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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

 

FORM 10-Q

 

(Mark One)

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

 

For the quarterly period ended September 30, 2023

 

OR

 

☐ 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.)

 

653 Collins Avenue, Miami Beach, FL 33139

(Address of Principal Executive Offices) (Zip Code)

 

(212) 644-2400

(Registrant’s Telephone Number, Including Area Code)

 

535 Fifth Avenue, 4th Floor, New York, NY 10017
(Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report)

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class

  Trading Symbol(s)   Name of each exchange on which registered
Common Stock - $0.01 par value   SIEB   The Nasdaq Capital Market

 

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 (“Exchange Act”) 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 ☒ No ☐

 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 such files).

 

Yes ☒ No ☐

 

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

 

Large accelerated filer ☐ Accelerated filer ☐
Non-accelerated filer ☒ Smaller reporting company ☒
  Emerging growth company ☐

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

 

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

 

Yes ☐ No ☒

 

Indicate the number of shares outstanding of each of the issuer’s classes of common equity, as of the latest practicable date: As of November 10, 2023, there were 40,580,936 issued and 39,580,936 shares outstanding of the registrant’s common stock.

 

 

 

 


 

SIEBERT FINANCIAL CORP.

 

INDEX

 

PART I - FINANCIAL INFORMATION   1
ITEM 1. FINANCIAL STATEMENTS   1
CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION   1
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS   2
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY   3
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS   4
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS   5
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS   20
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK   31
ITEM 4. CONTROLS AND PROCEDURES   31
PART II - OTHER INFORMATION   32
ITEM 1. LEGAL PROCEEDINGS   32
ITEM 1A. RISK FACTORS   32
ITEM 6. EXHIBITS   33
SIGNATURES   34

 

- i -


 

Forward-Looking Statements

 

For purposes of this Quarterly Report on Form 10-Q (“Report”), the terms “Siebert,” “Company,” “we,” “us” and “our” refer to Siebert Financial Corp., its wholly-owned and majority-owned subsidiaries collectively, unless the context otherwise requires.

 

The statements contained throughout this Report, including any documents incorporated by reference, that are not historical facts, including statements about our beliefs and expectations, are “forward-looking statements” within the meaning of the U.S. Private Securities Litigation Reform Act of 1995. Forward-looking statements include statements preceded by, followed by or that include the words “may,” “could,” “would,” “should,” “believe,” “expect,” “anticipate,” “plan,” “estimate,” “target,” “project,” “intend” and similar words or expressions. In addition, any statements that refer to expectations, projections, or other characterizations of future events or circumstances are forward-looking statements.

 

These forward-looking statements, which reflect our beliefs, objectives, and expectations as of the date hereof, are based on the best judgement of management. All forward-looking statements speak only as of the date on which they are made. Such forward-looking statements are subject to certain risks, uncertainties and assumptions relating to factors that could cause actual results to differ materially from those anticipated in such statements, including, without limitation, the following: economic, social and political conditions, global economic downturns resulting from extraordinary events; securities industry risks; interest rate risks; liquidity risks; credit risk with clients and counterparties; risk of liability for errors in clearing functions; systemic risk; systems failures, delays and capacity constraints; network security risks; competition; reliance on external service providers; new laws and regulations affecting our business; net capital requirements; extensive regulation, regulatory uncertainties and legal matters; failure to maintain relationships with employees, customers, business partners or governmental entities; the inability to achieve synergies or to implement integration plans; the closing conditions relating to the Second Tranche Purchase Agreement with Kakaopay may not be satisfied and the transactions contemplated by the Second Tranche Purchase Agreement may not be consummated; and other consequences associated with risks and uncertainties detailed in Part I, Item 1A - Risk Factors of our Annual Report on Form 10-K for the year ended December 31, 2022, (“2022 Form 10-K”), and our filings with the SEC.

 

We caution that the foregoing list of factors is not exclusive, and new factors may emerge, or changes to the foregoing factors may occur, that could impact our business. We undertake no obligation to publicly update or revise these statements, whether as a result of new information, future events or otherwise, except to the extent required by the federal securities laws.

 

- ii -


 

PART I - FINANCIAL INFORMATION

 

ITEM 1. FINANCIAL STATEMENTS

SIEBERT FINANCIAL CORP. & SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION

 

   

September 30,
2023

(unaudited)

    December 31,
2022
 
ASSETS            
Current assets            
Cash and cash equivalents   $ 4,932,000     $ 23,672,000  
Cash and securities segregated for regulatory purposes     237,378,000       276,166,000  
Receivables from customers     71,761,000       52,057,000  
Receivables from broker-dealers and clearing organizations     8,366,000       9,094,000  
Receivables from non-customers     30,000       100,000  
Other receivables     2,433,000       2,119,000  
Prepaid expenses and other assets     1,613,000       2,055,000  
Securities borrowed     404,924,000       336,909,000  
Securities owned, at fair value     18,687,000       3,204,000  
Total Current assets     750,124,000       705,376,000  
Deposits with broker-dealers and clearing organizations     1,478,000       1,311,000  
Property, office facilities, and equipment, net     9,305,000       8,328,000  
Software, net     1,701,000       991,000  
Lease right-of-use assets     3,045,000       2,222,000  
Equity method investment in related party    
      2,584,000  
Investments, cost    
      850,000  
Deferred tax assets     3,504,000       4,397,000  
Goodwill     1,989,000       1,989,000  
Total Assets   $ 771,146,000     $ 728,048,000  
                 
LIABILITIES AND EQUITY                
Liabilities                
Current liabilities                
Payables to customers   $ 270,221,000     $ 321,391,000  
Payables to non-customers     991,000       11,506,000  
Drafts payable     1,016,000       2,384,000  
Payables to broker-dealers and clearing organizations     3,446,000       660,000  
Accounts payable and accrued liabilities     4,102,000       2,507,000  
Taxes payable     2,496,000       1,052,000  
Securities loaned     408,395,000       327,180,000  
Securities sold, not yet purchased, at fair value     1,000       2,000  
Current portion of lease liabilities     846,000       1,158,000  
Current portion of long-term debt     84,000       1,073,000  
Current portion of deferred contract incentive     733,000       808,000  
Total Current liabilities     692,331,000       669,721,000  
Lease liabilities, less current portion     2,376,000       1,245,000  
Long-term debt, less current portion     4,249,000       5,974,000  
Deferred contract incentive, less current portion     625,000       1,188,000  
Total Liabilities     699,581,000       678,128,000  
                 
Commitments and Contingencies    
 
     
 
 
Equity                
Stockholders’ equity                
Common stock, $.01 par value; 100,000,000 shares authorized; 40,580,936 shares issued and 39,580,936 shares outstanding as of September 30, 2023, respectively. 32,505,329 shares issued and outstanding as of December 31, 2022.     406,000       325,000  
Treasury stock, at cost; 1,000,000 and 0 shares held as of September 30, 2023 and December 31, 2022, respectively     (2,510,000 )    
 
Additional paid-in capital     45,016,000       29,642,000  
Retained earnings     27,642,000       18,982,000  
Total Stockholders’ equity     70,554,000       48,949,000  
Noncontrolling interests     1,011,000       971,000  
Total Equity     71,565,000       49,920,000  
Total Liabilities and Equity   $ 771,146,000     $ 728,048,000  

 

Numbers are rounded for presentation purposes. See notes to condensed consolidated financial statements.

- 1 -


 

SIEBERT FINANCIAL CORP. & SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(unaudited)

 

   

Three Months Ended

September 30,

   

Nine Months Ended

September 30,

 
    2023     2022     2023     2022  
Revenue                        
Commissions and fees   $ 1,986,000     $ 1,750,000     $ 5,839,000     $ 5,943,000  
Interest, marketing and distribution fees     7,194,000       5,204,000       21,583,000       10,717,000  
Principal transactions and proprietary trading     3,753,000       953,000       9,207,000       1,767,000  
Market making     223,000       723,000       836,000       2,022,000  
Stock borrow / stock loan     4,008,000       4,183,000       11,963,000       11,909,000  
Advisory fees     506,000       437,000       1,421,000       1,420,000  
Other income     380,000       1,086,000       963,000       2,589,000  
Total Revenue     18,050,000       14,336,000       51,812,000       36,367,000  
                                 
Expenses                                
Employee compensation and benefits     8,723,000       7,290,000       23,770,000       21,752,000  
Clearing fees, including execution costs     581,000       398,000       1,265,000       1,267,000  
Technology and communications     827,000       1,214,000       2,409,000       3,374,000  
Other general and administrative     1,108,000       1,072,000       3,320,000       2,939,000  
Data processing     725,000       932,000       2,317,000       2,135,000  
Rent and occupancy     467,000       562,000       1,436,000       1,491,000  
Professional fees     979,000       874,000       3,060,000       2,602,000  
Depreciation and amortization     265,000       240,000       716,000       760,000  
Interest expense     40,000       108,000       222,000       335,000  
Advertising and promotion     62,000       58,000       52,000       230,000  
Total Expenses     13,777,000       12,748,000       38,567,000       36,885,000  
                                 
Operating income (loss)     4,273,000       1,588,000       13,245,000       (518,000 )
                                 
Impairment of investments    
     
      (1,035,000 )    
 
Earnings of (loss from) equity method investment in related party    
      (148,000 )     111,000       67,000  
Non-operating income (loss)    
      (148,000 )     (924,000 )     67,000  
                                 
Income (loss) before provision for (benefit from) income taxes     4,273,000       1,440,000       12,321,000       (451,000 )
Provision for (benefit from) income taxes     1,516,000       473,000       3,621,000       (836,000 )
Net income     2,757,000       967,000       8,700,000       385,000  
Less net income (loss) attributable to noncontrolling interests     (4,000 )     (85,000 )     40,000       (405,000 )
Net income available to common stockholders   $ 2,761,000     $ 1,052,000     $ 8,660,000     $ 790,000  
                                 
Net income available to common stockholders per share of common stock                                
Basic and diluted
  $ 0.07     $ 0.03     $ 0.24     $ 0.02  
                                 
Weighted average shares outstanding                                
Basic and diluted
    39,678,762       32,403,235       36,224,313       32,419,398  

 

Numbers are rounded for presentation purposes. See notes to condensed consolidated financial statements.

 

- 2 -


 

SIEBERT FINANCIAL CORP. & SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

(unaudited)

 

    Common Stock     Treasury Stock                                
    Number of
Shares
Issued
    $.01 Par
Value
    Number of
Shares
    Amount     Additional
Paid-In
Capital
    Retained
Earnings
    Total
Stockholders’
Equity
    Noncontrolling
Interests
    Total Equity  
Balance – January 1, 2022     32,403,235     $ 324,000      
    $
    $ 27,967,000     $ 20,972,000     $ 49,263,000     $ 1,243,000     $ 50,506,000  
Issuance and transfers of RISE membership interests          
           
      1,573,000             1,573,000       1,841,000       3,414,000  
Net loss          
           
            (973,000 )     (973,000 )     (119,000 )     (1,092,000 )
Balance – March 31, 2022     32,403,235     $ 324,000      
    $
    $ 29,540,000     $ 19,999,000     $ 49,863,000     $ 2,965,000     $ 52,828,000  
Net income (loss)          
           
            711,000       711,000       (201,000 )     510,000  
Balance – June 30, 2022     32,403,235     $ 324,000      
    $
    $ 29,540,000       20,710,000     $ 50,574,000     $ 2,764,000     $ 53,338,000  
Termination of agreement with technology partner          
      193,906       (293,000 )    
            (293,000 )           (293,000 )
Share-based compensation     138,000       1,000            
      233,000             234,000             234,000  
Net income (loss)          
           
            1,052,000       1,052,000       (85,000 )     967,000  
Balance – September 30, 2022     32,541,235     $ 325,000       193,906     $ (293,000 )   $ 29,773,000     $ 21,762,000     $ 51,567,000     $ 2,679,000     $ 54,246,000  

 

    Common Stock     Treasury Stock                                
    Number of
Shares
Issued
    $.01 Par
Value
    Number of
Shares
    Amount     Additional
Paid-In Capital
    Retained
Earnings
    Total
Stockholders’
Equity
    Noncontrolling
Interests
    Total Equity  
Balance – January 1, 2023     32,505,329     $ 325,000      
    $
    $ 29,642,000     $ 18,982,000     $ 48,949,000     $ 971,000     $ 49,920,000  
Net income          
           
            3,196,000       3,196,000       19,000       3,215,000  
Balance – March 31, 2023     32,505,329     $ 325,000      
    $
    $ 29,642,000     $ 22,178,000     $ 52,145,000     $ 990,000     $ 53,135,000  
Kakaopay transaction, net of issuance cost     8,075,607       81,000            
      15,374,000             15,455,000             15,455,000  
Net income          
           
            2,703,000       2,703,000       25,000       2,728,000  
Balance – June 30, 2023     40,580,936     $ 406,000      
    $
    $ 45,016,000     $ 24,881,000     $ 70,303,000     $ 1,015,000     $ 71,318,000  
Reacquisition of shares outstanding                 1,000,000       (2,510,000 )    
            (2,510,000 )           (2,510,000 )
Net income (loss)          
           
            2,761,000       2,761,000       (4,000 )     2,757,000  
Balance – September 30, 2023     40,580,936     $ 406,000       1,000,000     $ (2,510,000 )   $ 45,016,000     $ 27,642,000     $ 70,554,000     $ 1,011,000     $ 71,565,000  

 

Numbers are rounded for presentation purposes. See notes to condensed consolidated financial statements.

 

- 3 -


 

SIEBERT FINANCIAL CORP. & SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited)

 

   

Nine Months Ended

September 30,

 
    2023     2022  
Cash Flows From Operating Activities            
Net income   $ 8,700,000     $ 385,000  
Adjustments to reconcile net income to net cash (used in) operating activities:                
Deferred income tax expense / (benefit)     893,000       (22,000 )
Depreciation and amortization     716,000       760,000  
Net lease liabilities     (4,000 )     (74,000 )
Earnings of equity method investment in related party     (111,000 )     (67,000 )
Impairment of investments     1,035,000      
 
Share-based compensation    
      234,000  
                 
Changes in                
Receivables from customers     (19,704,000 )     19,721,000  
Receivables from non-customers     70,000       19,000  
Receivables from and deposits with broker-dealers and clearing organizations     561,000       4,285,000  
Securities borrowed     (68,015,000 )     324,494,000  
Securities owned, at fair value     (15,483,000 )     523,000  
Prepaid expenses and other assets     (190,000 )     (823,000 )
Prepaid service contract    
      711,000  
Payables to customers     (51,170,000 )     (54,067,000 )
Payables to non-customers     (10,515,000 )     (8,081,000 )
Drafts payable     (1,368,000 )     (496,000 )
Payables to broker-dealers and clearing organizations     2,786,000       188,000  
Accounts payable and accrued liabilities     1,594,000       (1,824,000 )
Securities loaned     81,215,000       (313,034,000 )
Securities sold, not yet purchased, at fair value     (1,000 )     (13,000 )
Taxes payable     1,444,000       (855,000 )
Deferred contract incentive     (638,000 )     (621,000 )
Cloud computing implementation     (776,000 )    
 
Net cash (used in) operating activities     (68,961,000 )     (28,657,000 )
                 
Cash Flows From Investing Activities                
Distribution from equity method investment in related party    
      172,000  
Purchase of office facilities and equipment     (241,000 )     (165,000 )
Purchase of software     (246,000 )     (379,000 )
Build out of property     (1,140,000 )     (892,000 )
Net cash (used in) investing activities     (1,627,000 )     (1,264,000 )
                 
Cash Flows From Financing Activities                
Issuance of RISE membership interests    
      600,000  
Transfers of RISE membership interests    
      240,000  
Kakaopay issuance cost     (1,589,000 )    
 
Shares issued for Kakaopay transaction     17,363,000      
 
Repayments of notes payable – related party    
      (1,470,000 )
Repayments of long-term debt     (2,714,000 )     (411,000 )
Net cash provided by (used in) financing activities     13,060,000       (1,041,000 )
                 
Net change in cash and cash equivalents, and cash and securities segregated for regulatory purposes     (57,528,000 )     (30,962,000 )
Cash and cash equivalents, and cash and securities segregated for regulatory purposes - beginning of year     299,838,000       330,584,000  
Cash and cash equivalents, and cash and securities segregated for regulatory purposes - end of period   $ 242,310,000     $ 299,622,000  
                 
Reconciliation of cash, cash equivalents, and cash and securities segregated for regulatory purposes                
Cash and cash equivalents - end of period   $ 4,932,000     $ 4,489,000  
Cash and securities segregated for regulatory purposes - end of period     237,378,000       295,133,000  
Cash and cash equivalents, and cash and securities segregated for regulatory purposes - end of period   $ 242,310,000     $ 299,622,000  
                 
Supplemental cash flow information                
Cash paid during the period for income taxes   $ 1,284,000     $ 42,000  
Cash paid during the period for interest   $ 222,000     $ 335,000  
                 
Non-cash investing and financing activities                
Treasury stock (1)   $ (2,500,000 )   $ (293,000 )
Kakaopay issuance cost (2)   $ 318,000     $  
Transfers of RISE membership interests (3)   $     $ 2,880,000  
Purchase of equity method investment in related party, net of cash paid of $350,000 (1)   $     $ 650,000  

 

(1) Refer to Note 3 – Transactions with Tigress and Hedge Connection for further detail.
(2) Refer to Note 5 – Kakaopay Transaction for further detail.
(3) Refer to Note 4 – RISE for further detail.

 

Numbers are rounded for presentation purposes. See notes to condensed consolidated financial statements.

 

- 4 -


 

SIEBERT FINANCIAL CORP. & SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

 

1. Organization and Basis of Presentation

 

Organization

 

Siebert Financial Corp., a New York corporation, incorporated in 1934, is a holding company that conducts the following lines of business through its wholly-owned and majority-owned subsidiaries:

 

Muriel Siebert & Co., Inc. (“MSCO”) provides retail brokerage services. MSCO is a Delaware corporation and broker-dealer registered with the Securities and Exchange Commission (“SEC”) under the Exchange Act and the Commodity Exchange Act of 1936, and member of the Financial Industry Regulatory Authority (“FINRA”), the New York Stock Exchange (“NYSE”), the Securities Investor Protection Corporation (“SIPC”), and the National Futures Association (“NFA”).

 

Siebert AdvisorNXT, Inc. (“SNXT”) provides investment advisory services. SNXT is a New York corporation registered with the SEC as a Registered Investment Advisor (“RIA”) under the Investment Advisers Act of 1940.

 

Park Wilshire Companies, Inc. (“PW”) provides insurance services. PW is a Texas corporation and licensed insurance agency.

 

Siebert Technologies, LLC (“STCH”) provides technology development. STCH is a Nevada limited liability company.

 

RISE Financial Services, LLC (“RISE”) is a Delaware limited liability company and a broker-dealer registered with the SEC and NFA.

 

StockCross Digital Solutions, Ltd. (“STXD”) is an inactive subsidiary headquartered in Bermuda.

 

For purposes of this Report on Form 10-Q, the terms “Siebert,” “Company,” “we,” “us,” and “our” refer to Siebert Financial Corp., MSCO, SNXT, PW, STCH, RISE, and STXD collectively, unless the context otherwise requires.

 

The Company is headquartered in Miami Beach, FL with primary operations in Florida, New Jersey, and California. The Company has 12 branch offices throughout the U.S. and clients around the world. The Company’s SEC filings are available through the Company’s website at www.siebert.com, where investors can obtain copies of the Company’s public filings free of charge. The Company’s common stock, par value $.01 per share, trades on the Nasdaq Capital Market under the symbol “SIEB.”

 

The Company primarily operates in the securities brokerage and asset management industry and has no other reportable segments. All of the Company’s revenues for the three and nine months ended September 30, 2023 and 2022 were derived from its operations in the U.S.

 

As of September 30, 2023, the Company is comprised of a single operating segment based on the factors related to management’s decision-making framework as well as management evaluating performance and allocating resources based on assessments of the Company from a consolidated perspective.

 

Basis of Presentation

 

The accompanying unaudited condensed consolidated financial statements (“financial statements”) of the Company have been prepared on the accrual basis of accounting in conformity with accounting principles generally accepted in the U.S. (“GAAP”) for interim financial information with the instructions for Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all the information and footnotes required by GAAP for complete annual financial statements. The U.S. dollar is the functional currency of the Company and numbers are rounded for presentation purposes.

 

In the opinion of management, the financial statements contain all adjustments (consisting of normal recurring entries) necessary to fairly present such interim results. Interim results are not necessarily indicative of the results of operations which may be expected for a full year or any subsequent period. These financial statements should be read in conjunction with the financial statements and notes thereto in the Company’s 2022 Form 10-K.

 

Principles of Consolidation

 

The financial statements include the accounts of Siebert and its wholly-owned and majority-owned consolidated subsidiaries. Upon consolidation, all intercompany balances and transactions are eliminated. For the period of March 31, 2022 to October 18, 2022, the Company determined that RISE was a variable interest entity (“VIE”) for which the Company was the primary beneficiary. As discussed in more detail in Note 4 – RISE, as of October 18, 2022, the Company’s ownership in RISE increased to 68% and therefore, the Company continued to consolidate RISE under the voting interest model (“VOE model”). The Company’s ownership in RISE remained 68% as of September 30, 2023.

 

For consolidated subsidiaries that are not wholly-owned, the third-party holdings of equity interests are referred to as noncontrolling interests. The net income or loss attributable to noncontrolling interests for such subsidiaries is presented as net income or loss attributable to noncontrolling interests in the statements of operations. The portion of total equity that is attributable to noncontrolling interests for such subsidiaries is presented as noncontrolling interests in the statements of financial condition. 

- 5 -


 

For investments in entities in which the Company does not have a controlling financial interest but has significant influence over its operating and financial decisions, the Company applies the equity method of accounting with net income and losses recorded in earnings of equity method investment in related party.

 

Significant Accounting Policies

 

The Company’s significant accounting policies are included in Note 2 – Summary of Significant Accounting Policies in the Company’s 2022 Form 10-K. During the three and nine months ended September 30, 2023, there were no significant changes made to the Company’s significant accounting policies.

 

2. New Accounting Standards

 

The Company did not adopt any new accounting standards during the three and nine months ended September 30, 2023. In addition, the Company has evaluated other recently issued accounting standards and does not believe that any of these standards will have a material impact on the Company’s financial statements and related disclosures as of September 30, 2023.

 

3. Transactions with Tigress and Hedge Connection

 

In 2021 and 2022, the Company entered into agreements and subsequent reorganization agreements and termination agreements with Tigress Holdings, LLC (“Tigress”) and Hedge Connection, LLC (“Hedge Connection”). Refer to Note 3 – Transactions with Tigress and Hedge Connection in the Company’s 2022 Form 10-K and Note 12 – Equity Method Investment in Related Party in this Report for more detail on these transactions and information that impacted the periods presented.

 

On January 21, 2022, the Company purchased Hedge Connection for $1,000,000, of which $400,000 was noncash consideration and $600,000 was a note payable. The Company paid off $350,000 of its note payable to Hedge Connection during the nine months ended September 30, 2022.

 

On July 10, 2023, the Company entered into a Share Redemption Agreement with Cynthia DiBartolo, CEO of Tigress, pursuant to which the Company repurchased from Ms. DiBartolo one million shares of its common stock held by Ms. DiBartolo in exchange for conveying to Ms. DiBartolo the Company’s 17% interest in Tigress. Refer to Siebert’s Current Report on Form 8-K filed on July 14, 2023, incorporated herein by reference, and Note 12 – Equity Method Investment in Related Party in this Report for more detail on these transactions and information that impacted the periods presented.

 

4. RISE

 

During the three months ended March 31, 2022, RISE issued and Siebert sold membership interests in RISE to certain employees, directors, and affiliates of RISE and Siebert.

 

From January 1, 2022 through March 30, 2022, RISE issued 8.3% of RISE’s total issued and outstanding membership interests in exchange for a net increase in assets of $1,000,000. Siebert sold membership interests representing 2% of RISE’s total issued and outstanding membership interests to Siebert employees.

 

On March 31, 2022, Siebert exchanged $2,880,000 in aggregate of notes payable to Gloria E. Gebbia for 24% ownership interest in RISE. As a result, Siebert’s direct ownership percentage in RISE declined from 76% as of December 31, 2021 to approximately 44% as of March 31, 2022. As of March 31, 2022, Siebert determined that RISE was a VIE and that Siebert was the primary beneficiary, requiring RISE to be consolidated in accordance with Accounting Standards Codification (“ASC”) Topic 810 – Consolidation.

 

As a result of transactions described in Note 3 – Transactions with Tigress and Hedge Connection, Siebert’s ownership in RISE increased to 68%, and therefore Siebert continued to consolidate RISE from October 18, 2022 through December 31, 2022 under the VOE model. There have been no further transactions completed by the Company related to RISE’s membership interests for the three and nine months ended September 30, 2023.

 

As of September 30, 2023, RISE reported assets of $1.4 million and no liabilities. As of December 31, 2022, RISE reported assets of $1.3 million and liabilities of $0.1 million. There are no restrictions on RISE’s assets.

 

5. Kakaopay Transaction

 

On April 27, 2023, Siebert entered into a Stock Purchase Agreement with Kakaopay (the “First Tranche Stock Purchase Agreement”), pursuant to which Siebert agreed to issue to Kakaopay Corporation (“Kakaopay”), a company established under the Laws of the Republic of Korea and a fintech subsidiary of Korean-based conglomerate Kakao Corp., 8,075,607 shares of Siebert’s common stock (the “First Tranche Shares” and, such transaction, the “First Tranche”) at a per share price of Two Dollars Fifteen Cents ($2.15), which represented 19.9% of the outstanding equity securities of Siebert on a fully diluted basis (taking into account the issuance of the First Tranche Shares). The First Tranche closed on May 18, 2023. 

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Concurrent with the execution of the First Tranche Stock Purchase Agreement, Siebert and Kakaopay entered into a second Stock Purchase Agreement (the “Second Tranche Stock Purchase Agreement” and, together with the First Tranche Stock Purchase Agreement, the “Stock Purchase Agreements”), pursuant to which Siebert agreed to issue to Kakaopay an additional 25,756,470 shares of Siebert’s common stock (the “Second Tranche Shares” and, such transaction, the “Second Tranche”) at a per share price of Two Dollars Thirty Five Cents ($2.35), so that Kakaopay will own 51% of the outstanding equity securities of Siebert on a fully diluted basis (taking into account the issuance of the First Tranche Shares and the Second Tranche Shares). The consummation of the Second Tranche is subject to a number of conditions, which have not yet been satisfied as of the date of this Report. The conditions to Kakaopay’s obligation to close the Second Tranche include, among others, (i) the affirmative vote of a majority of the outstanding shares of Siebert’s common stock and the affirmative vote of the holders of a majority of the outstanding shares of Siebert’s common stock not beneficially owned, directly or indirectly, by certain family members related to Directors John J. Gebbia and Gloria E. Gebbia (“Gebbia Stockholders”), Kakaopay or any of their respective affiliates, (ii) approval by FINRA, (iii) favorable completion of the review by the Committee on Foreign Investment in the United States (“CFIUS”), (iv) certain performance conditions relating to order execution and the execution of employment and consulting agreements for key personnel of Siebert and MSCO, (v) the approvals in connection to the filing of an overseas direct investment report as required under the Foreign Exchange Transactions Act of the Republic of Korea, and, if applicable in accordance with applicable law, any antitrust report or filing with the Korea Fair Trade Commission shall have been obtained or provided, (vi) the listing by Siebert of the Second Tranche Shares on the Nasdaq Capital Market, (vii) the accuracy of certain representations and warranties of Siebert as of the closing of the Second Tranche, (viii) the absence of any material adverse effect having occurred with respect to Siebert between April 27, 2023 and the closing of the Second Tranche, and (ix) the performance by Siebert of all covenants, agreements and obligations required to be performed by it prior to the closing of the Second Tranche. The conditions to Siebert’s obligation to close the Second Tranche include, among others, (i) the affirmative vote of the holders of a majority of the outstanding shares of Siebert’s common stock not beneficially owned, directly or indirectly, by the Gebbia Stockholders, Kakaopay or any of their respective affiliates, (ii) approval by FINRA, (iii) favorable completion of the review by CFIUS, (iv) the accuracy of certain representations and warranties of Kakaopay as of the closing of the Second Tranche, (v) the absence of any material adverse effect having occurred with respect to Kakaopay between April 27, 2023 and the closing of the Second Tranche, and (vi) the performance by Kakaopay of all covenants, agreements and obligations required to be performed by it prior to the closing of the Second Tranche. Refer to the Company’s Current Report on Form 8-K filed on May 3, 2023, incorporated herein by reference, for further detail regarding this transaction.

 

Since the closing of the First Tranche, Korean authorities have taken action against Kakaopay, its parent company, Kakao Corp., and their affiliates. In addition, Kakao Corp., recently announced that it will establish an independent compliance committee for Kakao Corp. and its subsidiaries to address what it described as the current crisis at Kakao Corp. and its subsidiaries. Siebert believes these events have had a material adverse effect on both Kakaopay and its ability to perform its obligations under the Second Tranche Stock Purchase Agreement and consummate the transactions contemplated therein. Accordingly, on November 11, 2023, Siebert delivered a notice to Kakaopay stating that a material adverse effect had occurred with respect to Kakaopay and that, as a result, Siebert’s conditions to closing will not be satisfied. The notice also specified that Kakaopay has indicated that it has no intention of satisfying the conditions precedent to Siebert preparing the proxy statement contemplated by the Second Tranche Stock Purchase Agreement. Siebert is considering its rights and obligations under the Second Tranche Stock Purchase Agreement, including evaluating whether and under what circumstances the Second Tranche Stock Purchase Agreement might be terminated, and has reserved all of its rights and remedies, including Siebert’s right to assert that Kakaopay has materially breached a number of covenants in the Second Tranche Stock Purchase Agreement. On November 12, 2023, Kakaopay delivered a letter in response to the notice that expressed Kakaopay’s disagreement with the statements in the notice. As a result of the foregoing, Siebert has incurred and may incur additional legal expenses evaluating these matters, the amount of which is uncertain as of the date hereof.

 

As of December 31, 2022, the Company capitalized deferred issuance costs related to this transaction of $318,000, which was recorded within the line item “Prepaid expenses and other assets” in the statements of financial condition. At the time of the issuance, the total deferred issuance cost of $1,907,000 related to this transaction was reclassified as a reduction to “Additional paid-in capital” in stockholders’ equity in the statements of financial condition. During the nine months ended September 30, 2023, the Company recognized $1,589,000 of issuance costs related to this transaction.

 

During the three and nine months ended September 30, 2023, the Company incurred deferred issuance costs related to the Second Tranche of $58,000, which was recorded within the line item “Prepaid expenses and other assets” in the statements of financial condition.

 

On May 22, 2023, Gloria E. Gebbia issued a warrant to BCW Securities LLC, a Delaware limited liability company (“BCW”), to purchase 403,780 shares of common stock of the Company held by Ms. Gebbia at an exercise price of $2.15 per share. Ms. Gebbia issued the warrant pursuant to that certain agreement, dated March 27, 2023, by and among Ms. Gebbia, the Company and BCW relating to the investment by Kakaopay in the Company.

 

6. Receivables From, Payables To, and Deposits With Broker-Dealers and Clearing Organizations

 

Amounts receivable from, payables to, and deposits with broker-dealers and clearing organizations consisted of the following as of the periods indicated:

 

   

As of

September 30,
2023

   

As of

December 31,
2022

 
Receivables from and deposits with broker-dealers and clearing organizations            
DTCC / OCC / NSCC (1)   $ 7,277,000     $ 8,187,000  
Goldman Sachs & Co. LLC (“GSCO”)     34,000       31,000  
Pershing Capital    
      96,000  
National Financial Services, LLC (“NFS”)     1,988,000       2,006,000  
Securities fail-to-deliver     469,000       3,000  
Globalshares     76,000       82,000  
Total Receivables from and deposits with broker-dealers and clearing organizations   $ 9,844,000     $ 10,405,000  
Payables to broker-dealers and clearing organizations                
Securities fail-to-receive   $ 2,695,000     $ 396,000  
Payables to broker-dealers     751,000       264,000  
Total Payables to broker-dealers and clearing organizations   $ 3,446,000     $ 660,000  

 

(1) Depository Trust & Clearing Corporation is referred to as (“DTCC”), Options Clearing Corporation is referred to as (“OCC”), and National Securities Clearing Corporation is referred to as (“NSCC”).

- 7 -


 

Under the DTCC shareholders’ agreement, MSCO is required to participate in the DTCC common stock mandatory purchase. As of September 30, 2023 and December 31, 2022, MSCO had shares of DTCC common stock valued at approximately $1,236,000 and $1,054,000, respectively, which are included within the line item “Deposits with broker-dealers and clearing organizations” on the statements of financial condition.

 

In September 2022, MSCO and RISE entered into a clearing agreement whereby RISE would introduce clients to MSCO. As part of the agreement, RISE deposited a clearing fund escrow deposit of $50,000 to MSCO, and had excess cash of approximately $1.0 million in its brokerage account at MSCO as of September 30, 2023. The resulting asset of RISE and liability of MSCO is eliminated in consolidation. The Company terminated its clearing relationships with GSCO and Pershing in 2022.

 

7. Prepaid Service Contract

 

In April 2020, the Company entered into an agreement with a technology partner whereby the Company paid the technology partner shares of the Company’s common stock and cash in exchange for services to develop a new client and back-end interface as well as related functionalities for the Company’s key operations. In February 2022, the Company entered into a Consulting Services Agreement (“CSA”) with the technology partner, whereby the Company would provide certain consulting services over an 18-month period. In September 2022, the Company and the technology partner mutually agreed to terminate the services being provided under both the original agreement as well as the CSA. Refer to Note 6 – Prepaid Service Contract in the Company’s 2022 Form 10-K for further detail. Information related to these transactions that impacted the periods presented is shown below.

 

As part of the termination, in September 2022, the technology partner returned 193,906 shares of the Company’s common stock previously issued and agreed to pay the Company a total of $950,000. The Company recorded amortization of prepaid service contract assets of $357,000 and $711,000 for the three and nine months ended September 30, 2022, respectively, which is included in the line item “Technology and communications” in the statements of operations. The Company recorded consulting fee income of $867,000 and $1,700,000 for the three and nine months ended September 30, 2022, respectively, which is recorded in “Other income” in the statements of operations. The Company did not record consulting fee income or amortization of prepaid service contract assets for the three and nine months ended September 30, 2023.

 

8. Fair Value Measurements

 

Overview

 

ASC 820 defines fair value, establishes a framework for measuring fair value as well as a hierarchy of fair value inputs. Refer to the below as well as Note 2 – Summary of Significant Accounting Policies in the Company’s 2022 Form 10-K for further information regarding fair value hierarchy, valuation techniques and other items related to fair value measurements.

 

Financial Assets and Liabilities Measured at Fair Value on a Recurring Basis

 

The tables below present, by level within the fair value hierarchy, financial assets and liabilities, measured at fair value on a recurring basis for the periods indicated. As required by ASC Topic 820, financial assets and financial liabilities are classified in their entirety based on the lowest level of input that is significant to the respective fair value measurement.

 

    As of September 30, 2023  
    Level 1     Level 2     Level 3     Total  
Assets                        
Cash and securities segregated for regulatory purposes                        
U.S. government securities   $ 118,101,000     $
    $
    $ 118,101,000  
                                 
Securities owned, at fair value                                
U.S. government securities   $ 17,875,000     $
    $
    $ 17,875,000  
Certificates of deposit    
      113,000      
      113,000  
Municipal securities    
      319,000      
      319,000  
Corporate bonds    
      131,000      
      131,000  
Equity securities     117,000       132,000      
      249,000  
Total Securities owned, at fair value   $ 17,992,000     $ 695,000     $
    $ 18,687,000  
Liabilities                                
Securities sold, not yet purchased, at fair value                                
Equity securities   $ 1,000     $
    $
    $ 1,000  
Total Securities sold, not yet purchased, at fair value   $ 1,000     $
    $
    $ 1,000  

 

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    As of December 31, 2022  
  Level 1     Level 2     Level 3     Total  
Assets                        
Cash and securities segregated for regulatory purposes                        
U.S. government securities   $ 140,978,000     $
    $
    $ 140,978,000  
                                 
Securities owned, at fair value                                
U.S. government securities   $ 2,808,000     $
    $
    $ 2,808,000  
Certificates of deposit    
      92,000      
      92,000  
Municipal securities    
      52,000      
      52,000  
Corporate bonds    
      7,000      
      7,000  
Equity securities     63,000       182,000      
      245,000  
Total Securities owned, at fair value   $ 2,871,000     $ 333,000     $
    $ 3,204,000  
Liabilities                                
Securities sold, not yet purchased, at fair value                                
Equity securities   $ 2,000     $
    $
    $ 2,000  
Total Securities sold, not yet purchased, at fair value   $ 2,000     $
    $
    $ 2,000  

 

The Company had U.S. government securities with the below market values and maturity dates for the periods indicated:

 

   

As of

September 30,
2023

 
Market value of U.S. government securities portfolio      
Maturing in 2023   $ 67,245,000  
Maturing in 2024     64,505,000  
Maturing in 2025     3,918,000  
Accrued interest     308,000  
Total Market value of U.S. government securities portfolio   $ 135,976,000  
         
     

As of

December 31,
2022

 
Market value of U.S. government securities portfolio        
Maturing in 2023   $ 106,873,000  
Maturing in 2024     36,506,000  
Accrued interest     408,000  
Total Market value of U.S. government securities portfolio   $ 143,787,000  

 

Financial Assets Measured at Fair Value on a Non-Recurring Basis

 

The following table represents information for assets measured at fair value on a nonrecurring basis and displays the carrying value after measurement as of the periods indicated. The fair value measurement is nonrecurring as these assets are measured at fair value only when there is a triggering event (e.g., an evidence of impairment). Assets included in the table are those that were impaired during the respective reporting periods and that are still held as of the reporting date. The estimated fair values for these amounts were determined using significant unobservable inputs (Level 3).

 

   

As of

September 30,
2023

    As of
December 31,
2022
 
Equity method investment in related party   $
    $ 2,584,000  

 

As a result of the 2022 transaction discussed in Note 3 – Transactions with Tigress and Hedge Connection, the Company recognized an impairment charge for its investment in Tigress of approximately $4,015,000 for the year ended December 31, 2022. The fair value of the Company’s investment in Tigress was determined using the income and market approach. For the income approach, the Company utilized estimated discounted future cash flow expected to be generated by Tigress. For the market approach, the Company utilized market multiples of revenue and earnings derived from comparable publicly-traded companies.

 

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As a result of the 2023 transaction discussed in Note 3 – Transactions with Tigress and Hedge Connection, the Company recognized an impairment charge for its investment in Tigress of approximately $185,000 during the nine months ended September 30, 2023, which is included in “Impairment of investments” in the statements of operations. The fair value of the Company’s investment in Tigress was determined using observed current market prices of Tigress’ membership interests that were below the Company’s carrying value of its equity investment in Tigress. Following the 2023 transaction discussed in Note 3 – Transactions with Tigress and Hedge Connection, the Company had no remaining interest in Tigress.

 

Financial Assets and Liabilities Not Carried at Fair Value

 

The following represents financial instruments in which the ending balances as of September 30, 2023 and December 31, 2022 are not carried at fair value in the statements of financial condition:

 

Short-term financial instruments: The carrying value of short-term financial instruments, including cash and cash equivalents as well as cash and securities segregated for regulatory purposes, are recorded at amounts that approximate the fair value of these instruments. These financial instruments generally expose the Company to limited credit risk and have no stated maturities or have short-term maturities and carry interest rates that approximate market rates. The Company had no cash equivalents for regulatory purposes as of September 30, 2023 and December 31, 2022. Securities segregated for regulatory purposes consist solely of U.S. government securities and are included in the fair value hierarchy table above. Cash and cash equivalents and cash and securities segregated for regulatory purposes are classified as level 1.

 

Receivables and other assets: Receivables from customers, receivables from non-customers, receivables from and deposits with broker-dealers and clearing organizations, other receivables, and prepaid expenses and other assets are recorded at amounts that approximate fair value and are classified as level 2 under the fair value hierarchy. The Company may hold cash equivalents related to rent deposits in prepaid expenses and other assets that are categorized as level 2 under the fair value hierarchy.

 

Securities borrowed and securities loaned: Securities borrowed and securities loaned are recorded at amounts which approximate fair value and are primarily classified as level 2 under the fair value hierarchy. The Company’s securities borrowed and securities loaned balances represent amounts of equity securities borrow and loan contracts and are marked-to-market daily in accordance with standard industry practices which approximate fair value.

 

Investments, cost: The Company’s non-marketable equity securities are investments in privately held companies without readily determinable market values due to the absence of quoted market prices, the inherent lack of liquidity and the fact that inputs used to measure fair value are unobservable and require management’s judgment. As there is no readily determinable fair value, the carrying amount of these investments minus impairment approximates the fair value. The cost will be adjusted upwards or downwards in accordance with observable market transactions. Under the fair value hierarchy, investments, cost is classified as level 3.

 

Payables: Payables to customers, payables to non-customers, drafts payable, payables to broker-dealers and clearing organizations, accounts payable and accrued liabilities, and taxes payable are recorded at amounts that approximate fair value due to their short-term nature and are classified as level 2 under the fair value hierarchy.

 

Deferred contract incentive: The carrying amount of the deferred contract incentive approximates fair value due to the relative short-term nature of the liability. Under the fair value hierarchy, the deferred contract incentive is classified as level 2.

 

Long-term debt: The carrying amount of the mortgage with East West Bank approximates fair value as it reflects terms that approximate current market terms for similar arrangements. Under the fair value hierarchy, the mortgage is classified as level 2.

 

9. Property, Office Facilities, and Equipment, Net

 

Property, office facilities, and equipment consisted of the following as of the periods indicated:

 

   

As of

September 30,
2023

   

As of

December 31,
2022

 
Property   $ 6,815,000     $ 6,815,000  
Office facilities     3,806,000       2,616,000  
Equipment     864,000       674,000  
Total Property, office facilities, and equipment     11,485,000       10,105,000  
Less accumulated depreciation     (2,180,000 )     (1,777,000 )
Total Property, office facilities, and equipment, net   $ 9,305,000     $ 8,328,000  

 

Total depreciation expense for property, office facilities, and equipment was $168,000 and $102,000 for the three months ended September 30, 2023 and 2022, respectively. Total depreciation expense for property, office facilities, and equipment was $403,000 and $298,000 for the nine months ended September 30, 2023 and 2022, respectively.

 

- 10 -


 

Miami Office Building

 

On December 30, 2021, the Company purchased an office building located at 653 Collins Ave, Miami Beach, FL (“Miami office building”). The Miami office building contains approximately 12,000 square feet of office space and serves as the headquarters of the Company.

 

Depreciation expense commenced in April 2023 when the Miami office building was completed and placed in service. The Company invested $299,000 and $296,000 in the three months ended September 30, 2023 and 2022, respectively, to build out the Miami office building. The Company invested $1,140,000 and $892,000 in the nine months ended September 30, 2023 and 2022 respectively, to build out the Miami office building.

 

10. Software, Net

 

Software consisted of the following as of the periods indicated:

 

   

As of

September 30,
2023

   

As of

December 31,
2022

 
Robo-advisor   $ 763,000     $ 763,000  
Other software     4,365,000       3,342,000  
Total Software     5,128,000       4,105,000  
Less accumulated amortization – robo-advisor     (763,000 )     (763,000 )
Less accumulated amortization – other software     (2,664,000 )     (2,351,000 )
Total Software, net   $ 1,701,000     $ 991,000  

 

In the fourth quarter of 2022, the Company partnered with a technology partner to develop a new retail trading platform for the Company’s customers and integrate this platform into the Company’s operations. The total capitalized software development work related to this project was $1,133,000 as of September 30, 2023, of which $219,000 and $776,000 was capitalized during the three and nine months ended September 30, 2023, respectively.

 

Total amortization of software was $98,000 and $138,000 for the three months ended September 30, 2023 and 2022, respectively. Total amortization of software was $312,000 and $461,000 for the nine months ended September 30, 2023 and 2022, respectively. As of September 30, 2023, the Company estimates future amortization of software assets of $176,000, $684,000, $537,000, and $304,000 in the years ended December 31, 2023, 2024, 2025, and 2026, respectively.

 

11. Leases

 

As of September 30, 2023, all of the Company’s leases are classified as operating and primarily consist of office space leases expiring in 2023 through 2028. The Company elected not to include short-term leases (i.e., leases with initial terms of less than twelve months), or equipment leases (deemed immaterial) on the statements of financial condition. The Company leases some miscellaneous office equipment, but they are immaterial and therefore the Company records the costs associated with this office equipment on the statements of operations rather than capitalizing them as lease right-of-use assets. The balance of the lease right-of-use assets and lease liabilities are displayed on the statements of financial condition and the below tables display further detail on the Company’s leases.

 

On July 7, 2023, the Company entered into a new lease agreement expiring in December 2028 for office space in the World Financial Center in New York City. This office will replace the New Jersey office as one of the Company’s key operating centers and the total commitment of the lease is approximately $2.1 million. The estimated build out cost for this office space is approximately $500,000.

 

Lease Term and Discount Rate  

As of

September 30,
2023

   

As of

December 31,
2022

 
Weighted average remaining lease term – operating leases (in years)     3.9       2.7  
Weighted average discount rate – operating leases     6.7 %     5.0 %

 

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Three Months Ended

September 30,

   

Nine Months Ended

September 30,

 
    2023     2022     2023     2022  
Operating lease cost   $ 356,000     $ 283,000     $ 965,000     $ 1,008,000  
Short-term lease cost     67,000       151,000       346,000       228,000  
Variable lease cost     44,000       128,000       125,000       255,000  
Total Rent and occupancy   $ 467,000     $ 562,000     $ 1,436,000     $ 1,491,000  
                                 
Cash paid for amounts included in the measurement of lease liabilities                                
Operating cash flows from operating leases   $ 315,000     $ 299,000     $ 969,000     $ 1,074,000  
                                 
Lease right-of-use assets obtained in exchange for new lease liabilities                                
Operating leases   $ 1,693,000     $ 152,000     $ 1,693,000     $ 754,000  

 

Lease Commitments

 

Future annual minimum payments for operating leases with initial terms of greater than one year as of September 30, 2023 were as follows:

 

Year   Amount  
2023   $ 287,000  
2024     938,000  
2025     861,000  
2026     694,000  
2027     520,000  
2028     443,000  
Remaining balance of lease payments     3,743,000  
Less: difference between undiscounted cash flows and discounted cash flows     521,000  
Lease liabilities   $ 3,222,000  

 

12. Equity Method Investment in Related Party

 

Transaction with Tigress

 

On November 16, 2021, the Company entered into an agreement with Tigress and a subsequent reorganization agreement with Tigress on October 18, 2022. Refer to Note 3 – Transactions with Tigress and Hedge Connection in the Company’s 2022 Form 10-K for further detail.

 

As a result of the reorganization agreement with Tigress on October 18, 2022, the Company’s ownership interest of Tigress decreased from 24% to 17%. Based on the level of the Company’s ownership of Tigress, the Company concluded that it was still able to exercise significant influence over Tigress following the reorganization agreement. Therefore, the Company continued to account for this investment under the equity method of accounting through the Company’s sale of its interest in Tigress on July 10, 2023.

 

On July 10, 2023, the Company entered into a Share Redemption Agreement with Cynthia DiBartolo, pursuant to the Share Redemption Agreement, the Company repurchased from Ms. DiBartolo one million (1,000,000) of its common stock held by Ms. DiBartolo in exchange for conveying to Ms. DiBartolo the Company’s 17% interest in Tigress. The Company has accounted for the Share Redemption Agreement as a sale of a financial asset in accordance with ASC 860. As the one million shares of Company common stock that the Company received from Ms. DiBartolo had a fair value equal to the fair value of the Company’s 17% interest in Tigress sold to Ms. DiBartolo, no gain or loss was recognized as a result of the transaction. Following the transaction, the Company had no remaining interest in Tigress.

 

For the three months ended September 30, 2023 and 2022, the loss recognized from the Company’s investment in Tigress was $0 and $148,000, respectively. For the nine months ended September 30, 2023 and 2022, the earnings recognized from the Company’s investment in Tigress were $111,000 and $67,000, respectively. The Company received cash distributions from Tigress of $0 and $172,000 during the three and nine months ended September 30, 2022, respectively.

 

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As of September 30, 2023 and December 31, 2022, the carrying amount of the Company’s investment in Tigress was $0 and $2,584,000, respectively.

 

Below is a table showing the summary of the consolidated statements of operations and financial condition for Tigress based on the most recent financials prior to the transaction on July 10, 2023 (unaudited):

 

    Six Months Ended June 30,  
    2023     2022  
Revenue   $ 4,025,000     $ 5,732,000  
Operating income   $ 650,000     $ 823,000  
Net income   $ 650,000     $ 823,000  

 

    As of  
    June 30,
2023
    December 31, 2022  
Assets   $ 8,795,000     $ 8,169,000  
Liabilities   $ 5,821,000     $ 5,301,000  
Stockholders’ Equity   $ 2,974,000     $ 2,868,000  

 

13. Investments, Cost

 

As of both September 30, 2023 and December 31, 2022, the Company maintained a 2% ownership interest in a retail platform (“Retail Platform”).

 

In June 2023, in view of the Retail Platform’s business performance and near-term business outlook that were below the Company’s previous expectations, as well as observed market transactions of the Retail Platform’s equity that were below the carrying value of the Company’s investment of the Retail Platform, the Company determined that an other than temporary impairment existed. For the three months ended September 30, 2023, the Company did not recognize an impairment charge for its investment in the Retail Platform. For the nine months ended September 30, 2023, the Company recognized an impairment charge for its investment in the Retail Platform of $850,000. The impairment loss was included in “Impairment of investments” in the statements of operations for the nine months ended September 30, 2023.

 

14. Goodwill

 

As of both September 30, 2023 and December 31, 2022, the Company’s carrying amount of goodwill was $1,989,000, all of which came from the Company’s acquisition of RISE. As of September 30, 2023, management concluded that there have been no impairments to the carrying value of the Company’s goodwill and no impairment charges related to goodwill were recognized during the three and nine months ended September 30, 2023 and 2022. Additionally, the Company determined there was not a material risk for future possible impairments to goodwill as of the date of the assessment.

 

15. Long-Term Debt

 

Mortgage with East West Bank

 

Overview

 

On December 30, 2021, the Company purchased the Miami office building for approximately $6.8 million, and the Company entered into a mortgage with East West Bancorp, Inc. (“East West Bank”) for approximately $4 million to finance part of the purchase of the Miami office building as well as $338,000 to finance part of the build out of the Miami office building.

 

The Company’s obligations under the mortgage are secured by a lien on the Miami office building and the term of the loan is ten years. The repayment schedule will utilize a 30-year amortization period, with a balloon on the remaining amount due at the end of ten years. The interest rate is 3.6% for the first 7 years, and thereafter the interest rate shall be at the prime rate as reported by the Wall Street Journal, provided that the minimum interest rate on any term loan will not be less than 3.6%. As part of the agreement, the Company must maintain a debt service coverage ratio of 1.4 to 1. The loan is subject to a prepayment penalty over the first five years which is calculated as a percentage of the principal amount outstanding at the time of prepayment. This percentage is 5% in the first year and decreases by 1% each year thereafter, with the prepayment penalty ending after 5 years. As of September 30, 2023, the Company was in compliance with all of its covenants related to this agreement.

 

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Remaining Payments

 

Future remaining annual minimum principal payments for the mortgage with East West Bank as of September 30, 2023 were as follows:

 

    Amount  
2023   $ 22,000  
2024     84,000  
2025     88,000  
2026     91,000  
Thereafter     4,048,000  
Total   $ 4,333,000  

 

The interest expense related to this mortgage was $40,000 and $39,000 for the three months ended September 30, 2023, and 2022, respectively. The interest expense related to this mortgage was $119,000 and $104,000 for the nine months ended September 30, 2023, and 2022, respectively. As of September 30, 2023, the interest rate for this mortgage was 3.6%.

 

Loan with East West Bank

 

On July 22, 2020, the Company entered into a loan and security agreement with East West Bank. In accordance with the terms of this agreement, the Company borrowed $5.0 million and paid off the full remaining balance of the loan of approximately $2.7 million in the second quarter of 2023. Refer to Note 13 – Long-Term Debt in the Company’s 2022 Form 10-K for more information.

 

16. Deferred Contract Incentive

 

Effective August 1, 2021, MSCO entered into an amendment to its clearing agreement with NFS that, among other things, extended the term of the arrangement for an additional four-year period commencing on August 1, 2021 and ending July 31, 2025.

 

As part of this agreement, the Company received a one-time business development credit of $3 million from NFS which was recorded in the line item “Deferred contract incentive” on the statements of financial condition. This credit will be recognized as contra expense over the term of the agreement in the line item “Clearing fees, including execution costs” on the statements of operations. The Company recognized $213,000 and $196,000 in contra expense for the three months ended September 30, 2023 and 2022, respectively. The Company recognized $637,000 and $621,000 in contra expense for the nine months ended September 30, 2023 and 2022, respectively. As of September 30, 2023 and December 31, 2022, the balance of the deferred contract incentive was $1.4 million and $2.0 million, respectively.

 

17. Revenue Recognition

 

Refer to Note 2 – Summary of Significant Accounting Policies in Company’s 2022 Form 10-K for detail on the Company’s primary sources of revenue and the corresponding accounting treatment. Information related to items that impact certain revenue streams within the periods presented is shown below.

 

Principal Transactions and Proprietary Trading

 

In 2022, the Company invested in treasury bill and treasury notes, which are primarily in the line item “Cash and securities segregated for regulatory purposes” on the statements of financial condition, in order to enhance its yield on its excess 15c3-3 deposits. During 2022, there was an increase in U.S. government securities yields, which created an unrealized loss on the Company’s U.S. government securities portfolio. The Company continuously invests in treasury bills and treasury notes as part of its normal operations to meet deposit requirements. The aggregate unrealized loss on the portfolio of approximately $1.3 million as of September 30, 2023 will be returned over the duration of the government securities, at a point no later than the maturity of the securities. Refer to Note 8 – Fair Value Measurements for additional detail.

 

The following table represents detail related to principal transactions and proprietary trading.

 

    Three Months Ended September 30,  
    2023     2022     Increase (Decrease)  
Principal transactions and proprietary trading                  
Realized and unrealized gain on primarily riskless principal transactions   $ 2,657,000     $ 2,340,000     $ 317,000  
Unrealized gain (loss) on portfolio of U.S. government securities     1,096,000       (1,387,000 )     2,483,000  
Total Principal transactions and proprietary trading   $ 3,753,000     $ 953,000     $ 2,800,000  

 

      Nine Months Ended September 30,  
      2023       2022       Increase (Decrease)  
Principal transactions and proprietary trading                        
Realized and unrealized gain on primarily riskless principal transactions   $ 6,642,000     $ 5,956,000     $ 686,000  
Unrealized gain (loss) on portfolio of U.S. government securities     2,565,000       (4,189,000 )     6,754,000  
Total Principal transactions and proprietary trading   $ 9,207,000     $ 1,767,000     $ 7,440,000  

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Stock Borrow / Stock Loan

 

For the three and nine months ended September 30, 2023, stock borrow / stock loan revenue was $4,008,000 ($13,000,000 gross revenue less $8,992,000 expenses) and $11,963,000 ($34,300,000 gross revenue less $22,337,000 expenses), respectively. For the three and nine months ended September 30, 2022, stock borrow / stock loan revenue was $4,183,000 ($9,921,000 gross revenue minus $5,738,000 expenses) and $11,909,000 ($26,222,000 gross revenue less $14,313,000 expenses), respectively.

 

18. Income Taxes

 

The Company’s provision for income taxes consists of federal and state taxes, as applicable, in amounts necessary to align the Company’s year-to-date tax provision with the effective rate that it expects to achieve for the full year. Each quarter the Company updates its estimate of the annual effective tax rate and records cumulative adjustments as necessary. As of September 30, 2023, the Company has concluded that its deferred tax assets are realizable on a more-likely-than-not basis with the with the exception of investments that are expected to generate a capital loss when realized and certain state net operating losses.

 

For the three months ended September 30, 2023, the Company recorded an income tax provision of $1,516,000 on pre-tax book income of $4,273,000. For the nine months ended September 30, 2023, the Company recorded an income tax provision of $3,621,000 on pre-tax book income of $12,321,000. The effective tax rate for the three and nine months ended September 30, 2023 was 35% and 29% respectively. The effective tax rate differs from the federal statutory rate of 21% primarily related to certain permanent tax differences and state and local taxes including the impact of finalizing the prior year tax filings.

 

For the three months ended September 30, 2022, the Company recorded an income tax provision of $473,000 on pre-tax book income of $1,440,000. For the nine months ended September 30, 2022, the Company recorded an income tax benefit of $836,000 on pre-tax book loss of $451,000. The effective tax rate for the three and nine months ended September 30, 2022 was 33% and 185%, respectively. The effective tax rate differs from the federal statutory rate of 21% primarily related to the benefit from the reversal of the uncertain tax position related to the 2018 amended tax return due to the expiration of the statute of limitations and certain permanent tax differences and state and local taxes.

 

As of both September 30, 2023 and December 31, 2022, the Company recorded an uncertain tax position of $1,596,000 related to various tax matters, which is included in the line item “Taxes payable” in the statements of financial condition.

 

19. Capital Requirements

 

MSCO

 

Net Capital

 

MSCO is subject to the Uniform Net Capital Rules of the SEC (Rule 15c3-1) of the Exchange Act. Under the alternate method permitted by this rule, net capital, as defined, shall not be less than the lower of $1 million or 2% of aggregate debit items arising from customer transactions. As of September 30, 2023, MSCO’s net capital was $54.1 million, which was approximately $52.3 million in excess of its required net capital of $1.8 million, and its percentage of aggregate debit balances to net capital was 60.50%.

 

As of December 31, 2022, MSCO’s net capital was $30.6 million, which was approximately $29.2 million in excess of its required net capital of $1.4 million, and its percentage of aggregate debit balances to net capital was 44.49%.

 

Special Reserve Account

 

MSCO is subject to Customer Protection Rule 15c3-3 which requires segregation of funds in a special reserve account for the exclusive benefit of customers. As of September 30, 2023, MSCO had cash and securities deposits of $236.2 million (cash of $118.1 million, securities with a fair value of $118.1 million) in the special reserve accounts which was $26.1 million in excess of the deposit requirement of $210.1 million. After adjustments for deposit(s) and / or withdrawal(s) made on October 2, 2023, MSCO had $2.0 million in excess of the deposit requirement.

 

As of December 31, 2022, MSCO had cash and securities deposits of $276.2 million (cash of $135.2 million, securities with a fair value of $141.0 million) in the special reserve accounts which was $11.9 million in excess of the deposit requirement of $264.3 million. The Company made no subsequent deposits or withdrawals on January 3, 2023.

 

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As of September 30, 2023, the Company was subject to the PAB Account Rule 15c3-3 of the SEC which requires segregation of funds in a special reserve account for the exclusive benefit of proprietary accounts of introducing broker-dealers. As of September 30, 2023, the Company had $1.2 million in the special reserve account which was approximately $0.2 million in excess of the deposit requirement of approximately $1.0 million. The Company made no subsequent deposits or withdrawals on October 2, 2023. As of December 31, 2022, the Company did not hold any proprietary accounts of introducing broker-dealers.

 

RISE

 

Net Capital

 

RISE, as a member of FINRA, is subject to the SEC Uniform Net Capital Rule 15c3-1. This rule requires the maintenance of minimum net capital and that the ratio of aggregate indebtedness to net capital, both as defined, shall not exceed 15 to 1 and that equity capital may not be withdrawn, or cash dividends paid if the resulting net capital ratio would exceed 10 to 1. RISE is also subject to the CFTC’s minimum financial requirements which require that RISE maintain net capital, as defined, equal to the greater of its requirements under Regulation 1.17 under the Commodity Exchange Act or Rule 15c3-1.

 

As of September 30, 2023, RISE’s regulatory net capital was approximately $1.2 million which was $1.0 million in excess of its minimum requirement of $250,000 under 15c3-1. As of December 31, 2022, RISE’s regulatory net capital was approximately $1.2 million which was $0.9 million in excess of its minimum requirement of $250,000 under 15c3-1.

 

20. Financial Instruments with Off-Balance Sheet Risk

 

The Company enters into various transactions to meet the needs of customers, conduct trading activities, and manage market risks and is, therefore, subject to varying degrees of market and credit risk. Refer to the below as well as Note 21 – Financial Instruments with Off-Balance Sheet Risk in the Company’s 2022 Form 10-K for further information.

 

As of September 30, 2023, the Company had margin loans extended to its customers of approximately $359.3 million, of which $71.8 million is within the line item “Receivables from customers” on the statements of financial condition. As of December 31, 2022, the Company had margin loans extended to its customers of approximately $365.4 million, of which $52.1 million is in the line item “Receivables from customers” on the statements of financial condition. There were no material losses for unsettled customer transactions for the three and nine months ended September 30, 2023 and 2022.

 

21. Commitments, Contingencies, and Other

 

Legal and Regulatory Matters

 

The Company is party to certain claims, suits and complaints arising in the ordinary course of business. As of September 30, 2023, all legal matters are without merit or involve amounts which would not have a material impact on the Company’s results of operations or financial position.

 

Overnight Financing

 

As of both September 30, 2023 and December 31, 2022, MSCO had an available line of credit for short term overnight demand borrowing with BMO Harris Bank (“BMO Harris”) of up to $25 million. As of those dates, MSCO had no outstanding loan balance and there were no commitment fees or other restrictions on this line of credit. On May 23, 2022, MSCO increased its principal amount for this line of credit from $15 million to $25 million.

 

At the Market Offering

 

On May 27, 2022, the Company entered into a Capital on DemandTM Sales Agreement (the “Sales Agreement”) with JonesTrading as agent, pursuant to which the Company may offer and sell, from time to time through JonesTrading, shares of the Company’s common stock having an aggregate offering amount of up to $9.6 million under the Company’s shelf registration statement on Form S-3. The Company is not obligated to make any sales of shares under the Sales Agreement. The Company agreed to pay JonesTrading a commission rate equal to 3.0% of the aggregate gross proceeds from each sale of shares. The Company or JonesTrading may suspend or terminate the offering upon notice to the other party and subject to other conditions. Whether the Company sells securities under the Sales Agreement will depend on a number of factors, including the market conditions at that time, the Company’s cash position at that time and the availability and terms of alternative sources of capital. For the three and nine months ended September 30, 2023 and 2022, the Company did not sell any shares pursuant to this Sales Agreement.

 

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NFS Contract

 

Effective August 1, 2021, MSCO entered into an amendment to its clearing agreement with NFS that, among other things, extends the term of the arrangement for an additional four-year period commencing on August 1, 2021 and ending July 31, 2025. If the Company chooses to exit this agreement before the end of the contract term, the Company is under the obligation to pay an early termination fee upon occurrence pursuant to the table below:

 

Date of Termination   Early Termination Fee  
Prior to August 1, 2024   $ 4,500,000  
Prior to August 1, 2025   $ 3,250,000  

 

For the three and nine months ended September 30, 2023 and 2022, there has been no expense recognized for any early termination fees. The Company believes that it is unlikely it will have to make material payments related to early termination fees and has not recorded any contingent liability in the financial statements related to this arrangement.

 

Technology Vendor

 

On March 31, 2023, the Company entered into an agreement with a technology vendor for certain development projects. As of September 30, 2023, the total budget for this project was approximately $1.1 million over a term of 2 years. For the three and nine months ended September 30, 2023, we incurred $214,000 in expenses related to this project.

 

General Contingencies

 

The Company’s general contingencies are included in Note 22 – Commitments, Contingencies, and Other in the Company’s 2022 Form 10-K. Other than the below, there have been no material updates to the Company’s general contingencies during the three and nine months ended September 30, 2023.

 

The Company, through its affiliate, Kennedy Cabot Acquisition, LLC (“KCA”), is self-insured with respect to employee health claims. As part of this plan, the Company recognized expenses of $336,000 and $234,000 for the three months ended September 30, 2023 and 2022, respectively. The Company recognized expenses as part of this plan of $782,000 and $1,139,000 for the nine months ended September 30, 2023 and 2022, respectively.

 

The Company had an accrual of $76,000 as of September 30, 2023, which represents the estimate of future expense to be recognized for claims incurred during the period.

 

The Company believes that its present insurance coverage and reserves are sufficient to cover currently estimated exposures, but there can be no assurance that the Company will not incur liabilities in excess of recorded reserves or in excess of its insurance limits.

 

As a result of the transaction and recent developments with Kakaopay, the Company has incurred and may incur additional legal expenses evaluating these matters, the amount of which is uncertain as of the date hereof. Refer to Note 5 – Kakaopay Transaction for further detail.

 

22. Employee Benefit Plans

 

The Company, through KCA, sponsors a defined-contribution retirement plan under Section 401(k) of the Internal Revenue Code that covers substantially all employees. Participant contributions to the plan are voluntary and are subject to certain limitations. The Company may also make discretionary contributions to the plan. For 401(k) employee contribution matching, the Company incurred $26,000 and $135,000 of expense for the three and nine months ended September 30, 2023, respectively. The Company did not incur any expense for 401(k) employee contribution matching in 2022.

 

The Company has an equity incentive plan that provides for the grant of stock options, restricted stock, and other equity awards of the Company’s common stock to employees, officers, consultants, directors, affiliates and other service providers of the Company. There were 3 million shares reserved under the equity incentive plan and 2,704,000 shares remained as of September 30, 2023. For the three and nine months ended September 30, 2022, the Company granted 138,000 restricted units that were fully vested upon grant date. The restricted units had a grant date fair value of $1.70 per share and compensation expense of $235,000 was recognized and is included in the line item “Employee compensation and benefits” in the statements of operations both for the three and nine months ended September 30, 2022. The Company did not issue any shares under this plan for the three and nine months ended September 30, 2023.

 

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23. Related Party Disclosures

 

KCA

 

KCA is an affiliate of the Company and is under common ownership with the Company. To gain efficiencies and economies of scale with billing and administrative functions, KCA serves as a paymaster for the Company for payroll and related functions, the entirety of which KCA passes through to the subsidiaries of the Company proportionally. In the first quarter of 2023, KCA entered into an agreement with the Company for payroll processing services. The Company incurred $10,000 and $40,000 of expenses related to these services for the three and nine months ended September 30, 2023, respectively.

 

KCA owns a license from the Muriel Siebert Estate / Foundation to use the names “Muriel Siebert & Co., Inc.” and “Siebert” within business activities, which expires in 2025. For the use of these names, KCA passed through to the Company $15,000 and $45,000 for the three and nine months ended September 30, 2023, respectively. There were no costs passed through to the Company for the use of these names in 2022.

 

Other than the above arrangements, KCA has earned no profit for providing any services to the Company as KCA passes through any revenue or expenses to the Company’s subsidiaries for the three and nine months ended September 30, 2023 and 2022. As of September 30, 2023 and December 31, 2022, the Company had a payable to KCA for miscellaneous expenses of $11,000 and $4,000, respectively, which are in the line item “Accounts payable and accrued liabilities” on the statements of financial condition.

 

PW

 

PW brokers the insurance policies for related parties. Revenue for PW from related parties was $8,000 and $7,000 for the three months ended September 30, 2023 and 2022, respectively. Revenue for PW from related parties was $99,000 and $102,000 for the nine months ended September 30, 2023 and 2022, respectively.

 

Gloria E. Gebbia, John J. Gebbia, and Gebbia Family Members

 

On March 31, 2022, Gloria E. Gebbia, a director of the Company, exchanged approximately $2.9 million of the Company’s notes payable to Gloria E. Gebbia for 24% of the outstanding and issued membership interests in RISE.

 

The Company has entered into various notes payable with Gloria E. Gebbia. The Company paid off this notes payable in 2022 and as such, the Company had no interest expense related to these notes payable in 2023. The Company had interest expense related to these notes payable of $30,000 and $131,000 for the three and nine months ended September 30, 2022, respectively.

 

Gloria E. Gebbia had extended loans to certain Company employees for the purchase of the Company’s shares. These transactions have not materially impacted the Company’s financial statements.

 

The sons of Gloria E. Gebbia and John J. Gebbia hold executive positions within the Company’s subsidiaries and their compensation was in aggregate $748,000 and $820,000 for the three months ended September 30, 2023 and 2022, respectively. The compensation for the sons of Gloria E. Gebbia and John J. Gebbia was in aggregate $1,878,000 and $1,894,000 for the nine months ended September 30, 2023 and 2022, respectively. Part of their compensation includes performance-based payments related to key revenue streams.

 

On May 22, 2023, Gloria E. Gebbia issued a warrant to BCW Securities LLC, a Delaware limited liability company, to purchase 403,780 shares of common stock of the Company held by Gloria E. Gebbia at an exercise price of $2.15 per share.

 

On May 24, 2023, the Board of Directors of the Company appointed John J. Gebbia as Chairman of the Board and Chief Executive Officer.

 

The Company compensated Gloria E. Gebbia and John J. Gebbia $90,000 each for the nine months ended September 30, 2023 for board of director fees.

 

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On July 1, 2023, Gloria E. Gebbia and John J. Gebbia entered into a consulting agreement with the Company for services. The compensation for the consulting agreement for Gloria E. Gebbia was $30,000 for both the three and nine months ended September 30, 2023. The compensation for the consulting agreement for John J. Gebbia was $125,000 for both the three and nine months ended September 30, 2023.

 

Gebbia Sullivan County Land Trust

 

The Company operates on a month-to-month lease agreement for its branch office in Omaha, Nebraska with the Gebbia Sullivan County Land Trust, the trustee of which is a member of the Gebbia Family. For both the three months ended September 30, 2023 and 2022, rent expense was $15,000 for this branch office. For both the nine months ended September 30, 2023 and 2022, rent expense was $45,000 for this branch office.

 

RISE

 

During the year ended December 31, 2022, RISE issued and Siebert sold membership interests of RISE to Siebert employees, directors and affiliates, refer to Note 4 – RISE for further detail. RISE entered into a clearing arrangement with MSCO and deposited a clearing fund escrow deposit of $50,000 to MSCO and had excess cash of approximately $1.0 million in its brokerage account at MSCO as of September 30, 2023.

 

Kakaopay and Affiliates

 

On April 27, 2023, the Company entered into the First Tranche Stock Purchase Agreement, pursuant to which the Company agreed to issue to Kakaopay the First Tranche Shares at a per share price of Two Dollars Fifteen Cents ($2.15). Refer to Note 5 – Kakaopay Transaction for further details on the transaction. MSCO entered into an agreement whereby it would provide an omnibus trading account for Kakaopay’s subsidiary, Kakao Pay Securities Corp., and provide trade execution services to Kakao Pay Securities Corp, subject to compliance with applicable U.S. laws, rules and regulations.

 

24. Subsequent Events

 

The Company has evaluated events that have occurred subsequent to September 30, 2023 and through November 14, 2023, the date of the filing of this Report.

 

On October 20, 2023, the Company relocated its headquarters to 653 Collins Avenue, Miami Beach, FL 33139.

 

Since the closing of the First Tranche with Kakaopay, there have been numerous developments related to Kakaopay and the transaction with Siebert. Refer to Note 5 – Kakaopay Transaction for further detail.

 

Based on the Company’s assessment, other than the events described above, there have been no material subsequent events that occurred during such period that would require disclosure in this Report or would be required to be recognized in the financial statements as of September 30, 2023.

 

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

 

The following discussion provides a narrative of our financial performance and condition that should be read in conjunction with the accompanying financial statements and related notes included under Part I, Item 1 of this Report. In addition to our historical consolidated financial information, the following discussion contains forward-looking statements that reflect our plans, estimates, and beliefs. Our actual results could differ materially from those discussed in the forward-looking statements. Factors that could cause or contribute to these differences include those discussed below and elsewhere in our 2022 Form 10-K, particularly in Part I, Item 1A – Risk Factors.

 

Overview

 

We are a financial services company and provide a wide variety of financial services to our clients. We operate in business lines such as retail brokerage, investment advisory, insurance, and technology development through our wholly-owned and majority-owned subsidiaries.

 

Results in the businesses in which we operate are highly correlated to general economic conditions and, more specifically, to the direction of the U.S. equity and fixed-income markets. Market volatility, overall market conditions, interest rates, economic, political, and regulatory trends, and industry competition are among the factors which could affect us and which are unpredictable and beyond our control. These factors affect the financial decisions made by market participants who include investors and competitors, impacting their level of participation in the financial markets. In addition, 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, as well as portions of communications costs and occupancy expenses. Accordingly, earnings for any period should not be considered representative of earnings to be expected for any other period.

 

Transaction with Kakaopay

 

On April 27, 2023, Siebert entered into the First Tranche Stock Purchase Agreement, pursuant to which Siebert agreed to issue to Kakaopay the First Tranche Shares at a per share price of Two Dollars Fifteen Cents ($2.15), which represented 19.9% of the outstanding equity securities of Siebert on a fully diluted basis (taking into account the issuance of the First Tranche Shares). The First Tranche Stock Purchase Agreement closed on May 18, 2023.

 

Concurrent with the execution of the First Tranche Stock Purchase Agreement, Siebert and Kakaopay entered into the Second Tranche Stock Purchase Agreement, pursuant to which Siebert agreed to issue to Kakaopay the Second Tranche Shares at a per share price of Two Dollars Thirty Five Cents ($2.35), so that Kakaopay will own 51% of the outstanding equity securities of Siebert on a fully diluted basis (taking into account the issuance of the First Tranche Shares and the Second Tranche Shares). The consummation of the Second Tranche is subject to a number of conditions, which have not yet been satisfied as of the date of this Report. Refer to Note 5 – Kakaopay Transaction for further detail regarding these conditions.

 

Concurrent with the consummation of the First Tranche, Siebert, Kakaopay, and the Gebbia Stockholders entered into a Stockholders’ Agreement (the “Stockholders’ Agreement”) whereby the parties agreed that Siebert’s Board of Directors would consist of seven directors. The parties agreed that following the consummation of the First Tranche, one of the seven directors would be designated by Kakaopay, and six (the “Gebbia Directors”) would be nominated by the Gebbia Stockholders, of whom three shall be independent directors.

 

Pursuant to the Stockholders’ Agreement, on May 24, 2023, the Board of Directors appointed Shin Ho-cheol, also known as Simon Shin, to the Board of Directors. The Board of Directors at that time also appointed John J. Gebbia as Chairman of the Board and Chief Executive Officer.

 

Concurrent with the consummation of the First Tranche, Siebert and Kakaopay entered into a Registration Rights Agreement (the “Registration Rights Agreement”) whereby Siebert agreed to grant Kakaopay certain registration rights with respect to certain securities of Siebert held by Kakaopay. In exchange for such registration rights, the parties agreed to a lock-up period ending the earlier of the outside date pursuant to the Second Tranche Stock Purchase Agreement and the date that such agreement is terminated.

 

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As of the date of this Report, prior to the close of the Second Tranche, the Gebbia Stockholders are collectively Siebert’s largest stockholders, controlling approximately 43% of Siebert’s outstanding equity securities, under the Stockholders’ Agreement, holding the right to appoint six (6) of Siebert’s seven (7)-member Board of Directors. As discussed above, Kakaopay currently has the right to appoint the seventh director, and exercised that right through the appointment of Simon Shin to the Company’s Board of Directors on May 24, 2023. Upon the closing of the Second Tranche, Kakaopay will own approximately 51% of Siebert’s outstanding equity securities and will have the right to appoint four (4) out of seven (7) directors of the Company’s Board of Directors, while the Gebbia Stockholders will have the right to appoint the remaining three (3) directors. Pursuant to the Stockholders’ Agreement, at all times, three (3) of the seven (7) directors of the Company’s Board of Directors are required to be independent directors in accordance with Nasdaq Listing Rule 5605. Refer to the Company’s Current Report on Form 8-K filed on May 3, 2023, incorporated herein by reference, for further detail regarding this transaction.

 

Since the closing of the First Tranche, Korean authorities have taken action against Kakaopay, its parent company, Kakao Corp., and their affiliates. In addition, Kakao Corp., recently announced that it will establish an independent compliance committee for Kakao Corp. and its subsidiaries to address what it described as the current crisis at Kakao Corp. and its subsidiaries. Siebert believes these events have had a material adverse effect on both Kakaopay and its ability to perform its obligations under the Second Tranche Stock Purchase Agreement and consummate the transactions contemplated therein. Accordingly, on November 11, 2023, Siebert delivered a notice to Kakaopay stating that a material adverse effect had occurred with respect to Kakaopay and that, as a result, Siebert’s conditions to closing will not be satisfied. The notice also specified that Kakaopay has indicated that it has no intention of satisfying the conditions precedent to Siebert preparing the proxy statement contemplated by the Second Tranche Stock Purchase Agreement. Siebert is considering its rights and obligations under the Second Tranche Stock Purchase Agreement, including evaluating whether and under what circumstances the Second Tranche Stock Purchase Agreement might be terminated, and has reserved all of its rights and remedies, including Siebert’s right to assert that Kakaopay has materially breached a number of covenants in the Second Tranche Stock Purchase Agreement. On November 12, 2023, Kakaopay delivered a letter in response to the notice that expressed Kakaopay’s disagreement with the statements in the notice. As a result of the foregoing, Siebert has incurred and may incur additional legal expenses evaluating these matters, the amount of which is uncertain as of the date hereof.

 

RISE

 

RISE was an institutional brokerage for which all its revenue producing customers transitioned to other prime service providers by the first quarter of 2022. The expenses associated with the transition resulted in a loss of $0.2 million and $0.9 million for RISE for the three and nine months ended September 30, 2022, respectively. During 2022, there were various transactions involving the ownership of RISE. Refer to Note 3 – Transactions with Tigress and Hedge Connection and Note 4 – RISE for additional detail.

 

As part of this transition, Siebert had an agreement with JonesTrading Institutional Service, LLC (“JonesTrading”) whereby JonesTrading pays RISE a percentage of the net revenue produced by certain historical clients of RISE less any related expenses. For the three months ended September 30, 2023 and 2022, this agreement resulted in pre-tax income of $78,000 and $61,000, respectively. For the nine months ended September 30, 2023 and 2022, this agreement resulted in pre-tax income of $232,000 and $137,000, respectively. We do not anticipate the pre-tax income related to this agreement will offset the reduction in pre-tax income from customers that have transitioned to other prime service providers.

 

Management is assessing the future strategic direction of RISE, taking into consideration current market conditions, demand trends, and resources. While we believe our expertise and industry relationships will enable us to execute a new strategic direction, our business plan for RISE is untested, and it is uncertain whether our efforts will attract the customers and revenue necessary to compete in the market.

 

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Transactions with Tigress and Hedge Connection

 

Siebert and RISE engaged in certain transactions with Tigress and Hedge Connection to exchange equity, cash, and respective leadership positions. Based upon the strategic direction of these ventures, management of the respective businesses decided to unwind the original transactions with these entities. See Note 3 – Transactions with Tigress and Hedge Connection and Note 12 – Equity Method Investment in Related Party for further detail.

 

Interest Rates

 

We are exposed to market risk from changes in interest rates. Such changes in interest rates primarily impact revenue from interest, marketing, and distribution fees. The Company primarily earns interest, marketing and distribution fees from margin interest charged on clients’ margin balances, interest on cash and securities segregated for regulatory purposes, and distribution fees from money market mutual funds in clients’ accounts. Securities segregated for regulatory purposes consist solely of U.S. government securities. If prices of U.S. government securities within our portfolio decline, we anticipate the impact to be temporary as we intend to hold our U.S. government securities portfolio to maturity. We seek to mitigate this risk by managing the average maturities of our U.S. government securities portfolio and setting risk parameters for securities owned, at fair value.

 

Client Account and Activity Metrics

 

The following tables set forth metrics we use in analyzing our client account and activity trends for the periods indicated. For the periods presented, there were no institutional client accounts or client activity metrics.

 

Client Account Metrics

 

    As of  
    September 30,
2023
    December 31,
2022
 
Retail customer net worth (in billions)   $ 14.6     $ 13.5  
Retail customer margin debit balances (in billions)   $ 0.4     $ 0.4  
Retail customer credit balances (in billions)   $ 0.5     $ 0.6  
Retail customer money market fund value (in billions)   $ 0.7     $ 0.6  
Retail customer accounts     128,727       122,394  

 

Retail customer net worth represents the total value of securities and cash in the retail customer accounts after deducting margin debits

 

Retail customer margin debit balances represents credit extended to our customers to finance their purchases against current positions

 

Retail customer credit balances represents client cash held in brokerage accounts

 

Retail customer money market fund value represents all retail customers accounts invested in money market funds

 

Retail customer accounts represents the number of retail customers

 

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Statements of Operations and Financial Condition

 

Statements of Operations for the Three Months Ended September 30, 2023 and 2022

 

Revenue

 

Commissions and fees for the three months ended September 30, 2023 were $1,986,000 and increased by $236,000 from the corresponding period in the prior year, primarily due to market conditions.

 

Interest, marketing and distribution fees for the three months ended September 30, 2023 were $7,194,000 and increased by $1,990,000 from the corresponding period in the prior year primarily due to rising interest rates that resulted in an increase in margin interest income and interest income received on U.S. government securities and bank deposits.

 

Principal transactions and proprietary trading for the three months ended September 30, 2023 were $3,753,000 and increased by $2,800,000 from the corresponding period in the prior year, primarily due to the factors discussed below.

 

The increase in realized and unrealized gain on primarily riskless principal transactions was primarily due to market conditions. The increase in unrealized gain on our portfolio of U.S. government securities was due to the following. We invested in 1-year treasury bills and 2-year treasury notes in order to enhance our yield on excess 15c3-3 deposits. During 2022, there was an increase in U.S. government securities yields, which created an unrealized loss on our U.S. government securities portfolio. In 2023, we began to record the reversal of the unrealized loss resulting in an unrealized gain due to the securities coming closer to maturity. We continually invest in US government securities based on market yields and cash needs.

 

We intend to hold our U.S. government securities portfolio to maturity and as such, the aggregate unrealized loss of $1.3 million as of September 30, 2023 will be returned over the duration of the government securities, at a point no later than the maturity of the securities, the latest maturity being April 2025. If the value of our portfolio of U.S. government securities declines further, we will incur further unrealized losses; however, we anticipate this loss to be temporary as we intend to hold our portfolio of U.S. government securities to maturity. We believe that the level invested reduces the risk of having to liquidate the securities prior to maturity.

 

Below is a summary of the change in the principal transactions and proprietary trading line item for the periods presented.

 

    Three Months Ended September 30,  
    2023     2022     Increase
(Decrease)
 
Principal transactions and proprietary trading                  
Realized and unrealized gain on primarily riskless principal transactions   $ 2,657,000     $ 2,340,000     $ 317,000  
Unrealized gain (loss) on portfolio of U.S. government securities     1,096,000       (1,387,000 )     2,483,000  
Total Principal transactions and proprietary trading   $ 3,753,000     $ 953,000     $ 2,800,000  

 

Market making for the three months ended September 30, 2023 was $223,000 and decreased by $500,000 from the corresponding period in the prior year, primarily due to market conditions.

 

Stock borrow / stock loan for the three months ended September 30, 2023 was $4,008,000 and decreased by $175,000 from the corresponding period in the prior year.

 

Advisory fees for the three months ended September 30, 2023 were $506,000 and increased by $69,000 from the corresponding period in the prior year, primarily due to market conditions.

 

Other income for the three months ended September 30, 2023 was $380,000 and decreased by $706,000 from the corresponding period in the prior year, primarily due to the termination of consulting fee income from a technology partner.

 

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Operating Expenses

 

Employee compensation and benefits for the three months ended September 30, 2023 were $8,723,000 and increased by $1,433,000 from the corresponding period in the prior year, primarily due to an increase in commission payouts and incentive compensation.

 

Clearing fees, including execution costs for the three months ended September 30, 2023 were $581,000 and increased by $183,000 from the corresponding period in the prior year, primarily due to an increase in market activity.

 

Technology and communications expenses for the three months ended September 30, 2023 were $827,000 and decreased by $387,000 from the corresponding period in the prior year, primarily due to a decrease in costs related to a technology partner.

 

Other general and administrative expenses for the three months ended September 30, 2023 were $1,108,000 and increased by $36,000 from the corresponding period in the prior year, primarily due to an increase in travel and entertainment expenses.

 

Data processing expenses for the three months ended September 30, 2023 were $725,000 and decreased by $207,000 from the corresponding period in the prior year, primarily due to the termination of a technology vendor.

 

Rent and occupancy expenses for the three months ended September 30, 2023 were $467,000 and decreased by $95,000 from the corresponding period in the prior year primarily due to the termination of certain short term leases in 2023.

 

Professional fees for the three months ended September 30, 2023 were $979,000 and increased by $105,000 from the corresponding period in the prior year, primarily due to an increase in consulting and board of directors fees partially offset by a decrease in legal fees.

 

Depreciation and amortization expenses for the three months ended September 30, 2023 were $265,000 and increased by $25,000 from the corresponding period in the prior year.

 

Interest expense for the three months ended September 30, 2023 was $40,000 and decreased by $68,000 from the corresponding period in the prior year, primarily due to a decrease in interest related to notes payable.

 

Advertising and promotion expense for the three months ended September 30, 2023 was $62,000 and increased by $4,000 from the corresponding period in the prior year.

 

Non-Operating Income (Loss)

 

The impairment of investments for the three months ended September 30, 2023 was $0 and there was no change from the corresponding period in the prior year.

 

The loss from equity method investment in related party for the three months ended September 30, 2023 was $0 and decreased by $148,000 from the corresponding period in the prior year, primarily due to no proportional loss from our investment in Tigress in the third quarter of 2023.

 

Provision For (Benefit From) Income Taxes

 

The provision from income taxes for the three months ended September 30, 2023 was $1,516,000 and increased from the provision for income taxes by $1,043,000 from the corresponding period in the prior year. The change from the corresponding period in the prior year is primarily due to an increase in pre-tax earnings in the third quarter of 2023. Refer to Note 18 – Income Taxes for additional detail.

 

Net Income (Loss) Attributable to Noncontrolling Interests

 

As further discussed in Note 1 – Organization and Basis of Presentation, we consolidate RISE’s financial results into our financial statements and reflect the portion of RISE not held by Siebert as a noncontrolling interests in our financial statements. The net loss attributable to noncontrolling interests for the three months ended September 30, 2023 was $4,000, and decreased by $81,000 from the corresponding period in the prior year, due to more expenses in RISE in 2022 associated with the exiting of the prime brokerage business.

 

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Statements of Operations for the Nine Months Ended September 30, 2023 and 2022

 

Revenue

 

Commissions and fees for the nine months ended September 30, 2023 were $5,839,000 and decreased by $104,000 from the corresponding period in the prior year, primarily due to market conditions.

 

Interest, marketing and distribution fees for the nine months ended September 30, 2023 were $21,583,000 and increased by $10,866,000 from the corresponding period in the prior year primarily due to rising interest rates that resulted in an increase in margin interest income and interest income received on U.S. government securities and bank deposits.

 

Principal transactions and proprietary trading for the nine months ended September 30, 2023 were $9,207,000 and increased by $7,440,000 from the corresponding period in the prior year due to multiple factors, which is detailed in the table below as well as in the above section titled “Statements of Operations for the Three Months Ended September 30, 2023 and 2022.”

 

    Nine Months Ended September 30,  
    2023     2022     Increase
(Decrease)
 
Principal transactions and proprietary trading                  
Realized and unrealized gain on primarily riskless principal transactions   $ 6,642,000     $ 5,956,000     $ 686,000  
Unrealized gain (loss) on portfolio of U.S. government securities     2,565,000       (4,189,000 )     6,754,000  
Total Principal transactions and proprietary trading   $ 9,207,000     $ 1,767,000     $ 7,440,000  

 

Market making for the nine months ended September 30, 2023 was $836,000 and decreased by $1,186,000 from the corresponding period in the prior year, primarily due to market conditions.

 

Stock borrow / stock loan for the nine months ended September 30, 2023 was $11,963,000 and increased by $54,000 from the corresponding period in the prior year, primarily due to the growth of stock locate and securities lending businesses.

 

Advisory fees for the nine months ended September 30, 2023 were $1,421,000 and increased by $1,000 from the corresponding period in the prior year.

 

Other income for the nine months ended September 30, 2023 was $963,000 and decreased by $1,626,000 from the corresponding period in the prior year, primarily due to the termination of consulting fee income from a technology partner.

 

Operating Expenses

 

Employee compensation and benefits for the nine months ended September 30, 2023 were $23,770,000 and increased by $2,018,000 from the corresponding period in the prior year, primarily due to an increase in incentive compensation and commission payouts, partially offset by lower employee healthcare costs and the elimination of compensation expenses related to RISE in 2023.

 

Clearing fees, including execution costs for the nine months ended September 30, 2023 were $1,265,000 and decreased by $2,000 from the corresponding period in the prior year.

 

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Technology and communications expenses for the nine months ended September 30, 2023 were $2,409,000 and decreased by $965,000 from the corresponding period in the prior year, primarily due to a decrease in technology costs related to RISE as well as a decrease in costs related to a technology partner, partially offset by an increase in software license costs.

 

Other general and administrative expenses for the nine months ended September 30, 2023 were $3,320,000 and increased by $381,000 from the corresponding period in the prior year, primarily due to an increase in travel and entertainment expenses.

 

Data processing expenses for the nine months ended September 30, 2023 were $2,317,000 and increased by $182,000 from the corresponding period in the prior year, primarily due to an increase from timing of financial and trading technology costs partially offset by a decrease from the termination of a technology vendor.

 

Rent and occupancy expenses for the nine months ended September 30, 2023 were $1,436,000 and decreased by $55,000 from the corresponding period in the prior year.

 

Professional fees for the nine months ended September 30, 2023 were $3,060,000 and increased by $458,000 from the corresponding period in the prior year, primarily due to an increase in consulting and board of director fees partially offset by a reduction in legal fees.

 

Depreciation and amortization expenses for the nine months ended September 30, 2023 were $716,000 and decreased by $44,000 from the corresponding period in the prior year, primarily due to the completion of useful lives of certain software assets in 2022, offset by depreciation expense from the Miami office building.

 

Interest expense for the nine months ended September 30, 2023 was $222,000 and decreased by $113,000 from the corresponding period in the prior year, primarily due to a decrease in interest related to notes payable.

 

Advertising and promotion expenses for the nine months ended September 30, 2023 were $52,000 and decreased by $178,000 from the corresponding period in the prior year, primarily due to a decrease in promotional costs for various marketing initiatives.

 

Non-Operating Income (Loss)

 

The impairment of investments for the nine months ended September 30, 2023 was a loss of $1,035,000 and increased by $1,035,000 from the corresponding period in the prior year, primarily due to the impairment of our investment in a Retail Platform and Tigress.

 

The earnings of equity method investment in related party for the nine months ended September 30, 2023 was $111,000 and increased by $44,000 from the corresponding period in the prior year, primarily due to an increase in our proportional income from our investment in Tigress.

 

Provision For (Benefit From) Income Taxes

 

The provision from income taxes for the nine months ended September 30, 2023 was $3,621,000 and increased from the benefit for income taxes by $4,457,000 from the corresponding period in the prior year. The change from the corresponding period in the prior year is primarily due to increased pre-tax earnings in the nine months ending September 30, 2023. Refer to Note 18 – Income Taxes for additional detail.

 

Net Income (Loss) Attributable to Noncontrolling Interests

 

As further discussed in Note 1 – Organization and Basis of Presentation, we consolidate RISE’s financial results into our financial statements and reflect the portion of RISE not held by Siebert as a noncontrolling interests in our financial statements. The net income attributable to noncontrolling interests for the nine months ended September 30, 2023 was $40,000, and increased by $445,000 from the corresponding period in the prior year, primarily due to more expenses in RISE in 2022 associated with the exiting of the prime brokerage business.

 

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Statements of Financial Condition as of September 30, 2023 and December 31, 2022

 

Assets

 

Assets as of September 30, 2023 were $771,146,000 and increased by $43,098,000 from December 31, 2022, primarily due to an increase in securities borrowed, receivables from customers, and securities owned, at fair value, partially offset by a decrease in cash and cash equivalents and cash and securities segregated for regulatory purposes.

 

Liabilities

 

Liabilities as of September 30, 2023 were $699,581,000 and increased by $21,453,000 from December 31, 2022, primarily due to an increase in securities loaned partially offset by a decrease in payables to customers and payables to non-customers.

 

Liquidity and Capital Resources

 

Overview

 

We expect to use our available cash, cash equivalents, and potential future borrowings under our debt agreements and potential issuance of new debt or equity, to support and invest in our core business, including investing in new ways to serve our customers, potentially seeking strategic acquisitions to leverage existing capabilities, and for general capital needs (including capital, deposit, and collateral requirements imposed by regulators and SROs). Based on our current level of operations, we believe our available cash, available lines of credit, overall access to capital markets, and cash provided by operations will be adequate to meet our current liquidity needs for the foreseeable future. As of the date of this Report, other than the items detailed in the section below, there are no known or material events that would require us to use large amounts of our liquid assets to cover expenses.

 

Kakaopay

 

The net capital infusion from Kakaopay to Siebert from the First Tranche was approximately $15.4 million after the issuance cost. This capital is currently being used to enhance our regulatory capital, and is primarily invested in U.S. government securities and is in the line item “Securities owned, at fair value” on the statements of financial condition. The capital to be raised from the close of the Second Tranche is approximately $60.4 million. The consummation of the Second Tranche is subject to a number of conditions, which have not yet been satisfied as of the date of this Report. Refer to Note 5 – Kakaopay Transaction for further detail regarding these conditions. Refer to the Company’s Current Report on Form 8-K filed on May 3, 2023, incorporated herein by reference, for further detail regarding this transaction.

 

The net capital from the First Tranche provides Siebert with additional liquidity and the ability to expand its various business lines. Siebert’s current management intends to utilize the additional capital primarily to launch correspondent clearing, to expand its securities lending business, corporate services, order flow opportunities, and other initiatives.

 

Cash and Cash Equivalents

 

Our cash and cash equivalents were $4.9 million and $23.7 million as of September 30, 2023 and December 31, 2022, respectively.

 

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Cash Requirements

 

The following table summarizes our short- and long-term material cash requirements as of September 30, 2023.

 

    Payments Due By Period  
    2023     2024     2025     2026     Thereafter     Total  
Operating lease commitments   $ 287,000     $ 938,000     $ 861,000     $ 694,000     $ 963,000     $ 3,743,000  
Mortgage with East West Bank     22,000       84,000       88,000       91,000       4,048,000       4,333,000  
Technology vendor*     192,000       575,000       383,000                   1,150,000  
Leasehold improvements**     500,000                               500,000  
Total   $ 1,001,000     $ 1,597,000     $ 1,332,000     $ 785,000     $ 5,011,000     $ 9,726,000  

 

* On March 31, 2023, we entered into an agreement with a technology vendor for certain development projects. As of September 30, 2023, the total budget for this project was approximately $1.1 million over a term of 2 years.

 

** On July 7, 2023, we entered into a new lease agreement expiring in December 2028 for office space in the World Financial Center in New York City. This office will replace the New Jersey office as one of our key operating centers and the total commitment of the lease is approximately $2.1 million. The estimated build out cost for this office space is approximately $500,000.

 

Debt Agreements

 

We have a $4.3 million mortgage outstanding with East West Bank, and an unutilized loan for short term overnight demand borrowing of up to $25 million with BMO Harris as of September 30, 2023. For the nine months ended September 30, 2023, we paid off our $2.7 million loan outstanding with East West Bank. As of September 30, 2023, we were in compliance with all covenants related to our debt agreements.

 

Shelf Registration Statement

 

On February 18, 2022, we filed a shelf registration statement on Form S-3 that was declared effective on March 2, 2022 by the SEC for the potential offering, issuance and sale by Siebert of up to $100.0 million of our common stock, preferred stock, warrants to purchase our common stock and/or preferred stock, units consisting of all or some of these securities and subscription rights to purchase all or some of these securities. The registration statement was filed in reliance on General Instruction I.B.6 of Form S-3, which imposes a limitation on the maximum amount of securities that we may sell pursuant to the registration statement during any twelve-month period. Assuming we remain subject to General Instruction I.B.6, at the time we sell securities pursuant to the registration statement, the amount of securities to be sold plus the amount of any securities we have sold during the prior twelve months in reliance on Instruction I.B.6 may not exceed one-third of the aggregate market value of our outstanding common stock held by non-affiliates as of a day during the 60 days immediately preceding such sale as computed in accordance with Instruction I.B.6. Whether we sell securities under the registration statement will depend on a number of factors, including the market conditions at that time, our cash position at that time and the availability and terms of alternative sources of capital.

 

At the Market Offering

 

On May 27, 2022, we entered into a Capital on DemandTM Sales Agreement with JonesTrading as agent, pursuant to which we may offer and sell, from time to time through JonesTrading, shares of our common stock having an aggregate offering amount of up to $9.6 million under our shelf registration statement on Form S-3. For the three and nine months ended September 30, 2023 and 2022, we did not sell any shares pursuant to this Sales Agreement. Refer to Note 21 – Commitments, Contingencies, and Other for additional detail.

 

Net Capital, Reserve Accounts, Segregation of Funds, and Other Regulatory Requirements

 

MSCO is subject to the Uniform Net Capital Rules of the SEC (Rule 15c3-1) and the Customer Protection Rule (15c3-3) of the Exchange Act and maintains capital and segregated cash reserves in excess of regulatory requirements. Requirements under these regulations may vary; however, MSCO has adequate reserves and contingency funding plans in place to sufficiently meet any regulatory requirements. In addition to net capital requirements, as a self-clearing broker-dealer, MSCO is subject to cash deposit and collateral requirements with clearing houses, such as the DTCC and OCC, which may fluctuate significantly from time to time based upon the nature and size of clients’ trading activity and market volatility. RISE, as a member of FINRA, is subject to the SEC Uniform Net Capital Rule 15c3-1 and the corresponding regulatory capital requirements.

 

MSCO can transfer funds to Siebert as long as MSCO maintains its liquidity and regulatory capital requirements. RISE can transfer funds to its shareholders, of which Siebert is entitled to its proportional ownership interest, as long as RISE maintains its liquidity and regulatory capital requirements. For the three and nine months ended September 30, 2023 and 2022, MSCO and RISE had sufficient net capital to meet their respective liquidity and regulatory capital requirements. Refer to Note 19 – Capital Requirements for more detail about our capital requirements.

 

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Cash Flows

 

Cash provided by and used in operating activities consisted of net income (loss) adjusted for certain non-cash items. Net operating assets and liabilities at any specific point in time are subject to many variables, including variability in customer activity, the timing of cash receipts and payments, and vendor payment terms. The total changes in our statements of cash flows, especially our operating cash flow, are not necessarily indicative of the ongoing results of our business as we have customer assets and liabilities on our statements of financial condition.

 

For the nine months ended September 30, 2023, we had negative operating cash flow primarily due to the net change in receivables and payables to customers and non-customers as well as the net change in securities borrowed and securities loaned. We had investing cash outflows primarily from the build out of the Miami office building and development work related to technology initiatives. We had financing cash inflows primarily due to the Kakaopay transaction partially offset by the repayment of our loan with East West Bank.

 

For the nine months ended September 30, 2022, we had negative operating cash flow primarily due to the net change in receivables and payables to customers and non-customers as well as the net change in securities borrowed and securities loaned. We had investing cash outflows primarily from the build out of the Miami office building and development work related to technology initiatives. We had financing cash outflows related the repayment of a note payable – related party, partially offset by the issuance and transfer of RISE membership interests.

 

Long Term Contracts

 

Effective August 1, 2021, MSCO entered into an amendment to its clearing agreement with NFS that, among other things, extends the term of their arrangement for an additional four-year period commencing on August 1, 2021 and ending July 31, 2025. Refer to Note 16 – Deferred Contract Incentive and Note 21 – Commitments, Contingencies and Other for additional detail.

 

Effective June 2023, MSCO entered into an amendment to its service agreement with Broadridge Securities Processing Solutions, LLC that, among other things, extends the term of their arrangement for a five-year period ending June 2028, with an option to terminate after three years. The total minimum expense for this arrangement is estimated at approximately $1.3 million.

 

Off-Balance Sheet Arrangements

 

We enter into various transactions to meet the needs of customers, conduct trading activities, and manage market risks and are, therefore, subject to varying degrees of market and credit risk. In the normal course of business, our customer activities involve the execution, settlement, and financing of various customer securities transactions. These activities may expose us to off-balance sheet risk in the event the customer or other broker is unable to fulfill their contracted obligations and we are forced to purchase or sell the financial instrument underlying the contract at a loss. There were no material losses for unsettled customer transactions for the three and nine months ended September 30, 2023 and 2022. Refer to Note 20 – Financial Instruments with Off-Balance Sheet Risk for additional detail.

 

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Uncertain Tax Positions

 

We account for uncertain tax positions in accordance with the authoritative guidance issued under ASC 740-10, which addresses the determination of whether tax benefits claimed or expected to be claimed on a tax return should be recorded in the financial statements. We may recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities based on the technical merits of the position. The tax benefits recognized in the financial statements from such position should be measured based on the largest benefit that has a greater than fifty percent likelihood of being realized upon ultimate settlement. ASC 740-10 also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods and disclosure requirements.

 

We recognize interest and penalties related to unrecognized tax benefits on the provision for income taxes line on the statements of operations. Accrued interest and penalties would be included on the related tax liability line on the statements of financial condition.

 

As of both September 30, 2023 and December 31, 2022, the Company recorded an uncertain tax position of $1,596,000 related to various tax matters, which is included in the line item “Taxes payable” in the statements of financial condition.

 

Critical Accounting Policies

 

Certain of our accounting policies that involve a higher degree of judgment and complexity are discussed in Part I, Item 2 – Management’s Discussion and Analysis of Financial Condition and Results of Operations in our 2022 Form 10-K. As of September 30, 2023, there have been no changes to our critical accounting policies or estimates.

 

New Accounting Standards

 

Refer to Note 2 - Summary of Significant Accounting Policies for additional information regarding new Accounting Standards Updates (“ASU”s) issued by the Financial Accounting Standards Board (“FASB”).

 

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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

 

Financial Instruments Held For Trading Purposes

 

We do not directly engage in derivative transactions, have no interest in any special purpose entity and have no liabilities, contingent or otherwise, for the debt of another entity.

 

Financial Instruments Held For Purposes Other Than Trading

 

We generally invest our cash and cash equivalents temporarily in dollar denominated bank account(s). These investments are not subject to material changes in value due to interest rate movements.

 

We invest cash and securities segregated for regulatory purposes in dollar denominated bank accounts which are not subject to material changes in value due to interest rate movements. We also invest cash and securities segregated for regulatory purposes and securities owned, at fair value in U.S. government securities which may be subject to material changes in value due to interest rate movements. Securities owned, at fair value invested in U.S. government securities are generally purchased to enhance yields on required regulatory deposits. While the value of the government securities may be subject to material changes in value, we believe any reduction in value would be temporary since the securities would mature at par value.

 

Customer transactions are cleared through clearing brokers on a fully disclosed basis and are also self-cleared by MSCO. If customers do not fulfill their contractual obligations any loss incurred in connection with the purchase or sale of securities at prevailing market prices to satisfy customer obligations may be incurred by Siebert. We regularly monitor the activity in customer accounts for compliance with margin requirements. We are 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 in the last five years.

 

ITEM 4. CONTROLS AND PROCEDURES

 

Disclosure Controls and Procedures

 

We carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and our Executive Vice President / 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 Exchange Act. Based on that evaluation, our management, including the Chief Executive Officer and the Executive Vice President / 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 Exchange Act, is recorded, processed, summarized, and reported within the time periods specified in the rules and forms of the SEC, and to ensure that information required to be disclosed is accumulated and communicated to our management, including our Executive Vice President / Chief Financial Officer, to allow timely decisions regarding required disclosure.

 

Based on its evaluation, our management, including our Executive Vice President / Chief Financial Officer, concluded that as of the end of the period covered by this Report, our disclosure controls and procedures were effective.

 

Changes in Internal Control over Financial Reporting

 

No change in the Company’s internal control over financial reporting (as defined in Exchange Act Rule 13a-15(f)) was identified during the end of the period covered by this Report, that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

 

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PART II - OTHER INFORMATION

 

ITEM 1. LEGAL PROCEEDINGS

 

The Company is party to certain claims, suits and complaints arising in the ordinary course of business. In the opinion of our management, as of the date of this Report, all such matters are without merit, or involve amounts which would not have a significant effect on the results of operations or financial position of the Company.

 

ITEM 1A. RISK FACTORS

 

In addition to the other information set forth in this Report, investors should carefully consider the risk factors discussed in Part I, Item 1A - Risk Factors in our 2022 Form 10-K and under Part II, Item 1A. of our Form 10-Qs. Each of such risk factors could materially affect our business, financial position, and results of operations. As of the date of this Report, other than the supplemental risk factors provided below, there have been no material changes from the risk factors disclosed in our 2022 Form 10-K.

 

There may be a limited public market for our common stock; Volatility.

 

12,959,556 shares of our common stock, or approximately 33% of our shares of our common stock outstanding, are currently held by non-affiliates as of November 10, 2023. A stock with a small number of shares held by non-affiliates, known as the “float,” will generally be more volatile than a stock with a large float. Although our common stock is traded on the Nasdaq Capital Market, there can be no assurance that an active public market will continue.

 

The Closing of the Second Tranche with Kakaopay is subject to a number of closing conditions, including various regulatory approvals, and there can be no assurance that such conditions will be satisfied or that the Second Tranche will close.

 

The consummation of the Second Tranche of the investment in Siebert by Kakaopay is subject to a number of conditions, which have not yet been satisfied as of the date of this Report. The conditions to Kakaopay’s obligation to close the Second Tranche include, among others, (i) the affirmative vote of a majority of the outstanding shares of Siebert’s common stock and the affirmative vote of the holders of a majority of the outstanding shares of Siebert’s common stock not beneficially owned, directly or indirectly, by the Gebbia Stockholders, Kakaopay or any of their respective affiliates, (ii) approval by FINRA, (iii) favorable completion of the review by CFIUS, (iv) certain performance conditions relating to order execution and the execution of employment and consulting agreements for key personnel of Siebert and MSCO, (v) the approvals in connection to the filing of an overseas direct investment report as required under the Foreign Exchange Transactions Act of the Republic of Korea, and, if applicable in accordance with applicable law, any antitrust report or filing with the Korea Fair Trade Commission shall have been obtained or provided; (vi) the listing by Siebert of the Second Tranche Shares on the Nasdaq Capital Market, (vii) the accuracy of certain representations and warranties of Siebert as of the closing of the Second Tranche, (viii) the absence of any material adverse effect having occurred with respect to Siebert between April 27, 2023 and the closing of the Second Tranche, and (ix) the performance by Siebert of all covenants, agreements and obligations required to be performed by it prior to the closing of the Second Tranche. The conditions to Siebert’s obligation to close the Second Tranche include, among others, (i) the affirmative vote of the holders of a majority of the outstanding shares of Siebert’s common stock not beneficially owned, directly or indirectly, by the Gebbia Stockholders, Kakaopay or any of their respective affiliates, (ii) approval by FINRA, (iii) favorable completion of the review by CFIUS, (iv) the accuracy of certain representations and warranties of Kakaopay as of the closing of the Second Tranche, (v) the absence of any material adverse effect having occurred with respect to Kakaopay between April 27, 2023 and the closing of the Second Tranche, and (vi) the performance by Kakaopay of all covenants, agreements and obligations required to be performed by it prior to the closing of the Second Tranche. There can be no assurance that any or all of the conditions necessary to close the Second Tranche Stock Purchase Agreement will be satisfied or that the Second Tranche will close. Certain of the conditions require action by Kakaopay, including providing information related to Kakaopay (and its affiliates) required to obtain FINRA and CFIUS approval.

 

Since the closing of the First Tranche, Korean authorities have taken action against Kakaopay, its parent company, Kakao Corp., and their affiliates. In addition, Kakao Corp., recently announced that it will establish an independent compliance committee for Kakao Corp. and its subsidiaries to address what it described as the current crisis at Kakao Corp. and its subsidiaries. Siebert believes these events have had a material adverse effect on both Kakaopay and its ability to perform its obligations under the Second Tranche Stock Purchase Agreement and consummate the transactions contemplated therein. Accordingly, on November 11, 2023, Siebert delivered a notice to Kakaopay stating that a material adverse effect had occurred with respect to Kakaopay and that, as a result, Siebert’s conditions to closing will not be satisfied. The notice also specified that Kakaopay has indicated that it has no intention of satisfying the conditions precedent to Siebert preparing the proxy statement contemplated by the Second Tranche Stock Purchase Agreement. Siebert is considering its rights and obligations under the Second Tranche Stock Purchase Agreement, including evaluating whether and under what circumstances the Second Tranche Stock Purchase Agreement might be terminated, and has reserved all of its rights and remedies, including Siebert’s right to assert that Kakaopay has materially breached a number of covenants in the Second Tranche Stock Purchase Agreement. On November 12, 2023, Kakaopay delivered a letter in response to the notice that expressed Kakaopay’s disagreement with the statements in the notice. As a result of the foregoing, Siebert has incurred and may incur additional legal expenses evaluating these matters, the amount of which is uncertain as of the date hereof.

 

Refer to Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operation – Transaction with Kakaopay above; and Siebert’s Current Report on Form 8-K filed on May 3, 2023, incorporated herein by reference, for further detail.

 

- 32 -


 

ITEM 6. EXHIBITS

 

Exhibit No.   Description of Document
     
10.40   Share Redemption Agreement, dated July 10, 2023, by and among Cynthia DiBartolo, Siebert Financial Corp., and Tigress Holdings, LLC
     
31.1   Certification of Principal Executive Officer 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 Principal Financial Officer 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.
     
32.1#   Certification of Principal Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
     
32.2#   Certification of Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
     
101.INS   Inline XBRL Instance Document (the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document).
     
101.SCH   Inline XBRL Taxonomy Extension Schema Document.
     
101.CAL   Inline XBRL Taxonomy Extension Calculation Linkbase Document.
     
101.DEF   Inline XBRL Taxonomy Extension Definition Linkbase Document.
     
101.LAB   Inline XBRL Taxonomy Extension Label Linkbase Document.
     
101.PRE   Inline XBRL Taxonomy Extension Presentation Linkbase Document.
     
104   Cover Page Interactive Data File (embedded with Inline XBRL document).

 

# This certification is deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (Exchange Act), or otherwise subject to the liability of that section, nor shall it be deemed incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Exchange Act.

 

- 33 -


 

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/ John J. Gebbia
    John J. Gebbia
    Chief Executive Officer
    (Principal executive officer)
     
  By: /s/ Andrew H. Reich
    Andrew H. Reich
    Executive Vice President, Chief Operating Officer, Chief Financial Officer, and Secretary
    (Principal financial and accounting officer)
     
  Dated: November 14, 2023

 

 

- 34 -

 

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EX-31.1 2 f10q0923ex31-1_siebertfin.htm CERTIFICATION

Exhibit 31.1

 

CERTIFICATION

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

 

I, John J. Gebbia, certify that:

 

1. I have reviewed this Quarterly Report on Form 10-Q of Siebert Financial Corp.;

 

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

 

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, and cash flows of the registrant as of, and for, the periods presented in this report;

 

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal controls over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

 

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

 

(b) Designed such internal controls over financial reporting, or caused such internal controls over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

 

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

 

(d) Disclosed in this report any change in the registrant’s internal controls over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal controls over financial reporting; and

 

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal controls over financial reporting, to the registrant’s auditors and the Audit Committee of the registrant’s board of directors (or persons performing the equivalent functions):

 

(a) All significant deficiencies and material weaknesses in the design or operation of internal controls over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize, and report financial information; and

 

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls over financial reporting.

 

/s/ John J. Gebbia   Date: November 14, 2023
John J. Gebbia    
Chief Executive Officer    
(Principal executive officer)    

 

 

 

 

EX-31.2 3 f10q0923ex31-2_siebertfin.htm CERTIFICATION

Exhibit 31.2

 

CERTIFICATION

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

 

I, Andrew H. Reich, certify that:

 

1. I have reviewed this Quarterly Report on Form 10-Q of Siebert Financial Corp.;

 

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

 

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, and cash flows of the registrant as of, and for, the periods presented in this report;

 

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal controls over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

 

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

 

(b) Designed such internal controls over financial reporting, or caused such internal controls over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

 

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

 

(d) Disclosed in this report any change in the registrant’s internal controls over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal controls over financial reporting; and

 

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal controls over financial reporting, to the registrant’s auditors and the Audit Committee of the registrant’s board of directors (or persons performing the equivalent functions):

 

(a) All significant deficiencies and material weaknesses in the design or operation of internal controls over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize, and report financial information; and

 

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls over financial reporting.

 

 

/s/ Andrew H. Reich   Date: November 14, 2023
Andrew H. Reich    
Executive Vice President, Chief Operating Officer,    
Chief Financial Officer, and Secretary    
(Principal financial and accounting officer)    

 

 

 

EX-32.1 4 f10q0923ex32-1_siebertfin.htm CERTIFICATION

Exhibit 32.1

 

CERTIFICATION
PURSUANT TO 18 U.S.C.
SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

 

In connection with the Quarterly Report of Siebert Financial Corp. (the “Company”) on Form 10-Q for the quarterly period ended September 30, 2023, as filed with the SEC on the date hereof (the “Report”), I, John J. Gebbia, in my capacity as Chief Executive Officer, hereby certify, pursuant to 18 U.S.C. ss. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:

 

1. The Report fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934; and

 

2. The information contained in the Report fairly presents, in all material respects, the financial condition of the Company at the end of the period covered by the Report and the results of operations of the Company for the period covered by the Report.

 

/s/ John J. Gebbia   Date: November 14, 2023
John J. Gebbia    
Chief Executive Officer    
(Principal executive officer)    

 

 

A signed original of this written statement required by Section 906, or other documents authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement required by Section 906, has been provided to Siebert Financial Corp. and will be retained by Siebert Financial Corp. and furnished to the SEC or its staff upon request.

 

 

 

 

EX-32.2 5 f10q0923ex32-2_siebertfin.htm CERTIFICATION

Exhibit 32.2

 

CERTIFICATION
PURSUANT TO 18 U.S.C.
SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

 

In connection with the Quarterly Report of Siebert Financial Corp. (the “Company”) on Form 10-Q for the quarterly period ended September 30, 2023, as filed with the SEC on the date hereof (the “Report”), I, Andrew H. Reich, in my capacity as Executive Vice President, Chief Operating Officer, Chief Financial Officer, and Secretary hereby certify, pursuant to 18 U.S.C. ss. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:

 

1. The Report fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934; and

 

2. The information contained in the Report fairly presents, in all material respects, the financial condition of the Company at the end of the period covered by the Report and the results of operations of the Company for the period covered by the Report.

 

/s/ Andrew H. Reich   Date: November 14, 2023
Andrew H. Reich    
Executive Vice President, Chief Operating Officer,    
Chief Financial Officer, and Secretary    
(Principal financial and accounting officer)    

 

A signed original of this written statement required by Section 906, or other documents authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement required by Section 906, has been provided to Siebert Financial Corp. and will be retained by Siebert Financial Corp. and furnished to the SEC or its staff upon request.