What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2023-03-29 compared with 2022-03-30 · 698 added, 779 removed, 489 unchanged (75% of the section changed)

3 unchanged sentences

Report of Independent Registered Public Accounting Firm

(PCAOB ID 23 )

Consolidated Statements of Financial Condition as of December 31, 2022 and 2021

Consolidated Statements of Income for each of the years in the two-year period ended December 31, 2021

Consolidated Statement of Changes in Stockholders’

Equity for each of the years in the two-year period ended December 31, 2021

Consolidated Statements of Operations for each of the years in the two-year period ended December 31, 2022

Consolidated Statement of Changes in Stockholders’ Equity for each of the years in the two-year period ended December 31, 2022

Consolidated Statements of Cash Flows for each of the years in the two-year period ended December 31, 2022

Notes to Consolidated Financial Statements

Siebert 2021 Form-10K 37

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM (PCAOB ID 23 )

Siebert 2022 Form-10K 36

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Shareholders and the Board of Directors of Siebert Financial Corp.:

Opinion on the Consolidated Financial Statements

Opinion on the Financial Statements

We have audited the accompanying consolidated statements of financial condition of Siebert Financial Corp.

& Subsidiaries (the Company) as of December 31, 2021 and 2020, the related consolidated statements of income, changes in stockholders'

equity and cash flows for the years then ended, and the related notes (collectively referred to as the consolidated financial statements).

& Subsidiaries (the Company) as of December 31, 2022 and 2021, the related consolidated statements of operations, changes in stockholders’ equity, and cash flows for the years then ended, and the related notes (collectively referred to as the consolidated financial statements).

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2022 and 2021, and the results of its operations and its cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

These consolidated financial statements are the responsibility of the Company's management.

Our responsibility is to express an opinion on the Company's consolidated financial statements based on our audits.

These consolidated financial statements are the responsibility of the Company's management.

Our responsibility is to express an opinion on the Company's consolidated financial statements based on our audits.

We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S.

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB and in accordance with auditing standards generally accepted in the United States of America.

We conducted our audits in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud.

The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting.

As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting.

Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

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We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matters

The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that:

(1) relate to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments.

The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing separate opinions on the critical audit matter or on the accounts or disclosures to which it relates.

Impairment of equity method investment in related party

As described in Note 3 to the consolidated financial statements, the Company entered into a Reorganization Agreement on October 18, 2022 with Tigress Holdings, LLC (“Tigress”), an equity-method investee of the Company.

Prior to this agreement, the Company owned 24% of the outstanding membership interests in Tigress, while Tigress owned a combination of stock in the Company as well as membership interests in one of the Company’s majority-owned subsidiaries, RISE Financial Services, LLC (“RISE”).

Under the terms of the Reorganization Agreement, the Company exchanged a portion of its outstanding membership interests in Tigress for all of Tigress’s membership interests in RISE.

As a result of the transaction described above, as well as the fact that Tigress had been impacted by adverse market conditions resulting in a decline in their performance and future projections, management concluded that a triggering event had occurred and evaluated if the investment in Tigress was other than temporarily impaired.

Thus, the Company performed an impairment test as of October 18, 2022, and estimated the fair value of Tigress using the income approach and the market approach and recognized an impairment charge.

The principal considerations for our determination that performing procedures relating to the impairment is a critical audit matter are (i) the significant judgment by management to evaluate the significant assumptions used in the determination of the fair value of the investment, which was used to determine the amount that fair value had declined below its related carrying value for a period considered to be other-than-temporary, (ii) a high degree of auditor judgment, subjectivity and effort in performing procedures and evaluating management’s assumptions related used in the impairment measurement, and (iii) the audit effort involved the use of professionals with specialized skill and knowledge.

Siebert 2022 Form-10K 37

How We Addressed the Matter in Our Audit

Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements.

These procedures included:

Tested the effectiveness of controls relating to management’s impairment measurement for the equity method investment in related party, including controls over the income and the market approach analyses and significant assumptions used to determine the fair value of the equity method investment in related party.

Tested management’s process for determining the fair value of its equity method investment in related party, including evaluating the appropriateness of the income approach and the market approach analyses.

Tested the completeness and accuracy of the underlying data used in the income approach and the market approach analyses and evaluated the reasonableness of the significant assumptions used by management in developing the fair value measurement related to the growth rates of assets under management and discount rates.

The reasonableness of the growth rates of assets under management was evaluated by considering (i) the consistency with external market and industry data, (ii) the consistency with past performance of the affiliate, and (iii) whether the growth rates were consistent with evidence obtained in other areas of the audit.

The reasonableness of the discount rate assumption was evaluated by considering the cost of capital of comparable businesses and other industry factors.

Engaged internal valuation professionals with specialized skill and knowledge to assist in the evaluation of the discount rates used to determine whether the fair value of the equity method investment in related party had declined below its carrying value for a period considered to be other-than-temporary.

/s/ Baker Tilly US, LLP

We have served as the Company's auditor since 2017.

New York, New York

March 29, 2023

Siebert 2021 Form-10K 38

Siebert 2022 Form-10K 38

SIEBERT FINANCIAL CORP.

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1,372,233,000

1,352,733,000

Deposits with broker-dealers and clearing organizations

Prepaid service contract –

Prepaid service contract – non-current

Property, office facilities, and equipment, net

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Lease right-of-use assets

Equity method investment in related party

Equity method investments in related parties

Investments, cost

Deferred tax assets

Intangible assets, net

1,404,235,000

1,372,987,000

LIABILITIES AND STOCKHOLDERS’

LIABILITIES AND STOCKHOLDERS’ EQUITY

Current liabilities

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1,343,382,000

1,330,046,000

Lease liabilities, less current portion

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1,353,729,000

1,335,001,000

Commitments and Contingencies

Stockholders’

Common stock, $.

01 par value;

Stockholders’ equity

Common stock, $ .01 par value;

100 million shares authorized;

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Retained earnings

Total Stockholders’

Total Stockholders’ equity

Noncontrolling interests

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1,404,235,000

1,372,987,000

Numbers are rounded for presentation purposes.

See notes to consolidated financial statements.

Siebert 2021 Form-10K 39

Siebert 2022 Form-10K 39

SIEBERT FINANCIAL CORP.

& SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

CONSOLIDATED STATEMENTS OF OPERATIONS

Commissions and fees

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Total Expenses

Earnings of equity method investment in related party

Income before provision for income taxes

Provision for income taxes

Operating income

Earnings of equity method investment in related parties

Impairment of equity method investment in related party

Loss on sale of equity method investment in related parties

Non-operating income (loss)

Income (loss) before provision for (benefit from) income taxes

Provision for (benefit from) income taxes

Net income (loss)

Less net loss attributable to noncontrolling interests

Net income available to common stockholders

Net income available to common stockholders per share of common stock

Net income (loss) available to common stockholders

Net income (loss) available to common stockholders per share of common stock

Basic and diluted

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See notes to consolidated financial statements.

Siebert 2021 Form-10K 40

Siebert 2022 Form-10K 40

SIEBERT FINANCIAL CORP.

& SUBSIDIARIES

CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’

CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY

Number of Shares Issued

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Additional Paid-In Capital

Treasury Stock

Retained Earnings

Total Stockholders’

Total Stockholders’ Equity

Noncontrolling Interests

Balance –

January 1, 2020

Shares issued for StockCross purchase

Shares issued for payment of professional services

Employee stock purchases

Adjustment for deferred tax asset valuation

Balance –

December 31, 2020

Balance – January 1, 2021

Shares issued for OpenHand transaction

Shares retired from OpenHand transaction

( 1,318,000 )

Shares issued for Tigress transaction

Balance –

December 31, 2021

Net income (loss)

Balance – December 31, 2021

Issuance and transfers of RISE membership interests

Termination of agreement with technology partner

Cancellation of treasury stock

Sales of equity method investments in related parties

Share-based compensation

Net income (loss)

Balance – December 31, 2022

Numbers are rounded for presentation purposes.

See notes to consolidated financial statements.

Siebert 2021 Form-10K 41

Siebert 2022 Form-10K 41

SIEBERT FINANCIAL CORP.

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Cash Flows From Operating Activities

Adjustments to reconcile net income to net cash provided by operating activities:

Deferred income tax expense

Net income (loss)

Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:

Deferred income tax expense (benefit)

Depreciation and amortization

Net lease liabilities

Loss on sale of OpenHand common stock

Impairment loss

Earnings of equity method investment in related party

Downward adjustment due to changes in observable prices

Loss on impairment

Earnings of equity method investment in related parties

Impairment of equity method investment in related party

Loss on sale of equity method investment in related parties

Share-based compensation

Receivables from customers

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Securities borrowed

( 712,256,000

Securities owned, at fair value

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Securities loaned

( 604,555,000

Securities sold, not yet purchased, at fair value

Interest payable

Taxes payable

Deferred contract incentive

Net cash provided by operating activities

Net cash provided by (used in) operating activities

Cash Flows From Investing Activities

1 unchanged sentence

Purchase of Openhand common stock

Distribution from equity method investment in related party

Purchase of office facilities and equipment

Purchase of property

Build out of property

Purchase of software

1 unchanged sentence

Cash Flows From Financing Activities

Notes payable –

related party

Long-term debt

Employee stock purchases

Net cash provided by financing activities

Net increase in cash and cash equivalents, and cash and securities segregated for regulatory purposes

Issuance of RISE membership interests

Transfers of RISE membership interests

Net change in notes payable – related party

Net change in long-term debt

Net cash provided by (used in) financing activities

Net change in cash and cash equivalents, and cash and securities segregated for regulatory purposes

Cash and cash equivalents, and cash and securities segregated for regulatory purposes - beginning of year

Cash and cash equivalents, and cash and securities segregated for regulatory purposes - end of year

Siebert 2022 Form-10K 42

Reconciliation of cash, cash equivalents, and cash and securities segregated for regulatory purposes

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Non-cash investing and financing activities

Shares issued for payment of professional services

Equity method investment in related party (1)

Termination of agreement with technology partner (2)

Transfers of RISE membership interests (3)

Net membership interests of RISE from transactions with Hedge Connection (1)

Net membership interests exchange between Tigress and RISE (1)

Forgiveness of notes payable from Hedge Connection (1)

Numbers are rounded for presentation purposes.

See notes to consolidated financial statements.

Siebert 2021 Form-10K 42

(1) Refer to Note 3 – Transactions with Tigress and Hedge Connection and Note 11 – Equity Method Investments in Related Parties for further detail.

(2) Refer to Note 6 – Prepaid Service Contract for further detail.

(3) Refer to Note 4 – RISE for further detail.

Siebert 2022 Form-10K 43

SIEBERT FINANCIAL CORP.

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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:

Retail brokerage business through Muriel Siebert & Co., Inc.

(“MSCO”), a Delaware corporation and broker-dealer registered with the Securities and Exchange Commission (“SEC”) under the Securities Exchange Act of 1934 (“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”).

MSCO engages in the business of providing brokerage services for retail customers and trading securities for its own account.

Investment advisory services through Siebert AdvisorNXT, Inc.

(“SNXT”), a New York corporation registered with the SEC as a Registered Investment Adviser (“RIA”) under the Investment Advisers Act of 1940.

SNXT engages in providing investment advisory services to retail and high net worth clients.

Insurance services through Park Wilshire Companies, Inc.

(“PW”), a Texas corporation and licensed insurance agency.

PW provides insurance agency services to retail and institutional accounts.

Robo-advisory technology development through Siebert Technologies, LLC (“STCH”), a Nevada limited liability company.  

Prime brokerage services through RISE Financial Services, LLC (“RISE”), formerly known as WPS Prime Services, LLC (“WPS”), a Delaware limited liability company and a broker-dealer registered with the SEC and NFA.

RISE is a woman-owned and operated financial services firm that offers a comprehensive suite of prime brokerage services aligned with the growing mission-driven Environmental Social and Governance (“ESG”) initiatives of institutional investors.

Muriel Siebert & Co., Inc.

(“MSCO”) provides retail brokerage services.

MSCO is a Delaware corporation and broker-dealer registered with the SEC under the Exchange Act and the Commodity Exchange Act of 1936, and member of FINRA, NYSE, SIPC, Euroclear, and NFA.

Siebert AdvisorNXT, Inc.

(“SNXT”) provides investment advisory services.

SNXT is a New York corporation registered with the SEC as an 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”), an inactive subsidiary headquartered in Bermuda.

For purposes of this Annual Report on Form 10-K, 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.

(“STXD”) is an inactive subsidiary headquartered in Bermuda.

For purposes of this Annual Report on Form 10-K, 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 New York, NY, with primary operations in New Jersey, Florida, and California.

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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’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 year ended December 31, 2021 and 2020 were derived from its operations in the U.S.

As of December 31, 2021, 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.

Transaction with Tigress Holdings, LLC

On November 16, 2021, the Company entered into an agreement with Tigress, a Delaware limited liability company.

As part of the agreement, (i) Tigress transferred to the Company limited liability company membership interests representing twenty-four percent (24%) of the outstanding membership interests in Tigress;

and (ii) the Company transferred to Tigress limited liability company membership interests representing twenty-four percent ( 24 %) of the outstanding membership interests of RISE and 1,449,525 shares of the Company’s common stock.

The common stock was issued pursuant to Section 4(a)(2) of the Securities Act of 1933, as amended.

Siebert 2021 Form-10K 43

As of December 31, 2021 and 2020, Siebert holds a controlling financial interest in RISE and therefore consolidates RISE within its financial statements.

Siebert owns the majority of RISE’s membership interest which has voting rights in proportion to its ownership interest in RISE.

Siebert’s ownership percentage of RISE as of December 31, 2021 and 2020 was 76 % and 100 %, respectively.

These consolidated financial statements reflect the results of operations and financial position of RISE, including consolidation of its investment in RISE.

The noncontrolling interests in RISE are reported as a component of total equity in the consolidated statement of financial condition.

As part of the transaction, WPS Prime Services, LLC was renamed to RISE Financial Services, LLC, and Tigress’

founder, Cynthia DiBartolo, will continue as CEO of Tigress, and assumed the position as CEO of RISE.

Gebbia, one of the Company’s and RISE’s directors, assumed the position of Chief Impact Officer at RISE.

DiBartolo was appointed to the Company’s and RISE’s Board of Directors and Ms.

Gebbia was appointed to Tigress’

Board of Directors.

RISE relaunched its business as a woman-owned and operated prime brokerage with a specific emphasis on aligning the mission-driven initiatives with the technological needs of institutional customers.

Arrangements with JonesTrading and Goldman Sachs

On August 30, 2021, Goldman Sachs & Co.

LLC ("GSCO") notified RISE that its clearing arrangement with RISE will be terminated.

Due to the termination of RISE’s clearing arrangement with GSCO, substantially all the revenue producing customers of RISE have transitioned to other prime service providers.

Revenue from customers that have transitioned to other prime service providers was approximately $ 12.6 million and $ 13.9 million for the year ended December 31, 2021 and 2020, respectively.

Pre-tax income from these customers was approximately $ 1.8 million and $ 1.3 million for the year ended December 31, 2021, and 2020, respectively.

As a result of this development, the Company recorded a full impairment of the RISE customer relationships intangible asset of $ 699,000 and RISE collected its clearing deposit from GSCO of approximately $ 2 million as of December 31, 2021.

In addition, RISE’s institutional customer assets under management were significantly reduced in the year ended December 31, 2021.

On October 7, 2021, RISE signed an agreement with JonesTrading Institutional Services, LLC (“JonesTrading”) to transfer certain customers of RISE to JonesTrading.

In exchange, JonesTrading agreed to pay RISE a percentage of the net revenue produced by those clients less any related expenses.

The percentage paid to RISE related to this agreement will decline every year and the arrangement will end in October 2024.

For the year ended December 31, 2021, this agreement resulted in a net expense of $ 22,000 as RISE was in the process of transitioning customers to JonesTrading.

The challenges posed by the COVID-19 pandemic on the global economy increased significantly starting in the first quarter of 2020.

COVID-19 spread across the globe during 2020 and impacted economic activity worldwide.

In response to COVID-19, national and local governments around the world instituted certain measures, including travel bans, prohibitions on group events and gatherings, shutdowns of certain businesses, curfews, shelter-in-place orders and recommendations to practice social distancing.

The primary financial impact on the Company from the COVID-19 pandemic for both the year ended December 31, 2021 and 2020 was lower interest revenue resulting from lower benchmark interest rates beginning in early 2020.

The Company is actively monitoring the impact of COVID-19 on its business, financial condition, liquidity, operations, employees, clients and business partners.

Based on management’s assessment as of December 31, 2021, the ultimate impact of COVID-19 on the Company’s business, results of operations, financial condition and cash flows is dependent on future developments, including the duration of the pandemic and the related length of its impact on the global economy, which are uncertain and cannot be predicted at this time.

Siebert 2021 Form-10K 44

Acquisition of StockCross

On January 25, 2019, the Company purchased approximately 15 % of the outstanding shares of StockCross Financial Services, Inc.

(“StockCross”).

Subsequently, the Company acquired the remaining 85 % of StockCross’

outstanding shares in exchange for 3,298,774 shares of the Company’s common stock.

The Company’s common stock was issued pursuant to Section 4(a)(2) of the Securities Act of 1933, as amended.

Effective January 1, 2020, StockCross was merged with and into MSCO, and as of January 1, 2020, all clearing and other services provided by StockCross were performed by MSCO.

Prior to and as of the date of the Company’s acquisition of StockCross, the Company and StockCross were entities under common control of Gloria E.

Gebbia, the Company’s principal stockholder, and members of her immediate family (collectively, the “Gebbia Family”).

The acquisition represented a change in reporting entity.

All of the Company's revenues for the years ended December 31, 2022 and 2021 were derived from its operations in the U.S.

As of December 31, 2022, 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.

Summary of Significant Accounting Policies

Basis of Presentation

The accompanying consolidated financial statements are prepared on the accrual basis of accounting in conformity with accounting principles generally accepted in the United States of America (“U.S.

GAAP”) as established by the Financial Accounting Standards Board (“FASB”) to ensure consistent reporting of financial condition.

The accompanying consolidated financial statements are prepared on the accrual basis of accounting in conformity with U.S.

GAAP as established by the FASB to ensure consistent reporting of financial condition.

The consolidated financial statements include the accounts of Siebert and its wholly-owned and majority-owned subsidiaries.

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dollar is the functional currency of the Company and numbers are rounded for presentation purposes.

The Company’s investments in non-majority-owned partnerships and affiliates are accounted for using the equity method until such time that they become wholly or majority-owned.

Earnings attributable to noncontrolling interests are recorded on the statements of income relating to wholly or majority-owned subsidiaries with the appropriate noncontrolling interest that represents the portion of equity not related to the Company’s ownership interest recorded on the statements of financial condition in each period.

The Company’s investments in non-majority-owned partnerships and affiliates are accounted for using the equity method until such time that they become wholly or majority-owned.

Earnings attributable to noncontrolling interests are recorded on the statements of operations relating to wholly or majority-owned subsidiaries with the appropriate noncontrolling interest that represents the portion of equity not related to the Company’s ownership interest recorded on the statements of financial condition in each period.

Principles of Consolidation

The consolidated 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 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 continues to consolidate RISE under the voting interest model (“VOE model”).

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.

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 parties.

Siebert 2022 Form-10K 44

Variable Interest Entities

The Company evaluates whether an entity is a VIE and determines if the primary beneficiary status is appropriate on a quarterly basis.

The Company consolidates a VIE for which it is the primary beneficiary.

When assessing the determination of the primary beneficiary, the Company considers all relevant facts and circumstances, including factors such as the power to direct the activities of the VIE that most significantly impact its economic performance, the obligation to absorb the losses and/or the right to receive the expected returns of the VIE.

If the Company determines that it is the primary beneficiary, the Company will consolidate the entity under the VIE model.

Segment Information

The Company operates and reports financial information in one operating segment.

Operating segments are defined as components of an enterprise for which separate financial information is evaluated regularly by the chief operating decision maker in deciding how to allocate resources and assess performance.

All the Company’s revenues and substantially all of the Company’s assets are attributed to or located in the United States.

Use of Estimates

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Actual results could differ from those estimates.

The Company is not aware of any material differences between the estimates used in closing the Company’s books for the last five years and the actual amounts of revenue and expenses incurred when the Company subsequently receives the actual confirmations, invoices, or other documentation.

Estimates are used in the allowance for credit losses, valuation of certain investments, intangible asset valuations and useful lives, depreciation, income taxes, and the contingent liabilities related to legal and healthcare expenses.

Estimates are used in the allowance for credit losses, valuation of certain investments, depreciation, income taxes, and the contingent liabilities related to legal and healthcare expenses.

The Company also estimates the valuation allowance for its deferred tax assets based on the more likely than not criteria.

The Company believes that its estimates are reasonable.

Accounting for Acquisitions

ASC 805 is used for accounting in business acquisitions.

ASC 805 requires that goodwill be recognized separately from assets acquired and liabilities assumed at their acquisition date fair values.

Goodwill, as of the date of acquisition, is determined as the excess of the consideration transferred net of the acquisition date fair values of assets acquired and liabilities assumed.

Fair value estimates at acquisition date may be assessed internally or externally using third parties.

As part of the valuation and appraisal process, the third-party appraiser prepares a report assigning estimated acquisition date fair values to assets and liabilities.

These fair value estimations are subjective and require careful consideration and sound judgment.

Management reviews the third-party reports for fairness of the assigned values.

Concentrations of Credit Risk

The Company is engaged in various trading and brokerage activities whose contra-parties include broker-dealers, banks and other financial institutions.

Siebert 2021 Form-10K 45

In the event contra-parties do not fulfill their obligations, the Company may sustain a loss if the market value of the instrument is different from the contract value of the transaction.

The risk of default primarily depends upon the credit worthiness of the contra-parties involved in the transactions.

It is the Company’s policy to review, as necessary, the credit standing of each contra-party with which it conducts business.

The Company has experienced no material historical losses in relation to its contra-parties for the year ended December 31, 2021 and 2020.

As of December 31, 2021 and 2020, the Company maintained its cash balances at various financial institutions.

These balances are insured by the Federal Deposit Insurance Corporation (“FDIC”) up to $ 250,000 per institution.

The Company is subject to credit risk to the extent that the financial institution with which it conducts business is unable to fulfill its contractual obligations and deposits exceed FDIC limits.

Allowance for Credit Losses

In June 2016, the FASB issued Accounting Standards Update (“ASU”) 2016-13, “Measurement of Credit Losses on Financial-Instruments.”

This ASU amends several aspects of the measurement of credit losses on financial instruments, including replacing the existing incurred credit loss model and other models with the Current Expected Credit Losses model (“CECL”).

Under CECL, the allowance for credit losses on financial assets that are measured at amortized cost reflects management’s estimate of credit losses over the remaining expected life of the financial assets.

Expected credit losses for newly recognized financial assets, as well as changes to expected credit losses during the period, would be recognized in earnings, and adoption of the ASU will generally result in earlier recognition of credit losses.

Expected credit losses will be measured based on historical experience, current conditions and forecasts that affect the collectability of the reported amount, and credit losses will be generally recognized earlier than under previous U.S.

The Company’s adoption of this ASU using the modified retrospective approach for all in-scope assets did not result in an adjustment to the opening balance in retained earnings.

The ASU impacts only those financial instruments that are carried by the Company at amortized cost such as securities borrowed / loaned, receivables from customers, receivables from broker-dealers and clearing organizations, and other receivables.

The adoption of this ASU did not have a material impact to the Company's financial statements.

ASC 820 defines fair value, establishes a framework for measuring fair value, and establishes a hierarchy of fair value inputs.

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.

A fair value measurement assumes that the transaction to sell the asset or transfer the liability occurs in the principal market for the asset or liability or, in the absence of a principal market, the most advantageous market.

Valuation techniques that are consistent with the market, income, or cost approach, as specified by ASC 820, are used to measure fair value.

The fair value hierarchy prioritizes the inputs to valuation techniques used to measure fair value into three broad levels:

Level 1 - Quoted prices (unadjusted) in active markets for an identical asset or liability that the Company can assess at the measurement date.

Level 2 - Inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly or indirectly.

Level 3 - Unobservable inputs for the asset or liability.

The availability of observable inputs can vary from security to security and is affected by a variety of factors, such as the type of security, the liquidity of markets, and other characteristics particular to the security.

To the extent that the valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair value requires more judgment.

As such, the degree of judgment exercised in determining fair value is greatest for instruments categorized in level 3.

The inputs used to measure fair value may fall into different levels of the fair value hierarchy.

In such cases, for disclosure purposes, the level in the fair value hierarchy within which the fair value measurement falls in its entirety is determined based on the lowest level input that is significant to the fair value measurement.

Fair value is a market-based measure considered from the perspective of a market participant rather than an entity-specific measure.

Therefore, even when market assumptions are not readily available, the Company’s own assumptions are set to reflect those that the Company believes market participants would use in pricing the asset or liability at the measurement date.

A description of the valuation techniques applied to the Company’s major categories of assets and liabilities measured at fair value on a recurring basis is as follows:

government securities:

government securities are valued using quoted market prices and as such, valuation adjustments are not applied.

Accordingly, U.S.

government securities are generally categorized in level 1 of the fair value hierarchy.

Certificates of deposit:

Certificates of deposit are included in investments valued at cost, which approximates fair value.

When certificates of deposits are held directly with banking institutions and issued directly to the Company, these are categorized within cash equivalents in level 2 of the fair value hierarchy.

When certificates of deposits are available for trading, they are categorized within securities owned, at fair value in level 2 of the fair value hierarchy.

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Corporate bonds:

The fair value of corporate bonds is determined using recently executed transactions, market price quotations (when observable), bond spreads, or credit default swap spreads obtained from independent external parties such as vendors and brokers, adjusted for any basis difference between cash and derivative instruments.

The spread data used is for the same maturity as the bond.

If the spread data does not reference the issuer, then data that references a comparable issuer is used.

When position-specific external price data is not observable, fair value is determined based on either benchmarking to similar instruments or cash flow models with yield curves, bond, or single-name credit default swap spreads and recovery rates as significant inputs.

Corporate bonds are generally categorized in level 2 of the fair value hierarchy.

Equity securities:

Equity securities are valued based on quoted prices from the exchange.

To the extent these securities are actively traded, valuation adjustments are not applied, and they are categorized in level 1 of the fair value hierarchy.

Securities quoted in inactive markets or with observable inputs are categorized into level 2.

If there are no observable inputs or quoted prices, securities are categorized as level 3 assets in the fair value hierarchy.

Level 3 assets are not actively traded and subjective estimates based on managements’ assumptions are utilized for valuation.

Municipal securities:

Municipal securities are valued using recently executed transactions, market price quotations (when observable), bond spreads from independent external parties such as vendors and brokers, adjusted for any basis difference between cash and derivative instruments.

The spread data used is for the same maturity as the bond.

Municipal securities are generally categorized in level 2 of the fair value hierarchy.

Unit investment trusts (“UITs”):

Units of UITs are carried at redemption value, which represents fair value.

Units of UITs are categorized as level 2.

Options are valued based on quoted prices from the exchange.

To the extent these securities are actively traded, valuation adjustments are not applied, and they are categorized in level 1 of the fair value hierarchy.

Securities quoted in inactive markets or with observable inputs are categorized into level 2.

If there are no observable inputs or quoted prices, securities are categorized as level 3 assets in the fair value hierarchy.

Level 3 assets are not actively traded and subjective estimates based on managements’ assumptions are utilized for valuation.

Cash and Cash Equivalents

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As of December 31, 2022 and 2021, the Company did not hold any cash equivalents.

As of December 31, 2022 and 2021, the Company maintained its cash balances at various financial institutions.

These balances are insured by the Federal Deposit Insurance Corporation (“FDIC”) up to $ 250,000 per institution.

The Company is subject to credit risk to the extent that the financial institution with which it conducts business is unable to fulfill its contractual obligations and deposits exceed FDIC limits.

At certain times, cash balances may exceed FDIC insured limits.

Cash and Securities Segregated For Regulatory Purposes

MSCO is subject to Exchange Act Rule 15c3-3, referred to as the “Customer Protection Rule,”

which requires segregation of funds in a special reserve account for the exclusive benefit of customers.

As of December 31, 2021, and 2020 the Company did not have any securities segregated for regulatory purposes.

Effective upon the Company’s acquisition of StockCross on January 1, 2020, the requirements and special reserve accounts of MSCO and StockCross were combined.

MSCO is subject to Exchange Act Rule 15c3-3, referred to as the “Customer Protection Rule,” which requires segregation of funds in a special reserve account for the exclusive benefit of customers.

As of December 31, 2022, the Company had approximately $ 135.2 million in cash deposits in special reserve accounts and $ 141.0 million in securities segregated for regulatory purposes.

As of December 31, 2021, the Company did not have any securities segregated for regulatory purposes.

Receivables From and Payables To Customers

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Receivables from customers include margin loans to securities brokerage clients and other trading receivables.

Margin loans are collateralized by customers securities and are carried at the amount receivable, net of an allowance for credit losses.

Margin loans are collateralized by customer securities and are carried at the amount receivable, net of an allowance for credit losses.

Collateral is required to be maintained at specified minimum levels at all times.

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The Company expects the borrowers will continually replenish the collateral as necessary because the Company subjects the borrowers to an internal qualification process to align investing objectives and risk tolerance in addition to monitoring customer activity.

The Company elected the practical expedient for Topic 326 which permits it to compare the amortized cost basis of the loaned amount with the fair value of collateral received at the reporting date to measure the estimate of expected credit losses.

The Company has no expectation of credit losses for its receivables from customers as of December 31, 2021 and 2020.

The Company elected the practical expedient for FASB ASC Topic 326 – “Financial Instruments – Credit Losses” (“Topic 326”) which permits it to compare the amortized cost basis of the loaned amount with the fair value of collateral received at the reporting date to measure the estimate of expected credit losses.

The Company had no expectation of credit losses for its receivables from customers as of December 31, 2022 and 2021.

Securities beneficially owned by customers, including those that collateralize margin or other similar transactions, are not reflected in the statements of financial condition.

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

Receivables from and payables to broker-dealers includes receivables from or payables to MSCO and RISE clearing broker-dealers, fail-to-deliver and fail-to-receive items, and amounts receivable for unsettled regular-way transactions.

Receivables from and payables to broker-dealers and clearing organizations includes amounts receivables from or payables to MSCO and RISE clearing broker-dealers, fail-to-deliver and fail-to-receive items, and amounts receivable for unsettled regular-way transactions.

Deposits with broker-dealers and clearing organizations include amounts held on deposit with broker-dealers and clearing organizations.

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Receivables from these broker-dealers and clearing organizations are subject to clearing agreements and include the net receivable from net monthly revenues as well as cash on deposit.

MSCO customer transactions for the years ended December 31, 2022 and 2021 were both self-cleared and cleared on a fully disclosed basis through NFS.

RISE customer transactions for the years ended December 31, 2022 and 2021 were cleared on fully disclosed basis through GSCO and Pershing.

The Company signed a four-year renewal with NFS commencing August 1, 2021 and ending on July 31, 2025, and NFS’s fees are offset against the Company’s revenues on a monthly basis.

All other broker-dealer and clearing organization relationships operate on a month-to-month basis.

Receivables from and deposits with broker-dealers and clearing organizations are in scope of the amended guidance for Topic 326.

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Further, management reassessed the risk characteristics of its receivables and applied the collateral maintenance practical expedient for the secured receivables in line with the CECL guidance.

As a result, the Company has no expectation of credit losses for these arrangements as of December 31, 2021 and 2020.

MSCO customer transactions for the year ended December 31, 2021 and 2020 were both self-cleared and cleared on a fully disclosed basis through National Financial Services Corp.

(“NFS”).

RISE customer transactions for the year ended December 31, 2021 and 2020 were cleared on fully disclosed basis through GSCO and Pershing LLC (“Pershing”).

The Company signed a four-year renewal with NFS commencing August 1, 2021 and ending on July 31, 2025, and NFS’s fees are offset against the Company’s revenues on a monthly basis.

All other broker-dealer and clearing organization relationships operate on a month-to-month basis.

As a result, the Company had no expectation of credit losses for these arrangements as of December 31, 2022 and 2021.

Current Expected Credit Losses

The Company follows Topic 326 which applies to financial assets measured at amortized cost, held-to-maturity debt securities and off-balance sheet credit exposures.

For on-balance sheet assets, an allowance must be recognized at the origination or purchase of in-scope assets and represents the expected credit losses over the contractual life of those assets.

Expected credit losses on off-balance sheet credit exposures must be estimated over the contractual period the Company is exposed to credit risk as a result of a present obligation to extend credit.

The impact to the periods presented is not material since the Company’s in-scope assets are primarily subject to collateral maintenance provisions for which the Company elected to apply the practical expedient of reporting the difference between the fair value of the collateral and the amortized cost for the in-scope assets as the allowance for current expected credit losses.

Securities Borrowed and Securities Loaned

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The Company has elected to use this approach for its allowance for credit losses on securities borrowed.

As a result of this election, and the fully collateralized nature of these arrangements, the Company has no expectation of credit losses on its securities borrowed balances as of December 31, 2021 and 2020.

As a result of this election, and the fully collateralized nature of these arrangements, the Company had no expectation of credit losses on its securities borrowed balances as of December 31, 2022 and 2021.

Securities Owned and Securities Sold, Not Yet Purchased at Fair Value

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Depreciation for equipment is calculated using the straight-line method over the estimated useful lives of the assets, generally not exceeding four years .

Office facilities are amortized over the shorter of their estimated useful life or the remaining lease term unless the lease transfers ownership of the underlying asset to the lessee, or the lessee is reasonably certain to exercise an option to purchase the underlying asset, in which case the lessee will amortize over the estimated useful life of the leasehold improvements.

Depreciation for property is calculated using the straight-line-method over the estimated useful life of the property, not exceeding 40 years.

Depreciation for property is calculated using the straight-line-method over the estimated useful life of the property, not exceeding forty years .

Software, Net

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Depending on the terms of the contract, the Company either records costs from software hosting arrangements as prepaid assets and amortizes them over the contract term, or the costs are expensed as incurred.

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The Company enters into certain software hosting arrangements where the cost for professional development services is capitalized and then amortized over the term of the contract.

Other software costs such as routine maintenance and various data services to provide market information to customers are expensed as incurred.

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The Company enters into certain software hosting arrangements where the associated professional development services work is capitalized and then amortized over the term of the contract.

Other software costs such as routine maintenance and various data services are expensed as incurred.

The Company reviews all relevant contracts to determine if the contract contains a lease at its inception date.

A contract contains a lease if the contract conveys the right to control the use of an underlying asset for a period of time in exchange for consideration.

If the Company determines that a contract contains a lease, it recognizes, in the statements of financial condition, a lease liability and a corresponding right-of-use asset on the commencement date of the lease.

The lease liability is initially measured at the present value of the future lease payments over the lease term using the rate implicit in the lease or, if not readily determinable, the Company’s secured incremental borrowing rate.

An operating lease right-of-use asset is initially measured at the value of the lease liability minus any lease incentives and initial direct costs incurred plus any prepaid rent.

The Company’s leases are classified as operating leases and consist of real estate leases for office space, data centers and other facilities.

Each lease liability is measured using the Company’s secured incremental borrowing rate, which is based on an internally developed rate based on the Company’s size, growth, risk profile and a duration similar to the lease term.

The Company’s leases have remaining terms of approximately 1 to 4.5 years as of December 31, 2022.

The Company does not include renewal options as the renewal options are not reasonably certain to be exercised;

however, the Company continues to monitor the lease renewal options.

The Company’s operating leases contain both lease components and non-lease components.

Non-lease components are distinct elements of a contract that are not related to securing the use of the underlying assets, such as common area maintenance and other management costs.

The Company has elected the practical expedient to not separate lease and non-lease components, and as such, the variable lease cost primarily represents variable payments such as common area maintenance and utilities which are usually determined by the leased square footage in proportion to the overall office building.

Operating lease expense is recognized on a straight-line basis over the lease term and is included in line item “Rent and occupancy” in the statements of operations.

Equity Method Investments

Investments in which the Company has the ability to exercise significant influence, but does not control, are accounted for under the equity method of accounting and are included in the equity method investment in related party line item in the statements of financial condition.

Under this method of accounting, the Company’s share of the net income or loss of the investee is presented before the income before provision for income taxes on the statements of income.

Investments in which the Company has the ability to exercise significant influence, but does not control, are accounted for under the equity method of accounting and are included in the line item “Equity method investment in related party” in the statements of financial condition.

Under this method of accounting, the Company’s share of the net income or loss of the investee is presented before the income before provision for income taxes on the statements of operations.

The Company evaluates its equity method investments whenever events or changes in circumstance indicate that the carrying amounts of such investments may be impaired.

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Certain identifiable intangible assets the Company acquires such as customer relationships and trade names are amortized over their estimated useful lives on a straight-line basis.

Amortization expense associated with such intangible assets is included in the line item “Depreciation and amortization”

on the statements of income.

Amortization expense associated with such intangible assets is included in the line item “Depreciation and amortization” on the statements of operations.

The Company evaluates intangible assets for impairment on an annual basis or when events or changes indicate the carrying value may not be recoverable.

The Company also evaluates the remaining useful lives of intangible assets on an annual basis or when events or changes warrants the remaining period of amortization to be revised.

Goodwill is recognized as a result of business combinations and represents the excess of the purchase price over the fair value of net tangible assets and identifiable intangible assets.

The Company evaluates goodwill for impairment on an annual basis or when events or changes indicate the carrying value may not be recoverable.

The Company has the option of performing a qualitative assessment of goodwill to determine whether it is more likely than not that the fair value of its equity is less than the carrying value.

If it is more likely than not that the fair value exceeds the carrying value, then no further testing is necessary;

otherwise, the Company must perform a two-step quantitative assessment of goodwill.

The Company may elect to bypass the qualitative assessment and proceed directly to performing a two-step quantitative assessment.

During the year ended December 31, 2021, the Company concluded that the intangible assets acquired from the acquisition of RISE were fully impaired.

For the years ended December 31, 2022 and 2021, impairment loss related to intangible assets of $ 0 and $ 699,000 was recorded in the statements of operations, respectively.

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Goodwill represents the excess purchase price of businesses acquired over the fair value of the identifiable net assets acquired.

Goodwill is not subject to amortization but rather is evaluated for impairment annually, or more frequently if events occur or circumstances change indicating it would more likely than not result in a reduction of the fair value of the reporting unit below its carrying value, including goodwill.

Goodwill may be evaluated for impairment by performing a qualitative assessment.

This qualitative assessment considers various financial, macroeconomic, industry, and reporting unit specific qualitative factors.

If the qualitative assessment indicates that it is more likely than not that the fair value of the reporting unit is less than its carrying amount, including goodwill, or, if for any other reason the Company determines to it be appropriate, then a quantitative assessment will be performed.

The quantitative assessment process utilizes an income and market approach to arrive at an indicated fair value range for the reporting unit.

The fair value calculated for the reporting unit is compared to its carrying amount, including goodwill, to ascertain if goodwill impairment exists.

If the fair value exceeds the carrying amount, including goodwill for the reporting unit, it is not considered impaired.

If the fair value is below the carrying amount, including goodwill for the reporting unit, then an impairment charge is recognized for the amount by which the carrying amount exceeds the calculated fair value, up to but not exceeding the amount of goodwill allocated to the reporting unit.

The Company’s annual impairment test date is December 31.

The Company completed a qualitative assessment for its reporting unit during its most recent annual impairment review.

The Company concluded that it has one reportable segment and tests goodwill on a consolidated basis.

Based on this qualitative assessment, the Company determined that there was no evidence of impairment to the balance of its goodwill as of December 31, 2022 and 2021.

Payables to Non-Customers

Payables to non-customers includes amounts due on cash and margin transactions on accounts owned and controlled by principal officers and directors of MSCO.

Payables to non-customers include amounts due on cash and margin transactions on accounts owned and controlled by principal officers and directors of MSCO.

Payables to non-customers amounts include any amounts received from interest on credit balances.

Effective upon the Company’s acquisition of StockCross on January 1, 2020, the Company no longer had any proprietary accounts of introducing broker-dealers.

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Drafts Payable

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Deferred Contract Incentive

The Company entered into an amendment with its agreement with NFS whereby the Company received a one-time business development credit of $ 3 million, and NFS will pay the Company four annual credits of $ 100,000 , which are recorded within the line item “Deferred contract incentive”

on the statements of financial condition.

The Company entered into an amendment with its agreement with NFS whereby the Company received a one-time business development credit of $ 3 million, and NFS will pay the Company four annual credits of $ 100,000 , which are both recorded in the line item “Deferred contract incentive” on the statements of financial condition.

Annual credits shall be paid on the anniversary of the date on which the first credit was paid.

The business development credit and annual credits will be recognized as contra expense over four years and one year, respectively, in the line item “Clearing fees, including execution costs”

on the statements of income.

The business development credit and annual credits will be recognized as contra expense over four years and one year , respectively, in the line item “Clearing fees, including execution costs” on the statements of operations.

Revenue Recognition

Revenue from contracts with customers and counterparties includes commissions and fees, principal transactions, market making, stock borrow / stock loan, advisory fees, interest, marketing and distribution fees, as well as other income.

The recognition and measurement of revenue is based on the assessment of individual contract terms.

Significant judgment is required to determine whether performance obligations are satisfied at a point in time or over time, how to allocate transaction prices where multiple performance obligations are identified, when to recognize revenue based on the appropriate measure of the Company’s progress under the contract, and whether constraints on variable consideration should be applied due to uncertain future events.

Advertising Costs

Advertising costs are expensed as incurred and were $ 44,000 and $ 0 for the year ended December 31, 2021, and 2020, respectively.

The primary sources of revenue for the Company are as follows:

Commissions and Fees

The Company earns commission revenue for executing trades for clients in individual equities, options, insurance products, futures, fixed income securities, as well as certain third-party mutual funds and ETFs.

The Company also earns commission revenue from an agreement with JonesTrading Institutional Service, LLC (“JonesTrading”) whereby JonesTrading pays the Company a percentage of the net revenue produced by certain institutional customers less any related expenses.

The Company earned $ 137,000 in net revenue and $ 22,000 in net expense for the years ended December 31, 2022 and 2021, respectively.

Commission revenue associated with combined trade execution and clearing services, as well as trade execution services on a standalone basis, is recognized at a point in time on the trade date when the performance obligation is satisfied.

The performance obligation is satisfied on the trade date because that is when the underlying financial instrument or purchaser is identified, the pricing is agreed upon, and the risks and rewards of ownership have been transferred to / from the customer.

The Company enters into arrangements with managed accounts of other pooled investment vehicles (funds) to distribute shares to investors (“distribution fees”).

The Company may receive distribution fees paid by the fund up front, over time, upon the investor’s exit from the fund (that is, a contingent deferred sales charge), or as a combination thereof.

The Company believes that its performance obligation is the sale of securities to investors and as such this is fulfilled on the trade date.

Any fixed amounts are recognized on the trade date and variable amounts are recognized to the extent it is probable that a significant revenue reversal will not occur until the uncertainty is resolved.

For variable amounts, as the uncertainty is dependent on the value of the shares at future points in time as well as the length of time the investor remains in the fund, both of which are highly susceptible to factors outside the Company’s influence, the Company does not believe that it can overcome this constraint until the market value of the fund and the investor activities are known, which are usually monthly or quarterly.

Distribution fees recognized in the current period are primarily related to performance obligations that have been satisfied in prior periods.

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Principal Transactions and Proprietary Trading

Principal transactions and proprietary trading primarily represent two business lines.

The first business line is riskless transactions in which the Company, after executing a solicited order, buys or sells securities as principal and at the same time buys or sells the securities with a markup or markdown to satisfy the order.

The second business line is entering into transactions where U.S.

government securities and other securities are traded by the Company.

Principal transactions and proprietary trading are recognized at a point in time on the trade date when the performance obligation is satisfied.

Market Making

Market making revenue is generated from the buying and selling of securities.

Market making transactions are recorded on a trade-date basis as the securities transactions occur.

Securities owned and securities sold, not yet purchased are recorded at fair market value at the end of the reporting period.

Stock Borrow / Stock Loan

The Company borrows securities on behalf of retail clients to facilitate short trading, loans excess margin and fully-paid securities from client accounts, facilitates borrow and loan contracts for broker-dealer counterparties, and provides stock locate services to broker-dealer counterparties.

The Company recognizes self-clearing revenues net of operating expenses related to stock borrow / stock loan.

Stock borrow / stock loan also includes any revenues generated from the Company’s fully paid lending programs on a self-clearing or introducing basis.

The Company does not utilize stock borrow / stock loan activities for the purpose of financing transactions.

The performance obligation is satisfied on the contract date because that is when the underlying financial instrument or purchaser is identified, the pricing is agreed upon, and the risks and rewards of ownership have been transferred to / from the counterparty.

For the year ended December 31, 2022, stock borrow / stock loan revenue was $14,518,000 ($33,883,000 gross revenue less $19,365,000 expenses).

For the year ended December 31, 2021, stock borrow / stock loan revenue was $11,864,000 ($29,441,000 gross revenue minus $17,577,000 expenses).

Advisory Fees

The Company earns advisory fees associated with managing client assets.

The performance obligation related to this revenue stream is satisfied over time;

however, the advisory fees are variable as they are charged as a percentage of the client’s total asset value, which is determined at the end of the quarter.

Interest, Marketing and Distribution Fees

The Company earns interest from clients’ accounts, net of payments to clients’ accounts, and on the Company’s bank balances and securities.

Interest income also includes interest payouts from introducing relationships related to short interest, net of charges.

The Company also earns margin interest which is the net interest charged to customers for holding financed margin positions.

Marketing and distribution fees consist of 12b-1 fees which are trailing payments from money market funds.

Interest, marketing and distribution fees are recorded as earned.

The Company enters into arrangements with managed accounts of other pooled investment vehicles (funds) to distribute shares to investors.

The Company may receive distribution fees paid by the fund up front, over time, upon the investor’s exit from the fund (that is, a contingent deferred sales charge), or as a combination thereof.

The Company believes that its performance obligation is the sale of securities to investors and as such this is fulfilled on the trade date.

Distribution fees recognized in the current period are primarily related to performance obligations that have been satisfied in prior periods.

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Other income represents fees generated from consulting services to technology providers, corporate services client fees, payment for order flow, and transactional fees generated from client accounts.

Transactional fees are recorded concurrently with the related activity.

Other income is recorded as earned.

Costs to Obtain or Fulfill a Contract;

For the periods presented, there were no costs capitalized related to obtaining or fulfilling a contract with a customer, and thus the Company has no balances for contract assets or contract liabilities.

The Company concludes that its revenue streams have the same underlying economic factors, and as such, no disaggregation of revenue is required.

Performance Obligation

The following table presents each revenue category and its related performance obligation:

Revenue Stream

Performance Obligation

Commissions and fees, Principal transactions and proprietary trading, Market making, Stock borrow / stock loan, Advisory fees

Provide financial services to customers and counterparties

Stock borrow / stock loan

Provide financial services to customers and Counterparties, net of expenses

Marketing and distribution fees

Provide financial services to customers and Counterparties, Variable:

n/a, recorded as earned

Interest, Other income

N/A, recorded as earned

Share-Based Compensation

The Company grants share-based compensation, which is described in the Employee Benefit Plan section of Note 18 – Commitments, Contingencies, and Other.

The Company accounts for share-based compensation in accordance with ASC Topic 718, “Compensation-Stock Compensation,” which establishes accounting for share-based compensation to employees for services.

Under the provisions of ASC 718-10-35, share-based compensation cost is measured at the grant date, based on the fair value of the award on that date and is expensed at the grant date (for the portion that vests immediately) or ratably over the related vesting periods.

Advertising and Promotion

Advertising and promotion costs are expensed as incurred and were $ 543,000 and $ 44,000 for the years ended December 31, 2022, and 2021, respectively.

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The Company accounts for income taxes under the asset and liability method, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements.

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The Company records uncertain tax positions in accordance with ASC 740 on the basis of a two-step process in which (1) the Company determines whether it is more likely than not that the tax positions will be sustained on the basis of the technical merits of the position and (2) for those tax positions that meet the more-likely-than-not recognition threshold, the Company recognizes the largest amount of tax benefit that is more than 50 percent likely to be realized upon ultimate settlement with the related tax authority.

The Company recognizes interest and penalties related to unrecognized tax benefits on the provision for income taxes line in the statements of income.

The Company recognizes interest and penalties related to unrecognized tax benefits on the provision for income taxes line in the statements of operations.

Accrued interest and penalties would be included on the related tax liability line in the statements of financial condition.

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Per Share Data

Basic earnings per share is calculated by dividing net income available to the Company’s common stockholders by the weighted average number of outstanding common shares during the year.

Diluted earnings per share is calculated by dividing net income available to the Company’s common stockholders by the number of shares outstanding under the basic calculation and adding, all dilutive securities, which consist of options.

The Company has no dilutive securities as of December 31, 2021 and 2020.

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Basic earnings per share is calculated by dividing net income available to the Company’s common stockholders by the weighted average number of outstanding common shares during the year.

The Company has no dilutive securities as of both December 31, 2022 and 2021.

Accounting Standards Adopted in Fiscal 2022

ASU 2020-01 - In January 2020, the FASB issued ASU 2020-01, “Investments - Equity Securities (Topic 321), Investments - Equity Method and Joint Ventures (Topic 323), and Derivatives and Hedging (Topic 815) - Clarifying the Interactions between Topic 321, Topic 323, and Topic 815.”

The ASU is based on a consensus of the Emerging Issues Task Force and is expected to increase comparability in accounting for these transactions.

ASU 2016-01 made targeted improvements to accounting for financial instruments, including providing an entity the ability to measure certain equity securities without a readily determinable fair value at cost, less any impairment, plus or minus changes resulting from observable price changes in orderly transactions for the identical or a similar investment of the same issuer.

Among other topics, the amendments clarify that an entity should consider observable transactions that require it to either apply or discontinue the equity method of accounting.

For public business entities, the amendments in the ASU are effective for fiscal years beginning after December 15, 2020, and interim periods within those fiscal years.

Early adoption is permitted.

The Company adopted this ASU on January 1, 2021.

The adoption of this standard did not have a material impact on the Company’s financial statements.

ASU 2019-12 - In December 2019, the FASB issued ASU 2019-12, “Income Taxes (Topic 740) Simplifying the Accounting for Income Taxes”, as part of its initiative to reduce complexity in the accounting standards.

The ASU eliminates certain exceptions from ASC 740 related to the approach for intraperiod tax allocation, the methodology for calculating income taxes in an interim period and the recognition of deferred tax liabilities for outside basis differences.

ASU 2019-12 also clarifies and simplifies other aspects of the accounting for income taxes.

The guidance is effective for fiscal years beginning after December 15, 2020 and for interim periods within those fiscal years.

The Company adopted this ASU on January 1, 2021.

The adoption of this standard did not have a material impact on the Company’s financial statements.

ASU 2016-13 - In June 2016, the FASB issued ASU 2016-13, “Measurement of Credit Losses on Financial-Instruments”.

Under CECL, the allowance for losses for financial assets that are measured at amortized cost reflects management’s estimate of credit losses over the remaining expected life of the financial assets.

The Company adopted this ASU on January 1, 2021 using the modified retrospective approach for all in-scope assets, which did not result in an adjustment to the opening balance in retained earnings.

The ASU impacts only those financial instruments that are carried by the Company at amortized cost such as securities borrowed / loaned, receivables from customers, non-customers, broker dealers and clearing organizations and other receivables.

The adoption of this ASU did not have a material impact to the Company's financial statements.

Management has evaluated other recently issued accounting pronouncements and does not believe that any of these pronouncements will have a material impact on the Company’s financial statements and related disclosures as of December 31, 2021.

Overview of Acquisition

Established in 1971, StockCross was one of the largest privately-owned brokerage firms in the nation and its operations consisted primarily of market making, fixed-income products distribution, online or broker-assisted equity trading, securities lending, and equity stock plan services.

Prior to being acquired by the Company, StockCross and the Company were affiliated entities through common ownership and had various related party transactions.

In January 2019, the Company acquired approximately 15 % ownership of StockCross.

Effective January 1, 2020, the Company acquired the remaining 85 % of StockCross’

outstanding shares and StockCross was merged with and into MSCO.

The purchase price paid was approximately $ 29,750,000 or 3,298,774 shares of the Company’s common stock which was issued in connection with the acquisition.

The acquisition of StockCross added incremental business lines, revenue streams, cost synergies and additional experienced management team members to MSCO.

Accounting for Acquisition

Prior to and as of the date of the acquisition, the Company and StockCross were entities under common control of the Gebbia Family.

As such, the acquisition was accounted for as a transaction between entities under common control.

The acquisition represented a change in reporting entity.

As such, upon the closing of the acquisition, the net assets of the Company were combined with those of StockCross at their historical carrying amounts and no goodwill was recorded as part of the transaction.

Siebert 2021 Form-10K 50

The Company acquired various assets and liabilities from StockCross which were recorded at their historical carrying amounts and summarized below:

Carrying Value

Assets acquired

Cash and cash equivalents

Cash and securities segregated for regulatory purposes

Receivables from customers

Receivables from broker-dealers and clearing organizations

Other receivables

Prepaid expenses and other assets

Securities borrowed

Securities owned, at fair value

Furniture, equipment and leasehold improvements, net

Lease right-of-use assets

Deferred tax assets

Total Assets acquired

Liabilities assumed

Payables to customers

Payables to non-customers

Drafts payable

Payables to broker-dealers and clearing organizations

Accounts payable and accrued liabilities

Securities loaned

Securities sold, not yet purchased, at fair value

Notes payable –

related party

Lease liabilities

Total Liabilities assumed

Net Assets acquired

The Company did not adopt any new accounting standards during the year ended December 31, 2022.

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 December 31, 2022.

Siebert 2022 Form-10K 52

Transactions with Tigress and Hedge Connection

Initial Transaction

On November 16, 2021, the Company entered into an agreement with Tigress, a Delaware limited liability company, and a disabled and woman-owned financial services firm.

As part of the agreement, (i) Tigress transferred to the Company limited liability company membership interests representing 24% of the outstanding membership interests in Tigress;

and (ii) the Company transferred to Tigress limited liability company membership interests representing 24% of the outstanding membership interests of RISE and 1,449,525 shares of the Company’s common stock.

The Company’s common stock was issued pursuant to Section 4(a)(2) of the Securities Act of 1933, as amended.

Reorganization Agreement

On October 18, 2022, the Company entered into a Reorganization Agreement (“Reorganization Agreement”) with Tigress whereby the Company exchanged 7 % of the outstanding membership interests in Tigress for all of Tigress’ ownership interest in RISE.

As of the date of this Report, the Company is currently evaluating the terms upon which it will transfer its remaining ownership of Tigress to Gloria E.

Gebbia pursuant to the Reorganization Agreement.

The net loss as a result of this transaction was $ 92,000 , which is in the line item “Loss on sale of equity method investment in related parties” in the statements of operations.

As a result of the transaction described above as well as the fact that Tigress and the financial services industry had been impacted by adverse market conditions resulting in a decline in Tigress’ performance and future projections, management concluded that a triggering event had occurred and evaluated if the investment in Tigress was other than temporarily impaired.

Thus, the Company performed an impairment test as of October 18, 2022, and estimated the fair value of Tigress 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.

Based upon the updated valuation, the Company recognized an impairment of $ 4,015,000 which is included in line item “Impairment of equity method investment in related party” in the statements of operations.

Hedge Connection

Initial Transaction

On January 21, 2022, RISE entered into an agreement with Hedge Connection, a Florida corporation and a woman-owned fintech company founded by Ms.

Vioni that provides capital introduction software solutions for the prime brokerage industry.

Pursuant to the agreement, (i) Hedge Connection transferred to the Company common stock representing 20 % of the outstanding post-closing issued and outstanding capitalization in Hedge Connection for a consideration of $ 600,000 , to be paid in three installments over 180 days, as well as approximately 3.33 % of the issued and outstanding membership interests of RISE;

(ii) the Company acquired an option from Ms.

Vioni to acquire 100% of the remaining interest in Hedge Connection at fair value market at the time of the option exercise, provided such valuation of Hedge Connection is not less than $ 5 million;

(iii) the Company acquired a technology license agreement from Hedge Connection to use its capital introduction software, Fintroz, for an annual license fee of $ 250,000 ;

Vioni provided the Company with the right to appoint one director to the Board of Directors of Hedge Connection;

Vioni was appointed to the Board of Directors of RISE as well as to the position of President of RISE Prime – Capital Introduction, a division of RISE.

Siebert 2022 Form-10K 53

Termination Agreement

On October 18, 2022, the Company entered into a Termination Agreement (“Termination Agreement”) with Hedge Connection and Ms.

Pursuant to the Termination Agreement, the parties terminated the Purchase Agreement, dated January 21, 2022.

Under the terms of the Termination Agreement, the Company re-conveyed to Hedge Connection, Hedge Connection common stock representing 20% of Hedge Connection and the related option from Ms.

Vioni to acquire 100 % of Ms.

Vioni’s remaining interest in Hedge Connection in exchange for 3.17 % of RISE and the cancellation of the Company’s obligation to repay the remaining $ 250,000 of its note payable to Hedge Connection.

The Termination Agreement also terminates the Hedge Connection technology license agreement.

Pursuant to the Termination Agreement, the Company shall assign to Tigress prospective prime brokerage customers of the Company who were solicited by the Company from January 1, 2022 through the closing date of the Reorganization Agreement.

In exchange, Tigress will split revenue with the Company on certain customers pursuant to the Reorganization Agreement.

The revenue recorded from this agreement was immaterial for the year ended December 31, 2022.

The net loss as a result of this transaction was $ 627,000 , which is in the line item “Loss on sale of equity method investment in related parties” in the statements of operations.

The components that resulted in the net loss of $ 627,000 were the writing off of the carrying value of the Company’s investment in Hedge Connection of $ 1,020,000 , offset by the forgiveness of the notes payable to Hedge Connection of $ 250,000 as well as the net return of RISE treasury stock of $ 143,000 .

During the first quarter of 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 and affiliates.

Through March 30, 2022, Siebert continued to hold a majority ownership interest in RISE.

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 of the aforementioned transactions, Siebert’s direct ownership percentage in RISE declined from 76 % as of December 31, 2021 to approximately 44 % as of March 31, 2022.

The change in membership interest on March 31, 2022 required Siebert to reassess its interest in RISE in accordance with Accounting Standards Codification (“ASC”) Topic 810 – Consolidation.

As of March 31, 2022, Siebert determined that RISE was a VIE as the equity holders lack the characteristics of a controlling financial interest.

Siebert holds a variable interest in RISE and is the primary beneficiary of RISE since it holds both the power to direct the activities of RISE that most significantly impact RISE’s economic performance, as well as the obligation to absorb losses and right to receive the returns from RISE that would be significant to RISE.

Accordingly, Siebert consolidated RISE as a VIE for the period from March 31, 2022 through October 18, 2022.

As a result of the 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.

As of December 31, 2022, RISE reported assets of $ 1.3 million and liabilities of $ 0.1 million.

As of December 31, 2021, RISE reported assets of $ 3.3 million and liabilities of $ 0.7 million.

There are no restrictions on the consolidated VIE’s assets.

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

4 unchanged sentences

DTCC / OCC / NSCC (1)

Goldman Sachs

Pershing Capital

Securities fail-to-deliver

3 unchanged sentences

Securities fail-to-receive

Payables to broker-dealers

Total Payables to broker-dealers and clearing organizations

Siebert 2021 Form-10K 51

Under the Depository Trust and Clearing Corporation (“DTCC”) shareholders’

agreement, MSCO is required to participate in the DTCC common stock mandatory purchase.

As of December 31, 2021 and 2020, MSCO had shares of DTCC common stock valued at approximately $ 905,000 and $ 937,000 , respectively, which are included within the line item “Deposits with broker-dealers and clearing organizations”

on the statements of financial condition.

(1) Depository Trust and 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”).

Siebert 2022 Form-10K 54

Under the DTCC shareholders’ agreement, MSCO is required to participate in the DTCC common stock mandatory purchase.

As of December 31, 2022 and 2021, MSCO had shares of DTCC common stock valued at approximately $ 1,054,000 and $ 905,000 , respectively, which are included in 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.

The resulting asset of RISE and liability of MSCO are eliminated in consolidation.

There was no income or expense related to this clearing relationship for the year ended December 31, 2022.

The Company is in the process of terminating its clearing relationships with GSCO and Pershing as of December 31, 2022.

As of the date of this report, the Company is no longer doing active business with these clearing vendors, and anticipates the full termination of these relationships by the end of the first quarter of 2023.

Prepaid Service Contract

On April 21, 2020, the Company entered into a Master Services Agreement (“MSA”), with InvestCloud, Inc.

(“InvestCloud”).

Pursuant to the MSA, InvestCloud agreed to provide the Company with the InvestCloud Platform, a new client and back end interface and related functionalities for the Company’s key operations.

The Company agreed to pay InvestCloud as consideration therefore during the initial three-year term an annual license fee of $ 600,000 as well as an upfront professional service fee of $ 1.0 million for one-time configuration, installation and customization of the software.

Following the initial three-year term, the MSA will automatically renew for additional one-year terms unless terminated by the Company upon 120 days’

In connection with the MSA, InvestCloud entered into a side letter agreement with the Company pursuant to which InvestCloud acquired 193,906 shares of the Company’s restricted common stock at a per share price of $ 5.81 (the Company’s share price as of the close of May 12, 2020) for a total of $ 1.1 million for professional services, which approximates the cost of services to be provided, to integrate the InvestCloud Platform into the Company’s existing systems.

The common stock was issued on May 12, 2020 pursuant to Section 4(a)(2) of the Securities Act of 1933, as amended.

The Company initially recorded a prepaid asset equal to the $ 2.1 million of the total professional services related to the development work to be performed by InvestCloud, which is within the line item “Prepaid service contract”

on the statements of financial condition.

The Company amortizes this asset over the 3 -year term of the contract, a period during which the arrangement is noncancelable.

The license fees related to the Company’s use of the InvestCloud Platform are prepaid three months in advance and are within the line item “Prepaid service contract”

on the statements of financial condition.

These prepaid license fees are amortized over the three-month term.

The amortization for all the prepaid assets related to InvestCloud is within the line item “Technology and Communications”

on the statements of income.

The expense related to share-based payments to InvestCloud for professional services was $ 376,000 and $ 219,000 for the year ended December 31, 2021, and 2020, respectively.

The total cost related to InvestCloud was $ 959,000 and $ 764,000 for the year ended December 31, 2021, and 2020, respectively.

In April 2020, the Company entered into an agreement with a technology partner in which the Company paid the technology partner $ 1.0 million and 193,906 shares of the Company’s restricted common stock for a total of $ 2.1 million 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 addition, the Company agreed to pay an annual license fee of $ 600,000 for this software.

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.

The consulting fee income was recognized on a straight-line basis over the service period.

The Company recorded a total of $ 1.7 million for the year ended December 31, 2022 from the technology partner which is included in the line item “Other income” on the statements of operations.

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.

Per the terms of the respective termination agreements, neither the Company nor the technology partner will have any further obligations to provide future services.

As part of the termination, the technology partner returned 193,906 shares of the Company’s common stock previously issued.

The Company wrote off the remaining balance of the prepaid service contract of $ 532,000 and the Company received $ 950,000 which is included in the line item “Other income” on the statements of operations.

The expense related to share-based payments to the technology partner for professional services was $ 239,000 and $ 376,000 for the years ended December 31, 2022 and 2021, respectively.

The total expense related to the technology partner was $ 711,000 and $ 959,000 for the years ended December 31, 2022 and 2021, respectively, which is included in “Technology and communications” on the statements of operations.

Fair Value Measurements

ASC 820 defines fair value, establishes a framework for measuring fair value, and establishes a hierarchy of fair value inputs.

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.

Valuation techniques that are consistent with the market, income, or cost approach, as specified by ASC 820, are used to measure fair value.

The fair value hierarchy prioritizes the inputs to valuation techniques used to measure fair value into three broad levels:

Level 1 - Quoted prices (unadjusted) in active markets for an identical asset or liability that the Company can assess at the measurement date.  

Level 2 - Inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly or indirectly.  

Level 3 - Unobservable inputs for the asset or liability.

To the extent that the valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair value requires more judgment.

As such, the degree of judgment exercised in determining fair value is greatest for instruments categorized in level 3.

Siebert 2021 Form-10K 52

The inputs used to measure fair value may fall into different levels of the fair value hierarchy.

Fair value is a market-based measure considered from the perspective of a market participant rather than an entity-specific measure.

A description of the valuation techniques applied to the Company’s major categories of assets and liabilities measured at fair value on a recurring basis is as follows:

government securities:

government securities are valued using quoted market prices and as such, valuation adjustments are not applied.

Accordingly, U.S.

government securities are generally categorized in level 1 of the fair value hierarchy.

Certificates of deposit:

Certificates of deposit are included in investments valued at cost, which approximates fair value.

When certificates of deposits are held directly with banking institutions and issued directly to the Company, these are categorized within cash equivalents in level 2 of the fair value hierarchy.

When certificates of deposits are available for trading, they are categorized within securities owned, at fair value in level 2 of the fair value hierarchy.

Corporate bonds:

The spread data used is for the same maturity as the bond.

If the spread data does not reference the issuer, then data that references a comparable issuer is used.

Corporate bonds are generally categorized in level 2 of the fair value hierarchy.

Equity securities:

Equity securities are valued based on quoted prices from the exchange.

To the extent these securities are actively traded, valuation adjustments are not applied, and they are categorized in level 1 of the fair value hierarchy.

Securities quoted in inactive markets or with observable inputs are categorized into level 2.

If there are no observable inputs or quoted prices, securities are categorized as level 3 assets in the fair value hierarchy.

Level 3 assets are not actively traded and subjective estimates based on managements’

assumptions are utilized for valuation.

Fair Value Hierarchy Tables

The following tables present the Company's fair value hierarchy for those assets and liabilities measured at fair value on a recurring basis as of the periods presented.

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.

Siebert 2022 Form-10K 55

As of December 31, 2022

Cash and securities segregated for regulatory purposes

government securities

Securities owned, at fair value

1 unchanged sentence

Certificates of deposit

Municipal securities

Corporate bonds

4 unchanged sentences

Total Securities sold, not yet purchased, at fair value

Siebert 2021 Form-10K 53

As of December 31, 2021

8 unchanged sentences

Total Securities sold, not yet purchased, at fair value

* As of December 31, 2021 and 2020, the U.S.

government securities had maturity dates of August 15, 2024 and August 31, 2021, respectively.

A description of the valuation techniques applied to the Company’s major categories of assets and liabilities measured at fair value on a non-recurring basis is as follows:

Non-marketable equity securities:

The Company’s non-marketable equity securities are investments in privately held companies that do not have a readily determinable market value.

Due to the absence of quoted market prices, these are classified as level 3 since considerable judgement and estimation is involved in determining the fair value of these securities.

The table below summarized the total carrying value of Level 3 equity assets and changes made during the periods presented.

Changes in Level 3 Equity Assets

Year Ended December 31, 2020

Valuation Technique

Reason for Change

Securities owned, at fair value

Balance –

January 1, 2020

Liquidation value based on valuation report

Sale of equity security

Balance –

December 31, 2020

The following represents financial instruments in which the ending balances as of December 31, 2021 and 2020 are not carried at fair value on the statements of financial condition:

*As of December 31, 2021, the U.S.

government securities had a maturity date of August 15, 2024.

As of December 31, 2022, the Company had U.S.

government securities with the below market values and maturity dates:

Market value of U.S.

government securities

Maturing 03/23/2023 , 3.750 % Discount Rate

Maturing 05/18/2023 , 2.700 % Discount Rate

Maturing 08/31/2023 , 1.375 % Coupon Rate

Maturing 12/31/2023 , 0.750 % Coupon Rate

Maturing 01/31/2024 , 0.875 % Coupon Rate

Maturing 05/31/2024 , 2.500 % Coupon Rate

Maturing 08/15/2024 , 0.375 % Coupon Rate

Accrued interest

Total Market value of investment in U.S.

government securities

Siebert 2022 Form-10K 56

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 display 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 December 31,

Equity method investment in related party

As a result of the transaction discussed 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.

Financial Assets and Liabilities Not Carried at Fair Value

The following represents financial instruments in which the ending balances as of December 31, 2022 and 2021 are not carried at fair value in the statements of financial condition:

Short-term financial instruments:

1 unchanged sentence

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 or securities segregated for regulatory purposes as of December 31, 2021 and 2020.

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.

Siebert 2021 Form-10K 54

Receivables and other assets:

Receivables from customers, receivables from non-customers, receivables from and deposits with broker-dealers and clearing organizations, other receivables, prepaid service contract, 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 that are categorized as level 2 under the fair value hierarchy in other receivables.

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.

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.

Notes payable –

related party:

The carrying amount of the notes payable –

related party approximates fair value due to the relative short-term nature of the borrowing.

Under the fair value hierarchy, the notes payable –

related party is classified as level 2.

Siebert 2022 Form-10K 57

Notes payable – related party:

The carrying amount of the notes payable – related party approximates fair value due to the relative short-term nature of the borrowing.

Under the fair value hierarchy, the notes payable – related party is classified as level 2.

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 line of credit and mortgage with East West Bank approximates fair value as they reflect terms that approximate current market terms for similar arrangements.

Under the fair value hierarchy, the line of credit is classified as level 2.

The carrying amount of the loan and mortgage with East West Bank approximates fair value as they reflect terms that approximate current market terms for similar arrangements.

Under the fair value hierarchy, the loan and mortgage are classified as level 2.

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.

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 and is recorded in the line item “Other general and administrative”

in the statements of income.

The cost will be adjusted upwards or downwards in accordance with observable market transactions and is recorded in the line item “Other general and administrative” in the statements of operations.

Under the fair value hierarchy, the investments, cost is classified as level 3.

6 unchanged sentences

Total Property, office facilities, and equipment, net

Total depreciation expense for property, office facilities, and equipment was 410,000 and $ 402,000 for the year ended December 31, 2021 and 2020, respectively.

Purchase of Office Building

On December 30, 2021, the Company acquired the Miami office building located at 653 Collins Ave, Miami Beach, FL.

The Miami office building contains approximately 12,000 square feet of office space, which will be used as one of the primary operating centers for the Company.

The seller of the property is City National Bank of Florida, a national banking association, as trustee under the provisions of a certain Trust Agreement, dated March 22, 1993 (the “Seller”).

The Seller has no material relationship with the Company.

The contract purchase price for the Miami office building was $ 6,750,000 , exclusive of customary real estate transaction costs.

The Company funded the purchase price via approximately $ 750,000 of the Company’s cash, a $ 2 million notes payable with Gloria E.

Gebbia, and the remaining $ 4 million via the mortgage with East West Bank.

Siebert 2021 Form-10K 55

Total depreciation expense for property, office facilities, and equipment was $ 404,000 and $ 410,000 for the years ended December 31, 2022 and 2021, respectively.

Miami Office Building

On December 30, 2021, the Company purchased the Miami 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 will serve as a primary operating center of the Company.

For the year ended December 31, 2022, no depreciation expense was recorded for the Miami office building.

Depreciation expense will commence when the build out of the Miami office building is completed and placed in service, which is expected to occur in the first quarter of 2023.

The Company invested $ 985,000 and $ 0 in the years ended December 31, 2022 and 2021, respectively, to build out the Miami office building.

Siebert 2022 Form-10K 58

Software, Net

3 unchanged sentences

Total Software

Less accumulated amortization –

other software

Less accumulated amortization – robo-advisor

Less accumulated amortization – other software

Total Software, net

Total amortization of software was $ 925,000 and $ 951,000 for the year ended December 31, 2021 and 2020, respectively.

As of December 31, 2021, the Company estimates future amortization of software assets of $ 506,000 , $ 187,000 , and $ 59,000 , in the year ended December 31, 2022, 2023, and 2024, respectively.

As of December 31, 2021, the Company rents office space under operating leases expiring in 2022 through 2026, and the Company has no financing leases.

The leases call for base rent plus escalations as well as other operating expenses.

The following table represents the Company’s lease right-of-use assets and lease liabilities on the statements of financial condition.

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 the trading platform into the Company’s operations.

The total software development work related to this project was $ 241,000 for the year ended December 31, 2022.

Amortization expense will commence when the retail trading platform is launched and placed into service, which is expected to occur in the second quarter of 2023.

Total amortization of software was $ 590,000 and $ 925,000 for the years ended December 31, 2022 and 2021, respectively.

As of December 31, 2022, the Company estimates future amortization of software assets of $429,000, $336,000, $197,000, and $29,000, in the years ended December 31, 2023, 2024, 2025, and 2026, respectively.

As of December 31, 2022, all of the Company’s leases are classified as operating and primarily consist of office space leases expiring in 2023 through 2027.

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.

As of December 31, 2021, the Company does not believe that any of the renewal options under the existing leases are reasonably certain to be exercised;

however, the Company will continue to assess and monitor the lease renewal options on an ongoing basis.

Lease right-of-use assets

Lease liabilities

The calculated amounts of the lease right-of-use assets and lease liabilities in the table above are impacted by the length of the lease term and the discount rate used to present value the minimum lease payments.

The Company leases miscellaneous office equipment, but they are immaterial and therefore the Company records the costs associated with this office equipment on the statements of income rather than capitalizing them as lease right-of-use assets.

The Company determined a discount rate of 5.0% would approximate the Company’s cost to obtain financing given its size, growth, and risk profile.

Siebert 2021 Form-10K 56

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.

Lease Term and Discount Rate

Weighted average remaining lease term –

operating leases (in years)

Weighted average discount rate –

operating leases

The following table represents lease costs and other lease information.

Weighted average remaining lease term – operating leases

Weighted average discount rate – operating leases

Operating lease cost

1 unchanged sentence

Variable lease cost

Sublease income

Total Rent and occupancy

3 unchanged sentences

Operating leases

Siebert 2021 Form-10K 57

Siebert 2022 Form-10K 59

Lease Commitments

3 unchanged sentences

Lease liabilities

Equity Method Investment in Related Party

On November 16, 2021, the Company entered into an agreement with Tigress, a Delaware limited liability company.

As part of the agreement, (i) Tigress transferred to the Company limited liability company membership interests representing twenty-four percent ( 24 %) of the outstanding membership interests in Tigress;

and (ii) the Company transferred to Tigress limited liability company membership interests representing twenty-four percent (24%) of the outstanding membership interests of RISE, and 1,449,525 shares of the Company’s common stock.

The value of the shares of the Company’s common stock was determined using a 60-day average of the Company’s common stock price as reported by the NASDAQ Capital Market.

The common stock was issued pursuant to Section 4(a)(2) of the Securities Act of 1933, as amended.

The Company’s ownership in Tigress is accounted for under the equity method of accounting.

In determining whether the investment in Tigress should be accounted for under the equity method of accounting, the Company considered the guidance under ASC 323, Investments –

Equity Method and Joint Ventures.

The Company maintains 24 % ownership interest in Tigress, which represents a significant ownership level, the Company and Tigress have common representation on their respective board of directors, and certain employees of Tigress are employees of RISE.

Based on these criteria, the Company determined that it was able to exercise significant influence of Tigress, and therefore the equity method of accounting was used for this transaction.

This investment is reported in the equity method investment in related party in the statements of financial condition.

Under the equity method, the Company recognizes its share of Tigress’

income or loss in the earnings of equity method investment in related party line item on the statements of income.

Equity Method Investments in Related Parties

The Company’s investment in Tigress is accounted for under the equity method of accounting.

In determining whether the investment in Tigress should be accounted for under the equity method of accounting, the Company considered the guidance under ASC 323, Investments – Equity Method and Joint Ventures.

Prior to the Reorganization Agreement, the Company maintained 24 % ownership interest in Tigress, which represented a significant ownership level, the Company and Tigress had common representation on their respective Board of Directors, and certain employees of Tigress were also employees of RISE.

Based on these criteria, the Company determined that it was able to exercise significant influence over Tigress, and therefore the equity method of accounting applied for this investment.

After the Reorganization Agreement, the Company owned 17 % of Tigress.

The Company concluded that it still had significant influence over Tigress due to the representation of Gloria E.

Gebbia on the Board of Directors of Tigress.

Therefore, the Company continues to account for this investment under the equity method of accounting as of December 31, 2022.

Under the equity method, the Company recognizes its share of Tigress’ income or loss in the line item “Earnings of equity method investment in related parties” in the statements of operations.

The Company has elected to classify distributions received from equity method investees using the cumulative earnings approach.

For the year ended December 31, 2021, the earnings recognized from the Company’s investment in Tigress was $ 172,000 and the Company did not receive any cash distributions.

As of December 31, 2021, the carrying amount of the investment in Tigress was $ 8,156,000 .

The Company evaluates its equity method investments for impairment when events or changes indicate the carrying value may not be recoverable.

If the impairment is determined to be other-than-temporary, the Company will recognize an impairment loss equal to the difference between the expected realizable value and the carrying value of the investment.

As of December 31, 2021, the fair value of the investment in Tigress is not estimated because there were no identified events or changes in circumstances that may have a significant adverse effect on the fair value of the investment and thus, no impairment was recorded.

Siebert 2021 Form-10K 58

The loss recognized from the Company’s investment in Tigress was $16,000 for the year ended December 31, 2022.

The earnings recognized from the Company’s investment in Tigress was $172,000 for the year ended December 31, 2021.

The Company received cash distributions from Tigress of $ 259,000 for the year ended December 31, 2022.

The Company did not receive any cash distributions from Tigress in 2021;

however, RISE made a distribution of $ 156,000 to Siebert in 2021 in lieu of a corresponding distribution from Tigress.

As of December 31, 2022 and 2021, the carrying amount of the investment in Tigress was $ 2,584,000 and $ 8,156,000 , respectively.

There were no events or circumstances suggesting the carrying amount of the investment was impaired as of December 31, 2022 and 2021.

Siebert 2022 Form-10K 60

Below is a table showing the summary from the consolidated statements of operations and financial condition for Tigress for the periods indicated (unaudited):

Year Ended December 31,

Operating income

Operating income (loss)

Net income (loss)

As of December 31,

Stockholders’

Stockholders’ Equity

Hedge Connection

Prior to the Termination Agreement, the Company determined that it was able to exercise significant influence over Hedge Connection as the Company had a significant level of ownership and had the right to appoint a director to Hedge Connection’s Board of Directors.

As such, the equity method of accounting applied for this investment, and the Company recognized $20,000 from its investment in Hedge Connection during the year ended December 31, 2022, which is in the line item “Earnings of equity method investment in related parties” in the statements of operations.

The Company did not receive any cash distributions from Hedge Connection for the year ended December 31, 2022.

As of December 31, 2022 and 2021, the carrying amount of the investment in Hedge Connection was both $ 0 .

Investments, Cost

On January 31, 2021, the Company and OpenHand Holdings, Inc.

(“OpenHand”) entered into a stock purchase agreement whereby the Company acquired an interest of 5 % of OpenHand common stock for consideration of a total of $ 2,231,000 consisting of $ 850,000 in cash and 329,654 restricted shares of the Company’s common stock valued at $ 1,381,000 or $ 4.19 per share.

The Company’s common stock was issued pursuant to Section 4(a)(2) of the Securities Act of 1933, as amended.

The Company and OpenHand intended to develop a subscription-based brokerage platform providing zero-commission trading for equity and option transactions and crediting its members daily with rebates of revenues generated by the clients, less operational expenses.

The value of the Company’s restricted stock was determined using the thirty-day trading average.

Initial Transaction

On January 31, 2021, the Company and OpenHand entered into a stock purchase agreement whereby the Company acquired an interest of 5 % of OpenHand common stock for consideration of a total of $ 2,231,000 consisting of $ 850,000 in cash and 329,654 restricted shares of the Company’s common stock valued at $ 1,381,000 or $ 4.19 per share.

The Company’s common stock was issued pursuant to Section 4(a)(2) of the Securities Act of 1933, as amended.

The value of the Company’s restricted stock was determined using the thirty-day trading average.

The Company agreed to register the shares issued to OpenHand by filing a selling shareholder registration statement.

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This option expires 18 months after the launch of the OpenHand platform.

Termination Agreement

On August 18, 2021, the Company and OpenHand agreed to terminate their working relationship.

In connection therewith, the Company and OpenHand amended and restated their January 31, 2021 stock purchase agreement to provide that the Company would pay $ 850,000 in cash in exchange for 2 % of the outstanding common stock of OpenHand as of January 31, 2021, and receive a 15 -month option to purchase an additional 2 % of the outstanding common stock of OpenHand at an exercise price equal to a company valuation of $ 42.5 million.

The parties agreed to rescind OpenHand’s purchase of the 329,654 restricted shares of the Company’s common stock.

No value was attributed to the option because it is not a derivative and there were no transaction costs associated with this option as of December 31, 2021.

As of December 31, 2021 and 2020, the carrying value of the Company’s investment in OpenHand was $ 850,000 and $ 0 , respectively.

The parties agreed to rescind OpenHand’s purchase of the 329,654 restricted shares of the Company’s common stock.

No value was attributed to the option because it was not a derivative and there were no transaction costs associated with this option, and the option expired in November 2022.

The investment does not have a readily determinable fair value since OpenHand is a private company and its shares are not publicly traded.

The Company made an accounting policy election to measure this investment at cost less any impairment adjusted for any changes resulting from observable price changes in orderly transactions for the identical or a similar investment of the same issuer.

For the year ended December 31, 2021, there was a loss on sale of $ 63,000 as a result of the August 18, 2021 amendment and is included within the line item titled “Other general and administrative”

on the statements of income.

Management concluded that there have been no additional adjustments as there were no other identified events or changes in circumstances during the reporting period that could have a significant effect on the original valuation of the investment.

Goodwill and Intangible Assets, Net

As of both December 31, 2021 and 2020, the Company’s carrying amount of goodwill was $ 1,989,000 , all of which came from the Company’s acquisition of RISE.

Siebert 2021 Form-10K 59

On August 30, 2021, GSCO notified RISE that its clearing arrangement with RISE will be terminated.

The termination of the clearing arrangement was indicative of a potential impairment event and required impairment testing of the Company’s goodwill.

The Company elected to rely on a qualitative assessment to evaluate goodwill, which indicated that the fair value of the Company’s goodwill was in excess of its carrying value.

The Company concluded that it has one reportable segment and tested goodwill on a consolidated basis.

In addition to other qualitative factors such current market conditions and macro-economic factors, the Company’s market capitalization was above its book value as of the date of the assessment.

Accordingly, as of December 31, 2021, 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 in the year ended December 31, 2021 and 2020.

Additionally, the Company determined there was not a material risk for future possible impairments to goodwill as of the date of the assessment.

Intangible Assets, Net

As a result of the Company’s acquisition of RISE, the Company acquired intangible assets consisting of the RISE customer relationships and trade name, the fair values of which were $ 987,000 and $ 70,000 , respectively, as of the acquisition date.

The Company amortizes its acquired intangible assets over their useful lives and the intangible assets are deductible for tax purposes.

The termination of GSCO’s clearing arrangement with RISE was indicative of a potential impairment event and required impairment testing of the Company’s intangible assets.

The Company performed a qualitative assessment to evaluate definite-lived intangible assets.

The qualitative assessment performed indicated that the fair value of the RISE customer relationships intangible asset was less than its carrying amount, and the Company proceeded to performing the quantitative assessment.

Due to the termination of GSCO’s clearing arrangement with RISE, substantially all of the revenue producing customers of RISE have transitioned to other prime service providers.

The forecasted revenue associated with RISE’s historical customer base was determined to be minimal.

As such, the Company determined that the RISE customer relationships intangible asset was fully impaired, resulting in an impairment loss of $ 699,000 for the year ended December 31, 2021.

Financial Information

The following tables summarize information related to the Company’s intangible assets as of the dates indicated.

Date Acquired

Original Useful Life

Remaining Useful Life

As of December 31, 2021

RISE Customer Relationships

RISE Trade Name

Purchase Price

Balance as of

December 31, 2020

Impairment Loss

Balance as of

December 31, 2021

RISE Customer Relationships

RISE Trade Name

Total Intangible assets

Siebert 2021 Form-10K 60

For the year ended December 31, 2021, there was a loss on sale of $ 63,000 as a result of the August 18, 2021 amendment which is included in the line item “Other general and administrative” on the statements of operations.

As of both December 31, 2022 and 2021, the carrying value of the Company’s investment in OpenHand was $ 850,000 , and management concluded that the Company’s investment in OpenHand is not impaired and that no additional events or changes in circumstances were identified that could have a significant effect on the original valuation of the investment.

Siebert 2022 Form-10K 61

Long-Term Debt

Mortgage with East West Bank

On December 30, 2021, the Company entered into a mortgage with East West Bank for approximately $4 million to finance part of the purchase 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.

On December 30, 2021, the Company purchased the Miami office building for approximately $ 6.8 million, which was partially financed through a ten year mortgage with East West Bancorp, Inc.

(“East West Bank”).

The mortgage was for approximately $ 4 million with a commitment for another $ 338,000 to finance part of the build out of the Miami office building.

The Company has utilized its commitment of $ 338,000 as of December 31, 2022.

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.

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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 December 31, 2021, the Company has an unused commitment of $ 338,000 with East West Bank which the Company intends to use for the build out of the Miami office building.

As of December 31, 2022, the Company was in compliance with all of its covenants related to this agreement.

Remaining Payments

Future remaining annual minimum principal payments for the mortgage with East West Bank as of December 31, 2022 were as follows:

There is no interest expense related to this line of credit for the year ended December 31, 2021.

The effective interest rate related to this line of credit was 3.6 % for the periods this line of credit has been in place.

Line of Credit with East West Bank

The interest expense related to this mortgage was $ 143,000 and $ 0 for the years ended December 31, 2022, and 2021, respectively.

As of December 31, 2022, 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 has the ability to borrow term loans in an aggregate principal amount not to exceed $ 10 million during the two-year period after July 22, 2020.

The Company’s obligations under the agreement are secured by a lien on all of the Company’s cash, dividends, stocks and other monies and property from time to time received or receivable in exchange for the Company’s equity interests in and any other rights to payment from the Company’s subsidiaries;

In accordance with the terms of this agreement, the Company had the ability to borrow term loans in an aggregate principal amount not to exceed $ 10 million during the two-year period after July 22, 2020.

The Company originally borrowed approximately $ 5.0 million and had an outstanding balance of $ 2.7 million as of December 31, 2022.

The Company’s ability to borrow an additional $5.0 million available on its loan with East West Bank expired on July 22, 2022.

any deposit accounts into which the foregoing is deposited and all substitutions, products, proceeds (cash and non-cash) arising out of any of the foregoing.

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Certain other non-financial covenants include that the Company must promptly notify East West Bank of the creation or acquisition of any subsidiary that at any time owns assets with a value of $100,000 or greater.

As of December 31, 2021 and the date of the filing of this Report, the Company was in compliance with all of its covenants related to this agreement.

Siebert 2021 Form-10K 61

In addition, the Company’s obligations under the agreement are guaranteed pursuant to a guarantee agreement by and among, John J.

As of December 31, 2022, the Company was in compliance with all its covenants related to this agreement.

Siebert 2022 Form-10K 62

In addition, the Company’s obligations under the agreement are guaranteed pursuant to a guarantee agreement by and among, John J.

Gebbia and Gloria E.

Gebbia individually, and as a co-trustees of the John and Gloria Living Trust, U/D/T December 8, 1994.

Both lending agreements with East West Bank are considered senior debt facilities.

As of December 31, 2021, the Company has drawn down a $ 5.0 million term loan under this agreement and has an outstanding balance of $ 3.7 million.

The Company has an additional $ 5.0 million remaining to draw down from this line of credit.

Gebbia, individually, and as a co-trustees of the John and Gloria Living Trust, U/D/T December 8, 1994 (“John and Gloria Gebbia Trust”).

Remaining Payments

Future remaining annual minimum principal payments for the line of credit with East West Bank as of December 31, 2021 were as follows:

The interest expense related to this line of credit was $ 138,000 and $ 54,000 for the year ended December 31, 2021, and 2020, respectively.

The effective interest rate related to this line of credit was 3.25% for the periods this line of credit has been in place.

Future remaining annual minimum principal payments for the loan with East West Bank as of December 31, 2022 were as follows:

The interest expense related to the loan was $ 144,000 and $ 138,000 for the years ended December 31, 2022 and 2021, respectively.

As of December 31, 2022, the interest rate for this loan was 7.5 %.

Notes Payable - Related Party

On December 30, 2021, Gloria E.

Gebbia, the Company’s principal stockholder, entered into a note agreement to lend the Company $ 2 million to finance part of the purchase of the Miami office building.

The annual interest rate is 4 % which will be paid monthly.

The note matures on 12/30/2022 and can be renewed at any time.

During 2022 the Company had notes payable to Gloria E.

Gebbia and Hedge Connection of $ 3 million and $ 600,000 , respectively;

however, as of December 31, 2022, the Company had no outstanding balance on these notes payables.

As of December 31, 2021, the Company had various notes payable to Gloria E.

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Issuance Date

Unpaid Principal Amount

Unpaid Principal

4.00% due December 30, 2022**

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November 30, 2020

Total Notes payable –

related party

As of December 31, 2020, the Company had various notes payable to Gloria E.

Gebbia, the details of which are presented below:

Issuance Date

Unpaid Principal Amount

4.00% due May 31, 2021*

December 1, 2020

4.00% due November 30, 2021**

November 30, 2020

Total Notes payable –

related party

* From May 31, 2021 to December 31, 2021, this notes payable was renewed multiple times with short term maturities.

On December 31, 2021, this notes payable was renewed with a maturity of June 30, 2022 and a new face amount of $ 2 million.

** This note payable is subordinated to MSCO and is subordinated to the claims of general creditors, approved by FINRA, and is included in MSCO’s calculation of net capital and the capital requirements under FINRA and SEC regulations.

Total Notes payable – related party

** On March 31, 2022, $ 2,880,000 in aggregate of notes payable to Gloria E.

Gebbia was exchanged for 24 % ownership interest in RISE.

During the year ended December 31, 2022, the Company paid the remainder of these notes payable.

*** This note payable is subordinated to MSCO and is subordinated to the claims of general creditors, approved by FINRA, and is included in MSCO’s calculation of net capital and the capital requirements under FINRA and SEC regulations.

On August 17, 2021, this note payable was renewed with a maturity of November 30, 2022.

The Company’s interest expense for these notes payable for the year ended December 31, 2021 and 2020 was $ 206,000 and $ 276,000 , respectively.

Siebert 2021 Form-10K 62

The Company’s interest payable related to these notes payable was $ 0 as of both December 31, 2021 and 2020.

The Company’s interest expense for these notes payable for the years ended December 31, 2022 and 2021 was $ 151,000 and $ 206,000 , respectively.

The Company’s interest payable related to these notes payable was $ 0 as of both December 31, 2022 and 2021.

Siebert 2022 Form-10K 63

Deferred Contract Incentive

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.

As part of this agreement, the Company received a one-time business development credit of $ 3 million, and NFS will pay the Company four annual credits of $ 100,000 , which are recorded within the line item “Deferred contract incentive”

on the statements of financial condition.

As part of this agreement, the Company received a one-time business development credit of $ 3 million from NFS, and NFS will pay the Company four annual credits of $ 100,000 , which are recorded in the line item “Deferred contract incentive” on the statements of financial condition.

Annual credits shall be paid on the anniversary of the date on which the first credit was paid.

The business development credit and annual credits will be recognized as contra expense over four years and one year, respectively, in the line item “Clearing fees, including execution costs”

on the statements of income.

The business development credit and annual credits will be recognized as contra expense over four years and one year, respectively, in the line item “Clearing fees, including execution costs” on the statements of operations.

The amendment also provides for an early termination fee if the Company chooses to end its agreement before the end of the contract term.

In relation to this agreement, the Company recognized $ 354,000 in contra expense for the year ended December 31, 2021, and the balance of the deferred contract incentive was approximately $ 2.7 million as of December 31, 2021.

Revenue Recognition

Overview of Revenue

The primary sources of revenue for the Company are as follows:

Commissions and Fees

Principal Transactions

Principal transactions primarily represent riskless transactions in which the Company, after executing a solicited order, buys or sells securities as principal and at the same time buys or sells the securities with a markup or markdown to satisfy the order.

Principal transactions are recognized at a point in time on the trade date when the performance obligation is satisfied.

Market Making

Market making revenue is generated from the buying and selling of securities.

Market making transactions are recorded on a trade-date basis as the securities transactions occur.

Securities owned are recorded at fair market value at the end of the reporting period.

Stock Borrow / Stock Loan

The Company recognizes self-clearing revenues net of operating expenses related to stock borrow / stock loan.

Stock borrow / stock loan also includes any revenues generated from the Company’s fully paid lending programs on a self-clearing or introducing basis.

The Company does not utilize stock borrow / stock loan activities for the purpose of financing transactions.

Siebert 2021 Form-10K 63

For the year ended December 31, 2021, stock borrow / stock loan revenue was $ 11,864,000 ($ 29,441,000 gross revenue less $ 17,577,000 expenses).

For the year ended December 31, 2020, stock borrow / stock loan revenue was $ 4,045,000 ($ 10,068,000 gross revenue minus $ 6,023,000 expenses).

Advisory Fees

The Company earns advisory fees associated with managing client assets.

The performance obligation related to this revenue stream is satisfied over time;

however, the advisory fees are variable as they are charged as a percentage of the client’s total asset value, which is determined at the end of the quarter.

Interest, Marketing and Distribution Fees

The Company earns interest from clients’

accounts, net of payments to clients’

accounts, and on the Company’s bank balances.

Interest income also includes interest payouts from introducing relationships related to short interest, net of charges.

The Company also earns margin interest which is the net interest charged to customers for holding financed margin positions.

Marketing and distribution fees consist of 12b-1 fees which are trailing payments from money market funds.

Interest, marketing and distribution fees are recorded as earned.

Other income represents revenue generated from correspondent clearing fees, corporate services client fees, payment for order flow, and transactional fees generated from client accounts.

Transactional fees are recorded concurrently with the related activity.

Other income is recorded as earned.

Categorization of Revenue

The following table presents the Company’s major revenue categories and when each category is recognized:

Revenue Category

Timing of Recognition

Trading Execution and Clearing Services

Commissions and fees

Recorded on trade date

Principal transactions

Recorded on trade date

Market making

Recorded on trade date

Stock borrow / stock loan

Recorded as earned

Advisory fees

Recorded as earned

Total Trading Execution and Clearing Services

Interest, marketing and distribution fees

Recorded as earned

Margin interest

Recorded as earned

Total Interest, marketing and distribution fees

Recorded as earned

Total Revenue

Siebert 2021 Form-10K 64

The following table presents each revenue category and its related performance obligation:

Revenue Stream

Performance Obligation

Commissions and fees, Principal transactions, Market making,

Stock borrow / stock loan, Advisory fees

Provide financial services to customers and counterparties

Interest, marketing and distribution fees, Other income

In relation to this agreement, the Company recognized $ 850,000 and $ 354,000 in contra expense for the years ended December 31, 2022, and 2021, respectively.

The balance of the deferred contract incentive was approximately $ 2.0 million and $ 2.7 million as of December 31, 2022 and 2021, respectively.

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 of approximately $ 3.9 million on the Company’s U.S.

government securities portfolio for the year ended December 31, 2022.

The aggregate unrealized loss on the portfolio will be returned over the duration of the government securities, at a point no later than the maturity of the securities.

The maturities of the government securities are primarily in 2023 and the latest maturity is August 2024.

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

Year Ended December 31,

Year Decrease)

Principal transactions and proprietary trading

Realized and unrealized gain on primarily riskless principal transactions

Unrealized loss on portfolio of U.S.

government securities

Total Principal transactions and proprietary trading

Soft Dollar Arrangement

For certain clients of RISE, the Company has soft dollar and commission sharing arrangements with customers that fall both within, and outside of, the safe harbor provisions of Rule 28(e) of the Securities Exchange Act of 1934 ("Rule 28(e)"), as amended.

For certain clients of RISE, the Company had soft dollar and commission sharing arrangements with customers that fall both within, and outside of, the safe harbor provisions of Rule 28(e) of the Securities Exchange Act of 1934 ("Rule 28(e)"), as amended.

These soft dollar arrangements were determined to be a separate performance obligation that should be allocated a portion of the transaction price.

Under these arrangements, the Company charges additional dollars on customer trades and uses these fees to pay third parties for research, brokerage services, market data, and related expenses (“research services”) on behalf of clients.

The Company is an agent in these arrangements, as it does not control the research services before they are transferred to the customer.

As such, the revenue from these agreements are recognized net of cost within the line item “Commissions and fees”

on the statements of income.

The Company paid client expenses of approximately $ 625,000 and $ 693,000 for the year ended December 31, 2021 and 2020, respectively.

The Company had an outstanding receivable and payable of approximately $ 30,000 and $ 247,000 , respectively, as of December 31, 2021 related to these arrangements.

The receivable and payable related to soft dollar arrangements are within the line items “Other receivables”

and “Accounts payable and accrued liabilities,”

respectively, on the statements of financial condition.

As of December 31, 2021 and 2020, no allowance for uncollectible commissions was necessary as the Company believes all commissions receivable will be realized.

For the year ended December 31, 2021 and 2020, there were no costs capitalized related to obtaining or fulfilling a contract with a customer, and thus the Company has no balances for contract assets or contract liabilities.

In addition, the acquisition of new entities did not impact the Company’s existing revenue streams as the acquired entities had consistent application of the revenue recognition guidance.

The Company concludes that its revenue streams have the same underlying economic factors, and as such, no disaggregation of revenue is required.

Employee Stock Purchases

On November 10, 2020, the Company issued 150,000 shares of its restricted common stock to each of Anthony Palmeri and Gerard Losurdo, each an employee of MSCO, as part of their employment agreements.

Palmeri and Mr.

Losurdo each paid the Company approximately $ 400,000 for their common stock, which was equal to 70 % of the closing price of the common stock as reported on Nasdaq on November 9, 2020.

The common stock issued to Mr.

Palmeri and Mr.

Losurdo was subject to a three-year restriction on transfer commencing on the day of issuance.

The issuance of the common stock was each approved by unanimous written consent of the Company's board of directors.

The shares were issued to Mr.

Palmeri and Mr.

Losurdo as part of their employment agreements in accordance with Nasdaq Listing Rule 5635(c)(4) and pursuant to Section 4(a)(2) of the Securities Act of 1933, as amended.

The above transaction had no impact to the Company’s statements of income, but it is reflected in the Company’s statement of financial condition, statement of changes in stockholders’

equity, and statement of cash flows within cash flows from financing activities for the year ended December 31, 2020.

Under these arrangements, the Company charged additional dollars on customer trades and used these fees to pay third parties for research, brokerage services, market data, and related expenses (“research services”) on behalf of clients.

The Company was an agent in these arrangements, as it did not control the research services before they were transferred to the customer.

As such, the revenue from these agreements were recognized net of cost in the line item “Commissions and fees” on the statements of operations.

The Company paid client expenses of approximately $ 8,000 and $ 625,000 for the years ended December 31, 2022 and 2021, respectively.

The Company did not have an outstanding receivable or payable as of December 31, 2022 related to these arrangements.

As of both December 31, 2022 and 2021, no allowance for uncollectible commissions was necessary as the Company believes all commissions receivable will be realized.

Referral Fees

In relation to the operations of RISE, the Company has agreements with various third parties to share commissions and pay fees as defined in the respective agreements.

These expenses were approximately $ 1,213,000 and $ 738,000 for the year ended December 31, 2021 and 2020, respectively, which are within in the line item “Referral fees”

on the statements of income.

Siebert 2021 Form-10K 65

On March 27, 2020, the Coronavirus Aid, Relief and Economic Security Act (“CARES Act”) was enacted in response to COVID-19 pandemic.

Under ASC 740, the effects of changes in tax rates and laws are recognized in the period which the new legislation is enacted.

The CARES Act made various tax law changes including among other things (i) increased the limitation under IRC Section 163(j) for 2019 and 2020 to permit additional expensing of interest (ii) enacted a technical correction so that qualified improvement property can be immediately expensed under IRC Section 168(k) and (iii) made modifications to the federal net operating loss rules including permitting federal net operating losses incurred in 2018, 2019, and 2020 to be carried back to the five preceding taxable years in order to generate a refund of previously paid income taxes and (iv) enhanced recoverability of AMT tax credits.

The CARES Act did not have a significant impact on the Company’s financial statements.

The Company’s provision for income taxes is comprised of the following:

In relation to the operations of RISE, the Company had agreements with various third parties to share commissions and pay fees as defined in the respective agreements.

These expenses were approximately $ 0 and $ 1,213,000 for the years ended December 31, 2022 and 2021, respectively, which are in the line item “Referral fees” on the statements of operations.

Siebert 2022 Form-10K 64

In August 2022, the Inflation Reduction Act (“IRA”) and CHIPS and Science Act (“CHIPS Act”) were both enacted.

This new legislation includes the implementation of a new corporate alternative minimum tax, an excise tax on stock buybacks, and tax incentives for energy and climate initiatives, among other provisions.

The income tax provisions of the IRA or the CHIPS Act had limited applicability to the Company and did not have a material impact on the Company’s financial statements.

The Company’s provision for (benefit from) income taxes is comprised of the following:

Year Ending December 31,

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Total Deferred

Total Provision for income taxes

The Company’s effective tax rate differs from the U.S.

federal statutory income tax rate of 21% for 2021 and 2020 as follows:

Total Provision for (benefit from) income taxes

The Company’s effective tax rate differs from the U.S.

federal statutory income tax rate of 21 % for the periods indicated are as follows:

Year Ending December 31,

8 unchanged sentences

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes.

Significant components of the Company’s deferred tax assets and liabilities are as follows:

As of December 31,

3 unchanged sentences

Share-based compensation

Intangible assets

Investment in Tigress

Investment in RISE

6 unchanged sentences

Net Deferred tax assets

Siebert 2021 Form-10K 66

In assessing the Company’s ability to recover its deferred tax assets, the Company evaluated whether it is more likely than not that some portion or the entire deferred tax asset will be realized.

Siebert 2022 Form-10K 65

In assessing the Company’s ability to recover its deferred tax assets, the Company evaluated whether it is more likely than not that some portion or the entire deferred tax asset will be realized.

The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income in those periods in which temporary differences become deductible and/or net operating losses can be utilized.

2 unchanged sentences

Based on historical operating profitability, positive trend of earnings and projected future taxable income, the Company concluded as of December 31, 2022 that its U.S.

deferred tax assets are realizable on a more-likely-than-not basis with the exception of certain federal net operating losses that are expected to expire unutilized as a result of limitations imposed by Section 382 of the Internal Revenue Code and certain state net operating losses.

The amount of the Company’s valuation allowance did not change during 2021.

deferred tax assets are realizable on a more-likely-than-not basis with the exception of certain investments that will result in future capital losses which are only available to offset capital gain income and certain state net operating losses.

The amount of the Company’s valuation allowance decreased $ 92,000 during 2022.

The Company will continue to evaluate its deferred tax assets to determine whether any changes in circumstances could affect the realization of their future benefit.

If it is determined in future periods that portions of the Company’s deferred income tax assets satisfy the realization standards, the valuation allowance will be reduced accordingly.

As of December 31, 2021, the Company had U.S.

federal net operating loss carryforwards of approximately $ 6.4 million which expire in varying amounts in 2035 and 2036 if not utilized.

federal net operating loss carryforwards of approximately $ 8.2 million of which $ 6.4 million expires in varying amounts in 2035 and 2036 if not utilized but available to offset 100 % of future taxable income and $ 1.8 million which is permitted to be carried forward indefinitely but only available to offset 80 % of future taxable income.

Approximately $ 6.4 million of the U.S.

federal net operating loss carryforwards are subject to annual limitation under Section 382.

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Balance as of December 31, 2022

Of the amounts reflected above as of December 31, 2021, the entire amount would reduce the Company’s effective tax rate if recognized.

Of the amounts reflected above as of December 31, 2022, the entire amount would reduce the Company’s effective tax rate if recognized.

The Company records accrued interest and penalties related to income tax matters as part of the provision for income taxes.

For the year ended December 31, 2021 and 2020, the Company recognized expense related to interest and penalties on unrecognized tax benefits of $ 27,000 and $ 0 , respectively.

For the year ended December 31, 2021 and 2020, the accrued balance of interest and penalties on unrecognized tax benefits was $ 27,000 and $ 0 , respectively.

For the years ended December 31, 2022 and 2021, the Company recognized expense related to interest and penalties on unrecognized tax benefits of $ 100,000 and $ 27,000 , respectively.

For the years ended December 31, 2022 and 2021, the accrued balance of interest and penalties on unrecognized tax benefits was $ 127,000 and $ 27,000 , respectively.

The Company does not believe that the amount of unrecognized tax benefits will significantly increase or decrease within the next 12 months.

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The open tax years for the federal and state income tax filings is generally 2019 through 2022.

Siebert 2021 Form-10K 67

Siebert 2022 Form-10K 66

Capital Requirements

MSCO is subject to the Uniform Net Capital Rules of the SEC (Rule 15c3-1) of the Securities Exchange Act of 1934.

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 December 31, 2021, MSCO’s net capital was $ 36.4 million, which was approximately $ 34.3 million in excess of its required net capital of $ 2.1 million, and its percentage of aggregate debit balances to net capital was 34.9 %.

As of December 31, 2020, MSCO’s net capital was $ 27.5 million, which was approximately $ 25.2 million in excess of its required net capital of $ 2.3 million, and its percentage of aggregate debit balances to net capital was 24.3 %.

Effective upon the Company’s acquisition of StockCross on January 1, 2020, the capital of MSCO and StockCross was combined.

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 December 31, 2021, MSCO had cash deposits of $ 326.8 million in the special reserve accounts which was $ 31.9 million in excess of the deposit requirement of $ 294.9 million.

After adjustments for deposit(s) and / or withdrawal(s) made on January 3, 2022, MSCO had $ 1.9 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.

As of December 31, 2021, MSCO had cash deposits of $ 326.8 million in the special reserve accounts which was $ 31.9 million in excess of the deposit requirement of $ 294.9 million.

After adjustments for deposit(s) and / or withdrawal(s) made on January 3, 2022, MSCO had $ 1.9 million in excess of the deposit requirement.

Effective upon the Company’s acquisition of StockCross on January 1, 2020, the requirements and special reserve accounts of MSCO and StockCross were combined.

Siebert 2021 Form-10K 68

Siebert 2022 Form-10K 67

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 December 31, 2021, RISE’s net capital was approximately $ 1.7 million which was $ 1.4 million in excess of its minimum requirement of $ 250,000 under 15c3-1.

As of December 31, 2020, RISE’s net capital was approximately $ 3.9 million which was $ 3.7 million in excess of its minimum requirement of $ 250,000 under 15c3-1.

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

As of December 31, 2021, RISE’s net capital was approximately $ 1.7 million which was $ 1.4 million in excess of its minimum requirement of $ 250,000 under 15c3-1.

Financial Instruments With Off-Balance Sheet Risk

The Company is engaged in various trading and brokerage activities whose counterparties include broker-dealers, banks and other financial institutions.

In the event the counterparties do not fulfill their obligations, the Company may sustain a loss if the market value of the instrument is different from the contract value of the transaction.

The risk of default primarily depends upon the credit worthiness of the counterparties involved in the transactions.

It is the Company’s policy to review, as necessary, the credit standing of each counterparty with which it conducts business.

The Company has experienced no material historical losses in relation to its counterparties for the years ended December 31, 2022 and 2021.

Off-Balance Sheet Risks

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.

In the normal course of business, the Company's customer activities involve the execution, settlement, and financing of various customer securities transactions.

These activities may expose the Company to off-balance sheet risk in the event the customer or other broker is unable to fulfill its contracted obligations and the Company has to purchase or sell the financial instrument underlying the contract at a loss.

The Company's customer securities activities are transacted on either a cash or margin basis.

In margin transactions, the Company extends credit to its customers, subject to various regulatory and internal margin requirements, and is collateralized by cash and securities in the customers'

In the normal course of business, the Company’s customer activities involve the execution, settlement, and financing of various customer securities transactions.

These activities may expose the Company to off-balance sheet risk in the event the customer or other broker is unable to fulfill their contracted obligations and the Company has to purchase or sell the financial instrument underlying the contract at a loss.

The Company’s customer securities activities are transacted on either a cash or margin basis.

In margin transactions, the Company extends credit to its customers, subject to various regulatory and internal margin requirements, and is collateralized by cash and securities in the customers’ accounts.

In connection with these activities, the Company executes and clears customer transactions involving the sale of securities not yet purchased, substantially all of which are transacted on a margin basis subject to individual exchange regulations.

As of December 31, 2021, the Company had margin loans extended to its customers of approximately $ 0.6 billion, of which $ 84.2 million is within the line item “Receivables from customers”

on the statements of financial condition.

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Siebert 2022 Form-10K 68

Such transactions may expose the Company to off-balance sheet risk in the event margin requirements are not sufficient to fully cover losses that customers may incur.

In the event the customer fails to satisfy obligations, the Company may be required to purchase or sell financial instruments at prevailing market prices to fulfill the customer's obligations.

In the event the customer fails to satisfy obligations, the Company may be required to purchase or sell financial instruments at prevailing market prices to fulfill the customer’s obligations.

The Company seeks to control the risks associated with its customer activities by requiring customers to maintain margin collateral in compliance with various regulatory requirements and internal guidelines which meet or exceed regulatory requirements.

The Company monitors required margin levels daily and pursuant to such guidelines, requires customers to deposit additional collateral or to reduce positions when necessary.

The Company's customer financing and securities settlement activities may require the Company to pledge customer securities as collateral in support of various secured financing sources such as bank loans and securities loaned.

The Company’s customer financing and securities settlement activities may require the Company to pledge customer securities as collateral in support of various secured financing sources such as bank loans and securities loaned.

In the event the counterparty is unable to meet its contractual obligation to return customer securities pledged as collateral, the Company may be exposed to the risk of acquiring the securities at prevailing market prices in order to satisfy its customer obligations.

1 unchanged sentence

In addition, the Company establishes credit limits for such activities and continuously monitors compliance.

The Company’s securities lending transactions are subject to master netting agreements with other broker-dealers;

however, amounts are presented gross in the statements of financial condition.

The Company further mitigates risk by using a program with a clearing organization which guarantees the return of cash to the Company as well as using industry standard software to ensure daily changes to market value are continuously updated and any changes to collateralization are immediately covered.

There were no material losses for unsettled customer transactions for the year ended December 31, 2021 and 2020.

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.

As of December 31, 2021, the Company had margin loans extended to its customers of approximately $ 581.8 million, of which $ 84.2 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 years ended December 31, 2022 and 2021.

Commitments, Contingencies and Other

1 unchanged sentence

The Company is party to certain claims, suits and complaints arising in the ordinary course of business.

All of the below legal matters are related to activities related to operations of StockCross Financial Services, Inc.

(“StockCross”), prior to the Company’s acquisition of StockCross on January 1, 2020.

On July 14, 2021, StockCross entered into a Letter of Acceptance, Waiver, and Consent with FINRA in connection with alleged excessive trading and suitability violations by a registered representative of StockCross in a customer’s account, supervisory failures to comply with supervisory requirements relating to certain equity and options and stock lending transactions, and certain record keeping requirements.

Pursuant to the consent, the Company agreed to a censure, pay a fine of $ 250,000 , and made an undertaking to retain an independent consultant to conduct a comprehensive review of the Company’s compliance with suitability rules in connection with solicited equity and options transactions, as well as possession-or-control requirements in connection with the firm’s stock loan business.

As of December 31, 2021, this legal matter has been resolved and the Company paid $ 250,000 for the year ended December 31, 2021, which is within the line item “Other general and administrative”

in the statements of income.

On July 9, 2021, StockCross entered into a Consent Order with the California Department of Financial Protection and Innovation in connection with alleged supervisory failures relating to the sale of Unit Investment Trusts to six customers.

Pursuant to the consent order, the Company agreed to desist and refrain from violations of California law relating to supervision by broker-dealers, to make a payment of $ 100,000 to the California Department of Financial Protection and Innovation for administrative costs, and to offer restitution of commissions of approximately $ 315,000 in aggregate to the six customers.

The Company paid $ 100,000 for the year ended December 31, 2021 related to this legal matter, which is within the line item “Other general and administrative”

in the statements of income.

As of December 31, 2021, this legal matter has been resolved and the six customers rejected the offer of restitutions.

For activity related to operations of StockCross prior to the Company’s acquisition of StockCross, FINRA’s Division of Enforcement is currently investigating UIT transactions that were executed by StockCross that the enforcement staff believes were terminated early.

All of these transactions occurred prior to the Company’s acquisition of StockCross on January 1, 2020.

Management cannot at this time assess either the duration or the likely outcome or consequences of this matter.

The Company believes that many of these transactions were UIT transactions that were the subject of its prior settlements with the Commonwealth of Massachusetts (Dkt.

E-2017-0104) and the State of California (CRD No.s:

6670 and 2400211).

All of these transactions occurred prior to the Company’s acquisition of StockCross on January 1, 2020.

Management cannot at this time assess either the duration or the likely outcome or consequences of the FINRA investigation.

Nevertheless, FINRA has the authority to impose sanctions on the Company or require that it make offers of restitution to other customers who FINRA believes incurred sales charges in early liquidations of UITs.

No assurances can be given that a mutual settlement with FINRA regarding these matters can be reached or that any amount paid in settlement will not be material.

As of December 31, 2021, all other 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.

Siebert 2021 Form-10K 70

No assurances can be given that a mutual settlement with FINRA regarding the investigation can be reached or that any amount paid in settlement will not be material.

As of December 31, 2022, all other 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.

Siebert 2022 Form-10K 69

Overnight Financing

As of December 31, 2021, MSCO had an available line of credit for short term overnight demand borrowing of up to $ 15 million with BMO Harris Bank.

As of December 31, 2021, MSCO had no outstanding loan balance with BMO Harris Bank and there were no commitment fees or other restrictions on this line of credit.

As of December 31, 2020, in addition to the $ 15 million line of credit with BMO Harris Bank, MSCO had a $ 15 million line of credit with Texas Capital Bank, which MSCO did not renew as of December 31, 2021.

The removal of this line of credit was due to Texas Capital Bank exiting the business line and did not impact MSCO’s ability to meet its liquidity requirements.

MSCO utilizes customer or firm securities as a pledge for short-term borrowing needs.

The interest expense for these credit lines was $ 17,000 and $ 19,000 the year ended December 31, 2021 and 2020, respectively.

There were no fees associated with these credit lines for the year ended December 31, 2021 and 2020.

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.

As of December 31, 2022 and 2021, MSCO had an available line of credit for short term overnight demand borrowing with BMO Harris Bank (“BMO Harris”) of up to $ 25 million and $ 15 million, respectively.

As of those dates, MSCO had no outstanding loan balance and there were no commitment fees or other restrictions on the line of credit.

On May 23, 2022, MSCO increased its principal amount for this line of credit from $ 15 million to $ 25 million.

The Company utilizes customer or firm securities as a pledge for short-term borrowing needs.

The interest expense for this credit line was $ 2,000 and $ 17,000 for the years ended December 31, 2022 and 2021, respectively.

There were no fees associated with the utilization of this credit line for the years ended December 31, 2022 and 2021.

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 year ended December 31, 2022, the Company did not sell any shares pursuant to this Sales Agreement.

For the year ended December 31, 2022, the Company incurred approximately $ 98,000 in legal and audit fees related to this Sales Agreement, which are in the line item “Professional services” on the statements of operations, and were expensed as incurred.

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 through 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:

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Prior to August 1, 2025

For the year ended December 31, 2021, 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 for these fees.

For the years ended December 31, 2022 and 2021, there has been no expense recognized for any early termination fees.

General Contingencies

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However, the Company believes that it is unlikely it will have to make material payments under these arrangements and has not recorded any contingent liability in the financial statements for these indemnifications.

The Company, through its affiliate, Kennedy Cabot Acquisition, LLC (“KCA”), is self-insured with respect to employee health claims.

The Company, through its affiliate, KCA is self-insured with respect to employee health claims.

KCA maintains stop-loss insurance for certain risks and has a health claim reinsurance limit capped at approximately $ 65,000 per employee as of December 31, 2022.

4 unchanged sentences

Accordingly, it is at least possible that the ultimate settlement of losses may vary significantly from the amounts included in the financial statements.

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As part of this plan, the Company recognized expenses of $ 1,405,000 and $ 1,308,000 for the year ended December 31, 2021 and 2020, respectively.

The Company had an accrual of $ 105,000 as of December 31, 2021, which represents the historical estimate of future claims 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.

Siebert 2022 Form-10K 70

As part of this plan, the Company recognized expenses of $ 1,529,000 and $ 1,405,000 for the years ended December 31, 2022 and 2021, respectively.

The Company had an accrual of $ 86,000 as of December 31, 2022, which represents the historical estimate of future claims to be recognized for claims incurred during the period.

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.

The Company, through KCA, sponsors a defined-contribution retirement plan under Section 401(k) of the Internal Revenue Code that covers substantially all employees of the Company.

Participant contributions to the plan are voluntary and are subject to certain limitations.

The Company may also make discretionary contributions to the plan.

No contributions were made by the Company or KCA for the year ended December 31, 2021 and 2020.

On August 6, 2021, the Company’s Board of Directors approved a 401(k) matching program for employees of the Company.

On September 17, 2021, the Company’s shareholders approved the Siebert Financial Corp.

2021 Equity Incentive Plan (the “Plan”) at the Company’s 2021 Annual Meeting of Shareholders.

The Plan 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 are 3 million shares reserved under the Plan, and the Company issued no securities under the Plan for the year ended December 31, 2021.

No contributions were made by the Company or KCA for the years ended December 31, 2022 and 2021.

On September 17, 2021, the Company’s shareholders approved the Siebert Financial Corp.

2021 Equity Incentive Plan (the “Plan”).

There were 3 million shares reserved under the Plan, 296,000 shares were issued during the year ended December 31, 2022, and 2,704,000 shares remained as of December 31, 2022.

The Company did not issue any shares for the year ended December 31, 2021.

The Company granted 296,000 restricted stock units at a weighted average price of $ 1.56 to employees and consultants of the Company for the year ended December 31, 2022.

These units were fully vested upon grant date and the Company recognized equity stock compensation expense of $ 461,000 in the line item “Employee compensation and benefits” in the statements of operations for the year ended December 31, 2022.

Related Party Disclosures

Prior to being acquired by the Company, StockCross and the Company were affiliated entities through common ownership and had various related party transactions.

In January 2019, the Company acquired approximately 15 % ownership of StockCross.

Effective January 1, 2020, the Company acquired the remaining 85 % of StockCross’

outstanding shares and StockCross was merged with and into MSCO.

The purchase price paid was approximately $ 29,750,000 or 3,298,774 shares of the Company’s common stock which was issued in connection with the acquisition.

Upon the closing of the transaction on January 1, 2020, all receivables and payables between the Company and StockCross were eliminated upon consolidation.

Kennedy Cabot Acquisition, LLC

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 addition, KCA has purchased the naming rights of the Company for the Company to use.

KCA sponsors a 401(k) profit sharing plan which covers substantially all of the Company’s employees.

Employee contributions to the plan are at the discretion of eligible employees.

There were no contributions by the Company or KCA to the plan for the year ended December 31, 2021 and 2020.

In January 2020, MSCO sold approximately $ 288,000 worth of a private equity security to KCA at cost.

For the year ended December 31, 2021 and 2020, 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.

Park Wilshire Companies, Inc.

In addition, KCA sponsors a defined-contribution retirement plan under Section 401(k) of the Internal Revenue Code that covers substantially all employees of the Company.

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.

KCA passed through to the Company its cost of $ 60,000 in each of the years ended December 31, 2022 and 2021 for the use of these names.

For the years ended December 31, 2022 and 2021, 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.

PW brokers the insurance policies for related parties.

Revenue for PW from related parties was $ 70,000 and $ 73,000 for the year ended December 31, 2021 and 2020, respectively.

Revenue for PW from related parties was $ 129,000 and $ 70,000 for the years ended December 31, 2022 and 2021, respectively.

Gebbia, John J.

Gebbia, and Gebbia Family Members

The Company has entered into various debt agreements with Gloria E.

Gebbia, the Company’s principal stockholder.

Refer to Note 14 –

“Notes Payable - Related Party”

for additional detail .

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In addition, the Company’s obligations under its line of credit with East West Bank are guaranteed pursuant to a guarantee agreement by and among, John J.

On March 31, 2022, Gloria E.

Gebbia exchanged approximately $ 2.9 million of her notes payable to the Company for 24 % of the outstanding and issued membership interests in RISE.

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The Company entered into various debt agreements with Gloria E.

Gebbia, the Company’s principal stockholder, which have been paid back as of December 31, 2022.

Refer to Note 14 – Notes Payable – Related Party for additional detail.

The Company’s obligations under its loan with East West Bank are guaranteed pursuant to a guarantee agreement by and among, John J.

Gebbia and Gloria E.

Gebbia, individually, and as a co-trustees of the John and Gloria Living Trust, U/D/T December 8, 1994.

Refer to Note 13 –

“Long-Term Debt”

for additional detail.

Gebbia has 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.

Gebbia, individually, and as a co-trustees of the John and Gloria Gebbia Trust.

Refer to Note 13 – Long-Term Debt for additional detail.

Gebbia has 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.

Their compensation was in aggregate $ 1,179,000 and $ 543,000 for the year ended December 31, 2021 and 2020, respectively.

Their compensation was higher in the year ended December 31, 2021 primarily due to voluntary reductions in their salaries and bonuses during the COVID-19 crisis in 2020.

Gebbia hold executive positions within the Company’s subsidiaries and their compensation was in aggregate $ 2,427,000 and $ 1,179,000 for the years ended December 31, 2022 and 2021, respectively.

Part of their compensation includes performance-based payments related to key revenue streams.

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 year ended December 31, 2021 and 2020, rent expense was $ 60,000 for this branch office.

Tigress Holdings, LLC and Cynthia DiBartolo

On November 16, 2021, the Company entered into an agreement with Tigress in exchange for 24% of RISE and shares of the Company’s common stock.

Refer to Note 1 –

“Organization”

for additional detail.

As part of the transaction, WPS was renamed to RISE, and Tigress’

founder, Cynthia DiBartolo, will continue as CEO of Tigress, and will assume the position as CEO of RISE.

Gebbia will assume the position of Chief Impact Officer at RISE.

DiBartolo will be appointed to the Company’s Board of Directors and Ms.

Gebbia was appointed to Tigress’

Board of Directors.

Certain employees of Tigress are also employees of RISE.

For the years ended December 31, 2022 and 2021, rent expense was $ 60,000 for this branch office.

Tigress, Hedge Connection, Ms.

DiBartolo, and Ms.

The Company has entered into various agreements and subsequent terminations with Tigress and its CEO, Ms.

DiBartolo as well as Hedge and its founder, Ms.

Refer to Note 3 – Transactions with Tigress and Hedge Connection and Note 11– Equity Method Investment in Related Parties for further detail.

During the year ended 2022, RISE issued and Siebert sold membership interests of RISE to Siebert employees, directors and affiliates.

Refer to Note 4 – RISE for further detail.

Subsequent Events

The Company has evaluated events that have occurred subsequent to December 31, 2022 and through March 29, 2023, the date of the filing of this report.

From January 31, 2022 to the date of this Report, RISE issued and Siebert sold membership interests in RISE to certain employees, directors, and affiliates of RISE and Siebert.

This amount represented, as of the date of this Report, an aggregate of 7 % of the total issued and outstanding membership interests in RISE.

Transaction with Hedge Connection

On January 21, 2022, RISE entered into an agreement with Hedge Connection, Inc.

(“Hedge Connection”), a Florida corporation and a woman-owned fintech company founded by Lisa Vioni that provides capital introduction software solutions for the prime brokerage industry.

Pursuant to the agreement, Hedge Connection transferred to RISE common stock representing twenty percent ( 20 %) of the outstanding post-closing issued and outstanding capitalization in Hedge Connection and an option from Ms.

Vioni to acquire 100 % of the remaining interest in Hedge Connection at fair value market at the time of the option exercise, provided such valuation of Hedge Connection is not less than $ 5 million for a consideration of $ 1,000,000 .

This consideration is to be paid in three cash installments over 180 days totaling $ 600,000 as well as approximately 3.33 % of the issued and outstanding membership interests of RISE.

In addition, RISE acquired a technology license agreement from Hedge Connection to use its capital introduction software, Fintroz, for an annual license fee of $ 250,000 , Ms.

Vioni provided RISE with the right to appoint one director to the Board of Directors of Hedge Connection, and Ms.

Vioni was appointed to the Board of Directors of RISE as well as to the position of President of RISE Prime –

Capital Introduction, a division of RISE.

Shelf Registration Statement

On February 18, 2022, the Company filed a shelf registration statement on Form S-3 with the SEC, File No.

333-262895, pursuant to General Instruction I.B.6 to Form S-3 (the “Baby Shelf Rule”), that was declared effective on March 2, 2022 (the “Registration Statement”).

The Company may from time to time sell any combination of the securities described in the Registration Statement in one or more offerings up to an aggregate offering price of $ 100.0 million;

provided, however, at the time the Company sells securities pursuant to the Registration Statement, the amount of securities to be sold plus the amount of any securities it has sold during the prior twelve months in reliance on General Instruction I.B.6 may not exceed one-third of the aggregate market value of the Company’s 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 while the Company remains subject to the Baby Shelf Rule.

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 consolidated financial statements as of December 31, 2021.

Siebert 2021 Form-10K 73

Management has determined 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 consolidated financial statements as of December 31, 2022.

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CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 8. Financial Statements and Supplementary Data