balances held by its clearing broker. Chapin Davis is responsible for payment to its clearing broker for any loss, liability, damage, cost or expense incurred as a result of customers failing to comply with margin or margin maintenance calls on all margin accounts. The margin account balance held by the clearing broker as of December 31, 2021 was \$1,328,672 In the event of any customer default, the Chapin Davis has rights to the underlying collateral provided. Given the existence of the underlying collateral provided as well as the negligible historical credit losses, the Chapin Davis does not maintain any loss reserve.
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#### 10. Regulatory Requirements
Chapin Davis is subject to the Securities and Exchange Commission's uniform Net Capital Rule (Rule 1503-1) which requires the maintenance of minimum net capital and requires that the ratio of "aggregate indebtedness" to net capital shall not exceed 15 to 1.
As of December 31, 2021 the net capital was \$530,018, which exceeded the capital requirement of \$50,000 by \$480,018 and the aggregate indebtedness ratio was 2.71 to 1.
#### 11. Consolidated Subsidiary
The following is a summary of certain financial information of the Company's consolidated subsidiary:
| Total assets | S | 64.409 |
|--------------------------|---|--------------|
| Due to Chapin Davis, Inc | | \$ (489,932) |
| Stockholders (deficit) | | \$ (434,709) |
These amounts are not included in the computation of net capital under Rule 15c3-1 of the Securities and Exchange Commission.
#### 12. Subsequent Events
In preparing these financial statements, the Company has evaluated events and transactions for potential recognition or disclosure through February 26, 2022 the date the financial statements were available to be issued. During the period January 1, 2022 through February 26, 2022 the Company did not have any subsequent events requiring recognition or disclosure.
{18}------------------------------------------------
#### CHAPIN DAVIS, INC. SCHEDULE OF COMPUTATION OF AGGREGATE INDEBTEDNESS AND NET CAPITAL (PURSUANT TO SECURITIES AND EXCHANGE COMMISSION RULE 15c3-1) DECEMBER 31, 2021
| COMPUTATION OF AGGREGATE INDEBTEDNESS | |
|----------------------------------------------------------|-----------------|
| Liabilities included in aggregate indebtedness: | |
| Accounts payable and accrued expenses | \$
1,437,437 |
| COMPUTATION OF NET CAPITAL | |
| Total Stockholders Equity | \$
1,888,971 |
| Less: Total Non-Allowable Assets | (1,356,647) |
| Add: Total Non-Allowable Liabilities | - |
| Net capital before haircuts on securities | 532,324 |
| Haircuts on securities | 2,306 |
| | 530,018 |
| CAPITAL REQUIREMENTS | |
| Net capital required | 95,829 |
| Net capital in excess of requirements | 434,189 |
| Net capital as shown above | 530,018 |
| Ratio of aggregated indebtedness to net capital | 2.71 to 1 |
| RECONCILIATION WITH COMPANY'S COMPUTATION | |
| Net capital, as reported in Company's Part II | |
| (Unaudited) Focus Report | \$
530,018 |
| Net Capital Per Above | \$
530,018 |
| | |
| Aggregate indebtedness, as reported in Company's Part II | |
| (Unaudited) Focus Report | \$
1,381,742 |
| Reclassification of Balance Sheet Items | 55,695 |
| Aggregate indebtedness, Per Above | \$
1,437,437 |
There were no material differences between the audited computation of net capital and the broker/dealer's corresponding Unaudited Part II A.
{19}------------------------------------------------
#### Schedule II
#### CHAPIN DAVIS, INC.
#### COMPUTATION FOR DETERMINATION OF RESERVE REQUIREMENTS UNDER RULE 15c3-3 OF THE SECURITIES AND EXCHANGE COMMISSION December 31, 2021
Chapin Davis is exempt from SEC Rule 15c3-3 because it does not carry securities accounts for customers or perform custodial functions relating to customer securities. Chapin Davis is exempt pursuant to k(2)(i).
{20}------------------------------------------------
#### Schedule III
#### CHAPIN DAVIS, INC.
#### INFORMATION RELATING TO POSSESSION OR CONTROL REQUIREMENTS UNDER RULE 15c3-3 OF THE SECURITIES AND EXCHANGE COMMISSION
#### December 31, 2021
Chapin Davis is exempt from SEC Rule 15c3-3 because it does not carry securities accounts for customers or perform custodial functions relating to customer securities. Chapin Davis is exempt pursuant to k(2)(i).
{21}------------------------------------------------
#### CERTIFIED PUBLIC ACCOUNTANTS
139 North Main Street, Suite 101 Bel Air, MD 21014
> The Board of Directors and Stockholders Chapin Davis, Inc. and Subsidiary Baltimore, Maryland
#### Report of Independent Registered Public Accounting Firm
We have reviewed management's statements, included in the accompanying Report, in which (1) Chapin Davis, Inc. identified the following provisions of 17 C.F.R. § 15c3-3(k) under which Chapin Davis, Inc. claimed an exemption from 17 C.F.R. § 240.15c3-3: (2)(ii) (the "exemption provisions") and (2) Chapin Davis, Inc. stated that Chapin Davis, Inc. met the identified exemption provisions throughout the most recent fiscal year ended December 31, 2021 without exception. Chapin Davis, Inc.'s management is responsible for compliance with the exemption provisions and its statements.
Our review was conducted in accordance with the standards of the Public Company Accounting Oversight Board (United States) and, accordingly, included inquiries and other required procedures to obtain evidence about Chapin Davis, Inc.'s compliance with the exemption provisions. A review is substantially less in scope than an examination, the objective of which is the expression of an opinion on management's statements. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that should be made to management's statements referred to above for them to be fairly stated, in all material respects, based on the conditions set forth in paragraph (k)(2)(ii) of Rule 15c3-3 under the Securities Exchange Act of 1934.
Bel Air, Maryland February 26, 2022
{22}------------------------------------------------
Chapin Davis, Inc. Exemption Report
For the Year End December 31, 2021
Chapin Davis, Inc. (the "Company") is a registered Broker-Dealer subject to Rule 17a-5 Promulgated by the Securities and Exchange Commission (17 C.F.R. €240.117a-5, "Reports to be made by certain Broker 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. €240.185(c)3-3 under the provisions of 17 C.F.R. €240.15(c)3-3(k): (2)(ii)
- 2) The Company met the identified exemption provisions in 17 C.F.R. €240.15(c)3-3(K) throughout the most recent fiscal year without exception.
Chapin Davis, Inc.
I, Stephanie N. Elliott affirm that, to the best of my knowledge and belief, this Exemption Report is true and correct.
Stephanie N. Elliott, President & CEO
Source: SEC EDGAR via Adviser Search (https://search.stillhousedata.com). Agents: see https://search.stillhousedata.com/llms.txt.