FOCUS Report Tellimer Markets Inc.

X-17A-5 [Paper] - FOCUS Report

Published: 2016-07-12 14:42:54
Submitted: 2016-05-27
Period Ending In: 2016-03-31
scanned.pdf Scanned paper document


                                                                                                                  OMB APPROVAL
                                                       16021562
                                                                                                          OMB Number:            3235-0123
                           SECURITIES AND EXC                      COMIQN                                 Expires:            May 31, 2017
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                               ANNUAL AUDITEDFPORT
                                                                                                                          SEC FILE NUMBER
                                    FORM X-17A-
                                      PART III  ,                                                                        8-67668
                                                   "O'r
                                      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           4/01/2015         AND ENDING         3/31/2016
                                                       MM/DD/YY                                                      MM/DD/YY

                                      A. REGISTRANT IDENTIFICATION
NAME OF BROKER-DEALERS: Exotix USA,INC.                                                                              OFFICIAL USE ONLY
ADDRESS OF PRINCIPAL PLACE OF BUSINESS:(Do not use P.O. Box No.)
444 Madison Avenue, 36th Floor                                                                                           FIRM I.D. NO.
                                                           (No. and Street)
New York                                                            NY                                                   10022
                  (City)                                           (State)                                              (Zip Code)
NAME AND TELEPHONE NUMBER OF PERSON TO CONTACT IN REGARD TO THIS REPORT
Ian                                                                                                             212-551-3480
                                                                                                                 (Area Code — Telephone Number)

                                     B. ACCOUNTANT IDENTIFICATION
INDEPENDENT PUBLIC ACCOUNTANT whose opinion is contained in this Report*
WithumSmith+Brown,PC
                                          (Name —ifindividual, state last,first, middle name)
1411 Broadway,91h Floor                    New York                                         NY                           10018-3496
      (Address)                               (City)                                            (State)                     (Zip Code)

CHECK ONE:
          [R] Certified Public Accountants
          ❑ Public Accountant
          ❑ Accountant not resident in United States or any of its possessions.

                                              FOR OFFICIAL USE ONLY




*Claimsfor exemption from the requirement that the annual report be covered by the opinion of an independent public
accountant
must be supported by a statement offacts and circumstances relied on as the basis for the exemption. See Section
240.17a-5 e 2
                                 Potential persons who are to respond to the collection of information contained in
                                 this form are not required to respond unless the form displays a currently valid
      SEC 1410 (06-02)           OMB control number.




                                                                                                                                          CJ~


                                       OATH OR AFFIRMATION

I, Ian Tweedley, swear (or affirm) that, to the best of my knowledge and belief the accompanying financial
statement and supporting schedules pertaining to the firm of Exotix USA, Inc., as of March 31, 2016, are
true and correct. I further swear (or affirm) that neither the company nor any partner, proprietor, principal
officer or director has any proprietary interest in any account classified solely as that of a customer.




Managing Director, CEO
                                                    CLAUDIA TAYLOR
                                 /         (VOTARY PUBLIC, State of New York
                                                     No.OITA5068172
                                                 Qualified in Kings County,
                                           COm~ri1S8i0t1       $10/2
               Notary Public                                             D/
This report ** contains(check all applicable boxes):
IK (a) Facing Page.
El (b) Statement of Financial Condition.
❑    (c) Statement ofIncome (Loss).
❑    (d) Statement of Changes in Financial Condition.
❑    (e) Statement of Changes in Stockholders' Equity or Partners' or Sole Proprietors' Capital.
❑    (f) Statement of Changes in Liabilities Subordinated to Claims of Creditors.
❑    (g) Computation of Net Capital.
❑    (h) Computation for Determination of Reserve Requirements Pursuant to Rule 156-3.
❑    (i) Information Relating to the Possession or Control Requirements Under Rule 15c3-3.
❑    0) A Reconciliation, including appropriate explanation ofthe Computation of Net Capital Under
     Rule 1.56-1 and the Computation for Determination of the Reserve Requirements Under Exhibit A of
     Rule 150-3.
❑    (k) A Reconciliation between the audited and unaudited Statements of Financial Condition with
     respect to methods of consolidation.
     (1) An Oath or Affirmation.
❑    (m)A copy of the SIPC Supplemental Report.
❑    (n) A report describing any material inadequacies found to exist or found to have existed since the
     date of the previous audit.
❑    (o) Exemption Report pursuant to Securities and Exchange Commission Rule 17a5(d)(4)

**For conditions ofconfidential treatment ofcertain portions ofthisfiling, see section 240.17a-5(e)(3).


EXOTIX USA, INC.

CONTENTS


Report of Independent Registered Public Accounting Firm    1


Financial Statement

   Statement of Financial Condition                        2

   Notes to Financial Statement                           3-8


                                                                                               withum~~             AUDIT TAX ADVISORY


                      REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Shareholder of
Exotix USA, Inc.

We have audited the accompanying statement of financial condition of Exotix USA, Inc. as of March 31, 2016. This
financial statement is the responsibility of the Company's management. Our responsibility is to express an opinion
on this financial statement based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board
(United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statement is free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statement. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

In our opinion, the statement of financial condition referred to above presents fairly, in all material respects, the
financial position of Exotix USA, Inc. as of March 31, 2016, in accordance with accounting principles generally
accepted in the United States of America.




May 25, 2016




Withum5m1th+8rown,PC 1411 Broadway, 9th Floor, New York, New York 10018-3496 T (212)751 9100 F (212) 750 3262 withum.com

          MEMBER OF HLB INTERNATIONAL.A WORLD-WIDE NETWORK OF INDEPENDENT PROFESSIONAL ACCOUNTING FIRMS AND BUSINESS ADVISORS.


EXOTIX USA, INC.


STATEMENT OF FINANCIAL CONDITION
March 31, 2016


ASSETS

  Cash                                                                                  5,544,280




                                                                                    $
  Restricted cash                                                                         275,483
  Receivables from affiliate                                                            1,114,935
  Fail to deliver                                                                          86,860
  Accounts receivable, customer                                                            83,260
  Deferred tax asset                                                                      171,330
  Income tax receivable                                                                   695,480
  Property and equipment, net                                                             103,206
  Other assets                                                                             45,959

                                                                                    $   8,120,793


LIABILITIES AND STOCKHOLDER'S EQUITY

Liabilities
  Accounts payable and accrued expenses                                             $    633,211
  Fail to receive                                                                         83,260
  Accounts payable, customer                                                              86,860
  Security deposit payable                                                                59,262
  Deferred rent                                                                          132,648

      Total liabilities                                                                   995,241

Stockholder's equity
  Common stock, $.01 par value,
   1,000 shares authorized, issued, and outstanding                                            10
  Additional paid-in capital                                                            1,999,990
  Retained earnings                                                                     5,125,552

      Total stockholder's equity                                                        7,125,552

                                                                                    $   8,120,793




                                   See accompanying notes to financial statement.
                                                                                                    2


EXOTIX USA, INC.

NOTES TO FINANCIAL STATEMENT


1. Nature of business and summary of significant accounting policies

Nature of Business

Exotix USA, Inc. (the "Company") is a corporation formed under the laws of Delaware on May 15, 2007. On
January 14, 2008, the Company became a broker-dealer and as such, is registered with the U.S. Securities and
Exchange Commission ("SEC") and is a member of the Financial Industry Regulatory Authority ("FINRA"). The
Company is wholly-owned by Exotix Partners LLP (the "Parent").

The Company is engaged in providing market information, market prices, and efficient trade execution in fixed
income and other financial instruments to professional and institutional investors in the Americas. The Company
offers the intermediation of loans extended to sovereign and corporate entities primarily located in emerging
markets and between professional and institutional investors on a name give-up basis. The Company conducts
business exclusively with institutional buy side investors, securities dealers and other professional market
participants.

Basis of Presentation

The financial statements have been prepared in conformity with accounting principles generally accepted in the
United States of America ("GAAP").

These financial statements were approved by management and available                              issuance on May 25, 2016.


                                                                                         for
Subsequent events have been evaluated through this date.

Restricted Cash

Restricted cash consisted of a letter of credit with a financial institution, in the form of a certificate of deposit, which is
held to secure one of the Company's leases.

Property and Equipment

Property and equipment is stated at cost less accumulated depreciation and amortization. All property and
equipment is being depreciated on a straight-line basis over the estimated useful lives of the related assets.
Amortization of leasehold improvement is computed on a straight-line basis over the estimated useful life of the
asset or the term of the lease, whichever is shorter. The Company provides for depreciation and amortization as
follows:

                                                 Estimated
           Asset                                 Useful Life                                   Principal Method

      Furniture and fixtures                     7 years                                       Straight-line
      Office and other equipment                 3 years                                       Straight-line
      Leasehold improvements                     Shorter of estimated life                     Straight-line
                                                 of asset or lease term


EXOTIX USA, INC.

NOTES TO FINANCIAL STATEMENT


1. Nature of business and summary of significant accounting policies(continued)

Revenue and Expense Recognition from Securities Transactions

Securities transactions and the related revenues and expenses are recorded on the trade-date basis. The Company
clears and settles debt transactions via a "piggy-back" arrangement with its affiliate Exotix Partners LLP and ICAP
Securities LLP. Equity transactions are cleared and settled between the executing local broker and the custodian
for the client.

Income Taxes

The Company follows an asset and liability approach to financial accounting and reporting for income taxes. Deferred
income tax asset and liabilities are computed for differences between the financial statement and tax basis of assets
and liabilities that will result in taxable or deductible amounts in the future based on the enacted tax laws and rates
applicable to the periods in which the differences are expected to affect taxable income. Valuation allowances are
established, when necessary, to reduce the deferred income tax assets to the amount expected to be realized.

The determination of the Company's provision for income taxes requires significant judgment, the use of estimates,
and the interpretation and application of complex tax laws. Significant judgment is required in assessing the timing
and amounts of deductible and taxable items and the probability of sustaining uncertain tax positions. The benefits
of uncertain tax positions are recorded in the Company's financial statements only after determining a more-likely-
than-not probability that the uncertain tax positions will withstand challenge, if any, from tax authorities. When
facts and circumstances change, the Company reassesses these probabilities and records any changes in the
financial statements as appropriate. Accrued interest and penalties related to income tax matters are classified as
a component of income tax expense.

In accordance with GAAP, the Company is required to determine whether a tax position of the Company is more
likely than not to be sustained upon examination by the applicable taxing authority, including resolution of any
related appeals or litigation processes, based on the technical merits of the position. The tax benefit to be
recognized is measured as the largest amount of benefit that is greater than fifty percent likely of being realized
upon ultimate settlement. De-recognition of a tax benefit previously recognized could result in the Company
recording a tax liability that reduces stockholder's equity. This policy also provides guidance on thresholds,
measurement, de-recognition, classification, interest and penalties, accounting in interim periods, disclosure, and
transition that is intended to provide better financial statement comparability among different entities.
Management's conclusions regarding this policy may be subject to review and adjustment at a later date based on
factors including, but not limited to, on-going analyses of and changes to tax laws, regulations and interpretations
thereof.

The Company files its income tax returns in the U.S. federal and various state and local jurisdictions. Generally, the
Company is no longer subject to income tax examinations by major taxing authorities for years before 2013. Any
potential examinations may include questioning the timing and amount of deductions, the nexus of income among
various tax jurisdictions and compliance with U.S. federal, state and local tax laws. The Company's management
does not expect that the total amount of unrecognized tax benefits will materially change over the next twelve
months.




                                                                                                                     4


EXOTIX USA,INC.

NOTES TO FINANCIAL STATEMENT


1. Summary of significant accounting policies (continued)

              Estimates
Use
         of
The preparation of financial statements in conformity with GAAP requires the Company's management to make
estimates and assumptions that affect the amounts disclosed in the financial statements. Actual results could differ
from those estimates.

 Translation           Foreign Currency and Foreign Exchange Gain/Loss
                  of
Assets and liabilities denominated in foreign currencies are translated into United States dollar amounts at the March
31, 2016 exchange rates. Transactions denominated in foreign currencies, including purchases and sales of
investments, and income and expenses, are translated into United States dollar amounts on the transaction date.
Adjustments arising from foreign currency transactions are reflected in the statement of operations.

The Company has a bank account denominated in Pound Sterling (GBP) to offset the risk of settlement of the
transactions conducted with the Parent.


2. Customer transactions

In the normal course of business, the Company effects transactions on behalf of customers on a delivery versus
payment basis. If these transactions do not settle due to failure to perform by either the customer or the
counterparty, the Company may be obligated to discharge the obligation of the nonperforming party and, as a
result, may incur a loss if the market value of the securities is different from the contract amounts. The risk of loss
to the Company is normally limited to differences in market values of the securities compared to their contract
amounts.


3. Related party transactions

 Receivables from Affiliate

Substantially all of the Company's commission revenue derived from effecting securities transactions on behalf
                                                               is
of customers, primarily United States institutional investors, and in some cases with its affiliates. Pursuant to a
clearing arrangement with an affiliate, the Company's commissions from customers are collected by an affiliate
and remitted to the Company. As of March 31, 2016, there was a receivable from affiliate under this arrangement
of approximately $1,115,000 for commissions from customers collected by the affiliate.

      Transfer Pricing and Head Office Charges

  Per a Services and Commissions Sharing Agreement (the "Agreement") between the Company and several
  affiliates, the Company shares revenues resulting from the Company's brokerage business via a profit split
  method.

      The Parent also provides certain support services ("Head Office Charges") to the Company, including but not
      limited to compliance, financial, legal and human resources. .




                                                                                                                     5


EXOTIX USA, INC.

NOTES TO FINANCIAL STATEMENT


3. Related party transactions(continued)

Clearance Fees

The Company pays clearing fees to the Parent. The Company receives the commission revenue from customers
after deducting the commission expense owed to the Parent. As a result, there are no commissions payable to the
Parent.

The Company entered into an agreement with EFCP Limited, an affiliate, whereby the Company facilitates
contacts by EFCP Limited with U.S. investors under Rule 15a-6 under the Exchange Act. The Company receives
the commission revenue from customers and pays 60% commission share expense.


4. Property and equipment

Details of property and equipment at March 31, 2016 are as follows:

Office and other equipment                       337,734
                                        $
Leasehold impro\,ements                           29,959
Furniture and fixtures                           400,628
                                                 768,321
Less accumulated depreciation
  and amortization                               665,115

                                                 103,206
                                        $
5. Net capital requirement

The Company, as a member of FINRA, is subject to the SEC Uniform Net Capital Rule 15c3-1. This Rule requires
the maintenance of minimum net capital and that the ratio of aggregate indebtedness to net capital, both as defined,
shall not exceed 15 to 1 and that equity capital may not be withdrawn or cash dividends paid if the resulting net
capital ratio would exceed 10 to 1. At March 31, 2016, the Company's net capital was approximately $4,374,000
which was approximately $4,124,000 in excess of its minimum requirement of $250,000.


6. Income taxes

At March 31, 2016, the Company had deferred tax assets of approximately $171,000. The Company's deferred tax
assets are primarily attributable to the tax effects of net operating loss carryforwards, differences between
depreciation for tax purposes and depreciation for book purposes, as well as timing differences on the recognition of
unrealized losses on foreign currency holdings and deferred rent used for financial reporting. The difference between
the statutory rates and the effective rates are primarily due to the deferred tax assets and liabilities which are
determined using enacted tax rates in the effect for the year in which the differences are expected to reverse.




                                                                                                                   [.1


EXOTIX USA,INC.

NOTES TO FINANCIAL STATEMENT


7. Concentrations of credit and off-balance sheet risk

Concentrations of Credit Risk

In the normal course of business, the Company's customer activities involve the execution, settlement, and financing
of various customer securities transactions. These activities may expose the Company to off-balance-sheet risk in
the event the customer or other broker is unable to fulfill its contracted obligations and the Company has to purchase
or sell the financial instrument underlying the contract at a loss.

The Company maintains its cash balances in various financial institutions. These balances are insured by the
Federal Deposit Insurance Corporation up to $250,000 per institution.

Off-Balance Sheet Risk

The Company acts as an agent for institutional customers and other broker-dealers in the purchase and sale of
foreign securities. The Company executes and clears all of these foreign trades through a contractually obligated
foreign affiliate. These trades .are settled on a basis of either delivery or receipt versus payment. In the normal
course of business, the Company's activities involve the execution and settlement of various customer securities
transactions. These activities may expose the Company to off-balance sheet risk in the event a counterparty is
unable to fulfill its contracted obligations and the Company has to purchase or sell the financial instrument
underlying the contract at a loss. The Company monitors the credit standing of all counterparties with which it
conducts business. All open transactions at March 31, 2016 settled with no resultant loss being incurred by the
Company.


8. Exemption from Rule 15c3-3

The Company is exempt from the SEC Rule 15c3-3 pursuant to the exemptive provisions of sub-paragraphs
(k)(2)(i) and, therefore, is not required to maintain a "Special Reserve Bank Account for the Exclusive Benefit of
Customers."


9. Commitments

Operating Leases

The Company leases its office space under operating leases that expire at various times through January
2020. The leases are secured by a letter of credit with a financial institution in the amount of approximately
$275,000, in the form of a certificate of deposit, which is included in restricted cash in the statement of financial
condition at March 31, 2016. Aggregate future minimum annual rental commitments are as follows:


Year Ending March 31,
          2017                                           387,305
                                                $
          2018                                           387,305
          2019                                           387,305
          2020                                           322,754

                                                $      1,484,669


EXOTIX USA, INC.

NOTES TO FINANCIAL STATEMENT


10. Rentals under operating leases

The Company subleases a portion of its office space to a tenant. The lease expires in 2020. The following is a
schedule of approximate future minimum base rentals under non-cancelable operating lease agreements in effect
at March 31, 2016:


Year Ending March 31,
          2017                                 $        119,981
          2018                                          123,581
          2019                                          127,288
          2020                                          131,107
          2021                                           44,458

                                               $        546,415

Additionally, the leases contain various clauses for tenants to reimburse the Company for real estate taxes and
operating expenses, which are not included above.


11. Employee benefit plan

The Company maintains a retirement plan (the "Plan"), pursuant to Section 401(k) of the Internal Revenue Code, for
eligible participants to make voluntary contributions of a portion of their annual compensation, on a deferred basis,
subject to limitations provided by the Internal Revenue Code. The Company matches up to 5% of employee
contributions to the Plan




                                                                                                                   3



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Document Modified: 2016-07-29 10:50:50
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