# MAGSTAR CAPITAL, LLC X-17A-5 (2020-02-26) — Broker-dealer annual report
- Company: MAGSTAR CAPITAL, LLC
- Form: X-17A-5
- Filed: 2020-02-26
- Period: 2019-12-31
- Accession: 0001744285-20-000003
- CIK: 1744285
- File #: 8-70145
- Material weakness: No
- Auditor: FGMK, LLC
- Auditor location: Chicago, IL
- Contact: David Magli
- Phone: 2243432140
- Signed by: David Magli (Chief Executive Officer)
Original filing: https://www.sec.gov/Archives/edgar/data/1744285/000174428520000003/public.pdf
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# *Magstar Capital, LLC*
Financial Statement and Independent Auditor's Report
December 31, 2019
**Filed as a Public Document Pursuant to Rule 17a-5(d) of the Securities Exchange Act of 1934.**
**\*\*\* PUBLIC DOCUMENT \*\*\***
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**UNITEDSTATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549**
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# **ANNUAL AUDITED REPORT FORM X-17A-5 PART III**
SEC FILE NUMBER **8-70145**
**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 09/17/2018 | | | | AND ENDING 12/31/2019
MM/DD/YY | | |
|----------------------------------------------------------------------------------------|-------------------------------------------------------------------|---------------------------------------------------------------------|---------|-----------------------------------|--|--|
| | | MN1,DIFYY | | | | |
| | | A. REGISTRANT IDENTIFICATION | | | | |
| | | NAME OF BROKER-DEALER: MagStar Capital, LLC | | OFFICIAL USE ONLY | | |
| | ADDRESS OF PRINCIPAL PLACE OF BUSINESS: (Do not use P.O. Box No.) | | | FIRM I.D. NO. | | |
| 201 Willett Avenue, Suite 230 | | | | | | |
| | | (No. and Street) | | | | |
| | Port Chester | NY | | 10573 | | |
| (City) | | (State) | | (Zip Code) | | |
| NAME AND TELEPHONE NUMBER OF PERSON TO CONTACT IN REGARD TO THIS REPORT
David Magli | | | | (224) 343-2140 | | |
| | | | | (Area Code - Telephone Number) | | |
| | | B. ACCOUNTANT IDENTIFICATION | | | | |
| INDEPENDENT PUBLIC ACCOUNTANT whose opinion is contained in this Report* | | | | | | |
| FGMK, LLC | | | | | | |
| | | (Name - if individual. state last. first, middle name) | | | | |
| | 333 W. Wacker Dr., 6th Floor Chicago | | IL | 60606 | | |
| (Address) | | (City) | (State) | (Zip Code) | | |
| CHECK ONE: | | | | | | |
| | | | | | | |
| EICertified Public Accountant
Public Accountant | | | | | | |
| | | Accountant not resident in United States or any of its possessions. | | | | |
| | | FOR OFFICIAL USE ONLY | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
*\*Claims for exemption from the requirement that the annual report be covered by the opinion of an independent public accountant must he supported by a statement of facts and circumstances relied on as the basis.for the exemption. See Section 240.17a-5(e)(2)*
> **Potential persons who are to respond to the collection of information contained in this form are not required to respond unless the form displays a currently valid OMB control number.**
SEC 1410 (11-05)
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# **TABLE OF CONTENTS**
| | Page |
|---------------------------------------------------------|-------|
| LETTER OF OATH OR AFFIRMATION | 1 |
| REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM | 2 |
| FINANCIAL STATEMENT | |
| Statement of Financial Condition | 3 |
| Notes to the Financial Statement | 4 - 6 |
| | |
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# **OATH OR AFFIRMATION**
| 1,David Magli | , swear (or affirm) that, to the best of |
|------------------------------------------------------------------------------------------------------------------------------------------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| Magstar Capital, LLC | my knowledge and belief he accompanying financial statement and supporting schedules pertaining to the firm of
, as |
| of December 31 | , 20 19
are true and correct. I further swear (or affirm) that |
| neither the company nor
classified solely as that of customer, except as follows: | y partner, proprietor, principal officer or director has any proprietary interest in any account |
| MICHELE Y VALENTA
Official al
Notary Public - State of Illinois
My Commission ExpirJun 22, 2023 | Si a re
Chief Executive Officer |
| | Title |
| (N,i,aaQ
Notary Public
This report ** contains (che all applicable boxes):
(a) Facing Page.
0 (b) Statement of Financial Condition.
D | A,aW4es,
(c) Statement of Income (Loss) or, if there is other comprehensive income in the period(s) presented, a Statement |
| (d) Statement of Change in Financial Condition.
(g) Computation of Net I apital.
MmEl | of Comprehensive In ome (as defined in §210.1-02 of Regulation S-X).
(e) Statement of Change in Stockholders' Equity or Partners' or Sole Proprietors' Capital.
(1) Statement of Change in Liabilities Subordinated to Claims of Creditors.
(h) Computation for Det- mination of Reserve Requirements Pursuant to Rule 15c3-3.
(i) Information Relating o the Possession or Control Requirements Under Rule 15c3-3.
0 (j) A Reconciliation, incl ding appropriate explanation of the Computation of Net Capital Under Rule 15c3-1 and the |
| O
consolidation.
e
(1) An Oath or Affirmatio
(m) A copy of the SIPC S is plemental Report. | Computation for Dete mination of the Reserve Requirements Under Exhibit A of Rule 15c3-3.
(k) A Reconciliation bet en the audited and unaudited Statements of Financial Condition with respect to methods of
0 (n) A report describing an material inadequacies found to exist or found to have existed since the date of the previous audit. |
| | |
*\*\*For conditions of confident!' treatment of certain portions of this filing. see section 240.17a-5(e)(3).*
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# **REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM**
To the Management of Magstar Capital, LLC
# *Opinion on the Financial Statement*
We have audited the accompanying statement of financial condition of Magstar Capital, LLC (the "Company") as of December 31, 2019, 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, 2019, 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. 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 audits 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 control over financial 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 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 2019.
Chicago, Illinois February 17, 2020
FGMK, LLC fgmk.com
333 W. Wacker Drive, 6th Floor Chicago, IL 60606 312.818.4300
2801 Lakeside Drive, 3rd Floor Bannockburn, IL 60015 847.374.0400
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# **STATEMENT OF FINANCIAL CONDITION**
# **DECEMBER 31, 2019**
| ASSETS | |
|---------------------------|---------------|
| Cash and cash equivalents | \$
210,637 |
| Accounts receivable | 413,256 |
| Prepaid expenses | 7,837 |
| | |
# **LIABILITIES AND MEMBER'S EQUITY**
| LIABILITIES | |
|----------------------|---------------|
| Accounts payable | \$
718 |
| Accrued expenses | 392,981 |
| Due to member | 40,374 |
| Contract liabilities | 37,500 |
| Other | 6,484 |
| | 478,057 |
| MEMBER'S EQUITY | 153,673 |
| | \$
631,730 |
\$ 631,730
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# **NOTES TO THE FINANCIAL STATEMENT**
# **NOTE 1 – DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES**
*Description of Business.* Magstar Capital, LLC (the "Company") was incorporated in the State of New York on January 26, 2018. The Company is registered as a broker/dealer with the Securities and Exchange Commission ("SEC") and the Financial Industry Regulatory Authority ("FINRA") and various states, and, in this capacity, it performs financial advisory, capital raising, and investment banking services.
*Significant Accounting Policies.* A summary of the Company's significant accounting policies are as follows. The Company follows accounting principles generally accepted in the United States of America ("GAAP") as established by the Financial Accounting Standards Board ("FASB") to ensure consistent reporting of financial condition, results of operations, and cash flows.
*Management Estimates and Assumptions.* The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates. Future events and their effects cannot be predicted with certainty; accordingly, accounting estimates require the exercise of judgment. Accounting estimates used in the preparation of these financial statements change as new events occur, as more experience is acquired, as additional information is obtained and as the operating environment changes.
*Cash and Cash Equivalents.* All highly liquid investments purchased with an original maturity of three months or less are considered to be cash equivalents. The Company regularly maintains cash balances that exceed Federal Depository Insurance Corporation limits.
*Accounts Receivable and Allowances for Uncollectible Accounts.* Accounts receivable are reported net of any estimated allowances for uncollectible accounts and contractual adjustments. All receivables are uncollateralized. To provide for receivables that could become uncollectible in the future, the Company may establish an allowance for uncollectible accounts to reduce the carrying amount of such receivables to their estimated net realizable value. The allowance for uncollectible accounts is based upon management's assessment of historical and expected net collections, business and economic conditions, and other collection indicators. No allowance was deemed necessary by management as of December 31, 2019.
*Due to Member.* Represents advances from the Company's member that are unsecured, non-interest bearing and due on demand.
*Revenue Recognition.* The Company recognizes revenue in accordance with FASB Accounting Standards Codification ("ASC") 606, *Revenue from Contracts with Customers*. Revenue from contracts with customers is recognized when, or as, the Company satisfies its performance obligations by transferring promised goods of services to customers. A good or service is transferred to a customer when, or as, the customer obtains control of that good or service. The amount of revenue recognized reflects the consideration to which the Company expects to be entitled in exchange for those promised goods or services.
*Significant Judgements*. Revenue from contracts with customers includes commission income and fees from investment banking services. The recognition and measurement of revenue is based on the assessment of individual contract terms. Significant judgement 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 do to uncertain future events.
The following provides detailed information on the recognition of the Company's revenue from contracts with customers:
*Initial/Advisory Fees.* Initial/Advisory fees are due in accordance with the terms of the executed agreement and are typically recorded upon execution of a signed agreement. Performance obligations in these arrangements vary depending on the contract, but are typically satisfied at a point in time under the arrangement. These types of fees may also include retainer, and/or success fees, which are recognized upon the completion or cancelation of the deal.
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# **NOTES TO THE FINANCIAL STATEMENT**
#### **NOTE 1 – DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES** (Concluded)
*Fairness Opinion and Valuation Fees.* Fairness opinion and valuation fees are due in accordance with the terms of the executed agreement, and the performance obligation is satisfied upon issuance of the fairness opinion or valuation, as applicable. Fees are recognized as revenue when the performance obligation is satisfied at a point in time, generally upon issuance of the fairness opinion or valuation.
*Placement/Underwriting Fees.* Placement/Underwriting fees are due in accordance with the terms of the executed agreement, and the performance obligation is satisfied upon consummating an offering. Fees are recognized as revenue when the performance obligation is satisfied at a point in time, generally when the respective closing of the offering has occurred.
*Completion Fees.* Completion fees are due in accordance with the terms of the executed agreement, typically either a dollar amount or percentage upon execution of a definitive agreement and the remainder upon closing, or a dollar amount or percentage upon closing. Performance obligation is satisfied upon the closing or cancelation of the transaction. Fees are recognized as revenue when the performance obligation is satisfied at a point in time, generally upon completion of these events.
*Reimbursed Expenses.* The Company categorizes revenue related to expenses made on behalf of clients and reimbursable by clients as reimbursed expenses.
*Costs to Obtain or Fulfill a Contract with a Customer.* The Company records as an asset certain costs incurred to obtain revenue contracts with its customers, such as sales commissions paid to employees for obtaining new contracts with clients. These costs are expensed at the time the performance obligation has been satisfied.
The Company did not have assets from costs to obtain contracts with customers at September 17, 2018 and December 31, 2019, respectively. During the period, the Company did not recognize any expense to obtain or fulfill a contract with a customer.
*Contract Liabilities.* The Company records a contract liability when the Company receives payment in advance of satisfying its performance obligation and recognizing revenue.
*Income Taxes.* The Company, with the consent of its members, elected under the Internal Revenue Code to be taxed as an S-corporation. As such, the members of an S-corporation are taxed on their proportionate share of the Company's taxable income. Therefore, no provision for Federal income taxes has been included in the accompanying financial statements. The Company's net income or loss is allocated among the members in accordance with the operating agreement of the Company. The Company may be subject to various state and local income taxes.
*Leases.* The Company recognizes and measures its leases in accordance with FASB ASC 842, *Leases.* The Company has elected, for all underlying classes of assets, to not recognize right of use assets and lease liabilities for short-term leases of less than 12 months at lease commencement, which do not include an option to renew or purchase the underlying asset that the Company is reasonably certain to exercise. The Company recognizes lease cost associated with our short-term leases on a straight-line basis over the lease term.
#### **NOTE 2 – COMMITMENTS, CONTINGENCIES AND INDEMNIFICATIONS**
In the ordinary course of business, the Company may be subject to various claims, litigation, regulatory and arbitration matters. Although the effects of these matters cannot be determined, the Company's management believes that their ultimate outcome will not have a material effect on the Company's financial position, results of operations, or net cash flows.
In the normal course of business, the Company enters into contracts that contain a variety of representations and warranties that provide indemnification 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 obligations under these indemnifications to be remote.
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#### **NOTES TO THE FINANCIAL STATEMENT**
#### **NOTE 3 – CONCENTRATIONS OF CREDIT AND MARKET RISK**
*Accounts Receivable.* Three customers account for 98% of accounts receivable as of December 31, 2019.
*Credit Risk.* Due to the nature of the industry, revenue received from customers is typically non-recurring. The ongoing operation of the Company is economically dependent on its ability to enter into contracts with new customers. Additionally, the Company may engage in various trading activities in which counterparties primarily include broker-dealers, banks, and other financial institutions. In the event counterparties do not fulfill their obligations, the Company may be exposed to risk. The risk of default depends on the creditworthiness of the counterparty or issuer of the instrument. It is the Company's policy to review, as necessary, the credit standing of each counterparty.
*Market Risk.* Market risk is the potential change in an instrument's value caused by fluctuations in interest rates, equity prices, credit spreads, volatilities, correlations, liquidity, or other risks. Exposure to market risk is influenced by a number of factors, including the relationships between financial instruments and the volatility and liquidity in the markets in which financial instruments are traded. The Company uses various analytical monitoring techniques to control is exposure to market risk.
# **NOTE 4 – NET CAPITAL REQUIREMENTS**
The Company is subject to the SEC's Uniform Net Capital Rule (Rule 15c3-1). Under this rule, the Company is required to maintain "minimum net capital" equivalent to \$5,000 or 6 2/3% of "aggregate indebtedness," whichever is greater, and a ratio of "aggregate indebtedness" to "net capital" less than 15 to 1, as these terms are defined. Rule 15c3-1 also provides that equity capital may not be withdrawn if the resulting net capital ratio would exceed 10 to 1. At December 31, 2019, the Company had net capital of \$93,855 which was \$61,984 in excess of its required net capital of \$31,871. The Company's net capital ratio was 5.09 to 1.
#### **NOTE 5 – SUBSEQUENT EVENTS**
Management has evaluated all subsequent events through the date the accompanying financial statement was issued.
Source: SEC EDGAR via Adviser Search (https://search.stillhousedata.com). Agents: see https://search.stillhousedata.com/llms.txt.