# ARBOR COURT CAPITAL, LLC X-17A-5 (2021-02-23) — Broker-dealer annual report - Company: ARBOR COURT CAPITAL, LLC - Form: X-17A-5 - Filed: 2021-02-23 - Period: 2020-12-31 - Accession: 0001162044-21-000245 - CIK: 1396431 - File #: 8-67609 - Material weakness: No - Auditor: Hobes & 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/1396431/000116204421000245/0001162044-21-000245-index.htm --- FINANCIAL STATEMENTS DECEMBER 31, 2020 DECEMBER 31, 2020 TABLE OF CONTENTS Report of Independent Registered Public Accounting Firm 1 Statement of Financial Condition December 31, 2020 2 Statement of Operations For the year ended December 31, 2020 3 Statement of Changes in Member’s Equity For the year ended December 31, 2020 4 Statement of Cash Flows For the year ended December 31, 2020 5 Notes to the Financial Statements 6 - 8 Supplemental Information 9 - 11 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 We have reviewed management’s statements, included in the accompanying Statement of Exemption Pursuant to Rule 15c3-3, in which (1) identified the following provisions of 17 C.F.R. §15c3-3(k) under which claimed an exemption from 17 C.F.R. §240.15c3-3(k)(2)(ii) (the “exemption provisions”) and (2) stated that met the identified exemption provisions throughout the most recent fiscal year without exception. ’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 ’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 provisions set forth in paragraph (k)(2)(ii) of Rule 15c3-3 under the Securities Exchange Act of 1934. Independence, Ohio February 13, INDEPENDENT MEMBER B K R INTERNATIONAL FIRMS IN PRINCIPAL CITIES WORLDWIDE -1- ARBOR COURT CAPITAL, LLC STATEMENT OF FINANCIAL CONDITION December 31, 2020 ASSETS Current Assets Cash and cash equivalents $ 460,729 Accounts receivable 25,953 Prepaid CRD account 5,371 Prepaid expenses 14,924 Total Current Assets 506,977 Other Assets Goodwill 22,500 Total Other Assets 22,500 Total Assets $ 529,477 LIABILITIES AND MEMBER'S EQUITY Liabilities Accounts Payable $ 1,960 Total Liabilities 1,960 Member's Equity Member's Equity $ 527,517 Total Liabilities and Member's Equity $ 529,477 See accompanying notes to financial statements. -2- ARBOR COURT CAPITAL, LLC STATEMENT OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 2020 Revenue Compliance services $ 11,491 Distribution services 170,591 12b-1 Fees 2,256 Markup income 5,528 Fees 2,475 192,341 Expenses Website Archiving 50 Commissions 423 Education 270 Payroll Expense 37,333 Email 1,944 FINRA Licenses and Permits 825 FINRA Registration Fees 16,974 Insurance 1,532 Professional Fees - Accounting 6,000 Rent 3,996 Computer & Copy Expense 505 Telephone 400 Utilities 439 Signature Guarantee 785 SIPC 295 Other Expenses 235 Total Expenses 72,006 Net Income (Loss) from Operations 120,335 Other Income Interest income 1,510 Total Other Income 1,510 Net Income (Loss) $ 121,845 See accompanying notes to financial statements. -3- ARBOR COURT CAPITAL, LLC STATEMENT OF CHANGES IN MEMBER'S EQUITY FOR THE YEAR ENDED DECEMBER 31, 2020 Beginning Balance $ 405,672 Net Income 121,845 Ending Balance $ 527,517 See accompanying notes to financial statements. -4- ARBOR COURT CAPITAL, LLC STATEMENT OF CASH FLOWS FOR THE YEAR ENDED DECEMBER 31, 2020 Cash Flows From Operating Activities: Net income $ 121,845 Adjustments to reconcile net income to net cash provided by operating activities (Increase) decrease in assets: Prepaid expenses and other current assets 725 Accounts receivable (3,122) Net Cash Provided by Operating Activities 119,448 Net Increase in Cash and Cash Equivalents 119,448 Cash and Cash Equivalents - January 1, 2020 341,281 Cash and Cash Equivalents - December 31, 2020 $ 460,729 Supplemental Disclosure of Cash Flow Information: Interest paid $ - Income taxes paid $ - See accompanying notes to financial statements. -5- NOTES TO THE FINANCIAL STATEMENTS DECEMBER 31, 2020 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, 2017, December 31, 2018 and December 31, 2019, and December 31, 2020 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, 2020, 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, 2020. -6- NOTES TO THE FINANCIAL STATEMENTS DECEMBER 31, 2020 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, 2020. 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, 2020 Arbor Court Capital, LLC owes $0 to MSS. -7- NOTES TO THE FINANCIAL STATEMENTS DECEMBER 31, 2020 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, Footprints Discover Value Fund, and AINN Fund are series of the MSS Series Trust and therefore are related parties. During the year ended December 31, 2020, CCA Aggressive Return Fund, Footprints Discover Value Fund, and AINN Fund paid Arbor Court Capital, LLC $15,142 for distribution services performed during the year. At December 31, 2020, Footprints Discover Value Fund, and AINN Fund owed $400 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, 2020, had net capital of $458,769 which was $453,769 in excess of its required net capital of $5,000. ’ s ratio of aggregate indebtedness to net capital was 0.43%. EXEMPTION FROM RULE 15c3-3 Arbor Court Capital, LLC is exempt from SEC Rule 15c3 ‐ 3 (SEC Customer Protection Rule) pursuant to exemptive paragraph 15c3 ‐ 3(k)(2)(ii). 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 13, 2021 and has noted no such events requiring disclosure. -8- SUPPLEMENTAL INFORMATION PURSUANT TO RULE 17a-5 OF THE SECURITIES EXCHANGE ACT OF 1934 DECEMBER 31, 2020 -9- 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, 2020 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. -10- Schedule I ARBOR COURT CAPITAL, LLC COMPUTATION OF NET CAPITAL PURSUANT TO RULE 15c3-1 OF THE SECURITIES AND EXCHANGE COMMISSION DECEMBER 31, 2020 Net Capital Total members' equity from statement of financial condition $ 527,517 Less: Non-allowable assets: Prepaid Expenses (5,371) Accounts receivable (25,953) Other Prepaids (14,924) Goodwill (22,500) (68,748) Net Capital 458,769 Computation of Aggregate Indebtedness Accounts payable 1,960 Computation of Basic Net Capital Requirement - 6 2/3% of Aggregate Indebtedness $ 131 Minimum Required Net Capital $ 5,000 Net Capital Requirement $ 5,000 Excess Net Capital $ 453,769 Excess Net Capital at 120% $ 452,769 Ratio of Aggregate Indebtedness to Net Capital 0.43% 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, 2020, 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. -11- Source: SEC EDGAR via Adviser Search (https://search.stillhousedata.com). Agents: see https://search.stillhousedata.com/llms.txt.