# D-MERC SERVICES LLC X-17A-5 (2021-02-25) — Broker-dealer annual report - Company: D-MERC SERVICES LLC - Form: X-17A-5 - Filed: 2021-02-25 - Period: 2020-12-31 - Accession: 0001728956-21-000005 - CIK: 1728956 - File #: 8-70072 - Material weakness: No - Auditor: Summit LLC - Auditor location: Denver, CO - Contact: Lori Sarian - Phone: 3032505923 - Signed by: Lori C Sarian (Managing Partner) Original filing: https://www.sec.gov/Archives/edgar/data/1728956/000172895621000005/secfilingaudit2020a.pdf --- {0}------------------------------------------------ Financia I Statements For the Year Ending December 3L,2020 ln accordance with Rule 17A-5(d) ![](_page_0_Picture_2.jpeg) Summit LLC Certified P ublic Accou ntants {1}------------------------------------------------ # TABLE OF CONTENTS | lndependent Registered Public Accounting Firm's Report | Paee (s )
4
3 | |--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|---------------------| | Statement of Fina n cia I Condition | 5 | | Statement of Ope rations | 6 | | Statement of Changes in Members' Equity | 7 | | Statement of Cash Flows | 8 | | Notes to Financial Statements | 9-12 | | Supplementary Schedules:
l. Computation of Net Capital Pursuant to Net Capital Rule 15c3-1 included in the
Company's Corresponding Unaudited Form X-17A-5 Part ll Filing | 13 | | Computation for Determination of Reserve Requirements Under Rule 15c3-3 | 74 | | lll. lnformation Relating to Possession or Control Requirements Under Rule 15c3-3 | 74 | | lndependent Registered Public Accounting Firm's Report on Management's Assertions
Regarding Exemption Claimed from Rule 15c3-3 | 15 | | Exemption Report Requirement for Broker/Dealers Under Rule 17a-5 of the Securities
and Exchange Act of 1934 | 16 | | lndependent Accountant's Report on Applying Agreed Upon Procedures
SIPC Assessment Reconciliation Pursuant to Form SIPC 7 | 51 -52
S3 | {2}------------------------------------------------ ![](_page_2_Picture_0.jpeg) Summit LLC Certif ied Publl( Accountants 999 18rh Srreer . su(e 3000 Denver, CO 80202 ### REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To The Directors and Members of D-Merc Services LLC ### opinion on the Financial Statements We have audited the accompanying statement of financial condition of D-Merc Services LLC as of December 31, 2020, the related statements of income and loss, changes in members' equity, and cash flows for the year then ended, and the related notes and schedules (collectively referred to as the financial statements). ln our opinion, the financial statements present fairly, in all material respects, the financial position of 0-Merc Services LLC as of December 31, 2020, 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. #### Basis for Opinion These financial statements are the responsibility of D-Merc LLC's management. Our responsibility is to express an opinion on D-Merc Services LLC's financial statements 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 D-Merc Services LLC 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 statements are free of material misstatement, whether due to error or fraud. Our audit included performing procedures to assess the risks of material misstatement ofthe financial statements, 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 accountinB 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. ### Supplemental lnformation The supplemental information listed below has been subjected to audit procedures performed in conjunction with the audit of D-Merc Services LLC's financial statements. - . Schedule l, Computation of Net Capital Under sEC Rule 15c3-1. - . Schedule ll, Computation for Determination of Reserve Requirements Under SEC Rule 15c3-3 (exemption) - . Schedule lll, lnformation Relating to Possession or Control Requirements Under SEC Rule 15c3-3 (exemption). {3}------------------------------------------------ The supplemental information is the responsibility of D-Merc Services LLC'5 management. Our audit procedures included determining whether the supplemental information reconciles to the financial statements or the underlying accounting and other records, as applicable, and performing procedures to test the completeness and accuracy of the information presented in the supplemental information. ln forming our opinion on the supplemental information, we evaluated whether the supplemental information, including its form and content, is presented in conformity with L7 C.F.R. 8240.L7a-5.|n our opinion, the supplemental information listed above is fairly stated, in all material respects, in relation to the financial statements as a whole. We have served as D-Merc Services LLC'S auditor since 2019. /--,\*x w Summit LLC Denver, Colorado February 11, 2021 {4}------------------------------------------------ ### STATEMENT OF TINANCIAT CONDITION DECEMBER 3T,2O2O #### ASSETS | Cash
Other assets | s | 17 ,513 | |-------------------------------------------------------------------------------|---|--------------------| | Total Assets | s | t7,5L3 | | LIABILITIES AND MEMBERS' EQUITY | | | | LIABILITIES:
Accounts payable and accrued expenses
othe r liab ilitie s | S | 7,522 | | Total Liabilities | | 7 ,522 | | COMMITMENTS AND CONTINGENCIES (Notes 4, 5, 6) | | | | MEMBERS, EQUITY (N ote 3):
Members'interests
Accumulated deficit | | 55,200
(4s,209) | | Total members'equity | | 9,99r | | Total Liabilities and Members' Equity | s | t7,5t3 | {5}------------------------------------------------ ### STATEMENT OF OPERATIONS YEAR ENDED DECEMBER 31,2020 | REVENUE | | |-------------------------------|--------------| | Commission income | 799,727
5 | | Total Revenue | L99,727 | | EXPENSES: | | | Commissions expense | 155,189 | | Contract la bor | 2L,717 | | Professional fees | 22,636 | | Adve rtising and promotion | 3,327 | | Rent and occupancy | t,871 | | Computer and software expense | r,379 | | lnsu rance | 926 | | Dues and subscriptions | 785 | | Other expenses | 1,066 | | Total Expenses | 208,896 | | NET TNCOME (1055) | (9,169)
s | {6}------------------------------------------------ ### STATEMENT OF CHANGES IN MEMBERS, EQUITY YEAR ENDED DECEMBER 31,2020 | | Members'
lnterests | | Retained Earnings
(accumulated
deficitl | | |-----------------------------|-----------------------|--------|-----------------------------------------------|----------| | BAIANCES, December 31, 2019 | s | so,ooo | s | (36,040) | | Contributions | | 5,2@ | | | | Distributions | | | | | | Net income | | | | (9,169) | | BAIANCES, December 31, 2020 | S | ss,2oo | s | (4s,209) | {7}------------------------------------------------ #### NOTES TO FINANCIAL STATEMENTS | CASH FTOWS FROM OPERATING ACTIVITIES: | | | |-------------------------------------------------------------|---|----------| | Net income (loss) | S | (s,16e) | | Adjustments to reconcile net income to net cash provided by | | | | ope rating activities: | | | | lncrease in accounts payable and accrued expenses | | (5,377) | | Net cash used in operating activities | | (t4,5461 | | CASH FLOWS USED IN FINANCING ACTIVITIES: | | | | Contrib utio n s by members | | | | Distributions to members | | 5,2@ | | Net cash provided by financing activities | | s,200 | | NET INCREASE IN CASH | | (9,346) | | CASH, at beginning of year | | 26,459 | | CASH, at end of year | s | L7,5L3 | {8}------------------------------------------------ ### NOTES TO FINANCIAT STATEMENTS # NOTE 1. EUS"VESS AND SUMMARY OF S'GNIFICANT ACCOUNTING POLICIES ### Orodnizotion ond Business D-Merc Services LLC (the "Company") is a Colorado limited liability corporation established on December 72, 2017. ln 2019 the Company underwent the New Member Application ("NMA") process with the Financial lndustry Regulatory Authority ("FlNRA") and was subsequently approved on April 23, 2019 and is registered as a broker-dealer under the Securities Exchange Act of 1934 and is a member of FINRA. The Company is a 70O% wholly-owned subsidiary of More Cowbell LLC, a Colorado Limited Liability company. The Company's primary operation is the retailtrading on behalf of customer accounts and the Company does not trade securities of its own accounts. The types of securities traded by the Company are alternative securities which include direct participation programs, oil and gas, private placements, real estate investment trusts, private offerings, private equity, private debt, 1031 Tax Exchanges, and other alternative investments. The Company, under Rule 15c3-3, is exempt from the reserve and possession or control requirements of Rule 15c3-3 of the Securities and Exchange Commission. The Com pany does not ca rry or clear customer accounts. All customer accounts, transactions, deposits and withdrawals are executed through its clearing broker. ### Revenue Recoonition The Company places securities orders on behalf of clients through its bank and clearing broker, Goldstar Trust Company ("Goldstar"). All transactions are recorded on a fully d isclosed basis once settlement has been fully agreed upon and the terms of the transactions are finalized at the date of confirmation, thus, no commissions receivables or commissions payable have been warranted or recorded. All funds are carried on behalf of the client by Goldstar. ### lncome Toxes The Company made an election to be taxed as a limited liability company under the lnternal Revenue Code. Accordingly, there is no provision for income taxes included in the accompanying financial statements. All income and expenses are reported by the Company's members on their respective tax returns. The 2016 through 2020 tax years generally remain subject to examination by U.S. federal and most state tax a uthorities. ### Adverti ond Promotiono I Expense The Company accounts for all marketing, advertising and promotional expenses in the period in which they are incurred. {9}------------------------------------------------ ### NOTES TO FINANCIAT STATEMENTS # NOTE 1- BUS"VESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) ### Use of Estimotes 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 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. ### Fdit Volue Meosurement The Financial Accounting Standards Board issued FASB ASC 820 (Accounting Standards Codification 820, "Fair Value Measurements and Disclosures") 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 company does not hold any positions besides cash as of December 31, 2020. # NOTE2- MEMBER'SEQUITY The Company is wholly owned by More Cowbell LLC, a limited liability company formed on January 28, 2007 under the laws of Colorado, filed pursuant to 5 7-80-203 and S 7-80-204 of the Colorado Revised Statutes (C.R.S.). More Cowbell shares the same address as the Company and acts solely as a holding company on behalf of the ComPanY. # NOTE 3- EXPENSE SHAR'NG AGREEMENT The Company has executed an Expense Sharing Agreement (the "Agreement") with its affiliate, prodigious LLC. The Agreement creates a relationship whereby Prodigious will charge the Company a monthly fee as it relates to rent, information technology services, utilization of contract employees, telephone expenses and other miscellaneous administrative costs. For the year ending December 31, 2020, the Company paid Prodigious LLC S1,871 under this agreement. This Agreement was terminated in April 2020. {10}------------------------------------------------ ### NOTES TO FINANCIAL STATEMENTS # NOTE 3- EXEMPTION, NET CAPITAL AND MINIMUM CAPITAL REQUIREMENTS Pursuant to the net capital provisions of rule 15c3-1 of the Securities Exchange Act of 1934, the Company is required to maintain a minimum net capital, as defined under such provisions. At December 31, 2020, the Company had net capital and net capital requirements of 59,991 and S5,000, respectively. The Company's net capital ratio (aggregate indebtedness to net capital)was .75 to 1. According to rule 15c3- 1, the Company's net capital ratio shall not exceed 15 to 1. The Company, under rule 15c3-3 is exempt from the customer reserve and possession or control requirements of rule 15c3,3 of the Securities and Exchange Commission. The Company does not carry or clea r customer transactions. During the year ended December 31, 2020, the Company operated below the required level of net capital pursuance to SEC Rule 15c3-1 from August 3, 2O2O throu8h August 13, 2020. The Company was in net capital compliance as of the morning of August 13, 2020. The Company notified the SEC and FINRA on August 19, 2020 via form 17a11(b) notification. # NOTE 4. COMMITMENTS The Company does not lease office space or equipment. # NOTE6. FINANC'ALINSTRUMENIS, OFF-BALANCE SHEET R'SKS AND UNCERTAINTIES The Company's financial instruments, including cash, receivables, other assets and payables are carried at amounts that approximate fair value due to the short-term nature of those instruments. Financial instruments, which potentially subject the Company to concentration of credit risk, consist principally of cash. The Company places its temporary cash investments with what management believes are high-credit, quality financial institutions. Securities transactions are initiated on a fully disclosed basis with Goldstar. Under the terms of the agreement with Goldstar, the company is ultimately responsible for the executing of transactions and the contractual obligations thereunder. ln conjunction with Goldstar, the Company seeks to control the risks of its activities and is required to maintain compliance with various regulatory and internal guidelines. Compliance with the various guidelines is monitored daily. The Company is engaged in various trading and brokerage activities where counterparties primarily include broker-dealers, banks, and other financial institutions. ln the event these counterparties do not fulfill their obligations, the Company may be exposed to risk. The risk of default depends on the credit worthiness of the counterparty or issuer of the instrument. lt is the Company's policy to review, as necessary, the credit standing of each counterparty with which it conducts business. Market risk arises due to fluctuations in interest rates and market prices that may result in changes in the values of trading instruments. The Company manages its exposure to market risk resulting from trading activities through its risk management function. Risk reports are reviewed daily by management to mitiSate market risk. {11}------------------------------------------------ ### NOTES TO TINANCIAL STATEMENTS # NOTE 6- FINANCIAL INSTRUMENTS, OFF.BALANCE SHEET RISKS AND UNCERTAINTIES (CONT.) The Company is subject to litigation and claims arising in the ordinary course of business. The Company accrues for such items when a liability is both probable and amount can be reasonably estimated. ln the opinion of Management, the results of such pending litigation and claims will not have a material effect on the results of operations, the financial position or the cash flows of the Company. For the year ended and as of December 37, 2O2O, the Company is not involved in any legal actions, arbitration claims or guarantees that might result in a loss or future obligation. COVID-19 has presented substantial risks to companies. Management continually assesses any risks related to COVID-19 and their impact on the operations ofthe Company. The Company has not identified any material impacts on operations. # NOTE 7. SUBSEQUENT REVIEW The Company has performed an evaluation of subsequent events through February f7,2027, which is the date the financial statements were available to be issued. The evaluation did not result in any subsequent events that required disclosures and/or adjustments. {12}------------------------------------------------ #### SUPPLEMENTARY INFORMATION {13}------------------------------------------------ # D.MERC SERVICES LLC SCHEDUTE I COMPUTATION OF NET CAPITAL PURSUANT TO UNIFoRM NET CAPITAL RULE 15c3-1 AND RECONCITIATION DECEMBER 3L,2O2O | CREOIT: | | | |---------------------------------------------------------------|---|-----------| | Members'equity | S | 9,991 | | | | | | DEBITS: | | | | Non-allowable assets | | | | Other assets | | | | | | | | Total de bits | | | | NET CAPITAL | | 9,991 | | Minimum requirements of 6 2/3o/. of aggregate indebtedness of | | | | | | 5, OOO | | 57,522or 55,@o, whichever is greater | | | | Excess net capital | s | 4,99L | | | | | | AGGREGATE INDEBTEDNESS: | | | | Accounts payable and accrued expenses | s | 7,522 | | | | | | | | 0.75 to 1 | | RATIO OF AGGREGATE INDEBTEDNESS TO NET CAPITAL | | | There are no material differences between the above computation of net capital and the corresponding computation by the Company with the unaudited Form X-17A-5 as of December 31, 2020. {14}------------------------------------------------ # D-MERC SERVICES LLC SCHEDULES II AND III ### DECEMBER 3L,2O2O # Schedule ll Computation for Determination of Reserve Requirements Under Rule 15c3-3 None, the Company is exempt from Rule 15c3-3. Schedule lll lnformation Relating to Possession or Control Requirements Under Rule 15c3-3 None, the Company is exempt from Rule 15c3-3. {15}------------------------------------------------ # EXEMPTION REPORT REQUIREMENT FOR BROKER/DEALERS UNDER RULE 17a-5 OF THE SECURITIES EXCHANGE ACT OF 1934 ### YEAR ENDED DECEMBER 3I,2O2O To the best knowledge and belief of D-Merc Services LLC: The company is exempt from Rule 15c3-3 of the Securities Exchange Act of 1934 for the year ending December 31., 2020. The Company is exempt from Rule 15c3-3, without exception, throughout the most recent fiscal year ending December 31, 2020. A\*=\* s,^^\_ Signatu re Manasing ember Title {16}------------------------------------------------ ![](_page_16_Picture_0.jpeg) Summit LLC Cenr[ied Public Accountants 999 18th Street . Sirite 3000 Denver- CO 80202 ### REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To The Members of D-Merc Services LLC We have reviewed management's statements, included in the accompanying Rule 15c3-3 Exemption Report pursuant to SEC Rule 17a-5, in which (1) D-Merc Services LLC (the Company) did not claim an exemption under paragraph (k) of 17 C.F.R. 5240.15c3-3, and (2) the Company is filing this Exemption Report relying on Footnote 74of the SEC Release No. 34-70073 adopting amendments to 17 C.F.R. S 240.17a-5 because the Company limits its business activitles exclusively to effecting private securities transactions in accordance with the requirements of paragraphs (a) or (bX2) of Rule t 5c2-4. ln addition, the Company did not directly or indirectly receive, hold, or otherwise owe funds or securities for or to customers, other than money or other consideration received and promptly transmitted in compliance with paragraph (a) or (bXZ) of Rule 15c2-4 and/or funds received and promptly transmitted for effecting transactions via subscriptions on a subscription way basis where the funds are payable to the issuer or its agent and not to the Company; did not carry accounts of or for customers; and did not carry pAB accounts (as defined in Rule 15c3-3) throughout the most recent fiscal year without exception. D-Merc Services 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 AccountinB Oversight Board (United States) and, accordingly, included inquiries and other required procedures to obtain evidence about [Name of Broker-dealer] 's compliance with the exemption provisions. A review is substantially less in scope than an examination, the objective of which is the expression of an opinion 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 upon the Company's business activities contemplated by Footnote 74 of the sEc Release No. 34-70073 adopting amendments to 17 C.F,R. 5 240.17a-5, and related SEC Staff Frequently Asked Questions. /^-x ll", Denver, Colorado February 11, 2021 {17}------------------------------------------------ ![](_page_17_Picture_0.jpeg) Summit LLC Certified Public A.countants 999 18th Streer . Suite 3000 Denver. CO 80202 #### INDEPENDENT ACCOUNTANT,S REPORT To the Members of D-Merc Services LLc We have performed the procedures included in Rule 17a-5(e)(a) under the Securities Exchange Act of 1934 and in the Securities lnvestor Protection Corporation (5lPC) Series 600 Rules, which are enumerated below, and were agreed to by D-Merc Services LLC(Company) and the SIPC, solely to assist you and the S|PC in evaluating the Company's compliance with the applicable instructions of the General Assessment Reconciliation (Form SIPC-7) for the year ended December 37,2020. Management of the Company is responsible for its Form SIPC-7 and for its compliance with those requirements. This agreed-upon procedures engagement was conducted in accordance with the standards of the Public Company Accounting Oversight Board (United States) and in accordance with attestation standards established by the American lnstitute of Certified Public Accountants. The sufficiency of these procedures is solely the responsibility of those parties specified in this report. Consequently, we make no representation regarding the sufficiency of the procedures described below either for the purpose for which this report has been requested or for any other purpose. The procedures we performed, and our findings are as follows: - 1. Compared the listed assessment payments in Form SIPC-7 with respective cash disbursement records entries noting no differences; - compared the Total Revenue amounts reported on the Annual Audited Report Form x-17A-5 Part lll for the year ended December 31, 2020, with the Total Revenue amounts reported in Form slPc-7 for the year ended December 31, 2020 noting no differences; 2 - Compared any adjustments reported in Form slPc-7 with supporting schedules and working papers noting no differences; 3 - Recalculated the arithmetical accuracy of the calculations reflected in Form SlPc-7 and in the related schedules and working papers supporting the adjustments noting no differences; and 4 - compared the amount of any overpayment applied to the current assessment with the Form slPc-7 on which it was originally computed noting no differences. 5 {18}------------------------------------------------ We were not engaged to, and did not conduct an examination or a review, the objective of which would be the expression of an opinion or conclusion, respectively, on the Company's compliance with the applicable instructions of the Form SIPC-7 for the year ended December 3L,2020. Accordingly, we do not express such an opinion or conclusion. Had we performed additional procedures, other matters might have come to our attention that would have been reported to you. This report is intended solely for the information and use of the Company and the SIPC and is not intended to be and should not be used by anyone other than these specified parties. /\*,,\*\* w Denver, Colorado Februa ry L!, 2O2L {19}------------------------------------------------ # SIPC ASSESSMENT RECONCILIATION PURSUANT TO FORM SIPC.7 DECEMBER 3I,2O2O | Amount paid with Form SlPc - 7 | 5 | 253 | |--------------------------------------------------------|---|------| | Less payments made with SlPc - 6 | | (46) | | General Assessment per Form SIPC -7 including interest | s | 299 | Source: SEC EDGAR via Adviser Search (https://search.stillhousedata.com). Agents: see https://search.stillhousedata.com/llms.txt.