# NORTH CAPITAL PRIVATE SECURITIES CORPORATION X-17A-5 (2021-06-01) — Broker-dealer annual report
- Company: NORTH CAPITAL PRIVATE SECURITIES CORPORATION
- Form: X-17A-5
- Filed: 2021-06-01
- Period: 2021-03-31
- Accession: 0001496269-21-000001
- CIK: 1496269
- File #: 8-68648
- Material weakness: No
- Auditor: Haynie & Company
- Auditor location: Salt Lake City, UT
- Contact: James Dowd
- Phone: 415-315-9916
- Website: hayniecpas.com
- Signed by: James Dowd (CEO)
Original filing: https://www.sec.gov/Archives/edgar/data/1496269/000149626921000001/NCPSPublic2021.pdf
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# **North Capital Private Securities Corporation (SEC ID No. 8-68648)**
**Annual Audit Report**
**March 31, 2021**
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**UNITEDSTATES SECURITIES AND EXCHANGE COMMISSION Washington,D.C.** 20549
## **ANNUAL AUDITED REPORT FORM X-17A-5 PART Ill**
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| OMBNumber: | | 3235-0123 |
| Expires: | | October 31, 2023 |
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| SEC FILE NUMBER | |
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| 8-68648 | |
**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 | -------
04/01/2020 | ---
AND ENDING | -----------
03/31/2021 |
|------------------------------------------------------------------------------------------|---------------------------------------------------------------------|-------------------|--------------------------------|
| | -
MM/DD/YY | | MM/DD/YY |
| | A. REGISTRANT IDENTIFICATION | | |
| NAME OF BROKER-DEALER: North Capital Private Securities Corporation | | | OFFICIAL USE ONLY |
| ADDRESS OF PRINCIPAL PLACE OF BUSINESS: (Do not use P.O. Box No.) | | | FIRM I.D. NO. |
| 623 EFT Union Blvd., Suite 101 | | | |
| | (No. and Street) | | |
| Salt Lake City | Utah | | 84047 |
| (City) | (State) | | (Zip Code) |
| NAME AND TELEPHONE NUMBER OF PERSON TO CONTACT IN REGARD TO THIS REPORT
James P. Dowd | | | 415-315-9916 |
| | | | (Area Code - Telephone Number) |
| | B. ACCOUNTANT IDENTIFICATION | | |
| INDEPENDENT PUBLIC ACCOUNTANT whose opinion is contained in this Report* | | | |
| Haynie & Company | | | |
| | (Name - if individual, state last. first. middle name) | | |
| 1785 West 2320 South | Salt Lake City | | 84119 |
| (Address) | (City) | (State) | (Zip Code) |
| CHECK ONE: | | | |
| 0certified 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(e)(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 0MB control number.**
SEC 1410 (06-02}
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#### **OATH OR AFFIRMATION**
| my knowledge and belief the accompanying financial statement and supporting schedules pertaining to the finn of
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North Capital Private Securities Corporation
-
-
-
-
, as
of March31
20_21 _
_ ~ are true and correct. I further swear (or affirm) that
neither the company nor any partner, proprietor, principal officer or director has any proprietary interest in any account
classified solely as that of a customer, except as follows:
None
Nola,y Pubf,c
L,nseyMHarlmH\$
Comm. ,69996t
Commission ExpiteS
Chief Executive Officer
April t2, 2022
State of Utah
Title
This report** contains (check all applicable boxes):
i2I (a) Facing Page.
(b) Statement of Financial Condition.
(c) Statement of Income (Loss).
(d) Statement of Changes in Financial Condition.
(e) Statement of Changes in Stockholders' Equity or Partners' or Sole Proprietors' Capital.
(f) Statement of Changes in Liabilities Subordinated to Claims of Creditors.
(g) Computation of Net Capital.
(h) Computation for Determination of Reserve Requirements Pursuant to Rule l 5c3-3.
(i) Information Relating to the Possession or Control Requirements Under Rule 15c3-3.
O (j)
A Reconciliation, including appropriate explanation of the Computation of Net Capital Under Rule 15c3-1 and the
Computation for Determination of the Reserve Requirements Under Exhibit A of Rule 15c3-3.
D (k) A Reconciliation between the audited and unaudited Statements of Financial Condition with respect to methods of
consolidation. | I, __ J_am_es_ | ______________
P_._D_o_w_d | ____
_ | ___
, swear (or affirm) that, to the best of
_ |
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| § (I) An Oath or Affirmation.
(m) A copy of the SIPC Supplemental Report.
(n) A report describing any material inadequacies found to exist or found to have existed since the date of the previous audit.
** For conditions of confidential treatment of certain portions of this fl ling, see section 240.17 a-5 (e)(3). | | | | |
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## **March 31, 2021**
## **Table of Contents**
| Report of Independent Registered Public Accounting Firm | 1 |
|---------------------------------------------------------|---|
| Statement of Financial Condition | 2 |
| Notes
to the Financial Statement | 3 |
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1785 West 2320 South Salt Lake City, UT 84119
801-972-4800 801-972-8941 www.HaynieCPAs.com
### **REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM**
To the Board of Directors of North Capital Private Securities Corporation
#### **Opinion on the Financial Statement**
We have audited the accompanying statement of financial condition of North Capital Private Securities Corporation as of March 31, 2021, 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 North Capital Private Securities Corporation as of March 31, 2021 in conformity with accounting principles generally accepted in the United States of America.
#### **Basis for Opinion**
This financial statement is the responsibility of North Capital Private Securities Corporation's management. Our responsibility is to express an opinion on North Capital Private Securities Corporation'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 North Capital Private Securities Corporation 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 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.
Haynie & Company Salt Lake City, UT June 1, 2021
We have served as North Capital Private Securities Corporation's auditor since 2019.
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## **Statement of Financial Condition**
**March 31, 2021**
| Assets | |
|---------------------------------------------------------------------------------------------|-----------------|
| Cash and cash equivalents | \$
942,139 |
| Cash segregated under federal and other regulations | 2,432,940 |
| Accounts receivable | 178,434 |
| Note receivable | 70,825 |
| Warrants and restricted stock, at fair value | 127,121 |
| Other current assets | 119,030 |
| Deferred tax asset | 379,316 |
| Due from affiliates | 5,141 |
| Total Assets | \$
4,254,946 |
| | |
| Liabilities and Stockholder's Equity | |
| Liabilities | |
| Accounts payable and accrued liabilities | \$
76,131 |
| Commissions payable | 78,923 |
| Payable to customers | 1,959,995 |
| Deferred revenue | 72,504 |
| Other liabilities | 29,218 |
| Due to related parties | 665,440 |
| Total Liabilities | 2,882,211 |
| Stockholder's Equity | |
| Common stock (no par value; 1,500 shares authorized;
6.76 shares issued and outstanding) | 2,027,151 |
| Accumulated deficit | (654,416) |
| Total Stockholder's Equity | 1,372,735 |
| Total Liabilities and Stockholder's Equity | \$
4,254,946 |
#### See accompanying notes
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## **Notes to the Financial Statement**
## **March 31, 2021**
#### **1. Organization**
North Capital Private Securities Corporation (the "Company") was incorporated in Delaware on May 20, 2010 and registered as a broker-dealer with the Securities and Exchange Commission pursuant to Section 15c of the Securities Exchange Act of 1934 on January 27, 2011. The Company is currently located in Salt Lake City, Utah and its primary business is that of a securities broker-dealer that engages in the private placement of securities of private funds and private companies, as well as providing placement services for Reg A offerings, public funds, and public non-traded REITs, along with providing escrow services for the foregoing. The company also offers services related to secondary trading of private securities.
#### **2. Significant Accounting Policies**
#### **Cash and Cash Equivalents**
The Company considers all demand deposits held in banks and certain highly liquid investments with original maturities of three months or less, other than those held for sale in the ordinary course of business, to be cash equivalents. Cash segregated under federal and other regulations is included in cash and cash equivalents at year end.
#### **Accounts Receivable**
Accounts receivable represents amounts earned per agreement that have not been collected. Management reviews accounts receivable and sets up an allowance for doubtful accounts when the collection of a receivable becomes unlikely. The Company considers accounts receivable to be fully collectible, and accordingly, no allowance for doubtful accounts has been provided.
#### **Use of Estimates**
The preparation of financial statements in accordance 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 and may have an impact on future periods.
#### **Fair Value of Financial Instruments**
Unless otherwise indicated, the fair values of all reported assets and liabilities that represent financial instruments (none of which are held for trading purposes) approximate the carrying values of such amounts.
#### **Income Taxes**
The Company's results are included in the consolidated federal income tax return and the combined franchise tax for the parent. The Company records income taxes as if the Company were to file a separate stand-alone tax return for federal and state income tax purposes.
Income taxes are provided for the tax effects of transactions reported in the financial statements and consist of taxes currently due plus deferred taxes related primarily to differences between the bases of certain assets and liabilities for financial and tax reporting. The deferred taxes represent the future tax return consequences of those differences, which will either be deductible or taxable when the assets and liabilities are recovered or settled.
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The provision (benefit) for income taxes are as follows:
### **Notes to the Financial Statement**
### **March 31, 2021**
#### **3. Income Taxes**
The Company's results are included in the consolidated tax return of its parent company and does not file a separate return. The Company accounts for income taxes in accordance with generally accepted accounting principles as if it filed a separate tax return. This requires recognition of deferred tax assets or liabilities for the expected future tax consequences of events that are included in the financial statements and tax returns in different periods.
Current Federal \$ - State 3,700 Deferred Federal (106,896) State (19,738) Income tax provision \$ (122,934)
Deferred tax assets and liabilities are primarily the result of the reporting basis of assets and liabilities between the cash method of accounting for tax purposes and the accrual method for financial statement purposes. A valuation allowance has been established for \$7,950 of deferred tax assets because the Company cannot conclude that it is more likely than not that this amount will be realized. Significant components of the Company's deferred tax balances as of March 31, 2021 are as follows:
| Deferred income tax assets: | |
|------------------------------------------------|---------------|
| Net operating loss carryforwards | \$
227,039 |
| Accrued liabilities | 220,007 |
| Accounts receivable
and
prepaid expenses | (67,730) |
| Capital loss carryforward | 7,950 |
| Total deferred
income taxes | 387,266 |
| Valuation allowance | (7,950) |
| Net deferred income tax asset | \$
379,316 |
Income taxes payable at March 31, 2021 was \$3,700, which was reported as due to related party as the taxes will be settled with the Parent.
The Parent company is no longer subject to federal and state tax examinations for tax years ending before March 31, 2018.
#### **4. Risk Concentrations**
The Company engages with certain partner companies (the "Platform Partners") and their representatives to execute private placements. For the year ended March 31, 2021, two Platform Partners generated 25% of revenue, 13% and 12% respectively.
At various times during the year, the Company's cash balance exceeded federal insurance limits.
#### **5. Related Party Transactions**
On August 30, 2011, the Company entered into an agreement with North Capital, Inc. ("North"), a company under common control, in which North provides office and administrative support in exchange for reimbursement of a specified percent of such overhead costs. On April 1, 2015 this agreement was amended to include North Capital Investment Technology ("NCIT"), the Company's sole stockholder. In February 2021, the agreement was amended to allocate expenses to related parties based on usage by entity.
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### **Notes to the Financial Statement**
### **March 31, 2021**
#### **5. Related Party Transactions (Continued)**
For the year ending March 31, 2021, the Company incurred expenses of \$1,269,277 related to this agreement, which includes employee compensation and benefits, rent, insurance, internet and other office expenses paid on the Company's behalf. At March 31, 2021, \$665,440 was owed to NCIT.
The Company's results of operations and financial position could differ significantly from those that would have been obtained if the entities were autonomous.
#### **6. Net Capital Requirements**
The Company is subject to the Securities and Exchange Commission's uniform net capital rule (Rule 15c3-1) which requires the Company to maintain a minimum net capital equal to or greater than \$250,000 and a ratio of aggregate indebtedness to net capital not exceeding 15 to 1, both as defined. At March 31, 2021, the Company's net capital was \$492,868 which exceeded the requirement by \$242,868.
#### **7. Fair Value Measurements**
The Fair Value Measurements Topic of the FASB Accounting Standards Codification establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to measurements involving significant unobservable inputs (Level 3 measurements). The three components of the fair value hierarchy are as follows:
- Level 1 Quoted prices (unadjusted) in active markets for identical assets or liabilities that the Company has the ability to access at the measurement date.
- Level 2 Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly.
- Level 3 Unobservable inputs for the asset or liability.
#### **Determination of Fair Value**
Under the Fair Value Measurements Topic of the FASB Accounting Standards Codification, the Company bases its fair value on the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between participants at the measurement date. It is the Company's policy to maximize the use of observable inputs and minimize the use of unobservable inputs when developing fair value measurements, in accordance with the fair value hierarchy. Fair value measurements for assets and liabilities where there exists limited or no observable market data and, therefore, are based primarily upon managements own estimates, are often calculated based on current pricing policy, the economic and competitive environment, the characteristics of the asset or liability and other such factors. Therefore, the results cannot be determined with precision and may not be realized in an actual sale or immediate settlement of the asset or liability. Additionally, there may be inherent weaknesses in any calculation technique, and changes in the underlying assumptions used, including discount rates and estimates of future cash flows, that could significantly affect the results of current or future value.
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## **Notes to the Financial Statement**
## **March 31, 2021**
#### **7. Fair Value Measurements (Continued)**
#### **Warrants and restricted stock**
Determining the appropriate fair value and calculating the fair value of warrants requires the use of highly subjective and complex assumptions. The Company uses the Black-Scholes option pricing model to calculate the fair value of the warrants at the time of the transaction or valuation date. The method requires the use of judgement in estimating stock price volatility (17%), expected dividends (0%), expected life (6 years), and the risk free interest rate (2.2%). The Company's estimate of volatility was based on similar companies' benchmark, and the risk free interest rate is based on the U.S. Treasury 5-10 year yields to maturity that approximately corresponds to the maturity dates of the warrants. The Company's estimate of value of restricted stock was based upon fair value, considering the lack of marketability, restrictions on resale, minority interest, and the Company's reasonable estimate of cash compensation that was foregone by electing to receive stock from the issuer.
#### **Assets Measured and Recognized at Fair Value on a Recurring Basis:**
| | Level 1 | Level 2 | Level 3 | Total |
|-----------------------------|---------|---------|-----------|-----------|
| | | | | |
| Assets
at
fair value: | | | | |
| Warrants | - | - | \$8,371 | \$8,371 |
| Restricted stock | - | - | \$118,750 | \$118,750 |
| | | | | |
| | | | | |
| Total assets at fair value | - | - | \$127,121 | \$127,121 |
#### **Changes in instruments for the year ended March 31, 2021**
The table below summarizes the activity for securities measured at fair value on a recurring basis. The Company did not hold level 1 or level 2 securities during the year.
| | Level 3 |
|----------------------------------|-----------|
| Balance at 4/1/2020 | \$67,112 |
| Value received
as income | \$57,500 |
| Total realized / unrealized loss | \$2,509 |
| | |
| Total assets at fair value | \$127,121 |
#### **8. Cash segregated under Federal and other regulations**
Cash of \$2,432,940 has been segregated in a special reserve bank account for the benefit of customers under rule 15c3-3 of the Securities and Exchange Act of 1934.
#### **9. Cash and restricted cash**
The following table provides a reconciliation of cash and restricted cash reported within the statement of financial condition with the total of the same such amounts presented in the statement of cash flows.
| Cash and cash equivalents | \$
942,139 |
|------------------------------------------------------------------------|---------------|
| Cash segregated under federal and other regulations | 2,432,940 |
| Total cash
and restricted cash shown in the statement of cash flows | \$ 3,375,079 |
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## **Notes to the Financial Statement**
### **March 31, 2021**
#### **10. Payables to customers**
The Company accounts for monies received from customers as a payable until the requested securities are purchased and transferred to the customer. As of March 31, 2021, \$1,959,995 was payable to customers.
#### **11. Subsequent Events**
The Company has evaluated subsequent events through June 1, 2021, the date which the financial statements were issued.
Source: SEC EDGAR via Adviser Search (https://search.stillhousedata.com). Agents: see https://search.stillhousedata.com/llms.txt.