SIEBERT FINANCIAL CORP 10-Q

UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 FORM 10-Q (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 2024 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from___________to___________ Commission file number 0-5703 Siebert Financial Corp. (Exact Name of Registrant as Specified in its Charter) New York 11-1796714 (State or Other Jurisdiction of Incorporation or Organization) (I.R.S. Employer Identification No.) 653 Collins Avenue , Miami Beach , FL 33139 (Address of Principal Executive Offices) (Zip Code) (310) 385-1861 (Registrant’s Telephone Number, Including Area Code) (Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report) Securities registered pursuant to Section 12(b) of the Act: Title of each class Trading Symbol(s) Name of each exchange on which registered Common Stock - $0.01 par value SIEB The Nasdaq Capital Market Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 (“Exchange Act”) during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐ Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐ Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. Large accelerated filer ☐ Accelerated filer ☐ Non-accelerated filer ☒ Smaller reporting company ☒ Emerging growth company ☐ If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐ Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒ Indicate the number of shares outstanding of each of the issuer’s classes of common equity, as of the latest practicable date: As of November 12, 2024 , there were 41,120,936 issued and 40,120,936 shares outstanding of the registrant’s common stock. SIEBERT FINANCIAL CORP. INDEX PART I - FINANCIAL INFORMATION 1 ITEM 1. FINANCIAL STATEMENTS 1 CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION 1 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS 2 CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY 3 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS 4 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 5 ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 21 ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK 29 ITEM 4. CONTROLS AND PROCEDURES 30 PART II - OTHER INFORMATION 31 ITEM 1. LEGAL PROCEEDINGS 31 ITEM 1A. RISK FACTORS 31 ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS 31 ITEM 3. DEFAULTS UPON SENIOR SECURITIES 31 ITEM 4. MINE SAFETY DISCLOSURES 31 ITEM 5. OTHER INFORMATION 31 ITEM 6. EXHIBITS 32 SIGNATURES 33 - i - Forward-Looking Statements For purposes of this Quarterly Report on Form 10-Q (“Report”), the terms “Siebert,” “Company,” “we,” “us” and “our” refer to Siebert Financial Corp., its wholly-owned and majority-owned subsidiaries collectively, unless the context otherwise requires. The statements contained throughout this Report that are not historical facts, including statements about our beliefs and expectations, are “forward-looking statements” within the meaning of the U.S. Private Securities Litigation Reform Act of 1995. Forward-looking statements may appear throughout this Report, including in Item 2 “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” Forward-looking statements include statements preceded by, followed by or that include the words “may,” “could,” “would,” “should,” “believe,” “expect,” “anticipate,” “plan,” “estimate,” “target,” “project,” “intend” and similar words or expressions. In addition, any statements that refer to expectations, projections, or other characterizations of future events or circumstances are forward-looking statements. These forward-looking statements, which reflect our beliefs, objectives, and expectations as of the date hereof, are based on the best judgement of management. All forward-looking statements speak only as of the date on which they are made. Such forward-looking statements are subject to certain risks, uncertainties and assumptions relating to factors that could cause actual results to differ materially from those anticipated in such statements, including the following: economic, social and political conditions, global economic downturns resulting from extraordinary events; securities industry risks; interest rate risks; liquidity risks; credit risk with clients and counterparties; risk of liability for errors in clearing functions; systemic risk; systems failures, delays and capacity constraints; network security risks; competition; reliance on external service providers; new laws and regulations affecting our business; net capital requirements; extensive regulation, regulatory uncertainties and legal matters; failure to maintain relationships with employees, customers, business partners or governmental entities; the inability to achieve synergies or to implement integration plans and other consequences associated with risks and uncertainties detailed in Part I, Item 1A – “ Risk Factors” of our Annual Report on Form 10-K for the year ended December 31, 2023, (“2023 Form 10-K”), and our other filings with the Securities and Exchange Commission (“SEC”). We caution that the foregoing list of factors is not exclusive, and new factors may emerge, or changes to the foregoing factors may occur, that could impact our business. The forward-looking statements are based upon management’s beliefs and assumptions and are made as of the date of this Report. You should not place undue reliance on these forward-looking statements. We undertake no obligation to publicly update or revise these statements, whether as a result of new information, future events or otherwise, except to the extent required by the federal securities laws. - ii - PART I - FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS SIEBERT FINANCIAL CORP. & SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION September 30, 2024 (unaudited) December 31, 2023 ASSETS Current assets Cash and cash equivalents $ 4,435,000 $ 5,735,000 Cash and securities segregated for regulatory purposes; (Cash of $ 129.6 million, securities with a fair value of $ 87.8 million as of September 30, 2024; Cash of $ 158.8 million, securities with a fair value of $ 115.5 million as of December 31, 2023) 217,429,000 274,317,000 Receivables from customers 78,206,000 72,823,000 Receivables from broker-dealers and clearing organizations 4,051,000 3,863,000 Receivables from non-customers 471,000 241,000 Other receivables 4,062,000 2,424,000 Prepaid expenses and other assets 1,748,000 1,700,000 Securities borrowed 222,584,000 394,709,000 Securities owned, at fair value 16,938,000 18,038,000 Total Current assets 549,924,000 773,850,000 Deposits with broker-dealers and clearing organizations 6,047,000 7,885,000 Property, office facilities, and equipment, net 10,130,000 9,404,000 Software, net 4,241,000 1,432,000 Other intangible assets, net 778,000 — Lease right-of-use assets 2,175,000 2,736,000 Deferred tax assets 3,542,000 4,504,000 Goodwill 2,319,000 1,989,000 Total Assets $ 579,156,000 $ 801,800,000 LIABILITIES AND EQUITY Liabilities Current liabilities Payables to customers $ 238,754,000 $ 289,777,000 Payables to non-customers 3,630,000 713,000 Drafts payable 2,133,000 1,726,000 Payables to broker-dealers and clearing organizations 1,111,000 481,000 Accounts payable and accrued liabilities 5,157,000 3,639,000 Taxes payable 2,179,000 2,313,000 Securities loaned 232,524,000 419,433,000 Securities sold, not yet purchased, at fair value 6,000 2,000 Current portion of lease liabilities 751,000 759,000 Current portion of long-term debt 87,000 84,000 Current portion of deferred contract incentive 625,000 808,000 Current portion of contract termination liability 1,782,000 1,898,000 Total Current liabilities 488,739,000 721,633,000 Lease liabilities, less current portion 1,690,000 2,227,000 Long-term debt, less current portion 4,162,000 4,229,000 Deferred contract incentive, less current portion — 438,000 Contract termination liability, less current portion 1,242,000 2,564,000 Total Liabilities 495,833,000 731,091,000 Commitments and Contingencies (see Note 19) Equity Stockholders’ equity Common stock, $ .01 par value; 100,000,000 shares authorized; 41,120,936 shares issued and 40,120,936 shares outstanding as of September 30, 2024, respectively. 40,580,936 shares issued and 39,580,936 shares outstanding as of December 31, 2023, respectively. 412,000 406,000 Treasury stock, at cost; 1,000,000 shares held as of both September 30, 2024 and December 31, 2023 ( 2,510,000 ) ( 2,510,000 ) Additional paid-in capital 46,056,000 45,016,000 Retained earnings 38,362,000 26,808,000 Total Stockholders’ equity 82,320,000 69,720,000 Noncontrolling interests 1,003,000 989,000 Total Equity 83,323,000 70,709,000 Total Liabilities and Equity $ 579,156,000 $ 801,800,000 Numbers are rounded for presentation purposes. See notes to condensed consolidated financial statements. - 1 - SIEBERT FINANCIAL CORP. & SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited) Three Months Ended September 30, Nine Months Ended September 30, 2024 2023 2024 2023 Revenue Commissions and fees $ 2,270,000 $ 1,903,000 $ 7,173,000 $ 5,607,000 Interest, marketing and distribution fees 8,350,000 7,194,000 24,948,000 21,583,000 Principal transactions and proprietary trading 4,197,000 3,753,000 11,277,000 9,207,000 Market making 597,000 223,000 1,706,000 836,000 Stock borrow / stock loan 5,784,000 4,008,000 14,578,000 11,963,000 Advisory fees 629,000 506,000 1,670,000 1,421,000 Other income 733,000 463,000 2,527,000 1,195,000 Total Revenue 22,560,000 18,050,000 63,879,000 51,812,000 Expenses Employee compensation and benefits 11,886,000 8,723,000 32,569,000 23,770,000 Clearing fees, including execution costs 345,000 581,000 1,011,000 1,265,000 Technology and communications 1,147,000 827,000 2,903,000 2,409,000 Other general and administrative 1,070,000 1,108,000 3,169,000 3,320,000 Data processing 894,000 725,000 2,377,000 2,317,000 Rent and occupancy 365,000 467,000 1,240,000 1,436,000 Professional fees 1,464,000 979,000 3,741,000 3,060,000 Depreciation and amortization 350,000 265,000 941,000 716,000 Interest expense 72,000 40,000 183,000 222,000 Advertising and promotion 128,000 62,000 225,000 52,000 Total Expenses 17,721,000 13,777,000 48,359,000 38,567,000 Operating income 4,839,000 4,273,000 15,520,000 13,245,000 Impairment of investments — — — ( 1,035,000 ) Earnings of equity method investment in related party — — — 111,000 Non-operating loss — — — ( 924,000 ) Income before provision for income taxes 4,839,000 4,273,000 15,520,000 12,321,000 Provision for income taxes 1,005,000 1,516,000 3,952,000 3,621,000 Net income 3,834,000 2,757,000 11,568,000 8,700,000 Less net income (loss) attributable to noncontrolling interests 8,000 ( 4,000 ) 14,000 40,000 Net income available to common stockholders $ 3,826,000 $ 2,761,000 $ 11,554,000 $ 8,660,000 Net income available to common stockholders per share of common stock Basic and diluted $ 0.10 $ 0.07 $ 0.29 $ 0.24 Weighted average shares outstanding Basic and diluted 40,022,458 39,678,762 39,894,622 36,224,313 Numbers are rounded for presentation purposes. See notes to condensed consolidated financial statements. - 2 - SIEBERT FINANCIAL CORP. & SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (unaudited) Common Stock Treasury Stock Number of Shares Issued $.01 Par Value Number of Shares Amount Additional Paid-In Capital Retained Earnings Total Stockholders’ Equity Noncontrolling Interest Total Equity Balance – January 1, 2023 32,505,329 $ 325,000 — $ — $ 29,642,000 $ 18,982,000 $ 48,949,000 $ 971,000 $ 49,920,000 Net income — — — — — 3,196,000 3,196,000 19,000 3,215,000 Balance – March 31, 2023 32,505,329 $ 325,000 — $ — $ 29,642,000 $ 22,178,000 $ 52,145,000 $ 990,000 $ 53,135,000 Kakaopay transaction, net of issuance cost 8,075,607 81,000 — — 15,374,000 — 15,455,000 — 15,455,000 Net income — — — — — 2,703,000 2,703,000 25,000 2,728,000 Balance – June 30, 2023 40,580,936 $ 406,000 — $ — $ 45,016,000 $ 24,881,000 $ 70,303,000 $ 1,015,000 $ 71,318,000 Reacquisition of shares outstanding — — 1,000,000 ( 2,510,000 ) — — ( 2,510,000 ) — ( 2,510,000 ) Net income (loss) — — — — — 2,761,000 2,761,000 ( 4,000 ) 2,757,000 Balance – September 30, 2023 40,580,936 $ 406,000 1,000,000 $ ( 2,510,000 ) $ 45,016,000 $ 27,642,000 $ 70,554,000 $ 1,011,000 $ 71,565,000 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 Interest Total Equity Balance – January 1, 2024 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 Transaction with J2 Financial 200,000 2,000 — — 348,000 — 350,000 — 350,000 Share-based compensation 50,000 1,000 — — 84,000 — 85,000 — 85,000 Net income (loss) — — — — — 3,688,000 3,688,000 ( 1,000 ) 3,687,000 Balance – March 31, 2024 40,830,936 $ 409,000 1,000,000 $ ( 2,510,000 ) $ 45,448,000 $ 30,496,000 $ 73,843,000 $ 988,000 $ 74,831,000 Share-based compensation 120,000 1,000 — — 299,000 — 300,000 — 300,000 Net income — — — — — 4,040,000 4,040,000 7,000 4,047,000 Balance – June 30, 2024 40,950,936 $ 410,000 1,000,000 $ ( 2,510,000 ) $ 45,747,000 $ 34,536,000 $ 78,183,000 $ 995,000 $ 79,178,000 Share-based compensation 170,000 2,000 — — 309,000 — 311,000 — 311,000 Net income — — — — — 3,826,000 3,826,000 8,000 3,834,000 Balance – September 30 2024 41,120,936 $ 412,000 1,000,000 $ ( 2,510,000 ) $ 46,056,000 $ 38,362,000 $ 82,320,000 $ 1,003,000 $ 83,323,000 Numbers are rounded for presentation purposes. See notes to condensed consolidated financial statements. - 3 - SIEBERT FINANCIAL CORP. & SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited) Nine Months Ended September 30, 2024 2023 Cash Flows From Operating Activities Net income $ 11,568,000 $ 8,700,000 Adjustments to reconcile net income to net cash used in operating activities: Deferred income tax expense 962,000 893,000 Depreciation and amortization 941,000 716,000 Earnings of equity method investment in related party — ( 111,000 ) Share-based compensation 460,000 — Impairment of investments — 1,035,000 Interest related to contract termination liability payment 62,000 — Changes in Receivables from customers ( 5,383,000 ) ( 19,704,000 ) Receivables from non-customers ( 230,000 ) 70,000 Receivables from and deposits with broker-dealers and clearing organizations 1,650,000 561,000 Securities borrowed 172,125,000 ( 68,015,000 ) Securities owned, at fair value 1,100,000 ( 15,483,000 ) Prepaid expenses and other assets ( 1,670,000 ) ( 190,000 ) Payables to customers ( 51,023,000 ) ( 51,170,000 ) Payables to non-customers 2,917,000 ( 10,515,000 ) Drafts payable 407,000 ( 1,368,000 ) Payables to broker-dealers and clearing organizations 630,000 2,786,000 Accounts payable and accrued liabilities 1,518,000 1,594,000 Securities loaned ( 186,909,000 ) 81,215,000 Securities sold, not yet purchased, at fair value 4,000 ( 1,000 ) Net lease liabilities 16,000 ( 4,000 ) Taxes payable ( 134,000 ) 1,444,000 Deferred contract incentive ( 621,000 ) ( 638,000 ) Trading platform implementation — ( 776,000 ) Contract termination liability payment ( 1,500,000 ) — Net cash used in operating activities ( 53,110,000 ) ( 68,961,000 ) Cash Flows From Investing Activities Purchase of office facilities and equipment ( 68,000 ) ( 191,000 ) Purchase of software ( 2,548,000 ) ( 246,000 ) Additions to property, office facilities, and equipment ( 1,240,000 ) ( 1,190,000 ) Transaction with J2 Financial ( 35,000 ) — Cash paid in a business acquisition, net of cash and cash equivalents acquired ( 1,123,000 ) — Net cash used in investing activities ( 5,014,000 ) ( 1,627,000 ) Cash Flows From Financing Activities Kakaopay issuance cost — ( 1,589,000 ) Proceeds received from shares issued for Kakaopay transaction — 17,363,000 Repayments of long-term debt ( 64,000 ) ( 2,714,000 ) Net cash (used in) / provided by financing activities ( 64,000 ) 13,060,000 Net change in cash and cash equivalents, and cash and securities segregated for regulatory purposes ( 58,188,000 ) ( 57,528,000 ) Cash and cash equivalents, and cash and securities segregated for regulatory purposes - beginning of period 280,052,000 299,838,000 Cash and cash equivalents, and cash and securities segregated for regulatory purposes - end of period $ 221,864,000 $ 242,310,000 Reconciliation of cash, cash equivalents, and cash and securities segregated for regulatory purposes Cash and cash equivalents - end of period $ 4,435,000 $ 4,932,000 Cash and securities segregated for regulatory purposes - end of period 217,429,000 237,378,000 Cash and cash equivalents, and cash and securities segregated for regulatory purposes - end of period $ 221,864,000 $ 242,310,000 Supplemental cash flow information Cash paid during the period for income taxes $ 3,125,000 $ 1,284,000 Cash paid during the period for interest $ 121,000 $ 222,000 Non-cash investing and financing activities Kakaopay issuance cost (1) $ — $ 318,000 Transaction with J2 Financial (2) $ 350,000 $ — Share-based compensation (3) $ 236,000 $ — Treasury stock (4) $ — $ ( 2,500,000 ) Numbers are rounded for presentation purposes. See notes to condensed consolidated financial statements. (1) Refer to Note 6 – Kakaopay Transaction for further detail. (2) Refer to Note 10 – Software, net for further detail. (3) Refer to Note 20 – Employee Benefit Plans for further detail. (4) Refer to Note 4 – Transaction with Tigress for further detail. - 4 - SIEBERT FINANCIAL CORP. & SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) 1. Organization and Basis of Presentation Organization Siebert Financial Corp., a New York corporation, incorporated in 1934, is a holding company that conducts the following lines of business through its wholly-owned and majority-owned subsidiaries: ● Muriel Siebert & Co., LLC (“MSCO”) provides retail brokerage services. MSCO is a Delaware corporation and broker-dealer registered with the Securities and Exchange Commission (“SEC”) under the Exchange Act and the Commodity Exchange Act of 1936, and member of the Financial Industry Regulatory Authority (“FINRA”), the New York Stock Exchange (“NYSE”), the Securities Investor Protection Corporation (“SIPC”), and the National Futures Association (“NFA”). ● Siebert AdvisorNXT, LLC (“SNXT”) provides investment advisory services. SNXT is a New York corporation registered with the SEC as a Registered Investment Advisor (“RIA”) under the Investment Advisers Act of 1940. ● Park Wilshire Companies, Inc. (“PW”) provides insurance services. PW is a Texas corporation and licensed insurance agency. ● Siebert Technologies, LLC (“STCH”) provides technology development. STCH is a Nevada limited liability company. ● RISE Financial Services, LLC (“RISE”) is a Delaware limited liability company and a broker-dealer registered with the SEC and NFA. ● Gebbia Entertainment, LLC (“GE”) is a Florida limited liability company and provides media entertainment services. ● StockCross Digital Solutions, Ltd. (“STXD”) is an inactive subsidiary headquartered in Bermuda. For purposes of this Report on Form 10-Q, the terms “Siebert,” “Company,” “we,” “us,” and “our” refer to Siebert Financial Corp., MSCO, SNXT, PW, STCH, RISE, GE, and STXD collectively, unless the context otherwise requires. On August 12, 2024, the Company entered into a Membership Interest Purchase Agreement with GE, whereby the Company purchased 100 % of GE from related parties. Refer to Note 3 – Business Combinations for more detail. The Company is headquartered in Miami Beach, FL with primary operations in Florida, New York, and California. The Company has 10 branch offices throughout the U.S. and clients around the world. The Company’s SEC filings are available through the Company’s website at www.siebert.com, where investors can obtain copies of the Company’s public filings free of charge. The Company’s common stock, par value $ .01 per share, trades on the Nasdaq Capital Market under the symbol “SIEB.” The Company primarily operates in the securities brokerage and asset management industry and has no other reportable segments. All of the Company’s revenues for the three and nine months ended September 30, 2024 and 2023 were derived from its operations in the U.S. The Company has evaluated the impact of its recent acquisition of GE on its consolidated financial statements and has determined that the acquisition is immaterial. As of September 30, 2024, the Company operates as a single reportable 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. Management will continue to monitor the financial significance of the GE acquisition and may report additional segments in accordance with ASC 280 – Segment Reporting. Basis of Presentation The accompanying unaudited condensed consolidated financial statements (“financial statements”) of the Company have been prepared on the accrual basis of accounting in conformity with accounting principles generally accepted in the U.S. (“GAAP”) for interim financial information with the instructions for Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all the information and footnotes required by GAAP for complete annual financial statements. The U.S. dollar is the functional currency of the Company and numbers are rounded for presentation purposes. In the opinion of management, the financial statements contain all adjustments (consisting of normal recurring entries) necessary to fairly present such interim results. Interim results are not necessarily indicative of the results of operations which may be expected for a full year or any subsequent period. These financial statements should be read in conjunction with the financial statements and notes thereto in the Company’s 2023 Form 10-K. Reclassification Certain amounts for the three and nine months ended September 30, 2023 and certain cash flows within the Investing Activities section have been reclassified 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 or investing activities for the periods presented. - 5 - Principles of Consolidation The financial statements include the accounts of Siebert and its wholly-owned and majority-owned consolidated subsidiaries. Upon consolidation, all intercompany balances and transactions are eliminated. The Company’s ownership in RISE was 68 % as of both September 30, 2024 and December 31, 2023. Refer to Note 5 – RISE for more information. For consolidated subsidiaries that are not wholly-owned, the third-party holdings of equity interests are referred to as noncontrolling interests. The net income or loss attributable to noncontrolling interests for such subsidiaries is presented as net income or loss attributable to noncontrolling interests in the statements of operations. The portion of total equity that is attributable to noncontrolling interests for such subsidiaries is presented as noncontrolling interests in the statements of financial condition. For investments in entities in which the Company does not have a controlling financial interest but has significant influence over its operating and financial decisions, the Company applies the equity method of accounting with net income and losses recorded in earnings of equity method investment in related party. Significant Accounting Policies The Company’s significant accounting policies are included in Note 2 – Summary of Significant Accounting Policies in the Company’s 2023 Form 10-K and any updates as of September 30, 2024 are listed below. Accounting for Acquisitions ASC 805 is used for accounting in business acquisitions. ASC 805 requires that goodwill be recognized separately from assets acquired and liabilities assumed at their acquisition date fair values. Goodwill, as of the date of acquisition, is determined as the excess of the consideration transferred net of the acquisition date fair values of assets acquired and liabilities assumed. Fair value estimates at acquisition date may be assessed internally or externally using third parties. As part of the valuation and appraisal process, the third-party appraiser prepares a report assigning estimated acquisition date fair values to assets and liabilities. These fair value estimations are subjective and require careful consideration and sound judgment. Management reviews the third-party reports for fairness of the assigned values. Intangible Assets, Net Certain identifiable intangible assets the Company acquires are amortized over their estimated useful lives on a straight-line basis. Amortization expense associated with such intangible assets is included in the “Depreciation and amortization” line item on the statements of income. The Company evaluates intangible assets for impairment on an annual basis or when events or changes indicate the carrying value may not be recoverable. The Company also evaluates the remaining useful lives of intangible assets on an annual basis or when events or changes warrants the remaining period of amortization to be revised. 2. New Accounting Standards Recently Issued Accounting Standards In November 2023, the Financial Accounting Standards Board (“FASB”) issued ASU 2023-07, “Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures.” This ASU updates reportable segment disclosure requirements primarily through enhanced disclosures about significant segment expenses. This ASU is effective for all entities for fiscal years beginning after December 15, 2023, and for interim periods within fiscal years beginning after December 15, 2024. Early adoption is permitted. The amendments should be applied retrospectively to all prior periods presented in the financial statements. The Company is currently evaluating this ASU to determine its impact on its disclosures. In December 2023, the 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. - 6 - Accounting Standards Adopted in Fiscal 2024 The Company did not adopt any new accounting standards during the three and nine months ended September 30, 2024. In addition, the Company has evaluated other recently issued accounting standards and does not believe that any of these standards will have a material impact on the Company’s financial statements and related disclosures as of September 30, 2024. 3. Business Combinations Overview of Acquisition On August 12, 2024, the Company entered into a Membership Interest Purchase Agreement by and among the Company, GE and members of the Gebbia family, the (“Gebbia Entertainment Purchase Agreement”), pursuant to which the Company acquired all of the outstanding equity of GE for a purchase price of $ 1,250,000 . Accounting for Acquisition The acquisition will be accounted for under the acquisition method of accounting for business combinations pursuant to ASC 805 – Business Combinations which requires, among other things, that the assets acquired and liabilities assumed be recognized at their fair values as of the proposed acquisition date. ASC 802 – Fair Value Measurements, which establishes a framework for measuring fair values, defines fair value as “the price that would be received to sell an asse or paid to transfer a liability in an orderly transaction between market participants at the measurement date”. Allocation of Purchase Price The Company was required to allocate the GE purchase price to tangible and identifiable intangible assets acquired based on their fair values as of August 12, 2024. The excess of the purchase price over those fair values is recorded as goodwill. The Company acquired intangible assets consisting of GE artist contracts, the fair value of which were $ 778,000 as of the acquisition date. The fair value of identifiable intangible assets and goodwill was determined primarily through a Discounted Cash Flow ( “ DCF”) analysis, which falls under the income approach. The valuation included the projection of future cash flows from the intangible asset, discounted at a rate that reflected the company’s weighted average cost of capital and accounting for a company-specific risk premium. Additionally, a perpetuity growth rate was applied beyond the forecast period. Goodwill was calculated as the excess of the acquisition price over the fair value of separable assets, capturing anticipated synergies from the business combination. The following table summarizes the Company’s allocation of the purchase price as of the date of acquisition: Estimated Fair Value Cash and cash equivalents $ 127,000 Accounts receivable 5,000 Security deposits 10,000 Other Intangible assets, net 778,000 Total Assets acquired 920,000 Goodwill 330,000 Purchase price $ 1,250,000 Since the date of acquisition, there has been no material impact on the Company’s financial statements for both the three and nine months ended September 30, 2024. 4. Transaction with Tigress The Company entered into agreements and subsequent terminations with Tigress Holdings, LLC (“Tigress”). Refer to Note 3 – Transactions with Tigress and Hedge Connection in the Company’s 2023 Form 10-K for more detail. Information related to transactions with Tigress that impacted the periods presented is detailed below. During the three months ended September 30, 2024 and 2023, no earnings were recognized from the Company’s investment in Tigress. During the nine months ended September 30, 2024 and 2023, the earnings recognized from the Company’s investment in Tigress were $ 0 and $ 111,000 , respectively. As of both September 30, 2024 and December 31, 2023, the Company had no interest in Tigress. - 7 - 5. RISE As of both September 30, 2024 and December 31, 2023, the Company’s ownership in RISE was 68 % and Siebert consolidated RISE under the voting interest model (“VOE model”) . As of both September 30, 2024 and December 31, 2023, RISE reported assets of $ 1.3 million and liabilities of $ 0 . There are no restrictions on RISE’s assets. 6. Kakaopay Transaction On April 27, 2023, the Company entered into a Stock Purchase Agreement (the “First Tranche Stock Purchase Agreement”) with Kakaopay Corporation (“Kakaopay”), a company established under the Laws of the Republic of Korea and a fintech subsidiary of Korean-based conglomerate Kakao Corp. pursuant to which the Company agreed to issue to Kakaopay 8,075,607 shares of the Company’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 the Company on a fully diluted basis (taking into account the issuance of the First Tranche Shares). The First Tranche closed on May 18, 2023. Refer to Note 5 – Kakaopay Transaction in the Company’s 2023 Form 10-K for further detail. 7. Receivables From, Payables To, and Deposits With Broker-Dealers and Clearing Organizations Amounts receivable from, payables to, and deposits with broker-dealers and clearing organizations consisted of the following as of the periods indicated: As of September 30, 2024 As of December 31, 2023 Receivables from and deposits with broker-dealers and clearing organizations DTCC / OCC / NSCC (1) $ 7,397,000 $ 9,332,000 Goldman Sachs & Co. LLC (“GSCO”) 46,000 38,000 National Financial Services, LLC (“NFS”) 2,312,000 2,212,000 Securities fail-to-deliver 273,000 119,000 Globalshares 70,000 47,000 Total Receivables from and deposits with broker-dealers and clearing organizations $ 10,098,000 $ 11,748,000 Payables to broker-dealers and clearing organizations Securities fail-to-receive $ 262,000 $ 399,000 Payables to broker-dealers 849,000 82,000 Total Payables to broker-dealers and clearing organizations $ 1,111,000 $ 481,000 (1) Depository Trust & Clearing Corporation is referred to as (“DTCC”), Options Clearing Corporation is referred to as (“OCC”), and National Securities Clearing Corporation is referred to as (“NSCC”). Under the DTCC shareholders’ agreement, MSCO is required to participate in the DTCC common stock mandatory purchase. As of September 30, 2024 and December 31, 2023, MSCO had shares of DTCC common stock valued at approximately $ 1,145,000 and $ 1,236,000 , respectively, which is included within the line item “Deposits with broker-dealers and clearing organizations” on the statements of financial condition. In September 2022, MSCO and RISE entered into a clearing agreement whereby RISE would introduce clients to MSCO. As part of the agreement, RISE deposited a clearing fund escrow deposit of $ 50,000 to MSCO, and had cash of approximately $ 1.2 million and $ 1.0 million in its brokerage account at MSCO as of September 30, 2024 and December 31, 2023, respectively. The resulting asset of RISE and liability of MSCO is eliminated in consolidation. 8. Fair Value Measurements Overview ASC 820 defines fair value, establishes a framework for measuring fair value as well as a hierarchy of fair value inputs. Refer to the below as well as Note 2 – Summary of Significant Accounting Policies in the Company’s 2023 Form 10-K for further information regarding fair value hierarchy, valuation techniques and other items related to fair value measurements. - 8 - Financial Assets and Liabilities Measured at Fair Value on a Recurring Basis The tables below present, by level within the fair value hierarchy, financial assets and liabilities, measured at fair value on a recurring basis for the periods indicated. As required by ASC Topic 820, financial assets and financial liabilities are classified in their entirety based on the lowest level of input that is significant to the respective fair value measurement. As of September 30, 2024 Level 1 Level 2 Level 3 Total Assets Cash and securities segregated for regulatory purposes U.S. government securities $ 87,814,000 $ — $ — $ 87,814,000 Securities owned, at fair value U.S. government securities $ 15,231,000 $ — $ — $ 15,231,000 Certificates of deposit — 113,000 — 113,000 Municipal securities — 321,000 — 321,000 Corporate bonds — 14,000 — 14,000 Collateralized mortgage obligations — 1,000 — 1,000 Options 28,000 — — 28,000 Equity securities 494,000 736,000 — 1,230,000 Total Securities owned, at fair value $ 15,753,000 $ 1,185,000 $ — $ 16,938,000 Liabilities Securities sold, not yet purchased, at fair value Options $ — $ 6,000 $ — $ 6,000 Total Securities sold, not yet purchased, at fair value $ — $ 6,000 $ — $ 6,000 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 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 September 30, 2024 Maturing in 2024 $ 2,988,000 Maturing in 2025 91,804,000 Maturing in 2026 8,097,000 Maturing after 2026 446,000 Accrued interest 158,000 Total Market value $ 103,493,000 - 9 - 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 Financial Assets and Liabilities Not Carried at Fair Value Financial assets and liabilities not measured at fair value are recorded at carrying value, which approximates fair value due to their short-term nature. The tables below represents financial instruments in which the ending balances as of September 30, 2024 and December 31, 2023 are not carried at fair value in the statements of financial condition: As of September 30, 2024 Carrying Value Fair Value Level 1 Level 2 Level 3 Financial assets, not measured at fair value Cash and cash equivalents $ 4,435,000 $ 4,435,000 $ 4,435,000 $ — $ — Cash – segregated for regulatory purposes 129,615,000 129,615,000 129,615,000 — — Securities borrowed 222,584,000 222,584,000 — 222,584,000 — Receivables from customers 78,206,000 78,206,000 — 78,206,000 — Receivables from non-customers 471,000 471,000 — 471,000 — Receivables from broker-dealers and clearing organizations 4,051,000 4,051,000 — 4,051,000 — Other receivables 4,062,000 4,062,000 — 4,062,000 — Deposits with broker-dealers and clearing organizations 6,047,000 6,047,000 — 6,047,000 — Total financial assets, not measured at fair value $ 449,471,000 $ 449,471,000 $ 134,050,000 $ 315,421,000 $ — Financial liabilities, not measured at fair value Securities loaned $ 232,524,000 $ 232,524,000 $ — $ 232,524,000 $ — Payables to customers 238,754,000 238,754,000 — 238,754,000 — Payables to non-customers 3,630,000 3,630,000 — 3,630,000 — Drafts payable 2,133,000 2,133,000 — 2,133,000 — Payables to broker-dealers and clearing organizations 1,111,000 1,111,000 — 1,111,000 — Deferred contract incentive 625,000 625,000 — 625,000 — Long-term debt 4,249,000 4,249,000 — 4,249,000 — Contract termination liability 3,024,000 3,024,000 — 3,024,000 — Total financial liabilities, not measured at fair value $ 486,050,000 $ 486,050,000 $ — $ 486,050,000 $ — - 10 - As of December 31, 2023 Carrying Value Fair Value Level 1 Level 2 Level 3 Financial assets, not measured at fair value Cash and cash equivalents $ 5,735,000 $ 5,735,000 $ 5,735,000 $ — $ — Cash – segregated for regulatory purposes 158,802,000 158,802,000 158,802,000 — — Securities borrowed 394,709,000 394,709,000 — 394,709,000 — Receivables from customers 72,823,000 72,823,000 — 72,823,000 — Receivables from non-customers 241,000 241,000 — 241,000 — Receivables from broker-dealers and clearing organizations 3,863,000 3,863,000 — 3,863,000 — Other receivables 2,424,000 2,424,000 — 2,424,000 — Deposits with broker-dealers and clearing organizations 7,885,000 7,885,000 — 7,885,000 — Total financial assets, not measured at fair value $ 646,482,000 $ 646,482,000 $ 164,537,000 $ 481,945,000 $ — Financial liabilities, not measured at fair value Securities loaned $ 419,433,000 $ 419,433,000 $ — $ 419,433,000 $ — Payables to customers 289,777,000 289,777,000 — 289,777,000 — Payables to non-customers 713,000 713,000 — 713,000 — Drafts payable 1,726,000 1,726,000 — 1,726,000 — Payables to broker-dealers and clearing organizations 481,000 481,000 — 481,000 — Deferred contract incentive 1,246,000 1,246,000 — 1,246,000 — Long-term debt 4,313,000 4,313,000 — 4,313,000 — Contract termination liability 4,462,000 4,462,000 — 4,462,000 — Total financial liabilities, not measured at fair value $ 722,151,000 $ 722,151,000 $ — $ 722,151,000 $ — 9. Property, Office Facilities, and Equipment, Net Property, office facilities, and equipment consisted of the following as of the periods indicated: As of September 30, 2024 As of December 31, 2023 Property $ 6,815,000 $ 6,815,000 Office facilities 3,963,000 2,475,000 Equipment 800,000 726,000 Total Property, office facilities, and equipment 11,578,000 10,016,000 Less accumulated depreciation ( 1,448,000 ) ( 612,000 ) Total Property, office facilities, and equipment, net $ 10,130,000 $ 9,404,000 Total depreciation expense for property, office facilities, and equipment was $ 222,000 and $ 168,000 for the three months ended September 30, 2024 and 2023, respectively. Total depreciation expense for property, office facilities, and equipment was $ 582,000 and $ 403,000 for the nine months ended September 30, 2024 and 2023, respectively. On July 7, 2023, the Company entered into a new lease agreement for office space in the World Financial Center in New York City. Depreciation expense commenced in March 2024, when the New York office space was placed into service. The Company invested $ 9,000 and $ 818,000 in the three and nine months ended September 30, 2024 to build out the New York office space. For both the three and nine months ended September 30, 2023, the Company invested $ 50,000 to build out the New York office space. In the second quarter of 2024, the Company completed the construction of its office in Omaha, Nebraska, investing $ 37,000 and $ 211,000 during the three and nine months ended September 30, 2024, respectively. Miami Office Building On December 30, 2021, the Company purchased an office building located at 653 Collins Ave, Miami Beach, FL (“Miami office building”). The Miami office building contains approximately 12,000 square feet of office space and serves as the headquarters of the Company. Depreciation expense commenced in April 2023 when the Miami office building was completed and placed in service. The Company invested $ 113,000 and $ 299,000 in the three months ended September 30, 2024 and 2023, respectively, to build out the Miami office building. The Company invested $ 211,000 and $ 1,140,000 in the nine months ended September 30, 2024 and 2023, respectively, to build out the Miami office building. - 11 - 10. Software, Net Software consisted of the following as of the periods indicated: As of September 30, 2024 As of December 31, 2023 Software $ 1,677,000 $ 1,081,000 Retail Platform 3,469,000 635,000 Total Software 5,146,000 1,716,000 Less accumulated amortization – Software ( 905,000 ) ( 284,000 ) Less accumulated amortization – Retail Platform — — Total Software, net $ 4,241,000 $ 1,432,000 The Company contracted with a technology vendor in the fourth quarter of 2023 to develop a new retail platform for the Company’s customers and integrate this platform into the Company’s operations (“Retail Platform”). The total software development expense related to this project was $ 3,469,000 as of September 30, 2024, all of which was capitalized. Amortization for the Retail Platform will commence once it is placed in service, which is expected to be in the second quarter of 2025. Total amortization of software was $ 128,000 and $ 98,000 for the three months ended September 30, 2024 and 2023, respectively. Total amortization of software was $ 359,000 and $ 312,000 for the nine months ended September 30, 2024 and 2023, respectively. As of September 30, 2024, the Company estimates the following future amortization of software assets: Year Amount 2024 $ 114,000 2025 929,000 2026 920,000 2027 731,000 2028 and after 1,546,000 Total $ 4,240,000 Transaction with J2 Financial Technology 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 (“J2 Financial”). 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 $ 35,000 of cash and 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 . This purchase is part of the software related to the Retail Platform and recorded in the line item “Software, net” on the statements of financial condition. 11. Leases As of September 30, 2024, 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 statements of financial condition. The Company leases some miscellaneous office equipment, but they are immaterial and therefore the Company records the costs associated with this office equipment on the statements of operations rather than capitalizing them as lease right-of-use assets. The balance of the lease right-of-use assets and lease liabilities are displayed on the statements of financial condition and the below tables display further detail on the Company’s leases. - 12 - 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 replaced 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. Lease Term and Discount Rate As of September 30, 2024 As of December 31, 2023 Weighted average remaining lease term – operating leases (in years) 3.4 3.9 Weighted average discount rate – operating leases 7.1 % 6.9 % Three Months Ended September 30, Nine Months Ended September 30, 2024 2023 2024 2023 Operating lease cost $ 236,000 $ 356,000 $ 771,000 $ 965,000 Short-term lease cost 75,000 67,000 296,000 346,000 Variable lease cost 54,000 44,000 173,000 125,000 Total Rent and occupancy $ 365,000 $ 467,000 $ 1,240,000 $ 1,436,000 Cash paid for amounts included in the measurement of lease liabilities Operating cash flows from operating leases $ 218,000 $ 315,000 $ 755,000 $ 969,000 Lease right-of-use assets obtained in exchange for new lease liabilities Operating leases $ 78,000 $ 1,693,000 $ 78,000 $ 1,693,000 Lease Commitments Future annual minimum payments for operating leases with initial terms of greater than one year as of September 30, 2024 were as follows: Year Amount 2024 $ 209,000 2025 909,000 2026 694,000 2027 520,000 2028 443,000 Remaining balance of lease payments 2,775,000 Less: difference between undiscounted cash flows and discounted cash flows 334,000 Lease liabilities $ 2,441,000 12. Goodwill and Other Intangible Assets, Net Goodwill As of September 30, 2024 and December 31, 2023, the Company’s carrying amount of goodwill was $ 2,319,000 and $ 1,989,000 , respectively. As of September 30, 2024, $ 1,989,000 of the Company’s carrying amount of goodwill came from the Company’s acquisition of RISE and $ 330,000 came from the Company’s acquisition of GE. As of September 30, 2024 and December 31, 2023, management concluded that there have been no impairments to the carrying value of the Company’s goodwill and no impairment charges related to goodwill were recognized during the three and nine months ended September 30, 2024 and 2023. Refer to Note 2 – Summary of Significant Accounting Policies in the Company’s 2023 Form 10-K for further information. Other Intangible Assets, Net As a result of the Company’s acquisition of GE, the Company acquired intangible assets consisting of GE artist contracts, the fair value of which were $ 778,000 as of the acquisition date. The useful life of the GE artist contracts is 5 years. 13. Long-Term Debt Mortgage with East West Bank Overview On December 30, 2021, the Company purchased the Miami office building for approximately $ 6.8 million, and the Company entered into a mortgage with East West Bancorp, Inc. (“East West Bank”) for approximately $ 4 million to finance part of the purchase of the Miami office building as well as $ 338,000 to finance part of the build out of the Miami office building. - 13 - The Company’s obligations under the mortgage are secured by a lien on the Miami office building and the term of the loan is ten years. The repayment schedule will utilize a 30-year amortization period, with a balloon on the remaining amount due at the end of ten years. The interest rate is 3.6 % for the first 7 years, and thereafter the interest rate shall be at the prime rate as reported by the Wall Street Journal, provided that the minimum interest rate on any term loan will not be less than 3.6 %. As part of the agreement, the Company must maintain a debt service coverage ratio of 1.4 to 1. The loan is subject to a prepayment penalty over the first five years which is calculated as a percentage of the principal amount outstanding at the time of prepayment. This percentage is 5% in the first year and decreases by 1% each year thereafter, with the prepayment penalty ending after 5 years. As of September 30, 2024, 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 September 30, 2024 were as follows: Year Amount 2024 $ 22,000 2025 88,000 2026 91,000 2027 95,000 2028 98,000 Thereafter 3,855,000 Total $ 4,249,000 The interest expense related to this mortgage was $ 39,000 and $ 40,000 for the three months ended September 30, 2024, and 2023, respectively. The interest expense related to this mortgage was $ 116,000 and $ 119,000 for the nine months ended September 30, 2024, and 2023, respectively. As of September 30, 2024, the interest rate for this mortgage was 3.6 %. 14. Deferred Contract Incentive Effective August 1, 2021, MSCO entered into an amendment to its clearing agreement with NFS that, among other things, extended the term of the arrangement for an additional four-year period commencing on August 1, 2021 and ending July 31, 2025. As part of this agreement, the Company received a one-time business development credit of $ 3 million from NFS, and NFS will pay the Company four annual credits of $ 100,000 , which are recorded in the line item “Deferred contract incentive” on the statements of financial condition. Annual credits shall be paid on the anniversary of the date on which the first credit was paid. The business development credit and annual credits will be recognized as contra expense over four years and one year , respectively, in the line item “Clearing fees, including execution costs” on the statements of 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 $ 213,000 in contra expense for both the three months ended September 30, 2024 and 2023. For both the nine months ended September 30, 2024 and 2023, the Company recognized $ 637,000 in contra expense. As of September 30, 2024 and December 31, 2023, the balance of the deferred contract incentive was $ 0.6 million and $ 1.2 million, respectively. 15. Revenue Recognition Refer to Note 2 – Summary of Significant Accounting Policies in Company’s 2023 Form 10-K for detail on the Company’s primary sources of revenue and the corresponding accounting treatment. Information related to items that impact certain revenue streams within the periods presented is shown below. Principal Transactions and Proprietary Trading The Company continuously invests in treasury bill and treasury notes as part of its normal operations to meet deposit requirements, which are primarily in the line item “Cash and securities segregated for regulatory purposes” on the statements of financial condition, in order to enhance its yield on its excess 15c3-3 deposits. During 2022, there was an increase in U.S. government securities yields, which created an unrealized loss on the Company’s U.S. government securities portfolio. In 2023, the Company recorded substantially all of the reversal of the unrealized loss resulting in a realized and unrealized gain due to the securities coming closer to maturity. Refer to Note 8 – Fair Value Measurements for additional detail. - 14 - The following table represents detail related to principal transactions and proprietary trading. Three Months Ended September 30, 2024 2023 Increase (Decrease) Principal transactions and proprietary trading Realized and unrealized gain on primarily riskless principal transactions $ 3,865,000 $ 2,657,000 $ 1,208,000 Realized and unrealized gain on portfolio of U.S. government securities 332,000 1,096,000 ( 764,000 ) Total Principal transactions and proprietary trading $ 4,197,000 $ 3,753,000 $ 444,000 Nine Months Ended September 30, 2024 2023 Increase (Decrease) Principal transactions and proprietary trading Realized and unrealized gain on primarily riskless principal transactions $ 10,788,000 $ 6,642,000 $ 4,146,000 Realized and unrealized gain on portfolio of U.S. government securities 489,000 2,565,000 ( 2,076,000 ) Total Principal transactions and proprietary trading $ 11,277,000 $ 9,207,000 $ 2,070,000 Disaggregation of Revenue The table below presents revenue from contracts with customers by major types of services for the periods indicated. Three Months Ended September 30, Nine Months Ended September 30, 2024 2023 2024 2023 Commissions and fees $ 2,270,000 $ 1,903,000 $ 7,173,000 $ 5,607,000 Interest, marketing and distribution fees Interest, marketing and distribution fees revenue 8,449,000 7,292,000 25,207,000 21,943,000 Interest, marketing and distribution fees expense ( 99,000 ) ( 98,000 ) ( 259,000 ) ( 360,000 ) Interest, marketing and distribution fees 8,350,000 7,194,000 24,948,000 21,583,000 Principal transactions and proprietary trading 4,197,000 3,753,000 11,277,000 9,207,000 Market making 597,000 223,000 1,706,000 836,000 Stock borrow / stock loan Stock rebate revenue 546,000 841,000 1,547,000 2,834,000 Retail fees 2,000 ( 26,000 ) ( 10,000 ) ( 58,000 ) Stock locate fees 5,236,000 3,193,000 13,041,000 9,187,000 Stock borrow / stock loan 5,784,000 4,008,000 14,578,000 11,963,000 Advisory fees 629,000 506,000 1,670,000 1,421,000 Other income 733,000 463,000 2,527,000 1,195,000 Total revenue $ 22,560,000 $ 18,050,000 $ 63,879,000 $ 51,812,000 16. Income Taxes The Company’s provision for income taxes consists of federal and state taxes, as applicable, in amounts necessary to align the Company’s year-to-date tax provision with the effective rate that it expects to achieve for the full year. Each quarter the Company updates its estimate of the annual effective tax rate and records cumulative adjustments as necessary. As of September 30, 2024, the Company has concluded that its deferred tax assets are realizable on a more-likely-than-not basis with the exception of capital loss carryforwards and investments that are expected to generate capital losses when realized. For the three and nine months ended September 30, 2024, the Company recorded an income tax provision of $ 1,005 , 000 and $ 3,952,000 on pre-tax book income of $ 4,839,000 and $ 15,520,000 , respectively. The effective tax rate for the three and nine months ended September 30, 2024 was 21 % and 25 % respectively. The effective tax rate differs from the federal statutory rate of 21 % primarily related to certain permanent tax differences and state and local taxes including the impact of finalizing the prior year tax filings. For the three and nine months ended September 30, 2023, the Company recorded an income tax provision of $ 1,516,000 and $ 3,621,000 on pre-tax book income of $ 4,273,000 and $ 12,321,000 , respectively. The effective tax rate for both the three and nine months ended September 30, 2023 was 35 % and 29 %, respectively. The effective tax rate differs from the federal statutory rate of 21 % primarily related to certain permanent tax differences and state and local taxes including the impact of finalizing the prior year tax filings. As of both September 30, 2024 and December 31, 2023, the Company recorded an uncertain tax position of $ 1,405,000 related to various tax matters, which is included in the line item “Taxes payable” in the statements of financial condition. - 15 - 17. Capital Requirements MSCO Net Capital MSCO is subject to the Uniform Net Capital Rules of the SEC (Rule 15c3-1) of the Exchange Act. Under the alternate method permitted by this rule, net capital, as defined, shall not be less than the lower of $ 1 million or 2 % of aggregate debit items arising from customer transactions. As of September 30, 2024, MSCO’s net capital was $ 62.9 million, which was approximately $ 61.1 million in excess of its required net capital of $ 1.8 million, and its percentage of aggregate debit balances to net capital was 69.89 %. 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 %. Special Reserve Account MSCO is subject to Customer Protection Rule 15c3-3 which requires segregation of funds in a special reserve account for the exclusive benefit of customers. As of September 30, 2024, MSCO had cash and securities deposits of $ 216.2 million (cash of $ 128.4 million, securities with a fair value of $ 87.8 million) in the special reserve accounts which was $ 39.5 million in excess of the deposit requirement of $ 176.7 million. After adjustments for deposit(s) and / or withdrawal(s) made on October 1, 2024, MSCO had $ 14.5 million in excess of the deposit requirement. 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. As of September 30, 2024, the Company was subject to the PAB Account Rule 15c3-3 of the SEC which requires segregation of funds in a special reserve account for the exclusive benefit of proprietary accounts of introducing broker-dealers. As of September 30, 2024, the Company had $ 1.3 million in the special reserve account which was approximately $ 0.1 million in excess of the deposit requirement of approximately $ 1.2 million. The Company made no subsequent deposits or withdrawals on October 1, 2024. 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. RISE Net Capital RISE, as a member of FINRA, is subject to the SEC Uniform Net Capital Rule 15c3-1. This rule requires the maintenance of minimum net capital and that the ratio of aggregate indebtedness to net capital, both as defined, shall not exceed 15 to 1 and that equity capital may not be withdrawn, or cash dividends paid if the resulting net capital ratio would exceed 10 to 1. RISE is also subject to the CFTC’s minimum financial requirements which require that RISE maintain net capital, as defined, equal to the greater of its requirements under Regulation 1.17 under the Commodity Exchange Act or Rule 15c3-1. As of September 30, 2024, RISE’s regulatory 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, 2023, RISE’s regulatory net capital was approximately $ 1.3 million which was $ 1.0 million in excess of its minimum requirement of $ 250,000 under 15c3-1. 18. Financial Instruments with Off-Balance Sheet Risk The Company enters into various transactions to meet the needs of customers, conduct trading activities, and manage market risks and is, therefore, subject to varying degrees of market and credit risk. Refer to the below as well as Note 20 – Financial Instruments with Off-Balance Sheet Risk in the Company’s 2023 Form 10-K for further information. As of September 30, 2024, the Company had margin loans extended to its customers of approximately $ 369.1 million, of which $ 78.2 million is within the line item “Receivables from customers” on the statements of financial condition. 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 statements of financial condition. There were no material losses for unsettled customer transactions for the three and nine months ended September 30, 2024 and 2023. The Company accounts for securities lending transactions in accordance with ASC Topic 210-20. The Company does not net securities borrowed and securities loaned and these items are presented on a gross basis on the statements of financial condition. The following table presents information about the Company’s securities borrowing and lending activity depicting the potential effect of rights of setoff between these recognized assets and liabilities. - 16 - As of September 30, 2024 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 FMV - Collateral Received or Pledged 2 Net Amount 3 Assets Securities borrowed $ 222,584,000 $ — $ 222,584,000 $ 212,732,000 $ 9,852,000 Liabilities Securities loaned $ 232,524,000 $ — $ 232,524,000 $ 222,053,000 $ 10,471,000 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 FMV - 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 1) Amounts represent recognized assets and liabilities that are subject to enforceable master agreements with rights of setoff. The company did not net any securities borrowed or securities loaned as of September 30, 2024 or December 31, 2023. 2) Represents the fair value of collateral the Company had received or pledged under enforceable master agreements. 3) Represents the total contract value as presented in the financial statements less the fair market value of the collateral received or pledged. 19. Commitments, Contingencies, and Other Legal and Regulatory Matters The Company is party to certain claims, suits and complaints arising in the ordinary course of business. As of September 30, 2024, the Company does not expect that these claims, suits and complaints will have a material impact on its results of operations or financial position. On April 18, 2024, the Company received a notification from Nasdaq Regulation that the Company no longer complied with Nasdaq’s Listing Rules (the “Nasdaq Rules”) for continued listing, as a result of the Company’s failure to file its 2023 Form 10-K. The Company regained compliance with the Nasdaq Rules in connection with the filing of its 2023 Form 10-K on May 10, 2024. Overnight Financing As of both September 30, 2024 and December 31, 2023, 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. The Company utilizes customer or firm securities as a pledge for short-term borrowing needs. There was $ 2,000 and $ 0 in interest expense for this line of credit for the three months ended September 30, 2024 and 2023, respectively. There was $ 5,000 and $ 0 in interest expense for this line of credit for the nine months ended September 30, 2024 and 2023, respectively. There were no fees related to this line of credit for the three or nine months ended September 30, 2024 and 2023. Credit Agreement On August 15, 2024, the Company entered into a Loan and Security Agreement (the “Credit Agreement”) with East West Bank (the “Lender”), a California banking corporation, dated as of July 29, 2024. The Credit Agreement provides for a revolving credit facility of up to $ 20,000,000 . The initial term of the Credit Agreement is two years. The Company may use any borrowings under the Credit Agreement for acquisitions, stock buybacks, and for general corporate purposes in an amount not to exceed $10,000,000. Obligations under the Credit Agreement shall be guaranteed by John J. Gebbia, the Company’s Chief Executive Officer, Gloria E. Gebbia, a Director of the Company, and John J. Gebbia and Gloria E. Gebbia, as co-trustees of the John and Gloria Living Trust. Borrowings under the Credit Agreement will bear interest on the outstanding daily balance at a rate of interest per annum equal to the greater of: (a) the one-month Term Secured Overnight Financing Rate (“Term SOFR”), as administered by CME Group Benchmark Administration plus 3.15 % and (b) 7.50 %. The origination fee is equal to one half of one percent ( 0.50 %) of the $ 20,000,000 revolver cap. The Credit Agreement contains customary affirmative covenants and negative covenants and requires the Company to maintain a minimum debt service coverage ratio of not less than 1.35:1.00 and minimum net capital of $ 43,000,000 . - 17 - NFS Contract Effective August 1, 2021, MSCO entered into an amendment to its clearing agreement with NFS that, among other things, extends the term of the arrangement for an additional four-year period commencing on August 1, 2021 and ending July 31, 2025. If the Company chooses to exit this agreement before the end of the contract term, the Company is under the obligation to pay an early termination fee upon occurrence pursuant to the table below: Date of Termination Early Termination Fee Prior to August 1, 2025 $ 3,250,000 For the three and nine months ended September 30, 2024 and 2023, there has been no expense recognized for any early termination fees. The Company believes that it is unlikely it will have to make material payments related to early termination fees and has not recorded any contingent liability in the financial statements related to this arrangement. Technology Vendor The Company has entered into agreements with technology vendors for certain development projects related to its Retail Platform. As of September 30, 2024, the Company incurred costs of approximately $ 2.8 million for these vendors. General Contingencies The Company’s general contingencies are included in Note 21 – Commitments, Contingencies, and Other in the Company’s 2023 Form 10-K. Other than the below, there have been no material updates to the Company’s general contingencies during the three and nine months ended September 30, 2024. The Company is self-insured with respect to employee health claims. As part of this plan, the Company recognized expenses of $ 229,000 and $ 336,000 for the three months ended September 30, 2024 and 2023, respectively. For the nine months ended September 30, 2024 and 2023, the Company recognized expenses of $ 956,000 and $ 782,000 , respectively. The Company had an accrual of $ 90,000 and $ 64,000 as of September 30, 2024 and December 31, 2023, respectively, which represents the estimate of future expense to be recognized for claims incurred during the periods. 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. 20. Employee Benefit Plans The Company sponsors a defined-contribution retirement plan under Section 401(k) of the Internal Revenue Code that covers substantially all employees (“401(k) plan”). Participant contributions to the 401(k) 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 an expense of $ 13,000 and $ 26,000 for the three months ended September 30, 2024 and 2023, respectively. For the nine months ended September 30, 2024 and 2023, the Company incurred an expense of $ 176,000 and $ 135,000 , respectively. 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 2,214,000 and 2,704,000 and shares remained as of September 30, 2024 and December 31, 2023, respectively. The table below presents the Plan awards granted and the related fair values for the nine months ended September 30, 2024. Shares Weighted- Average Grant Date Fair Value Nonvested as of December 31, 2023 (1) — $ — Granted 490,000 1.74 Vested ( 340,000 ) 1.78 Nonvested as of September 30, 2024 150,000 $ 1.65 (1) The Company did not issue any share-based compensation for the year ended December 31, 2023. - 18 - As of September 30, 2024, there was $ 158,000 of total unrecognized compensation cost related to nonvested shares granted. The cost is expected to be recognized over a weighted average period of 0.8 years. The Company recognized stock-based compensation expense of $ 696,000 for the nine months ended September 30, 2024, with $ 460,000 included in “Employee compensation and benefits” and $ 236,000 fully capitalized within “Software, net” on the statements of financial condition. 21. 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, during 2023 KCA had an agreement with the Company to serve as a paymaster for the Company for payroll and related functions including serving as the sponsor for the Company’s 401(k) plan. KCA passed through any expense or revenue related to this function to the subsidiaries of the Company proportionally. The Company incurred $ 10,000 and $ 40,000 of expenses related to these services for the three and nine months ended September 30, 2023. This agreement was terminated as of January 1, 2024. KCA owns a license from the Muriel Siebert Estate / Foundation to use the names “Muriel Siebert & Co., Inc.” and “Siebert” within business activities, which expires in 2025. For the use of these names, KCA passed through to the Company its cost of $ 15,000 in both the three months ended September 30, 2024 and 2023. For both the nine months ended September 30, 2024 and 2023, KCA passed through to the Company its cost of $ 45,000 . Other than the above arrangements, KCA has earned no profit for providing any services to the Company as KCA passed through any revenue or expenses to the Company’s subsidiaries for the three and nine months ended September 30, 2024 and 2023. PW PW brokers the insurance policies for related parties. Revenue for PW from related parties was $ 26,000 and $ 8,000 for the three months ended September 30, 2024 and 2023, respectively. Revenue for PW from related parties was $ 75,000 and $ 99,000 for the nine months ended September 30, 2024 and 2023, respectively. Gloria E. Gebbia, John J. Gebbia, and Gebbia Family Members 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 $ 1,054,000 and $ 748,000 for the three months ended September 30, 2024 and 2023, respectively. The compensation for the sons of Gloria E. Gebbia and John J. Gebbia was in aggregate $ 2,593,000 and $ 1,878,000 for the nine months ended September 30, 2024 and 2023, respectively. Part of their compensation includes payments related to key revenue streams. On May 22, 2023, Gloria E. Gebbia issued a warrant to BCW Securities LLC, a Delaware limited liability company, to purchase 403,780 shares of common stock of the Company held by Gloria E. Gebbia at an exercise price of $ 2.15 per share. Refer to Note 6 - Kakaopay Transaction for more information. Gebbia Sullivan County Land Trust The Company operates on a month-to-month lease agreement for its branch office in Omaha, Nebraska with the Gebbia Sullivan County Land Trust, the trustee of which is a member of the Gebbia Family. For both the three months ended September 30, 2024 and 2023, rent expense was $ 15,000 for this branch office. For both the nine months ended September 30, 2024 and 2023, rent expense was $ 45,000 for this branch office. The Company has completed construction of its branch office in Omaha, Nebraska. Refer to Note 9 – Property, Office Facilities, and Equipment, net for further detail. Credit Agreement On August 15, 2024, the Company entered into the Credit Agreement with the Lender whereby John J. Gebbia and Gloria E. Gebbia, along with the John and Gloria Living Trust, are guaranteeing the Company’s obligations under the Credit Agreement with the Lender. Refer to Note 19 - Commitments, Contingencies, and Other for more information. Gebbia Entertainment, LLC On August 12, 2024, the Company acquired 100 % of GE, a music and entertainment company owned by John J. Gebbia, Gloria E. Gebbia, and David Gebbia. Refer to Note 3 – Business Combinations, for further detail. - 19 - Kakaopay and Affiliates On April 27, 2023, the Company entered into the First Tranche Stock Purchase Agreement, pursuant to which the Company agreed to issue to Kakaopay the First Tranche Shares at a per share price of Two Dollars Fifteen Cents ($ 2.15 ). Refer to Note 6 – Kakaopay Transaction for further details on the transaction. MSCO entered into an agreement whereby it would provide an omnibus trading account for Kakaopay’s subsidiary, Kakao Pay Securities Corp., and provide trade execution services to Kakao Pay Securities Corp., subject to compliance with applicable U.S. laws, rules and regulations. Tigress The Company has entered into various agreements and subsequent terminations with Tigress. Refer to Note 4 – Transaction with Tigress for further detail. RISE In September 2022, MSCO and RISE entered into a clearing arrangement 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 $ 1.2 million and $ 1.0 million in its brokerage account at MSCO as of September 30, 2024 and December 31, 2023, respectively. The resulting asset of RISE and liability of MSCO is eliminated in consolidation. 22. Subsequent Events The Company has evaluated events that have occurred subsequent to September 30, 2024 and through November 12, 2024, the date of the filing of this Report. Based on the Company’s assessment, there have been no material subsequent events that occurred during such period that would require disclosure in this Report or would be required to be recognized in the financial statements as of September 30, 2024. - 20 - ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion provides a narrative of our financial performance and condition that should be read in conjunction with the accompanying financial statements and related notes included under Part I, Item 1 of this Report. In addition to our historical consolidated financial information, the following discussion contains forward-looking statements that reflect our plans, estimates, and beliefs. Our actual results could differ materially from those discussed in the forward-looking statements. Factors that could cause or contribute to these differences include those discussed below and elsewhere in our 2023 Form 10-K, particularly in Part I, Item 1A – Risk Factors. Overview We are a financial services company and provide a wide variety of financial services to our clients. We operate in business lines such as retail brokerage, investment advisory, insurance, and technology development through our wholly-owned and majority-owned subsidiaries. Results in the businesses in which we operate are highly correlated to general economic conditions and, more specifically, to the direction of the U.S. equity and fixed-income markets. Market volatility, overall market conditions, interest rates, economic, political, and regulatory trends, and industry competition are among the factors which could affect us and which are unpredictable and beyond our control. These factors affect the financial decisions made by market participants who include investors and competitors, impacting their level of participation in the financial markets. In addition, in periods of reduced financial market activity, profitability is likely to be adversely affected because certain expenses remain relatively fixed, including salaries and related costs, as well as portions of communications costs and occupancy expenses. Accordingly, earnings for any period should not be considered representative of earnings to be expected for any other period. Financial Overview Earnings per share were $0.10 for the current quarter, compared to earnings per share of $0.07 for the prior-year quarter. For the current quarter, our net revenues were $22.6 million and operating income before taxes was $4.8 million, compared to net revenues of $18.1 million and operating income before taxes of $4.3 million in the prior-year quarter. Financial highlights as of September 30, 2024: ● Retail customer net worth increased by 10% to $17.5 billion compared to December 31, 2023 ● Stock borrow / stock loan increased by 44% to 5.8 million compared to the prior-year quarter ● Commissions and fees increased by 19% to $2.3 million compared to the prior-year quarter Trends and Key Factors Affecting our Operations Market Risk Market risk is our risk of loss resulting from the impact of changes in market prices on our trading inventory and investment positions. We have exposure to market risk primarily through our broker-dealer trading operations. Through our broker-dealer subsidiary, we trade debt obligations and equity securities and maintain trading inventories to ensure availability of securities to facilitate client transactions. Inventory levels may fluctuate daily as a result of client demand. Our primary market risks relate to interest rates and equity prices. Equity risk results from changes in prices of equity securities, affecting the value of the equity securities and other instruments that derive their value from a particular stock. We may enter into underwriting commitments and, as a result, we may be subject to market risk on any unsold securities issued in the offerings to which we are committed. Risk exposure is controlled by limiting our participation, the transaction size, or through the syndication process. Interest Rate Risk We are exposed to market risk from changes in interest rates. Such changes in interest rates primarily impact revenue from interest, marketing, and distribution fees. We primarily earn interest, marketing and distribution fees from margin interest charged on clients’ margin balances, interest on cash and securities segregated for regulatory purposes, and distribution fees from money market mutual funds in clients’ accounts. Securities segregated for regulatory purposes consist solely of U.S. government securities. If prices of U.S. government securities within our portfolio decline, we anticipate the impact to be temporary as we intend to hold these securities to maturity. We seek to mitigate this risk by managing the average maturities of our U.S. government securities portfolio and setting risk parameters for securities owned, at fair value. - 21 - The following table presents simulated changes to net interest revenue over the next 12 months beginning September 30, 2024 and December 31, 2023 of a gradual increase or decrease in market interest rates relative to prevailing market rates at the end of each reporting period: As of September 30, 2024 December 31, 2023 Increase of 200 basis points 26 % 35 % Increase of 100 basis points 12 % 19 % Increase of 50 basis points 6 % 4 % Decrease of 50 basis points (8 )% (3 )% Decrease of 100 basis points (14 )% (11 )% Decrease of 200 basis points (28 )% (26 )% The difference in our simulated incremental increases and decreases in the market interest rates as of September 30, 2024 compared to December 31, 2023 is primarily due to an increase in the proportion of segregated cash to segregated securities and an increase in the proportion of margin debit balances to cash credit balances. Technology Initiatives At the end of 2023, we hired new technology personnel, changed our primary software development vendor, and made investments in technology development. Some of these technology investments include the development of a Siebert mobile retail trading application, online platform for our retail customer base and corporate services clients, as well as upgrades to our technological and operational infrastructure to support these platforms and future growth. We believe that these ongoing investments in technology will be key in meeting the needs of our retail customers, correspondent clearing, corporate services as well as our expansion into new markets and demographics. Client Account and Activity Metrics The following tables set forth metrics we use in analyzing our client account and activity trends for the periods indicated. Client Account Metrics As of September 30, 2024 December 31, 2023 Retail customer net worth (in billions) $ 17.5 $ 15.9 Retail customer margin debit balances (in billions) $ 0.4 $ 0.3 Retail customer credit balances (in billions) $ 0.4 $ 0.5 Retail customer money market fund value (in billions) $ 0.8 $ 0.7 Retail customer accounts 158,594 153,727 ● Retail customer net worth represents the total value of securities and cash in the retail customer accounts after deducting margin debits ● Retail customer margin debit balances represent credit extended to our customers to finance their purchases against current positions ● Retail customer credit balances represent client cash held in brokerage accounts ● Retail customer money market fund value represents all retail customers accounts invested in money market funds ● Retail customer accounts represent the number of retail customers Statements of Operations and Financial Condition Statements of Operations for the Three Months Ended September 30, 2024 and 2023 Revenue Commissions and fees for the three months ended September 30, 2024 were $2,270,000 and increased by $367,000 from the corresponding period in the prior year, primarily due to strong market conditions. - 22 - Interest, marketing and distribution fees for the three months ended September 30, 2024 were $8,350,000 and increased by $1,156,000 from the corresponding period in the prior year primarily due to an increase in interest income received on U.S. government securities and bank deposits. Principal transactions and proprietary trading for the three months ended September 30, 2024 were $4,197,000 and increased by $444,000 from the corresponding period in the prior year, primarily due to the factors discussed below. The increase in realized and unrealized gain on primarily riskless principal transactions was primarily due to strong market conditions. The increase in unrealized gain on our portfolio of U.S. government securities was due to the following. We invested in 1-year treasury bills and 2-year treasury notes in order to enhance our yield on excess 15c3-3 deposits. During 2022, there was an increase in U.S. government securities yields, which created an unrealized loss on our U.S. government securities portfolio. In 2023, we began to record substantially all of the reversal of the unrealized loss resulting in an unrealized gain due to the securities coming closer to maturity. We continually invest in US government securities based on market yields and cash needs. Below is a summary of the change in the principal transactions and proprietary trading line item for the periods presented. Three Months Ended September 30, 2024 2023 Increase (Decrease) Principal transactions and proprietary trading Realized and unrealized gain on primarily riskless principal transactions $ 3,865,000 $ 2,657,000 $ 1,208,000 Realized and unrealized gain on portfolio of U.S. government securities 332,000 1,096,000 (764,000 ) Total Principal transactions and proprietary trading $ 4,197,000 $ 3,753,000 $ 444,000 Market making for the three months ended September 30, 2024 was $597,000 and increased by $374,000 from the corresponding period in the prior year, primarily due to strong equity markets. Stock borrow / stock loan for the three months ended September 30, 2024 was $5,784,000 and increased by $1,776,000 from the corresponding period in the prior year, primarily due to growth in stock locate services. Advisory fees for the three months ended September 30, 2024 were $629,000 and increased by $123,000 from the corresponding period in the prior year, primarily due to growth in platform assets. Other income for the three months ended September 30, 2024 was 733,000 and increased by $270,000 from the corresponding period in the prior year, primarily due to fees related to administrative services. Operating Expenses Employee compensation and benefits for the three months ended September 30, 2024 were $11,886,000 and increased by $3,163,000 from the corresponding period in the prior year, primarily due to an increase in commission payouts, executive compensation, as well as additional personnel related to technology initiatives. Clearing fees, including execution costs for the three months ended September 30, 2024 were $345,000 and decreased by $236,000 from the corresponding period in the prior year, primarily due to a reduction in volume. Technology and communications expenses for the three months ended September 30, 2024 were $1,147,000 and increased by $320,000 from the corresponding period in the prior year, primarily due to an expansion of technological infrastructure. Other general and administrative expenses for the three months ended September 30, 2024 were $1,070,000 and decreased by $38,000 from the corresponding period in the prior year. Data processing expenses for the three months ended September 30, 2024 were $894,000 and increased by $169,000 from the corresponding period in the prior year, primarily due to increased market activities. Rent and occupancy expenses for the three months ended September 30, 2024 were $365,000 and decreased by $102,000 from the corresponding period in the prior year, primarily due to the expiration of short term leases. Professional fees for the three months ended September 30, 2024 were $1,464,000 and increased by $485,000 from the corresponding period in the prior year primarily due to an increase in legal and accounting fees offset by an decrease in consulting services. - 23 - Depreciation and amortization expenses for the three months ended September 30, 2024 were $350,000 and increased by $85,000 from the corresponding period in the prior year, primarily due to an increase in depreciation related to office facilities in 2024. Interest expense for the three months ended September 30, 2024 was $72,000 and increased by $32,000 from the corresponding period in the prior year, primarily due to the interest related to an agreement with Kakaopay in 2024. Advertising and promotion expense for the three months ended September 30, 2024 was $128,000 and increased by $66,000 from the corresponding period in the prior year, primarily due to a reversal related to advertising expenses in 2023 as well as an increase in marketing initiatives in 2024. Provision For (Benefit From) Income Taxes The provision from income taxes for the three months ended September 30, 2024 was $1,005,000 and decreased by $511,000 from the corresponding period in the prior year. The change from the corresponding period in the prior year is primarily due to the impact of finalizing the prior year tax filings in the third quarter of 2024. Refer to Note 16 – Income Taxes for additional detail. Net Income (Loss) Attributable to Noncontrolling Interests As further discussed in Note 1 – Organization and Basis of Presentation, we consolidate RISE’s financial results into our financial statements and reflect the portion of RISE not held by Siebert as a noncontrolling interest in our financial statements. The net income attributable to noncontrolling interests for the three months ended September 30, 2024 was $8,000, and increased by $12,000 from the corresponding period in the prior year. Statements of Operations for the Nine Months Ended September 30, 2024 and 2023 Revenue Commissions and fees for the nine months ended September 30, 2024 were $7,173,000 and increased by $1,566,000 from the corresponding period in the prior year, primarily due to strong market conditions. Interest, marketing and distribution fees for the nine months ended September 30, 2024 were $24,948,000 and increased by $3,365,000 from the corresponding period in the prior year primarily due to an increase in interest income received on U.S. government securities and bank deposits. Principal transactions and proprietary trading for the nine months ended September 30, 2024 were $11,277,000 and increased by $2,070,000 from the corresponding period in the prior year, primarily due to the factors discussed below. The increase in realized and unrealized gain on primarily riskless principal transactions was primarily due to strong market conditions. The increase in unrealized gain on our portfolio of U.S. government securities was due to the following. We invested in 1-year treasury bills and 2-year treasury notes in order to enhance our yield on excess 15c3-3 deposits. During 2022, there was an increase in U.S. government securities yields, which created an unrealized loss on our U.S. government securities portfolio. In 2023, we began to record substantially all of the reversal of the unrealized loss resulting in an unrealized gain due to the securities coming closer to maturity. We continually invest in US government securities based on market yields and cash needs. Below is a summary of the change in the principal transactions and proprietary trading line item for the periods presented. Nine Months Ended September 30 2024 2023 Increase (Decrease) Principal transactions and proprietary trading Realized and unrealized gain on primarily riskless principal transactions $ 10,788,000 $ 6,642,000 $ 4,146,000 Realized and unrealized gain on portfolio of U.S. government securities 489,000 2,565,000 (2,076,000 ) Total Principal transactions and proprietary trading $ 11,277,000 $ 9,207,000 $ 2,070,000 Market making for the nine months ended September 30, 2024 was $1,706,000 and increased by $870,000 from the corresponding period in the prior year, primarily due to strong equity markets. Stock borrow / stock loan for the nine months ended September 30, 2024 was $14,578,000 and increased by $2,615,000 from the corresponding period in the prior year, primarily due to a growth in stock locate services. Advisory fees for the nine months ended September 30, 2024 were $1,670,000 and increased by $249,000 from the corresponding period in the prior year, primarily due to growth in platform assets. Other income for the nine months ended September 30, 2024 was $2,527,000 and increased by $1,332,000 from the corresponding period in the prior year, primarily due to fees related to administrative services. - 24 - Operating Expenses Employee compensation and benefits for the nine months ended September 30, 2024 were $32,569,000 and increased by $8,799,000 from the corresponding period in the prior year, primarily due to an increase in commission payouts, executive compensation, as well as additional personnel related to technology initiatives. Clearing fees, including execution costs for the nine months ended September 30, 2024 were $1,011,000 and decreased by $254,000 from the corresponding period in the prior year, primarily due to a reduction in volume. Technology and communications expenses for the nine months ended September 30, 2024 were $2,903,000 and increased by $494,000 from the corresponding period in the prior year, primarily due to an expansion of technological infrastructure. Other general and administrative expenses for the nine months ended September 30, 2024 were $3,169,000 and decreased by $151,000 from the corresponding period in the prior year, primarily due to a decrease in office expenses. Data processing expenses for the nine months ended September 30, 2024 were $2,377,000 and increased by $60,000 from the corresponding period in the prior year, primarily due to increased market activities. Rent and occupancy expenses for the nine months ended September 30, 2024 were $1,240,000 and decreased by $196,000 from the corresponding period in the prior year, primarily due to a discontinued rent expense related to the temporary Miami office. Professional fees for the nine months ended September 30, 2024 were $3,741,000 and increased by $681,000 from the corresponding period in the prior year primarily due to an increase in legal and accounting fees offset by an decrease in consulting services. Depreciation and amortization expenses for the nine months ended September 30, 2024 were $941,000 and increased by $225,000 from the corresponding period in the prior year, primarily due to an increase in depreciation related to office facilities in 2024. Interest expense for the nine months ended September 30, 2024 was $183,000 and decreased by $39,000 from the corresponding period in the prior year, primarily due to the repayment of a loan with East West Bank in the second quarter of 2023. Advertising and promotion expense for the nine months ended September 30, 2024 was $225,000 and increased by $173,000 from the corresponding period in the prior year, primarily due to a reversal related to advertising expenses in 2023 as well as an increase in marketing initiatives in 2024. Non-Operating Income (Loss) The earnings of equity method investment in related party for the nine months ended September 30, 2024 was $0 and decreased by $111,000 from the corresponding period in the prior year, primarily due to the exit of our investment in Tigress in the third quarter of 2023. The impairment of investment for the nine months ended September 30, 2024 was $0 and decreased by $1,035,000 from the corresponding period in the prior year, primarily due to the impairment of our investment in a trading technology provider and the impairment of our investment in Tigress occurring in 2023. Provision For (Benefit From) Income Taxes The provision from income taxes for the nine months ended September 30, 2024 was $3,952,000 and increased by $331,000 from the corresponding period in the prior year. The change from the corresponding period in the prior year is primarily due to increased pre-tax earnings in the nine months ending September 30, 2024. Refer to Note 16 – Income Taxes for additional detail. Net Income (Loss) Attributable to Noncontrolling Interests As further discussed in Note 1 – Organization and Basis of Presentation, we consolidate RISE’s financial results into our financial statements and reflect the portion of RISE not held by Siebert as a noncontrolling interest in our financial statements. The net income attributable to noncontrolling interests for the nine months ended September 30, 2024 was $14,000, and decreased by $26,000 from the corresponding period in the prior year,. - 25 - Statements of Financial Condition As of September 30, 2024 and December 31, 2023 Assets Assets as of September 30, 2024 were $579,156,000 and decreased by $222,644,000 from December 31, 2023, primarily due to a decrease in cash and securities segregated for regulatory purposes and securities borrowed. Liabilities Liabilities as of September 30, 2024 were $495,833,000 and decreased by $235,258,000 from December 31, 2023, primarily due to a decrease in payables to customers and securities loaned. Liquidity and Capital Resources Overview As of September 30, 2024, a significant portion of our assets were liquid in nature, providing us with flexibility in financing our business. A significant portion of our assets not held by customers or used for stock borrow / stock loan consisted primarily of cash and cash equivalents, securities owned, at fair value, which are marked-to-market daily, and receivables from and deposits with broker-dealers and clearing organizations. We expect to use our available cash, cash equivalents, and potential future borrowings under our debt agreements and potential issuance of new debt or equity, to support and invest in our core business, including investing in new ways to serve our customers, potentially seeking strategic acquisitions to leverage existing capabilities, and for general capital needs (including capital, deposit, and collateral requirements imposed by regulators and SROs). Based on our current level of operations, we believe our available cash, available lines of credit, overall access to capital markets, and cash provided by operations will be adequate to meet our current liquidity needs for the foreseeable future. As of the date of this Report, other than the items detailed in the section below, there are no known or material events that would require us to use large amounts of our liquid assets to cover expenses. Kakaopay The net capital infusion from Kakaopay to Siebert from the First Tranche transaction was approximately $14.8 million after the issuance cost. This capital is currently being used to enhance our regulatory capital, and is primarily invested in U.S. government securities and is in the line item “Securities owned, at fair value” on the statements of financial condition. Refer to Note 5 – Kakaopay Transaction in our 2023 Form 10-K for further detail. Credit Agreement On August 15, 2024, we entered into the Credit Agreement with East West Bank providing a $20 million revolving credit facility, which offers substantial financial flexibility to support our strategic initiatives. This credit facility allows the Company to fund acquisitions, execute stock buybacks, and meet general corporate needs up to $10 million, ensuring access to capital for both growth and operational purposes. The two-year term of the Credit Agreement, combined with a competitive interest rate structure that is tied to either the one-month Term SOFR plus 3.15% or a minimum of 7.50%, provides a stable and predictable financing source. The personal guarantees provided by key executives, John J. Gebbia and Gloria E. Gebbia, and their trust, further strengthen the Company’s borrowing position and help secure favorable terms. Cash and Cash Equivalents Our cash and cash equivalents were $4.4 million and $5.7 million as of September 30, 2024 and December 31, 2023, respectively. - 26 - Debt Agreements We have $4.2 million outstanding on our mortgage with East West Bank and an unutilized line of credit for short term overnight demand borrowing of up to $25 million with BMO Harris as of September 30, 2024. As of September 30, 2024, we were in compliance with all covenants related to our mortgage agreement. Cash Requirements The following table summarizes our short- and long-term material cash requirements as of September 30, 2024. Payments Due By Period 2024 2025 2026 2027 2028 Thereafter Total Operating lease commitments $ 209,000 $ 909,000 $ 694,000 $ 520,000 $ 443,000 $ — $ 2,775,000 Kakaopay fee (1) 1,000,000 2,000,000 1,000,000 — — — 4,000,000 Mortgage with East West Bank (2) 22,000 88,000 91,000 95,000 98,000 3,855,000 4,249,000 Technology vendors (3) 39,000 1,521,000 — — — — 1,560,000 Broadridge contract (4) 102,000 407,000 170,000 — — — 679,000 Total $ 1,372,000 $ 4,925,000 $ 1,955,000 $ 615,000 $ 541,000 $ 3,855,000 $ 13,263,000 (1) Pursuant to the Settlement Agreement with Kakaopay, we will pay Kakaopay a fee of $5 million payable in ten quarterly installments beginning in the first quarter of 2024. Refer to Note 5 – Kakaopay Transaction in our 2023 Form 10-K for further detail. (2) On December 30, 2021, we purchased the Miami office building and financed part of the purchase price with a mortgage with East West Bank. (3) We have entered into agreements with technology vendors for certain development projects related to our Retail Platform. As of September 30, 2024, we have incurred approximately $2.8 million out of the $4.4 million total budget for these vendors. (4) In June 2023, we entered into an amendment to its service agreement with Broadridge Securities Processing Solutions, LLC with a total minimum expense of approximately $1.2 million for this arrangement. Shelf Registration Statement On February 18, 2022, we filed a shelf registration statement on Form S-3 that was declared effective on March 2, 2022 by the SEC for the potential offering, issuance and sale by Siebert of up to $100.0 million of our common stock, preferred stock, warrants to purchase our common stock and/or preferred stock, units consisting of all or some of these securities and subscription rights to purchase all or some of these securities. However, since we filed the 2023 Form 10-K after its scheduled due date, we no longer satisfy the eligibility requirements for use of registration statements on Form S-3, which requires that we file in a timely manner all reports required to be filed during the prior twelve calendar months. As a result, we have suspended use of the shelf registration statement. Net Capital, Reserve Accounts, Segregation of Funds, and Other Regulatory Requirements MSCO is subject to the Uniform Net Capital Rules of the SEC (Rule 15c3-1) and the Customer Protection Rule (15c3-3) of the Exchange Act and maintains capital and segregated cash reserves in excess of regulatory requirements. Requirements under these regulations may vary; however, MSCO has adequate reserves and contingency funding plans in place to sufficiently meet any regulatory requirements. In addition to net capital requirements, as a self-clearing broker-dealer, MSCO is subject to cash deposit and collateral requirements with clearing houses, such as the DTCC and OCC, which may fluctuate significantly from time to time based upon the nature and size of clients’ trading activity and market volatility. RISE, as a member of FINRA, is subject to the SEC Uniform Net Capital Rule 15c3-1 and the corresponding regulatory capital requirements. MSCO can transfer funds to Siebert as long as MSCO maintains its liquidity and regulatory capital requirements. RISE can transfer funds to its shareholders, of which Siebert is entitled to its proportional ownership interest, as long as RISE maintains its liquidity and regulatory capital requirements. For the three and nine months ended September 30, 2024 and 2023, MSCO and RISE had sufficient net capital to meet their respective liquidity and regulatory capital requirements. Refer to Note 17 – Capital Requirements for more detail about our capital requirements. Cash Flows Cash used in operating activities consisted of net income adjusted for certain non-cash items. Net operating assets and liabilities at any specific point in time are subject to many variables, including variability in customer activity, the timing of cash receipts and payments, and vendor payment terms. The total changes in our statements of cash flows, especially our operating cash flow, are not necessarily indicative of the ongoing results of our business as we have customer assets and liabilities on our statements of financial condition. - 27 - For the nine months ended September 30, 2024, cash used in operating activities decreased by $15.9 million compared to the prior year period, which was primarily driven by the net change in securities borrowed and securities loaned, receivables from broker-dealers and clearing organizations, receivables from customers, payables to non-customers and securities owned, at fair value. For the nine months ended September 30, 2024, cash used in investing activities increased by $3.4 million compared to the prior year period, which was primarily driven by the purchase of software related to the Retail Platform as well as the acquisition of GE in 2024. For the nine months ended September 30, 2024, cash flows used in financing activities decreased by $13.1 million compared to 2023, which was primarily driven by the issuance of shares related to the transaction with Kakaopay in 2023. Long Term Contracts Effective August 1, 2021, MSCO entered into an amendment to its clearing agreement with NFS that, among other things, extends the term of their arrangement for an additional four-year period commencing on August 1, 2021 and ending July 31, 2025. As part of this agreement, we received a one-time business development credit of $3 million, and NFS will pay us four annual credits of $100,000 over the term of the agreement. The amendment also provides for an early termination fee; however, as of September 30, 2024, we do not expect to terminate the contract with NFS before the end of the contract term. Refer to Note 14 – Deferred Contract Incentive and Note 19 – Commitments, Contingencies and Other for additional detail. Effective June 2023, MSCO entered into an amendment to its service agreement with Broadridge Securities Processing Solutions, LLC that, among other things, extends the term of their arrangement for a five-year period ending June 2028, with an option to terminate after three years. The total minimum expense for this arrangement is estimated at approximately $1.2 million over the duration of the contract. Off-Balance Sheet Arrangements We enter into various transactions to meet the needs of customers, conduct trading activities, and manage market risks and are, therefore, subject to varying degrees of market and credit risk. In the normal course of business, our customer activities involve the execution, settlement, and financing of various customer securities transactions. These activities may expose us to off-balance sheet risk in the event the customer or other broker is unable to fulfill their contracted obligations and we are forced to purchase or sell the financial instrument underlying the contract at a loss. There were no material losses for unsettled customer transactions for the three and nine months ended September 30, 2024 and 2023. Refer to Note 18 – Financial Instruments with Off-Balance Sheet Risk for additional detail. Uncertain Tax Positions We account for uncertain tax positions in accordance with the authoritative guidance issued under ASC 740-10, which addresses the determination of whether tax benefits claimed or expected to be claimed on a tax return should be recorded in the financial statements. We may recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities based on the technical merits of the position. The tax benefits recognized in the financial statements from such position should be measured based on the largest benefit that has a greater than fifty percent likelihood of being realized upon ultimate settlement. ASC 740-10 also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods and disclosure requirements. We recognize interest and penalties related to unrecognized tax benefits on the provision for income taxes line on the statements of operations. Accrued interest and penalties would be included on the related tax liability line on the statements of financial condition. As of both September 30, 2024 and December 31, 2023, the Company recorded an uncertain tax position of $1,405,000 related to various tax matters, which is included in the line item “Taxes payable” in the statements of financial condition. Critical Accounting Policies and Estimates Certain of our accounting policies that involve a higher degree of judgment and complexity are discussed in Part I, Item 2 – Management’s Discussion and Analysis of Financial Condition and Results of Operations in our 2023 Form 10-K. As of September 30, 2024, there have been no changes to our critical accounting policies or estimates. - 28 - New Accounting Standards In November 2023, the FASB issued ASU 2023-07, “Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures.” This ASU updates reportable segment disclosure requirements primarily through enhanced disclosures about significant segment expenses. This ASU is effective for all entities for fiscal years beginning after December 15, 2023, and for interim periods within fiscal years beginning after December 15, 2024. Early adoption is permitted. The amendments should be applied retrospectively to all prior periods presented in the financial statements. We are currently evaluating this ASU to determine its impact on the Company’s disclosures. In December 2023, the 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 us for annual periods beginning after December 15, 2024, though early adoption is permitted. We are still evaluating the presentational effect that ASU 2023-09 will have on our consolidated financial statements, but we expect considerable changes to our income tax footnote. Refer to Note 2 – New Accounting Standards for additional information regarding new ASUs issued by the FASB. ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Financial Instruments Held For Trading Purposes We do not directly engage in derivative transactions, have no interest in any special purpose entity and have no liabilities, contingent or otherwise, for the debt of another entity. Financial Instruments Held For Purposes Other Than Trading We generally invest our cash and cash equivalents temporarily in dollar denominated bank account(s). These investments are not subject to material changes in value due to interest rate movements. We invest cash and securities segregated for regulatory purposes in dollar denominated bank accounts which are not subject to material changes in value due to interest rate movements. We also invest cash and securities segregated for regulatory purposes and securities owned, at fair value in U.S. government securities which may be subject to material changes in value due to interest rate movements. Securities owned, at fair value invested in U.S. government securities are generally purchased to enhance yields on required regulatory deposits. While the value of the government securities may be subject to material changes in value, we believe any reduction in value would be temporary since the securities would mature at par value. Customer transactions are cleared through clearing brokers on a fully disclosed basis and are also self-cleared by MSCO. If customers do not fulfill their contractual obligations any loss incurred in connection with the purchase or sale of securities at prevailing market prices to satisfy customer obligations may be incurred by Siebert. We regularly monitor the activity in customer accounts for compliance with margin requirements. We are exposed to the risk of loss on unsettled customer transactions if customers and other counterparties are unable to fulfill their contractual obligations. There were no material losses for unsettled customer transactions in the last five years. See “Item 2 – Management’s Discussion and Analysis of Financial Condition and Results of Operations - Trends and Key Factors Affecting our Operations” of this Report for our quantitative and qualitative disclosures about market risk. - 29 - ITEM 4. CONTROLS AND PROCEDURES Disclosure Controls and Procedures We carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and our Executive Vice President / Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures as of the end of the period covered by this Report pursuant to Rule 13a-15(e) or Rule 15d-15(e) of the Exchange Act. Based on its evaluation, our management, including our Chief Executive Officer and our Executive Vice President / Chief Financial Officer, concluded that as of the end of the period covered by this quarterly report, our disclosure controls and procedures were ineffective, based on the material weaknesses in internal control over financial reporting as previously disclosed in our 2023 Form 10-K. Ongoing Remediation of Previously Identified Material Weakness Management is in the process of implementing the following measures to ensure that the control deficiencies contributing to the material weakness are remediated: (i) designing and implementing controls related to provisioning, privileged access, and user access reviews, (ii) developing an enhanced risk assessment process to evaluate logical access, and (iii) improving the existing training program associated with control design and implementation. The material weakness will not be considered remediated until the applicable controls operate for a sufficient period of time and management has concluded, through testing, that these controls are operating effectively. We expect that the remediation will be completed as of the year-ended December 31, 2024. Changes in Internal Control over Financial Reporting There were no changes in our internal control over financial reporting during the most recently completed fiscal quarter that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting - 30 - PART II - OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS We are party to certain claims, suits and complaints arising in the ordinary course of business. As of the date of this Report, we do not expect that these claims, suits and complaints will have a material impact on our results of operations or financial position. ITEM 1A. RISK FACTORS In addition to the other information set forth in this Report, investors should carefully consider the risk factors discussed in Part I, Item 1A - Risk Factors in our 2023 Form 10-K and under Part II, Item 1A. of our Form 10-Qs. Each of such risk factors could materially affect our business, financial position, and results of operations. As of the date of this Report, there have been no material changes from the risk factors disclosed in our 2023 Form 10-K. ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS None. ITEM 3. DEFAULTS UPON SENIOR SECURITIES None. ITEM 4. MINE SAFETY DISCLOSURES Not applicable. ITEM 5. OTHER INFORMATION None of our directors or officers adopted , modified or terminated a Rule 10b5-1 trading arrangement or a non-Rule 10b5-1 trading arrangement during the three and nine months ended September 30, 2024, as such terms are defined under Item 408(a) of Regulation S-K. - 31 - ITEM 6. EXHIBITS Exhibit No. Description of Document 10.44 East West Loan and Security Agreement, dated July 29, 2024 (incorporated by reference to Exhibit 10.44 to the Company’s Current Report on Form 8-K (File No. 000-05703) filed on August 20, 2024). 10.45 East West Revolver Note Agreement, dated July 29, 2024 (incorporated by reference to Exhibit 10.45 to the Company’s Current Report on Form 8-K (File No. 000-05703) filed on August 20, 2024). 10.46 Continuing Guaranty, dated July 29, 2024 (incorporated by reference to Exhibit 10.46 to the Company’s Current Report on Form 8-K (File No. 000-05703) filed on August 20, 2024). 31.1** Certification of Principal Executive Officer pursuant to Exchange Act Rules 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. 31.2** Certification of Principal Financial Officer pursuant to Exchange Act Rules 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. 32.1**# Certification of Principal Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. 32.2**# Certification of Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. 101.INS Inline XBRL Instance Document (the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document). 101.SCH Inline XBRL Taxonomy Extension Schema Document. 101.CAL Inline XBRL Taxonomy Extension Calculation Linkbase Document. 101.DEF Inline XBRL Taxonomy Extension Definition Linkbase Document. 101.LAB Inline XBRL Taxonomy Extension Label Linkbase Document. 101.PRE Inline XBRL Taxonomy Extension Presentation Linkbase Document. 104 Cover Page Interactive Data File (embedded with Inline XBRL document). ** Filed herewith # This certification is deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (Exchange Act), or otherwise subject to the liability of that section, nor shall it be deemed incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Exchange Act. - 32 - SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this Report to be signed on its behalf by the undersigned thereunto duly authorized. SIEBERT FINANCIAL CORP. By: /s/ John J. Gebbia John J. Gebbia Chief Executive Officer (Principal executive officer) By: /s/ Andrew H. Reich Andrew H. Reich Executive Vice President, Chief Operating Officer, Chief Financial Officer, and Secretary (Principal financial and accounting officer) Dated: November 12, 2024 - 33 -