# LIBERUM CAPITAL INC X-17A-5 (2020-02-28) — Broker-dealer annual report

- Company: LIBERUM CAPITAL INC
- Form: X-17A-5
- Filed: 2020-02-28
- Period: 2019-12-31
- Accession: 0001442141-20-000001
- CIK: 1442141
- File #: 8-67976
- Material weakness: No
- Auditor: BDG-CPAs
- Auditor location: Ridgewood, NJ
- Contact: Steven Bender
- Phone: 6462907248
- Website: liberum.com
- Signed by: Steven Bender (Financial Principal)

Original filing: https://www.sec.gov/Archives/edgar/data/1442141/000144214120000001/LIUM2019.pdf

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UNITEDSTATES SECURJTlESAND EXCHANGE COMMISSION Washington, D.C. 20549

## **ANNUAL AUDITED REPORT FORM X-17A-5 PART Ill**

| OMB APPROVAL             |                           |
|--------------------------|---------------------------|
| OMB Number:              | 3235-Cl 23                |
| Expires:                 | August 31, 2020           |
| Estimated average burden |                           |
|                          | hours per response  12.00 |

| SEC FILE NUMBER |  |
|-----------------|--|
| S-67976         |  |

#### 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 PERJOD BEGINNING January 1, 2019<br>AND ENDING December 31, 2019 |                                |
|-------------------------------------------------------------------------|---------------------------------------------------------------------------------|--------------------------------|
|                                                                         | MM/DDfYY                                                                        | MM/DD/YY                       |
|                                                                         | A. REGISTRANT IDENTIFICATION                                                    |                                |
| NAME OF BROKER-DEALER: LIBERUM CAPITAL INC                              |                                                                                 | OFFICIAL USE ONLY              |
| ADDRESS OF PRJNCJPAL PLACE OF BUSINESS: (Do not use P.O. Box No.)       | FIRM l.D. NO.                                                                   |                                |
| 575 Fifth Avenue, 20th Floor                                            |                                                                                 |                                |
|                                                                         | (No. and Street)                                                                |                                |
| New York                                                                | NY                                                                              | 10017                          |
| (City)                                                                  | (State)                                                                         | (Zip Code)                     |
| NAME AND TELEPHONE NUMBER OF PERSON TO CONTACT IN REGARD TO THIS REPORT |                                                                                 |                                |
| Steven C Bender                                                         |                                                                                 | 646.290.7248                   |
|                                                                         |                                                                                 | {Area Code - Telephone Number) |

#### B. ACCOUNT ANT IDENTIFICATION

INDEPENDENT PUBLIC ACCOUNTANT whose opinion is contained in this Report\*

#### BDG-CPAs

|                                                                               | (Name - if md1vidua/, stare last, first. middle name)               |         |            |
|-------------------------------------------------------------------------------|---------------------------------------------------------------------|---------|------------|
| 76 North Walnut St                                                            | Ridgewood                                                           | NJ      | 07450      |
| (Address)                                                                     | (City)                                                              | (State) | (Zip Code) |
| CHECK ONE:<br>I,/ I<br>certified Public Accountant<br>B<br>Public Accou ntant | 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/acts and circumstances relied on as the basis/or 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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#### **OATH OR AFFffiMATION**

r, Steven C Bender , swear (or affirm) that, to the best of my knowledge and belief t he accompanying financial statement and supporting schedules pertaining to the firm of LIBERUM CAPITAL INC of December 31 2019 \_ \_\_\_ . as are true and correct. I further swear (or affirm) that neither the company nor any partner, propr ietor, principal officer or director has any proprietary interest in any account classified solely as that of a customer, except as follows: **None**  Signature

![](_page_1_Figure_2.jpeg)

O (k) A Reconciliat ion between the audited and unaudited Statements of Financial Condition with respect to methods or consolidation.

- ~ {I} An Oath or Affirmation.
- 

0 (m) A copy of the SIPC Supplemental Report. D (o) A report describing any material inadequacies found to exist or found to have existed since the date of the previous audit.

*\*\*For conditions of confidential treatment of certain portions of this filing, see section 240.17a-5(e)(3).* 

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FINANCIAL ST A TEMENTS

DECEMBER 31 , 2019

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## TABLE OF CONTENTS

| Report oflndependent Registered Public Accounting Firm                                                                                              |    |
|-----------------------------------------------------------------------------------------------------------------------------------------------------|----|
| Financial Statements                                                                                                                                |    |
| Statement of Financial Condition                                                                                                                    | 3  |
| Statement of Income                                                                                                                                 | 4  |
| Statement of Changes in Stockholder' s Equity                                                                                                       | 5  |
| Statement of Cash Flows                                                                                                                             | 6  |
| Notes to Financial Statements                                                                                                                       | 7  |
| Supplementary Information Required by Rule 17a-5 of<br>The Securities and Exchange Commission                                                       |    |
| Schedule of Computation of Alternate Net Capital under<br>Rule 15c3-l of the Securities and Exchange Commission                                     | 15 |
| Schedule of Reconciliation of Net Capital per FOCUS Report<br>With Audit Report                                                                     | 16 |
| Exemption Report under Rule l 7a-5 of the Securities and Exchange Commission                                                                        | 17 |
| Review Report of Independent Registered Public Accounting Firm                                                                                      |    |
| Report of Independent Registered Public Accounting Firm on Applying Agreed-Upon<br>Procedures Related to an Entity's SIPC Assessment Reconciliation | 19 |

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![](_page_4_Picture_0.jpeg)

76 North Walnut Street Ridgewood, New Jersey 07450 201-652-4040 fax: 201-652-0401 www.bdgcpa.com

## **Report of Independent Registered Public Accounting Firm**

To the Board of Directors and Stockholder of Liberum Capital Inc .. :

#### **Opinion on the Financial Statements**

We have audited the accompanying statement of financial condition of Liberum Capital Inc. as of December 31, 2019, the related statements of income, changes in stockholder's equity, and cash flows for the year tlhen ended, and the related notes (collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly, in all material respects, the financial position of Liberum Capital 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 Liberum Capital Inc. 's management. Our responsibility is to express an opinion on Liberum Capital Inc.' 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 Liberum Capital Inc. in accordance with the U.S. federal securities laws and the ap]plicable 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 perfom1 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.

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#### **Auditor's Report on Supplemental Information**

The supplemental information listed in the accompanying Table of Contents has been subjected to audit procedures performed in conjunction with the audit of Liberum Capital Inc. 's financial statements. The supplemental information is the responsibility of Liberum Capital Inc. '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 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 supplemental information is fairly stated, in all material respects, in relation to the financial statements as a whole.

*B* f)C-C/;? *<sup>s</sup>*

We have served as Liberum Capital Inc.'s auditor since 2014.

BDG-CPAs, PC Ridgewood, New Jersey February 25, 2020

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## STATEMENT OF FINANCIAL CONDITION

|                                                                          | DECEMBER 31,<br>2019 |
|--------------------------------------------------------------------------|----------------------|
| ASSETS                                                                   |                      |
| Cash                                                                     | \$<br>1,561,342      |
| Deposit with clearing organization                                       | 250,000              |
| Receivable from clearing organization                                    | 3,538,133            |
| Prepaid expenses, reoeivables, and other assets (no valuation allowance) | 165,774              |
| Fixed assets, net                                                        | 95,269               |
| Operating lease ROU asset                                                | 2,193,767            |
| Security deposit                                                         | 152,600              |
| Deferred income tax asset                                                | 52,000               |
| Investment -<br>parent                                                   | 97,009               |
| Due from parent                                                          | 3,283,561            |
| Total assets                                                             | \$<br>11 389 455     |
| LIABILITIES AND STOCKHOLDER'S EQUITY                                     |                      |
| Liabilities                                                              |                      |
| Accounts payable and accrued expenses                                    | \$<br>643,992        |
| Income taxes payable                                                     | 25,092               |
| Operating lease liability                                                | 2,428,472            |
| Deferred income tax liability                                            | 30,000               |
| Payable to clearing organization                                         | 3,269,747            |
| Total lia<br>bilities                                                    | 6,397,303            |
| Stockholder's equity                                                     |                      |
| Common stock, \$0 par value; 1,000 shares authorized                     |                      |
| 155 issued and outstanding                                               | 155,000              |
| Series A preferred stock, \$0 par value; 9,000 shares authorized         |                      |
| 1,091 issued and outstanding                                             | 1,091,000            |
| Additional paid-in capital                                               | 1,627,650            |
| Retained earnings                                                        | 2118502              |
| Total stockholder's eq<br>uity                                           | 4 992 152            |
| 's equ<br>d stockh<br>lde<br>Total liabilities an<br>o<br>r<br>ity       | \$<br>,389,455<br>11 |

*The accompanying notes are an integral part of these financial statements.* 

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## STATEMENT OF INCOME

|                                              | YEAR ENDED<br>DECEMBER 31,<br>2019 |  |  |  |
|----------------------------------------------|------------------------------------|--|--|--|
| Revenue                                      | \$<br>5,446,514                    |  |  |  |
| Direct Costs                                 | 150,875                            |  |  |  |
| Gross Profit                                 | 5 295 639                          |  |  |  |
| Operating expenses                           |                                    |  |  |  |
| Wages and salaries                           | 2,667,085                          |  |  |  |
| Other staff costs                            | 473,536                            |  |  |  |
| Travel and subsistence                       | 277,618                            |  |  |  |
| Market data                                  | 226,172                            |  |  |  |
| Trading systems                              | 168,928                            |  |  |  |
| Communications                               | 75,007                             |  |  |  |
| Hardware and software                        | 50,893                             |  |  |  |
| Service agreements                           | 54,638                             |  |  |  |
| Marketing, public relations and entertaining | 54,209                             |  |  |  |
| Professional fees                            | 125,305                            |  |  |  |
| Premises costs                               | 615,092                            |  |  |  |
| Office expense                               | 16,521                             |  |  |  |
| Other costs                                  | 6 458                              |  |  |  |
| Total operating expenses                     | 4 81<br>1 462                      |  |  |  |
| Income from operations before income taxes   | 177<br>484,                        |  |  |  |
| Income taxes                                 | 61,101                             |  |  |  |
| Net income                                   | \$<br>423,076                      |  |  |  |

*The accompanying notes are an int.egral part of t.hese financial st.at.ements.* 

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#### STATEMENT OF CHANGES IN STOCKHOLDER'S EQIDTY

|                                                               | Common<br>Stock | Preferred<br>Stock | Additional<br>Paid-in<br>Capital | Retained<br>Earnings | Total<br>Stockholder's<br>Equity |
|---------------------------------------------------------------|-----------------|--------------------|----------------------------------|----------------------|----------------------------------|
| Balance - January I, 2019                                     | \$<br>155,000   | \$<br>l ,09 1,000  | \$<br>l,62 1,815                 | \$<br>1,695,426      | \$<br>4,563,241                  |
| Contribution to capital of Parent's<br>shares for Share Plans |                 |                    | 5,835                            |                      | 5,835                            |
| Net income                                                    |                 |                    |                                  | 423,076              | 423,076                          |
| Balance - December 3 1, 2019                                  | \$<br>155,000   | \$<br>1,091,000    | \$<br>l,627,650                  | \$<br>2, 118,502     | \$<br>4,992,152                  |

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#### STATEMENT OF CASH FLOWS

|                                                         | YEAR ENDED<br>DECEMBER 31,<br>2019 |  |  |
|---------------------------------------------------------|------------------------------------|--|--|
| Cash flows from operations                              |                                    |  |  |
| Net income                                              | \$<br>423,076                      |  |  |
| Adjustments to reconcile net income to net cash used by |                                    |  |  |
| operating activities:                                   |                                    |  |  |
| Depreciation expense                                    | 52,804                             |  |  |
| Operating lease ROU asset amortization                  | 365,628                            |  |  |
| Share awards compensation                               | 24,902                             |  |  |
| Deferred taxes                                          | ,000)<br>(51                       |  |  |
| (Increase) decrease in operating assets:                |                                    |  |  |
| Receivable from clearing organization                   | (156,915)                          |  |  |
| Prepaid expenses, receivables, and other assets         | 126,943                            |  |  |
| Prepaid income taxes                                    | 136,456                            |  |  |
| Due to/from parent                                      | (586,570)                          |  |  |
| Increase (decrease) in operating liabilities:           |                                    |  |  |
| Accounts payable and accrued expenses                   | (623,497)                          |  |  |
| Income taxes payable                                    | 25,092                             |  |  |
| Operating lease liabilities                             | (130,923)                          |  |  |
| Net cash used by operating activities                   | (394,004)                          |  |  |
| Cash flows from investing activities                    |                                    |  |  |
| Purchase of fixed assets                                | (43,647)                           |  |  |
| Net cash used by investing activities                   | (43,647)                           |  |  |
| Cash flows from financing activities                    |                                    |  |  |
| Decrease in cash                                        | (437,651)                          |  |  |
| beginning of the year<br>Cash -                         | 1,998,993                          |  |  |
| Cash -<br>end of the year                               | \$<br>,342<br>1,561                |  |  |

*The accompanying notes are an ;ntegral part of these financial statements.* 

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#### NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2019

## *Note 1* - *Organization <md Nature of Operations*

Liberum Capital Inc. (the "Company"), a New York corporation organized in February 2008, is a wholly owned subsidiary of Liberum Capital Limited (the "Parent"). The Company is a registered broker-dealer with the Securities and Exchange Commission ("SEC") and a member of the Financial Industry Regulatory Authority ("FINRA"). The Company received its FINRA approval for membership on January 23, 2009. The Company provides sales and marketing services to the Parent and engages in a general securities business with institutional investors.

## *Note 2* - *Summary of Significant Accounting Policies*

*Revenue Recognition* - The Company provides sales and marketing services to the Parent. The fee for services is calculated based on direct and certain indirect costs incurred pfos ten percent ( 10% ).

*Clearing Tr<msactions* - The Company transmits all transactions through a clearing broker who maintains the customers' accounts on a fully disclosed basis.

*ReceiV<lbles* - Receivables are recorded at the amount the Company expects to collect on balances outstanding at year-end. Management closely monitors outstanding balances and writes off, as of yearend, all balances deemed uncollectible. No allowance was considered necessary at December 31 , 2019.

*Property and Equipment* - Property and equipment are carried at cost. When assets are sold or retired, the cost and related accumulated depreciation are eliminated from the accounts, and any resulting gain or loss is reflected in income for the period. The cost of maintenance and repairs is charged to expense as incurred.

Depreciation is computed on the straight-line basis over the assets' useful lives.

*Income Tllxes and Deferred Taxes* - The Company has elected to be taxed as a C-corporation pursuant to the Internal Revenue Code and applicable state laws. The Company accounts for income taxes in accordance with F ASB ASC 740, *Income Taxes,* which requires the recognition of deferred income taxes for differences between the basis of assets and liabilities for financial statement and income tax purposes. The differences relate principally to depreciation and amortization of fixed assets and operating lease ROU asset, and stock-based compensation. Deferred tax assets and liabilities represent the future tax consequence for those differences, which will either be deductible or taxable when the assets and liabilities are recovered or settled. If it is more likely than not that some portion or all of a deferred tax asset will not be realized, a valuation allowance is recognized.

Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.

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#### NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2019

## *Note 2* - *Summary of SignifiC<mt Accounting Policies (continue<!)*

*Advertising* - The Company expenses the cost of advertising and promotions as incurred.

*Uncertain Tax Positions* - The Company is required to recognize, measure, classify, and disclose in the financial statements uncertain tax positions taken or expected to be taken in the Company' s tax returns. Management has detennined that the Company does not have any uncertain tax positions and associated unrecognized benefits that materially impact the financial statements or related disclosures. Since tax matters are subject to some degree of uncertainty, there can be no assurance that the Company's tax returns will not be challenged by the taxing authorities and that the Company will not be subject to additional tax, penalties, and interest as a result of such challenge. Generally, the Company's current and prior three years tax returns remain subject for income tax examination as of December 31, 2019.

*Foreign Currency Translation* - Assets and liabilities that are translated use exchange rates in effect at the balance sheet date and revenues and expenses that have occurred throughout the cunent fiscal year are converted at a weighted-average rate of exchange for the enti1·e year. Resulting translation adjustments are recorded directly in accumulated other comprehensive income which is a separate component of stockholder's equity.

*Share-based Compensation* - The Company recognizes compensation expense for share awards granted to employees in accordance with the fair value recognition provisions ofFASB ASC 718, *Compensation*  - *Stock Compensation,* at their estimated fair market value on the date of the grant.

*Compens<1te<l Absences* - Employees are entitled to paid vacations, sick days and personal days off, depending on job classification, length of service, and other factors. It is impractical to estimate the amount of compensation for future absences, and accordingly, no liability has been recorded in the accompanying financial statements. It is the Company's policy to recognize the cost of compensated absence when actually paid.

*Statement of Cash Flows* - For purposes of the Statement of Cash Flows, the Company has defined cash equivalents as highly liquid assets, with original maturities of less than three months that are not held for sale in the ordinary course of business.

*Use of Estimates* - The preparation of the financial statements in conformity with accounting principles generally accepted in the United States of America ("GAAP"), requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements, as well as the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

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#### NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2019

## *Note 2* - *S ummary of Signific<mt Accounting Policies (continued)*

*Leases* - The Company recognizes and measures its leases in accordance with F ASB ASC 842, *Leases.*  The Company is a lessee in a noncancelable operating lease for office space. The Company determines if an arrangement is a lease, or contains a lease, at inception of a contract and when the terms of an existing contract are changed. The Company recognizes a lease liability and a right of use (ROU) as.set at the commencement date of the lease. The lease liability is initially and subsequently recognized based on the present value of its future lease payments. Variable payments are included in the future lease payments when those variable payments depend on an index or a rate. The discount rate is the implicit rate if it is readily determinable or otherwise the Company uses its incremental borrowing rate. The implicit rates of our leases are not readily determinable and accordingly, we use our incremental borrowing rate based on the information available at the commencement date for all leases. The Company' s incremental borrowing rate for a lease is the rate of interest it would have to pay on a collateralized basis to borrow an amount equal to the lease payments under similar terms and in a similar economic environment. The ROU asset is subsequently measured throughout the lease term at the amount of the remeasured lease liability (i.e., present value of the remaining lease payments) , plus unamortized initial direct costs, plus (minus) any prepaid (accrued) lease payments, less the unamortized balance of lease incentives received , and any impairment recognized. Lease cost for lease payments is recognized on a straight-line basis over the lease term.

The Company has elected, for all underlying classes of assets, to not recognize ROU assets and lease liabilities for short-term leases that have a lease term of 12 months or less at lease commencement, and do not include an option to purchase the underlying asset that the Company is reasonably certain to exercise. We recognize lease cost associated with our short-term lease on a straight-line basis over the lease term.

*Subsequent Events* - Management has reviewed and evaluated all events and transactions from December 31, 2019 (statement of financial condition date) through February 25, 2020, the date that the financial statements are available for issuance. The effects of those events and transactions that provide additional pertinent information about conditions that existed at the statement of financial condition date have been recognized in the accompanying financial statements.

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#### NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2019

#### *Note 3* - *Property and Equipment*

Property and equipment at December 3 I, 2019, consisted of the following:

| Furniture and fixtures | \$<br>77,538 |
|------------------------|--------------|
| Equipment              | 156 935      |
|                        | 234,473      |
|                        | (139,204)    |
|                        | \$<br>95,269 |

#### *Note 4* - Investment - *Parent*

The Parent has adopted stock-based compensation plans that eligible employees of the Company may participate in (See Note 13). When an employee of the Company is awarded shares under the plans, the Company records a contribution to additional paid-in capital, and a corresponding investment in parent for the fair market value of the Parent's shares on the date of the award. As compensation expense is recognized in accordance with F ASB ASC 718, *Compensalion* - *Stock CompensaLion,* the investment in parent is reduced accordingly.

#### *Note* 5 - *Income Taxes*

The income tax expense (benefit) for the year ended December 31, 2019 consists of the following:

| Current         |              |
|-----------------|--------------|
| Federal         | 74,861<br>\$ |
| State and local | 37,240       |
|                 | 112,101      |
| Deferred        |              |
| Federal         | (32,640)     |
| State and local | (18,360)     |
|                 | (51,000)     |
|                 | 61 I 01<br>~ |

The income tax expense reported on the statement of income differs from the amounts that would result from applying statutory tax rates to income before income taxes primarily because of share awards deductibility upon vesting. The deferred tax asset of \$52,000 as of December 31 , 2019 relates primarily

*See Report of Independent Registered Public Accounting F;rm.* - 10 -

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#### NOTES TO FINANCIAL STATEMENTS DECEMBER 31,2019

#### *Note* 5 - *Income Taxes (continued)*

to unamortized share awards and difference in operating lease ROU asset and operating lease liability. The deferred tax liability of \$30,000 as of December 31, 2019 relates primarily to accelerated tax depreciation versus book depreciation. The Company presents deferred income tax assets and liabilities in accordance with F ASB Accounting Standards Update (ASU) 2015-17, *Balance Sheet Classifications of Def erred Taxes.* 

#### *Note 6* - *Related Party Transactions*

At December 31 , 2019 the Company has a receivable from the Parent totaling \$3,283,561. There are no repayment terms associated with this transaction.

The Company has a service agreement with the Parent. Under the service agreement, the Company will provide sales and marketing services to the Parent. The fee earned by the Company for sales and marketing services is to be calculated based on direct and certain indirect costs incurred by the Company plus ten percent ( 10%). For the year ended December 31, 2019, the fees earned by the Company from the Parent for these services amounted to \$5,449,750.

#### *Note* 7- *Capital*

During 2010, the Company amended its Certificate of Incorporation as filed with the New York State Department of State, Division of Corporation, to provide that the Company shall be entitled to issue 10,000 shares, consisting of 1,000 shares of common stock with no par value and 9,000 shares of preferred stock with no par value. The total of 9,000 shares of preferred stock shall be designated as a series known as Series A Preferred Stock.

The holders of Common Stock shall be entitled to receive dividends out of the funds legally available therefore at 2% above LIBOR at such times and in such amounts as the Board of Directors may determine in its sole discretion. Such dividends shall be non-cumulative. For 2019, the Board of Directors did not declare any dividends.

Upon liquidation, dissolution or winding up of the Company, each holder of each outstanding share of Series A Preferred Stock shall be entitled to be paid out of the assets of the Company available for distribution, whether such assets are capital, surplus or earnings before any amount shall be paid or distributed to the holders of the Common Stock or any other series or class of capital stock of the Company ranking on liquidation junior to the Series A Preferred Stock, an amount per share equal to any declared but unpaid dividends to which such holder of Series A Preferred Stock is then entitled.

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#### NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2019

#### *Note 8* - *Net Capital Requirement*

The Company is subject to the SEC Uniform Net Capital Rule (Rule 15c3-l), which requires the maintenance of minimum net capital. At December 31, 2019, the Company had net capital of \$1,145,939, which was \$845,939 in excess of its required net capital of \$300,000.

## *Note 9 -Jndemnificl1tions*

In the normal course of its business, the Company indemnifies and guarantees certain service providers, such as clearing and custody agents, trustees. and administrators, against specified potential losses in connections with their acting as an agent of, or providing services to, the Company or jts affiliates. The Company also indemnifies some clients against potential losses incurred in the event specified third-party service providers, including sub-custodians and third-party brokers, improperly execute transactions.

The maximum potential amount of future payments that the Company could be required to make under these indemnifications cannot be estimated. However, the Company believes that Et is unlikely it will have to make material payments under these arrangements and has not recorded any contingent liability in the financial statements for these indemnifications.

The Company provides representations and warranties to counterparties in connection with a variety of commercial transactions and occasionally indemnifies them against potential losses caused by the breach of those representations and warranties. The Company may also provide standard indemnifications to some counterparties to protect them in the event additional taxes are owed or payments are withheld, due either to a change in or adverse application of certain tax laws. These indemnifications generally are standard contractual terms and are entered in the normal course of business. The maximum potential amount of future payments that the Company could be required to make under these indemnifications cannot be estimated. However, the Company believes that it is unlikely it will have to make material payments under these arrangements and has not recorded any contingent liability in the financial statements for these indemnifications.

#### *Note* JO- *Clish Segregated under Federal and Other Regulations*

The Company is not required to maintain a special reserve bank account for the protection of customers as required by Rule 15c3-3 of the Securities and Exchange Commission under Section K(2)ii of the rule.

## *Note 11* - *Concentration of Credit Risk and Other Fimmcial Information*

Cash held by financial institutions which exceed the Federal Deposit Insurance Corporation ("FDIC') limits expose the Company to concentrations of credit risk. Balances throughout the year usually exceed the maximum coverage by the FDIC on insmed depositor accounts. At December 31, 2019, the Company's uninsured cash balance was \$1 ,31 1,342.

{16}------------------------------------------------

#### NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2019

## *Note 11* - *Concentration of Credit Risk and Other Financial Information (continuetl)*

Supplemental Disclosure of Cash Flow Information

| Cash paid during the year for:                                             | Income taxes                                                             | \$<br>0      |
|----------------------------------------------------------------------------|--------------------------------------------------------------------------|--------------|
|                                                                            | Interest                                                                 | 0            |
| Operating cash flow from operating leases                                  | Cash paid for amounts included in the measurement of lease liabilities:  | \$ 419,650   |
| ROU assets obtained in exchange for lease obligations:<br>Operating leases |                                                                          | \$ 2,559,395 |
| Operating leases                                                           | Reductions to ROU assets resulting from reductions to lease obligations: | \$ (291,072) |

#### *Note 12 - Retirement Plan*

The Company has a 40I(k) retirement plan for its employees. The plan is available to all employees meeting certain eligibility requirements. The Company did not make any contributions to the plan on behalf of the employees in2019.

#### *Note 13* - *Share Plans anti Stock-Based Compensation*

The Parent had adopted an Ordinary Share Scheme and Growth Share Plans (the "Plans") for eligilble employees as defined in the Plans. The shares of the Parent are awarded at a price that approximates the estimated fair value of the shares at the date of grant as determined in accordance with the Plans. The shares awarded vest under various provisions, not to exceed 5 years. For the year ended December 31, 2019, the Company recorded compensation expense under the Plans of \$24,902.

#### *Note 14* - *Receivable From anti Payable To Clearing Organization*

Amounts receivable from and payable to clearing organization at December 31 , 2019, consist of the following:

|                                               | Receivable             | Payable     |
|-----------------------------------------------|------------------------|-------------|
| Securities failed-to-deliver/receive<br>Other | \$3,269,747<br>268,386 | \$3,269,747 |
|                                               | \$3 538 133            | \$3 269 747 |

*See Report of independent Registered Public Accounting Firm.* 

{17}------------------------------------------------

#### **NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2019**

#### *Note 15* - *Leases*

The Company has obligations as a lessee for office space with an initial noncancelable term in excess of one year. The Company classified this lease as an operating lease. The lease contains a renewal option of five years. Because the Company is not reasonably certain to exercise the renewal option, the optional period is not included in determining the lease term, and associated payments under the renewal option are excludled from lease payments. The Company' s lease does not include termination options for either party to the lease or restrictive financial or other covenants. Payments due under the lease contract include fixed payments plus variable payments. The Company' s office space lease requires it to make variable payments for the Company's proportionate share of the building's property taxes, insurance, and common area maintenance. These variable lease payments are not included in lease payments used to determine lease liability and are recognized as variable costs when incurred.

| The components of lease cost for the year ended December 31, 2019 are as fol lows: |               |
|------------------------------------------------------------------------------------|---------------|
| Operating lease cost                                                               | \$<br>506,613 |
| Weighted average remaining lease term:                                             |               |
| Operating leases                                                                   | 6 years       |
| Weighted average discount rate:                                                    |               |
| Operating leases                                                                   | 5.5 %         |

Maturities of lease liabilities under the noncancelable operating lease as of December 31 , 2019 are as follows:

| 2020                    | \$<br>334,686 |
|-------------------------|---------------|
| 2021                    | 353,564       |
| 2022                    | 386,401       |
| 2023                    | 426,749       |
| 2024                    | 450,821       |
| Thereafter              | 476 251       |
| Total lease liabilities | \$2.428.472   |

*See Report of Indep endent Registered Pubhc Accounting Firm.* 

{18}------------------------------------------------

#### **SCHEDULE OF COMPUTATION OF ALTERNATE NET CAPITAL UNDER SEC RULE 15c3-1**

|                                                                      |    | DECEMBER 31,<br>2019 |  |
|----------------------------------------------------------------------|----|----------------------|--|
| Total stockholder's equity                                           | \$ | 4 992 152            |  |
| Add: Other or allowable credits                                      |    |                      |  |
| Deductions and/or charges:<br>Nonallowable assets:                   |    |                      |  |
| Prepaid expenses and other assets                                    |    | 165,774              |  |
| Fixed assets                                                         |    | 95,269               |  |
| Securitty deposit                                                    |    | 152,600              |  |
| Deferred income tax asset                                            |    | 52,000               |  |
| Investment - parent                                                  |    | 97,009               |  |
| Due from parent                                                      |    | 3,283,561            |  |
|                                                                      |    | 3,846,213            |  |
| Net capital before haircuts on securities positions                  |    | l, 145 ,939          |  |
| Haircuts on securities                                               |    |                      |  |
| Net capitaE                                                          | \$ | l,145,939            |  |
| COMPUTATION OF ALTERNATE NET CAPITAL REQUIREMENT                     |    |                      |  |
| Minimum dollar net capital requirement of reporting broker or dealer | \$ | 250,000              |  |
| Excess net capital                                                   |    | 895,939              |  |
| Net capital in excess of 120% of minimum net capital requirement     | \$ | 845,939              |  |

*See Report of Independent Registered Pubhc Accounting Firm and accompanying notes.* 

{19}------------------------------------------------

# **LIBERUM CAPITAL INC.**

## **SCHEDULE OF REC ON CILIA TION OF NET CAPITAL PER FOCUS REPORT WITH AUDITREPORT**

|                                   | DECEMBER 31,<br>2019 |
|-----------------------------------|----------------------|
| Net capital -<br>per FOCUS Report | \$<br>1,145 ,933     |
| Rounding                          | 6                    |
| Net capital -<br>per audit report | \$<br>1 145 939      |

{20}------------------------------------------------

# **LIBERUM** 575 Fifth Avenue, 20111 Floor

New York, NY 10017, United States of America T +1 212 596 4800 IF +1 212 596 4898 www.liberum.com

#### Liberum Capital Inc.

#### Exemption Report

Liberum Capital Inc (the "Company") is a registered broker-dealer subject to Rule 17a-5 promulgated by the Securities and Exchange Commission (17 C.F.R §240.17a-5, "Reports to be made by certain brokers and dealers"). This Exemption Report was prepared as required by 17 C.F.R. § 240.17a-5(d)(1) and (4). To the best of its knowledge and belief, the Company states the following:

(1) The Company claims an exemption from 17 C. F. R. § 240.15c3-3(k)(2)(ii) (the "exemption provision") and (2) the Company met the exemption provision throughout the most recent fiscal year 2019 without exception.

Liberum Capital Inc.

@;!:- CM 2125/20

Financial Principal

I

{21}------------------------------------------------

![](_page_21_Picture_0.jpeg)

76 North Walnut Street Ridgewood, New Jersey 07450 201-652-4040 fax: 201-652-0401 www.bdgcpa.com

## **Report of Independent Registered Public Accounting Firm**

To the Board of Directors and Stockholder of Liberum Capital Inc .. :

We have reviewed management's statements, included in the accompanying Exemption Report, in which **(1)** Liberum Capital Inc. (the "Company") identified the following provisions of 17 C.F.R. § l 5c3-3(k) under which the Company claimed an exemption from 17 C.F .R. § 240. l 5c3- 3: (k)(2)(ii) (the "exemption provisions") and (2) the Company stated that the Company met the identified exemption provisions throughout the most recent fiscal year without exception. The Company'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 the Company'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 opm1on.

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 l 5c3-3 under the Securities Exchange Act of 1934.

*B/JC-C/;?s* 

BDG-CPAs, PC Ridgewood, New Jersey February 25, 2020


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