# FORGE MARKETS LLC X-17A-5 (2021-02-24) — Broker-dealer annual report
- Company: FORGE MARKETS LLC
- Form: X-17A-5
- Filed: 2021-02-24
- Period: 2020-12-31
- Accession: 0001568695-21-000001
- CIK: 1568695
- File #: 8-69232
- Material weakness: No
- Auditor: EISNERAMPER LLP
- Auditor location: NEW YORK, NY
- Contact: Scott Daniels
- Phone: 212-751-4422
- Signed by: JOHN-PAUL TEUTONICO (CEO/CCO)
Original filing: https://www.sec.gov/Archives/edgar/data/1568695/000156869521000001/fmllpublic2020.pdf
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| UNITED STATES |
|------------------------------------|
| SECURITIES AND EXCHANGE COMMISSION |
| Washingta,, D.C. 20549 |
| ANNUAL AUDITED REPORT | |
|-----------------------|--|
| FORM X-17A-5 | |
| PART Ill | |
| | 8 - | 69232 |
|-------------|-----|---------------------------|
| | | SEC FILE NUMBER |
| | | hours per response 12.00 |
| | | Estimated average burden |
| | | Expires: October 31. 2023 |
| 0MB Number: | | 3235-0123 |
| | | 0MB APPROVAL |
**FACING PAGE Information Required** *ci* **Brokers and Dealers Pursuant to Section 17** *ci* **the Securities Exchange Act** *ci* **1934 and Rule 17a-5 Thereunder**
| REPORT FOR THE PERIOD BEGINNING | -------------
111/2020 | AND ENDING | ------------
12131/2020 |
|------------------------------------------------------------------------------------------------|-----------------------------------------------------------|---------------|-----------------------------------|
| | MM/DD/YY | | MM/DD/YY |
| | A. REGISTRANT IDENTIFICATION | | |
| NAME OF BROKER-DEALER: | | | |
| FORGE MARKETS LLC | | | OFFICIAL USE ONLY
FIRM ID. NO. |
| ADDRESS OF PRINCIPAL PLACE OF BUSINESS: (Do not use P.O. Box No.)
19OAKLANE | | | |
| GLEN COVE | (No. aid Street)
NY | | 11542 |
| (City) | (State) | | (Zip Code) |
| NAME AND TELEPHONE NUMBER OF PERSON TO CONTACT IN REGARD TO THIS REPORT
JOHN-PAUL TEUTONICO | | | 917-456-2371 |
| | | | |
| | | | (Area Code-- TaephoneNo.) |
| | | | |
| | B. ACCOUNTANT IDENTIFICATION | | |
| | | | |
| INDEPENDENT PUBLIC ACCOUNTANT whose opinion is contained in this Report*
EISNERAMPER LLP | (Nane-- if individual. s:ate /a,t, firs:, rriddle narre ) | | |
| | | | |
| 733 THIRD A VE.
(Address) | NEW YORK
(City) | NY
(State) | 10017
(Zip Code) |
| ~ Certified PublicA=untc11t | | | |
| D PublicA=untc11t | | | |
| D A=untc11t not resident in United States or c11y of its possessions | | | |
| CHECK ONE: | FOR OFFICIAL USE ONLY | | |
\* Claims for exemption from the re-:,uirement that the annual report be covered by the opinion of an independent public accountant m.1st 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 |
| SEC 1410 (06-02) | unless the form displays a currently valid 0MB control number. |
| | |
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STATEMENT OF FINANCIAL CONDITION AND REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
DECEMBER 31, 2020
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**CONTENTS DECEMBER 31, 2020**
| Report of Independent Registered Public Accounting Firm | |
|---------------------------------------------------------|-----|
| Financial Statement | |
| Statement of Financial Condition | 2 |
| Notes to Statement of Financial Condition | 3-6 |
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# **REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM**
To the Sole Member of Forge Markets LLC
#### **Opinion on the Financial Statement**
We have audited the accompanying statement of financial condition of Forge Markets LLC (the "Company") as of December 31, 2020 and the related notes (collectively referred to as the "financial statement"). In our opinion, the financial statement presents fairly, in all material respects , the financial position of the Company 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 the Company's management. Our responsibility is to express an opinion on the Company'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 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 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.
We have served as the Company's auditor since 2014.
EISNERAMPER LLP New York, New York February 23, 2021
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# **STATEMENT OF FINANCIAL CONDITION**
**DECEMBER 31, 2020**
| Assets | |
|------------------------------------------------|------------------|
| Cash | \$
9,049,671 |
| Accounts receivable | 1,202,156 |
| Due from affiliate | 500 |
| Goodwill | 50,000 |
| Other assets | 35,610 |
| Total Assets | \$
10,337,937 |
| Liabilities and Member's Equity
Liabilities | |
| Accounts payable and accrued expenses | \$
130,879 |
| Commissions payable | 68,120 |
| Due to affiliates | 2,874,982 |
| Total Liabilities | 3,073,981 |
| Member's Equity | 7,263,956 |
| Total Liabilities and Member's Equity | \$
10,337,937 |
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### **NOTES TO STATEMENT OF FINANCIAL CONDITION DECEMBER 31, 2020**
#### **1. Nature of business**
Forge Markets LLC (the "Company") is an entity organized under the laws of the state of Delaware on December 18, 2012. The Company primarily provides private placement services for its clients.
On January 5, 2016, the Company's former parent entered into an agreement to transfer its ownership to Equi LLC ("the Sole Member"). The Sole Member obtained ownership of the net assets of approximately \$134,000 for consideration of approximately \$184,000. The excess of the consideration over the net assets as of the date of the transaction of \$50,000 was pushed down to the Company and recorded as goodwill.
The Company is a registered broker-dealer with the Securities and Exchange Commission ("SEC") and is a member of the Financial Industry Regulatory Authority ("FINRA").
#### **2. Summary of significant accounting policies**
#### Basis of Presentation
The accompanying financial statements are presented in U.S. Dollars and have been prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP").
#### Cash
Cash consists of cash in banks, primarily held at one financial institution. The Company at times maintains cash in deposit accounts in excess of Federal Deposit Insurance Corporation limits. The Company has not experienced any losses on such accounts.
#### Accounts Receivable
Accounts receivable are carried at the amounts billed to customers, net of an allowance for credit losses, which is an estimate for credit losses based on a review of all outstanding amounts.
#### Allowance for Credit Losses
On January 1, 2020, the Company adopted ASC Topic 326, Financial Instruments - Credit Losses ("ASC 326"). ASC 326 impacts the impairment model for certain financial assets measured at amortized cost by requiring a current expected credit loss (CECL) methodology to estimate expected credit losses over the entire life of the financial assets as of the reporting date. The allowance for credit losses is based on the Company's expectation of the collectability of financial instruments carried at amortized cost, including accounts receivable utilizing the CECL framework. The adoption of ASC 326 had no impact on the Company's opening member's equity. The Company's expectation is that the credit risk associated with accounts receivable is that any client with which it conducts business with is unable to fulfill its contractual obligations. Management monitors the credit risk of clients and currently there is not a foreseeable expectation of an event or change which could result in the fees receivable being unpaid based on individual facts and circumstances. The Company considers factors such as historical experience, credit quality, age of balances and current and future economic conditions that may affect the Company's expectation of the collectability in determining the allowance for credit losses. The Company has no allowance for credit losses as of and for the year ended December 31 , 2020.
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## **NOTES TO STATEMENT OF FINANCIAL CONDITION DECEMBER 31, 2020**
### **2. Summary of significant accounting policies (continued)**
#### Revenue Recognition
Revenue from Contracts with Customers ("ASC Topic 606") requires that an entity recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The guidance requires an entity to follow a five step model to (a) identify the contract(s) with a customer, (b) identify the performance obligations in the contract, (c) determine the transaction price, (d) allocate the transaction price to the performance obligations in the contract, and (e) recognize revenue when (or as) the entity satisfies a performance obligation.
#### Placement Fees
The Company earns agency placement fees in non-underwritten transactions, such as private placements of equity securities. The Company enters into arrangements with individual customers or pooled investment vehicles to transact in private placements. The Company will receive placement fees on these transactions and believes that its performance obligation is completed upon the execution of the signed agreement with its customers and as such is earned on the trade date.
#### Goodwill
Goodwill is not subject to amortization and is tested for impairment annually or more frequently if events or changes in circumstances indicate that the asset may be impaired. As the Company only has one reporting unit, the impairment test consists of a comparison of the fair value of the Company with the carrying amount of the net assets, including goodwill. Fair value is typically based on future cash flows discounted at a rate commensurate with the risk involved or the market-based comparable. If the carrying amount of the Company's net assets exceeds the fair value of the Company, then an analysis will be performed to compare the implied fair value of goodwill with its carrying amount. An impairment loss will be recognized in an amount equal to the excess of the carrying amount over the implied fair value. After an impairment loss is recognized, the adjusted carrying amount of goodwill is its new accounting basis. Accounting guidance on the testing of goodwill for impairment allows entities testing goodwill for impairment the option of performing a qualitative assessment to determine the likelihood of goodwill impairment and whether it is necessary to perform such a two-step impairment test. There was no impairment loss recorded for the year ended December 31 , 2020.
### Income Taxes
The Company is treated as a disregarded entity for federal and state income tax purposes and is not subject to taxes on its income. All tax effects of the Company's income or loss are passed through to the member. Therefore, no provision or liability for federal and state income taxes is included in these financial statements. At December 31 , 2020, management has determined that the Company had no uncertain tax positions that would require financial statement recognition. This determination will always be subject to ongoing reevaluation as facts and circumstances may require.
### Use of Estimates
The preparation of financial statements in conformity with **GAAP** requires the Company's management to make estimates and assumptions that affect the amounts disclosed in the financial statements. Actual results could differ from those estimates.
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## **NOTES TO STATEMENT OF FINANCIAL CONDITION DECEMBER 31, 2020**
### **2. Summary of significant accounting policies (continued)**
### Fair Value of Financial Instruments
At December 31 , 2020, the carrying value of the Company's financial instruments, such as accounts receivable, approximate their fair values due to the nature of their short term maturities and are categorized as Level 2 investments.
### **3. Related party transactions**
Pursuant to an administrative services agreement with Forge Global, Inc, an affiliated entity, the Company recorded rent, compensations and other general and administrative expenses for the year ended December 31 , 2020 based on the terms and conditions stipulated in this agreement. The balance due to the affiliate under this arrangement was approximately \$2,825,000 and is included in due to affiliates on the statement of financial condition at December 31 , 2020.
Pursuant to a Commission Share Agreement entered into on January 10, 2020 with Sharespost Financial Corporation, an affiliated entity, the Company recorded commission expenses for the year ended December 31 , 2020 based on the terms and conditions stipulated in this agreement. The balance due to affiliate under this arrangement was approximately \$50,000 and is included in due to affiliates on the statement of financial condition at December 31 , 2020.
The Company paid regulatory fees on behalf of Forge Global Advisors LLC, an affiliated entity for the year ended December 31 , 2020 and has a due from affiliate of \$500 on the statement of financial condition at December 31 , 2020.
### **4. Net capital requirement**
The Company, as a member of FINRA, is subject to the Securities and Exchange Commission Uniform Net Capital Rule 15c3-1. This Rule requires the maintenance of minimum net capital and that the ratio of aggregate indebtedness as defined to net capital , shall not exceed 15 to 1. The rule also provides that equity capital may not be withdrawn or cash dividends paid if the resulting net capital ratio would exceed 10 to 1. At December 31 , 2020, the Company's net capital was approximately \$5,855,000 which was approximately \$5,650,000 in excess of its computed minimum net capital requirement of approximately \$205,000.
### **5. Concentrations of credit risk**
The Company maintains its cash balances in a bank account at a financial institution, and at times the balance may exceed the federally insured limit. The Company is subject to credit risk to the extent any financial institution with which it conducts business is unable to fulfill contractual obligations on its behalf.
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## **NOTES TO STATEMENT OF FINANCIAL CONDITION DECEMBER 31, 2020**
### **6. Other uncertainties**
#### Coronavirus
The outbreak of the novel coronavirus ("COVID-19") in many countries continues to adversely impact global commercial activity and has contributed to significant volatility in financial markets. The World Health Organization has declared COVID-19 a "Public Health Emergency of International Concern." The global impact of the outbreak continues to evolve, and as cases of the virus have continued to be identified, many countries have reacted by instituting quarantines and restrictions on travel. Such actions are creating disruption in global supply chains, and adversely impacting a number of industries. The outbreak could have a continued adverse impact on economic and market conditions and trigger a period of global economic slowdown. The rapid development and fluidity of this situation precludes any prediction as to the ultimate adverse impact of COVID-19. Nevertheless, COVID-19 could have a material impact on the Company's financial statements.
### **7.Subsequentevent**
The Company submitted a form Continuing Membership Application to FINRA and the application is still pending as of February 23, 2021.
Source: SEC EDGAR via Adviser Search (https://search.stillhousedata.com). Agents: see https://search.stillhousedata.com/llms.txt.