SIEBERT FINANCIAL CORP — Interim / Quarterly Report 2013

May 15, 2013

10-Q 1 n13201_10-q.htm

| UNITED
STATES |
| --- |
| SECURITIES
AND EXCHANGE COMMISSION |
| WASHINGTON,
DC 20549 |
| FORM
10-Q |

(Mark One)
x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934

OR

o TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

| For the transition period from
_____ to __________ | |
| --- | --- |
| Commission file number | 0-5703 |

| Siebert
Financial Corp. |
| --- |
| (Exact Name of
Registrant as Specified in its Charter) |

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

| 885
Third Avenue, New York, NY 10022 |
| --- |
| (Address of Principal
Executive Offices) (Zip Code) |
| (212)
644-2400 |
| (Registrant’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 Securities 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 o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes x No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definition of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one)

Large Accelerated Filer o	Accelerated Filer o
Non-Accelerated Filer o	Smaller Reporting Company x

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes o No x

Indicate the number of shares outstanding of each of the issuer’s classes of common equity, as of the latest practicable date: As of May 2, 2013, there were 22,085,860 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 “Management’s Discussion and Analysis of Financial Condition and Results of Operations” below and elsewhere in this report, as well as oral statements that may be made by us or by our officers, directors or employees acting on our 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 our actual results to be materially different from our 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; changes and prospects for changes in interest rates; 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 greater discounts on commissions than we do; the prevalence of a flat fee environment; decline in participation in corporate or municipal finance underwritings; limited trading opportunities; the method of placing trades by our customers; computer and telephone system failures; our level of spending on advertising and promotion; 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. We undertake 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 us involves various risks, including those mentioned above and those which are detailed from time to time in our Securities and Exchange Commission filings.

1

Part I - FINANCIAL INFORMATION

Item 1. Financial Statements.

Siebert Financial Corp. & Subsidiaries
Consolidated Statements of Financial Condition
	March 31, 2013 (unaudited)	December 31, 2012
ASSETS
Cash
and cash equivalents	$ 18,634,000	$	18,902,000
Cash
equivalents – restricted	1,532,000		1,532,000
Receivable
from brokers	1,080,000		1,923,000
Securities
owned, at fair value	330,000		255,000
Furniture,
equipment and leasehold improvements, net	324,000		312,000
Investment
in and advances to affiliates	8,606,000		9,304,000
Prepaid
expenses and other assets	948,000		900,000
Intangibles,
net	325,000		328,000
	$ 31,779,000	$	33,456,000
LIABILITIES AND STOCKHOLDERS’ EQUITY
Liabilities:
Accounts
payable and accrued liabilities	$ 2,124,000	$	2,416,000
Contingencies
(Note 9)
Stockholders’
equity:
Common stock, $.01 par value; 49,000,000 shares
authorized, 23,211,846 shares issued, and 22,087,486 and 22,097,392 shares
outstanding at March 31, 2013 and December 31, 2012, respectively	232,000		232,000
Additional paid-in capital	19,490,000		19,490,000
Retained earnings	14,690,000		16,059,000
Less: 1,124,360 and 1,114,454 shares of treasury
stock, at cost at March 31, 2013 and December 31, 2012, respectively	(4,757,000	)	(4,741,000	)
	29,655,000		31,040,000
	$ 31,779,000	$	33,456,000

See notes to condensed consolidated financial statements.

2

| Siebert Financial Corp. &
Subsidiaries |
| --- |
| Consolidated Statements of
Operations |
| (unaudited) |

| | Three
Months Ended | | | |
| --- | --- | --- | --- | --- |
| | March
31, | | | |
| | 2013 | | 2012 | |
| Revenues: | | | | |
| Commissions and
fees | $ 2,985,000 | | $ 5,158,000 | |
| Investment
banking | 730,000 | | 509,000 | |
| Trading profits | 535,000 | | 863,000 | |
| Interest and
dividends | 16,000 | | 23,000 | |
| | 4,266,000 | | 6,553,000 | |
| Expenses: | | | | |
| Employee
compensation and benefits | 2,259,000 | | 2,489,000 | |
| Clearing fees,
including floor brokerage | 584,000 | | 967,000 | |
| Professional
fees | 844,000 | | 790,000 | |
| Advertising and
promotion | 99,000 | | 138,000 | |
| Communications | 347,000 | | 488,000 | |
| Occupancy | 257,000 | | 251,000 | |
| Other general
and administrative | 551,000 | | 651,000 | |
| | 4,941,000 | | 5,774,000 | |
| Loss from equity investees | (694,000 | ) | (154,000 | ) |
| Net (loss) income | $ (1,369,000 | ) | $ 625,000 | |
| Net (loss) income per share of common stock - Basic and
Diluted | $ (.06 | ) | $ .03 | |
| Weighted average shares outstanding - Basic and
Diluted | 22,093,322 | | 22,103,495 | |

See notes to condensed consolidated financial statements.

3

| Siebert Financial Corp. &
Subsidiaries | | | | |
| --- | --- | --- | --- | --- |
| Consolidated Statements of Cash
Flows | | | | |
| (unaudited) | | | | |
| | Three
Months Ended | | | |
| | March
31, | | | |
| | 2013 | | 2012 | |
| Cash flows from operating
activities: | | | | |
| Net (loss)
income | $ (1,369,000 | ) | $ 625,000 | |
| Adjustments to
reconcile net (loss) income to net cash used in operating activities: | | | | |
| Depreciation and
amortization | 31,000 | | 109,000 | |
| Loss from equity
investees | 694,000 | | 154,000 | |
| Distribution
from equity investees | 73,000 | | 2,000 | |
| Changes in: | | | | |
| Securities
owned, at fair value | (75,000 | ) | (14,000 | ) |
| Receivable from
brokers | 843,000 | | (586,000 | ) |
| Prepaid expenses
and other assets | (48,000 | ) | (103,000 | ) |
| Accounts payable
and accrued liabilities | (292,000 | ) | (603,000 | ) |
| Net cash used in
operating activities | (143,000 | ) | (416,000 | ) |
| Cash flows from investing
activities: | | | | |
| Purchase of
furniture, equipment and leasehold improvements | (40,000 | ) | (154,000 | ) |
| Advances to
equity investees | (69,000 | ) | (46,000 | ) |
| Net cash used in
investing activities | (109,000 | ) | (200,000 | ) |
| Cash flows from financing activities: | | | | |
| Purchase of
treasury shares | (16,000 | ) | (6,000 | ) |
| Net cash used in
financing activities | (16,000 | ) | (6,000 | ) |
| Net decrease in
cash and cash equivalents | (268,000 | ) | (622,000 | ) |
| Cash and cash equivalents - beginning of period | 18,902,000 | | 21,167,000 | |
| Cash and cash equivalents - end of period | $ 18,634,000 | | $ 20,545,000 | |
| Supplemental cash flow disclosures: | | | | |
| Cash paid for: | | | | |
| Income taxes | $ 26,000 | | $ 12,000 | |

See notes to condensed consolidated financial statements

4

Siebert Financial Corp. & Subsidiaries Notes to Condensed Consolidated Financial Statements Three Months Ended March 31, 2013 and 2012 (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 and transactions have been
eliminated. Investment in two entities in which the Company has ownership
interests of 49% and 33.33%, respectively, are accounted for by the equity
method and included in investment in and advances to affiliates in the
consolidated statements of financial condition.
	The condensed consolidated interim financial statements presented
herein are unaudited and include all adjustments (consisting of normal
recurring adjustments) which are, in the opinion of management, necessary for
a fair presentation of the financial position and results of operations of
the interim periods pursuant to the rules and regulations of the Securities
and Exchange Commission (the “SEC”). Certain information and footnote
disclosures normally included in annual financial statements prepared in
accordance with generally accepted accounting principles (“GAAP”) in the
United States of America (“U.S.”) have been condensed or omitted pursuant to
SEC rules and regulations, although the Company believes that the disclosures
made are adequate to make the information not misleading. The balance sheet
at December 31, 2012 has been derived from the audited consolidated statement
of financial condition at that date, but does not include all information and
footnotes required by U.S. GAAP for complete financial statements. These
condensed consolidated financial statements should be read in conjunction
with the consolidated financial statements included in the Company’s Annual
Report on Form 10-K for the year ended December 31, 2012. Because of the
nature of the Company’s business, the results of operations for the three
months ended March 31, 2013 are not necessarily indicative of operating
results for the full year.
2.	Securities:
	Securities owned are carried at fair value with realized and
unrealized gains and losses reflected in trading profits. Siebert clears all
its security transactions through unaffiliated clearing firms on a fully
disclosed basis. Accordingly, Siebert does not hold funds or securities for,
or owe funds or securities to, its customers. Those functions are performed
by the clearing firms.
3.	Fair Value of Financial Instruments:
	Authoritative
accounting guidance defines fair value, establishes a framework for measuring
fair value and establishes a fair value hierarchy. Fair value is the price
that would be received to sell an asset or paid to transfer a liability in an
orderly transaction between participants at the measurement date. Fair value
measurements are not adjusted for transaction costs. The fair value hierarchy
prioritizes inputs to valuation techniques used to measure fair value into
three levels:

5

| Level 1 – Unadjusted quoted prices in active markets for identical
assets or liabilities. |
| --- |
| Level 2 – Inputs other than quoted prices that are observable, either
directly or indirectly, and reasonably available. |
| Level 3 – Unobservable inputs which reflect the assumptions that
management develops based on available information about the assumptions
market participants would use in valuing the asset or liability. |
| Financial
instruments valued of the Company are at fair value (Level 1) at March 31,
2013 as follows: |

| Financial
Instruments | Level 1 | Total |
| --- | --- | --- |
| Cash equivalents | $ 19,525,000 | $ 19,525,000 |
| Securities | 330,000 | 330,000 |
| | $ 19,855,000 | $ 19,855,000 |

| | Securities include common stock of $330,000 valued on the last
business day of the period at the last available reported sales price on the
primary securities exchange. As of March 31, 2013, the Company did not hold
any level 2 or level 3 financial statements. |
| --- | --- |
| 4. | Per Share Data: |
| | Basic earnings (loss) per share is calculated by dividing net income
(loss) by the weighted average outstanding common shares during the period.
Diluted earnings per share is calculated by dividing net income by the number
of shares outstanding under the basic calculation and adding all dilutive
securities, which consist of options. There were no dilutive options for the
three months ended March 31, 2012. Accordingly, basic and diluted income per
share are the same for the period. Basic and diluted net loss per common
share for the three months ended March 31, 2013 are the same as the effect of
stock options is anti-dilutive. Shares underlying stock options not included
in the diluted computation amounted to 400,000 and 1,228,200 in 2013 and
2012. |
| 5. | Net Capital: |
| | Siebert is subject to the SEC’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 Stock Exchange also
provides that equity capital may not be withdrawn or cash dividends paid if
resulting net capital would be less than 5% of aggregate debits. As of March
31, 2013, Siebert had net capital of approximately $16,751,000 as compared
with net capital requirements of $250,000. Siebert claims exemption from the
reserve requirement under section 15c3-3(k)(2)(ii). |
| 6. | Revenue: |
| | Commission, revenues and related clearing expenses are recorded on a
trade-date basis. Fees, consisting principally of revenue participation with
the Company’s clearing broker in distribution fees |

6

	and interest, are recorded as earned.
	Investment banking revenue includes gains and fees, net of syndicate
expenses, arising from underwriting syndicates in which the Company
participates. Investment banking management fees are recorded on the offering
date, sales concessions on the settlement date and underwriting fees at the
time the underwriting is completed and the income is reasonably determinable. Trading profits are also recorded on a trade-date basis and principally
represent riskless principal transactions which the Company, after receiving
an order, buys or sells securities as principal and at the same time sells or
buys the securities with a markup or markdown to satisfy the order. Interest
is recorded on an accrual basis and dividends are recorded on the ex-dividend
date.
7.	Capital Transactions:
	On January 23, 2008, the Board of Directors of the Company authorized
a buy back of up to 300,000 shares of common stock. Under this program,
shares are purchased from time to time, at management’s discretion, in the
open market and in private transactions. The Company purchased 9,906 shares
at a cost of $16,000 (average price per share of $1.56) in the first quarter
of 2013.
	There are no stock option transactions during the three months ended
March 31, 2013. At March 31, 2013, there are 400,000 outstanding options at a
weighted average exercise price of $3.33, which were fully vested and
exercisable. As of March 31, 2013, there were no unrecognized compensation
costs.
8.	Investment in and advances to affiliates:
	Siebert, Brandford, Shank & Co., L.L.C.
(“SBS”)
	Siebert holds a 49% ownership interest in SBS which is engaged in
municipal bond underwritings. Income or loss from SBS is considered to be
integral to Siebert’s operations and material to the results of operations.
	Summarized financial data of SBS is set forth below.

| Total
assets, including secured demand note of $1,200,000 due from Siebert | March 31, 2013 — $ 23,931,000 | | | |
| --- | --- | --- | --- | --- |
| Total
liabilities, including subordinated liabilities of $1,200,000 due to Siebert | 7,111,000 | | | |
| Total
members’ capital | 16,820,000 | | | |
| Regulatory
minimum net capital requirement | 250,000 | | | |
| Total
revenues | 3,995,000 | $ | 5,626,000 | |
| Net loss | (1,229,000 | ) | (299,000 | ) |

| Siebert charged SBS $25,000 and $19,000 during the three months ended
March 31, 2013 and 2012, respectively, for general and administrative
services, which Siebert believes approximates the cost of furnishing such
services. |
| --- |
| Siebert’s share of net loss for the three months ended March 31, 2013
and 2012 amounted to $602,000 and $146,000, respectively. |

7

| Siebert received distributions of $73,000 from SBS during the three
months ended March 31, 2013 and Siebert’s share of undistributed earnings
from SBS amounted to $7.8 million at March 31, 2013. Such amount 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 net capital requirements. |
| --- |
| SBS Financial Products Company, LLC
(“SBSFPC”) |
| The Company has a 33.33% ownership interest in, and the two
individual principals of SBS have an aggregate 66.66% ownership interest in,
SBSFPC which engages in derivatives transactions related to the municipal
underwriting business. Income/(loss) from SBSFPC is considered to be integral
to the Company’s operations and material to the results of operations. |
| Summarized
financial data of SBSFPC is set forth below. |

| Total assets | March
31, 2013 — $ 150,890,000 | | March
31, 2012 | |
| --- | --- | --- | --- | --- |
| Total
liabilities | 150,099,000 | | | |
| Total
members’ capital | 791,000 | | | |
| Total
revenues | (222,000 | )* | $ 21,000 | |
| Net loss | (275,000 | ) | (25,000 | ) |

| | * Negative balance
was attributable to unrealized loss on derivative contracts. |
| --- | --- |
| | The Company’s share of net loss for the three months ended March 31,
2013 and 2012 amounted to $92,000 and $8,000, respectively. |
| | At March 31, 2013, SBSFPC had accumulated distributions in excess of
cumulative earnings in the amount of $409,000 of which the Company’s share
was $136,000. The Company received no distribution from SBSFPC during the
three months ended March 31, 2013. |
| 9. | Contingencies
and Commitments: |
| | 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 customer 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 are unable to fulfill their contractual
obligations. There were no material losses for unsettled customer
transactions for the three months ended March 31, 2013 and 2012. |
| | In a prior
year, Siebert was named as one of the defendants in a class action pending in
the United States District Court, Southern District of New York. The
complaint was brought on behalf of a class of purchasers in a public offering
by Lehman Brothers Holdings, Inc. of $1,500,000,000 of 6.75% Subordinated
Notes due 2017 (the “Notes”) as to Siebert and certain smaller issuances of
other securities. Siebert had agreed to purchase $15 million of the Notes and
$462,953 of the other securities as an underwriter in the offerings. Siebert
and the plaintiffs’ class resolved all claims against Siebert in
consideration of a $1 million payment by Siebert which was paid in a prior
year. As certain plaintiffs did not agree to a settlement or purchased
securities were not covered by the settlement, additional liability to
Siebert is possible. At present, Siebert is unable to determine the potential
liability, if any. |

8

| | Siebert is party to certain claims, suits and complaints arising in
the ordinary course of business. In the opinion of management all such
claims, suits and complaints are without merit, or involve amounts which
would not have a material effect on the financial position or results of
operations of the Company. |
| --- | --- |
| | Siebert is party to a Secured Demand Note Collateral Agreement, as
amended on July 27, 2012, with SBS which obligates Siebert to lend SBS, on a
subordinated basis, up to $1,200,000. The secured demand note payable held by
SBS and a related $1,200,000 receivable due from SBS are included in
investments in and advances to equity investees in the accompanying
consolidated statements of financial condition. Amounts that Siebert is
obligated to lend under this arrangement are collateralized by cash
equivalents of $1,532,000. Any amounts loaned will bear interest at 4% per
annum and are repayable on August 31, 2014. |
| 10. | Income taxes: |
| | There is no
provision for income taxes on income in the 2012 period as the Company had
available net operating loss carryforward (which had been fully reserved) to
offset such income. No tax benefit has been recognized for the loss in the
2013 period as the Company has fully offset the related deferred tax asset by
a valuation allowance due to cumulative losses incurred by the Company and
its subsidiaries during the prior three years. |
| 11. | Reclassifications: |
| | As previously reported for the quarter ended March 31, 2012, the
Company recorded various minimum state taxes based on gross revenues and capital which was
presented as income taxes on the consolidated statement of operations. The
Company has reclassified such taxes to general and administrative expenses to
conform to the 2013 presentation. |
| 12. | Concentrations: |
| | During the quarter ended March 31, 2012, commission income earned
from one customer accounted for approximately 21% of total revenue. |

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

| |
| --- |
| Business Environment |
| Our working capital is invested primarily in money market funds, so
that liquidity has not been materially affected. The recent financial crisis
did have the effect of reducing participation in the securities market by our
retail and institutional customers, which had an adverse effect on our
revenues. Our affiliate, Siebert, Brandford, Shank & Co., L.L.C. had a
loss for the current period of approximately $1,229,000. This resulted in a
loss to the Company of $602,000 for the current three month period. Our
expenses include the costs of an arbitration proceeding commenced by a former
employee following the termination of his employment, which remains
unresolved. The Company believes that the action is without merit, but the
costs of defense, which are included as professional expenses, have adversely
affected the Company’s results of operations and may continue to affect the
results of operations until the action is completed. Competition in the
brokerage industry remains intense. |

9

The following table sets forth certain metrics as of March 31, 2013 and 2012 and for the three months ended March 31, 2013 and 2012, respectively, which we use in evaluating our business.

| Retail Customer Activity: | For
the Three Months ended March 31, — 2013 | 2012 |
| --- | --- | --- |
| Total retail
trades: | 84,878 | 103,123 |
| Average
commission per retail trade: | $ 22.64 | $ 31.75 |
| | As
of March 31, | |
| Retail customer balances: | 2013 | 2012 |
| Retail
customer net worth (in billions): | $ 6.9 | $ 6.8 |
| Retail
customer money market fund value (in billions): | $ 1.0 | $ 1.0 |
| Retail
customer margin debit balances (in millions): | $ 186.0 | $ 237.0 |
| Retail
customer accounts with positions: | 40,904 | 44,003 |

Description:

| • | Total retail trades represent retail trades that generate
commissions. |
| --- | --- |
| • | Average commission per retail trade represents the average commission
generated for all types of retail customer trades. |
| • | Retail customer net worth represents the total value of securities
and cash in the retail customer accounts before deducting margin debits. |
| • | Retail customer money market fund value represents all retail
customers accounts invested in money market funds. |
| • | Retail customer margin debit balances represent credit extended to
our customers to finance their purchases against current positions. |
| • | Retail customer accounts with positions represent retail customers
with cash and/or securities in their accounts. |
| | We, like other securities firms, are 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 our
relative profitability. In periods of reduced financial market activity,
profitability is likely to be adversely affected because certain expenses
remain relatively fixed, including salaries and |

10

related costs, portions of communications costs and occupancy expenses. Accordingly, earnings or loss for any period should not be considered representative of any other period.

Recent Developments

| |
| --- |
| Critical Accounting
Policies |
| We
generally follow accounting policies standard in the brokerage industry and
believe that our policies appropriately reflect our financial position and
results of operations. Our management makes significant estimates that affect
the reported amounts of assets, liabilities, revenues and expenses and the
related disclosure of contingent assets and liabilities included in the
financial statements. The estimates relate primarily to revenue and expense
items in the normal course of business as to which we receive no
confirmations, invoices, or other documentation at the time the books are
closed for a period. We use our best judgment, based on our knowledge of
these revenue transactions and expenses incurred, to estimate the amounts of
such revenue and expense. We are not aware of any material differences
between the estimates used in closing our books for the last five years and
the actual amounts of revenue and expenses incurred when we subsequently receive
the actual confirmations, invoices or other documentation. Estimates are also
used in determining the useful lives of intangible assets, and the fair
market value of intangible assets. Our management believes that its estimates
are reasonable. |
| Results of Operations |
| We had a
net loss of $1.4 million and a net income of $625,000 for the three months
ended March 31, 2013 and 2012, respectively. |
| Total
revenues for the three months ended March 31, 2013 were $4.3 million, a
decrease of $2.3 million or 34.9% from the same corresponding period in 2012. |
| Commission
and fee income for the three months ended March 31, 2013 was $3.0 million, a
decrease of $2.2 million or 42.1% from the same corresponding period in 2012
primarily due to a decrease in retail customer trading as well as a decrease
in fees from margin debits due to lower average margin debit balances.
Additionally, there was a decrease in our institutional trading commissions
and our commission recapture operations. |
| Investment
banking revenues for the three months ended March 31, 2013 were $730,000, an
increase of $221,000 or 43.4% from the same corresponding period in 2012
primarily due to our participation in more new issues in the equity and debt
markets. |
| Trading profits were $535,000 for the three
months ended March 31, 2013, a decrease of $328,000 or 38.0% from the same
corresponding period in 2012 due to an overall decrease in riskless principal trading
volume in the debt markets and the loss of a debt sales-trader in the fourth
quarter of 2012. |
| Interest and dividends for the three months
ended March 31, 2013 were $16,000, a decrease of $7,000 or 30.4% from the
same corresponding period in 2012 primarily due to lower cash balances. |

11

| Total
expenses for the three months ended March 31, 2013 were $4.9 million, a
decrease of $833,000 or 14.4% from the same corresponding period in 2012. |
| --- |
| Employee
compensation and benefit costs for the three months ended March 31, 2013 were
$2.3 million, a decrease of $230,000 or 9.2% from the same corresponding
period in 2012 due to a decrease in commissions paid based on production in
the debt capital markets and retail operations. |
| Clearing and
floor brokerage costs for the three months ended March 31, 2013 were
$584,000, a decrease of $383,000 or 39.6% from the same corresponding period
in 2012 primarily due to lower retail trading volumes as well as execution
charges for institutional equity customers. |
| Professional
fees were $844,000 for the three months ended March 31, 2013, an increase of
$54,000, or 6.8% from the same corresponding period in 2012 primarily due to
an increase in legal fees relating to a dispute with a former employee and
increases in consulting fees relating to our Information Technology
department offset by a decrease in consulting fees relating to our commission
recapture business. |
| Advertising
and promotion expenses for the three months ended March 31, 2013 were
$99,000, a decrease of $39,000 or 28.3% from the same corresponding period in
2012 due to a decrease in online advertising. |
| Communications
expense for the three months ended March 31, 2013 was $347,000, a decrease of
$141,000 or 28.9% from the same corresponding period in 2012 primarily due to
a decrease in Bloomberg devices due to fewer employees in the Institutional
Trading department and the elimination of costs associated with the
discontinuance of our website developed and maintained by a software vendor
as of June 2012. |
| Occupancy
costs for the three months ended March 31, 2013 were $257,000, an increase of
$6,000 or 2.4% from the same corresponding period in 2012 due to the an
increase in our New York office rents. |
| Other
general and administrative expenses were $551,000, a decrease of $100,000 or
15.4% from the same corresponding period in 2012 due to a decrease in
depreciation, registration and placement fees offset by increases in supplies
and travel and entertainment.. |
| Loss from
Siebert’s equity investment in Siebert, Brandford, Shank & Co., L.L.C.,
an entity in which Siebert holds a 49% equity interest (“SBS”), for the three
months ended March 31, 2013 was $602,000, compared to a loss of $146,000 from
the same corresponding period in 2012 due to SBS participating in fewer
municipal bond offerings as senior- and co-manager. Loss from our equity
investment in SBS Financial Products Company, LLC, an entity in which we hold
a 33% equity interest (“SBSFPC”), for the three months ended March 31, 2013
was $92,000 as compared to a loss of $8,000 from the same corresponding
period in 2012. The losses in 2013 and 2012 were due to the marked to market
loss in positions. Income and loss from equity investees is considered to be
integral to our operations and material to the results of operations. |
| There is
no provision for income taxes for the three months ended March 31, 2012
because the Company utilized its net operating loss carry forward for which
no benefit was previously recognized. No tax benefit related to the pre-tax
loss was recorded for the three months ended March 31, 2013 due to the
recording of a full valuation allowance to offset deferred tax assets based
on recent losses and the likelihood of realization of such assets. |

Liquidity and Capital Resources

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| Our
assets are highly liquid, consisting generally of cash, money market funds
and commercial paper. Our total assets at March 31, 2013 were $32 million. As
of that date, $20 million, or 63.5%, of our total assets were regarded by us
as highly liquid. |
| --- |
| Siebert
is subject to the net capital requirements of the SEC, the NYSE and other
regulatory authorities. At March 31, 2013, Siebert’s regulatory net capital
was $16.8 million, $16.5 million in excess of its minimum capital requirement
of $250,000. |
| On
January 23, 2008, the Board of Directors of the Company authorized a buy back
of up to 300,000 shares of common stock. Shares will be
purchased from time to time, in our discretion, in the open market and in
private transactions. The Company purchased 9,906 shares at an average price
of $1.56 in the first quarter of 2012. |
| Siebert
has entered into a Secured Demand Note Collateral Agreement with SBS under
which Siebert is obligated to lend to SBS up to $1.2 million on a
subordinated basis collateralized by cash equivalents of approximately $1.5
million as of March 31, 2013. Amounts obligated to be loaned by Siebert under
the facility are reflected on our balance sheet as “cash equivalents –
restricted”. SBS pays Siebert interest on this amount at the rate of 4% per
annum. The facility expires on August 31, 2014 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 invested temporarily in dollar denominated money market
funds. These investments are not subject to material changes in value due to
interest rate movements. |
| --- |
| 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 counterparties are unable to fulfill their contractual
obligations. There were no material losses for unsettled customer
transactions as of March 31, 2013. |

Item 4. Controls and Procedures

| We
carried out an evaluation, under the supervision and with the participation
of management, including our Chief Executive Officer and Chief Financial
Officer, of the effectiveness of the design and operation of our disclosure
controls and procedures as of the end of the period covered by this report
pursuant to Rule 13a-15(e) or Rule 15d-15(e) of the Securities Exchange Act
of 1934, as amended. Based on that evaluation, our management, including the
Chief Executive Officer and Chief Financial Officer, concluded that our
disclosure controls and procedures are effective to ensure that the
information we are required to disclose in reports that we file or submit
under the Securities Exchange Act of 1934, as amended, is recorded,
processed, summarized and reported within the time periods specified in the
rules and forms of the Securities and Exchange Commission and to ensure that
information required to be disclosed is accumulated and communicated to our
management, including our Chief Executive Officer and Chief Financial
Officer, to allow timely decisions regarding timely disclosure. |
| --- |
| There
were no changes in our internal control over financial reporting during the
most recently completed fiscal quarter that have materially affected, or are
reasonably likely to materially affect, our internal control over financial
reporting. |

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Part II - OTHER INFORMATION

Item 1. Legal Proceedings

We are involved in various routine lawsuits of a nature we deem to be customary and incidental to our business. In the opinion of management, the ultimate disposition of such actions will not have a material adverse effect on our financial position or results of operations.

Item 1A. Risk Factors

In addition to the other information set forth in this report, you should carefully consider the risk factors discussed in Part I, Item 1A. “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2012, which could materially affect our business, financial position and results of operations. There are no material changes from the risk factors set forth in Part I, Item 1A, “Risk Factors,” of our Annual Report on Form 10-K for the year ended December 31, 2012.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

On January 23, 2008, our Board of Directors authorized the repurchase of up to 300,000 shares of our common stock. Shares will be purchased from time to time, in our discretion, in the open market and in private transactions.

We purchased 9,906 shares at an average price of $1.56 in the first quarter of 2013.

A summary of our repurchase activity for the three months ended March 31, 2013 is as follows:

Issuer Purchases Of Equity Securities

Period — January 2013	1,465	Average Price Paid Per Share — $ 1.67	118,336	181,664
February 2013	4,059	$ 1.56	122,395	177,605
March 2013	4,382	$ 1.52	126,777	173,223
Total	9,906	$ 1.56	126,777	173,223

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Item 6. Exhibits

| 31.1 | Certification of Muriel
F. Siebert pursuant to Exchange Act Rules 13a-14(a) and 15d-14(a), 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(a) and 15d-14(a), 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. |

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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: May 15, 2013
By:	/s/ Joseph M. Ramos, Jr.
	Joseph M. Ramos, Jr.
	Executive Vice President and Chief Financial Officer
	(principal financial and accounting officer)
Dated: May 15, 2013

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