SIEBERT FINANCIAL CORP 10-K

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA INDEX TO CONSOLIDATED FINANCIAL STATEMENTS SIEBERT FINANCIAL CORP. Page Report of Independent Registered Public Accounting Firm (PCAOB ID 23 ) 31 Consolidated Statements of Financial Condition as of December 31, 2023 and 2022 32 Consolidated Statements of Operations for each of the years in the two-year period ended December 31, 2023 33 Consolidated Statements of Changes in Stockholders’ Equity for each of the years in the two-year period ended December 31, 2023 34 Consolidated Statements of Cash Flows for each of the years in the two-year period ended December 31, 2023 35 Notes to Consolidated Financial Statements 36 Siebert 2023 Form-10K  30 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Shareholders and the Board of Directors of Siebert Financial Corp.: Opinion on the Financial Statements We have audited the accompanying consolidated statements of financial condition of Siebert Financial Corp. (the Company) as of December 31, 2023 and 2022, 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, 2023 and 2022, 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. 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. 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. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion. Critical Audit Matter 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) relates 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. Revenue Recognition As described in Note 2 and Note 17 to the consolidated financial statements, the Company recognizes revenue from the following types of services: commissions and fees; principal transactions and proprietary trading; market making; stock borrow and stock loan; advisory fees; interest, marketing, and distribution fees; and other income. The principal considerations for our determination that revenue recognition is a critical audit matter are (i) the significant number of revenue streams and (ii) the volume of information used in the calculation of each revenue stream. This required an increased extent of audit effort when performing audit procedures. 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: ● Reviewed management’s revenue recognition policies and related contracts. ● Performed substantive tests of details for a sample of transactions for each material revenue stream. ● As a result of the Company’s material weakness related to Information Technology General Controls (ITGCs), we increased the extent of substantive tests of details we would have otherwise made if the Company’s controls were designed and operating effectively. In addition, we utilized original source documents for audit evidence, rather than system reports or other information generated by the Company’s information technology (IT) systems. For any reports obtained from the IT systems, the engagement team designed specific audit procedures to substantively test the completeness and accuracy of such reports. /s/ Baker Tilly US, LLP We have served as the Company’s auditor since 2017. New York , New York May 10, 2024 Siebert 2023 Form-10K  31 SIEBERT FINANCIAL CORP. & SUBSIDIARIES CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION December 31, 2023 December 31, 2022 ASSETS Current assets Cash and cash equivalents $ 5,735,000 $ 23,672,000 Cash and securities segregated for regulatory purposes; (Cash of $ 158.8 million, securities with a fair value of $ 115.5 million as of December 31, 2023; Cash of $ 135.2 million, securities with a fair value of $ 141.0 million as of December 31, 2022) 274,317,000 276,166,000 Receivables from customers 72,823,000 52,057,000 Receivables from broker-dealers and clearing organizations 3,863,000 9,094,000 Receivables from non-customers 241,000 100,000 Other receivables 2,424,000 2,119,000 Prepaid expenses and other assets 1,700,000 2,055,000 Securities borrowed 394,709,000 336,909,000 Securities owned, at fair value 18,038,000 3,204,000 Total Current assets 773,850,000 705,376,000 Deposits with broker-dealers and clearing organizations 7,885,000 1,311,000 Property, office facilities, and equipment, net 9,404,000 8,328,000 Software, net 1,432,000 991,000 Lease right-of-use assets 2,736,000 2,222,000 Equity method investment in related party — 2,584,000 Investments, cost — 850,000 Deferred tax assets 4,504,000 4,397,000 Goodwill 1,989,000 1,989,000 Total Assets $ 801,800,000 $ 728,048,000 LIABILITIES AND STOCKHOLDERS’ EQUITY Liabilities Current liabilities Payables to customers $ 289,777,000 $ 321,391,000 Payables to non-customers 713,000 11,506,000 Drafts payable 1,726,000 2,384,000 Payables to broker-dealers and clearing organizations 481,000 660,000 Accounts payable and accrued liabilities 3,639,000 2,507,000 Taxes payable 2,313,000 1,052,000 Securities loaned 419,433,000 327,180,000 Securities sold, not yet purchased, at fair value 2,000 2,000 Current portion of lease liabilities 759,000 1,158,000 Current portion of long-term debt 84,000 1,073,000 Current portion of deferred contract incentive 808,000 808,000 Current portion of contract termination liability 1,898,000 — Total Current liabilities 721,633,000 669,721,000 Lease liabilities, less current portion 2,227,000 1,245,000 Long-term debt, less current portion 4,229,000 5,974,000 Deferred contract incentive, less current portion 438,000 1,188,000 Contract termination liability, less current portion 2,564,000 — Total Liabilities 731,091,000 678,128,000 Commitments and Contingencies Equity Stockholders’ equity Common stock, $ .01 par value; 100,000,000 shares authorized; 40,580,936 shares issued and 39,580,936 shares outstanding as of December 31, 2023, respectively. 32,505,329 shares issued and outstanding as of December 31, 2022. 406,000 325,000 Treasury stock, at cost; 1,000,000 and 0 shares held as of December 31, 2023 and 2022, respectively. ( 2,510,000 ) — Additional paid-in capital 45,016,000 29,642,000 Retained earnings 26,808,000 18,982,000 Total Stockholders’ equity 69,720,000 48,949,000 Noncontrolling interests 989,000 971,000 Total Equity 70,709,000 49,920,000 Total Liabilities and Equity $ 801,800,000 $ 728,048,000 Numbers are rounded for presentation purposes. See notes to consolidated financial statements. Siebert 2023 Form-10K  32 SIEBERT FINANCIAL CORP. & SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS Year Ended December 31, 2023 2022 Revenue Commissions and fees $ 7,541,000 $ 7,340,000 Interest, marketing and distribution fees 29,577,000 17,234,000 Principal transactions and proprietary trading 13,094,000 3,743,000 Market making 1,304,000 2,443,000 Stock borrow / stock loan 16,172,000 14,518,000 Advisory fees 1,928,000 1,862,000 Other income 1,898,000 2,962,000 Total Revenue 71,514,000 50,102,000 Expenses Employee compensation and benefits 31,936,000 28,734,000 Clearing fees, including execution costs 1,672,000 2,143,000 Technology and communications 3,364,000 4,471,000 Other general and administrative 4,410,000 4,010,000 Data processing 3,236,000 3,169,000 Rent and occupancy 1,873,000 1,955,000 Professional fees 4,459,000 3,202,000 Depreciation and amortization 2,020,000 995,000 Interest expense 263,000 440,000 Advertising and promotion 155,000 543,000 Total Expenses 53,388,000 49,662,000 Operating income 18,126,000 440,000 Earnings of equity method investment in related party 111,000 4,000 Impairment of investments ( 1,035,000 ) ( 4,015,000 ) Loss on sale of equity method investment in related party — ( 719,000 ) Transaction termination costs ( 5,943,000 ) — Non-operating loss ( 6,867,000 ) ( 4,730,000 ) Income (loss) before provision for (benefit from) income taxes 11,259,000 ( 4,290,000 ) Provision for (benefit from) income taxes 3,415,000 ( 1,300,000 ) Net income (loss) 7,844,000 ( 2,990,000 ) Less net income (loss) attributable to noncontrolling interests 18,000 ( 1,000,000 ) Net income (loss) available to common stockholders $ 7,826,000 $ ( 1,990,000 ) Net income (loss) available to common stockholders per share of common stock Basic and diluted $ 0.21 $ ( 0.06 ) Weighted average shares outstanding Basic and diluted 37,070,366 32,408,449 Numbers are rounded for presentation purposes. See notes to consolidated financial statements. Siebert 2023 Form-10K  33 SIEBERT FINANCIAL CORP. & SUBSIDIARIES CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY Common Stock Treasury Stock Number of Shares Issued $.01 Par Value Number of Shares Amount Additional Paid-In Capital Retained Earnings Total Stockholders’ Equity Noncontrolling Interests Total Equity Balance – January 1, 2022 32,403,235 $ 324,000 — $ — $ 27,967,000 $ 20,972,000 $ 49,263,000 $ 1,243,000 $ 50,506,000 Issuance and transfers of RISE membership interests — — — — 1,573,000 — 1,573,000 1,841,000 3,414,000 Termination of agreement with technology vendor — — 193,906 ( 293,000 ) — — ( 293,000 ) — ( 293,000 ) Cancellation of treasury stock ( 193,906 ) ( 2,000 ) ( 193,906 ) 293,000 ( 291,000 ) — — — — Sales of equity method investments in related parties — — — — ( 65,000 ) — ( 65,000 ) ( 1,113,000 ) ( 1,178,000 ) Share-based compensation 296,000 3,000 — — 458,000 — 461,000 — 461,000 Net (loss) — — — — — ( 1,990,000 ) ( 1,990,000 ) ( 1,000,000 ) ( 2,990,000 ) Balance – December 31, 2022 32,505,329 $ 325,000 — $ — $ 29,642,000 $ 18,982,000 $ 48,949,000 $ 971,000 $ 49,920,000 Kakaopay transaction, net of issuance cost 8,075,607 81,000 — — 14,814,000 — 14,895,000 — 14,895,000 Non-cash consideration due to Kakaopay transaction — — — — 560,000 — 560,000 — 560,000 Reacquisition of shares outstanding — — 1,000,000 ( 2,510,000 ) — — ( 2,510,000 ) — ( 2,510,000 ) Net income — — — — — 7,826,000 7,826,000 18,000 7,844,000 Balance – December 31, 2023 40,580,936 $ 406,000 1,000,000 $ ( 2,510,000 ) $ 45,016,000 $ 26,808,000 $ 69,720,000 $ 989,000 $ 70,709,000 Numbers are rounded for presentation purposes. See notes to consolidated financial statements. Siebert 2023 Form-10K  34 SIEBERT FINANCIAL CORP. & SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS Year Ended December 31, 2023 2022 Cash Flows From Operating Activities Net income (loss) $ 7,844,000 $ ( 2,990,000 ) Adjustments to reconcile net income (loss) to net cash (used in) operating activities: Deferred income tax benefit ( 107,000 ) ( 655,000 ) Depreciation and amortization 2,020,000 995,000 Earnings of equity method investment in related party ( 111,000 ) ( 4,000 ) Impairment of investments 1,035,000 4,015,000 Transaction termination costs - Kakaopay fee 4,462,000 — Loss on sale of equity method investment in related party — 719,000 Share-based compensation — 461,000 Changes in Receivables from customers ( 20,766,000 ) 33,270,000 Receivables from non-customers ( 141,000 ) ( 19,000 ) Receivables from and deposits with broker-dealers and clearing organizations ( 1,343,000 ) 3,321,000 Securities borrowed ( 57,800,000 ) 602,609,000 Securities owned, at fair value ( 14,834,000 ) 787,000 Prepaid expenses and other assets ( 269,000 ) ( 335,000 ) Prepaid service contract — 711,000 Payables to customers ( 31,614,000 ) ( 55,279,000 ) Payables to non-customers ( 10,793,000 ) ( 5,924,000 ) Drafts payable ( 658,000 ) 580,000 Payables to broker-dealers and clearing organizations ( 179,000 ) 406,000 Accounts payable and accrued liabilities 1,132,000 ( 1,170,000 ) Securities loaned 92,253,000 ( 604,555,000 ) Securities sold, not yet purchased, at fair value — ( 22,000 ) Net lease liabilities 69,000 ( 90,000 ) Taxes payable 1,261,000 ( 696,000 ) Deferred contract incentive ( 750,000 ) ( 750,000 ) Retail Platform implementation ( 978,000 ) — Net cash used in operating activities ( 30,267,000 ) ( 24,615,000 ) Cash Flows From Investing Activities Distribution from equity method investment in related party — 259,000 Purchase of office facilities and equipment ( 352,000 ) ( 284,000 ) Build out of property ( 1,313,000 ) ( 985,000 ) Purchase of software ( 894,000 ) ( 830,000 ) Net cash used in investing activities ( 2,559,000 ) ( 1,840,000 ) Cash Flows From Financing Activities Issuance of RISE membership interests — 600,000 Transfers of RISE membership interests — 240,000 Kakaopay issuance cost ( 1,589,000 ) — Shares issued for Kakaopay transaction 17,363,000 — Repayments of notes payable – related party — ( 4,470,000 ) Repayments of long-term debt ( 2,734,000 ) ( 661,000 ) Net cash provided by (used in) financing activities 13,040,000 ( 4,291,000 ) Net change in cash and cash equivalents, and cash and securities segregated for regulatory purposes ( 19,786,000 ) ( 30,746,000 ) Cash and cash equivalents, and cash and securities segregated for regulatory purposes - beginning of year 299,838,000 330,584,000 Cash and cash equivalents, and cash and securities segregated for regulatory purposes - end of year $ 280,052,000 $ 299,838,000 Reconciliation of cash, cash equivalents, and cash and securities segregated for regulatory purposes Cash and cash equivalents - end of year $ 5,735,000 $ 23,672,000 Cash and securities segregated for regulatory purposes - end of year 274,317,000 276,166,000 Cash and cash equivalents, and cash and securities segregated for regulatory purposes - end of year $ 280,052,000 $ 299,838,000 Supplemental cash flow information Cash paid during the year for income taxes $ 2,260,000 $ 59,000 Cash paid during the year for interest $ 263,000 $ 440,000 Non-cash investing and financing activities Treasury stock (1) $ ( 2,510,000 ) $ — Kakaopay issuance cost (2) $ ( 318,000 ) $ — Non-cash consideration due to Kakaopay transaction (2) $ ( 560,000 ) $ — Non-cash consideration due to Kakaopay transaction (2) $ 560,000 $ — Transfers of RISE membership interests (3) $ — $ 2,880,000 Termination of agreement with technology vendor (4) $ — $ ( 293,000 ) Net membership interests of RISE from transactions with Hedge Connection (1) $ — $ 256,000 Net membership interests exchange between Tigress and RISE (1) $ — $ ( 93,000 ) Forgiveness of notes payable from Hedge Connection (1) $ — $ 250,000 (1) Refer to Note 3 – Transactions with Tigress and Hedge Connection and Note 12 – Equity Method Investment in Related Party for further detail. (2) Refer to Note 5 – Kakaopay Transaction for further detail. (3) Refer to Note 4 – RISE for further detail. (4) Refer to Note 7 – Prepaid Service Contract for further detail. Numbers are rounded for presentation purposes. See notes to consolidated financial statements. Siebert 2023 Form-10K  35 SIEBERT FINANCIAL CORP. & SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. Organization Overview Siebert Financial Corp., a New York corporation, incorporated in 1934, is a holding company that conducts the following lines of business through its wholly-owned and majority-owned subsidiaries: ● Muriel Siebert & Co., Inc. (“MSCO”) provides retail brokerage services. MSCO is a Delaware corporation and broker-dealer registered with the SEC under the Exchange Act and the Commodity Exchange Act of 1936, and member of FINRA, NYSE, SIPC, Euroclear, NFA, and CFTC. ● 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, CFTC, FINRA, SIPC, and NFA. ● StockCross Digital Solutions, Ltd. (“STXD”) is an inactive subsidiary headquartered in Bermuda. For purposes o f 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. On January 1, 2024, MSCO changed its name to Muriel Siebert & Co., LLC and SNXT changed its name to Siebert AdvisorNXT, LLC with its tax status changing from a C-Corporation to a Limited Liability Corporation. Refer to Note 24 – Subsequent Events for further detail. The Company is headquartered in Miami Beach, FL, with primary operations in New Jersey and California. The Company has 11 branch offices throughout the U.S. and clients around the world. The Company’s SEC filings are available through the Company’s website at www.siebert.com, where investors can obtain copies of the Company’s public filings free of charge. The Company’s common stock, par value $ .01 per share, trades on the Nasdaq Capital Market under the symbol “SIEB.” The Company primarily operates in the securities brokerage and asset management industry and has no other reportable segments. All of the Company’s revenues for the years ended December 31, 2023 and 2022 were derived from its operations in the U.S. As of December 31, 2023, the Company is comprised of a single operating segment based on the factors related to management’s decision-making framework as well as management evaluating performance and allocating resources based on assessments of the Company from a consolidated perspective. 2. Summary of Significant Accounting Policies Basis of Presentation 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. Upon consolidation, all intercompany balances and transactions are eliminated. The U.S. dollar is the functional currency of the Company and numbers are rounded for presentation purposes. Siebert 2023 Form-10K  36 Reclassification Certain prior year amounts have been reclassified to conform to the presentation of the current period. The Company reclassified $ 137,000 related to a certain revenue stream from the line item “Commissions and fees” to “Other income” on the consolidated statements of operations for the year ended December 31, 2022 to conform to the presentation of the current period. The reclassification has not materially impacted the Company’s financial statements, and did not result in a change in total revenue, net income or cash flows from operations for the periods presented. 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 has not changed through December 31, 2023; 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 on the consolidated statements of operations. The portion of total equity that is attributable to noncontrolling interests for such subsidiaries is presented as noncontrolling interests on the consolidated 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 party. 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 The preparation of consolidated financial statements in conformity with U.S. GAAP requires the Company to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the consolidated financial statements and the reported amounts of expenses during the reporting period. Actual results could differ from those estimates. These estimates relate primarily to expenses in the normal course of business as to which the Company receives no confirmations, invoices, or other documentation at the time the books are closed. The Company uses its best judgment, based on knowledge of these expenses incurred, to estimate the amount of such expenses. 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 periods presented and the actual amounts of 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, 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. Siebert 2023 Form-10K  37 Fair Value 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: U.S. government securities: U.S. 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 which are recorded at fair value, which approximates cost. 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 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. Siebert 2023 Form-10K  38 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 is the price at which the issuing company may choose to repurchase a security before its maturity date, which represents fair value. Units of UITs are categorized as level 2. Options: 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 Cash and cash equivalents are all cash balances that are unrestricted. The Company has defined cash equivalents as highly liquid investments with original maturities of less than 90 days that are not held for sale in the ordinary course of business. As of December 31, 2023 and 2022, the Company did not hold any cash equivalents. As of December 31, 2023 and 2022, 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, 2023, the Company had approximately $ 158.8 million in cash deposits in special reserve accounts and $ 115.5 million in securities segregated for regulatory purposes. 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. Receivables From and Payables To Customers Receivables from and payables to customers include amounts due and owed on cash and margin transactions. Receivables from customers include margin loans to securities brokerage clients and other trading receivables. 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. The Company monitors margin levels and requires customers to provide additional collateral, or reduce margin positions, to meet minimum collateral requirements if the fair value of the collateral changes. 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. Receivables from and payables to customers amounts include any amounts received from interest on credit balances or paid on margin debit balances. 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, 2023 and 2022. Securities beneficially owned by customers, including those that collateralize margin or other similar transactions, are not reflected on the consolidated statements of financial condition. Siebert 2023 Form-10K  39 Receivables From and Payables to Non-Customers Receivables from and payables to non-customers include amounts due and owed on cash and margin transactions on non-customer accounts owned and controlled by principal officers and directors of MSCO. Receivables from non-customers include margin loans to securities brokerage clients and other trading receivables. Margin loans are collateralized by non-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. The Company monitors margin levels and requires non-customers to provide additional collateral, or reduce margin positions, to meet minimum collateral requirements if the fair value of the collateral changes. 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 non-customer activity. Receivables from and payables to non-customers amounts include any amounts received from interest on credit balances or paid on margin debit balances. 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 non-customers as of December 31, 2023 and 2022. Securities beneficially owned by non-customers, including those that collateralize margin or other similar transactions, are not reflected in the consolidated statements of financial condition. Receivables From, Payables To, and Deposits With Broker-Dealers and Clearing Organizations 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. Amounts payables to broker-dealers and clearing organizations are offset against corresponding amounts receivables from broker-dealers and clearing organizations. 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, 2023 and 2022 were both self-cleared and cleared on a fully disclosed basis through NFS. RISE customer transactions for the year ended December 31, 2023 were cleared on fully disclosed basis through MSCO. For the year ended December 31, 2022 were cleared on fully disclosed basis through GSCO and Pershing. RISE did not have any customer transactions through MSCO for the years ended December 31, 2023 and 2022. 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. In June 2023, the Company 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. All other broker-dealer and clearing organization relationships operate on a month-to-month basis. Siebert 2023 Form-10K  40 Receivables from and deposits with broker-dealers and clearing organizations are in scope of the amended guidance for Topic 326. The Company continually reviews the credit quality of its counterparties and historically has not experienced a default. 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 had no expectation of credit losses for these arrangements as of December 31, 2023 and 2022. 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 Securities borrowed transactions are recorded at the amount of cash collateral delivered to the counterparty. Securities loaned transactions are recorded at the amount of cash collateral received. For securities borrowed and loaned, the Company monitors the market value of the securities and obtains or refunds collateral as necessary. The Company can elect to use an approach to measure the allowance for credit losses using the fair value of collateral where the borrower is required to, and reasonably expected to, continually adjust and replenish the amount of collateral securing the instrument to reflect changes in the fair value of such collateral. 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 had no expectation of credit losses on its securities borrowed balances as of December 31, 2023 and 2022. Netting of Financial Assets and Financial Liabilities Substantially all of the Company’s securities borrowing and securities lending activity is transacted under master agreements that may allow for net settlement in the ordinary course of business, as well as offsetting of all contracts with a given counterparty in the event of default by one of the parties. However, for financial statement purposes, the Company does not net balances related to these financial instruments. These financial instruments are presented on a gross basis in the consolidated statements of financial condition. Siebert 2023 Form-10K  41 The potential effect of rights of setoff associated with the Company’s recognized assets and liabilities is as follows: As of December 31, 2023 Gross Amounts of Recognized Assets and Liabilities Gross Amounts Offset in the Consolidated Statements of Financial Condition 1 Net Amounts Presented in the Consolidated Statements of Financial Condition Collateral Received or Pledged 2 Net Amount 3 Assets Securities borrowed $ 394,709,000 — 394,709,000 $ 371,076,000 $ 23,633,000 Liabilities Securities loaned $ 419,433,000 — 419,433,000 $ 404,312,000 $ 15,121,000 As of December 31, 2022 Gross Amounts of Recognized Assets and Liabilities Gross Amounts Offset in the Consolidated Statements of Financial Condition 1 Net Amounts Presented in the Consolidated Statements of Financial Condition Collateral Received or Pledged 2 Net Amount 3 Assets Securities borrowed $ 336,909,000 — 336,909,000 $ 326,618,000 $ 10,291,000 Liabilities Securities loaned $ 327,180,000 — 327,180,000 $ 316,648,000 $ 10,532,000 1) Amounts represent recognized assets and liabilities that are subject to enforceable master agreements with rights of setoff. 2) Represents the fair value of collateral the Company had received or pledged under enforceable master agreements. 3) Represents the amount for which, in the case of net recognized assets, the Company had not received collateral, and in the case of net recognized liabilities, the Company had not pledged collateral. Securities Owned and Securities Sold, Not Yet Purchased at Fair Value Securities owned, at fair value represent marketable securities owned by the Company at trade-date valuation. Securities sold, not yet purchased, at fair value represent marketable securities sold by the Company prior to purchase at trade-date valuation. These securities are classified as trading securities and in accordance with ASC 940, these securities are measured initially at fair value and any realized or unrealized gains or losses to fair value are included in profit or loss. Below is a table with further detail on the Company’s securities. Type of Security Classification Consolidated Statements of Financial Condition Recording of Realized and Unrealized Gain or Loss Certificates of deposit, Corporate bonds, municipal securities, options Trading Securities owned, at fair value Principal transactions and proprietary trading Equities Trading Securities owned, at fair value; Securities sold, not yet purchased at fair value Market making, Principal transactions and proprietary trading U.S. government securities Trading Securities owned, at fair value Principal transactions and proprietary trading U.S. government securities Trading Cash and securities segregated for regulatory purposes Principal transactions and proprietary trading Property, Office Facilities, and Equipment, Net Property, office facilities, and equipment are stated at cost, net of accumulated depreciation and amortization. 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, generally between four and ten years , or the remaining life of the 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 office facilities. Depreciation for property is calculated using the straight-line-method over the estimated useful life of the property, not exceeding forty years . Siebert 2023 Form-10K  42 Software, Net The Company capitalizes certain costs for certain software and amortizes them over their useful life, generally not exceeding three years . 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. 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. Leases 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, on the consolidated 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 5 years as of December 31, 2023. 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” on the consolidated 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 line item “Equity method investment in related party” on the consolidated 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 consolidated 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. 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. Investments, Cost Investments in equity shares without a readily determinable fair value and for which the Company does not have the ability to exercise significant influence are accounted for at cost adjusted for observable price changes in orderly transactions for the identical or a similar investment of the same issuer, and impairments. Those investments are classified within Investments, cost on the consolidated statements of financial condition. As of December 31, 2023 and 2022, the Company had investments, cost of $0 and $ 850,000 , respectively. Siebert 2023 Form-10K  43 Goodwill 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 both December 31, 2023 and 2022. Drafts Payable Drafts payable represent checks drawn by the Company against customer accounts which remained outstanding and had not cleared the bank as of the end of the period. 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 both recorded in the line item “Deferred contract incentive” on the consolidated 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 consolidated statements of operations. Contract Termination Liability The Company entered into a settlement agreement with Kakaopay whereby it will pay Kakaopay $ 5 million, payable in quarterly installments. The Company accounted for this transaction as an exit or disposal cost obligation in accordance with ASC 420, “Exit or Disposal Cost Obligations.” Accordingly, the Company recognized the liability at fair value by using a present value technique that used a discount rate equivalent to the bank prime rate as of the date of the agreement. The liability is recorded on the line item “Contract termination liability” on the consolidated statements of financial condition. The expense was recorded in the line item “Transaction termination costs” on the consolidated statements of operations. Refer to Note 5 – Transaction with Kakaopay for further detail. Revenue Recognition 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. Siebert 2023 Form-10K  44 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. Principal Transactions and Proprietary Trading Principal transactions and proprietary trading primarily represent two revenue streams. The first revenue stream 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 revenue stream 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. 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 or trading counterparty. 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. 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 counterparty. 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. Securities borrowed and securities loaned transactions are recorded at the amount of cash collateral advanced or received, respectively, with all related securities, collateral, and cash both held at and moving through DTC or OCC as appropriate for each counterparty. Securities borrowed transactions require the Company to deposit cash or other collateral with the lender. Securities loaned transactions require the receipt of collateral by the Company in the form of cash in an amount generally in excess of the fair value of securities loaned. The Company monitors the fair value of securities borrowed and loaned daily, with additional collateral obtained or returned as necessary. Securities borrow and loan fees represent interest or (rebate) on the cash received or paid as collateral on the securities borrowed or loaned. The Company applies a practical expedient to ASC 326 regarding its securities borrowed and loaned balances and their underlying collateral. Inherent in this activity, the Company and its counterparties to securities borrowed and loaned transactions, mark to market the collateral, securing these transactions on a daily basis through DTC or OCC. The counterparty continually replenishes the collateral securing the asset in accordance with standard industry practice. Based on the above factors, there is no material current expected credit loss under ASC 326 for securities borrowed and loaned transactions is not needed as of December 31, 2023. Siebert 2023 Form-10K  45 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. 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. 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. Other Income Other income represents fees generated from consulting services to a technology provider, payment for order flow, and transactional fees generated from client accounts. The performance obligation for consulting services to a technology provider is providing consulting services and is satisfied over time in line with the duration of the consulting contract. The performance obligation related to payment for order flow is providing financial services and is satisfied at a point in time. The performance obligation related to transactional fees generated from client accounts is providing financial services to clients and is satisfied over time. The Company also earns revenue from an agreement with JonesTrading Institutional Service, LLC (“JonesTrading”) whereby J onesTrading pays the Company a percentage of the net revenue produced by certain historical institutional customers less any related expenses. Revenue from JonesTrading is determined based on the factors outside of the Company’s control and the Company records the income amount on a monthly basis when the actual amount of income is known. Costs to Obtain or Fulfill a Contract; Other 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. Siebert 2023 Form-10K  46 Performance Obligation The following table presents each revenue category and its related performance obligation: Revenue Stream Performance Obligation Recognition Commission and fees Provide financial services to customers and counterparties Point in time recognition Principal transactions and proprietary trading Provide financial services to customers and counterparties Point in time recognition Market making Provide financial services to customers and counterparties Point in time recognition Stock borrow / stock loan Provide financial services to customers and counterparties Point in time recognition Advisory fees Provide financial services to customers and counterparties Over time recognition Interest, marketing and distribution fees Interest NA Over time recognition Marketing fees Provide financial services to customers and counterparties Point in time recognition Distribution fees Fixed: provide financial services to customers and counterparties; Variable: NA Fixed: Point in time recognition; Variable: Over time recognition Other income Consulting services to a technology provider Provide consulting services Over time recognition Payment for order flow Provide financial services to customers Point in time recognition Transactional fees generated from client accounts Provide financial services to customers Point in time recognition Revenue from agreement with JonesTrading NA Point in time recognition Share-Based Compensation The Company grants share-based compensation and 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. Refer to Note 22 – Employee Benefit Plans for further detail. Advertising and Promotion Advertising and promotion costs are expensed as incurred and were $ 155,000 and $ 543,000 for the years ended December 31, 2023, and 2022, respectively. Income Taxes 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 consolidated financial statements. Under this method, the Company determines deferred tax assets and liabilities on the basis of the differences between the consolidated financial statements and tax bases of assets and liabilities by using enacted tax rates in effect for the year in which the differences are expected to reverse. The effect of a change in tax rates on deferred tax assets and liabilities is recognized in income in the period that includes the enactment date. The Company recognizes deferred tax assets to the extent that the Company believes that these assets are more likely than not to be realized. In making such a determination, the Company considers all available positive and negative evidence, including future reversals of existing taxable temporary differences, projected future taxable income, tax-planning strategies, and results of recent operations. If the Company determines that it would be able to realize deferred taxes in the future in excess of their net recorded amount, the Company would make an adjustment to the deferred tax asset valuation allowance, which would reduce the provision for income taxes. Siebert 2023 Form-10K  47 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 on the consolidated statements of operations. Accrued interest and penalties would be included on the related tax liability line on the consolidated statements of financial condition. Capital Stock The authorized capital stock of the Company consists of a single class of common stock. Shares authorized were 100 million as of both December 31, 2023 and 2022. 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 both December 31, 2023 and 2022. New Accounting Standards In December 2023, the Financial Accounting Standards Board (“FASB”) issued ASU 2023-09, “Improvements to Income Tax Disclosures” (“ASU 2023-09”). The ASU is intended to enhance the transparency and decision usefulness of income tax disclosures. The amendments in the ASU address investor requests for enhanced income tax information primarily through changes to the rate reconciliation and income taxes paid information. ASU 2023-09 will be effective for the Company for annual periods beginning after December 15, 2024, though early adoption is permitted. The Company is still evaluating the presentational effect that ASU 2023-09 will have on its consolidated financial statements, but the Company expects considerable changes to its income tax footnote. Accounting Standards Adopted in Fiscal 2023 The Company did not adopt any new accounting standards during the year ended December 31, 2023. 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 consolidated financial statements and related disclosures as of December 31, 2023. 3. Transactions with Tigress and Hedge Connection Tigress 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. Siebert 2023 Form-10K  48 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 a result of the Reorganization Agreement, the Company’s ownership interest of Tigress decreased from 24 % to 17 %. Based on the level of the Company’s ownership of Tigress, the Company concluded that it was still able to exercise significant influence over Tigress following the Reorganization Agreement. Therefore, the Company continued to account for this investment under the equity method of accounting through the Company’s sale of its interest in Tigress on July 10, 2023. During the years ended December 31, 2023 and 2022, the net loss as a result of this transaction was $0 and $ 719,000 , respectively, which is in the line item “Loss on sale of equity method investment in related party” on the consolidated statements of operations. Share Redemption Agreement On July 10, 2023, the Company entered into a Share Redemption Agreement with Cynthia DiBartolo, CEO of Tigress, pursuant to which the Company repurchased from Ms. DiBartolo one million shares of its common stock held by Ms. DiBartolo in exchange for conveying to Ms. DiBartolo the Company’s 17 % interest in Tigress. The Company accounted for the Share Redemption Agreement as a sale of a financial asset in accordance with ASC 860. The one million shares of Company common stock that the Company received from Ms. DiBartolo had a fair value of $ 2,510,000 which was equal to the fair value of the Company’s 17 % interest in Tigress sold to Ms. DiBartolo. As such, no gain or loss was recognized as a result of the transaction. Following the transaction, the Company had no remaining interest in Tigress. Refer to Note 12 – Equity Method Investment in Related Party in this Report for more detail on these transactions and information that impacted the periods presented. Impairment As a result of the Reorganization Agreement described above as well as the fact that Tigress 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 for the year ended December 31, 2022, which is included in line item “Impairment of investments” on the consolidated statements of operations. As a result of the Share Redemption Agreement described above, the Company recognized an impairment charge for its investment in Tigress of approximately $ 185,000 for the year ended December 31, 2023, which is included in “Impairment of investments” in the consolidated statements of operations. The fair value of the Company’s investment in Tigress was determined using observed current market prices of Tigress’ membership interests that were below the Company’s carrying value of its equity investment in Tigress. Following the Share Redemption Agreement, the Company had no remaining interest in Tigress. Siebert 2023 Form-10K  49 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 ; (iv) Ms. Vioni provided the Company with the right to appoint one director to the Board of Directors of Hedge Connection; and (v) 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. Termination Agreement On October 18, 2022, the Company entered into a Termination Agreement (“Termination Agreement”) with Hedge Connection and Ms. Vioni. 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. 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 party” on the consolidated 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 . 4. RISE 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. As of March 31, 2022, Siebert determined that RISE was a VIE and that Siebert was the primary beneficiary, requiring RISE to be consolidated in accordance with Accounting Standards Codification (“ASC”) Topic 810 – Consolidation. As a result of 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. There have been no further transactions related to RISE’s membership interests for the year ended December 31, 2023. As of December 31, 2023, RISE reported assets of $ 1.3 million and liabilities of $ 0 . As of December 31, 2022, RISE reported assets of $ 1.3 million and liabilities of $ 0.1 million. There are no restrictions on RISE’s assets. Siebert 2023 Form-10K  50 5. Kakaopay Transaction On April 27, 2023, Siebert entered into a Stock Purchase Agreement with Kakaopay (the “First Tranche Stock Purchase Agreement”), pursuant to which Siebert agreed to issue to Kakaopay Corporation (“Kakaopay”), a company established under the Laws of the Republic of Korea and a fintech subsidiary of Korean-based conglomerate Kakao Corp., 8,075,607 shares of Siebert’s common stock (the “First Tranche Shares” and, such transaction, the “First Tranche”) at a per share price of Two Dollars Fifteen Cents ($ 2.15 ), which represented 19.9 % of the outstanding equity securities of Siebert on a fully diluted basis (taking into account the issuance of the First Tranche Shares). The First Tranche closed on May 18, 2023 and, in connection therewith, Siebert entered into a Registration Rights and Lock-Up Agreement (the “Registration Rights Agreement”) and a Stockholders’ Agreement (the “Original Stockholders’ Agreement”) with Kakaopay. Concurrent with the execution of the First Tranche Stock Purchase Agreement, Siebert and Kakaopay entered into a second Stock Purchase Agreement (the “Second Tranche Stock Purchase Agreement” and, together with the First Tranche Stock Purchase Agreement, the “Stock Purchase Agreements”), pursuant to which Siebert agreed to issue to Kakaopay an additional 25,756,470 shares of Siebert’s common stock (the “Second Tranche Shares” and, such transaction, the “Second Tranche”) at a per share price of Two Dollars Thirty Five Cents ($ 2.35 ), so that Kakaopay would 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). On December 19, 2023, Siebert entered into a Termination and Settlement Agreement (the “Settlement Agreement”) with Kakaopay, Kakaopay Securities Corp. (“Kakaopay Securities”), MSCO and certain Gebbia parties named therein. Under the Settlement Agreement, the parties mutually agreed to terminate the Second Tranche Stock Purchase Agreement. The parties terminated the Second Tranche Stock Purchase Agreement after reaching a compromise regarding their disagreement over, among other things, the occurrence of a “Purchaser Material Adverse Effect” in the Second Tranche Stock Purchase Agreement, and the ability of the closing conditions in the Second Tranche Stock Purchase Agreement to be satisfied. Certain related agreements were also terminated, including the Foreign Broker-Dealer Fee Sharing Agreement, dated April 27, 2023, between MSCO and Kakaopay Securities, and the Support and Restrictive Covenant Agreements by certain Gebbia stockholders, each dated April 27, 2023. The parties also agreed (i) to amend and restate the Original Stockholders’ Agreement as described below, (ii) that the Company will pay Kakaopay a fee of $ 5,000,000 (payable in ten quarterly installments beginning on March 29, 2024) and (iii) to customary releases. Kakaopay continues to own the 8,075,607 shares of the Company’s common stock that it purchased from the Company in May 2023, and Kakaopay agreed to certain standstill restrictions with respect to its ownership of the Company’s common stock, subject to certain conditions. In connection with the foregoing, on December 19, 2023, Siebert entered into an Amended and Restated Stockholders’ Agreement (the “A&R Stockholders’ Agreement”) with Kakaopay, certain stockholders listed on Schedule I thereto and John J. Gebbia (in his individual capacity and as representative of the Gebbia Stockholders (as defined therein)) to amend and restate the Original Stockholders’ Agreement. Under the A&R Stockholders’ Agreement, Kakaopay retains its right to designate one director to the Company’s board of directors, subject to certain conditions, but the additional board designation rights in the Original Stockholders’ Agreement that would have applied following the closing of the Second Tranche have been removed. The A&R Stockholders’ Agreement also, among other things, modifies various specified events requiring the prior written consent of Kakaopay, which provided the Company’s management with additional flexibility to grow the Company with reduced restrictions. The A&R Stockholders’ Agreement also adds tag-along rights in favor of Kakaopay and the Gebbia Stockholders. At the time of the issuance, the total deferred issuance cost of $ 2,467,000 related to the First Tranche was reclassified as a reduction to “Additional paid-in capital” in stockholders’ equity on the consolidated statements of financial condition. This amount consisted of $ 318,000 which was recorded within the line item “Prepaid expenses and other assets” on the consolidated statements of financial condition as of December 31, 2022, and $ 2,149,000 which was incurred during the year ended December 31, 2023. Of the amount incurred during the year ended December 31, 2023, $ 560,000 was part of non-cash consideration. The Company incurred $ 5,943,000 for the year ended December 31, 2023 associated with the termination of the transaction with Kakaopay which is recorded in the line item “Transaction termination cost” on the consolidated statements of operations. This amount consisted of the $ 5,000,000 fee to Kakaopay (payable in ten quarterly installments beginning on March 29, 2024) adjusted for the present value of the payments as of the date of the agreement, as well as legal and other consulting costs associated with the transaction of approximately $ 1,481,000 . The discount rate used for the calculation of the present value of the cash flows was 8.5 %. On May 22, 2023, Gloria E. Gebbia issued a warrant to BCW Securities LLC, a Delaware limited liability company (“BCW”), to purchase 403,780 shares of common stock of the Company held by Ms. Gebbia at an exercise price of $ 2.15 per share. Ms. Gebbia issued the warrant pursuant to that certain agreement, dated March 27, 2023, by and among Ms. Gebbia, the Company and BCW relating to the investment by Kakaopay in the Company. The fair value of the warrant of $ 560,000 was recorded as non-cash consideration on the consolidated statements of changes in stockholders’ equity and the consolidated statements of cash flows, as well as for the deferred issuance cost related to the First Tranche as described above. Siebert 2023 Form-10K  51 6. Receivables From, Payables To, and Deposits With Broker-Dealers and Clearing Organizations Amounts receivable from, payables to, and deposits with broker-dealers and clearing organizations consisted of the following as of the periods indicated: As of December 31, 2023 As of December 31, 2022 Receivables from and deposits with broker-dealers and clearing organizations DTCC / OCC / NSCC (1) $ 9,332,000 $ 8,187,000 Goldman Sachs & Co. LLC (“GSCO”) 38,000 31,000 Pershing — 96,000 National Financial Services, LLC (“NFS”) 2,212,000 2,006,000 Securities fail-to-deliver 119,000 3,000 Globalshares 47,000 82,000 Total Receivables from and deposits with broker-dealers and clearing organizations $ 11,748,000 $ 10,405,000 Payables to broker-dealers and clearing organizations Securities fail-to-receive $ 399,000 $ 396,000 Payables to broker-dealers 82,000 264,000 Total Payables to broker-dealers and clearing organizations $ 481,000 $ 660,000 (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”). Under the DTCC shareholders’ agreement, MSCO is required to participate in the DTCC common stock mandatory purchase. As of December 31, 2023 and 2022, MSCO had shares of DTCC common stock valued at approximately $ 1,236,000 and $ 1,054,000 , respectively, which are included in the line item “Deposits with broker-dealers and clearing organizations” on the consolidated statements of financial condition. In September 2022, MSCO and RISE entered into a clearing agreement whereby RISE would introduce clients to MSCO. As part of the agreement, RISE deposited a clearing fund escrow deposit of $ 50,000 to MSCO, and had excess cash of approximately $ 1.0 million in its brokerage account at MSCO as of December 31, 2023. RISE did not have any balances at MSCO as of December 31, 2022. The resulting asset of RISE and liability of MSCO is eliminated in consolidation. The Company terminated its clearing relationships with GSCO and Pershing in 2022. 7. Prepaid Service Contract In April 2020, the Company entered into an agreement with a technology vendor in which the Company paid the technology vendor $ 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 vendor, 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 vendor which is included in the line item “Other income” on the consolidated statements of operations. In September 2022, the Company and the technology vendor 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 vendor will have any further obligations to provide future services. As part of the termination, the technology vendor returned 193,906 shares of the Company’s common stock previously issued. As of December 31, 2022, 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 consolidated statements of operations. Siebert 2023 Form-10K  52 The expense related to share-based payments to the technology vendor for professional services was $ 0 and $ 239,000 for the years ended December 31, 2023 and 2022, respectively. The total expense related to the technology vendor was $0 and $ 711,000 for the years ended December 31, 2023 and 2022, respectively, which is included in “Technology and communications” on the consolidated statements of operations. 8. Fair Value Measurements Financial Assets and Liabilities Measured at Fair Value on a Recurring Basis The tables below present, by level within the fair value hierarchy, financial assets and liabilities measured at fair value on a recurring basis for the periods indicated. As required by ASC Topic 820, financial assets and financial liabilities are classified in their entirety based on the lowest level of input that is significant to the respective fair value measurement. As of December 31, 2023 Level 1 Level 2 Level 3 Total Assets Cash and securities segregated for regulatory purposes U.S. government securities $ 115,515,000 $ — $ — $ 115,515,000 Securities owned, at fair value U.S. government securities $ 17,636,000 $ — $ — $ 17,636,000 Certificates of deposit — 114,000 — 114,000 Corporate bonds — 3,000 — 3,000 Options 2,000 — — 2,000 Equity securities 146,000 137,000 — 283,000 Total Securities owned, at fair value $ 17,784,000 $ 254,000 $ — $ 18,038,000 Liabilities Securities sold, not yet purchased, at fair value Equity securities $ 2,000 $ — $ — $ 2,000 Total Securities sold, not yet purchased, at fair value $ 2,000 $ — $ — $ 2,000 As of December 31, 2022 Level 1 Level 2 Level 3 Total Assets Cash and securities segregated for regulatory purposes U.S. government securities $ 140,978,000 $ — $ — $ 140,978,000 Securities owned, at fair value U.S. government securities $ 2,808,000 $ — $ — $ 2,808,000 Certificates of deposit — 92,000 — 92,000 Municipal securities — 52,000 — 52,000 Corporate bonds — 7,000 — 7,000 Equity securities 63,000 182,000 — 245,000 Total Securities owned, at fair value $ 2,871,000 $ 333,000 $ — $ 3,204,000 Liabilities Securities sold, not yet purchased, at fair value Equity securities $ 2,000 $ — $ — $ 2,000 Total Securities sold, not yet purchased, at fair value $ 2,000 $ — $ — $ 2,000 Siebert 2023 Form-10K  53 The Company had U.S. government securities, certificates of deposit, municipal securities, and corporate bonds with the market values and maturity dates for the periods indicated below: As of December 31, 2023 Maturing in 2023 $ 30,000,000 Maturing in 2024 98,931,000 Maturing in 2025 3,965,000 Maturing after 2025 115,000 Accrued interest 257,000 Total Market value $ 133,268,000 As of December 31, 2022 Maturing in 2023 $ 106,873,000 Maturing in 2024 36,506,000 Maturing after 2024 150,000 Accrued interest 409,000 Total Market value $ 143,938,000 Financial Assets Measured at Fair Value on a Non-Recurring Basis The following table represents information for assets measured at fair value on a nonrecurring basis and displays the carrying value after measurement as of the periods indicated. The fair value measurement is nonrecurring as these assets are measured at fair value only when there is a triggering event (e.g., an evidence of impairment). Assets included in the table are those that were impaired during the respective reporting periods and that are still held as of the reporting date. The estimated fair values for these amounts were determined using significant unobservable inputs (Level 3). As of December 31 2023 2022 Equity method investment in related party $ — $ 2,584,000 As a result of the 2023 transaction discussed in Note 3 – Transactions with Tigress and Hedge Connection, the Company recognized an impairment charge for its investment in Tigress of approximately $ 185,000 during the year ended December 31, 2023, which is included in “Impairment of investments” on the consolidated statements of operations. The fair value of the Company’s investment in Tigress was determined using observed current market prices of Tigress’ membership interests that were below the Company’s carrying value of its equity investment in Tigress. Following the transaction, the Company had no remaining interest in Tigress. As a result of the 2022 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, 2023 and 2022 that are not carried at fair value in the consolidated statements of financial condition: Short-term financial instruments: The carrying value of short-term financial instruments, including cash and cash equivalents as well as cash and securities segregated for regulatory purposes, are recorded at amounts that approximate the fair value of these instruments. These financial instruments generally expose the Company to limited credit risk and have no stated maturities or have short-term maturities and carry interest rates that approximate market rates. The Company had no cash equivalents for regulatory purposes as of December 31, 2023 and 2022. Securities segregated for regulatory purposes consist solely of U.S. government securities and are included in the fair value hierarchy table above. Cash and cash equivalents and cash and securities segregated for regulatory purposes are classified as level 1. Siebert 2023 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, and prepaid expenses and other assets are recorded at amounts that approximate fair value and are classified as level 2 under the fair value hierarchy. The Company may hold cash equivalents related to rent deposits in prepaid expenses and other assets that are categorized as level 2 under the fair value hierarchy. Securities borrowed and securities loaned: Securities borrowed and securities loaned are recorded at amounts which approximate fair value and are primarily classified as level 2 under the fair value hierarchy. The Company’s securities borrowed and securities loaned balances represent amounts of equity securities borrow and loan contracts and are marked-to-market daily in accordance with standard industry practices which approximate fair value. Investments, cost: The Company’s non-marketable equity securities are investments in privately held companies without readily determinable market values due to the absence of quoted market prices, the inherent lack of liquidity and the fact that inputs used to measure fair value are unobservable and require management’s judgment. As there is no readily determinable fair value, the carrying amount of these investments minus impairment approximates the fair value. The cost will be adjusted upwards or downwards in accordance with observable market transactions. Under the fair value hierarchy, investments, cost is classified as level 3. Payables: Payables to customers, payables to non-customers, drafts payable, payables to broker-dealers and clearing organizations, accounts payable and accrued liabilities, and taxes payable are recorded at amounts that approximate fair value due to their short-term nature and are classified as level 2 under the fair value hierarchy. Deferred contract incentive: The carrying amount of the deferred contract incentive approximates fair value due to the relative short-term nature of the liability. Under the fair value hierarchy, the deferred contract incentive is classified as level 2. Long-term debt: The carrying amount of the mortgage with East West Bank approximates the fair value at the time of issuance as it reflected terms that approximated market terms for similar arrangements. During the periods presented, the interest rate has increased to reflect current market terms, which would favorably reduce the fair value of long-term debt. Under the fair value hierarchy, the mortgage is classified as level 2. Contract settlement liability: The carrying amount of the contract settlement liability approximates fair value which is the present value of the payments at a discount rate as of the date of the agreement. Under the fair value hierarchy, the contract settlement liability is classified as level 2. 9. Property, Office Facilities, and Equipment, Net Property, office facilities, and equipment consisted of the following as of the periods indicated: As of December 31 2023 2022 Property $ 6,815,000 $ 6,815,000 Office facilities 2,475,000 2,616,000 Equipment 726,000 674,000 Total Property, office facilities, and equipment 10,016,000 10,105,000 Less accumulated depreciation ( 612,000 ) ( 1,777,000 ) Total Property, office facilities, and equipment, net $ 9,404,000 $ 8,328,000 Total depreciation expense for property, office facilities, and equipment was $ 589,000 and $ 404,000 for the years ended December 31, 2023 and 2022, 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 serves as the headquarters of the Company. Siebert 2023 Form-10K  55 Depreciation expense commenced in April 2023 when the Miami office building was completed and placed in service. The Company invested $ 1,313,000 and $ 985,000 in the years ended December 31, 2023 and 2022, respectively, to build out the Miami office building. 10. Software, Net Software consisted of the following as of the periods indicated: As of December 31 2023 2022 Robo-advisor $ — $ 763,000 Other software 1,716,000 3,342,000 Total Software 1,716,000 4,105,000 Less accumulated amortization – robo-advisor — ( 763,000 ) Less accumulated amortization – other software ( 284,000 ) ( 2,351,000 ) Total Software, net $ 1,432,000 $ 991,000 In the fourth quarter of 2022, the Company partnered with a technology vendor to develop a new Retail Platform. The total software development expense related to this project was $ 978,000 as of December 31, 2023, all of which was capitalized. During the year ended December 31, 2023, the Company decided to terminate the agreement with the technology vendor and reassess its technology needs. The Company decided to change the strategic direction of its technology development for its Retail Platform and determined that an other than temporary impairment of the Retail Platform existed. The Company recognized an impairment loss of $ 990,000 for the year ended December 31 , 2023, which is included in “Depreciation and amortization” on the consolidated statements of operations. Total amortization of software was $ 442,000 and $ 590,000 for the years ended December 31, 2023 and 2022, respectively. As of December 31, 2023, the Company estimates future amortization of current software assets of $ 560,000 , $ 492,000 , $ 317,000 , and $ 63,000 , in the years ended December 31, 2024, 2025, 2026, and 2027, respectively. 11. Leases As of December 31, 2023, all of the Company’s leases are classified as operating and primarily consist of office space leases expiring in 2024 through 2028. The Company elected not to include short-term leases (i.e., leases with initial terms of less than twelve months), or equipment leases (deemed immaterial) on the consolidated statements of financial condition. The Company leases some miscellaneous office equipment, but they are immaterial and therefore the Company records the costs associated with this office equipment on the consolidated 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 consolidated statements of financial condition and the below tables display further detail on the Company’s leases. On July 7, 2023, the Company entered into a new lease agreement expiring in December 2028 for office space in the World Financial Center in New York City. This office will replace the New Jersey office as one of the Company’s key operating centers and the total commitment of the lease is approximately $ 2.1 million. The estimated build out cost for this office space is approximately $ 800,000 . Lease Term and Discount Rate As of December 31, 2023 As of December 31, 2022 Weighted average remaining lease term – operating leases (in years) 3.9 2.7 Weighted average discount rate – operating leases 6.9 % 5.0 % Year Ended December 31 2023 2022 Operating lease cost $ 1,326,000 $ 1,299,000 Short-term lease cost 392,000 366,000 Variable lease cost 155,000 290,000 Total Rent and occupancy $ 1,873,000 $ 1,955,000 Cash paid for amounts included in the measurement of lease liabilities Operating cash flows from operating leases $ 1,256,000 $ 1,380,000 Lease right-of-use assets obtained in exchange for new lease liabilities Operating leases $ 1,693,000 $ 888,000 Siebert 2023 Form-10K  56 Lease Commitments Future annual minimum payments for operating leases with initial terms of greater than one year as of December 31, 2023 were as follows: Year Amount 2024 $ 938,000 2025 861,000 2026 694,000 2027 520,000 2028 443,000 Remaining balance of lease payments 3,456,000 Less: difference between undiscounted cash flows and discounted cash flows 470,000 Lease liabilities $ 2,986,000 12. Equity Method Investment in Related Party Transaction with Tigress The Company’s investment in Tigress was 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 continued to account for this investment under the equity method of accounting through the Company’s sale of its interest in Tigress on July 10, 2023. Under the equity method, the Company recognized its share of Tigress ’ income or loss in the line item “Earnings of equity method investment in related party” on the consolidated statements of operations. The Company has elected to classify distributions received from equity method investees using the cumulative earnings approach. The earnings recognized from the Company’s investment in Tigress was $ 111,000 and a loss of $ 16,000 for the years ended December 31, 2023 and 2022, respectively, which is in the line item “Earnings of equity method investment in related party” on the consolidated statements of operations. The Company received cash distributions from Tigress of $ 0 and $ 259,000 for the years ended December 31, 2023 and 2022, respectively. As of December 31, 2023 and 2022, the carrying amount of the investment in Tigress was $0 and $ 2,584,000 , respectively. There were no events or circumstances suggesting the carrying amount of the investment was impaired as of December 31, 2022. Below is a table showing the summary from the consolidated statements of operations and financial condition for Tigress based on the most recent financials prior to the transaction on July 10, 2023 (unaudited): Six Months Ended June 30, 2023 Year Ended December 31, 2022 Revenue $ 4,039,000 $ 8,432,000 Operating income (loss) $ 721,000 $ ( 132,000 ) Net income (loss) $ 721,000 $ ( 132,000 ) As of June 30, 2023 December 31, 2022 Assets $ 8,824,000 $ 8,169,000 Liabilities $ 5,853,000 $ 5,301,000 Stockholders’ Equity $ 2,971,000 $ 2,868,000 Transaction with Hedge Connection Prior to the Termination Agreement with Hedge Connection, 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 $ 0 and $ 20,000 from its investment in Hedge Connection during the years ended December 31, 2023 and 2022, respectively, which is in the line item “Earnings of equity method investment in related party” on the consolidated statements of operations. Siebert 2023 Form-10K  57 13. Investments, Cost As of both December 31, 2023 and 2022, the Company maintained a 2 % ownership interest in the Trading Technology Provider. In June 2023, in view of the Trading Technology Provider’s business performance and near-term business outlook that were below the Company’s previous expectations, as well as observed market transactions of the Trading Technology Provider’s equity that were below the carrying value of the Company’s investment of the Trading Technology Provider, the Company determined that an other than temporary impairment existed. For the year ended December 31 , 2023, the Company recognized an impairment charge for its investment in the Trading Technology Provider of $ 850,000 , which is included in “Impairment of investments” on the consolidated statements of operations. As of December 31 2023 and 2022, this ownership interest in the Trading Technology Provider was $ 0 and $ 850,000 , respectively, which is in the line item “Investments, cost” on the consolidated statements of financial condition. 14. Long-Term Debt Mortgage with East West Bank Overview On December 30, 2021, the Company purchased the Miami office building for approximately $ 6.8 million, which was partially financed through a 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. The interest rate is 3.6 % for the first 7 years, and thereafter the interest rate shall be at the prime rate as reported by the Wall Street Journal, provided that the minimum interest rate on any term loan will not be less than 3.6 %. As part of the agreement, the Company must maintain a debt service coverage ratio of 1.4 to 1. The loan is subject to a prepayment penalty over the first five years which is calculated as a percentage of the principal amount outstanding at the time of prepayment. This percentage is 5% in the first year and decreases by 1% each year thereafter, with the prepayment penalty ending after 5 years. As of December 31, 2023, 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, 2023 were as follows: Amount 2024 $ 84,000 2025 88,000 2026 91,000 2027 95,000 2028 98,000 Thereafter 3,857,000 Total $ 4,313,000 The interest expense related to this mortgage was $ 159,000 and $ 143,000 for the years ended December 31, 2023, and 2022, respectively. As of December 31, 2023, the interest rate for this mortgage was 3.6 %. Loan with East West Bank Overview 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 had the ability to borrow term loans in an aggregate principal amount not to exceed $ 10 million during the two-year period following July 22, 2020. The Company originally borrowed approximately $ 5.0 million and paid off the full remaining balance of the loan of approximately $ 2.7 million for the year ended December 31, 2023. Siebert 2023 Form-10K  58 The Company’s obligations under the agreement were 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; any deposit accounts into which the foregoing was deposited and all substitutions, products, proceeds (cash and non-cash) arising out of any of the foregoing. Each term loan had a term of four years, beginning when the draw was made. The repayment schedule utilized a five-year (60 month) amortization period, with a balloon on the remaining amount due at the end of four years. Term loans made pursuant to the agreement bore interest at the prime rate as reported by the Wall Street Journal, provided that the minimum interest rate on any term loan was not less than 3.25 %. In addition to the foregoing, on the date that each term loan was made, the Company paid to the lender an origination fee equal to 0.25 % of the principal amount of such term loan. Pursuant to the loan agreement, the Company paid all lender expenses in connection with the loan agreement. This agreement contained certain financial and non-financial covenants. The financial covenants were that the Company must maintain a debt service coverage ratio of 1.35 to 1 , an effective tangible net worth of a minimum of $ 25 million, and MSCO must maintain a net capital ratio that is not less than 10 % of aggregate debit items. Certain other non-financial covenants included 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 June 30, 2023 and December 31, 2022, the interest rate for this loan was 8.0 % and 7.5 %, respectively. The interest expense related to the loan was $ 103,000 and $ 144,000 for the years ended December 31, 2023 and 2022, respectively. 15. Notes Payable - Related Party 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. During the year ended December 31, 2023, the Company did not have notes payable to Gloria E. Gebbia. The Company’s interest expense for these notes payable for the year ended December 31, 2022 was $ 151,000 . 16. 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 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 consolidated 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 consolidated 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 $ 850,000 in contra expense for both the years ended December 31, 2023, and 2022. The balance of the deferred contract incentive was approximately $ 1.2 million and $ 2.0 million as of December 31, 2023 and 2022, respectively. 17. Revenue Recognition Refer to Note 2 – Summary of Significant Accounting Policies for detail on the Company’s primary sources of revenue and the corresponding accounting treatment. Information related to items that impact certain revenue streams within the periods presented is shown below. Principal Transactions and Proprietary Trading The Company regularly invests in treasury bill and treasury notes, which are primarily in the line item “Cash and securities segregated for regulatory purposes” on the consolidated statements of financial condition, in order to enhance its yield on its excess 15c3-3 deposits. During 2022, there was an increase in U.S. government securities yields, which created an unrealized loss on the Company’s U.S. government securities portfolio. In 2023, the Company recorded the reversal of the unrealized loss resulting in a realized and unrealized gain due to the securities coming closer to maturity, the latest maturity being April 2025. Refer to Note 8 – Fair Value Measurements for additional detail. Siebert 2023 Form-10K  59 The following table represents detail related to principal transactions and proprietary trading. Year Ended December 31 2023 2022 Year over Year Increase Principal transactions and proprietary trading Realized and unrealized gain on primarily riskless principal transactions $ 9,275,000 $ 7,643,000 $ 1,632,000 Realized and unrealized gain (loss) on portfolio of U.S. government securities 3,819,000 ( 3,900,000 ) 7,719,000 Total Principal transactions and proprietary trading $ 13,094,000 $ 3,743,000 $ 9,351,000 Stock Borrow / Stock Loan For the years ended December 31, 2023 and 2022, stock borrow / stock loan revenue was $ 16,172,000 ($ 47,166,000 gross revenue less $ 30,994,000 expenses) and $ 14,518,000 ($ 33,883,000 gross revenue less $ 19,365,000 expenses), respectively. Interest, Marketing and Distribution Fees For the years ended December 31, 2023 and 2022, interest, marketing and distribution fees was $ 29,577,000 ($ 30,036,000 gross revenue less $ 459,000 expenses) and $ 17,234,000 ($ 17,908,000 gross revenue less $ 674,000 expenses), respectively. Other Income The Company earned $ 265,000 and $ 137,000 in income for the years ended December 31, 2023 and 2022, respectively, in relation to its agreement with Jones Trading. 18. Income Taxes The Company’s provision for (benefit from) income taxes is comprised of the following: Year Ended December 31 2023 2022 Current Federal $ 3,023,000 $ ( 749,000 ) State and local 499,000 104,000 Total Current 3,522,000 ( 645,000 ) Deferred Federal $ ( 366,000 ) $ ( 305,000 ) State and local 259,000 ( 350,000 ) Total Deferred ( 107,000 ) ( 655,000 ) Total Provision for (benefit from) income taxes $ 3,415,000 $ ( 1,300,000 ) 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 Ended December 31 2023 2022 Federal statutory income tax rate 21.0 % 21.0 % Goodwill amortization ( 2.5 )% 6.5 % Non-deductible fines and penalties — % — % Share based compensation — % — % Permanent differences 2.7 % ( 6.1 )% State and local taxes, net of federal benefit 5.7 % 9.4 % Change in valuation allowance 2.4 % 2.0 % Other 1.1 % ( 2.5 )% Effective tax rate 30.4 % 30.3 % Siebert 2023 Form-10K  60 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 2023 2022 Deferred tax assets: Net operating losses $ 3,393,000 $ 5,023,000 Lease liabilities 840,000 648,000 Share-based compensation — — Investment in Tigress — 775,000 Investment in RISE 123,000 10,000 Investment in OpenHand 239,000 — R&D costs capitalization 142,000 — Settlement liability related to Kakaopay termination 1,253,000 — Capital loss carryover 803,000 — Other 79,000 45,000 Subtotal 6,872,000 6,501,000 Less: valuation allowance ( 1,243,000 ) ( 978,000 ) Total Deferred tax assets $ 5,629,000 $ 5,523,000 Deferred tax liabilities: Fixed assets $ ( 1,125,000 ) $ ( 1,126,000 ) Total Deferred tax liabilities ( 1,125,000 ) ( 1,126,000 ) Net Deferred tax assets $ 4,504,000 $ 4,397,000 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. The Company considered all positive and negative evidence when determining the amount of the net deferred tax assets that are more likely than not to be realized. This evidence includes, but is not limited to, historical earnings, scheduled reversal of taxable temporary differences, tax planning strategies and projected future taxable income. Based on historical operating profitability, positive trend of earnings and projected future taxable income, the Company concluded as of December 31, 2023 that its U.S. 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 and certain state net operating losses. The amount of the Company’s valuation allowance increased $ 265,000 during 2023. 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, 2023, the Company had U.S. federal net operating loss carryforwards of approximately $ 4.6 million which expire in varying amounts starting in 2035 to 2036 if not utilized but available to offset 100 % of future taxable income. The U.S. federal net operating loss carryforwards are subject to annual limitation under Section 382. Siebert 2023 Form-10K  61 A reconciliation of the beginning and ending amount of unrecognized tax benefits, excluding interest and penalties, is as follows: Amount Balance as of December 31, 2021 $ 2,418,000 Additions for tax positions taken during current year — Additions for tax positions taken during prior year 12,000 Reductions for tax positions taken during prior years ( 834,000 ) Settlements — Expirations of statutes of limitations — Balance as of December 31, 2022 $ 1,596,000 Additions for tax positions taken during current year 15,000 Additions for tax positions taken during prior year — Reductions for tax positions taken during prior years ( 2,000 ) Settlements — Expirations of statutes of limitations ( 204,000 ) Balance as of December 31, 2023 $ 1,405,000 The unrecognized tax benefit of $ 1,405,000 and $ 1,596,000 as of December 31, 2023 and 2022, respectively, are recorded in the line item “Taxes payable” on the consolidated statements of financial condition. Of the amounts reflected above as of December 31, 2023 and 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 years ended December 31, 2023 and 2022, the Company recognized expense related to interest and penalties on unrecognized tax benefits of $ 118,000 and $ 100,000 , respectively. For the years ended December 31, 2023 and 2022, the accrued balance of interest and penalties on unrecognized tax benefits was $ 245,000 and $ 127,000 , respectively. The Company does not believe that the amount of unrecognized tax benefits will significantly increase or decrease within the next 12 months. The Company files a federal income tax return and income tax returns in various state tax jurisdictions. The Company is not currently under examination by the IRS or any state or local taxing authority for any tax year. The open tax years for the federal and state income tax filings is generally 2020 through 2023. On October 8, 2021, the Organization for Economic Co-operation and Development (OECD) announced the OECD/G20 Inclusive Framework on Base Erosion and Profit Shifting which agreed to a two-pillar solution to address tax challenges arising from digitalization of the economy. On December 20, 2021, the OECD released Pillar Two Model Rules defining the global minimum tax, which calls for the taxation of a minimum rate of 15 % for multinational companies with consolidated revenue above € 750 million. Various foreign jurisdictions are in the process of enacting legislation to adopt a minimum effective tax rate. The OECD continues to release additional guidance on the two-pillar solution with an implementation anticipated by 2024. Based on the fact that the Company’s operations are all located within the United State and is below current revenue thresholds contained in the Pillar Two Model Rules, the Company expects to be outside the scope of the implementation of the reporting requirements for 2024. 19. Capital Requirements MSCO Net Capital MSCO is subject to the Uniform Net Capital Rules of the SEC (Rule 15c3-1) of the Exchange Act. Under the alternate method permitted by this rule, net capital, as defined, shall not be less than the lower of $ 1 million or 2 % of aggregate debit items arising from customer transactions. As of December 31, 2023, MSCO’s net capital was $ 56.1 million, which was approximately $ 54.3 million in excess of its required net capital of $ 1.8 million, and its percentage of aggregate debit balances to net capital was 63.42 %. 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, 2023, MSCO had cash and securities deposits of $ 273.1 million (cash of $ 157.6 million, securities with a fair value of $ 115.5 million) in the special reserve accounts which was $ 26.2 million in excess of the deposit requirement of $ 246.9 million. After adjustments for deposit(s) and / or withdrawal(s) made on January 2, 2024, MSCO had $ 3.2 million in excess of the deposit requirement. Siebert 2023 Form-10K  62 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, 2023, the Company was subject to the PAB Account Rule 15c3-3 of the SEC which requires segregation of funds in a special reserve account for the exclusive benefit of proprietary accounts of introducing broker-dealers. As of December 31, 2023, the Company had $ 1.2 million in the special reserve account which was approximately $ 0.2 million in excess of the deposit requirement of approximately $ 1.0 million. The Company made no subsequent deposits or withdrawals on January 2, 2024. As of December 31, 2022, the Company did not hold any proprietary accounts of introducing broker-dealers. RISE Net Capital RISE, as a member of FINRA, is subject to the SEC Uniform Net Capital Rule 15c3-1. This rule requires the maintenance of minimum net capital and that the ratio of aggregate indebtedness to net capital, both as defined, shall not exceed 15 to 1 and that equity capital may not be withdrawn, or cash dividends paid if the resulting net capital ratio would exceed 10 to 1. RISE is also subject to the CFTC’s minimum financial requirements which require that RISE maintain net capital, as defined, equal to the greater of its requirements under Regulation 1.17 under the Commodity Exchange Act or Rule 15c3-1. As of December 31, 2023, RISE’s net capital was approximately $ 1.3 million which was $ 1.0 million in excess of its minimum requirement of $ 250,000 under 15c3-1. As of December 31, 2022, RISE’s net capital was approximately $ 1.2 million which was $ 0.9 million in excess of its minimum requirement of $ 250,000 under 15c3-1. 20. Financial Instruments With Off-Balance Sheet Risk Credit 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 experienced no material historical losses in relation to its counterparties for the years ended December 31, 2023 and 2022. 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 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. 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. 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. 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. The Company seeks to mitigate this risk by monitoring the market value of securities pledged on a daily basis and by requiring adjustments of collateral levels in the event of excess market exposure. In addition, the Company establishes credit limits for such activities and continuously monitors compliance. Siebert 2023 Form-10K  63 The Company’s securities lending transactions are subject to master netting agreements with other broker-dealers; however, amounts are presented gross on the consolidated statements of financial condition and as net on the consolidated statements of operations for both of the periods presented. 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. As of December 31 , 2023, the Company had margin loans extended to its customers of approximately $ 338.1 million, of which $ 72.8 million is in the line item “Receivables from customers” on the consolidated statements of financial condition. As of December 31, 2022, the Company had margin loans extended to its customers of approximately $ 365.4 million, of which $ 52.1 million is in the line item “Receivables from customers” on the consolidated statements of financial condition. There were no material losses for unsettled customer transactions for the years ended December 31, 2023 and 2022. 21. Commitments, Contingencies and Other Legal and Regulatory Matters The Company is party to certain claims, suits and complaints arising in the ordinary course of business. As of December 31, 2023, the Company does not expect that these claims, suits and complaints will have a material impact on its results of operations or financial position. Overnight Financing As of December 31, 2023 and 2022, MSCO had an available line of credit for short term overnight demand borrowing with BMO Harris Bank (“BMO Harris”) of up to $ 25 million. As of those dates, MSCO had no outstanding loan balance and there were no commitment fees or other restrictions on 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 $ 1,000 and $ 2,000 for the years ended December 31, 2023 and 2022, respectively. There were no fees associated with the utilization of this credit line for the years ended December 31, 2023 and 2022. At the Market Offering On May 27, 2022, the Company entered into a Capital on Demand TM 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 years ended December 31, 2023 and 2022, the Company did not sell any shares pursuant to this Sales Agreement. For the years ended December 31, 2023 and 2022, the Company incurred approximately $ 0 and $ 98,000 , respectively, in legal and audit fees related to this Sales Agreement, which are in the line item “Professional fees” on the consolidated statements of operations, and were expensed as incurred. Since the Company filed this Report after its scheduled due date, the Company no longer satisfies the eligibility requirements for use of registration statements on Form S-3, which requires that the Company files in a timely manner all reports required to be filed during the prior twelve calendar months. As a result, the Company has suspended use of the shelf registration statement and the Company is not able to access the At the Market program as of the date of this Report. Siebert 2023 Form-10K  64 NFS Contract Effective August 1, 2021, MSCO entered into an amendment to its clearing agreement with NFS that, among other things, extends the term of the arrangement 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: Date of Termination Early Termination Fee Prior to August 1, 2024 $ 4,500,000 Prior to August 1, 2025 $ 3,250,000 For the years ended December 31, 2023 and 2022, there has been no expense recognized for any early termination fees. The Company believes that it is unlikely it will have to make material payments related to early termination fees and has not recorded any contingent liability in the consolidated financial statements related to this arrangement. Technology Vendors In 2023 the Company entered into agreements with technology vendors for certain development projects related to our Retail Platform. As of December 31, 2023, the Company has incurred approximately $ 0.5 million out of the $ 2.6 million total budget for these projects. General Contingencies In the normal course of its business, the Company indemnifies and guarantees certain service providers against specified potential losses in connection with their acting as an agent of, or providing services to, the Company. The maximum potential amount of future payments that the Company could be required to make under these indemnifications cannot be estimated. 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 consolidated financial statements for these indemnifications. The Company provides representations and warranties to counterparties in connection with a variety of commercial transactions and occasionally indemnifies them against potential losses caused by the breach of those representations and warranties. The Company may also provide standard indemnifications to some counterparties to protect them in the event additional taxes are owed or payments are withheld, due either to a change in or adverse application of certain tax laws. These indemnifications generally are standard contractual terms and are entered into in the normal course of business. The maximum potential amount of future payments that the Company could be required to make under these indemnifications cannot be estimated. 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 consolidated financial statements for these indemnifications. 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 , 2023. The estimated liability for self-insurance claims is initially recorded in the year in which the event of loss occurs and may be subsequently adjusted based upon new information and cost estimates. Reserves for losses represent estimates of reported losses and estimates of incurred but not reported losses based on past and current experience. Actual claims paid and settled may differ, perhaps significantly, from the provision for losses. This adds uncertainty to the estimated reserves for losses. Accordingly, it is at least possible that the ultimate settlement of losses may vary significantly from the amounts included in the consolidated financial statements. As part of this plan, the Company recognized expenses of $ 971,000 and $ 1,529,000 for the years ended December 31 , 2023 and 2022, respectively. The Company had an accrual of $ 64,000 as of December 31 , 2023, 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. 22. Employee Benefit Plans The Company, through KCA, sponsors a defined-contribution retirement plan under Section 401(k) of the Internal Revenue Code that covers substantially all employees 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. For 401(k) employee contribution matching, the Company incurred $ 173,000 of expense for the year ended December 31, 2023. The Company did not incur any expense for 401(k) employee contribution matching in 2022. Siebert 2023 Form-10K  65 On September 17, 2021, the Company’s shareholders approved the Siebert Financial Corp. 2021 Equity Incentive Plan (the “Plan”). 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 were 3 million shares reserved under the Plan and 2,704,000 shares remained as of December 31, 2023. For the year ended December 31, 2022, the Company granted 296,000 restricted stock units at a weighted average price of $ 1.56 to employees and consultants of the Company. 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” on the consolidated statements of operations for the year ended December 31, 2022. The Company did not issue any shares for the year ended December 31, 2023. 23. Related Party Disclosures KCA Gloria E. Gebbia, who is a director of Siebert, is the managing member of Kennedy Cabot Acquisition, LLC (“KCA”). As a result, 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 sponsors a defined-contribution retirement plan under Section 401(k) of the Internal Revenue Code that covers substantially all employees of the Company. In the first quarter of 2023, KCA entered into an agreement with the Company for payroll processing services. The Company incurred $ 40,000 of expenses related to these services for the year ended December 31, 2023. KCA owns a license from the Muriel Siebert Estate / Foundation to use the names “Muriel Siebert & Co., LLC” and “Siebert” within business activities, which expires in 2025. KCA passed through to the Company its cost of $ 60,000 for both the years ended December 31, 2023 and 2022 for the use of these names. Other than the above arrangements, KCA has earned no profit for providing any services to the Company for the years ended December 31, 2023 and 2022 as KCA passes through any revenue or expenses to the Company’s subsidiaries. As of December 31, 2023 and 2022, the Company had a payable to KCA for miscellaneous expenses of $ 0 and $ 4,000 , respectively, which are in the line item “Accounts payable and accrued liabilities” on the consolidated statements of financial condition. PW PW is a subsidiary of the Company and PW brokers the insurance policies for related parties. Revenue for PW from related parties was $ 124,000 and $ 129,000 for the years ended December 31, 2023 and 2022, respectively. Gloria E. Gebbia, John J. Gebbia, and Gebbia Family Members The Company has entered into various notes payable with Gloria E. Gebbia. 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. The Company paid off these notes payable in 2022 and as such, the Company had no interest expense related to these notes payable in 2023. The Company had interest expense related to these notes payable of $ 151,000 for the year ended December 31, 2022. Gloria E. Gebbia had extended loans to certain Company employees for the purchase of the Company’s shares. These transactions have not materially impacted the Company’s consolidated financial statements. The three sons of Gloria E. Gebbia and John J. Gebbia hold executive positions within the Company’s subsidiaries and their compensation was in aggregate $ 2,776,000 and $ 2,427,000 for the years ended December 31, 2023 and 2022, respectively. Part of their compensation includes performance-based payments related to key revenue streams. On May 22, 2023, Gloria E. Gebbia issued a warrant to BCW to purchase 403,780 shares of common stock of the Company held by Ms. Gebbia at an exercise price of $ 2.15 per share. Ms. Gebbia issued the warrant pursuant to that certain agreement, dated March 27, 2023, by and among Ms. Gebbia, the Company and BCW relating to the investment by Kakaopay in the Company. The fair value of the warrant of $ 560,000 was recorded as non-cash consideration on the consolidated statements of changes in stockholders’ equity and the consolidated statements of cash flows, as well as for the deferred issuance cost related to the First Tranche. In 2023, Gloria E. Gebbia entered into a consulting agreement with the Company for consulting services. The compensation for the consulting agreement for Gloria E. Gebbia was $ 90,000 for the year ended December 31, 2023. Siebert 2023 Form-10K  66 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 years ended December 31, 2023 and 2022, rent expense was $ 60,000 for this branch office. Kakaopay and Affiliates On April 27, 2023, the Company entered into the First Tranche Stock Purchase Agreement, pursuant to which the Company agreed to issue to Kakaopay the First Tranche Shares at a per share price of Two Dollars Fifteen Cents ($ 2.15 ). MSCO entered into an agreement whereby it would provide an omnibus trading account for Kakaopay’s subsidiary, Kakao Pay Securities Corp., and provide trade execution services to Kakao Pay Securities Corp, subject to compliance with applicable U.S. laws, rules and regulations. Tigress and Hedge Connection The Company has entered into various agreements and subsequent terminations with Tigress and Hedge Connection. Refer to Note 3 – Transactions with Tigress and Hedge Connection and Note 12– Equity Method Investment in Related Party for further detail. RISE During the year ended December 31, 2022, RISE issued and Siebert sold membership interests of RISE to Siebert employees, directors and affiliates. Refer to Note 4 – RISE for further detail. In September 2022, MSCO and RISE entered into a clearing agreement whereby RISE would introduce clients to MSCO. As part of the agreement, RISE deposited a clearing fund escrow deposit of $ 50,000 to MSCO, and had excess cash of approximately $ 1.0 million in its brokerage account at MSCO as of December 31, 2023. RISE did not have any balances at MSCO as of December 31, 2022. The resulting asset of RISE and liability of MSCO is eliminated in consolidation. 24. Subsequent Events The Company has evaluated events that have occurred subsequent to December 31, 2023 and through May 10, 2024, the date of the filing of this report. Effective January 1, 2024, MSCO changed its name from Muriel Siebert & Co., Inc. to Muriel Siebert & Co., LLC, and SNXT changed its name to from Siebert AdvisorNXT, Inc. to Siebert AdvisorNXT, LLC with their tax status changing from C-Corporations to LLCs under state law. Starting in 2024, both MSCO and SNXT are single member limited liability companies that will be treated as disregarded entities for tax purposes. As such, both MSCO and SNXT will no longer be subject to direct taxation and will be disregarded by the relevant tax authorities. The guidance in Accounting Standards Update 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes specifies that an entity is not required to allocate income tax provision to a legal entity that is both not subject to tax and disregarded by the taxing authority, but an entity may elect to do so. MSCO and SNXT are not making the available election to allocate income taxes. Accordingly, on a prospective basis, MSCO and SNXT will no longer record current or deferred income taxes. On January 18, 2024, STCH entered into a Purchase Agreement (the “Purchase Agreement”) with J2 Financial Technology, Inc., d/b/a “Guild”, a Delaware corporation. Under the Purchase Agreement, STCH purchased a mobile self-directed trading app for the total purchase price of $ 385,000 . The purchase price consisted of 200,000 restricted shares of the Company’s common stock (priced at the historical 30-day moving average as of January 18, 2024) worth approximately $ 350,000 and $ 35,000 cash. On April 18, 2024, the Company received a notification from Nasdaq Regulation that the Company no longer complies with Nasdaq’s Listing Rules (the “Nasdaq Rules”) for continued listing, as a result of the Company’s failure to file this Report. The Company expects to regain compliance with the Nasdaq Rules in connection with the filing of this Report on May 10, 2024. However , since this Report was filed after its scheduled due date, the Company will no longer satisfy the eligibility requirement for use of registration statements on Form S-3, which requires that the Company file in a timely manner all reports required to be filed during the prior twelve calendar months. As a result, the Company has suspended use of its registration statements on Form S-3 (333-276585 and 333-262895), and will no longer be able to use its registration statements or access its At the Market program. Refer to Siebert’s Current Report on Form 8-K filed on April 24, 2024 for more information. Based on the Company’s assessment, other than the events described above, there have been no material subsequent events that occurred during such period that would require disclosure in this report or would be required to be recognized in the consolidated financial statements as of December 31, 2023. Siebert 2023 Form-10K  67 ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None