# GBM INTERNATIONAL, INC. X-17A-5 (2020-03-02) — Broker-dealer annual report - Company: GBM INTERNATIONAL, INC. - Form: X-17A-5 - Filed: 2020-03-02 - Period: 2019-12-31 - Accession: 0000876453-20-000001 - CIK: 876453 - File #: 8-43882 - Material weakness: No - Auditor: EEPB - Auditor location: Houston, TX - Contact: Kristy Johnson - Phone: 281-367-0380 - Signed by: Jose Macouzezt (President/CCO) Original filing: https://www.sec.gov/Archives/edgar/data/876453/000087645320000001/audit148.pdf --- {0}------------------------------------------------ l"NITEDSTATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 #### OMSAPPROVAl OMB Number: 3235-0123 Expires: August 31, 2020 Estimated average burden hours oerresponse ...... 12.00 ## **ANNUAL AUDITED REPORT FORM X-17A-5 PARTlll** | SEC FILE NUMBER | |-----------------| | 8-43882 | | | 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 01/01/2019 | | AND ENDING 12/31/2019 | | | |------------------------------------------------|---------------------------------------------------------------------------|-----------------------|-------------------------------|--| | | | | | | | | A. REGISTRANT IDENTIFICATION | | | | | NAME oF BROKER-DEALER: GBM International, Inc. | | OFFICIAL USE ONLY | | | | | ADDRESS OF PRINCIPAL PLACE OF BUSINESS: (Do not use P.O. Box No.) | | FIRM l.D. NO. | | | 2700 Post Oak Blvd., Suite 1110 | | | | | | | (No and Street} | | | | | Houston | Texas | 77056 | | | | {City) | (State ) | (Z1p Code} | | | | Jose Macouzet | NAME AND TELEPHONE NUMBER OF PERSON TO CONTACT IN REGARD TO THIS REPORT | | 281-745·91CO | | | | | | (Area Code- Telephone Number) | | | | B. ACCOUNTANT IDENTIFICATION | | | | | | INDEPENDENT PUBLIC ACCOUNT ANT whose opinion is contained in this Report* | | | | | EEPB, P.C. | | ----
-- | ---- | | | | (Name - 1/ mdiwdual. statf! /aJI. first. middle flame) | | - | | | 2950 North Loop West, Suite 1200 Houston | | Texas | 77092 | | | (Address) | (City) | (State ) | (Zip Code) | | | CHECK ONE: | | | | | | Iv' I
Certified Public Accountant | | | | | | OPublic Accountant | | | | | | D | 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 be supported by a statement of facts and circumstances relied on as the basisfo1· the exemption. See Section 240. /7a-5{e){1)* > 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 (06-02) {1}------------------------------------------------ #### **OATH OR AFFIRMATION** ![](_page_1_Figure_1.jpeg) *\*\*For conditions of confidential tre ,1tment of certain portions of this filing, see section 240. I 7a-5(e}( 3).* {2}------------------------------------------------ # GBM INTERNATIONAL, INC. (A WHOLLY-OWNED SUBSIDIARY OF PORTFOLIO INVESTMENTS, INC.) FINANCIAL STATEMENTS AND SUPPLEMENTAL INFORMATION December 31 , 2019 {3}------------------------------------------------ ## **CONTENTS** | PAGE
NUMBER | | |-------------------------------------------------------------------------------------------------|--| | 3-4
INDEPENDENT AUDITORS' REPORT
.






| | | FINANCIAL STATEMENTS | | | STATEMENT OF FINANCIAL CONDITION , . , , . , . , , 5 | | | STATEMENT OF INCOME . 6 | | | STATEMENT OF CHANGES IN SUBORDINATED BO RROWI NGS 7 | | | STATE MENT OF STOCKHOLDER'S EQUITY 8 | | | STATEMENT OF CASH FLOWS 9
NOTES TO FINANCIAL STATEMENTS 10-22 | | | SUPPLEMENTAL INFORMATION | | | COMPUTATION OF NET CAPITAL , , 23 | | | . 24
GBM INTERNATIONAL, INC EXEMPTION REPORT | | | REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
25 | | | INDEPEND ENT AUDITOR'S REPORT ON APP LYING AG REED-UPON | | | PROCEDURES RELATED TO AN ENTITY'S SIPC ASSESSMENT | | | RECONCILIATION , , . , 26 | | | GEN ERAL ASSESSMENT RECONCILIATION , 27 | | {4}------------------------------------------------ ![](_page_4_Picture_0.jpeg) #### REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Board of Directors and Shareholders of GBM International, Inc. #### **Opinion on the Financial Statements** We have audited the accompanying statement of financial condition of GBM International, Inc. as of December 31, 2019, the related statements of income, changes in stockholder's equity, changes in subordinated borrowings, and cash flows for the year then ended, and the related notes and supplemental information (collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly , in all material respects, the financial position of GBM International, Inc. as of December 31, 2019, 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 GBM International, lnc.'s management. Our responsibility is to express an opinion on GBM International, lnc.'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 GBM International, Inc. 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 of the 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 accounting 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 . #### **Auditor's Report on Supplemental Information** The computation of net capital has been subjected to audit procedures performed in conjunction with the audit of GBM International, lnc.'s financial statements. The supplemental information is the responsibility of GBM International, lnc. 's 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. In forming our opinion on the supplemental {5}------------------------------------------------ information, we evaluated whether the supplemental information, including its form and content. is presented in conformity with 17 C.F.R. §240.17a-5. In our opinion, the computation of net capital is fairly stated, in all material respects, in relation to the financial statements as a whole. We have served as GBM International, lnc.'s auditor since 2007. Houston, TX February 28, 2020 {6}------------------------------------------------ #### GBM INTERNATIONAL, INC. #### STATEMENT OF FINANCIAL CONDITION #### DECEMBER 31 I 2019 #### ASSETS #### CURRENT ASSETS | Cash and cash equivalents
Deposits held by clearing brokers, restricted
Receivable from employees
Receivable from affiliates
Securities owned -
marketable, at market value
Other assets | \$ | 6,713,292
406,465
26,800
443,716
1,400,717
57,498 | |------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|----|------------------------------------------------------------------| | TOTAL CURRENT ASSETS | | 9,048,488 | | Property and equipment, net
Operating lease, right-of-use-asset | | 6,076
68,762 | | TOTAL NON-CURRENT ASSETS | | 74,838 | | TOTAL ASSETS | | 9,123,326 | | LIABILITIES AND STOCKHOLDER'S EQUITY | | | | CURRENT LIABILITIES | | | | Accounts payable and accrued liabilities
Operating lease liability
Deferred income tax payable | \$ | 325, 197
69,053
76,776 | | TOTAL CURRENT LIABILITIES | | 471,026 | | COMMITMENTS AND CONTINGENCIES | | | | STOCKHOLDER'S EQUITY | | | | Common stock, no par value; 1,000 shares authorized;
725 shares issued and outstanding
Additional paid in capital
Retained earnings (deficit) | | 1,516,333
7,135,967 | | TOTAL STOCKHOLDER'S EQUITY | | 8,652,300 | | TOTAL LIABILITIES AND STOCKHOLDER'S EQUITY | \$ | 9,123,326 | {7}------------------------------------------------ #### GBM INTERNATIONAL, INC. #### STATEMENT OF INCOME #### FOR THE YEAR ENDED DECEMBER 31 , 2019 #### REVENUE | Comission income
Interest and dividends
Other income | 7,345,361
153,023
350,268 | |------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|-----------------------------------------------------------------------------| | TOTAL REVENUE | 7,848,652 | | EXPENSES | | | Employee compensation and benefits
Clearing, execution and commission fees
Research and terminal usage fees
General and administrative
Professional fees
Interest expense
Depreciation expense | 1,837,367
2, 104,441
165,501
724,933
355,423
24,820
7,233 | | TOTAL EXPENSES | 5,219,718 | | INCOME BEFORE INCOME TAXES | 2,628,934 | | PROVISION FOR INCOME TAXES | (555,098) | | NET INCOME | \$
2,073,836 | {8}------------------------------------------------ ### GBM INTERNATIONAL, INC. STATEMENT OF CHANGES IN SUBORDINATED BORROWINGS FOR THE YEAR ENDED DECEMBER 31. 2019 | BALANCE AT DECEMBER 31, 2018 | \$ | |----------------------------------|----| | Proceeds from subordinated notes | | | Payment of subordinated notes | | | BALANCE AT DECEMBER 31, 2019 | \$ | {9}------------------------------------------------ ## GBM INTERNATIONAL. INC. STATEMENT OF STOCKHOLDER'S EQUITY FOR THE YEAR ENDED DECEMBER 31, 2019 | | Shares | Additional
Paid-In
Capital | Accumulated
Deficit | Total | |--------------------------------------------------------------|--------|----------------------------------|------------------------------|------------------------------------------------| | BALANCE AT DECEMBER 31 , 2018
Distributions
Net income | 725 | \$
3,221,333
(1 ,705,000) | \$
5,062,131
2,073,836 | \$
8,283 ,464
(1 , 705,000)
2,073,836 | | BALANCE AT DECEMBER 31 , 2019 | 725 | \$
1,516,333 | \$
7,135,967 | \$
8,652,300 | {10}------------------------------------------------ #### GBM INTERNATIONAL, INC. #### STATEMENT OF CASH FLOWS #### FOR THE YEAR ENDED DECEMBER 31 I 2019 | CASH FLOWS FROM OPERATING ACTIVITIES | | |--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|----------------------------------------| | Net income | \$
2,073,836 | | Adjustments to reconcile net income
to cash provided by operating activities:
Depreciation
Deferred income taxes
Changes in operating assets and liabilities
Deposits held by clearing brokers, restricted
Securities owned at market value
Receivable from employees | 7,233
71,626
10,325
(353,369) | | Receivable from affiliates | 1,200
1,272,956 | | Other assets | (20,031) | | Accounts payable and accrued liabilities | 87,085 | | State Tax Liablity | (1 ,491) | | Accrued income taxes payable to affiliate | (115,728) | | NET CASH PROVIDED BY
OPERATING ACTIVITIES | 3,033,642 | | CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of Property and Equipment
NET CASH USED IN
INVESTING ACTIVITIES | ~954)
{954} | | | | | CASH FLOWS FROM FINANCING ACTIVITIES
Distribution
NET CASH USED IN | (1 ,705,000) | | FINANCING ACTIVITIES | ~1 705 000} | | NET INCREASE IN CASH AND | | | CASH EQUIVALENTS | 1,327,688 | | CASH AND CASH EQUIVALENTS, beginning of year | 5,385,604 | | CASH AND CASH EQUIVALENTS, end of year | \$
6,713,292 | | SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Interest Paid | \$
24,820 | {11}------------------------------------------------ ## GBM INTERNATIONAL, INC. NOTES TO FINANCIAL STATEMENTS DECEMBER 31 I 2019 ## NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES ### Organization GBM INTERNATIONAL, INC. **("International" or the "Company") was incorporated for the** purpose of serving as an introducing broker-dealer to its customers and conduct certain investment banking activities. International is a wholly-owned subsid iary of Portfolio Investments, Inc. ("Pl"), **which is a** wholly-owned subsidiary of Corporativo GBM S.A.B. de C.V. **("GBM Mexico"). International is registered with the Securities and Exchange** Commission as a broker-dealer under the Securiti es Exchange Act of 1934 and is a member of the Financial Industry Regulatory Authority ("Fl NRA"). **International is also** registered with the Commodity Futures Trad ing Commission as an introducing broker and is a member of the National Futures Associ ation . International executes securiti es trades for customers as a principal and agent. futures trades as agent and trades securities for its own account. All customer securities and futures transactions are cleared on a fully disclosed basis through unaffili ated broker-dealers. Accordingly, International does not carry customer accounts and does not receive, deliver or hold cash or securities in connection with such transactions. ### Cash and cash equivalents For the purposes of the statement of cash fl ows, International considers cash and highly liquid investments with original maturities of three months or less when purchased to be cash and cash equivalents. #### Deposits held by clearing brokers During the year ended December 31 , 2019, International maintained Securities **Clearing Agreements with Pershing LLC ("Pershing") and Apex Clearing Corporation,** Inc. **("APEX"). Pursuant to the terms of each Agreement, International is required to** maintain a certain level of cash or eligible securities on deposit at each clearing firm. At December 31, 2019, International was required to have cash deposits of \$150.000 at Pershing. The APEX agreement was terminated during 2019. Should Pershing suffer a loss due to a failure of a customer of International to complete a transaction, International is required to indemnify the applicable clearing firm to the extent of any such loss. At December 31 , 2019 there were no such amounts owed to either clearing firm nor did International incur any such loss during the year ended December 31, 2019. International maintained a similar Agreement with R.J . **O'Brien ("RJO") to** provide **clearing services for lnternational's futures trading activities. The amount of the cash** deposit maintained by International at RJO at December 31, 2019 was \$10,000. International is required to indemnify RJO to the extent of any loss incurred by RJO due to a failure of a customer of International to complete a transaction . {12}------------------------------------------------ ## NOTE1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) At December 31, 2019 there were no such amounts owed to RJO nor did International incur any such loss during the year ended December 31, 2019. At December 31, 2019, Intern ational maintained cash of \$157,819, \$237,645 and \$10,000 in the clearing deposit account of Pershing, APEX and RJO respecti vely. ### Receivable from nonaffi liated brokers and dealers Receivabl es from brokers, dealers, and clearing organizations may include amounts receivable for securities fai led to deliver, certain deposits for securities borrowed, amounts receivable from clearing organizations relating to open transactions, goodfaith and margin deposits , and commissions receivable. #### Securiti es transactions Securities owned and securities sold , not yet purchased are valued at market value. Unrealized gain or loss from marking securities owned and securiti es sold, not yet purchased to market value is included in income under other income. Securities transactions and related income and expense are recorded on the trade date. Realized gains and losses from sales of securities and derivatives are computed using the first-in, first-out method. ### Property and equipment Property and equipment is stated at cost, less accumulated depreciation . Depreciation is provided using accelerated methods over estimated useful lives of the related assets ranging from 5-7 years. Leasehold improvements are depreciated over the remaining useful life of the lease. Maintenance and repairs are charged to operations as incurred. #### Income taxes **lnternational's revenue and expenses are included in the consolidated Federal income tax return filed by Pl. lnternational's tax calculations are** made as if International prepared a separate income tax return. Additionally, International may record a tax benefit, if such benefit can be utilized by Pl in its consolidated return . International is also subject to certain state income taxes. International uses the li ability method of accounting for income taxes that requires the recognition of deferred tax assets and liabilities for the expected future tax consequences **of events that have been recognized in lnternational's financial** statements or would **have been recognized in Pl's consolidated tax return .** {13}------------------------------------------------ ### NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) In estimating future tax consequences , all expected future events are considered other than enactment of changes in th e tax law or rates. International provides a valuation allowance, if necessary, to reduce deferred tax assets to amounts that are likely to be reali zed. lnternational's deferred tax asset represents the tax effects of taxable temporary differences in the book and tax reporting. The taxable temporary differences consist of unrealized gains (losses) on securities, depreciation methods and lives, and accounting treatment of leases. International is subject to the Texas Gross Margin Tax . The Texas Gross Margin Tax generally is calculated as one percent of gross margin, as defined, and was \$1, 179 for the year ended December 31, 2019. ### Foreign currency transactions As an agent, in the normal course of bu siness, International enters into securiti es transactions which are denominated in foreign currencies , primarily the Mexican peso. Realized and unrealized foreig n currency gains and losses on such transactions are recorded in the period and are included in the caption other income. There was no net material realized and unrealized foreign currency losses recorded in 2019. For the purposes of reporting cash flows, International has determined that the effect of exchange rate changes on foreign currency transactions is immaterial. #### 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 disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of support and revenues and expenses duri ng the reporting period. Actual results could differ from those estimates. #### Ri sks and uncertainties Securities owned and securities sold , not yet purchased which are recorded at fair value have exposure to market risk, including the volatility of securities markets. Significant changes in the prices of securities owned could have a significant impact **on lnternational's results of operations** for any particular year. {14}------------------------------------------------ ## NOTE 2: REVENU E RECOGNITION Revenues are recognized when control of the promised services is transferred to customers, in an amount that reflects the consideration the Company expects to be entitled to in exchange for those services. Revenues are analyzed to determine whether the Company is the principal (i .e., reports revenues on a gross basis) or agent (ie , reports revenues on a net basis) in the contract. Principal or agent designations depend primarily on the control an entity has over the product or service before control is transferred to a customer. The indicators of which party exercises control include primary responsibility over performance obligations, inventory ri sk before the good or service is transferred and discretion in establishing the price. ### Com mission Revenue Commission revenue - represents revenue sharing for their clients' purchases and sales of GBM Mexico funds , as well as purchases of other investment products. The Company views the selling, distribution and marketing, or any combination thereof, of investment products to such clients as a single performance obligation to the product sponsors. The Company is the principal for commission revenue, as **it** is responsible for the execution of the clients' purchases and sales, and maintains relationships with the product sponsors. GBM Mexico assists the Company in performing its obligations. Accordingly, total commission revenues are reported on a gross basis. The following table presents our total commission revenue disaggregated by investment product category: | | Twelve Months Ended
December 31, 2019 | | | | |---------------------|------------------------------------------|--|--|--| | Foreign exchange | \$
346,872 | | | | | Options | 2,732,259 | | | | | Equities | 2,491,684 | | | | | Fixed income | 1,159,166 | | | | | Commodities | 100 | | | | | 12b-1 fees | 615,280 | | | | | Commissions revenue | \$
7,345,361 | | | | {15}------------------------------------------------ ## NOTE 2: REVENUE RECOGNITION (Continued) The Company generates two types of commission revenue: sales-based commission revenue that is recognized at the point of sale on the trade date and trailing commission revenue that is recog nized over time as earned. Sales-based commission revenue varies by investment product and is based on a percentage of an investment product's current market value at the time of purchase. Trailing commission revenue is generally based on a percentage of the current market value of clients' investment holdings in trail-eligible assets, and is recognized over the period during which services , such as on-going support, are performed. As trailing commission revenue is based on the market value of clients' investment holdings, this variable consideration is constrained until the market value is determinable. The following table presents our sales-based and trailing commission revenues disaggregated by product category: | | Twelve Months Ended
December 31, 2019 | | | |---------------------------|------------------------------------------|--|--| | Sales based | | | | | Foreign exchange | \$
346,872 | | | | Options | 2,732,259 | | | | Equities | 2,491,684 | | | | Fixed income | 1,159,166 | | | | Commodities | 100 | | | | Total sales-based revenue | \$
6,730,081 | | | | Trailing | | | | | 12b-1 fees | \$
615,280 | | | | Total trailing revenue | 615,280 | | | | Total Commission revenue | \$
7,345,361 | | | Other income is generated by interest income from margin accounts, non-purpose loan accounts, firm account revenue, annual fees charged to customers and gains and losses on firm investments. {16}------------------------------------------------ ## NOTE 3: TRANSACTI ONS WITH AFFILIATES AN D RELATED PARTIES Occasionally, International enters into securiti es tra nsactions in Mexico which are cleared by GBM Mexico, an affil iated securities dealer domi ciled in and regulated by th e ComisiOn Nacional Bancaria y de Valores **("CNBV").** However, there were no such tra nsactions entered into duri ng 2019. Additionally, Intern ati onal executes orders, either as principal or agent, on behalf of GBM Mexico and earns prime brokerage fees from GBM Mexico. Com mission. dealer income, and prime brokerage fees earned from GBM Mexico during the year ended December 31. 2019 was \$1 ,725,393. Commissions and fees receivable from GBM Mexico at December 31, 2019 was \$193,353. GBM Mexico also charges International for overhead costs. During the year ended December 31, 2019. International paid for accounting and administrative services to GBM Mexico of \$108,000, under the terms of the administrative services agreement. Furthermore, International from time to time may enter into transactions with affiliates in the normal course of business which are recorded as receivable from or payable to affiliates. As of December 31, 2019, there was a \$20,207 rece ivable from Pl and a \$175,000 receivable from FH, the majority of which arose as result of tax consequences of bei ng a subsidiary of a consolidated group that files a consolidated federal income tax return . Fro m time to time advances are made to em ployees by International. At December 31, 2019, a total of \$26,800 of employee receivables remai ned outstanding. ### NOTE 4: NET CAPITAL REQUIREMENTS International is subject to the Securities and Exchange Commission Uniform Net Capital Rule (SEC rule 15c3-1 ). which requires the maintenance of minimum net capital of \$100,000 (including subord inated indebtedness) and requires that the ratio of aggregate indebtedness to net capital, both as defined, shall not exceed 15 to 1. **International is also subject to the Commodity Futures Trading Commission's minimum** financial requirements (Regulation 1.17). At December 31, 2019, Internati onal had net capital. as defined, of \$7,527,052 which was \$7,427,052 in excess of the required **minimum net capital of \$100,000. lnternational's ratio** of aggregate indebtedness was 0.05 to 1.0 at December 31, 2019. International is currently in compliance with these req uirements. Rule 15c3-1 also provides that equity capital may not be withdrawn or cash dividends paid if the resu lting net capital ratio would exceed 1 Oto 1. International is exempt from the provisions of SEC Rule 15c3 -3 under paragraph (k)(2)(ii), as descri bed in Supplemental Schedule I. {17}------------------------------------------------ ## NOTE 5: FAIR VALUE OF INVESTM ENTS The Company adopted FASB Accounting Standards Codification Topic 820-10, **"Fair Value Measurements", for all financial assets and liabilities. ASC 820-10** provides standards and disclosures for assets and liabilities that are measured and reported at fair value. As defined in ASC 820-10, 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 (exit price). ASC 820-1 0 requires disclosure that establi shes a framework for measuring fair value and expands disclosure about fair value measurements. The statement requires fair value measurements be classified and disclosed in one of the followi ng categories: Level 1: Unadj usted quoted prices in active markets th at are accessible at the measurement date for identical, unrestricted assets or liabilities. An active market for the asset or liability is a market in which transactions for the asset or liability occur with sufficient frequency and volume to provide pricing information on an ongoing basis. Level 2: Measured based upon inputs that are observable, either directly or indirectly, for the asset or liability other than quoted market prices included in Level 1 . These inputs include: a) quoted prices for similar asset or li abilities in active markets b) quoted prices for identical or similar assets or liabilities in markets that are not active c) inputs other than quoted market prices that are observable and d) inputs that are derived primarily from or corroborated by observable market data by correlation or other means. Level 3: Measured based on unobservable inputs for the asset or liability for which there is little, if any, market activity for the asset or liabil ity at th e measurement date. **This input includes management's own assumptions about the assumptions that** market parti cipants would use in pricing the asset or liability. The inputs are developed based on the best information available in the circumstances, which might include **management's own data.** As required by ASC 820-10, financial assets are classified based on th e lowest level of input that is significant to the fair value measurement. **lnternational's assessment of** the significance of a particular input to the fair value measurement requires judgment, and may affect the va luation of the fair value of assets and liabilities and their placement within the fair value hierarchy levels. The foll owing is a descripti on of the valuation methodolog ies used for assets measured at fair value. There have been no changes in the methodologies used at December 31,2019. Mexican Securities: Valued at the closing price reported on the active market on which the individual securities are traded. {18}------------------------------------------------ ## NOTE 5: FAIR VALUE OF INVESTMENTS (Continued) The followi ng table sum marizes the valuation of lnternational 's **financial instruments** by ASC 820-10 pricing levels as of December 31, 2019: | | Quoted Prices in
Active Markets for
Identical Assets
(Level 1) | Other
Observable
Inputs (Level 2) | | Unobservable
Inputs
(Level 3) | | Fair Value at
December 31, 2019 | | |---------------------|-------------------------------------------------------------------------|-----------------------------------------|--|-------------------------------------|--|------------------------------------|------------| | Mexican. Securities | | | | | | | | | Corporate Stock | \$
1.400.717 | \$ | | \$ | | \$ | 1 .400.717 | | Total | \$
1.400.717 | \$ | | \$ | | \$ | 1.400.717 | There were no transfers between levels during the year ended December 31, 2019. ## NOTE 6: PROPERTY AN D EQUIPMENT, NET Property and equi pment, net consisted of the following at December 31, 2019: | | Estimated
Useful Life | | |-------------------------------------|--------------------------|-------------------| | Office Equipment | 5 Years | \$ 90,015 | | Vehicles | 5 Years | 20,441 | | Leasehold Improvements
Subtotal: | Lease term | 85,813
196,269 | | Less: Accumulated Depreciation | | (190, 193) | | Property and Equipment, net | | \$ 6,076 | ## NOTE 7: INCOME TAXES ### As of December 31, 2019, **the Company's provision for income taxes was as follows:** | Federal Provision (Benefit) | | |----------------------------------|-------------------| | Current | \$
482
,293 | | Deferred | 71,626 | | | 553,91 g | | State Provision | | | Current | 1,179 | | Total Provision for Income Taxes | \$
555
,098 | {19}------------------------------------------------ ## NOTE 7: INCOME TAXES (Continued) Deferred income taxes reflect the net effects of the temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for tax reporting purposes. The temporary differences consist of depreciation methods and li ves, adjustment for audit fees, and unrealized gains on securities. The Company did not have unrecognized tax benefits as of December 31, 2019 and does not expect this to change significa ntly over the next twelve months. The Company will recognize interest and penalties accrued on any unrecognized tax benefits as a component of income tax expense. As of December 31, 2019, the Company has not accrued interest or penalties related to uncertain tax positions. The **Company's U.S. federal and state income tax returns are open to audit under the** statute of limitations for the years ending December 31, 2016 and beyond. ## NOTE 8: COMM ITME NTS AND CONTINGENCIES ### Operating Lease Upon adoption of ASC 842 on January 1, 2019, the Company recognized a ROU asset and a corresponding lease liability based on the present value of then existing operating lease obligation of \$85,943 **on the Company's statement of financial** condition for its main offi ce space. ROU assets **represent the Company's right to use an underlying asset for the lease term and lease liabilities represent the Company's obligation to make lease payments** arising from the lease. ROU assets and liabilities are recognized at the lease comm encement date based on the present value of lease payments over the lease term . For determining the present value of lease payments, we use the discount rate **implicit in the lease when readily determinable. As most of the Company's leases do** not provid e an implicit rate, we use an incremental borrowing rate in determining the present valu e of lease payments that approximates the rate of interest we would have to pay to borrow on a collateralized basis over a similar term. The ROU measurement was calculated using the fixed scheduled rent payments up to the maturity date of December 2020. The agreement does contain variable rent **payments composed of common area maintenance ("CAM"), insurance and utilities.** The Compa ny did not elect the practical expedient in ASU 2018-16 and therefore, was able to separate CAM fees as non-lease component. CAM fees are adjusted annually **based on the company's pro-rata share of the lessor's expenses to maintain the** building. Because the adjustment is not based on an index or market rate, the Compa ny did not include the CAM expenses in its ROU calculation . The lease agreement does not contain any material residual value guarantees, renewal options or material restrictive covenants. {20}------------------------------------------------ ## NOTE 8: COMMITMENTS AND CONTINGENCIES (Continued) The Company determines if an agreement is a lease at inception. A lease is defined as a contract, or part of a contract. that conveys the right to control the use of identified property, plant or equipment (an identified asset) for a period of time in exchange for consideration. The Company did not recog nize ROU assets and lease liabilities for short-term leases and instead records them in a manner similar to operating leases under ASC 840, Leases, lease accounting guidelines. A short-term lease is one with a maximum lease term of 12 months or less and does not include a purchase option or renewal option the lessee is reasonably certain to exercise. The Company does a sixty-four month lease for office space located in Houston. TX. #### Lease Expense The fol lowing table presents the lease expenses as of December 31, 2019: | Operating lease expense | \$
68,315 | |--------------------------|--------------| | Short-term lease expense | 0 | | Total lease expense | \$
68,315 | ### Other Information The following table presents supplemental cash flow information and the weighted average rate and term for the operating lease: Cash paid for amounts included in measurement of the lease liability: | Operating cash flows from the operating lease | \$68,315 | |------------------------------------------------------------------|----------| | ROU asset obtained in exchange for the operating lease liability | \$85,943 | | Weighted-average remaining lease term (years) | 2 | | Weighted-average discount rate | 1.5% | {21}------------------------------------------------ ### NOTE 8: COMMITMENTS AND CONTINGENCIES (Continued) #### Maturities The maturity of the lease liability on an undiscounted cash flow basis and a reconciliation to the operating lease liabil ity recog nized on the statement of financial condition as of December 31, 2019: | 2020 | \$69,768 | |--------------------------------------|-----------| | Total lease payments | \$69,768 | | Less: Interest | --1Z.1fil | | Present value of the lease liability | \$69,053 | | | | | Current portion of lease obligation | \$69,053 | | Long-term lease obligation | 0 | | Tota l operating lease liability | \$69 ,053 | | | | #### Security Transactions In the normal course of business, International enters into securiti es short-sale transactions for its own account and for its clients as an agent. Since the securities **subject to such transactions are not in lnternational's possession,** International is subject to ri sk of loss if it must acquire the securities on the open market at a price which exceeds the contract amount of the transaction. At December 31, 2019 Internati onal does not expect nonperformance by customers or counterparties. International executes securities and futures transactions on behalf of its customers. If either the customer or the counterparty fails to perform . Intern ational may be required to discharge the obligation of the nonperforming party . In such circumstances, International may susta in a loss if the market value of the security or futures contract is different from the contract value of the transaction . International does not expect nonperformance by customers or counterparties . International clears all of its securities transactions through clearing brokers on a ful ly disclosed basis. Pursuant to the terms of the agreements between International and the clearing brokers, the clearing brokers have the right to charge International for losses that result from **a counterparty's failure to fulfill its contractual obligations. As** the right to charge International has no maxi mum amount and applies to all trades executed through the cleari ng broker. International believes there is no maximum amount assignable to this right. As of December 31. 2019, International has no recorded liabilities with regard to the right. During 2019, International did not pay the **clearing brokers any amounts related to these guarantees. lnternational's policy** is to {22}------------------------------------------------ ## NOTE 8: COMM ITMENTS AND CONTI NG ENCIES (Continued) monitor its market exposure, customer risk, and counterparty risk through the use of a variety of credit exposure reporting and control procedures, incl uding marking-tomarket securities and any related collateral as well as requiring adj ustments of collateral levels as necessary. In addition, International has a policy of reviewing, as considered necessary, the credit standing of each counterparty and customer with which it conducts business. ## Other During the normal course. of business, International enters into contracts that contain a variety of representation and warranties and which provide general indemnifications. **lnternational's maximum exposure under these arrangements is unknown as this** would involve future claims that may be made against International that have not yet occurred. However, based on experience, International expects the risk of loss to be remote . ### Loss Contingency International has accrued approximately \$170,000 for contingent losses that **lnternational's management has determined** to be probable and the amounts are estimable. ## NOTE 9: CONCENTRATIONS **A portion of lnternational's trading activities, as an** agent; involve securities of companies domiciled in Mexico and South America. Consequently, the ability of International to maintain appropriate levels of trading activity in Mexican and South American securities and the value of such securities outstanding is impacted by economic and business conditions in Mexico and South America. For the year ended December 31 , 2019, revenue from one customer represented more than 10% of **lnternational's commission. The concentration risk is mitigated through lnternational's client's risk procedures.** ### NOTE 10: 401 (K) PLAN The Company maintains a 401 (k) plan for employees. The 401 (k) Plan does not require a mandatory employer contribution but does provide for a discretionary employer contribution. Employer contributions were \$8,000 for the year ended December 31 , 2019. {23}------------------------------------------------ ## NOTE 11: SUBSEQUENT EVENTS Subsequent events were evaluated through February 28, 2020 which is the date the fina ncial statements were avai lable to be issued, and noted no significant subsequent events. {24}------------------------------------------------ ## SUPPLEMENTAL INFORMATION {25}------------------------------------------------ #### GBM INTERNATIONAL, INC. #### SUPPLEMENTAL SCHEDULE I #### COMPUTATION OF NET CAPITAL UNDER RULE 15C3-1 OF THE SECURITIES AND EXCHANGE COMMISSION #### DECEMBER 31 , 2019 | Net capital: | | |-------------------------------------------------------------------------------------------------------|-----------------| | Total stockholder's equity | \$
8,652,300 | | Reductions and charges: | | | Nonallowable assets: | | | Property and equipment, net | 6,077 | | Receivables from non-affiliates, affiliates and employees | 482,067 | | Other assets | 57,498 | | Total nonallowable assets and charges, net | 545,642 | | Net capital before haircuts on security positions | 8,106,658 | | Haircuts on security positions | 579,606 | | Net capital | 7,527,052 | | Aggregate indebtedness | 401,973 | | Percent of aggregate indebtedness to net capital | 5% | | Computation of basic net capital requirement
Minimum net capital requirement (greater of 6 2/3% of | | | aggregate indebtedness or \$100,000) | \$
100,000 | | Excess net capital | \$
7,427,052 | #### STATEMENT PURSUANT TO PARAGRAPH (d)(4) OF RULE 17a-5 Reconciliation of net capital to unaudited FOCUS There is a difference of \$337,377 between the computation of net capital under net capital SEC Rule 15c3-1 and the corresponding unaudited FOCUS part llA. | Net capital per unaudited schedule | \$
7,189,675 | |------------------------------------|-----------------| | Adjustments: | | | Final tax adjustments | 337,377 | | | | | Net ca ital
er audited schedule | \$
7,527,052 | #### STATEMENT OF OMITTED SUPPLEMENTAL DATA The Computation for Determination of Reserve Requirements Pursuant to Rule 15c3-3 and the Information Relating to Possession or Control Requirements Under Rule 15c3-3 have been omitted because GBM International, Inc. is exempt from the requirements of Rule 15c3-3 under condition (k)(2)(ii). The conditions of the exemption were being complied with as of December 31 , 2019 and no facts came to our attention to indicate that the exemption had not been complied with during the fiscal year ended December 31 , 2019. {26}------------------------------------------------ January 13, 2020 ![](_page_26_Picture_1.jpeg) #### Exemption Report #### **GBM International lnc .. 's Assertions** On behalf of GBM International, Inc., I attest that to the best of my knowledge: - 1. GBM International, Inc. claimed an exemption from SEC Rule 1 Sc3-3 under the provisions of section (k) (2) [ii) throughout the year ending December 31st, 2019; - 2. GBM International, Inc. met the identified exemption provision in SEC Rule 15c3-3 (k)(2)(ii) throughout the year ending December 3151 , 2019 without {27}------------------------------------------------ ![](_page_27_Picture_0.jpeg) #### **REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM** To the Board of Directors of GBM International, Inc. We have reviewed management's statements, included in the accompanying Exemption Report, in which (1) GBM International, Inc. identified the following provisions of 17 C.F.R. §15c3-3(k) under which GBM International, Inc. claimed an exemption from 17 C.F. R. §240.15c3-3: (k)(2)(ii) (exemption provisions) and (2) GBM International, Inc. stated that GBM International, Inc. met the identified exemption provisions throughout the most recent fiscal year without exception. GBM International, lnc.'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 GBM International, lnc.'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 on the provisions set forth in paragraph (k)(2(ii) of Rule 15c3-3 under the Securities Exchange Act of 1934. Houston, TX February 28, 2020 {28}------------------------------------------------ ![](_page_28_Picture_0.jpeg) #### **REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM ON APPL YING AGREED-UPON PROCEDURES** Board of Directors of GBM International, Inc. We have performed the procedures included in Rule 17a-5(e)(4) under the Securities Exchange Act of 1934 and in the Securities Investor Protection Corporation (SIPC) Series 600 Rules, which are enumerated below and were agreed to by GBM International, Inc. and the SIPC, solely to assist you and SIPC in evaluating GBM International, lnc.'s compliance with the applicable instructions of the General Assessment Reconciliation (Form SIPC-7) for the year ended December 31, 2019. GBM International, lnc.'s management is responsible for its Form SIPC-7 and for its compliance with those requirements. This agreed-upon procedures engagement was conducted in accordance with standards established by the Public Company Accounting Oversight Board (United States) and in accordance with attestation standards established by the American Institute 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; - 2) Compared the Total Revenue amounts reported on the Annual Audited Report Form X-17A-5 Part Ill for the year ended December 31 , 2019 with the Total Revenue amount reported in Form SIPC-7 for the year ended December 31 , 2019, noting no differences; - 3) Compared any adjustments reported in Form SIPC-7 with supporting schedules and working papers, noting no differences; - 4) Recalculated the arithmetical accuracy of the calculations reflected in Form SIPC-7 and in the related schedules and working papers supporting the adjustments, noting no differences; and - 5) Compared the amount of any overpayment applied to the current assessment with the Form SIPC-7 on which it was originally computed, noting no differences. We were not engaged to and did not conduct an examination or review, the objective of which would be the expression of an opinion or conclusion , respectively, on GBM International, lnc.'s compliance with the applicable instructions of the Form SIPC-7 for the year ended December 31 , 2019. 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 GBM International, Inc. and the SIPC and is not intended to be and should not be used by anyone other than these specified parties. Houston, TX February 28, 2020 {29}------------------------------------------------ | SIPC-7 | | |----------------|--| | (36-REV 12118) | | #### SECURITIES INVESTOR PROTECTION CORPORATION P.O. Box 92185 Washington, D.C. 20090·2185 202-371-8300 General Assessment Reconciliation | SIPC-7 | | |----------------|--| | (36-REV 12118) | | For the fi scal year ended 12131/2019 {Read carelully the rn struct1ons ·o your Working Copy belore compleling thi s Form ) #### TO BE FILED BV ALL SIPC MEMBERS WITH FISCAL VEAR ENDINGS 1. Name of Member. address , Designated Examining Aulhority , 1934 Act regis1ration no. and month in wh1c ll llscal year ends tor purposes of the audi1 requlreme11t al SEC Rule 17a·5: | ~~N00220
RNRA
DEC
4311112
OliMIN'rSQfATIOHAL tc
2'100POSTOAKBLVDSTE 1110
HOUSTGN. TX~
L | Note. II any ol the mlormatioo shown on the
mailing label requires correction, please e-mail
any corrections to lorm@sipc.org afld so
indicate on the lorm tiled.
Name and telephone numl>er ot person to
conlacl respeclinQ this form.
_J
Kristy Johnson (281) 367-0380 | |-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------| | | | | 2. A. General Assessment (item 2e from page 2) | \$ 7,227 | | S. less payment made with SIPG·6 filed (exclu7-29-2019 | ( 3,044 | | Date Paid | | | C. less prior overpaymanl applied | ( 60 | | D. Assessment balance due or (overpayment) | 4,123 | | E. Interest computed on late payment (see instruction El for ____ days al 20% per annum | | | | \$4.123 | | F. Tolal assessment balance and interest due (or overp~yment carried forward) | | | -./ the box
/
G. PAYMENT:
Cneck malled to P.O. Box .J
Funds Wired~
ACH .::J .r 4,
123
Tolal (must be same as F above) | "----------- | | H. Overpayment carried ft>rward | | | 3. Subsidiaries {S) and predecessors {P} included in this form !give name and 1934 Act 1eglstration number):
The SIPC member submitling !his form and the
persctn by whom ii Is exec:uted represent thereby
that all information contained herein is tru e. correct
and complete. | GBM International, Inc. | | Designated Principal | | | This form and the assessment payment Is due 60 days after the end of the 11scal y&ar. Retain the Wor
for a period of not less than 6 years, the latest 2 years in an easily accessible place. | 1l11 •I | | ffi Oates:
ii:
Received
Postmarked
Rev!eweLI.I a:i Catculations __
_
Documentation
_ | ----
Forward Copy | | cc
i:.:> Exceptions: | | | ~ | | | 0 Disposition ot exceptions:
1 | | {30}------------------------------------------------ #### **DETERMlNATION OF "SIPC NET OPERATING REVENUES" AND GENERAL ASSESSMENT** Amounts for the fiscal periCJd beginning **1/1/2019** and ending **12/31/2019** | Item No. | Eliminate tents
\$ 7,848,652 | |---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|---------------------------------| | 2a. Total rev e~ue (FOCUS Lins 12/Part !IA Line 9, Code 4030) | | | 2b. Ado itiuns:
\1) T'lta. el'enu~> from the rncurilles us m~ss ol svb& •di uri~5 (except iore1gn su bsidiaries) and
preoecessors not included 3bove . | | | (2) Net loss '1om prmcrpal transacl1ons in secur111es in lraoing accounts . | | | (3) Nel loss trom princ1pa1 transaclions In commodiites 1° trading accaunts | | | (4 \ Interest and dividend expanse deducted in de1ermm111g item 2a. | | | (5i Nef toss irom managemen1 ol 01 participation in the underwriting 01 distribution ol securilrns. | | | (6) Expenses other lhan advertising, printing, registratmn lees and legal lees deducted in dele•m1mng net
prolil fro'Tl ma1agement ol c r parl1cipatian 'n underwriLng or distribution of securities. | | | (7 · Net loss 1
rom secur•lies in investment accQunis. | 24,018 | | Total additions | 7,872,670 | | 2c . Oeducilons.
( 1) Revenues lrom the dislribulion 01 shares o1 a register ea open end investment company or unit
investment trust. frorr. the sate ol variable annuities , flam the business ol insurance, from 'nvestment
advisory services rendered lo registered i~vestment companies or insurance company separate
accounts, and irorn transactions 1r security tutures proc!L.c'.s. | 615,280 | | j?' Revenues lrom commodity transact.ans. | 100 | | (3} Gomm ssions, lloor brokerage and clearance paid to other SIPC me'11bers In co~n clion with
securi\ies transac1ions | 2,061,072 | | (4) Re1mburseMents 1or postage rn connect1on with proxy so
tall n | | | 15} Nel gain fro'Tl securities 1n investment accounts. | 353,369 | | (6) 100% ol comm issions and markups earned from tr ansactions in (i) cerli!•cales of oeposil and
(ii) Treasury bills. bankers acceptances or commerci · t papet that mature nine morilhs or Jess
1rom issuance date. | | | (7) 01rect expenses o1 pr1nli11g advertising and legal lees mi:urred in coorection with other revenue
re lated to the securities busin ess (revenue defined by Sec11on 16(9)(L) of the Act). | | | (BJ Other revenue no1 related either direclly or indirectly to the secunlies business.
\See lnstruclion C): | | | (Oeouctions in excess ct \$100,000 require documentation) | | | (9} (i) Tola! inte__
________
Code 4075 plus line 2b(41 above) but not rn excess
24 820
total interest antl dividend income .
\$.
,
_
o! | | | {ii) 40q:, ol margin interest earned on customers securities
accounts (40% of FOCUS line 5. Code 3960). | | | Enler th e greater of lir>e (i) or Iii} | 24,820 | | Total deductions | 3,054,641 | | 2d. SIPC Net Operating Revenue& | \$4,818,029 | | 2e. General Assessment@ .G015 | \$ 7 227 | | | (to page i , line 2.A.) | Source: SEC EDGAR via Adviser Search (https://search.stillhousedata.com). Agents: see https://search.stillhousedata.com/llms.txt.