# FIRST SOUTHERN, LLC X-17A-5 (2022-02-25) — Broker-dealer annual report - Company: FIRST SOUTHERN, LLC - Form: X-17A-5 - Filed: 2022-02-25 - Period: 2021-12-31 - Accession: 0001664778-22-000001 - CIK: 1664778 - File #: 8-69733 - Type: Broker-dealer - Material weakness: No - Auditor: FGMK, LLC - Auditor location: CHICAGO, IL - Contact: STEPHANIE JACKELS - Phone: 770-777-9373 - Email: sjackels@fssec.com - Website: fssec.com - Signed by: STEPHANIE JACKELS (CHIEF FINANCIAL OFFICER) Original filing: https://www.sec.gov/Archives/edgar/data/1664778/000166477822000001/firstsouthernauditpublic.pdf --- {0}------------------------------------------------ UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 | | OMB APPROVAL | | |--------------------------|--------------|--| | OMB Number: 3235-0123 | | | | Expires: Oct. 31, 2023 | | | | Estimated average burden | | | | hours per response: 12 | | | #### ANNUAL REPORTS FORM X-17A-5 PART III SEC FILE NUMBER 8-69733 FACING PAGE Information Reguired Pursuant to Rules 173-5, 17a-12, and 18a-7 under the Securities Exchange Act of 1934 | FILING FOR THE PERIOD BEGINNING 01/01/2021 | | | AND ENDING 12/31/2021 | |----------------------------------------------------------------------------------------|-----------------------------------------------------------------------------------------------------------------------------------|------|--------------------------------------------| | | MM/DD/YY | | MM/DD/YY | | | A. REGISTRANT IDENTIFICATION | | | | First Southern LLC
NAME OF FIRM: | | | | | TYPE OF REGISTRANT (check all applicable boxes): | | | | | Broker-dealer
Check here if respondent is also an OTC derivatives dealer | Security-based swap dealer | | _ Major security-based swap participant | | ADDRESS OF PRINCIPAL PLACE OF BUSINESS: (Do not use a P.O. box no.) | | | | | | GAM Tower, 2 Tabonuco Street, Suite 200 | | | | | (No. and Street) | | | | Guaynabo | PR | | 00968 | | (City) | (State) | | (Zip Code) | | PERSON TO CONTACT WITH REGARD TO THIS FILING | | | | | Stephanie Jackels | (770) 777-9373 | | sjackels@fssec.com | | (Name) | (Area Code - Telephone Number) | | (Email Address) | | | B. ACCOUNTANT IDENTIFICATION | | | | INDEPENDENT PUBLIC ACCOUNTANT whose reports are contained in this filing"
FGMK, LLC | | | | | | (Name - if individual, state last, first, and middle name) | | | | 333 W. Wacker Drive, 6th FIr | Chicago | | 11
60606 | | (Address) | (City) | | (Zip Code)
(State) | | 12/17/2009 | | 3968 | | | (Date of Registration with PCAOB)(if applicable) | | | (PCAOB Registration Number, if applicable) | | | FOR OFFICIAL USE ONLY
Claime for available that the result the possible to anywer he saveral but the reporter of an interested | | | Claims for exemption from the requirement that the annual reports of an independent public accountant must be supported by a statement of facts and circumstances relied on as the basis of the exemption. See 17 CFR 240.17a-5(e)(1)(ii), if applicable. 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 OMB control number. {1}------------------------------------------------ | OATH OR AFFIRMATION | | | | |---------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--|--| | | | | | | | swear (or affirm) that, to the best of my knowledge and belief, the
Stephanie Jackels
financial report pertaining to the firm of First Southern LLC | | | | | 2 021 , is true and correct. I further swear (or affirm) that neither the company nor any
December 31 | | | | | partner, officer, director, or equivalent person, as the case may be, has any proprietary interest in any account classified solely | | | | | as that of a customer. | | | | | | | | | | Signature: | | | | | | | | | | Title:
DAPTHES | | | | | Chief Financial Officer
GEORGIA | | | | | obruary 1, 2026 | | | | | Notary Public | | | | | This filing" * contains (check all applicable boxes)."""" | | | | | (a) Statement of financial condition. | | | | | (b) Nctes to consolidated statement of financial condition. | | | | | [c) Statement of income (loss) or, if there is other comprehensive in the period(s) presented, a statement of | | | | | comprehensive income (as defined in § 210.1-02 of Regulation S-X). | | | | | (d) Statement of cash flows | | | | | [e) Statement of changes in stockholders' or partners' or sole proprietor's equity. | | | | | [f) Statement of changes in liabilities subordinated to claims of creditors. | | | | | [g) Notes to consolidated financial statements. | | | | | Computation of net capital under 17 CFR 240.15c3-1 or 17 CFR 240.18a-1, as applicable. | | | | | (i) Computation of tangible net worth under 17 CFR 240 18a-2. | | | | | [] Computation for determination of customer reserve requirements pursuant to Exhibit A to 17 CFR 240.15c3-3.
[ (k) Computation for determination of security-based swap reserve requirements pursuant to Exhibit B to 17 CFR 240.25c3-3 or | | | | | Exhibit A to 17 CFR 240.18a-4, as applicable. | | | | | (1) Computation for Determination of PAB Requirements under Exhibit Alto 9 240.15c3-3. | | | | | [m] Information relating to possession or control requirements for customers under 17 CFR 240.15c3-3. | | | | | (n) Information relating to possession or control requirements for security-based swap customers under 17 CFR | | | | | 240.15c3-3(p)(2) or 17 CFR 240.18a-4, as applicable. | | | | | O Reconciliations, including appropriate explanations, of the FOCUS Report with computation of net capital or tangible net | | | | | worth under 17 CFR 240.15c3-1, 17 CFR 240.18a-1, or 17 CFR 240.18a-2, as applicable, and the reserve requirements under 17 | | | | | CFR 240.15c3-3 or 17 CFR 240.18a-4, as applicable, if material differences exist, or a statement that no material differences
exist. | | | | | [p) Summary of financial data for subsidiaries not consolidated in the statement of financial condition. | | | | | (q) Oath or affirmation in accordance with 17 CFR 240.17a-5, 17 CFR 240.17a-12, or 17 CFR 240.18a-7, as applicable. | | | | | [r] Compliance report in accordance with 17 CFR 240.17a-5 or 17 CFR 240.18a-7, as applicable. | | | | | [s) Exemption report in accordance with 17 CFR 240.17a-5 or 17 CFR 240.18a-7, as applicable. | | | | | (t) Independent public accountant's report based on an examination of the statement of financial condition. | | | | | [u] Incependent public accountant's report based on an examination of the financial statements under 17 | | | | | CFR 240.17a-5, 17 CFR 240.18a-7, or 17 CFR 240.17a-12, as applicable. | | | | | [ (v) Independent public accountant's report based on an examination of certain statements in the compliance report under 17 | | | | | CFR 240.17a-5 or 17 CFR 240.18a-7, as applicable. | | | | | [w] Independent public accountant's report based on a review of the exemption report under 17 CFR 240.17a-5 or 17
CFR 240.18a-7, as applicable. | | | | | [x] Supplemental reports on applying agreed upon procedures, in accordance with 17 CFR 240.17a-12, | | | - as applicable. O (y) Report describing any material inadequacies found to exist or found to have existed since the date of the previous audit, or a statement that no material inadequacies exist, under 17 CFR 240.17a-12(k). - O (z) Other: - \*\* To request confidential treatment of this filing, see 17 CFR 240.170-5(e)(3) or 17 CFR 240.180-7(d)(2), as applicable. {2}------------------------------------------------ ST SOUTHERN, LLC Separately Bound Financial Statement For ear Ended De 31, 2021 h ublic Accounting Firm This report is deemed PUBLIC in accordance with Rule 17a-5(d) under the Securities Exchange Act of 1934. {3}------------------------------------------------ #### TABLE OF CONTENTS | Report of Independent Registered Public Accounting Firm | Page 1 | |---------------------------------------------------------|-----------------| | Statement of Financial Condition | Page 2 | | | Pages 3 -
12 | {4}------------------------------------------------ ![](_page_4_Picture_0.jpeg) #### REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Management of First Southern, LLC #### Opinion on the Financial Statement We have audited the accompanying statement of financial condition of First Southern, LLC (the "Company") as of December 31, 2021, 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, 2021, 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 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 misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audit we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal reporting. Accordingly, we express no such opinion. 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 principles used and significant estimates made by management, as well presentation of the financial statement. We believe that our audit provides a reasonable basis for our opinion. FGMK, LLC We have served as the Company's auditor since 2017. Chicago, Illinois February 24, 2022 FGMK, LLC fgmk.com 333 W. Wacker Drive, 6th Floor Chicago, IL 60606 312818 4300 2801 Lakeside Drive, 3rd Floor Bannockburn, IL 60015 847.374.0400 {5}------------------------------------------------ #### **FIRST SOUTHERN, LLC STATEMENT OF FINANCIAL CONDITION December 31, 2021** #### ASSETS | ASSETS | | | |-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|----------|-------------------------------------------------------------------------------------------------------------------------------------------------| | a
eg
v
Cash and cash
s
Clearing firm depos
it
t
(�
roke
Due from cl
b
Win
ci\.at f
air v
ti
Secu
Ju
i
et
Right-of-use
l
ass
Other :ommissions recei
e
vab
Due from related parties
Fixed assets, net
Intangible assets, net
Tax asset receivable
Employee loans recei
Other assets
Total Assets | \$
\$ | 698,089
,000,000
1
991,674
614,714
618,972
31,626
24,720
127,780
33,333
132,500
899,405
84 507
5,257,320 | | | | | | LIABILITIES | | | | Due to clearing broker
Lease liability
Due to related parties
Accounts payable and accrued expenses
Total Liabilities | \$ | 11,602
645,008
22,982
374 727
54 319 | | MEMBERS' EQUITY | | | | Total Members' Equity | | | | Total Liabilities and Members' Equity | | | The accompanying notes are an integral part of this financial statement. {6}------------------------------------------------ #### NOTE A - DESCRIPTION OF BUSINESS Organization and Description of Business: First Southern, LLC, (the "Company") is a registered broker-dealer that began business in 2016. The Company is registered with the Securities and Exchange Commission ("SEC"), the Financial Industry Regulatory Authority ("FINRA") and the securities commissions of appropriate states. The Company's business includes referral services for accounts and securities transactions historically referred from the Company's affiliate First Southern Securities, LLC ("FSS"). Additionally, the Company may provide merger and acquisition services and brokerage services. The Company operates from offices located in Guaynabo, Puerto Rico. The Company operates under the provisions of paragraph (k)(2)(ii) of Rule 15c3-3 of the Securities Exchange Act of 1934 and, accordingly, is exempt from the remaining provisions of that rule. The requirements of paragraph (k)(2)(i) provide that the Company clear all transactions on behalf of customers on a fully disclosed basis with a clearing broker-dealer. The clearing broker-dealer carres all of the accounts of the customers and maintains and preserves all related books and records as are customarily kept by a clearing broker-dealer. #### NOTE B - SUMMARY OF SIGNIFICANT ACCOUNT POLICIES A summary of the Company's significant accounting policies are as follows: Accounting Policies: The Company follows generally accepted accounting principles ("GAAP"), as established by the Financial Accounting Standards Board (the "FASB") to ensure consistent reporting of financial condition, results of operations, and cash flows, Cash and Cash Equivalents: The Company considers all cash and money market instruments with an original maturity of ninety days or less to be cash and cash equivalents. The Company maintains its demand deposits in high credit quality financial institutions. Balances at times may exceed federally insured limits. Fixed Assets: Fixed assets are recorded at cost, net of accumulated depreciation and amortization. Depreciation is provided by use of straight-line methods over the estimated useful lives of the respective assets. Leasehold improvements are amortized over the shorter of the estimated useful lives or the term of the respective lease. Maintenance and repairs are charged to expense as incurred; major renewals and betterments are capitalized. When fixed assets are sold or retired, the related cost and accumulated depreciation and amortization are removed from the accounts and any gain or loss is included in the results of operations. {7}------------------------------------------------ #### NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Income Taxes: The Company has elected to be taxed as an S corporation whereby the income or losses of the Company flow through to its members and no income taxes are recorded in the accompanying financial statements. Tax Asset Receivable: The Company pays local taxes to Secretaria de Hacienda in Puerto Rico. At December 31, 2021 a tax asset receivable of \$132,500, resulting from overestimation of tax expense resulting from new and increased business activity. The Company will apply the tax asset receivable to future tax liability of the Company. Use of Estimates: Management uses estimates and assumptions in preparing financial statements in accordance with GAAP. Those estimates and assumptions affect the reported amounts of assets and liabilities, and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expense during the reporting period. Actual results could vary from the estimates that were assumed in preparing the financial statements. Securities Transactions: Principal transactions and related revenues and expenses are recorded at fair value on a trade-date basis (as if they had settled). Profit and loss arising from all securities transactions entered into for the account and risk of the Company are recorded in trading revenue in the statement of operations. Amounts receivable and payable for securities transactions that have not reached their contractual settlement date are recorded net as receivable from clearing broker on the statement of financial condition. Revenue from Contracts with Customers: The revenue recognition guidance 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. In determining the transaction price, an entity may include consideration only to the extent that it is probable that a significant reversal in the amount of cumulative revenue recognized would not occur when the uncertainty associated with the variable consideration is resolved. The recognition and measurement of revenue is based on the assessment of individual contract terms. Significant judgment 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. {8}------------------------------------------------ # NOTE B SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Trading Commissions· The Company earns brokerage fees from its contracts with brokerage customers to transact n their account. Fees are transaction-based, including trade execution services, and **)l e8!\_11** .ed at the point in time that the transaction is executed (i.e., the trade date) his ·11cl Tcles risk16\s rincipal (government and corporate bonds) transactions in which the Compar receies a buy order from a customer and the Company purchases the security from anoth 'person or ento ityofset the sale to the customer. The riskless principal revenue is earned at the time the tramcl£!!\_Qn§E -1s executed. Mutual funds or pooled investment vehicles (collectively, "funds") have entered into agrs zments with the Company to distribute/sell its shares to investors. Fees are paid up front or over tit 1e (Pb-1 fees) on the basis of a contractual rate applied to the monthly or quarterly market value o **Je** fund. Reven s'>fecognized monthly as services are provided. inc1"4Z lanning Other related service/ p'g:\_vided services and the fees the Company earns, which are based **n** se-hedule!'Klte a nized when the services are rendered. #### Investment Advisory Fees: **J** The Company earns investment advi**sor** fe¢ **[Om 1ts** :ontracts with brokerage customers to are primarily earned over time as the om\_l;n yptp · des th tracted quarterly services and are generally assessed based on a tiered **f the** market value of assets under management ("AUM) at month-end. These fees were rec rde within the Commission - trading clearing firm on the accompanying statement of operations. « #### Investment Banking, Commissions Sharing Services· These services include agreements to provide advisory services to cu tomers fowhr i t ch hey charge the customers fees. The Co,npany provides advisor/s; -<;es/co O\_? e f cyetivi 'nudilng mergers and acquisitions, reorganizations, tender offers, leverag,ed\_buyoz,t nclraising act' v and the pricing of securities to be issued *S* Investment Banking: The agreement contains nonrefundable retainer **fees or** success fees, which may be fixed or represent a percentage of value that the customer receives if and when the corporate finance activity is completed ("success fees"). In some ca�is also an "announcement fee" that is calculated on the date that a transaction is announced based on the price included in the underlying sale agreement. The retainer fees, announcement fee, or other milestone fees reduce any success fee subsequently invoiced and received upon the completion of the corporate finance activity. The Company has evaluated its nonrefundable retainer payments, to ensure its fee relates to the transfer of a good or service, as a distinct performance obligation, in exchange for the retainer. If a promised good or service is not distinct, the Company combines that good or service with other promised goods or services until it identifies a bundle of goods or services that is distinct. {9}------------------------------------------------ # NOTE B **-SUMMARY** OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Finders Fees: These.services include agreements to facilitate transactions between a buyer and a seller. The Company locates a deal or transaction and brings it to the attention of interested parties. These services are hcoot nsidered any guarantee of completion of a transaction. The Finders Fees are negotiated in the transaction and are recorded if and when a transaction has occurred between the bu./r"d'\.Vojpany is considered an agent the transaction. Unde ing Co ssion/ T pany earns commissions from its participation in a syndicate underwriting group. The purpose of the underwriting syndicate is to market new bonds or shares too large for one compan7.dle Tax Credits Commissi ns: The Com pa s commissions from its facilitation of transactions between buyer(s) and seller(s). The 07pJy &ntes parties with transferrable tax credits and brings it to the attentior of interested irties These services are not considered any guarantee of completion of a transaction. **e** Credits Commissions are negotiated in the transaction and are recorded if and when a tr; isaction **has :cu**rred betwe n the buyer and seller. The Company is considered an agent the transacti(°j Private Placements: The Compan s plac m nt e of private securities. The performance obligation is the consummation ofthe sale of securities for each contract with a customer. The Company earns agency placement fees inon-underwritten transactions, such as private placements of equity securities. The Company records placement revenue at the point in time when the services for the transaction are coripleted at the assumption of the terms of each assignment. The Company contracts the service as it is transferred to e customer and is therefore acting as a principal. Accounts Receivable: The Company recognizes revenues as are ,d� not **received at the time they are considered to represent uncondition? 'rights to consideration, are** recorded as a receivable. Accounts receivable balances associated with tracts with customers at December 31, 2021 and December 31, 2020 were \$9,860 and \$-0-, res **ect**ively. Other Commissions The Company earns other commissions on facilitating tansactions for clients of the Company. Revenues are recorded when they are considered earned. Revenues are recorded on a gross basis. The Company is considered a principal in the transaction. Subsequent Events: Subsequent events were evaluated through February 24, 2022, the date which the financial statements were available to be issued. {10}------------------------------------------------ # NOTE C -NET CAPITAL The Company, as a registered broker dealer is subject to the SEC Uniform Net Capital Rule (Rule 15c3-1), which requires the maintenance of minimum net capital and requires that the ratio of aggregate inde tednestsonet capital, both as defined, shall not exceed I5 to 1. At December 31, 2021, the m an ada- neQded hnet capital of \$2,681,077 which was \$2,581,077 in excess of its required et capiia! OS1*08000* and its ratio of aggregate indebtedness to net capital was 0.16 to 1.0. z NOTE D- LEASES The Company is a lessee ir a non-cancelable operating lease, for office space. The company determines if an arrangement is a lease, or contains a lease, at inception of a contract and when the terms of an existing contract are changed. The Company recognizes a lease liability and a rightof-use ("ROU) asset a omc nc1 ent m daf7 0t: fre easet. l The lease liability is initially and subsequently recognize **as d o** the er'5& tval f its future lease payments. Variable payments are included in the ut re leas**e p** tents when those variable payments depend on an index or rate. The discount rate i /2 t lie\! teJ.fjliJ readily determinable or otherwise the Company uses its incremental bor **win**g rate. **The** Company deter vined that the implicit rate of our leases is not readily determinable and accordingly, we use our incremental borrowing rate based on the information available at the commencement late of all leases. The Company's incremental borrowing rate for a lease is thrat e e of interesi t twould have to pay on a collateralized basis to borrow an amount equal to the lease p fs under similar terms and in a similar economic environment. The ROU asset is subsequently measured throughout the lease term at the amount of the remeasured lease liability (i.e., presen t'.ue of the rem ·.1 ease payments), plus any impairment recognized. Lease cost for lease payrents is recog ize on a straight-line basis over the lease term. **V** The Company has elected, for all underlying classes of assets, o not gnize ROU as **et** and lease liabilities for short-term leases that have a lease term of 12 �ths nor less t lease commencement, and do not include an option to purchase or ext **n** the lease term f the underlying asset that the Company is reasonably certain to exercise. **h** Company recognizes lease cost associated with short-term leases on a straight-line basis over the **lease teI** The Company's leases do not include termination options for either party to the lease or restrictive financial or covenants. Payments due under the lease contracts include fixed payments plus, for many of the Company's leases, variable payments. The Company's office space leases require it to make variable payments for the Company's proportionate share of the building's property taxes, insurance, and common area maintenance. These variable lease payments are not included in lease payments used to determine lease liability and are recognized as variable costs when incurred. {11}------------------------------------------------ #### NOTE D-LEASES (CONTINUED) Weighted average remaining lease term: Operating leases 4.83 years Weighted average discount rate: Operating leases 4.25 % Amounts disclosed for ROU assets obtained in exchange for lease obligations and reductions to ROU assets resulting from reductions to lease obligation include amounts added to or reduced from the carrying amount of ROU assets resulting from new leases, lease modification or reassessments. Maturities of lease liabilities under non-cancelable operating leases as of December 31, 2021 are as follows: | 2022 | | \$ 139,979 | |-------------------------|--|------------| | 2023 | | 144.218 | | 2024 | | 148.534 | | 2025 | | 152.929 | | 2026 | | 130,628 | | Sub-Total | | \$ 716,288 | | (Less Imputed Interest) | | (71.280) | | Total | | \$ 645,008 | #### NOTEE-OPERATING AGREEMENT The Company's operating agreements provides for separate classes of units starting with Class A units and continuing up to and including Class H units are voting while Class B units through Class H units are non-voting. Class B units through Class H units are intended to constitute profits interest in the Company, as defined in the operating agreement. Profits are allocated to Class C through H units according to net revenue generated. The remaining profit or loss is allocated to the Class B units. As of December 31, 2021, the capital contributed to the Company is representative of the Class B units. #### NOTE F - CONTINGENCIES The Company is subject to litigation in the normal course of business. The Company has no litigation in progress at December 31, 2021. {12}------------------------------------------------ #### FIRST SOUTHERN, LLC NOTES TO FINANCIAL STATEMENT December 31, 2021 #### NOTE G-FAIR VALUE OF ASSETS AND LIABILITIES FASB Accounting Standards Codification ("ASC") 820, Fair Value Measurement, defines fair value, establishes a framework for measuring fair value, and establishes a fair value hierarchy which prioritizes the inputs to valuation techniques. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. A fair value measurement assumes that the transaction to sell the asset or transfer the liability occurs in the principal market for the asset or liability or, in the absence of a principal market, the most advantageous market. Valuation techniques that are consistent with the market, income or cost approach, as specified by FASB ASC 820, are used to measure fair value. The fair value hierarchy prioritizes the inputs to valuation techniques used to measure fair value into three broad levels: - · Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities the Company has the ability to access. - · Level 2 inputs are inputs (other than quoted prices included within level 1) that are observable for the asset or liability, either directly or indirectly. - · Level 3 are unobservable inputs for the asset or liability and rely on management's own assumptions about the assumptions that market participants would use in pricing the asset or liability. The availability of observable inputs can vary from instrument to instrument and is affected by a wide variety of factors, including, for example, the type of instrument, whether the instrument is new and not yet established in the marketplace, the liquidity of markets, and other characteristics particular to the instrument. To the extent that valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair value requires more judgment. Accordingly, the degree of judgment exercised in determining fair value is greatest for instruments categorized in Level 3. In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, an instrument's level within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement. The Company's assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to the instrument. The following section describes the valuation techniques used by the Company to measure different financial instruments at fair value and includes the level within the fair value hierarchy in which the financial instrument is categorized. Page - 9 - {13}------------------------------------------------ #### NOTE G-FAIR VALUE OF ASSETS AND LIABILITIES (CONTINUED) The following table presents the Company's fair value hierarchy for those assets and liabilities measured at fair value as of December 31, 2021: | Assets: | | Level 1 | | Level 2 | Level 3 | Total
December
31, 2021 | | |--------------------------------------|---|---------|-----|---------|------------------------|-------------------------------|---------| | Securities owned: | | | | | | | | | Corporate bonds | A | | - S | 225.377 | \$ 37.719 S | | 263.096 | | State and municipal government bonds | | | | 150.743 | 200,875 | | 351,618 | | Total | 0 | | | | - \$ 376,120 \$238,594 | S | 614,714 | | | | | | | | | | Fair value of investments securities available for sale are determined by obtaining quoted prices on nationally recognized securities exchanges when available. If quoted prices are not available, fair value is determined using matrix pricing which is a mathematical technique used widely in the industry to value debt securities without relying exclusively on quoted prices for the specific securities but rather by relying on the securities relationship to other benchmark quoted securities. Corporate bonds which include firm enterprises are stated at fair value based on third-party dealer quotes. These financial instruments are classified in Level 3 of the fair value hierarchy. State and municipal government obligations which include U.S. Government securities and Government-sponsored enterprises are stated at fair value based on third-party dealer quotes. These financial instruments are classified in Level 3 of the fair value hierarchy. The Company assesses the levels of the instruments at each measurement date, and transfers between levels are recognized on the actual date of the event or change in circumstances that caused the transfer in accordance with the Company's accounting policy regarding the recognition of transfers between levels of the fair value hierarchy. #### NOTE H- INDEMNIFICATIONS In the normal course of business, the Company enters into contracts that contain a variety of representations and warranties that provide indemnifications under certain circumstances. The Company's maximum exposure under these arrangements is unknown, as this would involve future claims that may be made against the Company that have not yet occurred. The Company expects the risk of future obligation under these indemnifications to be remote. {14}------------------------------------------------ ### NOTE I RELATED PAR TIES #### Due from related ies: The Company has **ente**red an agreement with an affiliated registered investment advisor, FSAM, LLC ("FS .• **o,u, ...** ' **... p** ovides advisory services. Expenses totaling \$8,613 were paid on behalf of FSAM b om pCar . Ocean Capital, LLC is a related entity which has no agreement with the Com9a"!'· F ens a·ng agr ent with a related entity, FSS. For 2021, the Company paid FSS \$1,902,529. This unt repr**ese**nts \$48,000 for rent and other office, general & administrative fees, \$1,3 0 fo -'ster epresentative consulting, \$169,642 **for** trading platform connections, \$90, 16 r othe1',e fopenses and�90,145 for consulting fees for services provided by FSS. The amour ie at Deer1ber 31*,2021* was \$22,982, directly resulting from the activity covered in the expense **sha** rin **gagr**eement. # NOTE J- 401( PLAN The Company initiated a tax-deferred 40l(k) plan c e ng all em·ploy S. he assJets are held for each employee in an individual account maintained by investment firm. The Company provides adiscretionary match. The Company's discretionary ma is **3°0.1\_** eac i-fiecl P,loyee's basic contribution. Plan contribution before non-vesting fo **ei** re **incur** :d by the *t7 '* pany during the year ended December 31, 2021 totaled \$32,227 employer matching Amounts payable at December 31, 2021 were \$3,013. ## NOTE K-EMPLOYEE LOANS RECEIVABLE The Company hired new registered representatives in 2021. As part of the hiring process, some of the registered representatives were provided with sign-on bonuses, forgivable over a period of time, varying by individual agreement. If a registered representative terminates employment before the amount is fully amortized, they are responsible for repayment of the unamortized portion of their sign-on bonus. Any unamortized amount is considered a non-allowable receivable. Future amortization of the registered representatives' sign-on bonuses as of December 31, 2021 are as follows: {15}------------------------------------------------ ### NOTE K -EMPLOYEE LOANS RECEIVABLE (CONTINUED) | \$163,452 | |-------------| | 163,452 | | 63 452
1 | | 154,287 | | 143 452 | | 111,310 | | \$899,405 | | | ## NOTE L-INT ANG ETS The Company entered into an assump**tion** agree · Santander Securities LLC ("Seller") to assume the customer listos Selle f r's First Puer ly of Funds and ten collateral accounts held by Banco Santander Puerto Rico ssets"). These Assets were assigned effective January 23, 2020, free and · interest and encumbrances. The purchase price for the customer I ization of customer list as of December 31, 2021 is \$33,333. ## NOTE M-MANAGEMENT EQUITY The Company initiated a Management Equity Pia **P. ")** effective Ju 1, 2021. The ypurpose of the Plan is to benefit certain Eligible Individuals w · n the op,inion of th**e** Company have helped grow, and will continue to grow, the value of the **'or** any. The **Plan is** intended to provide additional incentive to grow the value of the Company by virtue *of the* opportunity to share financially in such growth and specifically by participation in **the growth of ifenterp ie rise** value of the Company through the date of the Liquidity Event The plan is intended to constitute an unfunded bonus plan/payroll practice, exempt from the Employee Retir m�nt Incoeme Security Act of 1974, as amended. *W* The Awards granted pursuant to the terms of this Plan represent a cot tin gent right to receive payment in accordance with the terms of the Grant Agreement. The grant of Ards does not (i) make the recipient a member of the Company, (ii) cause there to arise any equity-based or equitable right in respect thereto in the recipient or (iii) create or cause there to arise a fiduciary obligation of the Company, its management or its members with respect to any person. During 2021, the Company awarded two Phantom Appreciation Units in accordance to the provisions outlined in the Plan. No Liquidity Event occurred in 2021 and there is no liability as of December 31, 2021 Source: SEC EDGAR via Adviser Search (https://search.stillhousedata.com). Agents: see https://search.stillhousedata.com/llms.txt.