SIEBERT FINANCIAL CORP — Interim / Quarterly Report 2014

May 15, 2014

10-Q 1 n13867_10q.htm QUARTERLY REPORT

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 | |
| --- | --- | --- |
| | For the
quarterly period ended | March 31, 2014 |
| | 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
(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 definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

| 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, 2014, there were 22,085,126 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, 2014 (unaudited) | December
31, 2013 | | |
| --- | --- | --- | --- | --- |
| ASSETS | | | | |
| Cash and cash equivalents | $ 14,190,000 | $ | 15,424,000 | |
| Cash equivalents – restricted | 1,532,000 | | 1,532,000 | |
| Receivable from brokers | 770,000 | | 1,105,000 | |
| Securities owned, at fair value | 377,000 | | 406,000 | |
| Furniture, equipment and leasehold
improvements, net | 672,000 | | 712,000 | |
| Investment in and advances to affiliates | 8,880,000 | | 8,022,000 | |
| Prepaid expenses and other assets | 755,000 | | 751,000 | |
| Intangibles, net | 15,000 | | 18,000 | |
| | $ 27,191,000 | $ | 27,970,000 | |
| LIABILITIES AND STOCKHOLDERS’ EQUITY | | | | |
| Liabilities: | | | | |
| Accounts payable and accrued liabilities | $ 2,054,000 | $ | 2,861,000 | |
| Contingencies (Note 9) | | | | |
| Stockholders’ equity: | | | | |
| Common stock, $.01 par value; 49,000,000
shares authorized, 23,211,846 shares issued, and 22,085,126 shares
outstanding at March 31, 2014 and December 31, 2013 | 232,000 | | 232,000 | |
| Additional paid-in capital | 19,490,000 | | 19,490,000 | |
| Retained earnings | 10,175,000 | | 10,147,000 | |
| Less: 1,126,720 shares of treasury stock,
at cost at March 31, 2014 and December 31, 2013 | (4,760,000 | ) | (4,760,000 | ) |
| | 25,137,000 | | 25,109,000 | |
| | $ 27,191,000 | $ | 27,970,000 | |

See notes to condensed consolidated financial statements.

2

Siebert Financial Corp. & Subsidiaries Consolidated Statements of Operations (unaudited)
	Three
Months Ended March 31,
	2014	2013
Revenues:
Commissions and fees	$ 2,980,000	$ 2,985,000
Investment banking	435,000	730,000
Trading profits	289,000	535,000
Interest and dividends	14,000	16,000
	3,718,000	4,266,000
Expenses:
Employee compensation and benefits	1,951,000	2,259,000
Clearing fees, including floor brokerage	522,000	584,000
Professional fees	763,000	844,000
Advertising and promotion	70,000	99,000
Communications	270,000	347,000
Occupancy	243,000	257,000
Other general and administrative	597,000	551,000
	4,416,000	4,941,000
Income
(loss) from equity investees	726,000	(694,000	)
Net income
(loss)	$ 28,000	$ (1,369,000	)
Net income
(loss) per share of common stock -
Basic and Diluted	.00	$ (.06	)
Weighted
average shares outstanding -
Basic	22,085,126	22,093,322
Diluted	22,087,585	22,093,322

See notes to condensed consolidated financial statements.

3

Siebert Financial Corp. & Subsidiaries Consolidated Statements of Cash Flows (unaudited)
	Three
Months Ended March 31,
	2014	2013
Cash flows from operating activities:
Net income (loss)	$ 28,000	$	(1,369,000	)
Adjustments to reconcile net income (loss)
to net cash used in operating activities:
Depreciation and amortization	82,000		31,000
(Income) / loss income from equity
investees	(726,000	)	694,000
Distribution from
equity investees	—		73,000
Changes in:
Securities owned, at fair value	29,000		(75,000	)
Receivable from brokers	335,000		843,000
Prepaid expenses and other assets	(4,000	)	(48,000	)
Accounts payable and accrued liabilities	(807,000	)	(292,000	)
Net cash used in operating activities	(1,063,000	)	(143,000	)
Cash flows from investing activities:
Purchase of furniture, equipment and
leasehold improvements	(39,000	)	(40,000	)
Advances to equity investees	(132,000	)	(69,000	)
Net cash used in investing activities	(171,000	)	(109,000	)
Cash flows from financing activities:
Purchase of treasury shares	—		(16,000	)
Net cash used in financing activities	—		(16,000	)
Net decrease in cash and cash equivalents	(1,234,000	)	(268,000	)
Cash and cash equivalents - beginning of
period	15,424,000		18,902,000
Cash and cash equivalents - end of period	$ 14,190,000	$	18,634,000
Supplemental cash flow disclosures:
Cash paid for:
Income taxes	$ 11,000	$	26,000

See notes to condensed consolidated financial statements

4

Siebert Financial Corp. & Subsidiaries
Notes to Condensed Consolidated Financial Statements
Three Months Ended March 31, 2014 and 2013
(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, 2013 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, 2013. Because of the
nature of the Company’s business, the results of operations for the three
months ended March 31, 2014 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. |
| The classification of financial instruments valued at fair value as
of March 31, 2014, is as follows: |

Financial Instruments	Level 1
Cash
equivalents	$ 14,926,000
Securities	377,000
	$ 15,303,000

| | Cash equivalents primarily represent investments in money market
funds. Securities consist of common stock valued on the last business day of
the period at the last available reported sales price on the primary
securities exchange. |
| --- | --- |
| 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. Basic and diluted net income per common
share for the three months ended March 31, 2014 are the same, as the effect
of stock options dilution is immaterial. Shares underlying stock options
included in the diluted computation amounted to 25,000 (out of 290,000
outstanding stock options) in 2014. Using the treasury stock method resulted
in an extra 2,459 weighted average shares for the diluted calculation. In
2013, shares underlying stock options not included in the diluted computation
amounted to 400,000. |
| 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, 2014, Siebert had net capital of approximately $12,506,000 as compared
with net capital requirements of $250,000. Siebert claims exemption from the
reserve requirement under section 15c3-3(k)(2)(ii). |

6

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, 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 in 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 did not purchase any
shares in the first quarter of 2014.
	There were no stock option transactions during the three months ended
March 31, 2014. At March 31, 2014, there were 290,000 outstanding options at
a weighted average exercise price of $3.11, which were fully vested and
exercisable. As of March 31, 2014, 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, 2014 — $ 31,634,000 | | |
| --- | --- | --- | --- |
| Total liabilities, including subordinated
liabilities of $1,200,000 due to Siebert | 14,246,000 | | |
| Total members’ capital | 17,388,000 | | |
| Regulatory minimum net capital requirement | 250,000 | | |
| Total revenues | 7,735,000 | 3,995,000 | |
| Net Income | 1,481,000 | (1,229,000 | ) |

7

| Siebert charged SBS $25,000 during the three months ended March 31,
2014 and 2013, for general and administrative services, which Siebert
believes approximates the cost of furnishing such services. |
| --- |
| Siebert’s share of net income for the three months ended March 31,
2014 and net loss in 2013 amounted to $726,000 and $602,000, respectively. |
| Siebert did not receive a distribution from SBS during the three
months ended March 31, 2014 and Siebert’s share of undistributed earnings
from SBS amounted to $8.1 million at March 31, 2014. 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. As of March 31, 2014, SBSFPC’s operations were being
phased out. |
| Summarized financial data of SBSFPC is set forth below. |

| Total assets | March
31, 2014 — $ 568,000 | | | |
| --- | --- | --- | --- | --- |
| Total
liabilities | — | | | |
| Total
members’ capital | 568,000 | | | |
| Total
revenues | — | | (222,000 | )* |
| Net loss | (1,000 | ) | (275,000 | ) |

| | * Negative balance
was attributable to unrealized loss on derivative contracts. |
| --- | --- |
| | The Company’s share of net loss for the three months ended March 31,
2014 and 2013 amounted to $0 and $92,000, respectively. |
| | During the quarter ended March 31, 2013, SBSFPC incurred a loss of
$241,000 on the write down in value of the derivative contracts with the City
of Detroit to adjust their carrying value to the carrying value of the
derivative contracts with the financial institution. In July 2013, as a
result of the filing of a bankruptcy petition by the City of Detroit, SBSFPC
unwound certain derivative contracts with a financial institution pursuant to
the terms of the contracts. The contracts were recorded as liabilities with a
carrying value of $123,063,000. In connection therewith, SBSFPC assigned
certain derivative contracts with the City of Detroit to the financial
institution, which were recorded as assets with a carrying value of
$123,063,000. No gain or loss was recognized by SBSFPC as a result of the
unwinding and assignment of these derivative contracts and SBSFPC has no
continuing obligations or rights with respect to the derivative contracts. |
| | At March 31, 2014, SBSFPC had accumulated distributions in excess of
cumulative earnings in the amount of $632,000 of which the Company’s share
was $211,000. The Company received no distribution from SBSFPC during the
three months ended March 31, 2014. |
| 9. | Contingencies and Commitments: |

8

| | 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, 2014 and 2013. |
| --- | --- |
| | 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 29, 2013, 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 is 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, 2015. |
| 10. | Income taxes: |
| | There is no provision for income taxes on income in the 2014 period
as the Company had available net operating loss carry forward (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. | Related parties: |
| | Effective September 16, 2013, one of the Principals having 25.5%
ownership in SBS and 33.3% interest in SBSFPC became the Company’s Chief
Executive Officer. |

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
income for the current period of approximately $1,481,000. This resulted in
income to the Company of $726,000 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 |

9

| results of operations until the action is completed. Competition in
the brokerage industry remains intense. |
| --- |
| The following table sets forth certain metrics as of and for the
three months ended March 31, 2014 and 2013, respectively, which we use in
evaluating our business. |

| Retail
Customer Activity: | For the
Three Months ended March 31, — 2014 | 2013 |
| --- | --- | --- |
| Total retail trades: | 80,782 | 81,982 |
| Average commission per retail trade: | $ 20.16 | $ 23.44 |
| Retail customer balances: | | |
| Retail customer net worth (in billions): | 7.3 | $ 6.9 |
| Retail customer money market fund value (in
billions): | 1.0 | $ 1.0 |
| Retail customer margin debit balances (in
millions): | 240.0 | $ 186.0 |
| Retail customer accounts with positions: | 34,871 | 40,904 |

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. |

10

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 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

On January 23, 2008, our Board of Directors authorized a buy back of up to 300,000 shares of common stock. Under this program, shares are purchased from time to time, at our discretion, in the open market and in private transactions. The Company did not purchase shares in the first quarter of 2014.

| 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 income of $28,000 and a net loss of $1.4 million for the three months
ended March 31, 2014 and 2013, respectively. |
| Total
revenues for the three months ended March 31, 2014 were $3.7 million, a
decrease of $548,000 or 12.8% from the same corresponding period in 2013. |
| Commission
and fee income for the three months ended March 31, 2014 was $3.0 million, a
decrease of $5,000 or 0.2% from the same corresponding period in 2013
primarily due to a decrease in the retail customer commission ticket average
offset by an increase in margin debit rebates as a result of higher margin debit
balances. |
| Investment
banking revenues for the three months ended March 31, 2014 were $435,000, a
decrease of $295,000 or 40.4% from the same corresponding period in 2013
primarily due to a decrease in participation in new issues in the equity and
debt markets. |
| Trading
profits were $289,000 for the three months ended March 31, 2014, a decrease
of $246,000 or 46.0% from the same corresponding period in 2013 due to an
overall decrease in customer trading volume in the debt markets. |

11

| Interest
and dividends for the three months ended March 31, 2014 were $14,000, a
decrease of $2,000 or 12.5% from the same corresponding period in 2013
primarily due to lower cash balances. |
| --- |
| Total
expenses for the three months ended March 31, 2014 were $4.4 million, a
decrease of $525,000 or 10.6% from the same corresponding period in 2013. |
| Employee
compensation and benefit costs for the three months ended March 31, 2014 was
$2.0 million, a decrease of $308,000 or 13.6% from the same corresponding
period in 2013 due to a decrease in commissions and bonuses paid based on
production in the debt capital markets and retail operations. In addition,
savings resulted from a lower headcount in 2014. |
| Clearing
and floor brokerage costs for the three months ended March 31, 2014 were
$522,000, a decrease of $62,000 or 10.6% from the same corresponding period
in 2013 primarily due to lower retail customer trading volumes. |
| Professional
fees were $763,000 for the three months ended March 31, 2014, a decrease of
$81,000, or 9.6% from the same corresponding period in 2013 primarily due to
a decrease in legal fees relating to a dispute with a former employee and a
decrease in consulting fees in our commission recapture business. |
| Advertising
and promotion expenses for the three months ended March 31, 2014 were
$70,000, a decrease of $29,000 or 29.3% from the same corresponding period in
2013 due to a decrease in online advertising. |
| Communications
expense for the three months ended March 31, 2014 was $270,000, a decrease of
$77,000 or 22.2% from the same corresponding period in 2013 primarily due to
savings in communication and line charges with our new phone vendor Shoretel. |
| Occupancy
costs for the three months ended March 31, 2014 were $243,000, a decrease of
$14,000 or 5.4% from the same corresponding period in 2013 due to a decrease
in our Jersey City office lease operating expenses. |
| Other
general and administrative expenses were $597,000, an increase
of $46,000 or 8.3% from the same corresponding period in 2013 due to an
increase in depreciation from leasehold improvements written off over the
life of the NY office lease. |
| Income
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, 2014 was $726,000, compared to a loss of
$602,000 from the same corresponding period in 2013 due to SBS participating
in more municipal bond offerings as senior- and co-manager. Income 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, 2014 was zero as compared to a loss of $92,000 from the same
corresponding period in 2013. In 2014, operations are winding down. The loss
in 2013 was due to the mark to market loss in positions. |
| There is
no provision for income taxes for the three months ended March 31, 2014
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. |

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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, 2014 were $27.2 million.
As of that date, $14.2 million, or 52.2%, 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, 2014, Siebert’s regulatory net capital
was $12.5 million, $12.3 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 did not purchase shares in the 1 st quarter of 2014. |
| 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, 2014. 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, 2015 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, 2014. |
| 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. |

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| 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. |
| --- |
| 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, 2013, 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, 2013. |
| 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 did not purchase shares in the first quarter of 2014. |
| A summary of our repurchase activity for the three months ended March
31, 2014 is as follows: |

Issuer Purchases Of Equity Securities

Period — January 2014	129,137	170,863
February
2014	129,137	170,863
March 2014	129,137	170,863
Total	129,137	170,863

All of the purchases were made in open market transactions.

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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/ Suzanne Shank |
| | Suzanne
Shank |
| | Acting Chief
Executive Officer (Principal executive officer) |
| Dated: May
15, 2014 | |

By:
Joseph M.
Ramos, Jr.
Executive
Vice President, Chief Operating Officer, Chief Financial Officer and Secretary (Principal financial and accounting officer)
Dated: May
15, 2014

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Item 6. Exhibits

| 31.1 | Certification of Suzanne Shank 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 Suzanne Shank 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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