SIEBERT FINANCIAL CORP — Interim / Quarterly Report 2004

Aug 16, 2004

10-Q 1 a8624_10q.htm a8624_10q

U.S. SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549

FORM 10-Q

(Mark One	)
[X]	Quarterly
report under Section 13 or 15(d) of the Securities Exchange Act of 1934
	For
the quarterly period ended June 30, 2004
[
]	Transition
report under Section 13 or 15(d) of the Exchange Act
	For
the transition period from ______
to ______
	Commission
file number 0-5703

Siebert Financial Corp. (Exact Name of Issuer as Specified in its Charter)

| New
York | 11-1796714 |
| --- | --- |
| (State
or Other Jurisdiction of Incorporation) | (I.R.S.
Employer Identification No.) |

885 Third Avenue, New York, NY 10022 (Address of Principal Executive Offices)

(212) 644-2400 (Issuer’s Telephone Number, Including Area Code)

(Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report)

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes X No

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).

Yes No X

State the number of shares outstanding of each of the issuer’s classes of common equity, as of the latest practicable date: As of July 30, 2004, there were 22,099,401 shares of Common Stock, par value $.01 per share, outstanding.

Unless the context otherwise requires, the “Company” shall mean Siebert Financial Corp. and its wholly owned subsidiaries and “Siebert” shall mean Muriel Siebert & Co., Inc., a wholly owned subsidiary of the Company.

Certain statements contained in the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” below and elsewhere in this document, as well as oral statements that may be made by the Company or by its officers, directors or employees acting on the Company’s behalf, that are not statements of historical or current fact constitute “forward looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward looking statements involve risks and uncertainties and known and unknown factors that could cause the actual results of the Company to be materially different from the historical results or from any future results expressed or implied by such forward looking statements, including, without limitation: changes in general economic and market conditions; fluctuations in volume and prices of securities; demand for brokerage and investment banking services; competition within and without the discount brokerage business, including the offer of broader services; competition from electronic discount brokerage firms offering lower rates on commissions than the Company; the prevalence of a flat fee environment; decline in participation in equity or municipal finance underwritings; limited trading opportunities; the method of placing trades by the Company’s customers; computer and telephone system failures; the level of spending by the Company on advertising and promotions; trading errors and the possibility of losses from customer non-payment of amounts due; other increases in expenses and changes in net capital or other regulatory requirements. The Company undertakes no obligation to publicly release the results of any revisions to these forward-looking statements which may be made to reflect events or circumstances after the date when such statements were made or to reflect the occurrence of unanticipated events. An investment in the Company involves various risks, including those mentioned above and those which are detailed from time to time in the Company’s Securities and Exchange Commission filings.

Part I - FINANCIAL INFORMATION

Item 1. Financial Statements.

Siebert Financial Corp. & Subsidiaries Consolidated Statements of Financial Condition

| | June
30, 2004 — (Unaudited) | | December
31, — 2003 | |
| --- | --- | --- | --- | --- |
| ASSETS | | | | |
| Cash
and cash equivalents | $28,053,000 | | $24,732,000 | |
| Cash
equivalents – restricted | 1,300,000 | | 1,300,000 | |
| Receivable
from clearing brokers | 1,119,000 | | 1,487,000 | |
| Advance
to clearing broker | 1,500,000 | | 1,500,000 | |
| Securities
owned, at market value | - | | 1,226,000 | |
| Furniture,
equipment and leasehold improvements, net | 1,686,000 | | 1,863,000 | |
| Investment
in and advances to equity investee | 2,726,000 | | 3,212,000 | |
| Prepaid
expenses and other assets | 1,156,000 | | 1,807,000 | |
| Intangibles,
net | 2,345,000 | | 2,346,000 | |
| Deferred
taxes | 529,000 | | 553,000 | |
| | $40,414,000 | | $40,026,000 | |
| LIABILITIES
AND STOCKHOLDERS’ EQUITY | | | | |
| Securities
sold, not yet purchased, at market value | 64,000 | | 6,000 | |
| Accounts
payable and accrued liabilities | 5,087,000 | | 4,885,000 | |
| | 5,151,000 | | 4,891,000 | |
| Commitments
and contingent liabilities | | | | |
| Stockholders’
equity: | | | | |
| Common
stock, $.01 par value; 49,000,000 shares authorized, | | | | |
| 22,983,917
shares issued and 22,097,115 and 22,222,014 shares | | | | |
| outstanding
at June 30, 2004 and December 31, 2003, respectively | 229,000 | | 229,000 | |
| Additional
paid-in capital | 17,931,000 | | 17,931,000 | |
| Retained
earnings | 21,145,000 | | 20,500,000 | |
| Less:
886,802 and 761,903 shares of treasury stock, at cost at June 30, 2004 | | | | |
| and
December 31, 2003, respectively | (4,042,000 | ) | (3,525,000 | ) |
| | 35,263,000 | | 35,135,000 | |
| | $40,414,000 | | $40,026,000 | |

See notes to consolidated financial statements.

Siebert Financial Corp. & Subsidiaries Consolidated Statements of Operations (Unaudited)

June
30,		June
30,
2004	2003	2004		2003
Revenues:
Commissions
and fees	$5,201,000	$5,261,000	$11,445,000	$9,387,000
Investment
banking	107,000	242,000	443,000	718,000
Trading
profits	182,000	207,000	432,000	404,000
Income
from equity investee	556,000	753,000	682,000	1,464,000
Interest
and dividends	105,000	148,000	180,000	243,000
	6,151,000	6,611,000	13,182,000	12,216,000
Expenses:
Employee
compensation and benefits	2,494,000	2,201,000	5,292,000	4,429,000
Clearing
fees, including floor brokerage	795,000	1,054,000	1,439,000	1,906,000
Advertising
and promotion	245,000	304,000	698,000	664,000
Communications	565,000	745,000	1,288,000	1,492,000
Occupancy	262,000	296,000	535,000	560,000
Interest	-	5,000	-	6,000
Other
general and administrative	1,336,000	1,579,000	2,762,000	3,245,000
	5,697,000	6,184,000	12,014,000	12,302,000
Income
(loss) before income taxes	454,000	427,000	1,168,000	(86,000	)
Provision
(benefit) for income taxes	224,000	181,000	523,000	(37,000	)
Net Income (loss)	$230,000	$246,000	$645,000	$(49,000	)
Net
income (loss) per share of common stock -
Basic
and Diluted	$.01	$ .01	$.03	$-
Weighted
average shares outstanding -
Basic	22,115,145	22,345,669	22,137,341	22,357,870
Weighted
average shares outstanding -
Diluted	22,330,151	22,618,211	22,335,238	22,357,870

See notes to consolidated financial statements.

Siebert Financial Corp. & Subsidiaries Consolidated Statements of Cash Flows (Unaudited)

June
30,
2004			2003
Cash flows from operating
activities:
Net
income (loss)	$645,000		$(49,000	)
Adjustments
to reconcile net income (loss) to net cash used in operating activities:
Depreciation
and amortization	806,000		834,000
Income
from equity investee	(682,000	)	(1,464,000	)
Deferred
taxes	24,000		(187,000	)
Changes
in:
Securities
owned, at market value	1,226,000		792,000
Receivable
from clearing brokers	368,000		(879,000	)
Prepaid
expenses and other assets	651,000		162,000
Securities
sold, not yet purchased, at market value	58,000
Accounts
payable and accrued liabilities	202,000		(6,000	)
Net
cash provided by (used in) operating activities	3,298,000		(797,000	)
Cash
flows from investing activities:
Return
of deposit on equipment			241,000
Purchase
of furniture, equipment and leasehold improvements	(228,000	)	(127,000	)
Advance
to clearing broker			(1,500,000	)
Purchase
of customer accounts	(400,000	)	(1,100,000	)
Payment
of advances by equity investee	(57,000	)	(40,000	)
Distribution
from equity investee	1,225,000		1,443,000
Net
cash provided by (used in) investing activities	540,000		(1,083,000	)
Cash flows from financing
activities:
Proceeds
from exercise of options			10,000
Repurchase
of common stock	(517,000	)	(473,000	)
Net
cash used in financing activities	(517,000	)	(463,000	)
Net
increase (decrease) in cash and cash equivalents	3,321,000		(2,343,000	)
Cash and cash equivalents
- beginning of period	24,732,000		22,498,000
Cash and cash equivalents
- end of period	$28,053,000		$20,155,000
Supplemental cash flow
disclosures:
Cash
paid for:
Interest			$6,000
Income
taxes	$121,000		$28,000

See notes to consolidated financial statements.

Siebert Financial Corp. & Subsidiaries

Notes to Consolidated Financial Statements Six Months Ended June 30, 2004 and 2003 (Unaudited)

| 1. | Organization
and Basis of Presentation: The
consolidated financial statements include the accounts of Siebert Financial
Corp. (the “Company”) and its wholly owned subsidiaries Muriel
Siebert & Co., Inc. (“Siebert”) and Siebert Women’s
Financial Network, Inc. (“WFN”). All material intercompany balances
have been eliminated. The statements are unaudited; however, in the opinion
of management, all adjustments considered necessary to reflect fairly
the Company’s financial position and results of operations, consisting
of normal recurring adjustments, have been included. The
accompanying consolidated financial statements do not include all of the
information and footnote disclosures normally included in financial statements
prepared in accordance with generally accepted accounting principles.
Accordingly, the statements should be read in conjunction with the audited
financial statements included in the Company’s Annual Report on Form
10-K for the year ended December 31, 2003. Because of the nature of the
Company’s business, the results of any interim period are not necessarily
indicative of results for a full year. |
| --- | --- |
| 2. | Stock-Based
Compensation Statement
of Financial Accounting Standards ("SFAS") No. 123, Accounting for Stock-Based
Compensation ("SFAS 123") as amended by SFAS No. 148, (Accounting for
Stock-Based Compensation – Transition and Disclosure an amendment
to FASB Statement 123), allows the fair value of stock-based compensation
to be included in expense over the period earned; alternatively, if the
fair value of stock-based compensation awards are not included in expense,
SFAS 123 requires disclosure of net income (loss), on a pro forma basis,
as if expense treatment had been applied. As permitted by SFAS 123, the
Company continues to account for such compensation under Accounting Principles
Board Opinion No. 25 ("APB 25"), Accounting for Stock Issued to Employees,
and related interpretations, pursuant to which no compensation cost was
recognized in connection with the issuance of stock options, as all options
granted under the 1997 Stock Option Plan had an exercise price equal to
or greater than the fair value of the underlying common stock on the date
of grant. Had the Company elected to recognize compensation expense for
the stock option plan, consistent with the method prescribed by SFAS 123,
the Company's net income (loss) and net income (loss) per share for the
three months and six months ended June 30, 2004 and 2003 would have (decreased)
increased the pro forma amounts as follows: |

| | Three
Months | | | | | | | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- |
| | Ended
June 30, | | | Ended
June 30, | | | | |
| | 2004 | 2003 | | 2004 | | 2003 | | |
| Net income (loss), as
reported | $230,000 | | $246,000 | | $645,000 | | $(49,000) | |
| Stock-based employee compensation
determined | | | | | | | | |
| under
APB 25 | - | | - | | - | | - | |
| Stock-based employee compensation
determined | | | | | | | | |
| under
the fair value based method, net of tax effect | (87,000 | ) | (140,000 | ) | (166,000 | ) | (610,000 | ) |
| Pro forma net income (loss) | $143,000 | | $106,000 | | $479,000 | | $(659,000 | ) |
| Net income (loss) per
share - basic: | | | | | | | | |
| As reported | $.01 | | $.01 | | $.03 | | $ - | |
| Pro
forma | $.01 | | $.01 | | $. 02 | | $(.03 | ) |
| Net income (loss) per
share - diluted: | | | | | | | | |
| As reported | $.01 | | $.01 | | $.03 | | $ - | |
| Pro
forma | $.01 | | $.01 | | $.02 | | $(.03 | ) |

| 3. | Net
Capital: Siebert
is subject to the Securities and Exchange Commission’s Uniform Net
Capital Rule (Rule 15c3-1), which requires the maintenance of minimum
net capital. Siebert has elected to use the alternative method, permitted
by the rule, which requires that Siebert maintain minimum net capital,
as defined, equal to the greater of $250,000 or two percent of aggregate
debit balances arising from customer transactions, as defined. (The net
capital rule of the New York Stock Exchange also provides that equity
capital may not be withdrawn or cash dividends paid if resulting net capital
would be less than five percent of aggregate debits.) As of June 30, 2004,
Siebert had net capital of approximately $16,267,000 as compared with
net capital requirements of $250,000. |
| --- | --- |
| 4. | Capital
Transactions: On May
15, 2000, the board of directors of the Company authorized a stock buy
back program of up to one million common shares. Shares will be purchased
from time to time in the open market and in private transactions. Through
June 30, 2004, 886,802 shares have been purchased at an average price
of $4.56 per share. |
| 5. | Option
Grants: During the six months
ended June 30, 2004, the Company’s Board of Directors granted options
to a director and employees of the Company to purchase an aggregate of
90,000 shares of the Company’s common stock at exercise prices ranging
from $3.75 to $4.87, the fair market value on the date of grants. The
employee option granted during the period, vest 20% per year for five
years and expire ten years from the date of grant. The director’s
option granted during the period, vest six months and expire five years
from the date of grant. |
| 6. | Intuit
Lawsuit Update: As previously
disclosed, Siebert filed a lawsuit against Intuit, Inc. (“Intuit”),
in New York State Supreme Court on September 17, 2003 (the “Intuit
Lawsuit”), seeking not less than $11.1 million in compensatory damages
and $33.3 million in punitive damages for claims relating to the Joint
Brokerage Service (the “JBS”) conducted during |

| | the years ended December 31 2003 and 2002 under the Strategic Alliance
Agreement between Siebert and Intuit. A motion by Intuit to stay the lawsuit
and require that the dispute be submitted to arbitration was denied in
a decision dated January 7, 2004. Intuit’s motion to reargue the
Court’s decision was denied by the Court in a decision dated June
7, 2004. Intuit is appealing both decisions to the Appellate Division
of the Supreme Court. In addition, on July 15, 2004, the Appellate Division
of the Supreme Court granted Intuit’s motion for a stay of litigation
pending its determination of Intuit’s appeal. The appeal will be
fully briefed by the parties by September 17, 2004 and is expected to
be argued before the Appellate Division in October 2004. |
| --- | --- |
| 7. | Account
Purchases: In February
2004, Siebert agreed to acquire certain retail discount brokerage accounts
from Wall Street Discount Corp. These accounts were transferred to Siebert
in April 2004. As of June 30, 2004, the purchase price of the customer
accounts has been recorded in “Intangibles” and is being amortized
over a five-year period. |
| 8. | Siebert
Brandford Shank & Co., LLC: Summarized financial data
of Siebert Brandford Shank & Co., LLC, (“SBS”) as of and
for the six months ended June 30, 2004 and 2003 is set forth below. Siebert
holds a 49% ownership interest in SBS. |

	2004	2003
Total
assets	$ 9,101,000	$ 8,808,000
Total
liabilities, including subordinated liabilities of
1,200,000	$ 3,746,000	$ 3,225,000
Total
members’ capital	$ 5,355,000	$ 5,583,000
Total
revenues	$ 6,937,000	$ 8,890,000
Net
income	$ 1,392,000	$ 2,987,000

| | Siebert
charged SBS $120,000 for the six months ended June 30, 2004 for rent and
general and administrative services, which Siebert believes approximates
the cost of furnishing such services. |
| --- | --- |
| | Siebert’s
share of undistributed earnings from SBS amounted to $2,232,000 and $2,344,000
at June 30, 2004 and 2003, respectively. Such amounts may not be immediately
available for distribution to Siebert for various reasons including the
amount of SBS’s available cash, the provisions of the agreement between
Siebert and the principals and SBS’s continued compliance with its
regulatory and net capital requirements. |
| 9. | Commitments
and Contingent Liabilities: |
| | As
previously disclosed, Siebert terminated the fully disclosed clearing
agreement (the “Clearing Agreement”) with Pershing LLC (formerly
the Pershing division of Donaldson, Lufkin & Jenrette Securities Corporation)
(“Pershing”). Based on consultation with counsel, Siebert believes
that the $1,500,000 that it advanced to Pershing in January 2003 should
be returned and that Pershing may be liable for damages. Pershing has
expressed its belief that it is entitled to retain the advance and receive
a minimum of $3 million for its unreimbursed costs, a termination fee
of $500,000 and $5 million for lost revenues. Siebert believes the Pershing
claims are without merit. No proceeding has been instituted by either
party. Accounts purchased by Siebert from other firms and the JBS accounts
that transferred to Siebert in December 2003, which were cleared through
Pershing, are now cleared through National Financial Services, Inc. |
| | The
Company is involved in various routine lawsuits of a nature deemed by
the Company customary and incidental to its business. In the opinion of
management, the ultimate disposition of such actions will not have a material
adverse effect on its financial position or results of operations. |

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

This discussion should be read in conjunction with the Company’s audited consolidated financial statements as of and for the year ended December 31, 2003, and the unaudited consolidated financial statements and the notes thereto contained elsewhere in this Quarterly Report.

Business Environment

The market was weak in the second quarter of 2004 due to the war on terrorism, rising interest rates and the resulting decreased interest in buying stocks. Competition in the brokerage industry remains intense although many of Siebert’s competitors have been consolidated or have gone out of business.

The Company, like other securities firms, is directly affected by general economic and market conditions including fluctuations in volume and prices of securities, changes and prospects for changes in interest rates and demand for brokerage and investment banking services, all of which can affect the Company’s relative profitability. In periods of reduced market activity, profitability is likely to be adversely affected because certain expenses, including salaries and related costs, portions of communications costs and occupancy expenses remain relatively fixed. Earnings, or loss, for any period should not be considered representative of any other period.

Recent Developments

In February 2004, Siebert agreed to acquire certain retail discount brokerage accounts from Wall Street Discount Corp. These accounts were transferred to Siebert in April 2004. As of June 30, 2004, the purchase price of the customer accounts has been recorded in “Intangibles” and is being amortized over a five-year period.

On May 15, 2000, the board of directors of the Company authorized the repurchase of up to 1,000,000 shares of the Company’s common stock. Shares will be purchased from time to time, in the discretion of the Company, in the open market and in private transactions. Through June 30, 2004, 886,802 shares have been purchased at an average price of $4.56 per share. The Company intends to continue acquiring shares pursuant to its stock repurchase program based upon the price of the stock and in accordance with applicable rules and regulations.

Critical Accounting Policies

The Company follows accounting policies standard in the brokerage industry and believes that its policies appropriately reflect its financial position and results of operations. Management has identified the use of “Estimates” as its critical accounting policy. These estimates relate primarily to revenue and expense items in the normal course of business as to which the Company receives no confirmations, invoices, or other documentation at the time the books are closed for a period. The Company uses its best judgment, based on its knowledge of these revenue transactions and expenses incurred, to estimate the amounts of such revenue and expense. The Company is not aware of any material differences between the estimates used in closing its books for the last five years and the actual amounts of revenue received and expenses incurred when the Company subsequently receives the actual confirmations, invoices or other documentation. Estimates are also used in determining the useful lives of tangible and intangible assets, and the fair market value of intangible assets. Management believes that its estimates are reasonable.

Results of Operations

The Company believes that its core business is performing relatively well, given the current difficult business environment for discount and online brokers. The Company had net income of $230,000 and $645,000 for the three months and six months ended June 30, 2004, respectively.

Three Months Ended June 30, 2004 Compared to Three Months Ended June 30, 2003

Total revenues for the three months ended June 30, 2004 were $6.2 million, a decrease of $460,000 or 7.0% from the same period in 2003.

Commission and fee income for the three months ended June 30, 2004 was $5.2 million, a decrease of $60,000 or 1.1% from the same period in 2003 due to lower trading volume as result of weakening market conditions during the second quarter of 2004.

Investment banking revenues for the three months ended June 30, 2004 were $107,000, a decrease of $135,000 or 55.8% due to the Company participating in less new issues.

Income from the Company’s equity investment in Siebert Brandford Shank & Co., LLC, an entity in which the Company holds a 49% equity interest (“SBS”), for the three months ended June 30, 2004 was $556,000 compared to income of $753,000, a decrease of $197,000 or 26.2% from the same period in 2003. This decrease was due to decreased activity in the municipal bond market. SBS serves as an underwriter for municipal bond offerings.

Trading profits were $182,000 for the three months ended June 30, 2004, a decrease of $25,000 or 12.1% over the same period in 2003 due to an overall decrease in trading margins.

Interest and dividends for the three months ended June 30, 2004 were $105,000, a decrease of $43,000 or 29.1% from the same period in 2003 primarily due to lower interest rates and the maturing of municipal bonds that provided higher yields.

Total expenses for the three months ended June 30, 2004 were $5.7 million, a decrease of $487,000 or 7.9% from the same period in 2003.

Employee compensation and benefit costs for the three months ended June 30, 2004 were $2.5 million, an increase of $293,000 or 13.3% from the same period in 2003. This increase was primarily due to the expansion of the Company’s Capital Markets Group and New York Stock Exchange Floor Operation and increase in bonus accruals.

Clearing and floor brokerage costs for the three months ended June 30, 2004 were $795,000, a decrease of $259,000 or 24.6% from the same period in 2003 primarily due to decreased volume of trade executions and a one time commission rebate of $200,000 from the Company’s clearing firm.

Advertising and promotion expenses for the three months ended June 30, 2004 were $245,000, a decrease of $59,000 or 19.4% from the same period in 2003 primarily due to management’s decision to spend less for advertising and promotion as a result of the continued weakness in the marketplace.

Communications expense for the three months ended June 30, 2004, was $565,000, a decrease of $180,000 or 24.2% from the same period in 2003 due primarily to due to management’s effort to control and maintain these costs.

Occupancy costs for the three months ended June 30, 2004 were $262,000, a decrease of $34,000 or 11.5% from the same period in 2003. This decrease was primarily due to the closing of the Your Discount Broker, Inc.’s (“YDB”) office in Aventura, Florida in 2003 and the combining of the Company’s Boca Raton office with YDB’s Boca Raton office in the second quarter of 2004.

Other general and administrative expenses for the three months ended June 30, 2004 were $1.3 million, a decrease of $243,000 or 15.4% from the same period in 2003. This decrease was primarily due to the elimination of product development costs relating to the Strategic Alliance between Siebert and Intuit, Inc.

For the three months ended June 30, 2004, there was a tax provision of $224,000 due to the Company’s income before income tax of $454,000. For the three months ended June 30, 2003, there was a tax provision of $181,000 due to the Company’s income before tax $427,000.

Six Months Ended June 30, 2004 Compared to Six Months Ended June 30, 2003

Total revenues for the six months ended June 30, 2004 were $13.2 million, an increase of $966,000 or 7.9% from the same period in 2003.

Commission and fee income for the six months ended June 30, 2004 was $11.5 million, an increase of $2.1 million or 21.9% from the same period in 2003 due to the increased trading volume for the first six months of 2004.

Investment banking revenues for the six months ended June 30, 2004 were $443,000, a decrease of $275,000 or 38.3% from the same period in 2003 due to the Company participating in less new issues.

Income from the Company’s equity investment in Siebert Brandford Shank & Co., LLC, an entity in which the Company holds a 49% equity interest (“SBS”), for the six months ended June 30, 2004 was $682,000 compared to income of $1,464,000, a decrease of $782,000 or 53.4% from the same period in 2003. This decrease was due to decreased activity in the municipal bond market. SBS serves as an underwriter for municipal bond offerings.

Trading profits were $432,000 for the six months ended June 30, 2004, an increase of $28,000 or 6.9% over the same period in 2003 due to an overall increase in trading margins for this period.

Interest and dividends for the six months ended June 30, 2004 were $180,000, a decrease of $63,000 or 25.9% from the same period in 2003 primarily due to lower interest rates and the maturing of municipal bonds that provided higher yields.

Total expenses for the six months ended June 30, 2004 were $12.0 million, a decrease of $288,000 or 2.3% from the same period in 2003.

Employee compensation and benefit costs for the six months ended June 30, 2004 were $5.3 million, an increase of $863,000 or 19.5% from the same period in 2003. This increase was primarily due to a higher trading volumes and an increase in commission payouts, an increase in bonus accruals and the expansion of the Company’s Capital Markets Group and New York Stock Exchange Floor Operations.

Clearing and floor brokerage costs for the six months ended June 30, 2004 were $1.4 million, a decrease of $467,000 or 24.5% from the same period in 2003 primarily due to increased volume of trade executions, offset by a one time commission rebate of $800,000 from the Company’s clearing firm.

Advertising and promotion expenses for the six months ended June 30, 2004 were $698,000, an increase of $34,000 or 5.1% from the same period in 2003 primarily due to management’s decision to spend more for advertising and promotion.

Communications expense for the six months ended June 30, 2004, was $1.3 million, a decrease of $204,000 or 13.7% from the same period in 2003 due to primarily management’s effort to control and maintain these costs.

Occupancy costs for the six months ended June 30, 2004 were $535,000, a decrease of $25,000 or 4.5% from the same period in 2003. This decrease was primarily due to the closing of the Your Discount Broker, Inc.’s (“YDB”) office in Aventura, Florida in 2003 and the combining of the Company’s Boca Raton office with YDB’s Boca Raton office in the second quarter of 2004.

Other general and administrative expenses for the six months ended June 30, 2004 were $2.8 million, a decrease of $483,000 or 14.9% from the same period in 2003. This decrease was primarily due to the elimination of product development costs relating to the Strategic Alliance between Siebert and Intuit, Inc.

For the six months ended June 30, 2004, there was a tax provision of $523,000 due to the Company’s income before income tax of $1,168,000. For the six months ended June 30, 2003, the benefit for income taxes was $37,000 due to loss before taxes of $86,000.

Liquidity and Capital Resources

The Company’s assets are highly liquid, consisting generally of cash and money market funds. The Company’s total assets at June 30, 2004 were $40.4 million. As of that date, $29.2 million, or 72%, of total assets were regarded by the Company as highly liquid.

Siebert is subject to the net capital requirements of the SEC, the NYSE and other regulatory authorities. At June 30, 2004, Siebert’s regulatory net capital was $16.3 million, $16.0 million in excess of its minimum capital requirement of $250,000.

The Company also intends to acquire additional shares of its common stock pursuant to its share buy back program.

Siebert has entered into a Secured Demand Note Collateral Agreement with SBS under which it is obligated to lend to SBS up to $1.2 million pursuant to a secured promissory note on a subordinated basis. Amounts pledged by Siebert under the facility are reflected on the Company’s balance sheet as “cash equivalents – restricted”. SBS pays Siebert interest on this amount at the rate of 10% per annum. The facility expires on August 31, 2005, at which time SBS is obligated to repay to Siebert any amounts borrowed by SBS thereunder.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Working capital is generally temporarily invested in dollar denominated money market funds and overnight certificates of deposits. These investments are not subject to material changes in value due to interest rate movements. The Company also invests in certain short-term municipal bonds, the values of which may fluctuate during the period they are held by the Company.

In the normal course of its business, Siebert enters into transactions in various financial instruments with off-balance sheet risk. This risk includes both market and credit risk, which may be in excess of the amounts recognized in the Company’s financial statements. Retail customer transactions are cleared through clearing brokers on a fully disclosed basis. If customers do not fulfill their contractual obligations, the clearing broker may charge Siebert for any loss incurred in connection with the purchase or sale of securities at prevailing market prices to satisfy the customers’ obligations. Siebert regularly monitors the activity in its customer accounts for compliance with its margin requirements. Siebert is exposed to the risk of loss on unsettled customer transactions if customers and other counter parties are unable to fulfill their contractual obligations.

Item 4. Controls and Procedures

The Company carried out an evaluation, under the supervision and with the participation of management, including the Company’s President and Chief Financial Officer, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures as of the end of the period covered by this report pursuant to Exchange Act Rule 13a-15 under the Securities Exchange Act of 1934. Based upon that evaluation, the President and Chief Financial Officer concluded that the Company’s disclosure controls and procedures are effective in timely alerting them to material information relating to the Company (including its consolidated subsidiaries) required to be included in the Company’s periodic Securities and Exchange Commission filings.

There were no changes in the Company’s internal control over financial reporting that occurred during the Company’s most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

Part II - OTHER INFORMATION

Item 1. Legal Proceedings

See Part 1-Item 1 “Notes to Consolidated Financial Statements-Intuit Lawsuit Update” with respect to the Company’s lawsuit against Intuit Inc. which was filed in New York State Supreme Court, County of New York on September 17, 2003, alleging, among other things, Intuit’s breach of contractual obligations, breach of fiduciary duties and misrepresentation and/or fraud, all relating to the Joint Brokerage services conducted under the Strategic Alliance Agreement between Siebert and Intuit.

The Company is involved in various routine lawsuits of a nature deemed by the Company customary and incidental to its business. In the opinion of management, the ultimate disposition of such actions will not have a material adverse effect on its financial position or results of operations.

Item 2. Changes in Securities, Use of Proceeds and Issuer Purchases of Equity Securities

| Period | Total
Number Of
Shares Purchased | Average
Price Paid
Per Share | Total
Number of Shares Purchased as Part of Publicly Announced Plans(1) | Maximum Number
of Shares That May Yet Be Purchased Under The Plan |
| --- | --- | --- | --- | --- |
| April
2004 May 2004 June 2004 Total | 10,235 21,190 7,184 38,609 | $ 4.78 $5.02 $4.14 $ 4.79 | 858,428 879,618 886,802 886,802 | 141,572 120,382 113,198 113,198 |

(1) On May 15, 2000, the Board of Directors of the Company authorized a buy back of up to one million shares of the Company’s common stock. Under this program, shares are purchased from time to time, at the Company’s discretion, in the open market and in private transactions.

| Item
3. Defaults
Upon Senior Securities |
| --- |
| None |

Item 4. Submission of Matters to a Vote of Security Holders

The Company held its annual meeting on June 30, 2004. At that meeting, the following matter was voted on and received the votes indicated:

| (1)
Election of Directors | For | % | Withheld |
| --- | --- | --- | --- |
| Muriel
F. Siebert | 21,658,846 | 99 | 132,085 |
| Nicholas
P. Dermigny | 21,647,951 | 99 | 142,980 |
| Patricia
L. Francy | 21,785,014 | 99 | 5,917 |
| Jane
H. Macon | 21,775,014 | 99 | 15,917 |
| Leonard
M. Leiman | 21,647,951 | 99 | 142,980 |
| Nancy
S. Peterson | 21,785,864 | 99 | 5,067 |
| Robert
P. Mazzarella | 21,657,951 | 99 | 132,900 |

| Item
5. Other Information | | |
| --- | --- | --- |
| None | | |
| Item
6. Exhibits
and Reports
on Form 8-K | | |
| (a) | | |
| | 31. 1 | Certification
of Muriel F. Siebert pursuant to Exchange Act Rules 13a-14 and 15d-14,
as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
| | 31. 2 | Certification
of Joseph M. Ramos, Jr. pursuant to Exchange Act Rule 13a-14 and 15d-14,
as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
| | 32. 1 | Certification
of Muriel F. Siebert of Periodic Financial Report under Section 906 of
the Sarbanes-Oxley Act of 2002 . |
| | 32. 2 | Certification
of Joseph M. Ramos, Jr. of Periodic Financial Report under Section 906
of the Sarbanes-Oxley Act of 2002. |
| (b) | Reports
on Form 8-K. | |
| | | None. |

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

| SIEBERT
FINANCIAL CORP. |
| --- |
| By: /s/
Muriel F. Siebert |
| Muriel
F. Siebert |
| Chairwoman
and President |
| (principal
executive officer) |
| Dated:
August 16, 2004 |
| By: /s/
Joseph M. Ramos, Jr. |
| Joseph
M. Ramos, Jr. |
| Executive
Vice President and Chief Financial Officer |
| (principal
financial and accounting officer) |
| Dated:
August 16, 2004 |