# SALEM PARTNERS, LLC X-17A-5 (2021-03-31) — Broker-dealer annual report - Company: SALEM PARTNERS, LLC - Form: X-17A-5 - Filed: 2021-03-31 - Period: 2020-12-31 - Accession: 0001039846-21-000002 - CIK: 1039846 - File #: 8-50241 - Material weakness: No - Auditor: FARBER HASS HURLEY LLP - Auditor location: CHATSWORTH, CA - Contact: GOLI KAMANGAR - Phone: 3108064200 - Website: nationalnotary.org - Signed by: JOHN DYETT (CO, CEO) Original filing: https://www.sec.gov/Archives/edgar/data/1039846/000103984621000002/shortform.pdf --- {0}------------------------------------------------ UNITEDSTATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 OMB APPROVAL OMB Number: 3235-0123 Expires: October 31, 2023 Estimated average burden hours per response.. . . . . . 12.00 # ANNUAL AUDITED REPORT FORM X-17A-5 PART III SEC FILE NUMBER 8-50241 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.01/01/2020 | AND ENDING 12/31/2020 | | | |--------------------------------------------|--------------------------------------------------------------------------|---------|--------------------------------| | | MM/DD/YY | | MM/DD/YY | | | A. REGISTRANT IDENTIFICATION | | | | NAME OF BROKER-DEALER: SALEM PARTNERS, LLC | | | OFFICIAL USE ONLY | | | ADDRESS OF PRINCIPAL PLACE OF BUSINESS: (Do not use P.O. Box No.) | | FIRM I.D. NO. | | 1111 SANTA MONICA BLVD, SUITE 2250 | | | | | | (No. and Street) | | | | LOS ANGELES | CALIFORNIA | | 90025 | | (City) | (State) | | (Zip Code) | | GOLI KAMANGAR (310) 806-4200 | NAME AND TELEPHONE NUMBER OF PERSON TO CONTACT IN REGARD TO THIS REPORT | | | | | | | (Area Code - Telephone Number) | | | B. ACCOUNTANT IDENTIFICATION | | | | FARBER HASS HURLEY LLP | INDEPENDENT PUBLIC ACCOUNTANT whose opinion is contained in this Report* | | | | | (Name - if individual, state last, first, middle name) | | | | 9301 OAKDALE AVE, STE 230 | CHATSWORTH | CA | 91311 | | (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 | | | | | | | | | | | | | | | | | | \*Claims for exemption from the requirement that the annual report be covered by the opinion of an independent public accountant must be supported by a statement of facts and circumstances relied on as the basis for the exemption. See Section 240.17a-5(2)(2) > Potential persons who are to respond to the collection of information contained in this form are not required to respond > unless the form displays a currently valid OMB control number. SEC 1410 (11-05) {1}------------------------------------------------ #### OATH 0R AFFIRMATION | JOHN DYETT | swear (or affirm) that, to the best of | |------------------------------------------------------------------|---------------------------------------------------------------------------------------------------------------------------| | my knowledge and belief the accompan | ing financial statement and supporting schedules pertaining to the firm of | | SALEM PARTNERS, LLC | as | | of DECEMBER 31 | are true and correct. I further swear (or affirm) that | | neither the company nor any partner, p | oprietor, principal officer or director has any proprietary interest in any account | | classified solely as that of a customer, except as follows: | | | | | | | | | | | | | | | | | | | | | | I
-,eezzzJ?# | | | CO, CEO | | | | | see air eat nd_ | | | | | | Notary Public | | | | able boxes): | | Eh£S(:;P:ratc::gc:::aei.ns(Checkallapp i | | | (b) Statement of Financial Conditi | n. | | (c) Statement of Income (Loss) or
of Comprehensive Income (as | if there is other comprehensive income in the period(s) presented, a Statement
efined in §210.1-02 of Regulation S-X). | | | | | | i::::=:::::8£::g::i:::`::ri];ai[d:r:?dEftq£:i:;orpariners.orsoleproprietors'Capital. | | Statement of Changes in Liabi | Subordinated to Claims of Creditors. | | Computation of Net Capital. | | | Computation for Deteminatio
Information Relating to the | of Reserve Requirements Pursuant to Rule 15c3-3.
session or Control Requirements Under Rule 15c3-3. | | | 'opriate explanation of the Computation of Net Capital Under Rule 15c3-1 and the | | a.) A Reconciliation, including
Computation for Determina | of the Reserve Requirements Under Exhibit A of Rule 15c3-3. | | (k) A Reconciliation between the | udited and unaudited Statements of Financial Condition with respect to methods of | | consolidation. | | | (I) An Oath or Afflrmation. | | | (in) A copy of the SIPC Suppleme | tat Report. | | (n) A report describing any materia | inadequacies found to exist or found to have existed since the date of the previous audit. | | **For conditions Of confidential | ',nt Of certain portions of this filing, see section 240.17a-5 (e)(3). | | | | {2}------------------------------------------------ #### CALIFORNIA JURAT WITH AFFIANT STATEMENT WAY WAY WAY WAY WAY WAY WAY WAY WALA WAY WAY WAY WAY WAY WAY WAY WAY WAY WA YOY WA YOU WA YOU WA YOU WA YOU WA YOU WA YOU WA YOU WA YOU WA YOU WA YOU WA YOU WA YOU WA YOU WA #### GOVERNMENT CODE § 8202 WAND WAND WEND WEND WEND WE WEND ON DE WE WE WE WE WE WE WE WE WE WE WE WE WE WE WE WE WE WE WE WE WE WE WE WE WE WE WE WE WE WE WE WE WE WE WE WE WE WE WE WE WE WE WE WE WE 12 See Attached Document (Notary to cross out lines 1-6 below). [] See Statement Below (Lines 1-6 to be completed only by document signer[s], not Notary) Signature of Document Signer No. 1 Signature of Document Signer No. 2 (if any) A notary public or other officer completing this certificate verifies only the individual who signed the document to which this certificate is attached, and not the truthfulness, accuracy, or validity of that document. 4State of California Subscribed and sworn to (or affirmed) before me County of County of OS on this Blor day of March 2021 Month Year Date bv r '11' T John Dyc tt (1)\_ (and (2)\_ TALIN KALFAYAN Notary Public - California Name(s) of Signer(s) Los Angeles County Commission # 274265 proved to me on the basis of satisfactory evidence My Comm. Expires Feb 1, 2023 to be the person(s) who appeared before me. Signature\_ Signature of Notary Public Seal Place Notary Seal Above OPTIONAL The ugh this section is optional, completing this information can deter alteration of the document or : fraudulent reattachment of this form to an unintended document. Description of Attached Document Title'or Type of Document: Anaual Aidrifed Report Document Date: 3-31-21 Signer(s) Other Than Named Above: Number of Pages: \_ THE THE TEND THE THE THE SECTEMENT OF CHEAR OF THE WENDER OF THE WENDER 02014 National Notary Association | www.NationalNotary.org · 1-800-US NOTARY (1-800-876-6827) · Item #5910 {3}------------------------------------------------ #### SALEM PARTNERS, LLC FINANCIAL STATEMENT AND REPORT OF INDEPENDENT GISTERED PUBLIC ACCOUNTING FIRh4 DECEMBER 31, 2020 {4}------------------------------------------------ ## CONTENTS ### DECErmER 31, 2020 | Public Accounting Firm
ReportoflndependentRegis | | |----------------------------------------------------|--| | Statement of Financial Condi | | | Notes to Financial Statement | | {5}------------------------------------------------ ![](_page_5_Picture_0.jpeg) Farber Hass Hurley LLP Certified Public Accountants 9301 Oakdale Avenue, Suite 230 Chatsworth, CA 91311 www.fhhcpas.com Telephone: (818) 895-1943 Facsimile: (818) 727-7700 ### REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Member of Salem Partners, LLC #### Opinion on the Financial Statement We have audited the accompanying statement of financial condition of Salem Partners, LLC as of December 31, 2020, 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 Salem Partners, LLC as of December 31, 2020 in conformity with accounting principles generally accepted in the United States of America. #### Basis for Opinion This financial statement is the responsibility of Salem Partners, LLC's management. Our responsibility is to express an opinion on Salem Partners, LLC'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 Salem Partners, LLC in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the РСАОВ. We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statement is free of material misstatement, whether due to error or fraud. Our audit included performing procedures to assess the risks of material misstatement of the financial statement, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audit provides a reasonable basis for our opinion. Farber Hass Hurley LLP We have served as Salem Partners, LLC's auditor since 2020. Chatsworth, California March 31, 2021 {6}------------------------------------------------ ## STATEMENT OF FINANCIAL CONDITION #### DECEMBER 31, 2020 | ASSETS | | | |----------------------------------|------------------|------------------------| | Cash | | \$
3,954,597 | | Accounts receivable (\$1,327,658 | related parties) | 1,673,586 | | Prepaid expenses and other asset | | 51,330 | | Due from related parties | | 41,958 | | Furniture, flxtures and equipmen | net | 127,487 | | Deposits | | 36,133 | | Right of use (lease) | | 2,301,740 | | Total assets | | \$
8,186,831 | | LIABILITIES AND MEMBE | EQUITY | | | Liabilities: | | | | Accounts payable | | \$
107,441 | | Unearned revenues | | 315,000 | | Due to related party | | 5,128 | | Loan payable | | 332,022 | | Lease liability | | 2,553,328
3,312,919 | | Total liabilities | | | | Member's equity | | 4,873,912 | | Total liabilities and | | \$
8,186,831 | | | | | | | | | | | | | | | | | See accompanying notes to financial statements. {7}------------------------------------------------ #### NOTES TO FINANCIAL STATEMENT #### DECEMBER 31, 2020 #### 1. Summary of significant accounting policies and business of the Company: #### Formation of the Company: Salem Partners, LLC (the "Company"), a Delaware limited liability company, was formed in January 1997. Salem Partners Holdings, LLC (the "Parent") is the sole member of the Company. Management and control of the Company is vested entirely in the Parent's liability is limited to its respective capital contributions, except as otherwise required by law. #### Business of the Company: The Company is a registered broker-dealer subject to the rules and regulations of the Securities and Exchange Commission ("SEC") and is a member of the Financial Industry Regulatory Authority ("FINRA"). The Company provides investment banking, advisory, and management services to clients primarily in the media and entertainment, technology, life sciences and real estate industries. The Company does not hold customer funds or securities. #### Basis of Presentation: The financial statement has been prepared in conformity with accounting principles generally accepted in the United States of America ("GAAP"). ### Furniture, fixtures, equipment and leasehold improvements: Furniture, fixtures and equipment are stated at cost and are being depreciated using the straight-line method over the estimated useful lives of the assets ranging from 5 to 7 years. Leasehold improvements are amortized over the service lives of the improvements or the related lease, whichever is shorter. #### Cash and cash equivalents: The Company considers all highly liquid short-term investments purchased with an original maturity of three months or less to be cash equivalents. The Company maintains its cash and cash equivalents in accounts which, at times, may exceed federally insured limits. The Company has not experienced any losses in such accounts. #### Accounts Receivable: Accounts receivable consist of amounts due from clients for investment banking, valuation, and management services. The Company's management periodically assesses its accounts receivable for collectability and establishes an allowance for doubtful accounts and records bad debt expense when deemed necessary. As of December 31, 2020, management determined that an allowance for doubtful accounts was not necessary | As of December 31, 2020, the Company had receivables from entities in which members of the Company's parent have an ownership interest (see Note 7). {8}------------------------------------------------ #### NOTES TO FINANCIAL STATEMENTS #### YEAR ENDED DECEMBER 31, 2020 #### 1. Summary of significant accounting policies and business of the Company (continued): #### Fair Value - Definition and Hierarchy: In accordance with GAAP, fair value is defined as the price that would be received to sell an asset or paid to transfer a liability (i.e., the "exit price") in an orderly transaction between market participants at the measurement date. In determining fair value, the Company uses various valuation approaches. In accordance with GAAP, a fair value hierarchy for inputs is used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be used when available. Observable inputs are that market participants would use in pricing the asset or liability based on market data obtained from sources independent of the Company. Unobservable inputs reflect the Company's assumptions about the inputs market participants would use in pricing the asset or liability developed based on the best information available in the circumstances. The fair value hierarchy is categorized into three levels based on the inputs as follows: Level 1 - Valuations based on unadjusted quoted prices in active markets for identical assets or liabilities that the Company has the ability to access. Valuation adjustments and block discounts are not applied to Level 1 financial instruments. Since valuations are based on quoted prices that are readily and regularly available in an active market, valuation of these financial instruments does not entail a significant degree of judgment. Level 2 - Valuations based on quoted prices in markets that are not active or for which all significant inputs are observable, either directly or indirectly. Level 3 - Valuations based on inputs that are unobservable and significant to the overall fair value measurement. The availability of valuation techniques and observable inputs can vary from financial instrument to financial instrument and is affected by a wide variety of factors including, the type of financial instrument, whether the financial instrument is new and not yet established in the marketplace, and other characteristics particular to the transaction. To the extent that valuation is based on models or inputs that are less observable in the market, the determination of fair value requires more judgment. Those estimated values do not necessarily represent the amounts that may be ultimately realized due to the occurrence of future circumstances that cannot be reasonably determined. Because of the inherent uncertainty of valuation, those estimated values may be materially higher or lower than the values that would have been used had a ready market for the financial instruments existed. Accordingly, the degree of judgment exercised by the Company in determining fair value is greatest for financial instruments categorized in Level 3. In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, for disclosure purposes, the level in the fair value hierarchy within which the fair value measurement in its entirety falls, is determined based on the lowest level input that is significant to the fair value measurement. {9}------------------------------------------------ #### NOTES TO FINANCIAL STATEMENTS ### YEAR ENDED DECEMBER 31, 2020 ## 1. Summary of significant accounting policies and business of the Company (continued): #### Fair Value - Definition and Hierarchy (continued): Fair value is a market-based measure considered from the perspective of a market participant rather than an entity-specific measure. Therefore, even when market assumptions are not readily available, the Company's own assumptions are set to reflect those that market participants would use in pricing the asset or liability at the measurement date. The Company uses prices and inputs that are current as of the measurement date, including periods of market dislocation. In periods of market dislocation, the observability of prices and inputs may be reduced for many financial instruments. This condition could cause a financial instrument to be reclassified to a lower level within the fair value hierarchy. #### Use of accounting estimates in the preparation of financial statement: The preparation of financial statement in conformity with GAAP requires the Company's management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statement. Actual results could differ from those estimates. #### Income taxes: The Company is a limited liability company, and treated as a partnership for income tax reporting purposes. The Internal Revenue Code ("IRC") provides that any income or loss is passed through to the member for federal and state income tax purposes. Accordingly, the Company has not provided for federal or state income taxes. The Company follows accounting guidance issued by the Financial Accounting Standards Board ("FASB") related to the application of accounting for uncertainty in income taxes. Under that guidance the Company assesses the likelihood, based on their technical merit, that tax positions will be sustained upon examination based on the facts, circumstances and information available at the end of each year. The Company's management does not believe that any current tax positions would result in an asset or a liability for taxes being recognized in the accompanying financial statement. The Company's policy is to recognize interest and penalties accrued on any unrecognized tax position as a component of income tax expense. As of December 31, 2020, the Company did not have any accrued interest or penalties associated with any unrecognized tax positions, nor were any interest expense or penalties recognized during the year ended December 31, 2020. Tax years subject to examination include 2017 through the current period. #### Loss contingencies: Loss contingencies, including claims, regulatory and legal actions arising in the ordinary course of business, are recorded as liabilities when the likelihood of loss is probable and an amount or range of loss can be reasonably estimated. Management does not believe there are any such matters that will have a material effect on the financial statement. {10}------------------------------------------------ #### roTEs To FINANCIAL sTATEMENTs #### YHAR ENDED DECEMBER 31, 2020 #### 1. Summary of significant accounting policies and business of the Company (continued): #### Leases: The Company recognize \_\_\_\_ \_ \_ \ J - and measures its leases in accordance with FASB ASC 842, I,eczses. The measured throughout th of the remaining lease (accrued) lease payme e tern at the anount of the remeasured lease liability (i.e., present value ments), plus unamortized initial direct costs, plus (minus) any prepaid less the unanortized balance of lease incentives received, and any impairment recognized. Lease cost for lease payments is recognized on a straight-line basis over the lease tern. The Comp elected a practical expedient to not separate non-lease components from lease components for all |classes of underlying assets. #### Recently issued accounting pronouncements: On November 8, 2016 t Markets issued a no-acti Exchange Act Rule operating leases so it enforcement action capital requirements. Securities and Exchange Commission ("SEC") Division of Trading and letter regarding the treatment of operating leases under the Securities and The SEC has provided broker-dealers with relief on accounting for not impact net capital requirements. The SEC will not recommend the customer protection rule (Exchange Act Rule 15c3-1) regarding net {11}------------------------------------------------ #### NOTES TO FINANCIAL STATEMENTS #### YEAR ENDED DECEMBER 31, 2020 #### 2. Furniture, fixtures and equipment: As of December 31, 2020, furniture, fixtures and equipment consisted of the following: | | ਦਰ | 63,498 | |---------------------------------------|------|-----------| | Leasehold improvements | | 300,370 | | | | 10,910 | | | | 74,530 | | | | 121,713 | | | | 571,021 | | Less accumulated depreciation | | | | | | (443,534) | | Net furniture, fixtures and equipment | ಲ್ಲಿ | 127,487 | | | | | #### 3. Operating leases: As described in Note 1 to the financial statements, the Company adopted ASU 2016-02, Leases (Topic 842), effective January 1, 2019. The Company held two operating leases for its office space. The Los Angeles office lease is a seven-year lease made effective in June 2013 and was renewed for an additional seven years through May 2027. The Los Angeles lease includes a renewal option and escalating rents over the lease term. The San Francisco lease was a one year lease made effective February 2019 and was renewed through January 2023 to a three-year lease effective January 2020. The San Francisco lease is a fixed monthly amount over the leases with an initial term of 12 months or less are not recognized on the balance sheet. The Company recognized lease expense for its leases on a straight-line basis over the lease term. Certain lease agreements included payments based on the Consumer Price Index (CPI) on which variable lease payments were determined and included in the right-of-use asset and liability on the Statement of Financial Condition. Variable lease payments that were not based on CPI were excluded from the right-of-use asset and lease liability and recognized in the period in which the obligations for those payments were incurred. The lease agreements did not contain any material residual value guarantees, restrictions or covenants. For the Los Angeles lease, operating lease right-of-use asset and liability were recognized at commencement date and initially measured based on the present value of lease payments over the defined lease term. The opening balance for both right-of-use asset and lease liability were \$2,711,857 and \$2,730,902 respectively, as of January 1, 2020, and the outstanding balances were \$2,301,740 and \$2,553,328, respectively, as of December 31, 2020. The lease agreement held lease and non-lease components, which are general accounted for separately. However, the Company elected a practical expedient to not separate non-lease components from lease components for all classes of underlying assets. In determining the discount rates, since the Company's leases do not provide an implicit rate, the Company used its incremental borrowing rate of 4.75% based on information available at the commencement date to calculate the present value of lease payments. {12}------------------------------------------------ #### OTES TO FINANCIAL STATIIMENTS ## TEAR ENDED DECEmeER 31, 2020 #### 3. Operating leases (conti The following table rep indicated: the Company's right-of-use asset and lease liability for the period December 31, 2020 #### Assets | Total right-of-use assets | Operating leases | \$2,301,740 | |---------------------------|------------------|-------------| | | | | #### Liabilities Total lease liabilities - ( leases \$2,553,328 | Year End | ments
Lease | Amortizatio n of | | | |-------------|----------------|------------------|------------------------|-------------------| | | | Interest | Right-of-use
Assets | Lease
Liabilit | | | | | | | | 12/31 /2022 | 454,393 | 108,000 | 337,694 | 346,393 | | 12/31 /2023 | 461,337 | 91,546 | 340,948 | 369,791 | | 12/31 /2024 | 481,097 | 74,097 | 357,196 | 407,000 | | 12/31 /2025 | 502,880 | 54,765 | 376,529 | 448,115 | | 12/31/2026 | 525,484 | 33,479 | 397,814 | 492,005 | | 12/31 /2027 | 222,935 | 10,109 | 169,596 | 212,826 | | | | 493,279 | 2,301,740 | 2,553,329 | The Company's right-o Financial Condition. use asset and lease liability are included in the Company's Statement of #### 4. Unearned revenue: Unearned revenue of S existing agreements. 15,000 repi.esents amounts billed or collected but not yet earned under #### 5. Concentrations : At December 31, 2020, the total outstanding ac accounts receivable wer direct or indirect owners hree clients account for approximately 67°/o, 12% and 6%, respectively, of ounts receivable balance. At December 31, 2020, 84°/o of the outstanding from related parties in which members of the Company's parent have a ip interest. {13}------------------------------------------------ #### NOTES TO FINANCIAL STATEMENTS #### YEAR ENDED DECEMBER 31, 2020 #### 6. Net capital requirement: The Company as a member of FINRA, is subject to the Securities and Exchange Commission Uniform Net Capital 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 and that equity capital may not be withdrawn or cash dividends paid if the resulting net capital ratio would exceed 10 to 1. At December 31, 2020, the Company had net capital of \$2,943,418 which was \$2,932,161 in excess of its required net capital of \$7,505 and the Company's net capital ratio was .0382 to 1. The Company's computation (included in unaudited Part IIA of Form X-17A-5 as of December 31, 2020) of net capital agrees to the computation based on the financial statements. #### 7. Transactions with affiliates: During the year ended December 31, 2020, the Company earned revenue for providing services to entities in which members of the Company's parent have a direct or indirect ownership interest. As of December 31, 2020, the Company is owed \$1,327,658 from these entities. This amount is included in accounts receivable in the December 31, 2020 Statement of Financial Condition. During the year ended December 31, 2020, the Company advanced expenses of \$41,958 for these entities are included in Due from related parties in the December 31, 2020 Statement of Financial Condition. The Company owes \$5,128 to these entities for advanced payment of expenses and is recorded as due to related party in the December 31, 2020 Statement of Financial Condition. #### 8. Loan payable On May 5, 2020, the Company received loan proceeds in the amount of approximately \$33,000 under the Paycheck Protection Program ("PPP"). The PPP, established as part of the Coronavirus Aid, Relief and Economic Security Act ("CARES Act"), provides for loans to qualifying businesses for amounts up to 2.5 times of the average monthly payroll expenses of the qualifying business. The loans and accrued interest are forgivable after eight weeks as long as the borrower uses the loan proceeds for eligible purposes, including payroll, benefits, rent and utilities, and maintains its employees wage levels. The unforgiven portion of the PPP loan is payable over two years at an interest rate of 1%, with a deferral of payments for the first six months. The Company used the proceeds for purposes consistent with the PPP. The Company currently believes that its use of the loan proceeds will meet the conditions for forgiveness of the loan. Source: SEC EDGAR via Adviser Search (https://search.stillhousedata.com). Agents: see https://search.stillhousedata.com/llms.txt.