# ARBOR COURT CAPITAL, LLC X-17A-5 (2019-03-01) — Broker-dealer annual report - Company: ARBOR COURT CAPITAL, LLC - Form: X-17A-5 - Filed: 2019-03-01 - Period: 2018-12-31 - Accession: 0001162044-19-000116 - CIK: 1396431 - File #: 8-67609 - Material weakness: No - Auditor: Hobe & Lucas - Auditor location: Independence, OH - Contact: Brandon Pokersnik - Phone: 440-922-0066 - Website: hobe.com - Signed by: Gregory B. Getts (President) Original filing: https://www.sec.gov/Archives/edgar/data/1396431/000116204419000116/0001162044-19-000116-index.htm --- ARBOR COURT CAPITAL, LLC FINANCIAL STATEMENTS DECEMBER 31, 2018 ARBOR COURT CAPITAL, LLC DECEMBER 31, 2018 TABLE OF CONTENTS Report of Independent Registered Public Accounting Firm 1 - 2 Statement of Financial Condition December 31, 2017 3 Statement of Operations For the year ended December 31, 2017 4 Statement of Changes in Member’s Equity For the year ended December 31, 2017 5 Statement of Cash Flows For the year ended December 31, 2017 6 Notes to the Financial Statements 7 - 9 Supplemental Information 10 - 12 Hobe & Lucas Certified Public Accountants, Inc. 4807 Rockside Road, Suite 510 (P) 216.524.8900 Independence, Ohio 44131 (F) 216.524.8777 www.hobe.com REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Member of Broadview Heights, Ohio Opinion on the Financial Statements We have audited the accompanying statement of financial condition of (a Delaware corporation), as of , and the related statements of operations and changes in member’s equity and cash flows for the year then ended, and the related notes (collectively referred to as the financial statements). In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of as of , 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 for Opinion These financial statements are the responsibility of ’s management. Our responsibility is to express an opinion on these financial statements 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 , 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 statements are 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 statements, 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 financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. Independent Member B K R INTERNATIONAL Firms In Principal Cities Worldwide -1- Supplemental Information The Supplemental Schedule of Computation of Net Capital Pursuant to Rule 15c3-1 of the Securities and Exchange Commission, and the Supplement Schedule of Computation for Determination of Reserve Requirements and Information Relating to Possession or Control Requirements Pursuant to Rule 15c3-3 of the Securities and Exchange Commission have been subjected to audit procedures performed in conjunction with the audit of ’s financial statements. The supplemental information is the responsibility of ’s management. Our audit procedures include 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 presenting in conformity with §240.17a-5. In our opinion, the Supplemental Schedule of Computation of Net Capital Pursuant to Rule 15c3-1 of the Securities and Exchange Commission, and the Supplement Schedule of Computation for Determination of Reserve Requirements and Information Relating to Possession or Control Requirements Pursuant to Rule 15c3-3 of the Securities and Exchange Commission are fairly stated, in all material respects, in relation to the financial statements as a whole. We have served as ’s auditor since 2008 Independence, Ohio February 23, -2- ARBOR COURT CAPITAL, LLC STATEMENT OF FINANCIAL CONDITION December 31, 2018 ASSETS Current Assets Cash and cash equivalents $ 243,584 Accounts receivable 16,368 Other current assets 15,841 Prepaid CRD account 2,516 Prepaid expenses 270 Total Current Assets 278,579 Other Assets Goodwill 22,500 Total Other Assets 22,500 Total Assets $ 301,079 LIABILITIES AND MEMBER'S EQUITY Liabilities Accrued Expenses $ 1,200 Accounts Payable 1,960 Deferred Distribution Revenue 1,744 Total Liabilities 4,904 Member's Equity Member's Equity $ 296,175 Total Liabilities and Member's Equity $ 301,079 See accompanying notes to financial statements. -3- ARBOR COURT CAPITAL, LLC STATEMENT OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 2018 Revenue Compliance services $ 4,125 Distribution services 92,961 Markup income 1,500 Prepaid Distribution Services 6,992 Fees 2,750 108,328 Expenses Website Archiving 1,091 Education 210 Payroll Expense 27,240 Electronic Social Media 360 Email 3,240 FINRA Licenses and Permits 1,428 FINRA Registration Fees 16,446 Insurance 1,355 Professional Fees - Accounting 6,025 Rent 3,996 Computer & Copy Expense 684 Telephone 400 Utilities 440 Signature Guarantee 625 SIPC 138 Other Expenses 270 Total Expenses 63,948 Net Income (Loss) from Operations 44,380 Other Income Other income 1,855 Interest income 36 Total Other Income 1,891 Net Income (Loss) $ 46,271 See accompanying notes to financial statements. -4- ARBOR COURT CAPITAL, LLC STATEMENT OF CHANGES IN MEMBER'S EQUITY FOR THE YEAR ENDED DECEMBER 31, 2018 Beginning Balance $ 249,903 Net Income 46,271 Ending Balance $ 296,174 See accompanying notes to financial statements. -5- ARBOR COURT CAPITAL, LLC STATEMENT OF CASH FLOWS FOR THE YEAR ENDED DECEMBER 31, 2018 Cash Flows From Operating Activities: Net income $ 46,271 Adjustments to reconcile net income to net cash provided by operating activities (Increase) decrease in assets: Prepaid expenses and other current assets 481 Accounts receivable (2,614) Increase in liabilies: Deferred Revenue 8 Accounts Payable 1,960 Net Cash Provided by Operating Activities 46,106 Net Increase in Cash and Cash Equivalents 46,106 Cash and Cash Equivalents - January 1, 2018 197,478 Cash and Cash Equivalents - December 31, 2018 $ 243,584 Supplemental Disclosure of Cash Flow Information: Interest paid $ - Income taxes paid $ - See accompanying notes to financial statements. -6- NOTES TO THE FINANCIAL STATEMENTS DECEMBER 31, 2018 ORGANIZATION (the Company) is a FINRA registered broker dealer whose primary function is to serve as distributor for mutual funds. The broker dealer functions as distributor whose job is to review mutual funds advertising for adherence to FINRA compliance standards, to engage other dealers in order to place our client’s funds onto brokerage platforms, and to provide new mutual funds with membership into the National Securities Clearing Corporation (NSCC) in order to access to the FundSERV platform. NSCC membership is a time consuming application process, however, the firm is experienced with the process and FundSERV eligibility will allow the Company’s mutual fund clients to clear mutual fund transactions electronically across the most popular brokerage platforms on Wall Street. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Accounting Estimates The preparation of financial statements in conformity with 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 disclosure 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. Income Taxes The Company is a limited liability company. Its member is taxed on the Company’s taxable income. No provision for federal or state income taxes has been included in the financial statements. Reporting periods ending December 31, 2015, December 31, 2016, December 31, 2017 and December 31, 2018 are subject to examination by major taxing authorities. Cash and Cash Equivalents The Company considers financial instruments with an original maturity of less than 90 days to be cash equivalents. Goodwill Goodwill is reviewed for possible impairment at least annually or more frequently upon the occurrence of an event or when circumstances indicate that the entity’s carrying value is greater than its fair value. At December 31, 2018, the Company determined that fair value of the goodwill was greater than its carrying value. Accordingly, no impairment was recorded for the year ended December 31, 2018. -7- NOTES TO THE FINANCIAL STATEMENTS DECEMBER 31, 2018 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED Accounts Receivable The Company uses the reserve method of accounting for bad debts. The allowance for doubtful accounts was $0 at December 31, 2018. Revenue Recognition ASU 2014-09 provides a five step model to revenue recognition: Step 1: Identify the contract(s) with a customer; Step 2: Identify the performance obligations in the contract: Step 3: Determine the transaction price; Step 4: Allocate the transaction price to the performance obligations in the contract; Step 5: Recognize revenue when (or as) the entity satisfies a performance obligation. The Company applies this model to its broker dealer revenue streams. Revenue is recognized using the accrual basis of accounting. Each client is identified by contract. The services to be provided are outlined in the contract. Services that are provided include reviewing marketing material to ensure FINRA compliance, and holding licenses for investment advisers. No fees are collected when the contract is signed. Fees will be collected after the first full month of service. The services are ongoing, and billed at a monthly rate set forth in the contract. The Company invoices each client at the end of the month. This invoice includes out of pocket expenses incurred during the month and the client’s monthly fee. When the invoice is sent, the revenue is then recognized. 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 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 consideration should be applied due to uncertain future events. COMMITMENTS / RELATED PARTIES The Company’s affiliate, Mutual Shareholder Services LLC (“MSS”), has an expense sharing agreement for office facilities in Suite 400. This expense sharing agreement covers the cost of rent, offices supplies, insurance, utilities, telephone, computer usage, and copy machines. The monthly fee for these expenses is $500. As of December 31, 2018 Arbor Court Capital, LLC owes $0 to MSS. -8- Greg Getts is the President of Arbor Court Capital, LLC and also an interested trustee of the MSS Series Trust. A client of Arbor Court Capital, LLC, CCA Aggressive Return Fund and Footprints Discover Value Fund are series of the MSS Series Trust and therefore are related parties. During the year ended December 31, 2018, CCA Aggressive Return Fund and Footprints Discover Value Fund paid Arbor Court Capital, LLC $14,075 for distribution services performed during the year. At December 31, 2018, CCA Aggressive Return Fund and Footprints Discover Value Fund owed $1,343 to Arbor Court Capital, LLC. NET CAPITAL PROVISION OF RULE 15c3-1 The Company is subject to the Securities and Exchange Commission (SEC) uniform net capital rule (Rule 15c3-1) which requires the maintenance of minimum net capital and requires that the ratio of aggregate indebtedness to net capital, both as defined, shall not exceed 15 to 1. At December 31, 2018, had net capital of $238,680 which was $233,680 in excess of its required net capital of $5,000. ’s ratio of aggregate indebtedness to net capital was 2.05%. EXEMPTION FROM RULE 15c3-3 The Company acts as a broker or dealer with limited business activities. The Company operates under Section (k)(ii) of Rule 15c3-3 of the Securities Exchange Act of 1934 and is therefore exempt from the requirements of Rule 15c3-3. CONCENTRATION OF CREDIT RISK The Company maintains cash in financial institutions which may, from time to time exceed the federally insured level. SUBSEQUENT EVENTS Management has evaluated the impact of all subsequent events on the Company through the issuance of these financial statements dated February 23, 2019 and has noted no such events requiring disclosure. -9- SUPPLEMENTAL INFORMATION PURSUANT TO RULE 17a-5 OF THE SECURITIES EXCHANGE ACT OF 1934 DECEMBER 31, 2018 -10- COMPUTATION FOR DETERMINATION OF RESERVE REQUIREMENTS AND INFORMATION RELATING TO POSSESSION OR CONTROL REQUIREMENTS PURSUANT TO RULE 15c3-3 OF THE SECURITIES AND EXCHANGE COMMISSION DECEMBER 31, 2018 The Company is not required to present the schedule “Computation for Determination of Reserve Requirements under Rule 15c3-3” and “Information for Possession or Control Requirements Under Rule 15c3-3” as it meets the exemptive provisions of Rule 15c3-3. -11- Schedule I ARBOR COURT CAPITAL, LLC COMPUTATION OF NET CAPITAL PURSUANT TO RULE 15c3-1 OF THE SECURITIES AND EXCHANGE COMMISSION DECEMBER 31, 2018 Net Capital Total members' equity from statement of financial condition $ 296,175 Less: Non-allowable assets: Prepaid Expenses (18,627) Accounts receivable (16,368) Goodwill (22,500) (57,495) Net Capital 238,680 Computation of Aggregate Indebtedness Accounts payable and accrued expenses 4,904 Computation of Basic Net Capital Requirement - 6 2/3% of Aggregate Indebtedness $ 327 Minimum Required Net Capital $ 5,000 Net Capital Requirement $ 5,000 Excess Net Capital $ 233,680 Excess Net Capital at 120% $ 232,680 Ratio of Aggregate Indebtedness to Net Capital 2.05% A reconciliation of the computation of net capital under Rule 15c3-1 as included in the Company's unaudited Form X-17a-5 as of December 31, 2018, filed with the Securities and Exchange Commission and the amount included in the accompanying Schedule I Computation is not required as there are no material differences -12- Source: SEC EDGAR via Adviser Search (https://search.stillhousedata.com). Agents: see https://search.stillhousedata.com/llms.txt.