What changed in this filing

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Item 2. Management’s Discussion and Analysis

2023-08-07 compared with 2023-05-15 · 293 added, 163 removed, 200 unchanged (70% of the section changed)

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Accordingly, earnings for any period should not be considered representative of earnings to be expected for any other

Transaction with Kakaopay

On April 27, 2023, Siebert entered into an agreement to raise new capital

into Siebert by issuing new shares of Siebert’s common stock to Kakaopay, a company established under the Laws of the Republic of

Korea and a fintech subsidiary of Korean-based conglomerate Kakao Corp.

Kakaopay offers a diverse array of financial services and has

approximately 40 million registered users according to Kakaopay.

Siebert entered into stock purchase agreements and ancillary agreements

regarding this transaction.

The transaction will occur

in two tranches, and in the first tranche, Kakaopay will purchase a 19.9% stake of Siebert of 8,075,607 newly issued shares for approximately

$17.4 million.

In the second tranche, subject to shareholder and regulatory approval, Kakaopay will acquire an additional 31.1% of Siebert

of 25,756,470 of newly issued shares for approximately $60.5 million.

After the close of the second tranche, Kakaopay will become the

largest shareholder of Siebert with a total of 51% ownership of Siebert.

We cannot make any assurances that any of the shareholder approvals,

regulatory approvals, or any other closing conditions to the second tranche will be satisfied.

The Gebbia Family will continue

to hold significant ownership of Siebert, and Siebert’s current management team, led by the Gebbia Family, will continue to manage

Siebert’s operations and branch locations.

Siebert intends to utilize the additional capital from the first tranche primarily to

expand its securities lending business, corporate services, and order flow opportunities, as well as launch correspondent clearing, among

other initiatives.

Refer to Siebert’s Current Report on Form 8-K filed on May 3, 2023 for further detail regarding this transaction.

with Kakaopay

April 27, 2023, Siebert entered into a Stock Purchase Agreement with Kakaopay (the “First Tranche Stock Purchase Agreement”),

pursuant to which Siebert agreed to issue to Kakaopay Corporation (“Kakaopay”), a company established under the Laws of the

Republic of Korea and a fintech subsidiary of Korean-based conglomerate Kakao Corp., 8,075,607 shares of Common Stock (the “First

Tranche Shares”, and such transaction, the “First Tranche”) at a per share price of Two Dollars Fifteen Cents ($2.15),

which represented 19.9% of the outstanding equity securities of Siebert on a fully diluted basis (taking into account the issuance of

the First Tranche Shares).

The First Tranche Stock Purchase Agreement closed on May 18, 2023.

with the execution of the First Tranche Stock Purchase Agreement, Siebert and Kakaopay entered into a second Stock Purchase Agreement

(the “Second Tranche Stock Purchase Agreement”, and together with the First Tranche Stock Purchase Agreement, the “Stock

Purchase Agreements”), pursuant to which Siebert agreed to issue to Kakaopay an additional 25,756,470 shares of Common Stock (the

“Second Tranche Shares”, and such transaction, the “Second Tranche”) at a per share price of Two Dollars Thirty

Five Cents ($2.35), so that Kakaopay will own 51% of the outstanding equity securities of Siebert on a fully diluted basis (taking into

account the issuance of the First Tranche Shares and the Second Tranche Shares).

copy of the First Tranche Stock Purchase Agreement and Second Tranche Stock Purchase Agreement, both dated April 27, 2023 are attached

in this Report as Exhibit 10.28 and Exhibit 10.29, respectively.

with the consummation of the First Tranche, Siebert, Kakaopay, and the certain family members related to Directors John J.

Gebbia (“Gebbia Stockholders”) entered into a Stockholders’ Agreement (the “Stockholders’ Agreement”)

whereby the parties agreed that Siebert’s Board of Directors would consist of seven directors.

The parties agreed that following

the consummation of the First Tranche, one of the seven directors would be designated by Kakaopay, and six (the “Gebbia Directors”)

would be nominated by the Gebbia Stockholders, of whom three shall be independent directors.

to the Stockholders’ Agreement, on May 24, 2023, the Board of Directors appointed Simon Shin to the Board of Directors.

of Directors at that time also appointed John J.

Gebbia as Chairman of the Board and Chief Executive Officer.

with the consummation of the First Tranche, Siebert and Kakaopay entered into a Registration Rights Agreement (the “Registration

Rights Agreement”) whereby Siebert agreed to grant Kakaopay certain registration rights with respect to certain securities of Siebert

held by Kakaopay.

In exchange for such registration rights, the parties agreed to a lock-up period ending the earlier of the outside date

pursuant to the Second Tranche Stock Purchase Agreement and the date that such agreement is terminated.

of the date of this Report, prior to the close of the Second Tranche, Gloria E.

Gebbia, members of her family, and affiliated entities

are collectively Siebert’s largest stockholders (such stockholders, the “Gebbia Stockholders”), controlling approximately

43% of Siebert’s outstanding equity securities, under the Stockholders’ Agreement, holding the right to appoint six (6) of

Siebert’s seven (7)-member board of directors (the “Siebert Board”).

As discussed above, Kakaopay currently has the

right to appoint the seventh director, and exercised that right through the appointment of Simon Shin to the Siebert Board on May 24,

Upon the closing of the Second Tranche, Kakaopay will own approximately 51% of Siebert’s outstanding equity securities and

will have the right to appoint four (4) out of seven (7) directors of Siebert’s Board, while the Gebbia Stockholders will have the

right to appoint the remaining three (3) directors.

Pursuant to the Stockholders’ Agreement, at all times, three (3) of the seven

(7) directors of the Siebert Board are required to be independent directors in accordance with Nasdaq Listing Rule 5605.

addition to obtaining authorizations, approvals or permits from FINRA, state, and Korean regulators, as described in the Second Tranche

Stock Purchase Agreement, and other customary conditions to closing ( e.g.

, no breach of fundamental representations and warranties

and no material adverse effect), the consummation of the Second Tranche Stock Purchase Agreement is contingent upon Siebert meeting certain

business performance targets, as described in the Second Tranche Stock Purchase Agreement, and obtaining certain Siebert Board and shareholder

approvals, entering into certain agreements with key personnel and stockholders, obtaining certain third-party consents, and appointing

certain directors to Siebert’s Board, each as described further in the Second Tranche Stock Purchase Agreement.

and Kakaopay do not expect the closing of the Second Tranche to result in reorganization or significant changes to the Company’s

rather, the primary motivation for entering into the transaction with Kakaopay is to mutually expand Kakaopay’s and Siebert’s

business leveraging the strengths of both firms.

Kakaopay offers a diverse array of financial services and has approximately 40 million

registered users according to Kakaopay.

The Gebbia Family will continue to hold significant ownership of Siebert, and Siebert’s

current management team, led by the Gebbia Family, will continue to manage Siebert’s operations and branch locations.

Siebert intends

to utilize the additional capital from the first tranche and second tranche primarily to launch correspondent clearing, expand its securities

lending business, corporate services, order flow opportunities, and other initiatives.

Refer to Siebert’s Current Report on Form

8-K filed on May 3, 2023 for further detail regarding this transaction.

RISE was an institutional

brokerage for which all its revenue producing customers transitioned to other prime service providers by the first quarter of 2022.

expenses associated with the transition resulted in a loss of $0.4 million for the three months ended March 31, 2022.

During 2022, there

were various transactions involving the ownership of RISE.

Refer to Note 3 – Transactions with Tigress and Hedge Connection and

Note 4 – RISE for additional detail.

expenses associated with the transition resulted in a loss of $0.3 million and $0.7 million for RISE for the three and six months ended

June 30, 2022, respectively.

During 2022, there were various transactions involving the ownership of RISE.

Refer to Note 3 – Transactions

with Tigress and Hedge Connection and Note 4 – RISE for additional detail.

As part of this transition,

Siebert had an agreement with JonesTrading Institutional Service, LLC (“JonesTrading”) hereby JonesTrading pays RISE a percentage

Siebert had an agreement with JonesTrading Institutional Service, LLC (“JonesTrading”) whereby JonesTrading pays RISE a percentage

of the net revenue produced by certain historical clients of RISE less any related expenses.

For the three months ended March 2023 and

For the three months ended June 30, 2023

and 2022, this agreement resulted in pre-tax income of $82,000 and $36,000, respectively.

For the six months ended June 30, 2023 and 2022,

this agreement resulted in pre-tax income of $148,000 and $119,000, respectively.

We do not anticipate the pre-tax income related

to this agreement will offset the reduction in pre-tax income from customers that have transitioned to other prime service providers.

We do not anticipate the pre-tax income related to this

agreement will offset the reduction in pre-tax income from customers that have transitioned to other prime service providers.

Management is assessing the

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Based upon the strategic

direction of these ventures, management of the respective businesses decided to unwind the original transactions with Siebert, RISE, Hedge

Connection and Tigress.

As of March 31, 2023 and the date of this Report, Siebert owned 17% of Tigress.

See Note 3 – Transactions with Tigress and Hedge Connection for further detail on these transactions.

direction of these ventures, management of the respective businesses decided to unwind the original transactions with these entities.

As of June 30, 2023 and the date of this Report, Siebert owned 17% and 0% of Tigress, respectively.

See Note 3 – Transactions with Tigress and Hedge Connection and Note 12 – Equity Method Investment in Related Party

for further detail.

Interest Rates

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government securities

within our portfolio decline, we anticipate the impact to be temporary as we intend to hold these securities to maturity.

We seek to mitigate

this risk by managing the average maturities of our U.S.

government securities portfolio and setting risk parameters for securities owned,

at fair value.

within our portfolio decline, we anticipate the impact to be temporary as we intend to hold our U.S.

government securities portfolio to

We seek to mitigate this risk by managing the average maturities of our U.S.

government securities portfolio and setting risk

parameters for securities owned, at fair value.

Technology Partner

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trading platform which will replace our current platforms and resulted in the termination of our original technology relationship.

believe this new technology provider will be key to creating a platform for the next generation of retail customers and the termination

of our original technology relationship had minimal impact on our current operations.

We plan to launch a new retail trading platform

in the second quarter of 2023.

June 2023, we launched a new trading platform to our retail clients.

We believe this new technology provider will be key to creating a

platform for the next generation of retail customers.

Client Account and Activity Metrics

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Retail customer money market fund value (in billions)

customer accounts

customer net worth represents the total value of securities and cash in the retail customer

accounts after deducting margin debits

customer margin debit balances represents credit extended to our customers to finance their

purchases against current positions

customer credit balances represents client cash held in brokerage accounts

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

customer accounts represents the number of retail customers

Activity M etrics

Three Months Ended

Retail customer accounts

● Retail customer net worth represents the total value of securities

and cash in the retail customer accounts after deducting margin debits

● Retail customer margin debit balances represents credit extended to our customers to finance their purchases

against current positions

● Retail customer credit balances represents client cash held in brokerage accounts

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

● Retail customer accounts represents the number of retail customers

Client Activity Metrics

Total retail trades

● Total retail trades represents retail trades that generate commissions

● Total retail trades represent retail trades that generate commissions

Statements of Operations and Financial Condition

Statements of Operations for the Three Months

Ended March 31, 2023 and 2022

Ended June 30, 2023 and 2022

Commissions and fees for the

three months ended March 31, 2023 were $1,901,000 and decreased by $439,000 from the corresponding period in the prior year, primarily

due to market conditions.

three months ended June 30, 2023 were $1,952,000 and increased by $99,000 from the corresponding period in the prior year, primarily due

to market conditions.

Interest, marketing and distribution

fees for the three months ended March 31, 2023 were $6,973,000 and increased by $4,611,000 from the corresponding period in the prior

year primarily due to an increase in rising interest rates that resulted in an increase in margin interest, 12b-1fees, as well as interest

treasuries and cash deposits within MSCO.

fees for the three months ended June 30, 2023 were $7,416,000 and increased by $4,265,000 from the corresponding period in the prior year

primarily due to rising interest rates that resulted in an increase in margin interest income and interest income received on U.S.

Principal transactions and

proprietary trading for the three months ended March 31, 2023 were $2,800,000 and increased by $3,067,000 from the corresponding period

proprietary trading for the three months ended June 30, 2023 were $2,654,000 and increased by $1,573,000 from the corresponding period

in the prior year, primarily due to the factors discussed below.

The decrease in realized and

The increase in realized and

unrealized gain on primarily riskless principal transactions was primarily due to market conditions.

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government securities was due to the following.

Siebert invested in 1-year treasury bills and 2-year treasury notes

in order to enhance its yield on its excess 15c3-3 deposits.

We invested in 1-year treasury bills and 2-year treasury notes in

order to enhance our yield on excess 15c3-3 deposits.

During 2022, there was an increase in U.S.

government securities yields,

which created an unrealized loss on our government securities portfolio.

In 2023, we began to see the reversal of the

unrealized loss resulting in an unrealized gain due to the securities coming closer to maturity.

We intend to hold these securities to

maturity and as such, the aggregate unrealized loss will be returned over the duration of the government securities, at a point no later

than the maturity of the securities, the latest maturity being August 2024.

If the value of our portfolio of government securities declines

further, we will incur further unrealized losses;

however, we anticipate this loss to be temporary as we intend to hold these securities

We believe that the level invested reduces the risk of having to liquidate the securities prior to maturity.

government securities yields, which created

an unrealized loss on our U.S.

government securities portfolio.

In 2023, we began to record the reversal of the unrealized loss resulting

in an unrealized gain due to the securities coming closer to maturity.

We continually invest in US government securities based on market

yields and cash needs.

We intend to hold our U.S.

government securities portfolio to maturity and as such, the aggregate unrealized loss of $2.4 million as of June 30, 2023 will be returned

over the duration of the government securities, at a point no later than the maturity of the securities, the latest maturity being April

If the value of our portfolio of U.S.

government securities declines further, we will incur further unrealized losses;

we anticipate this loss to be temporary as we intend to hold our portfolio of U.S.

government securities to maturity.

We believe that

the level invested reduces the risk of having to liquidate the securities prior to maturity.

Below is a summary of the

change in the principal transactions and proprietary trading line item for the periods presented.

Three Months Ended March 31,

Three Months Ended June 30,

Principal transactions and proprietary trading

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Market making for the three

months ended March 31, 2023 was $345,000 and decreased by $419,000 from the corresponding period in the prior year, primarily due to market

months ended June 30, 2023 was $268,000 and decreased by $267,000 from the corresponding period in the prior year, primarily due to market

Stock borrow / stock loan

for the three months ended March 31, 2023 was $3,442,000 and decreased by $136,000 from the corresponding period in the prior year.

for the three months ended June 30, 2023 was $4,513,000 and increased by $365,000 from the corresponding period in the prior year, primarily

due to the expansion of stock locate counterparties and the growth of stock locate and securities lending businesses.

Advisory fees for the three

months ended March 31, 2023 were $444,000 and decreased by $63,000 from the corresponding period in the prior year, primarily due to market

months ended June 30, 2023 were $471,000 and decreased by $5,000 from the corresponding period in the prior year.

Other income for the three

months ended March 31, 2023 was $265,000 and decreased by $795,000 from the corresponding period in the prior year, primarily due to the

termination of consulting fee income from a technology partner as well as a decrease in various customer account fees.

months ended June 30, 2023 was $318,000 and decreased by $161,000 from the corresponding period in the prior year, primarily due to the

termination of consulting fee income from a technology partner.

Operating Expenses

Employee compensation and

benefits for the three months ended March 31, 2023 were $6,967,000 and decreased by $127,000 from the corresponding period in the prior

year, primarily due to a decrease in commissions paid to revenue producers, partially offset by timing of certain compensation expenses.

benefits for the three months ended June 30, 2023 were $8,080,000 and increased by $712,000 from the corresponding period in the prior

year, primarily due to timing of commission payouts and an increase in incentive compensation.

Clearing fees, including execution

costs for the three months ended March 31, 2023 were $355,000 and decreased by $139,000 from the corresponding period in the prior year,

primarily due the timing of certain fees and a decrease in our clearing costs related to RISE.

costs for the three months ended June 30, 2023 were $329,000 and decreased by $46,000 from the corresponding period in the prior year,

primarily due to a decrease in clearing costs with NFS.

Technology and communications

expenses for the three months ended March 31, 2023 were $789,000 and decreased by $393,000 from the corresponding period in the prior

year, primarily due to a decrease in technology costs related to RISE as well as a decrease in costs related to a technology partner.

expenses for the three months ended June 30, 2023 were $793,000 and decreased by $185,000 from the corresponding period in the prior year,

primarily due to a decrease in technology costs related to RISE as well as a decrease in costs related to a technology partner, partially

offset by an increase in software license cost.

Other general and administrative

expenses for the three months ended March 31, 2023 were $1,093,000 and increased by $161,000 from the corresponding period in the prior

expenses for the three months ended June 30, 2023 were $1,119,000 and increased by $184,000 from the corresponding period in the prior

year, primarily due to an increase in travel and entertainment expenses.

Data processing expenses for

the three months ended March 31, 2023 were $851,000 and increased by $335,000 from the corresponding period in the prior year, primarily

due to timing of service charges and overall increase in processing fees.

the three months ended June 30, 2023 were $741,000 and increased by $54,000 from the corresponding period in the prior year, primarily

due to an increase in trading technology cost.

Rent and occupancy expenses

for the three months ended March 31, 2023 were $478,000 and increased by $5,000 from the corresponding period in the prior year.

for the three months ended June 30, 2023 were $491,000 and increased by $35,000 from the corresponding period in the prior year.

Professional fees for the

three months ended March 31, 2023 were $1,074,000 and increased by $378,000 from the corresponding period in the prior year, primarily

due to an increase in consulting fees related to certain transactions and timing of other consulting vendor charges.

three months ended June 30, 2023 were $1,007,000 and decreased by $25,000 from the corresponding period in the prior year, primarily due

to timing of legal fees, partially offset by an increase in board fees.

Depreciation and amortization

expenses for the three months ended March 31, 2023 were $190,000 and decreased by $69,000 from the corresponding period in the prior year,

primarily due to the completion of useful lives of certain software assets in 2022.

expenses for the three months ended June 30, 2023 were $261,000 and had no change from the corresponding period in the prior year.

Interest expense for the three

months ended March 31, 2023 was $88,000 and decreased by $36,000 from the corresponding period in the prior year, primarily due to a decrease

in notes payable offset by an increase in interest rates related to the mortgage and the loan with East West Bank in 2023.

months ended June 30, 2023 was $94,000 and decreased by $9,000 from the corresponding period in the prior year, primarily due to a decrease

in interest related to notes payable.

Advertising and promotion

expense for the three months ended March 31, 2023 was a credit of $28,000 and decreased by $141,000 from the corresponding period in the

prior year, primarily due to a reversal related to advertising expenses.

Earnings of (Loss from) Equity Method Investment

in Related Party

expense for the three months ended June 30, 2023 was $18,000 and decreased by $41,000 from the corresponding period in the prior year,

primarily due to a decrease in promotional costs for various marketing initiatives.

Non-Operating Income (Loss)

The impairment of investments

for the three months ended June 30, 2023 was $1,035,000 and increased by $1,035,000 from the corresponding period in the prior year, primarily

due to the impairment of our investment in the Retail Platform and our investment in Tigress.

The earnings of equity method

investment in related party for the three months ended March 31, 2023 was $38,000 and decreased by $127,000 from the corresponding period

in the prior year, primarily due to a decrease in our proportional income from our investment in Tigress.

investment in related party for the three months ended June 30, 2023 was $73,000 and increased by $59,000 from the corresponding period

in the prior year, primarily due to an increase in our proportional income from our investment in Tigress.

Provision For (Benefit From) Income Taxes

provision from income taxes for the three months ended March 31, 2023 was $1,136,000 and increased from the benefit for income taxes by

provision from income taxes for the three months ended June 30, 2023 was $969,000 and increased from the benefit for income taxes by $1,996,000

from the corresponding period in the prior year.

The change from the corresponding period in the prior year is primarily due

to increased pre-tax earnings in the first quarter of 2023.

The change from the corresponding period in the prior year is primarily due to increased

pre-tax earnings in the second quarter of 2023.

Refer to Note 18 – Income Taxes for additional detail.

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The net income

attributable to noncontrolling interests for the three months ended March 31, 2023 was $19,000, and increased by $138,000 from the corresponding

attributable to noncontrolling interests for the three months ended June 30, 2023 was $25,000, and increased by $226,000 from the corresponding

period in the prior year, due to more expenses in RISE in 2022 associated with the exiting of the prime brokerage business.

Statements of Operations for the Six Months

Ended June 30, 2023 and 2022

Commissions and fees for the

six months ended June 30, 2023 were $3,853,000 and decreased by $340,000 from the corresponding period in the prior year, primarily due

to market conditions.

Interest, marketing and distribution

fees for the six months ended June 30, 2023 were $14,389,000 and increased by $8,876,000 from the corresponding period in the prior year

primarily due to rising interest rates that resulted in an increase in margin interest income and interest income received on U.S.

Principal transactions and

proprietary trading for the six months ended June 30, 2023 were $5,454,000 and increased by $4,640,000 from the corresponding period in

the prior year due to multiple factors, which is detailed in the table below as well as in the above section titled “Statements

of Operations for the Three Months Ended June 30, 2023 and 2022.”

Six Months Ended June 30,

Principal transactions and proprietary trading

Realized and unrealized gain on primarily riskless principal transactions

Unrealized gain (loss) on portfolio of U.S.

government securities

Total Principal transactions and proprietary trading

Market making for the six

months ended June 30, 2023 was $613,000 and decreased by $686,000 from the corresponding period in the prior year, primarily due to market

Stock borrow / stock loan

for the six months ended June 30, 2023 was $7,955,000 and increased by $229,000 from the corresponding period in the prior year, primarily

due to the expansion of stock locate counterparties and the growth of stock locate and securities lending businesses.

Advisory fees for the six

months ended June 30, 2023 were $915,000 and decreased by $68,000 from the corresponding period in the prior year, primarily due to market

Other income for the six months

ended June 30, 2023 was $583,000 and decreased by $920,000 from the corresponding period in the prior year, primarily due to the termination

of consulting fee income from a technology partner.

Operating Expenses

Employee compensation and

benefits for the six months ended June 30, 2023 were $15,047,000 and increased by $585,000 from the corresponding period in the prior

year, primarily due to an increase in incentive compensation, partially offset by lower commission payouts, lower employee healthcare

costs and the elimination of compensation expense related to RISE in 2023.

Clearing fees, including execution

costs for the six months ended June 30, 2023 were $684,000 and decreased by $185,000 from the corresponding period in the prior year,

primarily due to a decrease in clearing costs with NFS.

Technology and communications

expenses for the six months ended June 30, 2023 were $1,582,000 and decreased by $578,000 from the corresponding period in the prior year,

primarily due to a decrease in technology costs related to RISE as well as a decrease in costs related to a technology partner, partially

offset by an increase in software license cost.

Other general and administrative

expenses for the six months ended June 30, 2023 were $2,212,000 and increased by $346,000 from the corresponding period in the prior year,

primarily due to an increase in travel and entertainment expenses.

Data processing expenses for

the six months ended June 30, 2023 were $1,592,000 and increased by $389,000 from the corresponding period in the prior year, primarily

due to an increase in trading technology cost.

Rent and occupancy expenses

for the six months ended June 30, 2023 were $969,000 and increased by $40,000 from the corresponding period in the prior year.

Professional fees for the

six months ended June 30, 2023 were $2,081,000 and increased by $353,000 from the corresponding period in the prior year, primarily due

to an increase in legal fees, board fees, and other consulting fees partially offset by a reduction in professional fees related to RISE

Depreciation and amortization

expenses for the six months ended June 30, 2023 were $451,000 and decreased by $69,000 from the corresponding period in the prior year,

primarily due to the completion of useful lives of certain software assets in 2022.

Interest expense for the six

months ended June 30, 2023 was $182,000 and decreased by $45,000 from the corresponding period in the prior year, primarily due to a decrease

in interest related to notes payable, partially offset by an increase in interest on our line of credit.

Advertising and promotion

expense for the six months ended June 30, 2023 was a credit of $10,000 and decreased by $182,000 from the corresponding period in the

prior year, primarily due to a reversal related to advertising expenses and a decrease in promotional costs for various marketing initiatives.

Non-Operating Income (Loss)

The impairment of investments

for the six months ended June 30, 2023 was $1,035,000 and increased by $1,035,000 from the corresponding period in the prior year, primarily

due to the impairment of our investment in the Retail Platform and our investment in Tigress.

The earnings of equity method

investment in related party for the six months ended June 30, 2023 was $111,000 and decreased by $104,000 from the corresponding period

in the prior year, primarily due to a decrease in our proportional income from our investment in Tigress.

Provision For (Benefit From) Income Taxes

provision from income taxes for the six months ended June 30, 2023 was $2,105,000 and increased from the benefit for income taxes by $3,414,000

from the corresponding period in the prior year.

The change from the corresponding period in the prior year is primarily due to increased

pre-tax earnings in the six months ending June 30, 2023.

Refer to Note 18 – Income Taxes for additional detail.

Net Income (Loss) Attributable to Noncontrolling

further discussed in Note 1 – Organization and Basis of Presentation, we consolidate RISE’s financial results into our financial

statements and reflect the portion of RISE not held by Siebert as a noncontrolling interests in our financial statements.

The net income

attributable to noncontrolling interests for the six months ended June 30, 2023 was $44,000, and increased by $364,000 from the corresponding

period in the prior year, primarily due to more expenses in RISE in 2022 associated with the exiting of the prime brokerage business.

Statements of Financial Condition as of

March 31, 2023 and December 31, 2022

Assets as of March 31, 2023

were $772,689,000 and increased by $44,641,000 from December 31, 2022, primarily due to an increase in securities borrowed partially offset

by a decrease in cash and cash equivalents and cash and securities segregated for regulatory purposes.

Liabilities as of March 31,

June 30, 2023 and December 31, 2022

Assets as of June 30, 2023

were $1,065,049,000 and increased by $337,001,000 from December 31, 2022, primarily due to an increase in securities borrowed partially

offset by a decrease in cash and cash equivalents and cash and securities segregated for regulatory purposes.

Liabilities as of June 30,

2023 were $993,731,000 and increased by $315,603,000 from December 31, 2022, primarily due to an increase in securities loaned partially

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access to capital markets, and cash provided by operations will be adequate to meet our current liquidity needs for the foreseeable future.

As of the date of this Report, there are no known or material events that would require us to use large amounts of our liquid assets to

cover expenses.

As of the date of this Report, other than the items detailed in the section below, there are no known or material events that would require

us to use large amounts of our liquid assets to cover expenses.

capital infusion from Kakao Pay to Siebert from the First Tranche was approximately $15.4 million after the issuance cost.

is currently being used to enhance our regulatory capital, and is primarily invested in U.S.

government securities and is recorded in

the line item “Securities owned, at fair value” on the statements of financial condition.

The capital to be raised from the

close of the second tranche is approximately $60.4 million.

capital from the First Tranche and Second Tranche provides Siebert with additional liquidity and ability to expand its various business

Siebert intends to utilize the additional capital primarily to launch correspondent clearing, expand its securities lending business,

corporate services, order flow opportunities, and other initiatives.

Cash and Cash Equivalents

cash and cash equivalents were $3.9 million and $23.7 million as of March 31, 2023 and December 31, 2022, respectively.

cash and cash equivalents were $7.6 million and $23.7 million as of June 30, 2023 and December 31, 2022, respectively.

Cash Requirements

following table summarizes our short- and long-term material cash requirements as of March 31, 2023.

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

Payments Due By Period

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Mortgage with East West Bank

Loan with East West Bank

Technology vendor*

* On March 31, 2023, we entered into an agreement with a technology vendor for certain development

projects for a total of approximately $1.2 million over a term of 2 years.

December 30, 2021, we purchased the Miami office building and are building out this space to be one of our primary operating centers.

As of March 31, 2023, we have incurred approximately $1.6 million out of the total estimated $1.7 million build out costs.

the fourth quarter of 2022, we partnered with a technology partner to develop a new retail trading platform for our customers and integrate

the retail trading platform into our operations.

As of March 31, 2023, we have incurred approximately $0.6 million out of the total estimated

$0.8 million development costs.

July 7, 2023, we entered into a new lease agreement expiring in December 2028 for office space in the World Financial Center in New York

This office will replace the New Jersey office as one of our key operating centers and the total commitment of the lease is approximately

March 31, 2023, we entered into an agreement with a technology vendor for certain development projects for a total of approximately $1.2

million over a term of 2 years.

Debt Agreements

have a $4.4 million mortgage and a $2.4 million loan outstanding with East West Bank, and an unutilized loan for short term overnight

demand borrowing of up to $25 million with BMO Harris as of March 31, 2023.

As of March 31, 2023, we were in compliance with all covenants

related to our debt agreements.

have a $4.4 million mortgage outstanding with East West Bank, and an unutilized loan for short term overnight demand borrowing of up to

$25 million with BMO Harris as of June 30, 2023.

In the second quarter of 2023, we paid off our $2.7 million loan outstanding with East

As of June 30, 2023, we were in compliance with all covenants related to our debt agreements.

Shelf Registration

February 18, 2022, we filed a shelf registration statement on Form S-3 that was declared effective on March 2, 2022 by the SEC for the

potential offering, issuance and sale by us of up to $100.0 million of our common stock, preferred stock, warrants to purchase our common

stock and/or preferred stock, units consisting of all or some of these securities and subscription rights to purchase all or some of these

The registration statement was filed in reliance on General Instruction I.B.6 of Form S-3, which imposes a limitation on the

maximum amount of securities that we may sell pursuant to the registration statement during any twelve-month period.

Assuming we remain

subject to General Instruction I.B.6, at the time we sell securities pursuant to the registration statement, the amount of securities

potential offering, issuance and sale by Siebert of up to $100.0 million of our common stock, preferred stock, warrants to purchase our

common stock and/or preferred stock, units consisting of all or some of these securities and subscription rights to purchase all or some

of these securities.

The registration statement was filed in reliance on General Instruction I.B.6 of Form S-3, which imposes a limitation

on the maximum amount of securities that we may sell pursuant to the registration statement during any twelve-month period.

remain subject to General Instruction I.B.6, at the time we sell securities pursuant to the registration statement, the amount of securities

to be sold plus the amount of any securities we have sold during the prior twelve months in reliance on Instruction I.B.6 may not exceed

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under our shelf registration statement on Form S-3.

For the three months ended March 31, 2023 and 2022, we did not sell any shares pursuant

to this Sales Agreement.

For the three and six months ended June 30, 2023 and 2022, we did not sell any shares

pursuant to this Sales Agreement.

Refer to Note 21 – Commitments, Contingencies, and Other for additional detail.

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Siebert is entitled to its proportional ownership interest, as long as RISE maintains its liquidity and regulatory capital requirements.

For the three months ended March 31, 2023 and 2022, MSCO and RISE had sufficient net capital to meet their respective liquidity and regulatory

capital requirements.

For the three and six months ended June 30, 2023 and 2022, MSCO and RISE had sufficient net capital to meet their respective liquidity

and regulatory capital requirements.

Refer to Note 19 – Capital Requirements for more detail about our capital requirements.

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of financial condition.

the three months ended March 31, 2023, we had negative operating cash flow primarily due to the change in payables to customers and payables

to non-customers.

We had investing cash outflows primarily from the build out of the Miami office building and development work related

to our new retail trading platform and other technology initiatives.

We had financing cash outflows due to the repayment of our loan with

East West Bank.

the three months ended March 31, 2022, we had negative operating cash flow primarily due to the change in payables to customers and payables

to non-customers, partially offset by the net effect of the change in securities borrowed and securities loaned.

We had investing cash

outflows primarily from the build out of the Miami office building and repayment of note payable - related party.

We had financing cash

inflows related to the issuance and transfers of RISE membership interests, partially offset by repayment of a note payable - related

party and long term debt.

For the six months ended June 30, 2023, we had negative operating cash

flow primarily due to an increase in securities borrowed and securities owned, at fair value, as well as a decrease in payables to customers,

partially offset by an increase in securities loaned.

We had investing cash outflows primarily from the build out of the Miami office

building and development work related to our new retail trading platform and other technology initiatives.

We had financing cash inflows

primarily due to the Kakao Pay transaction offset by the repayment of our loan with East West Bank.

the six months ended June 30, 2022, we had negative operating cash flow primarily due to the decrease in securities loaned, partially

offset by the decrease in securities borrowed.

We had investing cash outflows primarily from the build out of the Miami office building

and development work related to software.

We had financing cash outflows related the repayment of a note payable - related party, partially

offset by the issuance and transfers of RISE membership interests.

Long Term Contracts

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The amendment also provides for an early termination fee;

however, as of March 31, 2023, we do not expect to terminate the contract with

however, as of June 30, 2023, we do not expect to terminate the contract with

NFS before the end of the contract term.

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and Other for additional detail.

June 2023, MSCO entered into an amendment to its service agreement with Broadridge Securities Processing Solutions, LLC that, among other

things, extends the term of their arrangement for a five-year period ending June 2028, with an option to terminate after three years.

The total minimum expense for this arrangement is estimated at approximately $1.3 million.

Off-Balance Sheet

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These activities may expose us to off-balance sheet risk in the

event the customer or other broker is unable to fulfill its contracted obligations and we are forced to purchase or sell the financial

event the customer or other broker is unable to fulfill their contracted obligations and we are forced to purchase or sell the financial

instrument underlying the contract at a loss.

There were no material losses for unsettled customer transactions for the three months ended

March 31, 2023 and 2022.

There were no material losses for unsettled customer transactions for the three and six

months ended June 30, 2023 and 2022.

Refer to Note 20 – Financial Instruments with Off-Balance Sheet Risk for additional detail.

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

As of both March 31, 2023

and December 31, 2022, the Company recorded an uncertain tax position of $1,596,000 related to various tax matters, which is included

in the line item “Taxes payable” in the statements of financial condition.

As of both June 30, 2023 and

December 31, 2022, the Company recorded an uncertain tax position of $1,596,000 related to various tax matters, which is included in the

line item “Taxes payable” in the statements of financial condition.

Critical Accounting Policies

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and Analysis of Financial Condition and Results of Operations in our 2022 Form 10-K.

As of March 31, 2023, there have been

As of June 30, 2023, there have been

no changes to our critical accounting policies or estimates.

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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-Q

Item 2. Management’s Discussion and Analysis