# HAMILTON CAVANAUGH INVESTMENT BROKERS, INC. X-17A-5 (2020-02-28) — Broker-dealer annual report - Company: HAMILTON CAVANAUGH INVESTMENT BROKERS, INC. - Form: X-17A-5 - Filed: 2020-02-28 - Period: 2019-12-31 - Accession: 0000920063-20-000001 - CIK: 920063 - File #: 8-46982 - Material weakness: No - Auditor: Morey, Nee, Buck & Oswald, LLC - Auditor location: Bethlehem, PA - Contact: Lindsay Hamilton - Phone: 9147616110 - Signed by: Lindsay Hamilton (General Counsel/Chief Compliance Officer) Original filing: https://www.sec.gov/Archives/edgar/data/920063/000092006320000001/public20191.pdf --- {0}------------------------------------------------ PUBLIC UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549. | | OMB APPROVAL | | |--------------------------|--------------------------|-----------------| | OMB Number: | | 3235-0123 | | | Expires: August 31, 2020 | | | Estimated average burgen | | | | hours per response 12.00 | | | | | | SEC FILE NUMBER | | | 8 - 046982 | | # ANNUAL AUDITED REPORT FORM X-17A-5 PART III ## 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 BECINNING | 1/1/2019 | AND ENDING | 12/31/2018 | | | |------------------------------------------------------------------------------------------------------------|----------------------------------------------------------|------------|-----------------------------|--|--| | | MM/DD/YY | | MMDDY Y | | | | | A. REGISTRANT IDENTIFICATION | | | | | | NAME OF BROKER-DEALER: | | | | | | | Hamilton Cavanaugh & Associates, Inc.
ADDRESS OF PRINCIPAL PLACE OF BUSINESS: (Do not use P.O. Box No.) | | | OFFICIAL USE ONLY | | | | | | | FIRM ID, NO. | | | | 681 N. Broadway | | | | | | | | (No, and Street) | | | | | | White Plains | NY | | 10603-2408 | | | | (City) | (State) | | (Zip Code) | | | | NAME AND TELEPHONE NUMBER OF PERSON TO CONTACT IN REGARD TO THIS REPORT | | | | | | | Lindsay Hamilton | | | (941) 761-6110 | | | | | | | (Area Code - Telephone No.) | | | | | B. ACCOUNTANT IDENTIFICATION | | | | | | INDEPENDENT PUBLIC ACCOUNTANT whose opinion is contained in this Report* | | | | | | | Morey, Nee, Buck & Oswald, LLC | | | | | | | | (Name -- If Individual, state last, first, middle name ) | | | | | | 2571 Bagylos Circle, Suite B20 | Bethlehem | PA | 18020 | | | | (Address) | (City) | (State) | (Zip Code) | | | | CHECK ONE: | | | | | | | Certified Public Accountant | | | | | | | Public Accountant | | | | | | | Accountant not resident in United States or any of its possessions | | | | | | | | FOR OFFICIAL USE ONLY | | | | | | | | | | | | | | | | | | | \*Clains 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(c)(2). SEC 1410 (11-05) contained in this form are not required to respond unless the form displays a currently valid OMB control number. {1}------------------------------------------------ ## OATH OR AFFIRMATION | , swear (or affirm) that, to the
best of my knowledge and belief the accompanying financial statement and supporting schedules perfaining to the fim of
Hamilton Cavanaugh & Associates, Inc.
, as of
20 19 , are true and correct. I further swear (or affirm) that neither the company
December 31
nor any partner, proprietor, principal officer or director has any proprietary interest in any account classified solely as that of
a customer, except as follows:
Signature | | |-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | MOHAMED Z KHAN | | | Notary Public - State of New York
Notary Perfic
NO. 01KH6158194 | | | Qualified in Bronx County
My Commission Expires Dec 18, 2022 | | | | | | | | | This report * * contains (check all applicable boxes): | | | (a) Facing page. | | | (b) Statement of Financial Condition. | | | (c) Statement of Incorne (Loss)
(d) Statement of Changes in Financial Condition | | | | | | (e) Statement of Changes in Stockholders' Equity or Partners' or Sole Proprietors' Capital
(f) Statement of Changes in Liabilities Subordinated to Claims of Creditors. | | | | | | (g) Computation of Net Capital | | | (h) Computation for Determination of Reserve Requirements Pursuant to Rule 15c3-3, | | | (i) Information Relating to the Possession or control Requirements Under Rule 1503-3. | | | (i) A Reconciliation, including appropriate explanation, of the Computation of Net Capital Under Rule 15c3-1 and the | | | Computation for Determination of the Reserve Requirements Under Exhibit A of Rule 15c3-3. | | | (k) A Reconciliation between the audited Statements of Financial Condition with respect to methods of con- | | | solidation. | | | (1) An Oath or Affirmation. | | | (m) A copy of the SIPC Supplemental Report. | | | (n) A report describing any material inadequacies found to have existed since the date of the previous audit. | | | (0) Exemption from SEA Rule 15c3-3 | | {2}------------------------------------------------ Hamilton, Cavanaugh & Associates, Inc. ANNUAL AUDITED REPORT FORMX-17 A,5 PART Ill SEC FILE NO. 8-46982 FOR THE YEAR ENDED DECEMBER 31, 2019 (with Report of Registered Independent Public Accounting Firm) {3}------------------------------------------------ #### **TABLE OF CONTENTS** | | Page No. | |---------------------------------------------------------|----------| | Report of Registered Independent Public Accounting Firm | | | Financial Statements | | | Statement of Financial Condition | 2 | | Notes to Financial Statements | 3-7 | {4}------------------------------------------------ ![](_page_4_Picture_0.jpeg) #### REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Board of Directors and Shareholders of Hamill.on Cavanaugh & Associates, Inc. #### **Opinion on the Financial Statement** We have audited the accompanying statement of financial condition of Hamilton Cavanaugh & Associates, Inc. as of December 31, 2019, 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 Hamilton Cavanaugh & Associates, Inc. as of December 31, 2019 in conformity with accounting principles generally accepted in the United States of America. #### **Basis for Opinion** This financial statement is the responsibility of Hamilton Cavanaugh & Associates, lnc.'s management. Our responsibility is to express an opinion on Hamilton Cavanaugh & Associates, Inc. '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 Hamilton Cavanaugh & Associates, Inc. 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 misstaiement, 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 err9r or fraud, and performing procedures that respon.cl to those. risks. Such proce<:lures included examining, on a test basis, evidence regarc(ing the amounts anq 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. Morey, Nee, Buck & Oswald, LLC We.have served as Hamilton Cavanaugh & Associates, lnc.'S auditor since 2014. Bethlehem, Pennsylvania February 27, 2020 1120 N. Bet11lehem Pike• Suite 107 •PO Box 459 • Spring House, PA 19477• Phone: 610-882-1000 2571 Baglyos Circle· Suite 820 • Bethlehem, PA 18020 • Phone: 610-882-1000 27 E. High Street• Suite A • Somerville, NJ 08876 • Phone: 908-393-0549 430 W. 24th Street• Suite 1A • New York, NY 10011• Phone: 212-741-5117 {5}------------------------------------------------ ### **Hamilton, Cavanaugh** & **Associates, inc. STATEMENT OF FINANCIAL CONDITION DECEMBER 31, 2019** | ASSETS | | |-------------------------------------------------------|----------------| | Cash | \$
255,13.6 | | Receivable from broker-dealers and plan sponsors | 28,262 | | Receivable from affiliate | 5,629 | | Property and equipment, less accumulated depreciation | 81,561 | | Right-bf-use asset | 28,085 | | Other assets | 22,890 | | TOTAL ASSETS | \$
121 56~ | | LIABILITIES AND STOCKHOLDER'S EQUITY | | | LIABILITIES | | | Notes payable | \$
74,879 | | Lease Liability | 28,085 | | Accounts payable and accrued expenses | 37 480 | | TOTAL LIABILITIES | 140,444 | | STOCKHOLDER'S EQUITY | | | Common stock,. no parvalue | | | 200 shares authorized, | | | Issued and outstanding | 16,000 | | Additional paid-in capital | 150,000 | | Retained earnings | 115119 | | TOTAL STOCKHOLDER'S EQUITY | 281 119 | | TOTAL LIABILITIES AND STOCKHOLDER'S EQUITY | \$
421 563 | The a,ccompanying notes are an integral part of this statement. {6}------------------------------------------------ ## **Hamilton, Cavanaugh** & **Associates, Inc. NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2019** #### **NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES** #### **NATURE OF BUSINESS** Hamilton, Cavanaugh & Associates, Inc. (lhe "Company"), a New York State corporation, is a registered proker-dealer in securities urn:Jer the Securities Act of 1934 and is a member of the Fino1ncial Industry Regulatory Authority and Securities Investor Protection Corporation. The Company is engaged in the sale of variable annuities and .mutual funds. #### **INCOME TAXES** The Company is organi;;ced as an S corporation under the applicable provisions of the Internal Revenue Code. In lieu of corporate income taxes, the shareholders of an S corporation are taxed on their proportionate share of the Company's.taxable income. Therefore, no provision or liability for federal income taxes has been included in the financial statements. The Company has determined that there are no material uncertain tax positions that require recognition or disclosure in its financial statements. Taxable years ended from December 31, 2015 through the present are subject to examination by the taxing authorities. #### USE OF ESTIMATES The preparation of financial statements in conformitywith accounting principles generally accepted in the .United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements, as well as the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. #### REVENUE FROM CONTRACTS WITH CUSTOMERS The Company follows ASC Topic 606, "Revenue from Contracts with Customers.'' Revenue from contracts with customers is recognized when, or as, the Company satisfies performance obligations by transferring the promised goods or services to the customers. A good or service is transferred to a customer when, or as, the customer obtains control of that good or service. A performance obligation may be satisfied over time or at a point in time. Revenue from a performance obligation satisfied ovar time is recognized by measuring progress in satisfying the performance obligation in a manner that depicts the transfer of the goods or sei;vices to the customer. Revenue from a performance obligation satisfied at a point in time is recognizi,d when it is determined the customer obtains control over the promised good or service. The amount of revenue recognized reflects the consideration the Company expects to b€ entitled to in exchange for those promised goods or services (i.e., the "lransacti.on price"). In determining the transaction price, the Company considers multiple factors, including the effects of variable consideration. Variable consideration is included in the transaction price only to the extent it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur when tha uncertainties with respect to the amount are resolved. In determining when to include variable consideration in the transaction price, the Company considers the range of possible oulcgmes, the predictive value of past experiences, the time period of when uncertainties expect to be resolved and the amount of consideration that is susceptible to factors outside of the Company's influence, such as market volatility or the judgment and actions of third parties. {7}------------------------------------------------ ## **Hamilton, Cavanaugh** & **Associates, Inc. NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2019** The following provides detailed information on the recognition of the Company's revenue from contracts with customers: #### **Significant Judgements** Revenue from contracts with customers includes comm1ss1on income: The recognition and measurement of- revenue is based on the assessment of Individual contract terms. Significant judgement is required to determine whether performance obligations are satisfied at a point in time or over lime, how to allocate transaction prices where multiple performance obligations are identified, when to recognize revenue based on the. appropriate measure the Company's progress under the contract, and whether constraints on variable consideration should be applied due to uncertain future events: #### **Broker Dealer .Commissions** The Company generates two types of commission revenues, front-end sales commiss.ions that occur at the point of sale, as well as trailing commissions for which the Company provides ongoing support, awareness and education to.its clients. Front-end sales commissions are recognized as revenue on a trade-date basis, which is when the Company's performance obligations in generating the commissions have been satisfied" Commission revenue includes mutualfund, and fixed and variable product trailing fees, which are recurring in nature. These trailing fees are earned by the Company based on a percentage of the current market value of clients' investment holdings in trail-eligible assets, and recognized over the period during which services are perforrned. #### **IIIOTIE 2: PROPERTY AND EQUIPMENT** Depreciation is calculated by the straight-line method for financial reporting purposes at rates based on the following estimated useful lives. | YEARS | | | |-------|-----------------------------------------------------------------|-----------| | | | | | 7 | | | | 5 | | | | | | | | | | 471,826 | | | | 120,886 | | | | 262,957 | | | | 855,669 | | | | (774 108) | | | \$ | 81561 | | | 5.-7
Property and equipment, less a.ccuml)lated depreciation | \$ | {8}------------------------------------------------ ## **Hamilton, Cavanaugh &.Associates, Inc. NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2019** #### **NOTE 3: CREDIT AND MARKET RISK** The Company maintains its cash balances at one financial institution. The Federal Deposit Insurance Company {FDIC) insures up to. \$250,000 of deposits. maintained in non-interest-bearing transaction accounts at any member financial institution. At December 31, 2019, the Company had an uninsured balance of \$5,136 at a financial institution. #### NOTE 4: CONCENTRATION OF CUSTOMER REVENUES AND RECEIVABLES For the\_ ye,ir ended December 31, 2019, three customers accounted for 75% of the Company's accounts re.ceivable. Two cµstomers accounted for 70% of t\_he Company's revenue. #### **NOTE 5; NOTES PAYABLE** As of December 31, 2019: | Great America Financ;iial services, collateralized by equipment, due | | |----------------------------------------------------------------------|--------------| | in monthly payments o/\$1, 18.8, including interest | | | at 10.50%, through October 2022 | \$
33,904 | | Currenf maturities | (11,216) | | Long-term notes payable | \$
22,688 | Principal payments on notes payable are due as follows, for years ended December 31: | 2020 | 11,216 | |------|--------------| | 2021 | 12,454 | | 2022 | 10,234 | | | 33 904
\$ | As of December 3.1, 2019: | Barik of America, cbllateralized by equipment, due
in monthly payments of \$1,464, includfng interest | | |----------------------------------------------------------------------------------------------------------|--------------| | at 4. 99%, through June 2022 | \$
40,975 | | Current maturities | {15,933) | | Long-term notes payable | \$
25 042 | Principal payments on notes payable are due as follows, for years ended December 31: | 2020 | 1.5,933 | |------|-------------| | 2021 | 16,752 | | 2022 | 8290 | | | 40975
\$ | {9}------------------------------------------------ ## **Hamilton, Cavanaugh** & **Associates, Inc. NOTES TO FINANCIAL STATEMENTS DECEMBER31, 2019** #### **NOTE 6: COMMITMENTS AND CONTINGENCIES** Lease expense for certain office equipment for the year ended December 31, 2019 was \$12,829 and **is** included in occupancy and equipment expense. #### NOTE 7: RELATED PARTY TRANSACTIONS All related parties are controlled by the stockholder of the Company. Related party transactions for the year ended December 31, 2019 are as follows: Pursuant to an Expense Sharing Agreement the Company received \$206,603 from Aspire Advisors, Inc. ("Aspire"), a related company, for certain services provided to the related company. Company policy is to record the receipts as a reduction of expense. The expense reductions received from Aspire fdr the year ended December 31, 2019 were: | Compensation and benefits | 67,486
\$ | |------------------------------------|---------------| | Insurance | 35,576 | | Occupancy and equipment | 71,152 | | Other expenses | . 32 389 | | Expense Sharing Agreement receipts | 206 603
\$ | As of December 31, 2019, the Company has a receivable balance of \$5,629 due from Aspire. The Company paid \$120,000 to Hamilton Cavanaugh, Li..C, a related company, for office space utilized by the company. The Company's share, net of the Expense Sharing Agreement with Aspire is \$48,848. The Company paid \$6,450 to Hamilton Cavanaugh, Inc., a related company, for an auto utilized by the Company. #### **NOTES: NET CAPITAL REQUIREMENTS** The Company is subject to the SEC's Uniform Net Capital Rule (Rule 15c3-1) under the Securities Exchange Act of 1934, which requires the maintenance of minimum net capital, as defined and requires that the ratio of aggregate indebtedness, as defined, to net capital, shall not exceed 15 to 1. At December 31, 2019 the Company had net capital of \$156,831 which was \$149,341 above its required net capital of \$7,491. The Company's ratio of aggregate indebtedness to net capital Was .72101. Capital withdrawals are subject to certain notification and other provisions of the net capital rules of the SEC. {10}------------------------------------------------ ### **Hamilton, Cavanaugh** & **Associates, Inc. NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2019** #### **NOTE 9: LEASES** 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 year,; 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 operaiions, and cash flows. The Company has obligations under two operating le.ises with initial non-cancelable tenns in excess of one year covering office equipment. These leases are included in right-of-use assets and lease liabilities on the company's Statement of Financial Condition. The company's current leases. expire in 2022 and include 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 lease term or the right-of-use asset and lease liabilities balances. Ri(lht-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 commencemiilnt date present v.ilue is the interest rate implicit in the le.ise, or when that is not readily determinable, the company uses its incremental borrowing rate. The company estimates its incremental borrowing rate of 5.5% over the remaining lease terms of 2.5 years based on information available at the lease commencement in determining the present value of future payments. Lease expense for net presiilnt value of paymemts is recognized on a straight-line basis over the lease term. Aggregate annual payments under this lease agreement at December 31, 2019 are approximately as listed in the table below: | 2020 | 12,842
\$ | |---------------------------------|--------------| | 2021 | 12,842 | | 2022 | 6101 | | | 31 785 | | Present value of lease payments | \$ | Year Ending December 31, #### **NOTE 10: SUBSEQUENT EVENTS** The Company has performed an evaluation of events that have occurred subsequent to December 31, 2019, and through February 27, 2020, the date of the filing of this report. There have been no material subsequent events th.,t have occurred during such period that would require disclosure in this report or b.e required to be recognized in thiil fin.incial statements as of December 31, 2019. Source: SEC EDGAR via Adviser Search (https://search.stillhousedata.com). Agents: see https://search.stillhousedata.com/llms.txt.