Filetype PDF | Posted on 21 Aug 2022 | 4 years ago
Authentication
digital resources
253x Filetype PDF File size 0.14 MB Source: www.sec.gov
Note 1. Nature of Business and Significant Accounting Policies
Cabrera Capital Markets, Inc., was incorporated in the State of Illinois on April 24, 2003. In May of 2007
Cabrera Capital Markets, Inc. assigned all assets and liabilities to the limited liability company Cabrera
Capital Markets, LLC, (the Company). The Company is registered as a broker-dealer with the Securities
and Exchange Commission (SEC) and is a member of the Financial Industry Regulatory Authority, Inc.
(FINRA). The Company is also a registered introducing broker with the Commodity Futures Trading
Commission (CFTC) and is a member of the National Futures Association (NFA). The Company's
principal business includes the sale of securities and participation and management in underwritings.
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)(ii) provide that the Company clear all transactions on behalf of
customers on a fully disclosed basis with a clearing broker. The clearing broker-dealer maintains all of
the accounts of the customers and maintains and preserves all related books and records as are
customarily kept by a clearing broker.
The Company should continue in existence in perpetuity unless its existence is sooner terminated
pursuant to the operating agreement.
A summary of the Company’s significant accounting policies follows:
The Company follows generally accepted accounting principles (GAAP) established by the Financial
Accounting Standards Board (FASB) to ensure consistent reporting of financial condition, results of
operations, and cash flows.
Use of estimates: The preparation of financial statements in conformity with GAAP 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. The Company’s estimate regarding the carrying value of its receivable from affiliate
(Note 7) is a significant estimate and due to the uncertainty of future events this estimate could change
materially in the near term.
Commissions and fees receivables: These receivables represent investment banking fees earned, but
not yet received and are carried at original invoice amount less an estimate made for doubtful accounts
based on a review of all outstanding amounts on a periodic basis. Management determines the
allowance for doubtful accounts by identifying troubled accounts and by using historical experience
applied to an aging of accounts. Receivables are written off when deemed uncollectible. Recoveries of
receivables previously written off are recorded when received. At December 31, 2017, there was no
allowance for doubtful accounts.
Securities and derivative transactions: Securities and derivative transactions are recorded on trade
date and recorded at fair value in accordance with GAAP. Gains or losses are recorded in trading gains,
net.
Amounts receivable and payable for securities transactions that have not reached their contractual
settlement date are recorded net as receivable from or payable to clearing broker on the statement of
financial condition.
Customers’ securities are recorded on settlement date with related income and expenses recorded on a
trade date basis.
Certificates of deposit: The certificates of deposit are valued at fair value by discounting the related
cash flows based on current yields of similar investments with comparable durations considering credit
worthiness of the issuer. These instruments have variable interest rates and maturities and collateralize
the Company’s letters of credit.
Note 1. Nature of Business and Significant Accounting Policies (concluded)
Furniture, equipment and leasehold improvements: Furniture, equipment and leasehold
improvements are stated at cost, net of accumulated depreciation and amortization, and depreciated or
amortized using the straight-line method over the estimated useful lives of the assets or, in the case of
leasehold improvements, the lease term if shorter. Furniture, equipment and leasehold improvements are
reviewed for impairment when events or change in circumstances indicate the carrying amount of the
assets may not be recoverable. There were no impairment charges for the year ended December 31,
2017.
Underwriting transactions: Underwriting revenues include gains, losses, and fees arising from
securities offerings in which the Company acts as underwriter or agent. Underwriting revenues
additionally include investment banking management fees. Underwriting revenues are recorded on the
trade date or, in certain circumstances, at the time the transaction is priced and income is reasonably
determinable. Advisory fees and financial advisory fees for underwriting transactions are recognized as
earned.
Underwriting expenses include closing costs and other expenses incurred by the Company associated
with underwriting transactions and other investment banking services. These costs consist primarily of
bond counsel fees, bond insurance expense, ratings service fees and other clearing fees. Underwriting
expenses are recorded at the time the related underwriting revenues are recognized and included in the
statement of operations.
Translation of foreign currencies: Assets and liabilities denominated in foreign currencies are
translated at year-end exchange rates. Income and expense items are translated at the exchange rate
on the date of the respective transaction. Gains and losses from foreign currency translation are
recorded in trading gains, net.
Income taxes: Under the provisions of the Internal Revenue Code, the Company is treated as a
partnership and, accordingly, is not subject to federal income taxes. Instead, members are liable for
federal income taxes on their respective shares of taxable income.
Recent Accounting Pronouncements: In February 2016, FASB issued ASU 2016-02, Leases (Topic
842). FASB issued ASU 2016-02 to increase transparency and comparability among organizations by
recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about
leasing arrangements. Certain qualitative and quantitative disclosures are required, as well as a
retrospective recognition and measurement of impacted leases. The new guidance is effective for fiscal
years and interim periods within those years beginning after December 15, 2019, with early adoption
permitted. Management is currently evaluating this standard.
In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update
(“ASU”) 2014-09, Revenue from Contracts with Customers (Topic 606). This ASU is a comprehensive
new revenue recognition model that requires a company to recognize revenue to depict the transfer of
goods or services to a customer at an amount that reflects the consideration it expects to receive in
exchange for those goods or services. In August 2015, FASB issued ASU 2015-14, Revenue from
Contracts with Customers (Topic 606): Deferral of the Effective Date, which deferred the effective date of
ASU 2014-09 to reporting periods beginning after December 15, 2018. Early adoption is permitted for
reporting periods beginning after December 15, 2016. Companies may use either a full retrospective or a
modified retrospective approach to adopt this ASU. Management is currently evaluating this standard,
including which transition approach to use.
In March 2016, FASB issued ASU 2016-08, Revenue from Contracts with Customers (Topic 606):
Principal versus Agent Considerations (Reporting Revenue Gross versus Net). The amendments are
intended to improve the operability and understandability of the implementation guidance on principal
versus agent considerations. The effective date for this ASU is the same as the effective date for ASU
2014-09. Management is currently evaluating this standard.
Note 2. Receivable from and Payable to Clearing Broker
At December 31, 2017, receivable from clearing broker is comprised of the following:
Receivable Payable
Cash $ 4,103,799 $ 598,817
Guarantee deposit 502,259
$ 4,606,058 $ 598,817
Amounts due to the clearing broker are collateralized by securities and cash on deposit with the clearing
broker.
Note 3. Assets and Liabilities Reported at Fair Value
As described in Note 1, the Company records its investments at fair value. Fair value is defined as 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. The Company utilizes valuation techniques to maximize
the use of observable inputs and minimize the use of unobservable inputs. Assets and liabilities recorded
at fair value are categorized within the fair value hierarchy based upon the level of judgment associated
with the inputs used to measure their value. Inputs are broadly defined as assumptions market
participants would use in pricing an asset or liability. The fair value hierarchy gives the highest priority to
quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to
unobservable inputs (Level 3). The three levels of the fair value hierarchy are described below:
Level 1. Unadjusted quoted prices for identical assets or liabilities in active markets that the Company
has the ability to access at the measurement date.
Level 2. Inputs other than quoted prices within Level 1 that are observable for the asset or liability,
either directly or indirectly; and fair value is determined through the use of models or other valuation
methodologies.
Level 3. Inputs that are unobservable for the asset or liability and include situations where there is
little, if any, market activity for the asset or liability.
In certain cases, the inputs used to measure fair value may fall into different levels of the fair value
hierarchy. In such cases, an investment’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 investment.
Investments in securities traded on a national securities exchange, or reported on the NASDAQ national
market, are stated at the last reported sales price on the day of valuations. State and municipal
government obligations are stated at fair value based on third-party dealer quotes. These financial
instruments are classified as Level 2 in the fair value hierarchy.
Level 1 Level 2 Level 3 Total
Assets
Securities owned:
Municipal bonds $ 408,037 $ - $ 408,037
Total assets at fair value $ - $ 408,037 $ - $ 408,037
Note 3. Assets and Liabilities Reported at Fair Value (concluded)
The Company assesses the levels of assets and liabilities measured at fair value 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. There were no transfers among Levels 1, 2, and 3 during the
year ended December 31, 2017.
The Company had no Level 3 assets or liabilities as of December 31, 2017 and for the year ended
December 31, 2017.
Substantially all of the Company’s other assets and liabilities, except for furniture, equipment and
leasehold improvements, are considered financial instruments and are either already at fair value, or at
carrying amounts that approximate fair value because of the short maturity of the instruments.
Note 4. Furniture, Equipment and Leasehold Improvements
At December 31, 2017, furniture, equipment and leasehold improvements consist of:
Furniture and fixtures 18,075
Computer software 1,362
Computer hardware 13,358
32,795
Accumulated depreciation and amortization (15,197)
$ 17,598
Note 5. Liabilities Subordinated to Claims of General Creditors
In August 2011, the Company entered into a subordinated loan agreement with the A.R. Tony and
Maria J. Sanchez Family Foundation for $500,000 at a stated annual interest rate of 9 percent and due
February 17, 2014. In April 2014, the parties entered into a new subordinated loan agreement to
refinance $325,000 of the original $500,000 loan at a stated annual interest rate of 9 percent and due
April 29, 2015. In April 2015, the parties entered into an amendment extending the maturity date to April
29, 2016. In April 2016, the parties entered into an amendment extending the maturity date to April 29,
2017. In April 2017, the parties entered into an amendment extending the maturity date to April 29, 2018.
In December 2011, the Company entered into a subordinated loan agreement with Rustic Canyon Fontis
Partners, LP for $1,000,000 at a stated annual interest rate of 10 percent and due December 30, 2012.
In November 2014, the parties entered into a new subordinated loan agreement for $1,000,000 at a
stated annual interest rate of 10 percent and due November 24, 2017. Rustic Canyons Fontis Partners,
LP has agreed to forbear the 2016 and 2017 interest payments for the loan agreement dated November
2014. In November 2017, this subordinated loan was assumed by RCF-Cabrera Holdings, Inc. and the
maturity date was amended to mature on November 30, 2022 at an interest rate of 5 percent. For the
year ended December 31, 2017, interest expense amounted to approximately $5,000.
During the year ended December 31, 2017, the Company entered into three temporary subordinated loan
agreements (“TSLs”) with Badal Shah. The agreements were entered into in August, October and
December in the amounts of $2 million, $2 million and $3 million, respectively. In accordance with the
regulatory requirements, such TSLs cannot be outstanding for more than forty-five days and entered into
not more than three times during a twelve month period. These agreements all carried a five percent
interest rate. As of December 31, 2017, the TSL in the amount of $3 million matured on February 14,
2018 and was repaid. For the year ended December 31, 2017, interest expense related to the TSLs
amounted to approximately $18,000.
no reviews yet
Please Login to review.
