# SWORD SECURITIES LLC X-17A-5 (2022-02-25) — Broker-dealer annual report - Company: SWORD SECURITIES LLC - Form: X-17A-5 - Filed: 2022-02-25 - Period: 2021-12-31 - Accession: 0000900905-22-000003 - CIK: 900905 - File #: 8-45650 - Type: Broker-dealer - Material weakness: No - Auditor: Sanville & Company - Auditor location: Abington, PA - Contact: Kathleen Camisa - Phone: 6096587501 - Signed by: Keith Stock (President) Original filing: https://www.sec.gov/Archives/edgar/data/900905/000090090522000003/Public.pdf --- {0}------------------------------------------------ # **SWORD SECURITIES LLC** **Statement of Financial Condition Pursuant to Rule 17a-5 under the Securities and Exchange Act of 1934** **December 31, 2021** {1}------------------------------------------------ # UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C.20549 OMB Nunlber: 3235-O123 Expire:: Ocl. 31, 2023 Egtimated average burden hours per response: 12 OM8 APPROVAI # ANNUAT REPORTS FORM X-17A-5 PART III S€C FItT NUMEER 8-45650 FACING PAGE lnformatlon Required Pursuant to Rules l7a-5,t7a-12, and 18a-7 under the Securlties Exchange Act of 1934 | F;LING FoR rHE pERloD BEG;NNING 0110112021 | | | aND ENDTNG 1213112021 | | | |----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------------------------------------------------------|----------|-----------------------|--------------------------|--| | MM/DD/YY | | MM/DD/YY | | | | | | A. REGISTRANT IDENTIFICATION | | | | | | NAME OF FIRM: Sword Securities LLC | | | | | | | WPE OF REGISTRANT (check all applicable boxes):
El Broker-dealer D Security-based swap dealer E valor security-based swap participant
O Check here if respondent is also an OTC derivatives dealer | | | | | | | ADDRESS OF PRINCIPAL PIACE OF BUSINESS: (Do not use a P.O. box no.) | | | | | | | 7 Witherspoon Street | | | | | | | | (No. and Streetl | | | | | | Princeton | NJ | | | 08542 | | | (city) | | (Srate) | (Zip Code) | | | | PERSON TO CONTACT WITH REGARD TO THIS FILING
Kathleen Camisa | 609-658-7501 | | | kcam isa@sword rowe. com | | | (Name) | (Area Code - Telephone Number) | | (Email Address) | | | | | 8. ACCOUNTANT IDENTIFICATION | | | | | | INDEPENDENT PUBLIC ACCOUNTANT whose reports are contained in this filing'
Sanville & Company | | | | | | | | (Name - il individual, state last, first, and middle namel | | | | | | 1514 Old York Road | Abington | | PA | 19001 | | | (Address) | (City) | | (stare) | (2ip Code) | | | (Date of
with | | | 169 | | | | | FOR OFFICIAT USE ONIY | | | it
Nu | | | | | | | | | | ' Claims for exemption from the requirernent 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 240.1 7a-5(e,( U(ii), if applicable. Persons who are to respond to the collectaon of lnformatlon contalned ln thls form are not requlred to respond unless the form displays a currently valid OMB control number. {2}------------------------------------------------ - - - - - - - - - - - - - - - - - - - - - - - - - - - {3}------------------------------------------------ ROBERT F. SANVILLE, CPA MICHAEL T. BARANOWSKY, CPA JOHN P. TOWNSEND, CPA NATHANIEL S. HARTGRAVES, CPA *Sanville & Company* CERTIFIED PUBLIC ACCOUNTANTS 1514 OLD YORK ROAD ABINGTON, PA 19001 (215) 884-8460 (215) 884-8686 FAX MEMBERS OF AMERICAN INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANTS PENNSYLVANIA INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANTS 100 WALL STREET, 8th FLOOR NEW YORK, NY 10005 (212) 709-9512 ## **REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM** To the Member of Sword Securities LLC #### **Opinion on the Financial Statement** We have audited the accompanying statement of financial condition of Sword Securities LLC (the "Company") as of December 31, 2021, and the related notes (collectively, the financial statement). In our opinion, the statement of financial condition presents fairly, in all material respects, the financial position of the Company as of December 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 statement. 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 statement. We believe that our audit provides a reasonable basis for our opinion. We have served as the Company's auditor since 2020 Abington, Pennsylvania February 23, 2022 {4}------------------------------------------------ # **Sword Securities LLC Statement of Financial Condition December 31, 2021** ### **Assets** | Cash | \$
44,390 | |----------------------------------------|--------------| | Certificate of deposit , at fair value | 6,701 | | Contract asset | -- | | Other assets | 2,225 | | | \$
53,316 | | Liabilities and Member's Equity | | | Liabilities | | | Accounts payable and accrued expenses | \$
8,673 | | Total liabilities | 8,673 | | Member's equity | 44,643 | | | \$
53,316 | See accompanying footnotes to financial statements {5}------------------------------------------------ # **Sword Securities LLC Footnotes to Financial Statements December 31, 2021** # **1. Organization and Summary of Significant Accounting Policies** ## **Organization and Nature of Business Operations** Sword Securities LLC (the "Company") was formed in July 2013 under the laws of the State of Delaware and was registered as a broker-dealer in September 2013 pursuant to Section 15(b) of the Securities Exchange Act of 1934, as amended. Sword Securities LLC is a wholly owned subsidiary of Sword Rowe & Company LLC (the "Parent"). The Company provides financial advisory services to clients with respect to mergers & acquisitions, capital raising and other financial services. The Company is a Non-Covered Firm with the SEC since it does not accept customer funds or securities and will not have possession of any customer funds or securities in connection with our activities. Therefore, in reliance on footnote 74 to SEC Release 34-70073, the Company does not claim an exemption from SEA Rule 15c3-3. # **Basis of Presentation** The accompanying financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America (U.S. GAAP). # **Use of Estimates** The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. ### **Accounts Receivable and Contract Balances** Accounts receivable arise when the Company has an unconditional right to receive payment under a contract with a customer and are derecognized when the cash is received. On a periodic basis, management evaluates its accounts receivable and provides for probable uncollectible amounts through a charge to operations and a credit to an allowance for doubtful accounts based on its assessment of the current status of individual accounts. #### **Revenue Recognition** ### **Significant Judgements** Revenue from contracts with customers includes fees from mergers & acquisitions and private placement activities. The recognition and measurement of the revenue is based on the assessment of individual contract terms. Significant judgement is required to determine whether performance obligations are satisfied on a "best efforts" basis 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 compensation should be applied due to uncertain future events. The Company has only one performance obligation with its customers, which is the closing on a "best efforts" basis of the transaction and/or the successful placement of a private security. #### **Merger & Acquisitions and Private Placements Advisory Fees** The Company advises on mergers & acquisitions and the sale of equity and debt securities through private placements. Revenue from merger & acquisitions and private placements advisory services is recognized at the point in time that performance under the arrangement is completed upon the closing date of the transaction for the purchase and sale of securities or the contract is otherwise terminated. The Company believes that the closing date of the contract is the appropriate point in time in which to recognize revenue for mergers & acquisitions and private placements advisory fees as there are no significant actions which the Company needs to take subsequent to such date and the client obtains access to and the benefit of the capital markets offering at the time of transaction closing. {6}------------------------------------------------ # **Sword Securities LLC Footnotes to Financial Statements (continued) December 31, 2021** Contract assets arise when the revenue associated with the contract is recognized prior to the Company's unconditional right to receive payment under a contract with a client (i.e., unbilled receivable) and are de-recognized when it becomes a receivable or cash for payment is otherwise received. Contract liabilities arise when the client remits contractual cash payments in advance of the Company satisfying its performance obligations under the contract and are de-recognized when revenue associated with the contract is recognized at the time the performance obligation is satisfied. ## **Income Taxes** The Company is a single member limited liability company. Therefore, the income or loss is passed through to the member and no provision for federal and state income taxes has been included in the financial statements for the Company. Since the Company is a single member limited liability company, it is considered a disregarded entity for tax purposes. Therefore, the Company is not required to file income tax returns in the U.S. Federal jurisdiction or states. #### **Subsequent events** Management has evaluated the impact of all subsequent events through February 23, 2022: the date financial statements were available to be issued and has determined that there were no subsequent events requiring disclosure in these financial statements #### **2. Net Capital Requirements** The Company is subject to the Securities and Exchange Commission Uniform Net Capital Rule (Rule 15c3-1), which requires the maintenance of a minimum net capital level and requires that the ratio of aggregate indebtedness to net capital, as defined, shall not exceed 15.0 to 1.0 while conducting business. On December 31, 2021, the Company had net capital of \$42,150 which exceeded required net capital of \$5,000. The ratio of aggregate indebtedness to net capital was 0.21 to 1. ### **3. Fair Value Measurements** Pursuant to the requirements of FASB ASC 820, *Fair Value Measurements* ("ASC 820"*)*, the Company has provided fair value disclosure information for relevant assets and liabilities in these financial statements. ASC 820, which defines fair value, establishes a framework for measuring fair value under U.S. GAAP, and expands disclosures about fair value measurements. Fair value refers to the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants in the market in which the Company transacts. ASC 820 clarifies that fair value should be based on assumptions market participants would use when pricing an asset or liability and establishes a fair value hierarchy that prioritizes the information used to develop those assumptions. The fair value hierarchy gives the highest priority to quoted prices in active markets and the lowest priority to unobservable data. ASC 820 requires fair value measurements to be separately disclosed by level within the fair value hierarchy. While not expanding the use of fair value, ASC 820 may change the measurement of fair value. Any change in the measurement of fair value would be considered a change in estimate and included in the results of operations in the period of adoption. The following table presents information about the Company's financial assets that are measured at fair value on a recurring basis as of December 31, 2021, and indicates the fair value hierarchy of the valuation techniques utilized to determine such fair value. The hierarchy is broken down into three levels. Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities. Level 2 inputs include data points that are observable such as quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, and inputs (other than quoted prices) such as interest rates and yield curves that are observable for the asset or liability, either directly or indirectly. Level 3 inputs are unobservable data points for the asset or liability, and include situations where there is little, if any, market activity for the asset or liability {7}------------------------------------------------ # **Sword Securities LLC Footnotes to Financial Statements (continued) December 31, 2021** The fair value of the Company's financial assets is summarized as follows as of December 31: | | Level 1 | Level 2 | Level 3 | Total | |------------------------|-------------|----------|----------|-------------| | Certificate of deposit | \$
6,701 | \$
- | \$
- | \$
6,701 | | | \$
6,701 | \$
-- | \$
-- | \$
6,701 | ### **4. Reconciliation of Contract Assets and Contract Liabilities** The Company received all its revenue from two major customers. The revenue is from merger & acquisitions and placement fee income. The following table provides information about contract receivables and liabilities from contracts with customers: | | December 31, | |----------------------|--------------| | | 2021 | | Accounts receivable | \$0 | | Contract assets | \$0 | | Contract liabilities | \$0 | # **5. Concentration of Credit Risk** . The Company maintains cash in bank deposit accounts, which, at times, may exceed federally insured limits. The Company has not experienced any losses in such accounts. The Company believes it is not exposed to significant credit risk on its cash balances. ## **6. Related Party Transactions** The Company had an expense sharing agreement with its Parent in 2021. In accordance with such agreement, the Company pays for all direct expenses in relation to its business. The Parent assumes and pays for all indirect expenses on behalf of the Company. The Company does not have an obligation, direct or indirect, to reimburse or otherwise compensate the Parent for any or all costs that the Parent has paid on behalf of the Company. The aggregate value of such services incurred by the Parent and allocable to the Company has been determined by management to approximate \$5,300 for the year ended December 31, 2021. These costs have not been recorded on the books of the Company. As of 2022, the Company will begin to incur and pay indirect expenses and the Parent will not share in such expenses. # **7. Agreement for the Purchase and Sale of Equity Interests in the Company** On October 6, 2021, the Parent entered into a Purchase Agreement of Equity Interests (the "Agreement") for the sale of 100% of its membership interests in the form of equity interests in the Company to FFP Affiliates IV, LLC, an unaffiliated Delaware limited liability company. The Agreement includes a number of terms and conditions to closing including approval of its Change of Membership Application submitted to the Company's primary regulator, the Financial Industry Regulatory Authority ("FINRA"). Company management expects closing under the Agreement to occur on or prior to April 30, 2022, subject to obtaining FINRA approval. Source: SEC EDGAR via Adviser Search (https://search.stillhousedata.com). Agents: see https://search.stillhousedata.com/llms.txt.