# JP DERIVATIVES, LLC X-17A-5 (2021-10-07) — Broker-dealer annual report - Company: JP DERIVATIVES, LLC - Form: X-17A-5 - Filed: 2021-10-07 - Period: 2021-06-30 - Accession: 0001675366-21-000008 - CIK: 1675366 - File #: 8-69788 - Type: Broker-dealer - Material weakness: Yes - Auditor: Lerner & Sipkin CPAs, LLP - Auditor location: New York, NY - Contact: Alan Krim - Phone: 5165261586 - Email: jlcrner@lernerslpkin.com - Website: lcrnerslpkln.com - Signed by: Jack Piuggi (President) Original filing: https://www.sec.gov/Archives/edgar/data/1675366/000167536621000008/jpderivatives21.pdf --- {0}------------------------------------------------ UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 # **ANNUAL AUDITED REPORT FORM X-17A-5 PART Ill** OMB APPROVAL OMB Number: 3235-0123 Expires: October 31, 2023 Estimated average burden hoursJJer response .. .... 12.00 > SEC FILE NUMBER 8-69788 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 07/01/20 AND ENDING 06/30/21 --------------------- --------------------- MM/00/YY MM/00/YY A. REGISTRANT IDENTIFICATION # NAME OF BROKER-DEALER: JP DERIVATIVES LLC OFFICIAL USE ONLY ADDRESS OF PRINCIPAL PLACE OF BUSINESS: (Do not use P.O. Box No.) FIRM 1.0. NO. C/0 BAYAT CONSULTING INC., 14 WALL STREET, 20TH FLOOR (No. and Street) NEW YORK NY 10005 (City) (State) (Zip Code) NAME AND TELEPHONE NUMBER OF PERSON TO CONTACT IN REGARD TO THIS REPORT (Area Code- Telephone Number) # B. ACCOUNTANT IDENTIFICATION INDEPENDENT PUBLIC ACCOUNTANT whose opinion is contained in this Report\* # LERNER & SIPKIN CPAs LLP | (Name - if individual, state last. first, middle name) | | | | | |--------------------------------------------------------|----------------------------------------------------------------------|---------|------------|--| | 420 Lexington Ave.- | Suite 2160 NEW YORK | NY | 10170 | | | (Address) | (City) | (State) | (Zip Code) | | | CHECK ONE: | | | | | | I/' I | Certified Pub I ic Accountant | | | | | DPublic Accountant | | | | | | | DAccountant not resident in United States or any of its possessions. | | | | | | FOR OFFICIAL USE ONLY | | | | *\*Claims f or 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. 17 a-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 OMB control number. SEC 1410 (11-05) {1}------------------------------------------------ # **OATH OR AFFIRMATION** | 1, JACK PIUGGI | | , swear (or affirm) that, to the best of | |------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|-------|------------------------------------------------------------------------------------------------------------------------------------| | my knowledge and belief the accompanying financial statement and supporting schedules pertaining to the firm of
JP DERIVATIVES LLC | | , as | | of JUNE 30 | 20 21 | are true and cotTect. 1 further swear (or affirm) that | | neither the company nor any partner, proprietor, principal oftlcer or director has any proprietary interest in any account
classified solely as that of a customer, except as follows: | | | | | | | | | | CEO | | | | Title
IAN G DOUGLAS
Notary Public, State of New York
Reg. No. 01 [)()6340695 | | This report** contains (check all applicable boxes):
0 (a) Facing Page.
0 (b) Statement ofFinanciaJ Condition.
0 (c) Statement ofincome (Loss) or, if there is other comprehensive.income in the pcriod(s) presented, a Statement | | Qualified in Nassau County
c-e:nmission Expires 4/2512024 | | of Comprehensive Income (as defined in §210.1-02 of Regulation S-X).
(d) Statement of Changes in Financial Condition.
,
(e) Statement of Changes in Stockholders' Equity or Prutners' or Sole Proprietors' Capital.
~
(f) Statement of Changes in Liabilities Subordinated to Claims of Creditors. | | | | § (g) Computation of Net Capital.
(h) Computation for Dete.rmination of Reserve Requirements Pursuant to Rule 15c3-3.
(i) .Information Relating to the. Possession or Control Requirements Under Rule l5c3-3 .
0 (j) A Reconciliation, including appropriate explanation ofthe Computation ofNet Capital Under Rule 15c3-l and the
Computation for Determination of the Reserve Requirements Under Exhibit A of Rule 15c3-3. | | | | consolidation.
0 (I) An Oath or Affirmation. | | 0 (k) A Reconciliation between the audited and unaudited Statements of Financial Condition with respect to methods of | | 0 (m) A copy of the SIPC Supplemental Report. | | 0 (n) A rep orr describing any materi-al inadequacies found to exist or found to have existed since the date of the previous audit | | | | | *\*\*For conditions of confidemialtrealment of certain portions of this filing, see section 240. 17a-5(e)(3).* {2}------------------------------------------------ # **JP Derivatives, LLC** Report on Audit of Financial Statements and Supplementary Information For the Year Ended June 30, 2021 {3}------------------------------------------------ ## **Contents** | As of and for the Year Ended June 30, 2021 | | |-------------------------------------------------------------------------------------------------------|---------| | Report of Independent Registered Public Accounting Firm | | | Financial Statements | | | Statement of Financial Condition | 2 | | Statement of Operations | 3 | | Statement of Changes in Member's Equity | 4 | | Statement of Cash Flows | 5 | | Notes to Financial Statements | 6, 7, 8 | | Supplementary Information | | | Schedule of Computation of Net Capital Under Rule 15c3-1 of
the Securities and Exchange Commission | 9 | | Exemption Report | 10 | | Independent Auditors' Report on Exemption Report | 11 | {4}------------------------------------------------ ![](_page_4_Picture_0.jpeg) 420 Lexington Ave .. Stc. 2100. NY. NY 10170 Tel212.57t.0064/ Fax 212.571 .0074 Jay Lerner: C.PA Jlerner®lernerslpkln.com Joseph G. Sipkln. C.P.A. }slpkln®lcrncrslpkln.com ## Report ofl.ndependent Registered Public Accounting Firm To the Members of JP Derivatives, LLC ### .Opinion on the Financial Statements We have ;audited the accompanying statement offmancial condition of JP Derivatives, LLC (the "Company") as of June 30,2021, the related st~tements of operations, changes in members' equity, and cash flows for year then ended and the related notes and schedules (collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of June 30, 202 I, and the results of its operations and its cash flows for the year then ended in conformity with accounting principles generally accepted in the United States of America. ### Bas.lliJQ.r Opinion These financial statements ru-e the responsibility 806,546 | | Commissions recievable | 581 ,891 | | Due from clearing firm | 350,421 | | Prepaids | 32,569 | | Security deposit | 2,500 | | Total assets | \$
1,773,927 | | | | | | | | LIABILITIES AND STOCKHOLDERS' EQUITY | | | Liabilities : | | | Accounts payable and accrued expenses | \$
272,366 | | Bank loan payable | 706,641 | | Commissions and bonus payable | 8,056 | | Total liabilities | 987,063 | | | | | MEMBER'S EQUITY: | 786,864 | | | | | TOTAL LIABILITIES AND MEMBER'S EQUITY: | \$
1,773,927 | See report of Independent Registered Public Accounting Firm and Notes to Financial Statements 2 {6}------------------------------------------------ ## **Statement of Operations For the Year Ended June 30, 2021** | Revenue: | | |---------------------------------------------------|-----------------| | Commissions income | \$
4,744,760 | | Rebate income | 16,705 | | Other Income | 795 | | Total revenue | 4,762,260 | | | | | | | | | | | | | | Expenses: | | | Salaries comissions, and other compensation costs | \$
2,164,843 | | Travel, meals and entertainment | 315,288 | | Commissions and clearance expenses | 301 ,915 | | Insurance | 297,273 | | Office | 284,997 | | Professional fees | 210,555 | | Data services | 178,315 | | Settlement Expenses | 130,000 | | Regulatory fees | 69,512 | | Communications | 56,937 | | Interest Expenses | 5,597 | | Dues and Subscriptions | 4,156 | | Charitable Donations | 284 | | Error P&L | (6,671) | | Other expenses | 32,775 | | Total expenses | 4,045,776 | | Net income (loss) | \$
716,484 | {7}------------------------------------------------ Statement of Changes in Members' Equity For the Year Ended June 30, 2021 | Member's Equity, June 30, 2021 | \$
786,864 | |--------------------------------|---------------| | Net income (loss) | 716,484 | | Capital Distribution | (668,196) | | Capital Contribution | 197,339 | | Member's Equity, July 1, 2020 | \$ 541 ,237 | {8}------------------------------------------------ ## Statement of Cash Flows For the Year Ended June 30, 2021 | Operating Activities:
Net income | \$ 716,484 | |--------------------------------------------------------------------------------------|---------------| | Adjustments to reconcile net income to
net cash used by operating activities: | | | Changes in operating assets and liabilities:
Increase in accounts receivable | (256,246) | | Increase in due from clearing broker | (421) | | Increase in prepaid expenses | (26,018) | | Increase in security Deposit | (2,500) | | Decrease in accounts payable and accrues expenses | (204,511) | | Decrease in commission and bonus payable | (27,971) | | Net cash provided by operating activities | 198,817 | | Cash Flows From Investing Activities | | | Capital contribution | 197,339 | | Capital distribution | (668,196) | | Net cash used by investing activity | (470,857) | | Cash Flows From Financing Activities | | | Proceeds from bank loan (PPP loan) | 333,733 | | | | | Net cash provided by financing activities | 333,733 | | Net increase in cash and cash equivalent | 61 ,693 | | Cash and cash equivalents - beginning of the year | 744,853 | | Cash and cash equivalents -end of the year | 806,546
\$ | | Supplemental disclosure of cash flow information:
Cash paid during the year for : | | | Interest
Income taxes | 5,597
\$ | | | \$ | {9}------------------------------------------------ Notes to Financial Statements For the Year Ended June 30 , 2021 #### **1. Organization and Nature of Business** JP Derivatives, LLC (the "Company") was organized as a limited liability company under the laws of the State of Delaware. The Company is wholly owned by Piuggi Capital, LLC (the Member). The Company executes options transactions for its clients solely on an agency and/or give-up basis. The Company is a broker-dealer registered with the American Stock Exchange (AMEX), the Securities and Exchange Commission (SEC) and is a member of the Securities Investor Protection Corporation (SIPC). The Company operates under the provisions of Paragraph (k)(2)(ii) of Rule 15c3-3 of the Securities and Exchange Commission and, accordingly, is exempt from the remaining provisions of that rule. Essentially, the requirements of Paragraph (k)(2)(ii) provide that the Company clears all transactions on behalf of customers on a fully disclosed basis with a clearing broker dealer, and promptly transmits all customer funds and securities to the clearing broker/dealer. The clearing broker/dealer carries all of the accounts of the customers and maintains and preserves the related books and records as are primarily kept by a clearing broker/dealer. Since the Company is a limited liability company, the Member is not liable for the debts, obligations, or liabilities of the Company, whether arising in contract, tort or otherwise, unless the Member has signed a specific guarantee. #### **2. Summary of Significant Accounting Policies** #### **a) Basis of Accounting** The financial statements are prepared using the accrual basis of accounting in accordance with accounting principles generally accepted in the United States of America . Revenue is recognized when earned, while expenses and losses are recognized when incurred. #### **b) Cash and Cash Equivalents** The Company considers all highly liquid investments with a maturity of three months or less when purchased to be cash equivalents. Cash and cash equivalents consist of funds maintained in checking and money market accounts held at financial institutions. The Company's cash and cash equivalents are held principally at one financial institution and at times may exceed federally insured limits. The Company has placed these funds in a high quality institution in order to minimize risk relating to exceeding insured limits. #### **c) Revenue Recognition** Effective January 1, 2018, the Company adopted ASC Topic 606, Revenue from Contracts with Customers ("ASC Topic 606"). The new 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 variable 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 Company applied the modified retrospective method of adoption which resulted in no adjustment as of January 1, 2018. The new revenue recognition guidance does not apply to revenue associated with financial instruments, interest income and expense, leasing and insurance contracts. Securities transactions (and the recognition of related income and expenses) are recorded on a trade date basis. Commission income and related income and expense are recorded on a settlement date basis. There is no material difference between settlement date and trade date. {10}------------------------------------------------ Notes to Financial Statements For the Year Ended June 30, 2021 #### d) Income Taxes The LLC is treated as a disregarded entity and has no federal and state tax liabilities. Any liability on profits is reported on the tax return of the sole member. The tax years since inception remain open to examination by the major taxing jurisdictions to which the LLC is subject. #### e) Furniture and Equipment Equipment is carried at cost and is depreciated over a useful life of 5-7 years using the straight-line method. #### f) Use of Estimates The preparation of financial statements in conformity 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 the disclosure of contingent assets and liabilities as of the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates. #### 4. Bank Loan Payable On May 5, 2020 the Company received the first loan of \$372,908 from Paycheck Protection Program Loan (PPP). On February 8, 2021 the Company received a second Joan of \$333,733 from Paycheck Protection Program Loan (PPP). The PPP is a Small Business Administration ("SBA") loan designed to provide a direct incentive for small businesses to keep their employees on the payroll. PPP loans bear interest at 1 %, defer loan payments for six months, and no collateral or personal guarantees are required. Most importantly, the SBA will forgive the entire loan if all employee criteria are met and the funds are used for eligible expenses. #### 5. Indemnifications In the normal course of its business, the Company indemnifies and guarantees certain service providers against specified potential losses in connection with their acting as an agent of, or providing services to, the Company. The maximum potential amount of future payments that the Company could be required to make under these indemnifications cannot be estimated. However, the Company believes that it is unlikely it will have to make material payments under these arrangements and has not recorded any contingent liability in the financial statements for these indemnifications. The Company provides representations and warranties to counterparties in connection with a variety of commercial transactions and occasionally indemnifies them against potential losses caused by the breach of those representations and warranties. The Company may also provide standard indemnifications to some counterparties to protect them in the event additional taxes are owed or payments are withheld , due either to a change in or adverse application of certain tax laws. These indemnifications generally are standard contractual terms and are entered into in the normal course of business. The maximum potential amount of future payments that the Company could be required to make under these indemnifications cannot be estimated. However, the Company believes that it is unlikely it will have to make material payments under these arrangements and has not recorded any contingent liability in the financial statements for these indemnifications. #### 6. Lease Accounting In connection with new FASB standard 842 regarding leases, which took effect as of the first day of the fiscal year after December 15, 2018, management has evaluated the financial impact the standards have had on the Company's financial statements. As of June 30, 2021 , the Company leases an office space under a month to month basis. As such , the Company does not have an obligation to record a right to use asset or an offsetting lease obligation. There is no impact to the Company's net capital. Rent expense of 20,303 is included "office" in these financial statements. {11}------------------------------------------------ ## **JP Derivatives LLC** Notes to Financial Statements For the Year Ended June 30, 2021 ### **7. Net Capital Requirement** The Company is subject to the Securities and Exchange Commission Uniform Net Capital Rule (15c3-1), which requires the maintenance of minimum net capital and requires that the ratio of aggregate indebtedness to net capital, both as defined, shall not exceed 800% in the first year of operations, and 1500% in every year thereafter. At June 30, 2021 , the Company had net capital of \$1 ,152,221 , which was \$1 ,133,526 in excess of its required net capital of \$18,695. The Company's aggregate indebtedness to net capital ratio was 24.34%. #### **8. Contingent Liabilities** As of June 30 , 2021 the Company is a party to ongoing arbitration brought by the Company regarding breach of confidentiality relating to the actions of a former employee. All legal obligations of the Company relating to the arbitration have been accrued for. The Company has received a countersuit, in which the Company is being sued for reimbursement of legal fees incurred in defending this proceeding. There is no probable expectation that the Company will reimburse these expenses. It is too early to express an opinion regarding the outcome of this proceeding but it is not expected to have a material negative impact on the Company. #### **9. Subsequent Events** The Company has evaluated events and transactions that occurred between July 1, 2021 and September 22, 2021 , which is the date the financial statements were available to be issued, for possible disclosure and recognition in the financial statements. {12}------------------------------------------------ ## (A LIMITED LIABILITY COMPANY) SUPPLEMENTARY INFORMATION Computation of Net Capital Under rule 15c3-1 of the Securities and Exchange Commission For the Year Ended June 30, 2021 #### SCHEDULE 1 | TOTAL MEMBER'S EQUITY QUALIFIED FOR NET CAPITAL
Add : Other (deductions) or allowable credits
Note Payable PPP loan to the extent eligible expenses have been recorded | \$
786,864
706,641 | |------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------------------------| | Deductions
Less: Nonallowable assets | (341,284) | | Net Capital | \$ 1,152,221 | | | | | | | | MINIMUM CAPITAL REQUIRED( THE GREATER OF)
(\$5,000 or 6 2/3% OF AGREGATE INDEBTEDNESS) | 18,695 | | CAPITAL IN EXCESS OF MINIMUM REQUIREMENTS | 1,133,526 | | | | | AGGREGATE INDEBTEDNESS | \$
280,422 | | PERCENTAGE OF AGGREGATE INDEBTEDNESS TO NET CAPITAL | 24.34% | | | | | Reconcilliation with the Company's (as included in Part IIA of Form X 17A-5 | | | as of June 30, 2020.)
Net Capital as reported in Company's Part IIA | | | unadited focus report | \$ 1,084,551 | | Audit Adjustments | 67,670 | | Net capital, per above | \$ 1 '152,221 | {13}------------------------------------------------ JP Derivatives, LLC F:Xernption Report Securities and Exchange Commission l 00 First Street, NE Washington, D.C. 20549 To whom *it* may concern: J P Derivatives, LLC (the "O:>mpany") is a registered broker-dealer sul.?icct to Ruk: 17a-s promulgated by the Secm·ities and Exchange Commission (17 C.F.R. §240.17a-s, "Rep::rts to be made by ce1tain brokers and dealers"). 1l1is Exemption Report wa<; prepared as rt."'"quired by 17 C.F.R § 240.17a-s(d)(l) and (4). To the 1-e..::;t of its knowledge and belief: the O:>mpany states the toll owing: (I) 'T'hc Company claimed an exemption 11-om 17 C.F.R. § 240.15c3-3 under the following provisions of I 7 C.F.R. § 240.15c3-3 (k): [(2)(ii)] (2) The Company met the identified exemption provisions m Paragraph (k) of Rule 15c3-3 throughout the most recent fiscal year vvithout exception . f, Jack Piuggi , swear (or affirm) that, to my best knowledge and bclict: we did not identify any exceptions to this exemption during this period. {14}------------------------------------------------ ![](_page_14_Picture_0.jpeg) 420 Lexington Ave .. Ste. 2160. NY, NY 10170 Tel212.571.0064/ Fax 212.571.0074 Jay Lerner. C.P.A. jlcrner@lernerslpkin.com Joseph G. Sipkfn. C.P.A. Jslpkln®lcrnerslpkln.com To the Members of JP Derivatives, LLC # Report of Independent .R.eg!stered Public Accounting Fil·m. Gentlemen: We have reviewed management's statements, included in the accompanying Exemption Report, in which (1) JP Derivatives, LLC identified the ·:following provisions of 17 C.F.R. § 15c3~3(k) under which JP Derivat ives, LLC claimed an exemption fi·om 17 C.F.R. § 240J 5c3-3: k(2)(ii), (the '"exemption pmvi:sions'') alid (2) JP Derivatives, LLC stated that JP Derivatives~ LLC met the identified exemption provisions throughout the most recent fiscal year without exception. JP Derivatives, LLC's management is responsible for compliance with the exemption provisions and its statements. Our review was conducted in accordance with the standards of the Public Company Accounting Oversight Board (United States) and, accordingly, included inquiries and other required procedures to obtain evidence about JP Derivatives, LLC's cornpliance with the exemption provisions. A review is substantially less in scope than an examination, the objective of which is the expression of an opi11ion on management's statements. Accordingly we do not express such an opinion. Based on our review, we are not aware of any material modifications that should be made to management's statements referred to above for them to be fairly stated, in all material respects, based on the provisions set forth in paragraph k(2)(ii) of Rule 15c3-3 under the Securities Exchange Act of 1934. ~i~CibW Lerner & Sipkin CPAs, LLP New York, NY September 22, 2021 Source: SEC EDGAR via Adviser Search (https://search.stillhousedata.com). Agents: see https://search.stillhousedata.com/llms.txt.