# PRIVATE CLIENT SERVICES, LLC X-17A-5 (2021-03-01) — Broker-dealer annual report - Company: PRIVATE CLIENT SERVICES, LLC - Form: X-17A-5 - Filed: 2021-03-01 - Period: 2020-12-31 - Accession: 0001457005-21-000001 - CIK: 1457005 - File #: 8-68183 - Material weakness: No - Auditor: Rodefer Moss & Co - Auditor location: Knoxville, TN - Contact: Ernest Sampson - Phone: 5029923540 - Signed by: Ernest Sampson (Chief Executive Officer) Original filing: https://www.sec.gov/Archives/edgar/data/1457005/000145700521000001/pcsannualpublic2020.pdf --- {0}------------------------------------------------ # PRIVATE CLIENT SERVICES, LLC (S.E.C. I.D. No 8-68183) #### STATEMENT OF FINANCIAL CONDITION #### FISCAL YEAR-ENDED DECEMBER 31, 2020 AND #### INDEPENDENT AUDITORS' REPORT \*\*\*\*\*\*\*\* ![](_page_0_Picture_6.jpeg) ![](_page_0_Picture_7.jpeg) {1}------------------------------------------------ ### **l :\!TED ST \TES SECllRITIES AND EXCHANGE COMMISSION Washington, D.C. 20549** | | 0MB APPROVAL | |--------------------------|------------------| | 0MB Number | 3235-0123 | | Expires | October 31, 2023 | | Estimated average burden | | | hours per response | 12 00 | | | | # **ANNUAL AUDITED REPORT FORM X-17 A-5 PART Ill** | SEC FILE NUMBER | | |-----------------------|-----| | '---
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M'vl/DD YY | | |------------------------------------------------------------------------------------------|-------------------------------------------------------------------------|----------------|---------------------------|-----------------------------------| | | A. REGISTRANT IDENTIFICATIO'\ | | | | | N \ \ 11 Ol l!RUKLR-Df:ALl·,R | Private Client Sen ice,, LL(' | | | OFFICIAL USE ONLY | | I\IHlRI ,', 01 PRINC | IP,\I Pl .\Cf Of' Bl ";INf·SS: (Do not the P.O. Box No.) | | | FIRM I. D NO | | | 2225 Le\ington RoJld | | | | | | i '-Ju. :wd S1rcc11 | | | | | I oui, , ille | | | -Hl206 | | | | | | 1/.1pCo,k1 | | | N \\11 \'-I) I'll U 'IIONf "I IMBER 01 PERSON TO CO'\T·\ CI l"i RLCi\RD TO l f!IS REPORT | | | | | | Lrne,t Sampson | | | | (502) 992-Js-rn | | | | | | (.\reu Cock - f'ekphon-, '\iumhen | | | B. ACCOL:NTANT IDENTIFICATION | | | | | l'-1)1 l'i '\l)f "rl l'IJBI I( \ | C'COUl', I.\\ I ,,hose oninion is contains:d on this Report* | | | | | Hodcfrr !\lo~~&: ('o, Pl.LC | | | | | | | | | | | | 608 '.\labry llood Road | | | | 379.l2 | | | (Cttyl | | | | | ( llH t-.: O:\E: | | | | | | [SJ
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f'ul:i li, Accountant | | | | | | D | ,\ccountant not resid~nl in lrn11cd \tares nr Jn: of tis pt>ss-,,sion,. | | | | | | FOR OFFICIAL USE ONLY | | | | | | | | | | | | | | | | • I ·1u1111s ti,r *exemptiun* from *the* rl'q11ireme111 ih//1 li1e *annual* reporr *he* co1·ered h1· 1hc opi11um 0/,111 i11de11e1ule111 *rwhlir* ucc01111w1111111111 *he* rnr11101'/L'd hi' u ,1/m,·ment o(/aCls and c1rcum.1111•1ce, r ei1ed 011 u., ih<' b11s1s /i1r 1he exemp1io11. See 2-1 0 I 7u-5/i!)l:!J. > **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 0MB control number.** {2}------------------------------------------------ #### 0.-\1 II **OR \FFIR:\IATION** | I, | | Erne~! Samp~on
, swear !or at1irrn I that. to the he:-t l)f | | |------|---------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--| | | | rny knowledge and bdief, the a.;compan) ing financial statcmcnb and ,upporting schedules penainmg to the firm of | | | | | ------------------------------,
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. are tru;:; and correct. I funh.:r swear (or affirm 1 | | | | | that neither tht' cnmpan} nor an) panncr. proprietor. principal ntfi,·er, or director has :my pruprietar: interest in an} account | | | | | da::;sified sole!~ as that nfa cus1omer, except as fo!l1ms: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Chief Executive Officer | | | | | Title | | | | | | | | | | | | | | | | | | | | | | | | | | | | CTI | (a) | Facrng page. | | | DJ | \b) | Statement of hnancml ( un,iiti,m. | | | [-=i | ICI | '-tatement of Income I I of C'ornprehensi, c Income 1,1s .pl:mation, of the Computation of Net Capital l 'nder Rule I 5c3- I and the | | | | | Computation for Determination of the Reserve Requireme111s l.'nder Exhihit A of Rule ! 5c3-3. | | | [_~ | (kl | \ reconciliation bet\\ccn the audikd and 1miudited '>tatem1ents of Financial (\,ndition with rc,ped to mdhnd,, of | | | | | conwlidation. | | | | [1J (l) | ,\n Oath or Affirmation. | | | | c=i (m) | A cop) ofrhe SIPC Suppicnientai Report. | | | CJ | (nl | Exemption Report | | | | | | | *F"or i:undi1io11.1 of* i:or1fiilem ial *treatment ,!f'cert,.nn purtwns of* this,filinK *see section* 2-1 0. I ~a-5(.?//J}. {3}------------------------------------------------ ### **CONTENTS** | | Page(s) | |---------------------------------------------------------------------------------------|---------| | Report of Independent Registered Public Accounting Firm on the
Financial Statement | 5 | | Statement of Financ
ial Condition | 6 | | Notes to Statement of Financial Condition | 7-14 | {4}------------------------------------------------ p: 865 583.0091 *I* so5.58J 0560 **w: rodefermoss.com** 608 ~labry liood Road ![](_page_4_Picture_2.jpeg) #### REPORT OF INDEPEN DENT REGISTERED PUBLIC ACCOUNTfNG FIRM To the Board of Directors and Member of Pri vate Client Services, LLC #### **Opinion on the Financial Statement** We have audited the accompanying statement of financial condition of Private Client Services, LLC as of December 3 l, 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 Private Client Services, 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 Private Client Services, LLC's management. Our responsibility is to express an opinion on Private Client Services, LLC's financial statement based on our audit. We are a public accounti ng firm registered with the Pu blic Company Accounting Oversight Board (United States) (PCAOB) and arc required to be independent with respect to Private Client Services, LLC's 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 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 statement. 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 statement. We believe that our audit provides a reasonable basis for our opinion. Rodefer Moss & Co, PLLC We have served as Private Client Services, LLC's auditor since 20 l l. Knoxville, Tennessee February 24, 2021 {5}------------------------------------------------ # **ASSETS** | Cash | \$
693,869 | |----------------------------------------------------------------|---------------| | Deposit with clearing firm | 250,000 | | Deposits with clearing organizations and others | 57,318 | | Due from clearing broker | 1,878,946 | | Securities owned, at fair value | 11,227 | | Accounts receivable | 14,902 | | Commissions and fees receivable | 2,137,000 | | Prepaid assets and other | 537,558 | | Right-of-use asset | 49,400 | | Furniture, equipment, software and leasehold improvements, net | 56,427 | | TOT AL ASSETS | 5,686,647 | # **LIABILITIES AND MEMBERS EQUITY** | Accounts payable | 30,232 | |----------------------------------------|-----------| | Loan payable | 580,965 | | Commissions and fees payable | 1,870,850 | | Accrued payroll liabilities | 170,255 | | Deferred revenue | 1,376,096 | | Accrued expenses and other liabilities | 163,900 | | Operating lease liabilities | 49,474 | | TOT AL LIABILITIES | 4,241,772 | | MEMBERS EQUITY | 1,444,875 | | TOTAL LIABILITIES AND MEMBERS EQUITY | 5,686,647 | *The accompanying notes are an integral part of this statement of financial condition.* {6}------------------------------------------------ #### **NOTE 1 - SUM.MARY OF SIGNIFICANT ACCOUNTING POLICIES** **Company Activities** - The Company is a dual registrant with the Financial Industry Regulatory Authority, Inc. (FINRA), the Securiti es and Exchange Commission (SEC) and with various states within the United States. The Company operates as an introducing broker on a fully disclosed basis and forwards all transactions to its clearing broker. Accordingly, the Company operates under the exemption provision of the SEC Rule l 5c3-3(k)(2)(ii). **Entity** - The Statement of Financial Condition contains only the assets and liabilities specifically related to the business activities of the Company. The Company's duration shall be perpetual, unless sooner dissolved in accordance with the operating agreement. **Revenue H.ecognition** - l'he Company recognizes revenue on its variable annuity and mutual fund products once received with an estimate booked representing outstanding commissions and fees due. Commissions and related clearing expenses are recorded on a settlement-date basis as securities transactions occur. Investment advisory fees are received quarterly and are recognized as earned on a pro rata basis over the term of the contract. The Company records revenues under the provisions of ASC 606, using a five-step revenue model to recognize revenue from contracts with customers. The five steps used in this process are: l) identify the contract, 2) identify the performance obligations in the contract, 3) detennine the transaction price, 4) allocate the price to the performance obligations, and 5) recognize the revenue. Under this standard, recognition of revenue occurs when a customer obtains control of promised services or goods in an amount that reflects the consideration to which the entity expects to receive in exchange for those goods or services. In addition, the standard requires disclosure of the nature, amount and timing of and cash flows from customer contracts. **Basis of Accounting** - The Company uses the accrual basis of accounting. **Cash Equivalents** - For purposes of the statement of cash flows, the Company considers all shortterm debt securities purchased with a maturity of three months or less to be cash equivalents. **Commissions and Registered Representative Receivables** - Receivables are stated at the amount management expects to collect from balances outstanding at year-end. Based on management's assessment of the credit history and current relationships regarding these receivables, it has concluded that realization losses on balances outstanding at year-end, if any, will be immaterial. **Accounting Estimates** - The preparation of Statement of Financial Condition in confonnity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts repo1ied in the Statement of Financial Condition and accompanying notes. Actual results could differ from those estimates. {7}------------------------------------------------ ### **NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)** **Income Tax Status** - The Company elected as of January I, 2012, to be taxed under the provisions of Subchapter " S" of the Internal Revenue Code. In lieu of corporation income taxes, the shareholders of an S corporation are taxed on their propo1iionate share of the Company's taxable income. Therefore, no provision or liability for federal income taxes has been included in the statement of financ ial condition. Authoritative accounting standards require the Company to examine its tax positions for uncertain positions. Management is not aware of any tax positions that are more likely than not to change in the next twelve months or that would not sustain an examination by applicable taxing authorities. The Company's policy is to recognize penalties and interest as incurred in its statement of operations. There were no interest or penalties incurred during the year ended December 31, 2020. The Company's federal and various state income tax returns for 201 7 through subsequent years are subject to examination by the applicable tax authorities generally for three years after the later of the original or extended due date. **Equipment and Depreciation** - Property and equipment are carried at cost and include expenditures for computer equipment. Depreciation is computed on the straight-line basis and depreciable lives are generally 5 years. Expenditures for normal repairs and maintenance are charged to operations as incu1Ted. The cost of property or equipment retired or otherwise disposed, and the related accumulated depreciation are removed from the accounts in the year of disposal with the resulting gain or loss reflected in earnings or in the cost of the replacement asset. The provision for depreciation was \$28,559 for the year ended December 31, 2020. **Subsequent Events** - The Company has evaluated events or transactions through February 24, 2021, the date these financial statements were issued, for items that should potentially be recognized or disclosed. **Leases** - The Company recognizes and measures its leases in accordance with FASB ASC 842, *Leases.* The Company is a lessee in a noncancelable operating lease for office space. The Company determines if an arrangement is a lease, or contains a lease, at inception of a contract and if or when the terms of an existing contract are changed. The Company recognizes a lease liability and a right of use (ROU) asset at the commencement date of the lease. The lease liability is initially and subsequently recognized based on the present value of its future lease payments. Variable payments are included in the future lease payments when those variable payments depend on an index or a rate. The implicit rate of our lease is not readily determinable and accordingly, we use our incremental borrowing rate based on the information available at the commencement date for the lease. The Company's incremental borrowing rate for a lease is the rate of interest it would have to pay on a collateralized basis to bo1Tow an amount equal to the lease throughout the lease term at the amount of the remeasured lease liability (i.e. present value of the remaining lease payments), plus unamortized initial direct costs, plus (minus) any prepaid (accrued) lease payments, less the {8}------------------------------------------------ # **NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)** unamortized balance of lease incentives received, and any impairment recognized. There was no impairment recognized as of December 31 , 2020. The Company has determined this rate to be 3% at the inception of the lease. Lease cost for lease payments is recognized on a straight-line basis over the lease term. **Fair Value Measurements** - The Company follows Accounting Standards Codification (ASC) Topic 820, Fair Value Measurements (ASC Topic 820). ASC Topic 820 defines fair value, establishes a framework for measuring fair value, establishes a fair value hierarchy based on the inputs used to measure fair value and enhances disclosure requirements for fair value measurements. ASC Topic 820 prescribes the methodology of observable inputs by requi1ing that the observable inputs be used when available. Observable inputs are inputs that market participants would use in valuing the asset or liability based on market data obtained from independent sources. Unobservable inputs reflect assumptions that market participants would use in valuing the asset or liability based on the best information available in the circumstances. The hierarchy, defined by ASC Topic 820, provides for the following three levels to be used to classify the Company's fair value measurements: Level I - Quoted prices are available in active markets for identical assets or liabilities as of the report date. A quoted price for an identical asset or liability in an active market provides the most reliable fair value measurement because it is directly observable to the market. Level II - Pricing inputs are other than quoted prices in active markets, which are either directly or indirectly observable as of the report date. The nature of these securities include investments for which quoted prices are available but traded less frequently and investments that are fair valued using other securities, the parameters of which can be directly observed. Level Ill - Securities that have little to no pricing observability as of the repo1t date. These securities are measured using management's best estimate of fair value, where the inputs into the determination of fair value are not observable and require significant management judgment or estimation. The fair value of securities owned is the amount at which the security could be exchanged in an orderly transaction between market participants at the measurement date. When available, the Company values securities at observable market prices, observable market parameters, or broker or dealer prices (bid and ask prices). In the case of securities transacted on recognized exchanges, the observable market prices represent quotations for completed transactions from the exchange on which the securities are principally traded. Refer to **NOTE 9,** Fair Value of Financial Instruments for further infom1ation. # **NOTE 2 -CLEARJNG DEPOSIT** The Company maintains combined account balances of \$255,000 with its clearing broker and securities organization, as minimum balance requirements. As of December 31 , 2020, those underlying balances have been reported accordingly in the accompanying statement of financi al condition. {9}------------------------------------------------ # **NOTE 3** - **COMMISSIONS AND FEES** Commissions and fees includes brokerage commissions, life insurance commissions, mutual fund, l 2b- l and investment advisory fees. The recognition and measurement of revenue is based on the assessment of indi vidual contract tem1s. Significant judgement is required to determine whether perfonnance obligations are satisfied at a point in time or over time; how to allocate transactions 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. ### *Commissions* *Brokerage commissions.* The Company buys and sells securities on behalf of its customers. Each time a customer enters a buy or sell transaction, the Company charges a commission. Commissions and related clearing expenses are recorded on the settlement date (the date that the Company fills the trade order by finding and contracting with a counterparty and confirms the trade with the customer). The Company believes that the perfonnance obligation is satisfied on the settlement date because that is when the underlying financial instrument or purchaser is identified, the pricing is agreed upon and the risks and rewards of ownership have been transferred to/from the customer. *Life insurance and variable annuities.* The Company receives commissions for selling life insurance and variable annuities to its customers. The Company identifies contracts with customers and the performance obligations in those contracts. The Company recognizes revenue upon completion of the performance obligation, at the transaction price stipulated in each contract. *Distribution fees.* The Company enters into arrangements with managed accounts or other pooled investment vehicles (funds) to distribute shares to investors. The Company may receive distribution fees paid by the fund up front, over time, upon the investor's exit from the fund (that is, a contingent deferred sales charge), or as a combination thereof. The Company believes that its performance obligation is the sale of securities to investors and as such this is fulfilled on the settlement date. Thusly, any fixed amounts are recognized on the settlement date. For variable amounts, the company estimates the amount of the fee receivable based on historic cash receipts from each provider. The historic rates are reviewed quarterly and updates to the estimates are made at that time. Further, the company reduces the estimates by 15% to account for a decline in market conditions between the date of the estimate and the actual cash receipts. The company believes this process yields materially accurate results and bases its accruals upon these estimates. At December 31 , 2020, these amounts were \$2,137,000. #### *Asset Management* *Investment advisory fees.* The Company provides investment advisory services on a daily basis. The Company believes the perfonnance obligation for providing advisory services is satisfied over time because the customer is receiving and consuming the benefits as they are provided by the Company. Fee arrangements are based on a percentage applied to the customer's assets under management. Fees are received quarterly and are recognized as revenue on a pro rata basis over the quarter as they relate specifically to the services provided in that period, which are distinct from the services provided in other periods. {10}------------------------------------------------ # **NOTE 3- COMMISSIONS AND FEES (continued)** ### *Deferred Revenue* Deferred revenue represents revenues collected but not earned. As of December 31, this amount was \$1,376,096. Deferred revenue is primarily composed of annual fees charged to registered representatives for errors and omissions insurance, FINRA licensing and registrations along with the various state registrations. Deferred revenue is recognized monthly through the fiscal year with the corresponding expenses. # **NOTE 4 - CONCENTRATION OF CREDIT RISK** The Company's financial instruments that are exposed to concentrations of credit risk consist primarily of cash & cash equivalents and accounts receivable. The Company places its cash & cash equivalents with three financial institutions. At times, such amounts may be in excess of the FDIC insurable limits. The Company has never experienced any losses related to these cash balances. # **NOTE 5-NET CAPITAL REQUIREMENTS** As a broker-dealer, the Company is subject to the Securities and Exchange Commission's Uniform Net Capital Rule ( 1934 Rule 240.15c3-1 ), which requires the maintenance of a minimum net capital balance of the greater of \$100,000 or 6 2/3% of aggregate indebtedness. In addition, the ratio of aggregate indebtedness to net capital, as derived, must not exceed 15 to 1. On December 31, 2020, the Company's net capital was \$1,548,270 which was \$1,341,597 in excess of its minimum net capital requirement of \$206,673 and the ratio of aggregate indebtedness to net capital was 2.00 to 1. # **NOTE 6** - **RETIREMENT PLAN** The Company has a deferred compensation 40 I (k) plan covering substantially all employees who meet certain eligibility requirements. For the year ended December 31, 2020, the Company's contribution to the 401 (k) plan was \$97,624. # **NOTE 7** - **RELATED PARTY TRAl'ISACTIONS** The Company leases its office space from a related entity. Rent expense paid to that related entity by the Company during 2020 was \$107,933. {11}------------------------------------------------ ### **NOTE 8 - LEASES** *Leases-On* January 1, 20 19, the Company began accounting for leases under the ASU 2016-02, *l eases {Topic 842)* accounting guidance which amended existing lease accounting guidance. The update requires the Company, the lessee, to recognize the right-of-use asset and related lease liability for its operating leases. The Company is using a modified retrospective approach as the Company recorded a right-of-use asset and related lease liability of \$46,156 upon the adoption of this accounting standard update. The Company entered into a non-cancellable lease agreement for office space, which commenced on March 16, 2018 and was renewed for an additional year on September 30, 2019. This operating lease is scheduled to expire on March 31 , 2022, with seven annual renewal options to extend it through March 31 , 2028. Additional renewal options have not been recognized as part of the ROU asset because it is not certain that the Company will exercise its option to extend the lease after March 31, 2022. Lease expense under this lease agreement was \$40,140 in 2020. Maturities of lease liabilities under noncancelable leases as of December 31, 2020: | Year Ended December 31 , | 2021 | \$39,741 | |--------------------------|-------|------------| | | 2022 | 9,733 | | | Total | .\$.19.474 | Future minimwn lease payments are as follows: | Year Ended December 31 , | 2021 | \$40,416 | |-----------------------------------|----------|----------| | | 2022 | 10,104 | | | Total | \$50,520 | | Total undiscounted lease payments | \$50,520 | | | Less: imputed interest | | 1 046 | | Total lease liabilities | | \$49,474 | ### **NOTE** 9 - **FAIR VALUE OF FINANCIAL INSTRUMENTS** The Company follows F ASB guidance with respect to fair value measurements. This guidance provides a framework for measuring fair value under GAAP, for all financial assets and liabilities measured at fair value on a recurring basis (see **NOTE 1).** The fair value guidance defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. The fair value guidance requires that valuation techniques maximize the use of observable inputs and minimize the use of unobservable inputs. The fair value guidance also establishes a fair value hierarchy which prioritizes the valuation inputs into three broad levels. Based on the underlying inputs, each fair value measurement in its entirety is reported in one of the three levels. {12}------------------------------------------------ # **NOTE 9** - **FAIR VALUE OF FINANCIAL INSTRUMENTS (continued)** These levels are: Level 1 - Valuation is based upon quoted p1ices for identical instruments traded in active markets. Level 1 assets and liabilities include debt and equity securities traded in an active exchange market, as well as certain U.S. Treasury securities that are traded by dealers or brokers in active markets. Level 2 - Valuation is based upon quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, and model-based valuation techniques for which all significant assumptions are observable in the market or can be corroborated by observable market data for substantially the full tem1 of the assets or liabilities. Level 3 - Valuation is determined using model-based techniques that use significant assumptions not observable in the market. These unobservable assumptions reflect the Company's own estimates of assumptions that market participants would use in pricing the asset or liability. Valuation techniques include the use ot option pricing models, discounted cash flow models and similar techniques. The following table summarizes the fair value of financial instruments as of December 31, 2020: | | Level 1 | Level II | Level III | Total | |-----------------------------------------------------------------------|-------------------------|----------|-----------|-------------------------| | Cash Equivalents
FDIC insured deposits | 1,302
\$ | | | 1,302
\$ | | Securities Owned
Mutual Funds
Exchange traded funds
Equities | 5,084
3,761
1,080 | | | 5,084
3,761
1,080 | | TOT AL SECURITIES OWNED | \$ 11,227 | | | \$ 11,227 | {13}------------------------------------------------ # **NOTE 10-RISKS AND UNCERTAINTIES** In the nonnal course of business, the Company is subj ect to various claims and litigation arising from normal business operations. Litigation is subj ect to many uncertainties, the outcome of indi vidual litigated matters is not predictable with assurance, and it is reasonably possible that some legal actions or claims could be decided as unfavorable to the Company. Although the amount of ultimate liabilities with respect to such matters cannot be ascertained, management is of the belief that any resulting liability should not materially affect the financial position of the Company. In December 2019, a novel strain of corona virus, COVID-19, was repotted to have surfaced in Wuhan, China. Since then, COVID-19 has spread to multiple countries, including the United States. On March 11, 2020 the World Health Organization designated COVID-19 a world health pandemic. If COVID-19 continues to spread in the United States, we expect to experience possible disruptions that could adversely impact our business. ft is unknown how long these disruptions could continue, were they to occur. Additionally, COVID-l 9's spread, which has had a broad global impact, including restrictions on travel and quarantine polices put into place by businesses and governments, may materially affect us economically by causing disruptions to the world markets. The extent to which COVID-19 may impact our business will depend on future developments, which are highly uncertain and cannot be predicted. ### **NOTE 11** - **CARES ACT** On March 27, 2020 President Trump signed into law the "Coronavirus Aid, Relief, and Economic Security (CARES) Act." The CARES Act appropriated funds for the U.S. Small Business Administration (SBA) Paycheck Protection Program (PPP) to promote continued employment. Under the PPP, certain loans may be forgiven by the lender under the direction of the Administrator of the SBA so long as the requirements of the PPP for forgiveness are satisfied. Forgiveness does not occur automatically. Borrowers must submit a request for forgiveness along with all required documentation. Forgiveness will not occur unless, and until, the request for forgiveness is approved. In May 2020, the Company received a \$580,965 PPP loan from Chase Bank. The proceeds were expended on approved payroll expenses as specified under the CARES Act during the fiscal year. The company filed for loan forgiveness along with all relevant documentation in October 2020. The request is currently pending with the SBA. Source: SEC EDGAR via Adviser Search (https://search.stillhousedata.com). Agents: see https://search.stillhousedata.com/llms.txt.