SIEBERT FINANCIAL CORP - FORM 10-Q

Attached files

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EX-32.2 - SIEBERT FINANCIAL CORP	n12594_ex32-2.htm
EX-31.2 - SIEBERT FINANCIAL CORP	n12594_ex31-2.htm
EX-31.1 - SIEBERT FINANCIAL CORP	n12594_ex31-1.htm
EX-32.1 - SIEBERT FINANCIAL CORP	n12594_ex32-1.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q


(Mark One)

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

	For the quarterly period ended June 30, 2012

OR

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

	For the transition period from______________________________ to________________________________

	Commission file number 0-5703
Siebert Financial Corp.

(Exact Name of Registrant as Specified in its Charter)(Zip Code)


New York		11-1796714

(State or Other Jurisdiction of Incorporation or	(I.R.S. Employer Identification No.)
Organization)

885 Third Avenue, New York, NY 10022

(Address of Principal Executive Offices)

(212) 644-2400

(Registrant’s Telephone Number, Including Area Code)

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

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

Yes x No o

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

Yes x No o

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


Large Accelerated Filer o	Accelerated Filer o

Non-Accelerated Filer o	Smaller Reporting Company x

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

Yes o No x

Indicate the number of shares outstanding of each of the issuer’s classes of common equity, as of the latest practicable date: As of August 3, 2012, there were 22,101,098 shares of Common Stock, par value $.01 per share, outstanding.

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

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

Part I - FINANCIAL INFORMATION

Item 1. Financial Statements

Siebert Financial Corp. & Subsidiaries
Consolidated Statements of Financial Condition


	June 30, 2012 (Unaudited)			December 31, 2011

ASSETS
Cash and cash equivalents	$	21,402,000		$	21,167,000
Cash equivalents – restricted		1,532,000			1,532,000
Receivable from brokers		1,440,000			1,033,000
Securities owned, at fair value		231,000			250,000
Furniture, equipment and leasehold improvements, net		297,000			757,000
Investment in and advances to affiliates		9,246,000			8,619,000
Prepaid expenses and other assets		778,000			827,000
Intangibles, net		633,000			638,000

	$	35,559,000		$	34,823,000



LIABILITIES AND STOCKHOLDERS’ EQUITY

Liabilities:
Accounts payable and accrued liabilities	$	3,270,000		$	3,599,000

Contingencies

Stockholders’ equity:
Common stock, $.01 par value; 49,000,000 shares authorized, 23,211,846 shares issued, and 22,101,197 and 22,105,499 shares outstanding at June 30, 2012 and December 31, 2011, respectively		232,000			232,000
Additional paid-in capital		19,490,000			19,490,000
Retained earnings		17,302,000			16,230,000
Less: 1,110,649 and 1,106,347 shares of treasury stock, at cost at June 30, 2012 and December 31, 2011, respectively		(4,735,000	)		(4,728,000	)

		32,289,000			31,224,000


	$	35,559,000		$	34,823,000

See notes to condensed consolidated financial statements.

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


	Three Months Ended June 30,					Six Months Ended June 30,

	2012		2011			2012		2011


Revenues:
Commissions and fees	$	3,879,000	$	3,539,000		$	9,037,000	$	7,484,000
Investment banking		1,198,000		406,000			1,707,000		1,578,000
Trading profits		531,000		526,000			1,394,000		903,000
Interest and dividends		17,000		27,000			40,000		36,000

		5,625,000		4,498,000			12,178,000		10,001,000


Expenses:
Employee compensation and benefits		2,631,000		2,380,000			5,120,000		4,842,000
Clearing fees, including floor brokerage		667,000		690,000			1,634,000		1,614,000
Professional fees		820,000		1,400,000			1,610,000		2,813,000
Advertising and promotion		89,000		93,000			227,000		193,000
Communications		498,000		527,000			986,000		1,084,000
Occupancy		226,000		272,000			477,000		543,000
Write off of software development costs		433,000					433,000
Other general and administrative		610,000		633,000			1,249,000		1,318,000

		5,974,000		5,995,000			11,736,000		12,407,000


Income (loss) from equity investees		839,000		(292,000	)		685,000		(1,376,000	)


Income (loss) before income taxes		490,000		(1,789,000	)		1,127,000		(3,782,000	)

Income tax provision		43,000		1,000			55,000		12,000

Net income (loss)	$	447,000	$	(1,790,000	)	$	1,072,000	$	(3,794,000	)


Net income (loss) per share of common stock - Basic and Diluted	$	.02	$	(.08	)	$	.05	$	(.17	)
Weighted average shares outstanding - Basic and Diluted		22,101,308		22,118,162			22,102,402		22,119,667

See notes to condensed consolidated financial statements.

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


	Six Months Ended June 30,

	2012			2011

Cash flows from operating activities:
Net income (loss)	$	1,072,000		$	(3,794,000	)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization		219,000			264,000
Write off of software development costs		433,000
(Income) loss from equity investees		(685,000	)		1,376,000
Distribution from equity investees		83,000			1,185,000
Stock based compensation		—			4,000
Changes in:
Securities owned, at fair value		19,000			(3,000	)
Receivable from brokers		(407,000	)		469,000
Prepaid expenses and other assets		49,000			55,000
Income tax refund receivable		—			507,000
Accounts payable and accrued liabilities		(329,000	)		86,000

Net cash provided by operating activities		454,000			149,000


Cash flows from investing activities:
Purchase of furniture, equipment and leasehold improvements		(187,000	)		(11,000	)
(Payment) collection of advances made to equity investees		(25,000	)		3,000

Net cash used in investing activities		(212,000	)		(8,000	)


Cash flows from financing activities:
Purchase of treasury shares		(7,000	)		(13,000	)

Net cash used in financing activities		(7,000	)		(13,000	)


Net increase in cash and cash equivalents		235,000			128,000

Cash and cash equivalents - beginning of period		21,167,000			22,646,000


Cash and cash equivalents - end of period	$	21,402,000		$	22,774,000


Supplemental cash flow disclosures:
Cash (received) paid for:
Income taxes, net	$	15,000		$	(138,000	)

See notes to condensed consolidated financial statements.

Siebert Financial Corp. & Subsidiaries
Notes to Condensed Consolidated Financial Statements
Six Months Ended June 30, 2012 and 2011
(Unaudited)


1.	Organization and Basis of Presentation:

	The consolidated financial statements include the accounts of Siebert Financial Corp. (the “Company”) and its wholly owned subsidiaries Muriel Siebert & Co., Inc. (“Siebert”) and Siebert Women’s Financial Network, Inc. (“WFN”). All material intercompany balances and transactions have been eliminated. Investment in two entities in which the Company has ownership interests of 49% and 33.33%, respectively, are accounted for by the equity method and included in investment in and advances to affiliates in the consolidated statement of financial condition.

	The condensed consolidated financial statements presented herein are unaudited and include all adjustments (consisting of normal recurring adjustments) which are, in the opinion of management, necessary for a fair presentation of the financial position and results of operations of the interim periods pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”). Certain information and footnote disclosures normally included in annual financial statements prepared in accordance with generally accepted accounting principles (“GAAP”) in the United States of America (“U.S.”) have been condensed or omitted pursuant to the SEC rules and regulations, although the Company believes that the disclosures made are adequate to make the information not misleading. The balance sheet at December 31, 2011 has been derived from the audited consolidated statement of financial condition at that date, but does not include all information and footnotes required by U.S. GAAP for complete financial statements. These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements included in the Company’s Form 10-K for the year ended December 31, 2011. Because of the nature of the Company’s business, the results of operations for the three and six months ended June 30, 2012 are not necessarily indicative of operating results for the full year.

2.	Securities:

	Securities owned are carried at fair value with realized and unrealized gains and losses reflected in trading profits. Siebert clears all its security transactions through unaffiliated clearing firms on a fully disclosed basis. Accordingly, Siebert does not hold funds or securities for, or owe funds or securities to, its customers. Those functions are performed by the clearing firms.

3.	Fair Value of Financial Instruments:

	Authoritative accounting guidance defines fair value, establishes a framework for measuring fair value and establishes a fair value hierarchy. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between participants at the measurement date. Fair value measurements are not adjusted for transaction costs. The fair value hierarchy prioritizes inputs to valuation techniques used to measure fair value into three levels:

	Level 1 – Unadjusted quoted prices in active markets for identical assets or liabilities.

	Level 2 – Inputs other than quoted prices that are observable, either directly or indirectly, and reasonably available.


	Level 3 – Unobservable inputs which reflect the assumptions that management develops based on available information about the assumptions market participants would use in valuing the asset or liability.

	The classification of financial instruments valued at fair value at June 30, 2012 is as follows:


Financial Instruments	Level 1		Total

Cash equivalents	$	20,743,000	$	20,743,000
Securities		231,000		231,000

	$	20,974,000	$	20,974,000


	Securities consist of common stock valued on the last business day of the period at the last available reported sales price on the primary securities exchange (Level 1).

	In May 2011, the Financial Accounting Standards Board issued guidance to expand disclosures for Level 3 measurements based on unobservable inputs. The Company adopted this standard in January 2012. The adoption of this standard did not have any impact on the Company’s disclosures.

4.	Per Share Data:

	Basic earnings (loss) per share is calculated by dividing net income (loss) by the weighted average outstanding common shares during the period. Diluted earnings per share is calculated by dividing net income by the number of shares outstanding under the basic calculation and adding all dilutive securities, which consist of options. There were no dilutive options for the three and six months ended June 30, 2012. Accordingly, basic and diluted income per share are the same for each period. The Company incurred a net loss for the three and six months ended June 30, 2011. Accordingly, basic and diluted net loss per common share are the same for each period as the effect of stock options is anti-dilutive. Shares underlying stock options not included in the diluted computation amounted to 478,200 at June 30, 2012 and 1,228,200 at June 30, 2011.

5.	Net Capital:

	Siebert is subject to the Securities and Exchange Commission’s Uniform Net Capital Rule (Rule 15c3-1), which requires the maintenance of minimum net capital. Siebert has elected to use the alternative method, permitted by the Rule, which requires that Siebert maintain minimum net capital, as defined, equal to the greater of $250,000 or two percent of aggregate debit balances arising from customer transactions, pursuant to the Rule. As of June 30, 2012, Siebert had net capital of approximately $18,440,000 as compared with net capital requirements of $250,000.

6.	Revenue:

	Commissions and fees earned on customer trades together with related clearing expenses are recorded on a trade-date basis. Fees, consisting principally of revenue participation with the Company’s clearing broker in distribution fees and interest, are recorded as earned. Trading profits are also recorded on a trade-date basis. Investment banking revenue includes gains and fees, net of syndicate expenses, arising from underwriting syndicates in which the Company participates. Investment banking management fees are recorded on the offering date, sales concessions on the settlement date and underwriting fees at the time the underwriting is completed and


	the income is reasonably determinable.

	Interest is recorded on an accrual basis and dividends are recorded on the ex-dividend date.

7.	Capital Transactions:

	On January 22, 2008, the Board of Directors of the Company authorized a buy back of up to 300,000 shares of common stock. Shares will be purchased from time to time, at management’s discretion, in the open market and in private transactions. During the six months ended June 30, 2012, the Company purchased 4,302 shares at an average price of $1.67.

	A summary of the Company’s stock option transactions for the six months ended June 30, 2012 is presented below:



	Shares			Weighted Average Exercise Price


Outstanding – January 1, 2012		1,228,200		$	3.88

Expired		(750,000	)	$	4.30


Outstanding – June 30, 2012		478,200	(a)	$	3.21


	(a) Shares are fully vested and exercisable.

	As of June 30, 2012, there was no unrecognized compensation cost.

8.	Investment In and Advances to Affiliates:

	Siebert, Brandford, Shank & Co., L.L.C. (“SBS”)

	Siebert holds a 49% ownership interest in SBS which is engaged in municipal bond underwritings. Income or loss from SBS is considered to be integral to Siebert’s operations and material to its results of operations.

	Summarized financial data of SBS is set forth below.


	June 30, 2012		June 30, 2011


Total assets, including secured demand note of $1,200,000 due from Siebert	$	30,370,000
Total liabilities, including subordinated liabilities of $1,200,000 due to Siebert		12,291,000
Total members’ capital		18,079,000
Regulatory minimum net capital requirement		250,000
Six months ended:
Total revenues	$	14,054,000	$	8,749,000
Net income (loss)		1,432,000		(2,784,000	)
Three months ended:
Total revenues		8,428,000		4,804,000
Net income (loss)		1,730,000		(614,000	)


	Siebert charged SBS $38,000 for each of the six months ended June 30, 2012 and 2011, and $19,000 for each of the three months ended June 30, 2012 and 2011, respectively, for general and administrative services, which Siebert believes approximates the cost of furnishing such services.

	Siebert’s share of net income (loss) for the three months ended June 30, 2012 and 2011 amounted to $847,000 and $(301,000), respectively, and for the six months ended June 30, 2012 and 2011 amounted to $701,000 and $(1.4) million, respectively.

	Siebert received a distribution from SBS of $81,000 during the six months ended June 30, 2012, and Siebert’s share of undistributed earnings from SBS amounted to $8.5 million at June 30, 2012. Such amount may not be immediately available for distribution to Siebert for various reasons including the amount of SBS’s available cash, the provisions of the agreement among Siebert and the principals of SBS and SBS’s continued compliance with its regulatory and net capital requirements.

	SBS Financial Products Company, LLC (“SBSFPC”)

	The Company has a 33.33% ownership interest in, and the two individual principals of SBS have an aggregate 66.66% ownership interest in, SBSFPC which engages in derivatives transactions related to the municipal underwriting business. Income and loss from SBSFPC is considered to be integral to the Company’s operations and material to its results of operations.

	Summarized financial data of SBSFPC is set forth below.


	June 30, 2012			June 30, 2011

Total assets	$	174,675,000
Total liabilities		173,756,000
Total members’ capital		919,000
Six months ended:
Total revenues		51,000			62,000
Net loss		(48,000	)		(34,000	)
Three months ended:
Total revenues		30,000			74,000
Net (loss) income		(23,000	)		29,000


	The Company’s share of net (loss) income of SBSFPC for the three months ended June 30, 2012 and 2011 amounted to $(8,000) and $10,000, respectively. The Company’s share of net (loss) for the six months ended June 30, 2012 and 2011 amounted to $(16,000) and $(11,000), respectively.

	At June 30, 2012, SBSFPC had cumulative distributions in excess of cumulative earnings in the amount of $281,000, of which the Company’s share was $94,000. The Company received a distribution from SBSFPC of $2,000 during the six months ended June 30, 2012.

9.	Contingent Liabilities:

	Retail customer transactions are cleared through clearing brokers on a fully disclosed basis. If customers do not fulfill their contractual obligations, the clearing broker may charge Siebert for any loss incurred in connection with the purchase or sale of securities at prevailing market prices to satisfy the customer obligations. Siebert regularly monitors the activity in its customer accounts for compliance with its margin requirements. Siebert is exposed to the risk of loss on unsettled customer transactions if customers are unable to fulfill their contractual obligations. There were no material losses for unsettled customer transactions for the six months ended June 30, 2012 and 2011.

	In 2009, Siebert was named as one of the defendants in a class action pending in the United States District Court, Southern District of New York. The complaint was brought on behalf of a class of purchasers in a public offering by Lehman Brothers Holdings, Inc. (“LBHI”) of $1,500,000,000 of 6.75% Subordinated Notes due 2017 (the “Notes”) and certain smaller issuances of other securities. The complaint asserted that Siebert and other underwriters of the Notes violated Section 11 of the Securities Act of 1933 in that relevant offering materials were false and misleading. Siebert had agreed to purchase $15 million of the Notes and $462,953 of the other securities as an underwriter in the offerings. Siebert and the plaintiffs class agreed to resolve all claims against Siebert in consideration of a $1 million payment by Siebert. The settlement was accrued as of December 31, 2011, paid into an escrow account during the first quarter of 2012 and approved by the court on May 2, 2012. As certain plaintiffs opted out of the class action or have brought claims involving other securities, additional liability to the Company is possible. At present, the Company is uncertain as to the potential liability, if any, in connection with the other potential plantiffs.

	Siebert is party to certain claims, suits and complaints arising in the ordinary course of business including actions related to various offering of notes by LBHI referred to above. In the opinion of management, all such claims, suits and complaints are without merit, or involve amounts which would not have a significant effect on the financial position or results of operations of the Company.

	Siebert is party to a Secured Demand Note Collateral Agreement, as amended on July 27, 2012, with SBS which obligates Siebert to lend SBS, on a subordinated basis, up to $1,200,000. The secured demand note payable held by SBS and a related $1,200,000 receivable due from SBS are included in investments in and advances to equity investees in the accompanying consolidated statement of financial condition. Amounts that Siebert is obligated to lend under this arrangement are collateralized by cash equivalents of $1,532,000. Any amounts loaned will bear interest at 4% per annum and are repayable on August 31, 2014.

10.	Income Taxes:

	Income tax provision for the three months ended June 30, 2012 and 2011 represented various minimum state income taxes. There is no provision for other income taxes for the three months and the six months ended June 30, 2012, because the Company utilized its net operating loss carry forward for which no benefit was previously recognized. Due to


	cumulative losses incurred by the Company and its subsidiaries during the prior three years, the Company has concluded that it is more likely than not that it will not realize its net deferred tax asset and, accordingly, has recorded a valuation allowance to fully offset its net deferred tax asset at June 30, 2012, which amounted to $3,791,000.

11.	Impairment of fixed assets:

	Effective June 30, 2012, the Company discontinued its relationship with a software vendor, which had developed and maintained one of its two websites. As a result, the Company wrote off its remaining unamortized carrying value of development costs of $433,000 relating to the discontinued website. Effective July 1, 2012, such services for the remaining website will be provided by the Company’s clearing broker .

12.	Significant customer:

	During each of the three and six months ended June 30, 2012, commission income earned from one customer accounted for approximately 19% of total revenue.

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

This discussion should be read in conjunction with our audited consolidated financial statements as of and for the year ended December 31, 2011, and the unaudited consolidated financial statements and the notes thereto contained elsewhere in this Quarterly Report.

Business Environment

Our working capital is invested primarily in money market funds, so that liquidity has not been materially affected. The crisis did have the effect of reducing participation in the securities market by our retail and institutional customers, which had an adverse effect on our revenues. However, the stock market has improved in the six months ended June 30, 2012 and consequently so have our revenues. Our affiliate, Siebert, Brandford, Shank & Co., L.L.C. (“SBS”) had income for the current six months period of approximately $1.4 million as a result of industry volumes increasing in the current period this year as compared to a loss of $2.8 million for the same period last year due to municipalities struggling with the fiscal crisis, concerns about defaults at the state and local level and the expiration of the Build America Bonds program in 2011. This increase in SBS’s income resulted in income to the Company of $701,000 for the current six month period. Our expenses include the costs of an arbitration proceeding commenced by a former employee following the termination of his employment, which remains unresolved. The Company believes that the action is without merit, but the costs of defense, which are included as professional expenses, have adversely affected the Company’s results of operation and may continue to affect the results of operations until the action is completed. Competition in the brokerage industry remains intense.

The following table sets forth certain metrics as of June 30, 2012 and 2011 and for the three and six months ended June 30, 2012 and 2011, respectively, which we use in evaluating our business.


	For the Three Months ended June 30,				For the Six Months ended June 30,
Retail Customer Activity:	2012		2011		2012		2011


Total retail trades:		86,096		102,202		189,219		216,231
Average commission per retail trade:	$	30.16	$	20.72	$	31.03	$	21.25


	As of June 30,

Retail customer balances:	2012		2011

Retail customer net worth (in billions):	$	6.5	$	6.8
Retail customer money market fund value (in billions):	$	1.0	$	1.0
Retail customer margin debit balances (in millions):	$	221.6	$	232.0
Retail customer accounts with positions:		42,934		45,994

Description:


	•	Total retail trades represent retail trades that generate commissions.

	•	Average commission per retail trade represents the average commission generated for all types of retail customer trades.

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

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

	•	Retail customer margin debits balances represent credit extended to our customers to finance their purchases against current positions.

	•	Retail customer accounts with positions represent retail customers with cash and/or securities in their accounts.

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

Recent Developments

On January 23, 2008, the Board of Directors of the Company authorized a buy back of up to 300,000 shares of common stock. Shares will be purchased from time to time, in our discretion, in the open market and in private transactions. During the six months ended June 30, 2012, the Company purchased 4,302 shares at an average price of $1.67.

Critical Accounting Policies

We generally follow accounting policies standard in the brokerage industry and believe that our policies appropriately reflect our financial position and results of operations. Our management makes significant estimates that affect the reported amounts of assets, liabilities, revenues and expenses and the related disclosure of contingent assets and liabilities included in the financial statements. The estimates relate primarily to revenue and expense items in the normal course of business as to which we receive no confirmations, invoices, or other documentation at the time the books are closed for a period. We use our best judgment, based on our knowledge of these revenue transactions and expenses incurred, to estimate the amounts of such revenue and expense. We are not aware of any material differences between the estimates used in closing our books for the last five years and the actual amounts of revenue and expenses incurred when we subsequently receive the actual confirmations, invoices or other documentation. Estimates are also

used in determining the useful lives of intangible assets, and the fair market value of intangible assets and securities. Our management believes that its estimates are reasonable.

Results of Operations

We had net income of $447,000 and $1,072,000 for the three months and six months ended June 30, 2012, respectively.

Three Months Ended June 30, 2012 Compared to Three Months Ended June 30, 2011

Total revenues for the three months ended June 30, 2012 were $5.6 million, an increase of $1.1 million or 25.0% from the same period in 2011.

Commission and fee income for the three months ended June 30, 2012 was $3.9 million, an increase of $340,000 or 9.6% from the same period in 2011 primarily due to an increase in average commissions charged per trade as a result of an increase in retail options trading by one customer, which accounted for approximately 26% of total commissions and fees, as well as an increase in our commission recapture operations offset by a decrease in institutional trading commissions.

Investment banking revenues for the three months ended June 30, 2012 were $1.2 million, an increase of $792,000 or 195.1% from the same period in 2011 due to our participation in larger new issues in the equity capital markets.

Trading profits were $531,000 for the three months ended June 30, 2012, an increase of $5,000 or 1.0% from the same period in 2011 due to an overall increase in trading volume primarily in the debt markets.

Interest and dividends for the three months ended June 30, 2012 were $17,000, a decrease of $10,000 or 37.0% from the same period in 2011 primarily due to lower yields.

Total expenses for each of the three months ended June 30, 2012 and 2011 were $6.0 million.

Employee compensation and benefit costs for the three months ended June 30, 2012 were $2.6 million, an increase $251,000 or 10.6% from the same period in 2011 due to an increase in commissions paid based on production in the capital markets and retail operations offset by a decrease in compensation due to a reduction in headcount for registered representatives.

Clearing and floor brokerage costs for the three months ended June 30, 2012 were $667,000, a decrease of $23,000 or 3.3% from the same period in 2011 due to an overall decrease in retail trading offset by higher clearing costs for increased retail options trading volume, which costs more to clear. Additionally, the decrease in execution charges for institutional trading was offset by an increase in clearing charges for our commission recapture operations.

Professional fees for the three months ended June 30, 2012, were $820,000, a decrease of $580,000 or 41.4% from the same period in 2011 primarily due to a decrease in legal fees relating to a dispute with a former employee offset by increases in consulting fees relating to our Information Technology department.

Advertising and promotion expenses for the three months ended June 30, 2012 were $89,000, a decrease of $4,000 or 4.3% from the same period in 2011 due to a decrease in public relations costs.

Communications expense for the three months ended June 30, 2012, was $498,000, a decrease of $29,000 or 5.5% from the same period in 2011 primarily due to a decrease in Bloomberg devices due to fewer employees in the Institutional Trading department and the result of the closing of our Surfside and Naples branches in Florida during the fourth quarter of 2011.

Occupancy costs for the three months ended June 30, 2012 were $226,000, a decrease of $46,000 or 16.9% from the same period in 2011 due to the closing of our Surfside and Naples branches in Florida during the fourth quarter of 2011.

Write off of software development costs of $433,000 was due to the Company’s discontinuation of its relationship with a software vendor on June 30, 2012, which had developed and maintained its website. As a result, the Company wrote off its remaining unamortized carrying value of development costs of $433,000. Effective July 1, 2012, such services will be provided by our clearing broker.

Other general and administrative expenses for the three months ended June 30, 2012 were $610,000, a decrease of $23,000 or 3.6% from the same period in 2011 due to a decrease in depreciation, training, subscriptions and data storage costs.

Income from Siebert’s equity investment in SBS, an entity in which Siebert holds a 49% equity interest, for the three months ended June 30, 2012, was $847,000, compared to a loss of $301,000 from the same period in 2011 due to SBS participating in more senior managed or co-managed transactions. Loss from our equity investment in SBS Financial Products Company, LLC, an entity in which we hold a 33.33% equity interest (“SBSFPC”) for the three months ended June 30, 2012, was $8,000 as compared to income of $10,000 for the same period in 2011. The losses in 2012 and 2011 were due to the mark to market loss in positions. Income and loss from equity investees is considered to be integral to our operations and material to the results of operations.

The tax provision for the three months ended June 30, 2012 and 2011 was $43,000 and $1,000, respectively, representing various minimum state income taxes. There is no provision for other income taxes for the three months ended June 30, 2012 because the Company utilized its net operating loss carry forward for which no benefit was previously recognized. No tax benefit related to the pre-tax loss was recorded for the three months ended June 30, 2011 due to the recording of a full valuation allowance to offset deferred tax assets based on recent losses and the likelihood of realization of such assets.

Six Months Ended June 30, 2012 Compared to Six Months Ended June 30, 2011

Total revenues for the six months ended June 30, 2012 were $12.2 million, an increase of $2.2 million or 21.8% from the same period in 2011.

Commission and fee income for the six months ended June 30, 2012 was $9.0 million, an increase of $1.6 million or 20.8% from the same period in 2011 primarily due to an increase in average commissions charged per trade as a result of an increase in retail options trading by one customer, which accounted for approximately 26% of total commission and fees, as well as an increase in our institutional trading commissions and our commission recapture operations.

Investment banking revenues for the six months ended June 30, 2012 were $1.7 million, an increase of $129,000 or 8.2% from the same period in 2011 due to our participation in more new issues in the equity and debt capital markets.

Trading profits were $1.4 million for the six months ended June 30, 2012, an increase of $491,000 or 54.4% from the same period in 2011 due to an overall increase in customer trading volume in the debt markets.

Interest and dividends for the six months ended June 30, 2012 were $40,000, an increase of $4,000 or 1.1% from the same period in 2011 primarily due to higher cash balances.

Total expenses for the six months ended June 30, 2012 were $11.7 million, a decrease of $671,000 or 5.4% from the same period in 2011.

Employee compensation and benefit costs for the six months ended June 30, 2012 were $5.1 million, an increase of $278,000 or 5.7% from the same period in 2011 due to an increase in commissions paid based on

production in the capital markets and retail operations as well as an increase in health benefits offset by a reduction in headcount for registered representatives.

Clearing and floor brokerage costs for the six months ended June 30, 2012 were $1.6 million, an increase of $20,000 or 1.2% from the same period in 2011 despite an overall decrease in retail trading volume. The increase in costs reflects a higher volume of retail options trading which costs more to clear as well as an increase in clearing charges for our commission recapture operations.

Professional fees for the six months ended June 30, 2012 were $1.6 million, a decrease of $1.2 million or 42.8% from the same period in 2011 primarily due to a decrease in legal fees relating to a dispute with a former employee offset by increases in consulting fees relating to our Information Technology department and our commission recapture operations.

Advertising and promotion expenses for the six months ended June 30, 2012 were $227,000, an increase of $34,000 or 17.6% from the same period in 2011 primarily due to an increase in online advertising.

Communications expense for the six months ended June 30, 2012 were $1.0 million, a decrease of $98,000 or 9.0% from the same period in 2011 primarily due to a decrease in Bloomberg devices due to fewer employees in the Institutional Trading department and the result of the closing of our Surfside and Naples branches in Florida during the fourth quarter of 2011.

Occupancy costs for the six months ended June 30, 2012 were $477,000, a decrease of $66,000 or 12.2% from the same period in 2011 due to the closing of our Surfside and Naples branches in Florida during the fourth quarter of 2011.

Other general and administrative expenses for the six months ended June 30, 2012 were $1.3 million, a decrease of $69,000 or 5.2% from the same period in 2011 due to a decrease in depreciation, training, subscriptions, computer updates and data storage costs.

Income from Siebert’s equity investment in SBS, an entity in which Siebert holds a 49% equity interest for the six months ended June 30, 2012, was $701,000, compared to a loss of $1.4 million from the same period in 2011 due to SBS participating in more senior managed or co-managed transactions. Loss from our equity investment in SBSFPC, an entity in which we hold a 33.33% equity interest, for the six months ended June 30, 2012, was $16,000 as compared to a loss of $11,000 from the same period in 2011. The losses in 2012 and 2011 were due to the mark to market loss in positions. Income and loss from equity investees is considered to be integral to our operations and material to the results of operations.

The tax provision for the six months ended June 30, 2012 and 2011 was $55,000 and $12,000, respectively, representing various minimum state income taxes. There is no provision for other income taxes for the six months ended June 30, 2012 because the Company utilized its net operating loss carry forward for which no benefit was previously recognized. No tax benefit related to the pre-tax loss was recorded for the six months ended June 30, 2011 due to the recording of a full valuation allowance to offset deferred tax assets based on recent losses and the likelihood of realization of such assets.

Liquidity and Capital Resources

Our assets are highly liquid, consisting generally of cash in money market funds. Our total assets at June 30, 2012 were $35.6 million. As of that date, we regarded $22.8 million, or 64%, of total assets as highly liquid.

Siebert is subject to the net capital requirements of the SEC, the NYSE and other regulatory authorities. At June 30, 2012, Siebert’s regulatory net capital was $18.4 million, $18.2 million in excess of its minimum capital requirement of $250,000.

On January 22, 2008, the Board of Directors of the Company authorized a buy back of up to 300,000 shares of common stock. During the six months ended June 30, 2012, 4,302 shares were purchased at an average price of $1.67 per share.

Siebert has entered into a Secured Demand Note Collateral Agreement with SBS under which Siebert is obligated to lend to SBS up to $1.2 million on a subordinated basis collateralized by cash equivalents of approximately $1.5 million as of June 30, 2012. Amounts pledged by Siebert under the facility are reflected on our balance sheet as “cash equivalents – restricted”. SBS pays Siebert interest on this amount at the rate of 4% per annum. The facility expires on August 31, 2014, at which time SBS is obligated to repay to Siebert any amounts borrowed by SBS thereunder.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Working capital is generally invested temporarily in dollar denominated money market funds. These investments are not subject to material changes in value due to interest rate movements.

Retail customer transactions are cleared through clearing brokers on a fully disclosed basis. If customers do not fulfill their contractual obligations, the clearing broker may charge Siebert for any loss incurred in connection with the purchase or sale of securities at prevailing market prices to satisfy the customers’ obligations. Siebert regularly monitors the activity in its customer accounts for compliance with its margin requirements. Siebert is exposed to the risk of loss on unsettled customer transactions if customers and other counter-parties are unable to fulfill their contractual obligations. There were no material losses for unsettled customer transaction as of June 30, 2012.

Item 4. Controls and Procedures

We carried out an evaluation, under the supervision and with the participation of management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures as of the end of the period covered by this report pursuant to Rule 13a-15(e) or Rule 15d-15(e) of the Securities Exchange of 1934, as amended. Based on that evaluation, our management, including the Chief Executive Officer and Chief Financial Officer, concluded that our disclosure controls and procedures are effective to ensure that the information we are required to disclose in reports that we file or submit under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the Securities and Exchange Commission and to ensure that information required to be disclosed is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding timely disclosure.

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

Part II - OTHER INFORMATION

Item 1. Legal Proceedings

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

Item 1A. Risk Factors

In addition to the other information set forth in this report, you should carefully consider the factors discussed in Part I, Item 1A. “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2011, which could materially affect our business, financial position and results of operations. There are no material changes from the risk factors set forth in Part I, Item 1A, “Risk Factors,” of our Annual Report on Form 10-K for the year ended December 31, 2011.

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

On January 23, 2008, our Board of Directors authorized the repurchase of up to 300,000 shares of our common stock. Shares will be purchased from time to time, in our discretion, in the open market and in private transactions. There is no expiration date for our stock repurchase plan. We purchased 452 shares at an average price of $1.82 in the second quarter of 2012.

A summary of our repurchase activity for the three months ended June 30, 2012 is as follows:

Issuer Purchases of Equity Securities


Period	Total Number Of Shares Purchased	Average Price Paid Per Share	Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs	Maximum Number of Shares That May Yet Be Purchased Under The Plans or Programs

April 2012	389	$1.82	113,003	186,997

May 2012			113,003	186,997

June 2012	63	1.80	113,066	186,934


Total	452	$1.82	113,066	186,934

All of the purchases were made in open market transactions.

Item 6. Exhibits


	31.1	Certification of Muriel F. Siebert pursuant to Exchange Act Rules 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

	31.2	Certification of Joseph M. Ramos, Jr. pursuant to Exchange Act Rule 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

	32.1	Certification of Muriel F. Siebert of Periodic Financial Report under Section 906 of the Sarbanes-Oxley Act of 2002.

	32.2	Certification of Joseph M. Ramos, Jr. of Periodic Financial Report under Section 906 of the Sarbanes-Oxley Act of 2002.

	101.INS*	XBRL Instance Document

	101.SCH*	XBRL Taxonomy Extension Schema Document

	101.CAL*	XBRL Taxonomy Extension Calculation Linkbase Document

	101.DEF*	XBRL Taxonomy Extension Definition Linkbase Document

	101.LAB*	XBRL Taxonomy Extension Label Linkbase Document

	101.PRE*	XBRL Taxonomy Extension Presentation Linkbase Document

* XBRL (Extensible Business Reporting Language) information is furnished and not filed or a part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, is deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, and otherwise is not subject to liability under these sections.

SIGNATURES

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


	SIEBERT FINANCIAL CORP.

	By:	/s/ Muriel F. Siebert

		Muriel F. Siebert
		Chairwoman and President
		(principal executive officer)

	Dated: August 14, 2012

	By:	/s/ Joseph M. Ramos, Jr.

		Joseph M. Ramos, Jr.
		Executive Vice President and Chief Financial Officer
		(principal financial and accounting officer)

	Dated: August 14, 2012

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