# WHITE OAK MERCHANT PARTNERS LLC X-17A-5 (2019-08-20) — Broker-dealer annual report - Company: WHITE OAK MERCHANT PARTNERS LLC - Form: X-17A-5 - Filed: 2019-08-20 - Period: 2019-06-30 - Accession: 0001356558-19-000001 - CIK: 1356558 - File #: 8-67283 - Material weakness: No - Auditor: Spicer Jeffries LLP - Auditor location: Denver, CO - Contact: Philip Ciantro - Phone: 6462269300 - Signed by: Andre Hakkak (Chief Executive Officer) Original filing: https://www.sec.gov/Archives/edgar/data/1356558/000135655819000001/WOMPPublic06.2019.pdf --- {0}------------------------------------------------ #### WHITE OAK MERCHANT PARTNERS, LLC STATEMENT OF FINANCIAL CONDITION WNE30, 2019 {1}------------------------------------------------ ![](_page_1_Picture_0.jpeg) # **SJ** SPICER JEFFRIES LLP **CERT.I FI ED PU BLI C ACCOUNTANT S** 4601 OTC BOULEVARD • SUITE 700 DENVER, COLORADO 80237 TELEPH ONE: (303) 753-1 959 FAX: (303) 753-0338 #### **www.spicerjeffri es.co m REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM** To the Member of White Oak Merchant Partners, LLC #### **Opinion on the Financial Statements** We have audited the accompanying statement of financial condition of White Oak Merchant Partners, LLC (the "Company") as of June 30, 2019, and the related notes (collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of June 30, 2019 in conformity with accounting principles generally accepted in the United States of America. #### **Basis for Opinion** These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's 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 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 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 presentation of the financial statements. We believe that our audit provides a reasonable basis for our opinion. We have served as White Oak Merchant Partners, LLC's auditor since 2019. Denver, Colorado August 6, 2019 ![](_page_1_Picture_13.jpeg) {2}------------------------------------------------ #### WHITE OAK MERCHANT PARTNERS, LLC Statement of Financial Condition June 30, 2019 | Assets | | |---------------------------------------|---------------------------| | Cash | \$
349,029 | | Prepaid Expenses | 3,778 | | Other Receivables | 2,272 | | Total assets | \$
355,079 | | Liabilities and Member's Equity | | | Accounts payable and accrued expenses | \$
145,941 | | Member's equity | 209,138 | | Total liabilities and member's equity | \$
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3_55_.,0_7_9 | *SeeAccompanying Notes to Financial Statements* {3}------------------------------------------------ # WHITE OAK MERCHANT PARTNERS, LLC *Notes to Financial Statements* JUNE 30,2019 # 1. Business and Summary of Significant Accounting Policies #### Business White Oak Merchant Partners, LLC (the "Company") is a California Limited Liability Company formed on December 5, 2005. The Company is registered with the Securities and Exchange Commission as a securities broker-dealer and is a member of the Financial Industry Regulatory Authority ("FINRA"). As a limited liability company, member's liability is limited to the amount reflected in their capital accounts. # Basis of Presentation The Company's financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America ("US GAAP"). # Revenue Private placement transaction and service fee revenue includes fees from debt offerings and debt advisory in which the Company acts as a placement agent or advisor, respectively. Private placement transaction fee revenue is recorded upon completion of the transactions per the term of the agreements. Private placement service fee revenue is recorded when services are provided per the terms of the agreements. # New Accounting Pronouncement -ASC 606 Revenue Recognition In May 2014, the Financial Accounting Standards Board ("F ASB") issued Accounting Standards Codification 606, Revenue from Contracts with Customers ("ASC 606"). The new accounting standard, along with its related amendments, replaces the current rules-based GAAP governing revenue recognition with a principles-based approach. The Company adopted the new standard on January 1, 2018 using the modified retrospective approach, which requires the Company to apply the new revenue standard to (i) all new revenue contracts entered into after January 1, 2018 and (ii) all existing revenue contracts as of January 1, 2018 through a cumulative adjustment to equity. In accordance with this approach, revenues for periods prior to January 1, 2018 will not be revised. {4}------------------------------------------------ # WHITE OAK MERCHANT PARTNERS, LLC *Notes to Financial Statements* JUNE 30,2019 # New Accounting Pronouncement-ASC 606 Revenue Recognition (continued) The core principle in the new guidance is that a company should recognize revenue in a manner that depicts the transfer of goods or services to customers in amounts that reflect the consideration the company expects to receive for those goods or services. In order to apply this core principle, the Company will apply the following five steps in determining the amount of revenues to recognize: (i) identify the contract; (ii) identify the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenue when (or as) the performance obligation is satisfied. Each of these steps involves management's judgment and an analysis of the material terms and conditions of the contract. Although total revenues may not be materially impacted by the new guidance, management notes changes to the disclosures based on the additional requirements prescribed by ASC 606. These new disclosures include information regarding the judgments used in evaluating when and how revenue is recognized and disclosures related to contract assets and liabilities. #### Cash The Company maintains its cash in bank deposit accounts with a commercial bank, which at times may exceed federally insured limits. The Company has not experienced any losses in such accounts. #### Income Taxes The Company elects to be treated as a pass-through entity for all relevant jurisdictions and therefore files informational income tax returns which attribute taxable income and taxes paid, if any, to the members. Management has concluded that the Company is not subject to income taxes in any jurisdiction and that there are no uncertain tax positions that would require recognition in the financial statements. Accordingly, no provision for income taxes is reflected in the accompanying financial statements. If the Company were to incur an income tax liability in the future, interest on any income tax liability would be reported as interest expense and penalties on any income tax liability would be reported as income taxes. Management's conclusions regarding uncertain tax positions may be subject to review and adjustment at a later date based upon ongoing analyses of tax laws, regulations and interpretations thereof as well as other factors. #### Use of Estimates The process of preparing financial statements in conformity with US Generally Accepted Accounting Principles requires the use of estimates and assumptions that affect the reported amount of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, and {5}------------------------------------------------ ### WHITE OAK MERCHANT PARTNERS, LLC *Notes to Financial Statements* JUNE 30,2019 # Use of Estimates (continued) the reported amounts of revenue and expenses during the reporting period. Such estimates primarily relate to unsettled transactions and events as of the date of the financial statements. Accordingly, upon settlement, actual results may differ from estimated amounts. #### New Accounting Pronouncement - ASC 842 Leases In February 2016, the Financial Accounting Standards Board ("FASB") published Accounting Standards Update No. 2016-02, Leases ("ASC 842"). The new accounting standard is applied to operating leases with a term greater than 12 months and requires lessee's to recognize (i) their obligations to make lease payments as a liability (the "lease liability"), initially measured at the present value of the lease payments, and (ii) their ability to use the leased property as a corresponding asset (a "right-of-use asset"). The updated standard is effective for fiscal years beginning after December 15, 2018 and the Company adopted the new standard on January 1, 2019 using the modified retrospective approach, which requires the Firm to (i) apply the new standard to leases in place as of the adoption date, (ii) record a cumulative-effect adjustment to retained earnings as of the first day of the adoption year, and (iii) follow the new rules for all leases entered or modified going forward. In accordance with this approach, assets and liabilities for periods prior to January 1, 2019 will not be revised. The core principle in the new guidance is that a company should provide information necessary to understand its leasing activities including a comprehensive understanding of the costs of property essential to a company's operations and how those costs are funded including the recognition of assets and liabilities associated with leases. Although the economic or legal characteristics of these leases are not altered, the impact on the presentation of assets and liabilities on financial statements may be material. Also, as a broker-dealer registered with the Securities and Exchange Commission ("SEC") and Financial Industry Regulatory Authority ("FINRA"), the Company is subject to SEC Rule 15C3-l, the Net Capital rule, under which the lease asset would be recorded as a non-allowable asset and the associated liability would be recorded as aggregate indebtedness, both of which could have a materially negative effect on Net Capital computed under SEC Rule 15c3-l. On May 31, 2016, the Securities Industry and Financial Markets Association ("SIFMA") requested relief from the SEC from the net capital impact of the lease capitalization required under ASC 842. On November 8, 2016, the SEC issued a "no action" letter permitting broker-dealers to add back to Net Capital the operating lease asset to the extent of the associated operating lease liability. If the value of the operating lease liability exceeds the value of the associated operating lease asset, the amount by which the liability's value exceeds the associated lease asset must be deducted for net capital purposes. {6}------------------------------------------------ # WHITE OAK MERCHANT PARTNERS, LLC *Notes to Financial Statements* WNE 30 2019 ### New Accounting Pronouncement-ASC 842 Leases (continued) The new guidance provided by ASC 842 may not materially impact the Company's presentation of assets and liabilities, and the relief provided by the SEC "no action" letter will substantially negate the effect of its application on the Company's Net Capital; however management notes changes to the disclosures based on the additional requirements prescribed by ASC 842. These new disclosures include information regarding the judgments used in determining the present value of lease payments and the corresponding value of the right-of-use asset. The lease is not in the name of the Company, but is in the name of the Parent. An expense sharing agreement has been established as described in Note 4 below. ## 2. Indemnification The Company enters into contracts that contain a variety of indemnifications for which the maximum exposure is unknown but for which management expects the risk of loss, if any, to be remote. The Company has no current claims or losses pursuant such contracts. #### 3. Net Capital Requirements The Company is subject to the Securities and Exchange Commission Uniform Net Capital Rule (Rule 15c3-l), 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 June 30, 2019, the Company had net capital of \$203,088 which was \$193,359 in excess of its required net capital of \$9,729. The Company's aggregate indebtedness to net capital ratio was .7186 to 1. The Company claims an exemption from Rule 15c3-3 pursuant to Rule 15c3-3(k)(2)(i) and therefore is not subject to the reserve requirements ofRule 15c3-3. #### 4. Related Party Transactions Effective August 2015, the Company had verbally revised the previously entered into expense sharing agreement with an affiliate, White Oak Global Advisors, LLC ("WOGA''). Both WOGA and Company are wholly owned by White Oak Financial, LLC. Under the terms of this Agreement, WOGA has agreed to pay all ordinary operating costs attributable to the activities of the Company, including office rent, utilities, information technology infrastructure, printing fees, and telephone fees. The revised expense sharing agreement was formally memorialized on December 1, 2015. During the year ended June 30, 2019, the Company incurred expenses in the amount of \$40,558 which were paid by a related party, White Oak Global Advisors. At June 30, 2019 \$126,996 was payable to the related party which is included in accounts payable and accrued expenses in the accompanying statement of financial condition. {7}------------------------------------------------ # WHITE OAK MERCHANT PARTNERS, LLC *Notes to Financial Statements* WNE 30 2019 #### Related Party Transactions (continued) During the year ended June 30, 2019, the Company made capital distributions to its parent company in the amount of \$2,400,000. From time to time, White Oak Merchant Partners' affiliated entities participate in deals for which the Company acts as a broker-dealer. In such instances, the Company does not earn fees for the participation of affiliated entities. The Company provides advisory and placement agent services to clients for private debt offerings where funds and separately managed accounts advised by WOGA may act as lenders to the Company's clients. During the year ended June 30, 2019, the Company did not earn service fees from advisory services to clients advised by WOGA. #### 5. Contingency From time to time, the Company is involved in routine litigation that arises in the ordinary course of business. There are no pending significant legal proceedings to which the Company is a party for which management believes the ultimate outcome would have a material adverse effect on the Company's financial position. On March 5, 2016, Intrepid Investments, LLC ("Intrepid") instituted an action in the Court of Chancery of the State of Delaware captioned Intrepid Investments, LLC - V. - London Bay Capital, LLC, London Bay Fund I, LLC, London Bay -TSS Acquisition Company, LLC, London Bay - TSS Holding Company, LLC, Olayan America Corporation, Crel Investments Limited, CREL/Oak, LLC, KHL Limited Lone Star SPV I, LLC, LS Holdings Group, LLC, LBCDLF, LLC, Selling Source Investment Company, LLC, Derek Craig Lafavor Living Trust, DLF Services, Inc., White Oak Global Advisors, LLC, White Oak Merchant Partners, LLC, White Oak Strategic Master Fund, L.P., Full Circle Capital Corporation, Sam Humphreys, Alton Irby, Douglas Tulley, Michael Levin, David Kostman, Glenn Mckay, Derek Lafavor, and Michael Brant, Civil Action No. 12077-VCS. The suit alleges that the officers and as majority owners of Selling Source, LLC, engaged in a set of transactions that harmed minority owner Intrepid. Intrepid alleges that White Oak Global Advisors, White Oak Merchant Partners, and White Oak Strategic Master Fund, as lenders to certain of the majority owners, knowingly participated in some of these transactions and are therefore liable. White Oak does not believe that White Oak Merchant Partners or White Oak Strategic Master Fund were at all involved in the conduct at issue. Delaware counsel has been identified, and all White Oak parties {8}------------------------------------------------ # WHITE OAK MERCHANT PARTNERS, LLC *Notes to Financial Statements* WNE 30 2019 filed motions to dismiss all claims against them. After the motion to dismiss had been filed, Intrepid filed a second amended complaint, which the White Oak defendants again moved to dismiss in its entirety. On June 21, 2019, Intrepid filed a third amended complaint. No schedule has yet been set by the Court regarding this third amended complaint. White Oak Global Advisors, LLC is fully insured for such litigation, and, in any event, even a negative outcome in this litigation would not have an adverse, material impact on the financial condition of White Oak Merchant Partners, LLC. # 6. Subsequent Events The Company has performed an evaluation of subsequent events through the date the financial statements were issued. The evaluation did not result in any subsequent events through required disclosures and/or adjustments. Source: SEC EDGAR via Adviser Search (https://search.stillhousedata.com). Agents: see https://search.stillhousedata.com/llms.txt.