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, ~~2018~~2019


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.)

120 Wall Street, New York, NY 10005

(Address of Principal Executive Offices) (Zip Code)

(212) 644-2400

(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 ~~and posted~~ pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit ~~and post~~ such files).

Yes ☒ 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 ~~14, 2018,~~13, 2019, there were 27,157,188 shares of ~~our~~the registrant’s common stock ~~par value $.01 per share~~ outstanding.

Unless expressly otherwise indicated or the context requires otherwise, the terms “Siebert,” “Company,” “we,” “us,” and “our” in this document refer to Siebert Financial Corp., a New York corporation, and its wholly-owned subsidiaries. The term “MSCO” shall refer to Muriel Siebert & Co., Inc., a Delaware corporation and registered broker-dealer, the term “NXT” shall refer to Siebert AdvisorNXT, Inc., a New York corporation registered with the Securities and Exchange Commission (“SEC”) as a Registered Investment Advisor, the term “PWC” shall refer to Park Wilshire Companies Inc., a Texas corporation and licensed insurance agency, and the term “KCAT” shall refer to KCA Technologies, LLC, a Nevada limited liability company and owner of certain intellectual property and related computer software for optimizing investment portfolios (“robo technology”). MSCO, NXT, PWC, and KCAT are wholly-owned subsidiaries of the Company.

~~Special Note Regarding Forward-Looking Statements~~

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

~~Part~~

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
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ 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	14
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	20
ITEM 4. CONTROLS AND PROCEDURES	21
PART II - OTHER INFORMATION	22
ITEM 1. LEGAL PROCEEDINGS	22
ITEM 1A. RISK FACTORS	22
ITEM 6. EXHIBITS	23
SIGNATURES	24

PART I - FINANCIAL INFORMATION

~~Item~~ITEM 1. ~~Financial Statements~~FINANCIAL STATEMENTS

~~Siebert Financial Corp.~~SIEBERT FINANCIAL CORP. & ~~Subsidiaries~~SUBSIDIARIES

~~Condensed Consolidated Statements of Financial Condition~~CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION

	September 30, 2018		December 31, 2017			September 30, 2019		December 31, 2018
	(unaudited)					(unaudited)
ASSETS
Cash and cash equivalents	$	7,341,000	$	3,765,000		$	4,231,000	$	7,229,000
Receivables from brokers		2,177,000		1,396,000
Deferred tax asset		1,393,000		—
Receivables from clearing and other brokers							2,436,000		2,030,000
Escrow deposit							2,000,000		—
Receivable from related party		1,000,000		283,000			1,000,000		1,000,000
Software		678,000		—
Receivable from lessors							—		171,000
Other receivables							103,000		96,000
Prepaid expenses and other assets							302,000		470,000
Furniture, equipment and leasehold improvements, net		528,000		347,000			1,000,000		468,000
Prepaid expenses and other assets		376,000		234,000
Securities owned, at fair value		—		—
Software, net							1,806,000		1,137,000
Lease right-of-use assets							2,501,000		—
Equity method investment in related party							3,509,000		—
Deferred tax assets							5,105,000		5,576,000
	$	13,493,000	$	6,025,000		$	23,993,000	$	18,177,000

LIABILITIES AND STOCKHOLDERS’ EQUITY
Liabilities:
Accounts payable and accrued liabilities						$	744,000	$	699,000
Due to clearing brokers and related parties							27,000		133,000
Income taxes payable	$	908,000	$	125,000			38,000		—
Accounts payable and accrued liabilities		761,000		561,000
Due to related party		—		127,000
Lease incentive obligation							—		171,000
Lease liabilities							2,817,000		—
Other liabilities							91,000		—
		1,669,000		813,000			3,717,000		1,003,000

Commitments and Contingencies
Stockholders’ equity:
Common stock, $.01 par value; 49,000,0000 shares authorized, 27,157,188 shares issued and outstanding as of September 30, 2018 and December 31, 2017		271,000		271,000
Common stock, $.01 par value; 49,000,000 shares authorized, 27,157,188 shares issued and outstanding as of September 30, 2019 and December 31, 2018							271,000		271,000
Additional paid-in capital		7,641,000		7,641,000			7,641,000		7,641,000
Retained earnings/(Accumulated deficit)		3,912,000		(2,700,000	)
Retained earnings							12,364,000		9,262,000
		11,824,000		5,212,000			20,276,000		17,174,000

	$	13,493,000	$	6,025,000		$	23,993,000	$	18,177,000

Numbers are rounded for presentation purposes. See notes to condensed consolidated financial statements.

2- 1 -

~~Siebert Financial Corp.~~SIEBERT FINANCIAL CORP. & ~~Subsidiaries~~
~~Condensed Consolidated Statements of Operations~~
~~(unaudited)~~SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

Three Months Ended
September 30,

Nine Months Ended
September 30,

2018 2017 2018 2017

Revenue:
Margin interest, marketing and distribution fees $ 2,731,000 $ 1,850,000 $ 7,953,000 $ 4,477,000
Principal transactions 2,634,000 154,000 7,838,000 360,000
Commissions and fees 2,465,000 1,077,000 7,651,000 3,295,000
Interest 34,000 4,000 69,000 9,000
Advisory fees 20,000 4,000 38,000 16,000
Total Revenue 7,884,000 3,089,000 23,549,000 8,157,000

Expenses:
Employee compensation and benefits 3,668,000 1,031,000 10,619,000 3,069,000
Other general and administrative 650,000 275,000 1,874,000 1,020,000
Clearing fees, including floor brokerage 631,000 252,000 2,212,000 819,000
Professional fees 477,000 372,000 1,572,000 1,265,000
Occupancy 248,000 86,000 737,000 306,000
Communications 120,000 56,000 369,000 192,000
Advertising and promotion 6,000 16,000 40,000 61,000
Total Expenses 5,800,000 2,088,000 17,423,000 6,732,000

Income before (benefit) from income taxes 2,084,000 1,001,000 6,126,000 1,425,000
(Benefit) from income taxes (1,035,000 ) — (485,000 ) —
Net Income $ 3,119,000 $ 1,001,000 $ 6,611,000 $ 1,425,000

Net income per share of common stock
Basic and diluted $ .11 $ .05 $ .24 $ .06

Weighted average shares outstanding
Basic and diluted 27,157,188 22,085,126 27,157,188 22,085,126

(unaudited)

	Three Months Ended September 30,					Nine Months Ended September 30,
	2019		2018			2019		2018
Revenue:
Margin interest, marketing and distribution fees	$	2,944,000	$	2,731,000		$	8,499,000	$	7,953,000
Commissions and fees		1,925,000		2,347,000			6,030,000		7,380,000
Principal transactions		2,041,000		2,634,000			5,479,000		7,838,000
Advisory fees		211,000		138,000			572,000		309,000
Interest		23,000		34,000			54,000		69,000
Total Revenue		7,144,000		7,884,000			20,634,000		23,549,000

Expenses:
Employee compensation and benefits		3,157,000		3,668,000			8,882,000		10,619,000
Clearing fees, including execution costs		617,000		631,000			1,849,000		2,212,000
Professional fees		439,000		477,000			1,388,000		1,572,000
Other general and administrative		589,000		501,000			1,861,000		1,360,000
Technology and communications		291,000		228,000			800,000		792,000
Rent and occupancy		380,000		248,000			995,000		737,000
Depreciation and amortization		244,000		41,000			670,000		91,000
Advertising and promotion		—		6,000			—		40,000
Total Expenses		5,717,000		5,800,000			16,445,000		17,423,000

Earnings of equity method investment in related party		30,000		—			84,000		—

Income before provision (benefit) for (from) income taxes		1,457,000		2,084,000			4,273,000		6,126,000
Provision (benefit) for (from) income taxes		353,000		(1,035,000	)		1,171,000		(485,000	)
Net income	$	1,104,000	$	3,119,000		$	3,102,000	$	6,611,000

Net income per share of common stock
Basic and diluted	$	0.04	$	0.11		$	0.11	$	0.24

Weighted average shares outstanding
Basic and diluted		27,157,188		27,157,188			27,157,188		27,157,188

Numbers are rounded for presentation purposes. See notes to condensed consolidated financial statements.

- 2 -

SIEBERT FINANCIAL CORP. & SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

(unaudited)

	Nine Months Ended September 30, 2019
	Number of Shares Issued		$.01 Par Value		Additional Paid-In Capital		Retained Earnings		Total
Balance – January 1, 2019		27,157,188	$	271,000	$	7,641,000	$	9,262,000	$	17,174,000
Net income		-		-		-		1,006,000		1,006,000
Balance – March 31, 2019		27,157,188		271,000		7,641,000		10,268,000		18,180,000
Net income		-		-		-		992,000		992,000
Balance – June 30, 2019		27,157,188		271,000		7,641,000		11,260,000		19,172,000
Net income		-		-		-		1,104,000		1,104,000
Balance – September 30, 2019		27,157,188	$	271,000	$	7,641,000	$	12,364,000	$	20,276,000

	Nine Months Ended September 30, 2018
	Number of Shares Issued		$.01 Par Value		Additional Paid-In Capital		Retained Earnings / (Accumulated Deficit)			Total
Balance – January 1, 2018		27,157,188	$	271,000	$	7,641,000	$	(2,700,000	)	$	5,212,000
Net income		-		-		-		1,693,000			1,693,000
Balance – March 31, 2018		27,157,188		271,000		7,641,000		(1,007,000	)		6,905,000
Net income		-		-		-		1,800,000			1,800,000
Balance – June 30, 2018		27,157,188		271,000		7,641,000		793,000			8,705,000
Net income		-		-		-		3,119,000			3,119,000
Balance – September 30, 2018		27,157,188	$	271,000	$	7,641,000	$	3,912,000		$	11,824,000

Numbers are rounded for presentation purposes. See notes to condensed consolidated financial statements.

- 3 -

~~Siebert Financial Corp.~~

SIEBERT FINANCIAL CORP. & ~~Subsidiaries~~
~~Condensed Consolidated Statements of Cash Flows~~
SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited)

	Nine Months Ended September 30,						Nine Months Ended September 30,
	2018			2017			2019			2018
Cash Flows From Operating Activities:
Net income	$	6,611,000		$	1,425,000		$	3,102,000		$	6,611,000
Adjustments to reconcile net income to net cash provided by/(used in) operating activities:
Reduction in valuation allowance related to deferred tax asset		(1,393,000	)		—
Deferred income tax expense								471,000			(1,393,000	)
Depreciation and amortization		91,000			90,000			670,000			91,000
Earnings of equity method investment in related party								(84,000	)		—
Return on investment in equity method investment in related party								84,000			—

Changes in:
Securities owned, at fair value		—			92,000
Receivables from brokers		(781,000	)		(494,000	)
Receivables from clearing and other brokers								(406,000	)		(781,000	)
Receivable from related party								—			(717,000	)
Receivable from lessors								171,000			—
Other receivables								(7,000	)		—
Prepaid expenses and other assets		(142,000	)		(12,000	)		168,000			(142,000	)
Accounts payable and accrued liabilities								45,000			200,000
Due to clearing brokers and related parties								(106,000	)		(127,000	)
Income taxes payable		784,000			—			38,000			784,000
Due to related party		(127,000	)		—
Receivable from related party		(717,000	)		—
Accounts payable and accrued liabilities		200,000			(266,000	)
Lease incentive obligation								(171,000	)		—
Other liabilities								91,000			—
Lease liability								316,000			—
Net cash provided by operating activities		4,526,000			835,000			4,382,000			4,526,000

Cash Flows From Investing Activities:
Return of investment in equity method investment in related party								156,000			—
Equity method investment in related party								(3,665,000	)		—
Escrow deposit								(2,000,000	)		—
Purchase of furniture, equipment, and leasehold improvements		(272,000	)		(350,000	)		(785,000	)		(272,000	)
Software		(678,000	)		—
Purchase of software								(1,086,000	)		(678,000	)
Net cash used in investing activities		(950,000	)		(350,000	)		(7,380,000	)		(950,000	)

Net increase in cash and cash equivalents		3,576,000			485,000
Net (decrease) / increase in cash and cash equivalents								(2,998,000	)		3,576,000
Cash and cash equivalents - beginning of period		3,765,000			2,730,000			7,229,000			3,765,000
Cash and cash equivalents - end of period	$	7,341,000		$	3,215,000		$	4,231,000		$	7,341,000

Supplemental Schedule Of Non-Cash Financing Activities:
Payment by related party of expenses	$	—		$	803,000

Supplemental Cash Flow Information:
Taxes paid	$	126,000		$	39,000

Numbers are rounded for presentation purposes. See notes to condensed consolidated financial statements.

- 4 -

~~Siebert Financial Corp. & Subsidiaries~~
~~Notes to Condensed Consolidated Financial Statements~~
~~Nine Months Ended September 30, 2018 and 2017~~

1.	~~Business and Basis of Presentation~~

SIEBERT FINANCIAL CORP. & SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1. Organization and Basis of Presentation

Organization

Siebert Financial Corp., a New York corporation incorporated in 1934, is a holding company that conducts its retail ~~discount~~ brokerage business through its wholly-owned subsidiary, Muriel Siebert & Co., Inc. (“MSCO”), a Delaware corporation and registered broker-dealer, its investment advisory business through its wholly-owned subsidiary, Siebert AdvisorNXT, Inc. (“~~NXT”~~SNXT”), a New York corporation registered with the U.S. Securities and Exchange Commission (“SEC”) as a Registered Investment Advisor under the Investment Advisers Act of 1940, as amended, and its insurance business through its wholly-owned subsidiary, Park Wilshire Companies, Inc. (“PWC”), a Texas corporation and licensed insurance ~~agency, and KCA~~agency. It also conducts operations through a fourth wholly-owned subsidiary, Siebert Technologies, ~~LLC,~~LLC. (“~~KCAT”~~STCH”), a Nevada limited liability company and ~~owner~~developer of ~~certain intellectual property and related computer software for optimizing investment portfolios (“robo technology”).~~robo-advisory technology. In September 2019, the name of this subsidiary was changed from KCA Technologies, LLC. to Siebert Technologies, LLC. For purposes of this Quarterly Report on Form 10-Q, the terms “Siebert,” “Company,” “we,” “us,” and “our” refer to Siebert Financial Corp., MSCO, ~~NXT,~~SNXT, PWC, and ~~KCAT~~STCH collectively, unless the context otherwise requires.

~~Our principal offices are located at 120 Wall Street,~~As previously reported in the Company’s Quarterly Report on Form 10-Q for the period ended June 30, 2019 and in a current report on Form 8-K filed on July 19, 2019, the Company signed a binding letter of intent to purchase the remaining 85% of StockCross Financial Services, Inc. (“StockCross”). Upon completion of the transaction, which is pending regulatory approval, the Company will own 100% of StockCross. In addition, as reported in a current report on Form 8-K filed October 3, 2019, the Company entered into an agreement, dated as of September 27, 2019, with, Weeden Investors L.P., a Delaware limited partnership and Weeden Securities Corporation, a Delaware corporation (the “Sellers”) pursuant to which the Company will acquire all of the Sellers’ member interests in Weeden Prime Services, LLC (“Weeden Prime”), a broker-dealer registered with the SEC offering prime brokerage services. As part of the transaction, the Company deposited $2.0 million in an escrow account pursuant to the agreement. Upon completion of the transaction, which is pending regulatory approval, the $2.0 million held in the escrow account will be part of the purchase price and Weeden Prime will be a wholly-owned subsidiary of the Company.

The Company is headquartered in New York, NY, ~~10005,~~with primary operations in New Jersey and ~~our phone number is (212) 644-2400. Our Internet address is www.siebertnet.com. Our~~California. The Company has 13 offices throughout the U.S. and clients around the world. The Company’s SEC filings are available through ~~our~~the Company’s website at www.siebertnet.com,, where investors ~~are able to~~can obtain copies of ~~our~~the Company’s public filings free of charge. ~~Our~~The Company’s common stock (“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 months ended and nine months ended September 30, 2019 and 2018 were derived from its operations in the U.S.

Basis of Presentation

The unaudited condensed consolidated financial statements ~~presented herein are~~of the Company have been prepared in accordance 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. In the opinion of the Company’s management, the accompanying unaudited ~~and include~~condensed consolidated financial statements contain all adjustments (consisting of normal recurring ~~adjustments) which~~entries) necessary to fairly present such interim results. Interim results are ~~in the opinion of our management, necessary for a fair presentation~~not necessarily indicative of the ~~financial position and~~ results of operations of the interim periods pursuant to the rules and regulations of the SEC. Certain information and footnote disclosures normally included in consolidated financial statements prepared in accordance with generally accepted accounting principles (“GAAP”) in the United States of America (“U.S.”) have been condensedwhich may be expected for a full year or omitted pursuant to the SEC rules and regulations, although the Company believes that the disclosures made are adequate to make the information not misleading. The balance sheet as of December 31, 2017 has been derived from the consolidated statements of financial condition at that date, but does not include all information and footnotes required by U.S. GAAP for complete financial statements.any subsequent period. These unaudited condensed consolidated financial statements should be read in conjunction with the ~~consolidated~~ financial statements ~~included~~and notes thereto in ~~our~~the Company’s Annual Report on Form 10-K for the year ended December 31, ~~2017~~2018 (“~~2017~~2018 Form 10-K”). ~~Due~~The condensed consolidated financial statements include the accounts of Siebert and its wholly-owned subsidiaries and upon consolidation, all intercompany balances and transactions are eliminated. The U.S. dollar is the functional currency of the Company and numbers are rounded for presentation purposes.

Reclassifications

Certain prior period amounts have been reclassified to conform to the ~~nature~~current year’s presentation. The reclassifications consisted of ~~our business, the results of operations for the three months~~breaking out certain commissions and ~~nine months ended September 30, 2018 are not necessarily indicative of operating results for the full year.~~

As further disclosed in our 2017 Form 10-K, the Company acquired certain retail broker-dealer assets of StockCross Financial Services, Inc. (“StockCross”), an affiliate of the Company. The impact of this acquisition has resulted in a significant improvement in operations for the three months and nine months ended September 30, 2018 as compared to the three months and the nine months ended September 30, 2017.

~~Recent Developments~~

As of June 25, 2018, Siebert joined the broad-market Russell 3000® Index. Annual Russell U.S. Indexes reconstitution captures the 4,000 largest U.S. stocks as of May 11, ranking them by total market capitalization. Membership in the Russell 3000® Index, which remains in place for one year, means automatic inclusion in the large-cap Russell 1000® Index or small-cap Russell 2000® Indexfees into advisory fees as well as breaking out certain other general and administrative expenses into technology and communications and depreciation which is consistent with the appropriate growth and value style indexes. Russell U.S. Indexes are widely used by investment managers and institutional investors as the basis for index funds and as benchmarks for active investment strategies and approximately $9 trillion in assets are benchmarked against Russell U.S. Indexes.current year presentation. These reclassifications have no effect on previously reported total revenue, total expenses, or net income.

On August 21, 2018, Siebert acquired all of the issued and outstanding membership interests of KCAT from Kennedy Cabot Acquisition, LLC (“KCA”), a certain related party of Siebert, for approximately $690,000. KCAT is a robo technology company initially tasked with developing a sophisticated robo product for Siebert AdvisorNXT (“Robo Platform”). The Robo Platform provides clients with an automated wealth management solution intended to maximize portfolio returns based on the client’s specific risk tolerance. The Robo Platform utilizes Modern Portfolio Theory to create optimal portfolios for each client by selecting low-cost, well-managed exchange traded funds (“ETFs”) and exchange traded notes (“ETNs”), and automatically rebalances portfolios in light of prevailing market conditions. Within the Robo Platform, the client has the option of using a pure robo track, or can opt for a hybrid approach, which combines the robo track with a traditional wealth manager to help manage their portfolio and make investment recommendations. See footnote 12 for additional information on the KCAT acquisition and the Robo Platform.

- 5 -

2.	~~Per Share Data~~

~~Basic earnings per share is calculated by dividing net income by~~

Significant Accounting Policies

The Company’s significant accounting policies are included in Note 2 in the ~~weighted average of the number of outstanding common shares during the period. The Company had net income of $3,119,000 for the three months ended September 30,~~Company’s 2018 ~~as compared~~Form 10-K. There have been no significant changes to ~~net income of $1,001,000 for the three months ended September 30, 2017. The Company had net income of $6,611,000~~these accounting policies for the nine months ended September 30, ~~2018~~2019 except as ~~compared~~described in the sections “Equity Method Investments” and the “Note 2 – New Accounting Standards” below.

Equity Method Investments

Investments in which the Company has the ability to exercise significant influence, but does not control, are accounted for under the equity method of accounting and are included in the equity method investment in related party asset in the condensed consolidated statements of financial condition. Under this method of accounting, the Company’s share of the net earnings or losses of the investee is presented before the income before provision (benefit) for (from) income taxes on the condensed consolidated statements of ~~$1,425,000~~operations.

The Company evaluates its equity method investments whenever events or changes in circumstance indicate that the carrying amounts of such investments may be impaired. If a decline in the value of an equity method investment is determined to be other than temporary, a loss is recorded in earnings in the current period.

2. New Accounting Standards

Recently Adopted Accounting Pronouncements

ASU 2016-02 – In February 2016, the FASB established Topic 842, Leases, by issuing Accounting Standards Update (“ASU”) 2016-02, which requires lessees to recognize leases on-balance sheet and disclose key information about leasing arrangements. The new standard establishes a right-of-use model that requires a lessee to recognize a lease right-of-use asset and lease liability on the statement of financial condition for all leases with a term longer than 12 months. Leases will be classified as finance or operating, with classification affecting the pattern and classification of expense recognition in the statement of operations. The new standard is effective for the ~~nine months ended~~Company on January 1, 2019, with early adoption permitted. The Company adopted the new standard on its effective date. A modified retrospective transition approach is required, applying the new standard to all leases existing at the date of initial application. An entity may choose to use either (1) its effective date or (2) the beginning of the earliest comparative period presented in the financial statements as its date of initial application. The Company adopted the new standard on January 1, 2019 and used the effective date as the date of initial application. Consequently, financial information will not be updated and the disclosures required under the new standard will not be provided for dates and periods before January 1, 2019. As of September 30, ~~2017.~~2019, the Company recognized lease right-of-use assets of approximately $2.5 million and corresponding lease liabilities of approximately $2.8 million.

3.	~~Net Capital~~

The new standard provides a number of optional practical expedients in transition. The Company elected the “package of practical expedients,” which permits the Company not to reassess under the new standard the Company’s prior conclusions about lease identification, lease classification and initial direct costs. The Company has not elected the hindsight practical expedient at transition.

The new standard also provides practical expedients for an entity’s ongoing accounting. The Company elected the short-term lease recognition exemption for all leases that qualify. This means, for those leases that qualify, the Company will not recognize lease right-of-use assets or lease liabilities.

ASU 2018-15 – In August 2018, the FASB issued ASU 2018-15, Intangibles—Goodwill and Other—Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract, which requires customers to apply the same criteria for capitalizing implementation costs incurred in a cloud computing arrangement that is hosted by the vendor as they would for an arrangement that has a software license. The standard is effective for interim and annual periods beginning after December 15, 2019 and early adoption is permitted. The standard can be adopted prospectively or retrospectively. The Company is currently evaluating the expected impact of this new standard.

3. Capital Requirements

MSCO is subject to the SEC’s Uniform Net Capital Rule (Rule 15c3-1 or “Uniform Net Capital Rule”), which requires the maintenance of minimum net capital. MSCO has elected to use the alternative method, permitted by the Uniform Net Capital Rule, which requires that MSCO maintain minimum net capital, as defined, equal to the greater of $250,000 or 2% of aggregate debit balances arising from customer transactions, as defined. The Uniform Net Capital Rule also provides that equity capital may not be withdrawn or cash dividends paid if the resulting net capital would be less than 5% of aggregate debits. As of September 30, 2019, MSCO had net capital of approximately $5.7 million, which was approximately $5.4 million in excess of required net capital of $250,000. As of December 31, 2018, MSCO had net capital of ~~$9,701,000 as compared with~~approximately $8.9 million, which was approximately $8.7 million in excess of required net capital ~~requirement~~ of $250,000.

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MSCO claims exemption from the reserve ~~requirement~~requirements under ~~Section 15c3-3(k)~~the SEC’s Rule 15c-3-3 pursuant to paragraph (k)(2)(ii). as it clears its customer transactions through one unaffiliated and one affiliated clearing firm on a fully disclosed basis.

4.	~~Revenue Recognition~~

The Company’s cash and cash equivalents are unrestricted and are used to fund working capital needs. The Company’s total assets as of September 30, 2019 were approximately $24.0 million, of which $4.2 million, or approximately 18%, is highly liquid. The Company’s total assets as of December 31, 2018 were approximately $18.2 million, of which $7.2 million, or approximately 40%, is highly liquid.

4. Receivables from and Payable to Brokers, Dealers and Clearing Organizations

The Company evaluates receivables from clearing organizations and other brokers for collectability noting no amount was considered uncollectable as of September 30, 2019 and as of December 31, 2018. No valuation allowance is recognized for receivables from clearing organizations and other brokers as the Company does not have a history of losses from these receivables and does not anticipate losses in the future.

Amounts receivable from / payable to brokers, dealers and clearing organizations consisted of the following as of the periods indicated:

	As of September 30, 2019 (unaudited)		As of December 31, 2018
Receivables from clearing and other brokers
National Financial Services (“NFS”)	$	1,743,000	$	1,664,000
StockCross		693,000		310,000
Other receivables		—		56,000
Total Receivables from clearing and other brokers	$	2,436,000	$	2,030,000

Receivable from related party
StockCross	$	1,000,000	$	1,000,000
Total Receivable from related party	$	1,000,000	$	1,000,000

Due to clearing brokers and related parties
MSCO	$	—	$	29,000
StockCross		27,000		46,000
NFS		—		58,000
Total Due to clearing brokers and related parties	$	27,000	$	133,000

5. Leases

A lease is defined as a contract, or part of a contract, that conveys the right to control the use of identified property, plant or equipment for a period of time in exchange for consideration. On January 1, ~~2018, we~~2019, the Company adopted ASU 2016-02, Leases (Topic 842) and all subsequent ASUs that modified Topic 842. For the ~~Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”)~~Company, Topic ~~606~~842 affected the accounting treatment for operating lease agreements in which the Company is the lessee.

As of September 30, 2019, the Company rents office space under operating leases expiring in 2019 through 2024, and the Company has no financing leases. The leases call for base rent plus escalations as well as other operating expenses. The following table represents the Company’s lease right-of-use assets and lease liabilities on the condensed consolidated statements of financial condition. The Company elected not to include short-term leases (i.e., leases with initial terms of twelve months or less), or equipment leases (deemed immaterial) on the condensed consolidated statements of financial condition.

	As of September 30, 2019 (unaudited)		As of December 31, 2018
Assets
Lease right-of-use assets	$	2,501,000		—
Liabilities
Lease liabilities	$	2,817,000		—

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The calculated amounts of the lease right-of-use assets and lease liabilities in the table above are impacted by ~~applying~~ the ~~modified retrospective method. Results for reporting periods beginning after January 1, 2018~~length of the lease term and the discount rate used to present value the minimum lease payments. As of September 30, 2019, the Company does not believe that any of the renewal options under the existing leases are ~~presented under Topic 606, while prior period amounts are not adjusted and~~reasonably certain to be exercised; however, the Company will continue to ~~be reported~~assess and monitor the lease renewal options on an ongoing basis. The Company also leases some miscellaneous office equipment, but they are immaterial and therefore the Company records the costs associated with this office equipment on the statement of operations rather than capitalizing them as lease right-of-use assets. The Company determined a discount rate of 5.0% would approximate the Company’s cost to obtain financing given its size, growth, and risk profile.

Lease Term and Discount Rate
Weighted average remaining lease term – operating leases (in years)	3.5
Weighted average discount rate – operating leases	5.0%

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

	Three Months Ended September 30, 2019		Nine Months Ended September 30, 2019
Operating lease cost	$	294,000	$	624,000
Short-term lease cost		81,000		321,000
Variable lease cost		5,000		50,000
Sublease income		—		—
Total lease cost	$	380,000	$	995,000

Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows from operating leases	$	275,000	$	632,000

Lease right-of-use assets obtained in exchange for new lease liabilities
Operating leases	$	813,000	$	3,028,000

Lease Commitments

Future annual minimum payments for operating leases with initial terms of greater than one year as of September 30, 2019 were as follows:

Year	Amount
2019	$	259,000
2020		992,000
2021		759,000
2022		513,000
2023		493,000
2024		56,000
Thereafter		—
Remaining balance of lease payments		3,072,000
Difference between undiscounted cash flows and discounted cash flows		255,000
Lease liabilities	$	2,817,000

Rent and related operating expenses were $380,000 and $248,000 for the three months ended September 30, 2019 and 2018, respectively. Rent and related operating expenses were $995,000 and $737,000 for the nine months ended September 30, 2019 and 2018, respectively.

6. Equity Method Investments

In January 2019, the Company purchased approximately 15% of StockCross’ outstanding shares. The number of shares purchased by the Company was 922,875 at a per share price of approximately $3.97. The Company’s ownership in StockCross is accounted for under the equity method of accounting.

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In determining whether the investment in StockCross should be accounted for under the equity method of accounting, ~~standards~~the Company considered the guidance under ASC 323, Investments – Equity Method and Joint Ventures. Although the Company maintains approximately 15% ownership interest in StockCross, the Company evaluated the positive evidence related to criteria such as common representation on the board of directors, participation in policy-making processes, material intra-entity transactions, interchange of managerial personnel and technological interdependency of the Company and StockCross. Based on these criteria, the Company determined that it was able to exercise significant influence of StockCross, and therefore the equity method of accounting was used for this transaction.

Under the equity method, the Company recognizes its share of StockCross’ earnings in the earnings of equity method investment in related party line item in the condensed consolidated statements of operations. The Company has elected to classify distributions received from equity method investees using the cumulative earnings approach. For the three months and nine months ended September 30, 2019, the earnings recognized from the Company’s investment in StockCross were $30,000 and $84,000, respectively. This investment is reported in the equity method investment in related party asset in the condensed consolidated statements of financial condition. In September 2019, StockCross made a $1.6 million cash distribution to its shareholders, of which Siebert received $241,000, which reduced the carrying amount of the investment in StockCross. As of September 30, 2019, the carrying amount of the investment in StockCross was approximately $3,509,000.

The Company evaluates its equity method investments for impairment when events or changes indicate the carrying value may not be recoverable. If the impairment is determined to be other-than-temporary, the Company will recognize an impairment loss equal to the difference between the expected realizable value and the carrying value of the investment. As of September 30, 2019, the fair value of the investment in StockCross is not estimated because there were no identified events or changes in circumstances that may have a significant adverse effect on the fair value of the investment and thus, no impairment was recorded.

Below is a table showing illustrating the summary from the condensed consolidated statements of operations for StockCross for the periods indicated (unaudited):

	Three Months Ended September 30, 2019		Nine Months Ended September 30, 2019
Revenue	$	3,757,000	$	11,552,000
Operating income	$	189,000	$	747,000
Net income	$	189,000	$	534,000

7. 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. In the opinion of the Company, all such matters are without merit, or involve amounts which would not have a significant effect on the financial statements of the Company.

General Contingencies

In the normal course of its business, the Company indemnifies and guarantees certain service providers against specified potential losses in connection with their acting as an agent of, or providing services to, the Company. The maximum potential amount of future payments that the Company could be required to make under these indemnifications cannot be estimated. However, the Company believes that it is unlikely it will have to make material payments under these arrangements and has not recorded any contingent liability in the financial statements for these indemnifications.

The Company provides representations and warranties to counterparties in connection with a variety of commercial transactions and occasionally indemnifies them against potential losses caused by the breach of those representations and warranties. The Company may also provide standard indemnifications to some counterparties to protect them in the event additional taxes are owed or payments are withheld, due either to a change in or adverse application of certain tax laws. These indemnifications generally are standard contractual terms and are entered into in the normal course of business. The maximum potential amount of future payments that the Company could be required to make under these indemnifications cannot be estimated. However, the Company believes that it is unlikely it will have to make material payments under these arrangements and has not recorded any contingent liability in the financial statements for these indemnifications.

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The Company is self-insured with respect to employee health claims. The Company maintains stop-loss insurance for certain risks and has a health claim reinsurance limit capped at approximately $50,000 per employee. The estimated liability for self-insurance claims is initially recorded in the year in which the event of loss occurs and may be subsequently adjusted based upon new information and cost estimates. Reserves for losses represent estimates of reported losses and estimates of incurred but not reported losses based on past and current experience. Actual claims paid and settled may differ, perhaps significantly, from the provision for losses. This adds uncertainty to the estimated reserves for losses. Accordingly, it is at least possible that the ultimate settlement of losses may vary significantly from the amounts included in the financial statements.

As part of this plan, the Company recognized expenses totaling $136,000 and $374,000 for the three months ended September 30, 2019 and 2018, respectively. The Company recognized expenses totaling $594,000 and $874,000 for the nine months ended September 30, 2019 and 2018, respectively.

The Company had an accrual of $48,000 as of September 30, 2019, which represents the historical estimate of future claims to be recognized for claims incurred prior to the period.

The ~~adoption~~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 ~~FASB ASC Topic 606 did not have an impact on the recognition~~recorded reserves or in excess of ~~our~~its insurance limits.

8. Revenue Recognition

The primary sources of revenue ~~such~~for the Company are as ~~principal transactions,~~follows: revenue from contracts with customers which includes commissions and fees, principal transactions, and advisory fees as well as other income which includes margin interest, marketing, and distribution fees. The ~~timing~~recognition and measurement of ~~recognition~~revenue is based on the assessment of ~~substantially all~~individual contract terms. The amount of ~~our remaining~~ revenue ~~was also not impacted,~~recognized by the Company is based on the consideration specified in contracts with its clients. The Company recognizes revenue when a performance obligation is satisfied over time as the services are performed or at a point in time depending on the nature of the services provided as further detailed below. Significant judgment is required to determine whether performance obligations are satisfied at a point in time or over time; how to allocate transaction prices where multiple performance obligations are identified; when to recognize revenue based on the appropriate measure of the Company’s progress under the contract; and ~~we therefore did not record any cumulative effect adjustment~~whether constraints on variable consideration should be applied due to ~~opening equity.~~uncertain future events. For the three months and nine months ended September 30, 2019 and 2018, there were no costs capitalized related to obtaining or fulfilling a contract with a customer, and thus the Company has no balances for contract assets or contract liabilities.

Categorization of Revenue by Service

The following table presents the major revenue categories and when each category is recognized (unaudited):

	Three Months Ended September 30,				Nine Months Ended September 30,
Revenue Category	2019		2018		2019		2018		Timing of Recognition
Trading Execution and Clearing Services
Commissions and fees	$	1,925,000	$	2,347,000	$	6,030,000	$	7,380,000	Recorded trade date
Principal transactions		2,041,000		2,634,000		5,479,000		7,838,000	Recorded trade date
Advisory fees and additional income		234,000		172,000		626,000		378,000	Recorded as earned

Other Income
Margin interest, marketing and distribution fees
Margin interest		2,151,000		1,943,000		6,254,000		5,454,000	Recorded as earned
12b1 fees		793,000		788,000		2,245,000		2,499,000	Recorded as earned
Total Margin interest, marketing and distribution fees		2,944,000		2,731,000		8,499,000		7,953,000

Total Revenue	$	7,144,000	$	7,884,000	$	20,634,000	$	23,549,000

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

Revenue Stream	Performance Obligation
Commissions and fees, Principal transactions, Advisory fees and additional income	Provide security trading services to customer and act as agent
Margin interest, marketing and distribution fees	n/a

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Disaggregation of Revenue – Legacy Siebert vs. StockCross Accounts

~~Below is~~The following table presents a breakdown of the Company’s ~~revenue:~~revenue between the amounts attributed to the retail customer accounts that were originally part of Siebert (“Legacy Siebert”) vs. the retail customer accounts acquired from StockCross (“StockCross accounts”) (unaudited):

Three Months Ended
September 30,

Nine Months Ended
September 30,

Revenue Stream Statements of Operations
Classification 2018 2017 2018 2017

Revenue from Principal transactions:
Principal transactions – non StockCross Principal transactions $ 437,000 $ 154,000 $ 1,514,000 $ 360,000
Principal transactions attributed to assets acquired from StockCross Principal transactions 2,197,000 — 6,324,000 —
Total Revenue from Principal transactions 2,634,000 154,000 7,838,000 360,000

Revenue from Commissions and fees:
Commissions and fees – non StockCross Commissions and fees 2,068,000 1,077,000 6,185,000 3,295,000
Commissions and fees attributed to assets acquired from StockCross Commissions and fees 397,000 — 1,466,000 —
Total Revenue from Commissions and fees 2,465,000 1,077,000 7,651,000 3,295,000

Revenue from Margin interest, marketing and distribution fees:
Margin interest, marketing and distribution fees – non StockCross Margin interest, marketing and distribution fees 2,409,000 1,850,000 7,049,000 4,477,000
Margin interest, marketing and distribution fees attributed to assets acquired from StockCross Margin interest, marketing and distribution fees 322,000 — 904,000 —
Total Revenue from Margin interest, marketing and distribution fees 2,731,000 1,850,000 7,953,000 4,477,000

Other Revenue:
Interest – non StockCross Interest 34,000 4,000 69,000 9,000
Advisory fees – non StockCross Advisory fees 20,000 4,000 38,000 16,000

Total Revenue Total Revenue $ 7,884,000 $ 3,089,000 $ 23,549,000 $ 8,157,000

	Three Months Ended September 30,				Nine Months Ended September 30,
	2019		2018		2019		2018
Revenue from Margin interest, marketing and distribution fees:
Margin interest, marketing and distribution fees – Legacy Siebert	$	2,566,000	$	2,409,000	$	7,451,000	$	7,049,000
Margin interest, marketing and distribution fees – StockCross accounts		378,000		322,000		1,048,000		904,000
Total Revenue from Margin interest, marketing and distribution fees		2,944,000		2,731,000		8,499,000		7,953,000

Revenue from Commissions and fees:
Commissions and fees – Legacy Siebert		1,544,000		1,950,000		5,043,000		5,914,000
Commissions and fees – StockCross accounts		381,000		397,000		987,000		1,466,000
Total Revenue from Commissions and fees		1,925,000		2,347,000		6,030,000		7,380,000

Revenue from Principal transactions:
Principal transactions – Legacy Siebert		582,000		437,000		1,496,000		1,514,000
Principal transactions – StockCross accounts		1,459,000		2,197,000		3,983,000		6,324,000
Total Revenue from Principal transactions		2,041,000		2,634,000		5,479,000		7,838,000

Additional Revenue:
Advisory fees – Legacy Siebert		211,000		138,000		572,000		309,000
Interest – Legacy Siebert		23,000		34,000		54,000		69,000

Total Revenue	$	7,144,000	$	7,884,000	$	20,634,000	$	23,549,000

Principal transactions are recorded on a trade-date basis and primarily represent riskless principal transactions in which the Company, after receiving an order, buys or sells securities as principal and at the same time buys or sells the securities with a markup or markdown to complete the order.

Commission and fees, margin interest, marketing and distribution fees, and related clearing expenses are recorded on a trade-date basis. Fees, consisting primarily of revenue participation with the Company’s clearing brokers in distribution fees and interest, are recorded as earned.

~~Advisory fees are earned typically on a quarterly basis in accordance with the terms of the client agreements.~~

~~Interest is recorded on the accrual basis.~~

5.	~~Fair Value Measurements~~

FASB ASC 820 defines fair value, establishes a framework for measuring fair value, and establishes a hierarchy of fair value inputs. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. A fair value measurement assumes that the transaction to sell the asset or transfer the liability occurs in the principal market for the asset or liability or, in the absence of a principal market, the most advantageous market. Valuation techniques that are consistent with the market, income, or cost approach, as specified by FASB ASC 820, are used to measure fair value.9. Provision (Benefit) For (From) Income Taxes

~~The fair value hierarchy prioritizes~~Provision (benefit) for (from) income taxes consists of the ~~inputs to valuation techniques used to measure fair value into three broad levels:~~following:

~~Level 1 - Quoted prices (unadjusted) in active markets~~Current income tax expense (benefit), which represents the amount of federal tax and state and local tax currently payable, including interest and penalties and amounts accrued for ~~an identical asset or liability that the Company can assess at the measurement date.~~unrecognized tax benefits, if any, and;

~~Level 2 - Inputs other than quoted prices included within level 1 that are observable for~~Deferred income tax expense (benefit), which represents the ~~asset or liability, either directly or indirectly.~~net change in the deferred tax assets balance during the year, including any change in the valuation allowance of the deferred tax assets, if any.

~~Level 3 - Unobservable inputs for~~For the ~~asset or liability.~~

~~The availability of observable inputs can vary from security to security~~three and is affected by a variety of factors, such as the type of security, the liquidity of markets, and other characteristics particular to the security. To the extent that the valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair value requires more judgment. As such, the degree of judgment exercised in determining fair value is greatest for instruments categorized in level 3.

The inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, for disclosure purposes, the level in the fair value hierarchy within which the fair value measurement falls in its entirety is determined based on the lowest level input that is significant to the fair value measurement.

Fair value is a market-based measure considered from the perspective of a market participant rather than an entity-specific measure. Therefore, even when market assumptions are not readily available, the Company’s own assumptions are set to reflect those that the Company believes market participants would use in pricing the asset or liability at the measurement date.

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

~~U.S. Government Securities:~~ U.S. government securities are valued using quoted market prices and as such, valuation adjustments are not applied. Accordingly, U.S. government securities are generally categorized in level 1 of the fair value hierarchy.

~~Municipal Securities:~~ Municipal securities are valued using recently executed transactions, market price quotations (when observable), bond spreads from independent external parties such as vendors and brokers, adjusted for any basis difference between cash and derivative instruments. The spread data used is for the same maturity as the bond. Municipal securities are generally categorized in level 2 of the fair value hierarchy.

~~Corporate Bonds and Convertible Preferred Stock:~~ The fair value of corporate bonds and convertible preferred stock are determined using recently executed transactions, market price quotations (when observable), bond spreads, or credit default swap spreads obtained from independent external parties such as vendors and brokers, adjusted for any basis difference between cash and derivative instruments. The spread data used is for the same maturity as the bond. If the spread data does not reference the issuer, then data that references a comparable issuer is used. When position-specific external price data is not observable, fair value is determined based on either benchmarking to similar instruments or cash flow models with yield curves, bond, or single-name credit default swap spreads and recovery rates as significant inputs. Corporate bonds and convertible preferred stocks are generally categorized in level 2 of the fair value hierarchy.

~~Exchange-Traded Equity Securities:~~ Exchange-traded equity securities are valued based on quoted prices from the exchange. To the extent these securities are actively traded, valuation adjustments are not applied, and they are categorized in level 1 of the fair value hierarchy; otherwise, they are categorized in level 2 or level 3 of the fair value hierarchy.

~~Certificates of Deposit:~~ ~~Certificates of deposit included in investments are valued at cost, which approximates fair value. These are categorized within segregated investments in level 2 of the fair value hierarchy.~~

~~Unit Investment Trusts:~~ ~~Units of unit investment trusts are carried at redemption value, which represents fair value. Units of unit investment trusts are categorized in level 1 of the fair value hierarchy.~~

~~There were no inventory positions as of September 30, 2018 and as of December 31, 2017.~~

6.	~~Commitments and Contingencies~~

Retail customer transactions are cleared, on a fully disclosed basis, through two clearing brokers, one of which is a related party. If customers do not fulfill their contractual obligations, the clearing broker may charge MSCO for any loss incurred in connection with the purchase or sale of securities at prevailing market prices to satisfy the customers’ obligations. MSCO regularly monitors the activity in its customer accounts for compliance with its margin requirement. MSCO is exposed to the risk of loss on unsettled customer transactions if customers fail to fulfill their contractual obligations. There were no material losses for unsettled customer transactions for the nine months ended September 30, 2019, there was no change in the valuation allowance of the historical net operating losses. For the three and nine months ended September 2018, there was a partial release of the valuation allowance of historical net operating losses of approximately $1.4 million.

The change in deferred tax assets for the three and nine months ended September 30, ~~2017.~~

2019 was due to the utilization of federal and state net operating losses and temporary differences in the depreciation of fixed assets.

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7.	~~Provision for Income Taxes~~

~~Income~~The following table presents the components of provision (benefit) for (from) for income taxes ~~consist of~~for the ~~following:~~periods indicated (unaudited):

	Three Months Ended September 30,						Nine Months Ended September 30,
	2019			2018			2019		2018
Current income tax expense (benefit)
Federal	$	161,000		$	300,000		$	295,000	$	847,000
State		223,000			58,000			405,000		61,000
		384,000			358,000			700,000		908,000

Deferred income tax expense (benefit)
Federal		(50,000	)		(423,000	)		261,000		(423,000	)
State		19,000			(970,000	)		210,000		(970,000	)
		(31,000	)		(1,393,000	)		471,000		(1,393,000	)

Total Provision (Benefit) For (From) Income Taxes	$	353,000		$	(1,035,000	)	$	1,171,000	$	(485,000	)

Three Months Ended
September 30, 2018

Nine Months Ended
September 30, 2018

Current income taxes
Federal $ 300,000 $ 847,000
State 58,000 61,000
358,000 908,000

Deferred tax benefit
Federal (423,000 ) (423,000 )
State (970,000 ) (970,000 )
(1,393,000 ) (1,393,000 )

Total (Benefit) from income taxes $ (1,035,000 ) $ (485,000 )
Effective Tax Rate

For interim financial reporting, ~~we estimate~~the Company estimates the effective tax rate for tax jurisdictions which is applied to the year to date income before provision (benefit) for (from) income taxes. For the three months ended September 30, 2019 and 2018, the Company’s effective tax rate was 24% and -50%, respectively. For the nine months ended September 30, 2019 and 2018, the Company’s effective tax rate was 27% and -8%, respectively.

As of December 31, 2018, the Company recorded an income tax benefit related to the recognition of deferred tax assets of $5,576,000. The increase in the effective tax rate in 2019 was due to an increase in deferred income tax expense corresponding to the decrease in the deferred tax assets. Deferred income tax expense (benefit) was -$31,000 and $471,000 for the three months and nine months ended September 30, 2019, respectively.

10. Earnings Per Share

Basic earnings per share is calculated by dividing net income by the weighted average of the number of outstanding common shares during the period. The Company had net income of $1,104,000 for the three months ended September 30, 2019 as compared to net income of $3,119,000 for the three months ended September 30, 2018. The Company had net income of $3,102,000 for the nine months ended September 30, 2019 as compared to net income of $6,611,000 for the nine months ended September 30, 2018.

11. Related Party Disclosures

StockCross

StockCross and the Company are under common ownership and StockCross serves as one of the two clearing brokers for the Company. StockCross has a clearing agreement with MSCO in which StockCross passes through all revenue and charges MSCO for related clearing expenses. Outside of the clearing agreement, MSCO has an expense sharing agreement with StockCross for its Beverly Hills and Jersey City offices and StockCross pays some vendors for miscellaneous expenses which it passes through to MSCO. As of September 30, 2019 and December 31, 2018, MSCO had receivables from StockCross totaling approximately $1.7 million and $1.3 million, respectively, consisting of financing for inventory positions, the net monthly clearing fees StockCross owes MSCO, and a clearing deposit. As of September 30, 2019 and December 31, 2018, MSCO had a payable to StockCross totaling $27,000 and $46,000, respectively. In January 2019, the Company purchased approximately 15% of StockCross’ outstanding shares and in July 2019 the Company entered into a binding letter of intent to purchase the remaining 85% of StockCross. For the three months and nine months ended September 30, ~~2018, our effective tax rate~~2019, the earnings recognized from the Company’s 15% investment in StockCross was ~~-50%~~$30,000 and ~~-8%, respectively, due~~$84,000, respectively. Please see Item 4. Financial Statements and Supplementary Data – “Note 6 – Equity Method Investments” for additional detail on the transaction with StockCross.

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Kennedy Cabot Acquisition (“KCA”)

KCA is an affiliate of the Company and StockCross. To gain efficiencies and economies of scale with billing and administrative functions, KCA serves as a paymaster for the Company and StockCross for compensation and benefits expenses, the entirety of which KCA passes through to the ~~reversal of~~Company and StockCross proportionally. In addition, KCA has purchased the ~~valuation allowance~~naming rights for the ~~deferred tax asset.~~Company for the Company to use.

~~As of September 30, 2018, we adjusted a portion of our valuation allowance against our deferred tax asset arising in U.S. federal~~PWC

PWC brokers the insurance policies for related parties. Revenue for PWC from related parties was $3,000 and state jurisdictions as the realization of such asset is considered to be more likely than not realizable at this time. As a result, we recognized a net deferred tax asset amounting to approximately $1,393,000 as of September 30, 2018, and our income tax expense decreased $1,393,000$67,000 for the three months and nine months ended September 30, ~~2018. A deferred tax asset of approximately $6,619,000 is reported net of a valuation allowance of $5,226,000.~~

~~In a future period, the Company’s assessment of the realizability of deferred tax assets~~2019, respectively. Revenue for PWC from related parties was $16,000 and therefore the appropriateness of the valuation allowance could change based on an assessment of all available evidence, both positive and negative, in that future period. If the Company’s conclusion about the realizability of its deferred tax assets and therefore the appropriateness of the valuation allowance changes in a future period, the Company could record an additional substantial tax benefit or expense when that occurs.

As of September 30, 2018, the Company had federal and state net operating loss carryforwards of $22,657,000 and $15,834,000, respectively, which expire between 2029 and 2036. Utilization of the Company’s net operating loss carryforwards for federal tax purposes and certain state jurisdictions are subject to annual limitations of approximately $900,000 per year under Internal Revenue Code Section 382 due to a previous change in ownership.

In regard to the effect of the Tax Cuts and Jobs Act, we determined that the primary change applicable to us will result in lower income tax expense in 2018 as well as subsequent years. The statutory federal income rates in effect of 34% as of December 31, 2017 and 21% in subsequent periods were utilized to calculate the income tax provision and this provision will result in lower income tax expense in 2018 as well as subsequent years. In addition, the change in federal income tax rates affected the valuation of our gross deferred tax asset; however, there was no material impact to the financials as of December 31, 2017 through June 30, 2018 as there was a full valuation allowance during those periods."

~~The reconciliation between the income tax provision and income taxes computed by applying the statutory federal income tax rate to income before income taxes~~$61,000 for the three ~~months~~ and ~~nine months ended September 30, 2018 is as follows:~~

Three Months Ended
September 30, 2018

Nine Months Ended
September 30, 2018

Expected income tax at statutory federal tax rate (21%) $ 438,000 $ 1,286,000
Tax amortization of intangible assets (70,000 ) (210,000 )
Depreciation 8,000 19,000
Net operating loss (47,000 ) (141,000 )
Temporary differences - charitable contributions 4,000 (57,000 )
State taxes 25,000 11,000
Reversal of valuation allowance (1,393,000 ) (1,393,000 )
Total (Benefit) from income taxes $ (1,035,000 ) $ (485,000 )

~~The primary item giving rise to the deferred tax asset is as follows:~~

Net operating loss carryforwards $ 6,619,000
Valuation allowance (5,226,000 )
Net deferred tax asset $ 1,393,000

As of December 31, 2017, March 31, 2018 and June 30, 2018, the Company’s deferred tax asset was primarily the result of U.S. and state net operating loss carryforwards. A full valuation allowance was recorded against the gross deferred tax asset as of December 31, 2017, March 31, 2018 and June 30, 2018. For the three months and nine months ended September 30, 2018, the Company recorded a net valuation allowance reversal of $1,393,000 related to net operating losses, on the basis of management’s reassessment of the amount of its deferred tax asset that is more likely than not to be realized.

As of each reporting date, management considers new evidence, both positive and negative, that could impact management’s view with regard to future realization of deferred tax assets. As of September 30, 2018, the Company had achieved a full year of positive earnings in 2017 as well as three consecutive quarters of positive earnings in 2018. In addition, the 2018 results included almost a full year of the results post-acquisition of the retail assets from StockCross. Based on our analysis of the positive and negative evidence, management determined that sufficient positive evidence existed as of September 30, 2018 to conclude that a portion of deferred tax asset was realizable. Therefore, we reduced the valuation allowance and income tax expense accordingly.

8.	~~Non-Recurring Charges~~

There were no non-recurring charges for the three months ended September 30, 2017. Included in the nine months ended September 30, 2017 is $342,000 primarily due to relocating the firm’s call center and costs associated with staff reductions.

9.	~~Related Party Transactions~~

The Company earned revenue and incurred expenses of $2,916,000 and $307,000, respectively, from StockCross for the three months ended September 30, 2018. The Company earned revenue and incurred expenses of $8,694,000 and $1,271,000, respectively, from StockCross for the nine months ended September 30, 2018.

As12. Subsequent Events

There have been no additional material subsequent events that have 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, 2018, the Company is owed a receivable from StockCross of $1,625,000. For the three months and nine months ended September 30, 2018, the Company received $14,000 in commissions and fees for a StockCross insurance policy.2019.

~~10.~~

~~Liabilities~~

~~Included in the September 30, 2018 condensed consolidated statements of financial condition is $312,000 of commissions payable as part of accounts payable and accrued liabilities.~~

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~~11.~~

~~Leases~~

~~In addition to the leases stated in our 2017 Form 10-K, the Company committed to the below lease. The future minimum base rental payments under this operating lease are as follows:~~

Total 2019 2020 2021 2022 2023 Later Years
Jersey City Office $ 2,212,000 $ 382,000 $ 428,000 $ 441,000 $ 454,000 $ 468,000 $ 39,000

~~12.~~

~~KCAT Acquisition and Software~~

On August 21, 2018, the Company signed a purchase agreement to acquire from KCA all of the issued and outstanding membership interests of KCAT. The net assets of KCAT included cash and capitalized software related to the Robo Platform. We have concluded that KCAT did not constitute a business in accordance with ASC Topic 805 and thus we accounted for this transaction as an asset acquisition. The majority of the shares of KCA were owned by the same shareholders who owned the majority of the shares of the Company. The Company's Board of Directors unanimously approved the acquisition of KCAT. The acquisition of KCAT was completed on August 21, 2018. The total consideration for the acquisition of KCAT was approximately $690,000. We believe that the Robo Platform will increase the breadth of our product offering and will generate substantial opportunity for the Company by appealing to customers within new demographics.

The software acquired from KCAT is accounted for under ASC Topic 985, Software, and shall be amortized over a 3 year period beginning in Q2 of 2019, the date we estimate the software will launch for commercial purposes.

~~Item~~ITEM 2. ~~Management’s Discussion~~MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Forward-Looking Statements

The statements contained in the following MD&A and ~~Analysis~~elsewhere throughout this Quarterly Report on Form 10-Q, including any documents incorporated by reference, that are not historical facts, including statements about our beliefs and expectations, are “forward-looking statements” within the meaning of ~~Financial Condition~~the U.S. Private Securities Litigation Reform Act of 1995. 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 ~~Results~~similar words or expressions. In addition, any statements that refer to expectations, projections, or other characterizations of ~~Operations~~future events or circumstances are forward-looking statements.

These forward-looking statements, which reflect our management’s beliefs, objectives, and expectations as of the date hereof, are based on the best judgement of our 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, without limitation, the following: economic, social and political conditions and other 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 our filings with the SEC, including our most recent filings on Forms 10-K and 10-Q.

The forward-looking statements contained herein speak only as of the date on which the statements were made. 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. 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.

This discussion should be read in conjunction with our consolidated financial statements ~~for the year ended December 31, 2017,~~on our 2018 Form 10-K, and our condensed consolidated financial statements and the notes thereto contained elsewhere in this Quarterly ~~Report.~~Report on Form 10-Q.

~~Business Environment~~ Executive Overview

~~Our cash is invested primarily~~We operate as a financial services company and provide a wide variety of financial services to our clients. Results in ~~bank accounts with large financial institutions. Our cash and working capital are sufficient to service~~ the ~~firm’s operations.~~

~~The following table presents certain metrics for, and as of, various periods within 2018 and 2017,~~businesses in which we ~~use in evaluating our business.~~

Three Months Nine Months
Ended September 30, Ended September 30,
Retail Customer Activity 2018 2017 2018 2017
Total retail trades 82,120 50,025 262,610 155,043
Average commission per retail trade $ 23.43 $ 20.35 $ 22.87 $ 20.63

As of September 30,
Retail Customer Metrics 2018 2017
Retail customer net worth (in billions) $ 11.7 $ 7.5
Retail customer money market fund value (in billions) $ 0.6 $ 0.7
Retail free credit balances (in billions) $ 0.4 $ 0.3
Retail customer margin debit balances (in billions) $ 0.4 $ 0.3
Retail customer accounts with positions 39,247 27,020

~~Description~~

	·	~~Total retail trades represents retail trades that generate commissions.~~
	·	~~Average commission per retail trade represents the average commission generated for all types of retail customer trades.~~
	·	~~Retail customer net worth represents the total value of securities and cash in the retail customer accounts before deducting margin debits.~~
	·	~~Retail customer money market fund value represents all retail customers accounts invested in money market funds.~~
	·	~~Retail customer margin debit balances represents credit extended~~operate are highly correlated to ~~our customers to finance their purchases against current positions.~~
	·	~~Retail customer accounts with positions represents retail customers with cash and/or securities in their accounts.~~

~~We, like other securities firms, are directly affected by~~ general economic conditions and, more specifically, to the direction of the U.S. equity and fixed-income markets. Market volatility, overall market conditions, ~~including fluctuations in volume and prices of securities, changes and prospects for changes in~~ interest rates, economic, political and ~~demand for brokerage~~regulatory trends, and ~~advisory services, all~~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 ~~which can affect our relative profitability.~~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, ~~such as~~including salaries and related costs, ~~as well as portions~~occupancy expenses and components of communications ~~and occupancy expenses.~~costs. Accordingly, earnings for any period should not be considered representative of earnings to be expected for any other period.

Significant Event

As reported in a current report on Form 8-K filed October 3, 2019, the Company entered into an agreement to acquire Weeden Prime, a broker-dealer registered with the SEC offering prime brokerage services. Upon completion of the transaction, which is pending regulatory approval, Weeden Prime will be a wholly-owned subsidiary of the Company.

10- 14 -

~~Critical Accounting Policies~~Client Account and Activity Metrics

~~We generally follow accounting policies standard~~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,
	2019		2018
Retail customer net worth (in billions)	$	11.2	$	11.7
Retail customer margin debit balances (in billions)	$	0.4	$	0.4
Retail customer credit balances (in billions)	$	0.4	$	0.4
Retail customer money market fund value (in billions)	$	0.6	$	0.6
Retail customer accounts		76,270		74,450

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

Retail customer margin debit balances represents credit extended to our customers to finance their purchases against current positions.

Retail customer credit balances represents client cash held in brokerage ~~industry and believe that our policies appropriately reflect our financial position and results~~accounts.

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

Retail customer accounts represents the number of ~~operations. Our management makes significant estimates that affect~~retail customers. Effective in December 2018, the ~~reported amounts~~retail customer accounts metric was revised to include all retail accounts regardless of assets, liabilities, revenue, and expenses as well as the related disclosure of contingent assets and liabilities included in the financial statements. The estimates relate primarily to revenue and expenses in the normal course of business as to which we receive no confirmations, invoices, or other documentation at the time the books are closed. We use our best judgment, based on our knowledge of these revenue transactions and expenses incurred, to estimate the amount of such revenue and expenses. We are not aware of any material differences between the estimates used in closing our books for the last five years and the actual amounts of revenue and expenses incurred when we subsequently receive the actual confirmations, invoices, or other documentation. Estimates are also used in determining the useful lives of intangible assets and the fair market value of intangible assets. ~~We also estimate the valuation allowance relating~~Prior periods have been updated to conform to the deferred tax asset based on more likely than not criteria. Our analysis includes positive and negative evidence available such as past operating history, estimated projected taxable income, industry and economic statistics, and the impact of the Tax Cuts and Jobs Act. Our management believes that its estimates are reasonable.

We are planning to capitalize certain costs related to the development of the Robo Platform upon completion. As indicated in footnote 12, we are in the development and testing phase as there are additional features and functionalities needed to be built out. The types of costs we will capitalize include expenses such as consulting fees for third-party developers working on the project. Costs related to post-implementation activities will be expensed as incurred. Internal-use software is amortized on a straight-line basis over the estimated useful life of the asset, which is expected to be three years.

~~Significant Events in the Third Quarter of 2018~~

~~KCAT Acquisition and Software~~

Post-acquisition of KCAT and the AdvisorNXT code, we are continuing to enhance and tailor the Robo Platform to fit our strategic needs. As part of the most recent wave of development, our goals were to streamline the online account opening process, build out new automation for money movement, and improve the visuals and branding for a better client experience.

As of the end of this quarter we have met these goals and have successfully launched the Robo Platform with the ability to onboard clients. In addition, we have made significant progress in the development of key algorithms and have remastered the portfolio selection process. The Robo Platform onboarding application is currently located at https://app.advisornxt.com/get-started.

Going forward, we are working on streamlining connectivity between the Robo Platform and the client website, our back office databases, and our clearing providers. In addition, we are continuing to automate trading and back office tasks related to rebalancing client portfolios and processing fees. These improvements will be critical as we continue to scale the Robo Platform and we anticipate the majority of these new features to become fully operational during Q2 of 2019. We are excited to offer our dynamic Robo Platform to our current ~~client base and when the application becomes fully operational, we will implement a strategic plan focused on customer acquisition.~~

~~Deferred Tax Asset~~

Deferred income taxes arise from temporary differences between the tax basis of assets and liabilities and their reported amounts in the financial statements, which will result in taxable or deductible amounts in the future. In evaluating our ability to recover our deferred tax assets within the jurisdiction from which they arise, we considered all available positive and negative evidence, including scheduled reversals of deferred tax liabilities, projected future taxable income, tax-planning strategies, and results of recent operations. In projecting future taxable income, we began with historical results and incorporated assumptions about the amount of future state and federal pretax operating income adjusted for items that did not have tax consequences. The assumptions about future taxable income required significant judgment and are consistent with the plans and estimates we use to manage the underlying businesses. In evaluating the objective evidence that historical results provide, we considered three years of cumulative operating loss.

~~Evaluation of Deferred Tax Asset as of December 31, 2017 through June 30, 2018~~

We did not recognize a deferred tax asset as of December 31, 2017 through June 30, 2018 based on our analysis of positive and negative evidence available. In assessing the amount to be recorded as a deferred tax asset, we considered the following factors:

~~Positive Evidence~~

~~Positive earnings for 2017.~~

~~Preliminary positive earnings for first six months of 2018 and positive projections for the full year.~~presentation.

~~Negative Evidence~~Client Activity Metrics

	Three Months Ended September 30,				Nine Months Ended September 30,
	2019		2018		2019		2018
Total retail trades		65,828		82,120		199,668		262,610
Average commission per retail trade	$	17.31	$	23.43	$	18.40	$	22.87

~~Track record of positive earnings in 2018 is limited.~~Total retail trades represents retail trades that generate commissions.

~~Significant losses in 2016, 2015, and 2014.~~

~~The unpredictable nature~~Average commission per retail trade represents the average commission generated for all types of ~~future revenue streams.~~

~~The potential correction in the market, which could result in losses to the Company and the inability to use the tax asset.~~

~~The uncertainty in the political environment which could result in a change in the tax code that may cause market repercussions.~~

~~The effect of the tariffs on the economy.~~

~~Increased competitive pressures.~~

ASC 740-10-30-22(c), provides examples of positive evidence that might support a conclusion that a valuation allowance is not needed when there is negative evidence. According to ASC 740-10-30-22(c), an example of positive evidence that might overcome negative evidence is "a strong earnings history exclusive of the loss that created the future deductible amount (tax loss carryforward or deductible temporary difference) coupled with evidence indicating that the loss (for example, an unusual, infrequent, or extraordinary item) is an aberration rather than a continuing condition."

In consideration of the guidance shown above, as of December 31, 2017, we believe that the Company did not have enough financial track record to be classified as having a “strong earnings history” as identified above. As of June 30, 2018, we considered the improved operating results post-acquisition of the retail assets from StockCross; however, we still believed that there was not enough financial track record for the Company to be classified as having a “strong earnings history.” In addition, a significant piece of objective negative evidence evaluated was the cumulative loss incurred over the three-year period ended December 31, 2016. Such objective evidence limited the ability to consider other subjective evidence such as our projections for future growth.customer trades.

Accordingly, the positive financial performance was insufficient to outweigh the negative evidence as indicated above, and we concluded, using the more likely than not criteria, that a full valuation allowance for the deferred tax asset was appropriate as of December 31, 2017, March 31, 2018, and June 30, 2018 and the evidence did not support recording a partial valuation allowance.

~~Evaluation of Deferred Tax Asset as of September 30, 2018~~

As of September 30, 2018, we recognized a deferred tax asset based on the additional positive evidence available. In assessing the amount to be recorded as a deferred tax asset, we considered the positive and negative evidence referenced above, as well as the below evidence:

~~Subsequent Positive Evidence~~

~~Three quarters of significantly improved operating results in comparison to 2017 and historical years.~~

~~Almost a full year of positive earnings post-acquisition of the retail assets from StockCross.~~

~~Taxable income of approximately $6 million as of September 30, 2018.~~

~~Revised projected taxable income for fiscal year 2018, 2019 and 2020 exceeding original projections performed at the end of 2017.~~

As of September 30, 2018, we considered the guidance from ASC 740-10-30-22(c) and believed that with three quarters of significantly improved operating results from the acquisition of the retail assets from StockCross, we concluded that the Company had a sufficient track record of positive performance as well as a trend of improving results to be classified as having a “strong earnings history.” While the negative evidence considered as of December 31, 2017 through June 30, 2018 was still relevant, the objective evidence of the Company’s performance during 2018 supported the positive evidence outweighing the negative.

As such, as of September 30, 2018, we believe that it was reasonable to record a deferred tax asset (net of valuation allowance) of approximately $1,393,000 as projected for the next three years. In assessing the amount to be recorded as a deferred tax asset, we concluded that a period not exceeding 3 years was a reasonable projection period due to increasing competitive pressures, regulatory costs, and the volatile political and economic environment.

~~Results~~Statements of Operations

for the Three Months Ended September 30, 2019 and 2018 ~~Compared to Three Months Ended September 30, 2017~~

Net Income

Net income for the three months ended September 30, ~~2018~~2019 was ~~$3,119,000, an increase of $2,118,000~~$1,104,000, decreasing by $2,015,000 or ~~212%~~65% from the corresponding period in ~~2017~~2018, primarily due to the ~~retail assets acquired from StockCross,~~partial release of the ~~recognition~~valuation allowance of historical net operating losses in the third quarter of 2018 as well as a ~~deferred tax asset,~~reduction in principal transactions and ~~an increase~~commission and fees revenues as a result of slower market conditions in ~~interest bearing earnings.~~the third quarter of 2019.

Revenue

Total revenue for the three months ended September 30, ~~2018~~2019 was ~~$7,884,000, an increase of $4,795,000~~$7,144,000, decreasing by $740,000 or ~~155%~~9% from the corresponding period in ~~2017~~2018, primarily due to slower market conditions in the third quarter of 2019 negatively impacting revenue from principal transactions as well as commission and fees. Average commissions per retail ~~assets acquired from StockCross and an increase~~trade decreased primarily due to a higher percentage of our clients’ trades receiving reduced commission rates as a result of continued price competition in ~~interest bearing earnings.~~the industry.

Margin interest, marketing and distribution fees for the three months ended September 30, ~~2018~~2019 were ~~$2,731,000, an increase of $881,000~~$2,944,000, increasing by $213,000 or ~~48%~~8% from the corresponding period in ~~2017~~2018, primarily due to ~~the retail assets acquired from StockCross and an increase~~a slight rise in interest rates.

Principal transactions for the three months ended September 30, 2018 were $2,634,000, an increase of $2,480,000 or 1,610% from the corresponding period in 2017 primarily due to the retail assets acquired from StockCross.

Commissions and fees for the three months ended September 30, ~~2018~~2019 were ~~$2,465,000, an increase of $1,388,000~~$1,925,000, decreasing by $422,000 or ~~129%~~18% from the corresponding period in ~~2017~~2018, primarily due to slower market conditions in the third quarter of 2019 negatively impacting overall demand for retail ~~assets acquired from StockCross.~~products.

~~Interest~~

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Principal transactions for the three months ended September 30, ~~2018 was $34,000, an increase of $30,000~~2019 were $2,041,000, decreasing by $593,000 or ~~750%~~23% from the corresponding period in ~~2017~~2018, primarily due to ~~increased cash balances.~~slower market conditions in the third quarter of 2019 negatively impacting overall demand for retail products.

Advisory fees for the three months ended September 30, ~~2018~~2019 were ~~$20,000, an increase of $16,000~~$211,000, increasing by $73,000 or ~~400%~~53% from the corresponding period in ~~2017~~2018, primarily due to ~~the preliminary launch~~overall expansion of the ~~robo technology.~~advisory business line which included revenue growth related to SNXT’s Robo-Advisor.

Interest for the three months ended September 30, 2019 was $23,000, decreasing by $11,000 or 32% from the corresponding period in 2018, primarily due to lower cash balances.

Operating Expenses

Total expenses for the three months ended September 30, ~~2018~~2019 were ~~$5,800,000, an increase of $3,712,000~~$5,717,000, decreasing by $83,000 or ~~178%~~1% from the corresponding period in ~~2017~~2018, primarily due to ~~items related to the retail assets acquired from StockCross such as additional personnel and office space requirements.~~a reduction in miscellaneous expenses.

Employee compensation and benefits for the three months ended September 30, ~~2018~~2019 were ~~$3,668,000, an increase of $2,637,000~~$3,157,000, decreasing by $511,000 or ~~256%~~14% from the corresponding period in ~~2017~~2018, primarily due to lower commission payouts associated with the decrease in commissions and fees and principal transaction revenues.

Clearing fees, including execution costs for the three months ended September 30, 2019 were $617,000, decreasing by $14,000 or 2% from the corresponding period in 2018, primarily due to the ~~retail assets acquired~~decrease in clearing and execution services associated with the lower level of overall client activity.

Professional fees for the three months ended September 30, 2019 were $439,000, decreasing by $38,000 or 8% from ~~StockCross.~~the corresponding period in 2018, primarily due to a reduction in legal fees.

Other general and administrative expenses for the three months ended September 30, ~~2018~~2019 were ~~$650,000, an increase of $375,000~~$589,000, increasing by $88,000 or ~~136%~~18% from the corresponding period in ~~2017~~2018, primarily due to incremental office expenses related to the ~~retail assets acquired from StockCross.~~Miami office.

~~Clearing fees, including floor brokerage~~Technology and communications for the three months ended September 30, 2019 were $291,000, increasing by $63,000 or 28% from the corresponding period in 2018, primarily due to a higher level of technological infrastructure expansion.

Rent and occupancy expenses for the three months ended September 30, ~~2018~~2019 were ~~$631,000, an increase of $379,000~~$380,000, increasing by $132,000 or ~~150%~~53% from the corresponding period in ~~2017~~2018, primarily due to the ~~retail assets acquired~~increase in rent from ~~StockCross.~~our office space in Jersey City and Miami.

~~Professional fees~~Depreciation and amortization for the three months ended September 30, ~~2018 were $477,000, an increase of $105,000~~2019 was $244,000, increasing by $203,000 or ~~28%~~495% from the corresponding period in ~~2017 primarily due to activities and developments related to expanding our business.~~

~~Occupancy expenses for the three months ended September 30,~~ 2018, ~~were $248,000, an increase of $162,000 or 188% from the corresponding period in 2017~~ primarily due to the ~~retail assets acquired from StockCross.~~

~~Communications expenses for the three months ended September 30, 2018 were $120,000, an increase~~depreciation and amortization of ~~$64,000 or 114% from the corresponding period in 2017 primarily due to the retail assets acquired from StockCross.~~incremental leasehold improvements and software development assets.

Advertising and promotion expenses for the three months ended September 30, ~~2018~~2019 were $0, decreasing by $6,000 ~~a decrease of $10,000 or 63%~~ from the corresponding period in ~~2017.~~2018, primarily due to the elimination of miscellaneous advertising costs.

Earnings of Equity Method Investment in Related Party

Earnings of equity method investment in related party for the three months ended September 30, 2019 were $30,000 due to the Company recognizing its proportional earnings from StockCross for the three months ended September 30, 2019.

Provision (Benefit) For (From) Income Taxes

Provision (benefit) for (from) income taxes for the three months ended September 30, ~~2018~~2019 was ~~a credit of $1,035,000, a decrease of $1,035,000~~$353,000, increasing by $1,388,000 or 134% from the corresponding period in ~~2017 which consisted of a credit of $1,393,000~~2018, primarily due to the ~~recognition~~partial release of ~~a deferred tax asset partially offset by income taxes~~the valuation allowance of ~~$358,000.~~

historical net operating losses in the third quarter of 2018.

Statements of Operations for the Nine Months Ended September 30, 2019 and 2018 ~~Compared to Nine Months Ended September 30, 2017~~

Net Income

Net income for the nine months ended September 30, ~~2018~~2019 was ~~$6,611,000, an increase of $5,186,000~~$3,102,000, decreasing by $3,509,000 or ~~364%~~53% from the corresponding period in ~~2017~~2018, primarily due to a reduction in principal transactions and commission and fees revenues as a result of market volatility in 2019, partially offset by the ~~retail assets acquired from StockCross, the recognition of a deferred tax asset, and an increase~~decrease in ~~interest bearing earnings. Included in~~operating expenses such as commission payouts related to those revenue streams. In addition, net income ~~for the nine months ended September 30, 2017 is $342,000 of non-recurring costs primarily~~decreased on a comparative basis due to ~~relocating~~ the ~~firm’s call center and costs associated with staff reductions.~~partial release of the valuation allowance of historical net operating losses in the third quarter of 2018.

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Revenue

Total revenue for the nine months ended September 30, ~~2018~~2019 was ~~$23,549,000, an increase of $15,392,000~~$20,634,000, decreasing by $2,915,000 or ~~189%~~12% from the corresponding period in ~~2017~~2018, primarily due to market volatility in 2019 negatively impacting revenue from principal transactions as well as commission and fees. Average commissions per retail trade decreased primarily due to a higher percentage of our clients’ trades receiving reduced commission rates as a result of continued price competition in the ~~retail assets acquired from StockCross and an increase in interest bearing earnings.~~industry.

Margin interest, marketing and distribution fees for the nine months ended September 30, ~~2018~~2019 were ~~$7,953,000, an increase of $3,476,000~~$8,499,000, increasing by $546,000 or ~~78%~~7% from the corresponding period in ~~2017~~2018, primarily due to ~~the retail assets acquired from StockCross and an increase~~a slight rise in interest rates.

Principal transactions for the nine months ended September 30, 2018 were $7,838,000, an increase of $7,478,000 or 2,077% from the corresponding period in 2017 primarily due to the retail assets acquired from StockCross.

Commissions and fees for the nine months ended September 30, ~~2018~~2019 were ~~$7,651,000, an increase of $4,356,000~~$6,030,000, decreasing by $1,350,000 or ~~132%~~18% from the corresponding period in ~~2017~~2018, primarily due to ~~the~~market volatility in 2019 negatively impacting overall demand for retail ~~assets acquired from StockCross.~~products.

~~Interest~~Principal transactions for the nine months ended September 30, ~~2018 was $69,000, an increase of $60,000~~2019 were $5,479,000, decreasing by $2,359,000 or ~~667%~~30% from the corresponding period in ~~2017~~2018, primarily due to ~~increased cash balances.~~market volatility in 2019 negatively impacting overall demand for retail products.

Advisory fees for the nine months ended September 30, ~~2018~~2019 were ~~$38,000, an increase of $22,000~~$572,000, increasing by $263,000 or ~~138%~~85% from the corresponding period in ~~2017~~2018, primarily due to ~~the preliminary launch~~overall expansion of the ~~robo technology.~~advisory business line which included revenue growth related to SNXT’s Robo-Advisor.

Interest for the nine months ended September 30, 2019 was $54,000, decreasing by $15,000 or 22% from the corresponding period in 2018, primarily due to lower cash balances.

Operating Expenses

Total expenses for the nine months ended September 30, ~~2018~~2019 were ~~$17,423,000, an increase of $10,691,000~~$16,445,000, decreasing by $978,000 or ~~159%~~6% from the corresponding period in ~~2017~~2018, primarily due to ~~items~~the lower commission payouts associated with less commissions and fees and principal transactions revenues, partially offset by the increase in other general and administrative expenses related to the ~~retail assets acquired from StockCross such~~expansion of our Jersey City office and the establishment of our Miami office as ~~additional personnel~~well as the increase in depreciation and ~~office space requirements.~~amortization of incremental assets.

Employee compensation and benefits for the nine months ended September 30, ~~2018~~2019 were ~~$10,619,000, an increase of $7,550,000~~$8,882,000, decreasing by $1,737,000 or ~~246%~~16% from the corresponding period in ~~2017~~2018, primarily due to lower commission payouts associated with the decrease in commissions and fees and principal transaction revenues.

Clearing fees, including execution costs for the nine months ended September 30, 2019 were $1,849,000, decreasing by $363,000 or 16% from the corresponding period in 2018, primarily due to the decrease in clearing and execution services associated with the lower level demand for retail ~~assets acquired~~products.

Professional fees for the nine months ended September 30, 2019 were $1,388,000, decreasing by $184,000 or 12% from ~~StockCross.~~the corresponding period in 2018, primarily due to a reduction in legal fees.

Other general and administrative expenses for the nine months ended September 30, ~~2018~~2019 were ~~$1,874,000, an increase of $854,000~~$1,861,000, increasing by $501,000 or ~~84%~~37% from the corresponding period in ~~2017~~2018, primarily due to incremental office expenses related to the ~~retail assets acquired from StockCross.~~expansion of our Jersey City office and the establishment of our Miami office.

~~Clearing fees, including floor brokerage~~Technology and communications for the nine months ended September 30, 2019 were $800,000, increasing by $8,000 or 1% from the corresponding period in 2018.

Rent and occupancy expenses for the nine months ended September 30, ~~2018~~2019 were ~~$2,212,000, an increase of $1,393,000~~$995,000, increasing by $258,000 or ~~170%~~35% from the corresponding period in ~~2017~~2018, primarily due to the ~~retail assets acquired~~increase in rent from ~~StockCross.~~our office space in Jersey City and Miami.

~~Professional fees~~Depreciation and amortization for the nine months ended September 30, ~~2018~~2019 were ~~$1,572,000, an increase of $307,000~~$670,000, increasing by $579,000 or ~~24%~~636% from the corresponding period in ~~2017 primarily due to activities and developments related to expanding our business.~~

~~Occupancy expenses for the nine months ended September 30,~~ 2018, ~~were $737,000, an increase of $431,000 or 141% from the corresponding period in 2017~~ primarily due to the ~~retail assets acquired from StockCross.~~depreciation and amortization of incremental leasehold improvements and software development assets.

Communications expenses for the nine months ended September 30, 2018 were $369,000, an increase of $177,000 or 92% from the corresponding period in 2017 primarily due to the retail assets acquired from StockCross.

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Advertising and promotion expenses for the nine months ended September 30, ~~2018~~2019 were $0, decreasing by $40,000 ~~a decrease of $21,000 or 34%~~ from the corresponding period in ~~2017.~~2018, primarily due to the elimination of miscellaneous advertising costs.

Earnings of Equity Method Investment in Related Party

Earnings of equity method investment in related party for the nine months ended September 30, 2019 was $84,000 due to the Company recognizing its proportional earnings from StockCross for the nine months ended September 30, 2019.

Provision (Benefit) For (From) Income Taxes

Provision (benefit) for (from) income taxes for the nine months ended September 30, ~~2018~~2019 was ~~a credit of $485,000, a decrease of $485,000~~$1,171,000, increasing by $1,656,000 or 341% from the corresponding period in ~~2017 which consisted of a credit of $1,393,000~~2018, primarily due to the ~~recognition~~partial release of ~~a deferred tax asset partially offset by income taxes~~the valuation allowance of ~~$908,000.~~

historical net operating losses in the third quarter of 2018.

14Statements of Financial Condition as of September 30, 2019 and December 31, 2018

Assets

Assets as of September 30, 2019 were $23,993,000 and increased by $5,816,000 or 32% from assets as of December 31, 2018, primarily due the lease right-of-use assets recorded per the new lease accounting guidance, an increase in furniture, equipment and leasehold improvements from the development of our technological infrastructure, as well as incremental software development assets. In relation to the purchase of approximately 15% of StockCross’ outstanding shares, there was an increase in the equity method investment in related party asset of approximately $3.7 million and corresponding decrease in cash, with no net change to total assets.

Liabilities

Liabilities as of September 30, 2019 were $3,717,000 and increased by $2,714,000 or 271% from liabilities as of December 31, 2018, primarily due to the lease liabilities recorded per the new lease accounting guidance.

Liquidity and Capital Resources

Our ~~working capital is invested in~~ cash and cash ~~equivalents.~~equivalents are unrestricted and are used to fund our working capital needs. Our total assets as of September 30, 2019 were approximately $24.0 million, of which $4.2 million, or approximately 18% consisted of cash and cash equivalents and were considered highly liquid. Our total assets as of December 31, 2018 were ~~$13,493,000,~~approximately $18.2 million, of which ~~$7,341,000,~~$7.2 million, or ~~54%, is~~approximately 40% consisted of cash and cash equivalents and were considered highly liquid.

MSCO is subject to regulatory requirements that are intended to ensure its liquidity and general financial soundness. Under the ~~SEC’s~~SEC's Uniform Net Capital Rule ~~(Rule 15c3-1 or “Uniform Net Capital Rule”)~~(Exchange Act Rule 15c3-1), ~~which requires~~MSCO is required to maintain, at all times, at least the ~~maintenance~~minimum level of net capital required under Rule 15c3-1. Since our aggregate debits may fluctuate significantly, our minimum net ~~capital.~~ capital requirements may also fluctuate significantly from period to period. Siebert may make cash capital contributions to MSCO, if necessary, to meet minimum net capital requirements.

MSCO may not repay any subordinated borrowings, pay cash dividends, or make any unsecured advances or loans to Siebert or employees if such payment would result in a net capital amount of less than (a) 5% of aggregate debit balances or (b) 120% of its minimum dollar requirement.

As of September 30, ~~2018, MSCO’s regulatory~~2019, MSCO had net capital ~~was $9,701,000,~~of approximately $5.7 million, which was ~~$9,451,000~~approximately $5.4 million in excess of required net capital of $250,000. As of December 31, 2018, MSCO had net capital of approximately $8.9 million, which was approximately $8.7 million in excess of its minimum capital requirement of $250,000.

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Contractual Obligations

Future annual minimum payments for operating leases with initial terms of greater than one year as of September 30, 2019 were as follows:

Year	Amount
2019	$	259,000
2020		992,000
2021		759,000
2022		513,000
2023		493,000
2024		56,000
Thereafter		—
Remaining balance of lease payments	$	3,072,000

There have been no material changes in our contractual obligations outside the ordinary course of business since December 31, 2018.

Off-Balance Sheet Arrangements

Retail customer transactions are cleared through two clearing brokers on a fully disclosed basis. If customers do not fulfill their contractual obligations, the clearing brokers may charge us for any loss incurred in connection with the purchase or sale of securities at prevailing market prices to satisfy customer obligations. 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.

Critical Accounting Policies

On January 1, 2019, we adopted the new standard under ASU 2016-02, Leases (Topic 842), which requires lessees to recognize lease on-balance sheet and disclose key information about leasing arrangements. As of September 30, 2019, the Company recognized lease right-of-use assets of approximately $2.5 million and corresponding lease liabilities of approximately $2.8 million. Please see Item 4. Financial Statements and Supplementary Data – “Note 5 – Leases” for additional detail.

Certain of our accounting policies that involve a higher degree of judgment and complexity are discussed in Part II – Item 7 – Management’s Discussion and Analysis of Financial Condition and Results of Operations – Critical Accounting Policies in our 2018 Form 10-K. Except as described above, there have been no changes to critical accounting estimates during the nine months ended September 30, 2019.

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~~Item~~ITEM 3. ~~Quantitative~~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 ~~Qualitative Disclosures about Market Risk~~have no liabilities, contingent or otherwise, for the debt of another entity.

~~Working capital is~~Financial Instruments Held For Purposes Other Than Trading

We generally ~~invested~~invest our cash and cash equivalents temporarily in dollar denominated bank ~~deposits, which may at times exceed FDIC limits. We have~~account(s). These investments are not ~~incurred any losses associated with such excess deposits.~~subject to material changes in value due to interest rate movements.

Retail customer transactions are cleared through two clearing brokers on a fully disclosed ~~basis, through two clearing brokers, one of which is a related party.~~basis. If customers do not fulfill their contractual obligations, the clearing ~~broker~~brokers may charge ~~MSCO~~us for any loss incurred in connection with the purchase or sale of securities at prevailing market prices to satisfy ~~the customers’~~customer obligations. ~~MSCO~~We regularly ~~monitors~~monitor the activity in ~~its~~ customer accounts for compliance with ~~its~~ margin ~~requirement. MSCO is~~requirements. We are exposed to the risk of loss on unsettled customer transactions if customers ~~fail~~and other counterparties are unable to fulfill their contractual obligations. There were no material losses for unsettled customer transactions ~~for~~in the ~~nine months ended September 30, 2018 and September 30, 2017.~~last five years.

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~~Item~~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 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 that evaluation, our management, including the Executive Vice President/Chief Financial Officer, concluded that our disclosure controls and procedures are effective to ensure that the information we are required to disclose in reports that we file or submit under the Exchange Act, is recorded, processed, summarized, and reported within the time periods specified in the rules and forms of the SEC, and to ensure that information required to be disclosed is accumulated and communicated to our management, including our Executive Vice President/Chief Financial Officer, to allow timely decisions regarding required disclosure.

~~As a result~~

Based on its evaluation, our management, including our Executive Vice President/Chief Financial Officer, concluded that as of the ~~following enhancements~~end of the period covered by this report, our disclosure controls and procedures were effective.

Changes in Internal Control over Financial Reporting

No change in the Company’s ~~reporting process, the issues regarding the historical material weaknesses have been remedied as of September 30, 2018.~~

~~We have implemented a number of measures to address the material weaknesses identified in our~~ internal ~~controls~~control over financial reporting which were disclosed in our 2017 Form 10-K. During the first nine months of 2018, we increased our accounting staff by hiring an individual with appropriate experience applying GAAP technical accounting guidance. We have also engaged an independent CPA/Consultant who has extensive experience in SEC reporting, internal controls, and compliance and has been intimately involved in these areas to remediate the material weaknesses identified. We designed additional controls around identification, documentation and application of technical accounting guidance with particular emphasis on events outside the ordinary course of business. These controls include the implementation of additional supervision and review activities by qualified personnel, the preparation of formal accounting memoranda to support our conclusions on technical accounting matters, and the development and use of checklists and research tools to assist in compliance with GAAP regarding complex accounting issues.

~~Management concluded that the material weaknesses as~~(as defined in ~~the 2017 Form 10-K did not have any material effect on the financial statements contained in the Form 10-Q for the quarters ended March 31, 2018, June 30, 2018, and September 30, 2018.~~

~~Except as described above, there were no changes in our internal controls over financial reporting~~Exchange Act Rule 13a-15(f)) was identified during the ~~most recently completed fiscal quarter~~end of the period covered by this report, that ~~have~~has materially affected, or ~~are~~is reasonably likely to materially affect, ~~our~~the Company’s internal ~~controls~~control over financial reporting.

15- 21 -

~~Part~~PART II - OTHER INFORMATION

~~Item~~ITEM 1. ~~Legal Proceedings~~LEGAL PROCEEDINGS

The Company is party to certain claims, suits and complaints arising in the ordinary course of business. In the opinion of our management, all such matters are without merit, or involve amounts which would not have a significant effect on the financial position of the Company.

~~Item~~ITEM 1A. ~~Risk Factors~~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~~Risk Factors”, in our ~~2017~~2018 Form 10-K, which could materially affect our business, financial position, and results of operations in addition to the following risk factor which updates and replaces the risk factor captioned “There may be no public market for our common stock” previously disclosed in our 2017 Form 10-K:

“operations. There ~~may be no public market for our common stock.~~

Approximately 6,925,906 shares of our common stock (approximately 25.5% of the total outstanding), are currently held by the public. Although our Common Stock is traded on the Nasdaq Capital Market, there can be no assurance that an active public market will continue.”

~~Except for the foregoing, there are~~have been no material changes from the risk factors ~~set forth in Part I, Item 1A -“Risk Factors,”~~disclosed in our ~~2017~~2018 Form ~~10-K.~~10-K other than the changes disclosed in our Quarterly Report on Form 10-Q for the period ended March 31, 2019.

16- 22 -

~~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/ Andrew H. Reich~~
		~~Andrew H. Reich~~
		~~Executive Vice President, Chief Operating Officer,~~ ~~Chief Financial Officer, and Secretary~~
		~~(Principal executive, financial and accounting officer)~~


	~~Dated: November 14, 2018~~

~~Item 5. Exhibits~~ITEM 6. EXHIBITS

Exhibit No.		Description of Document

31.1		Certification of Andrew H. Reich 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 Andrew H. Reich of Periodic Financial Report under Section 906 of the Sarbanes-Oxley Act of 2002.

10.1		Equity Interests Purchase Agreement, dated as of September 27, 2019, by and among Siebert Financial Corp., Weeden Investors L.P. and Weeden Securities Corporation. (incorporated by reference to Siebert Financial Corp.’s Current Report on Form 8-K filed with the SEC on October 3, 2019)
~~101.INS~~
101.INS		XBRL Instance Document

101.SCH		XBRL Taxonomy Extension Schema

101.CAL		XBRL Taxonomy Extension Calculation Linkbase

101.DEF		XBRL Taxonomy Extension Definition Linkbase

101.LAB		XBRL Taxonomy Extension Label Linkbase

101.PRE		XBRL Taxonomy Extension Presentation Linkbase

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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/ Andrew H. Reich
		Andrew H. Reich
		Executive Vice President, Chief Operating Officer, Chief Financial Officer, and Secretary
		(Principal executive, financial and accounting officer)

~~101.SCH~~		~~XBRL Taxonomy Extension Schema~~

~~101.CAL~~		~~XBRL Taxonomy Extension Calculation Linkbase~~

~~101.DEF~~		~~XBRL Taxonomy Extension Definition Linkbase~~

~~101.LAB~~		~~XBRL Taxonomy Extension Label Linkbase~~

~~101.PRE~~		~~XBRL Taxonomy Extension Presentation Linkbase~~ Dated: November 13, 2019

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	Three Months Ended September 30, 2018			Nine Months Ended September 30, 2018
Current income taxes
Federal	$	300,000		$	847,000
State		58,000			61,000
		358,000			908,000

Deferred tax benefit
Federal		(423,000	)		(423,000	)
State		(970,000	)		(970,000	)
		(1,393,000	)		(1,393,000	)

Total (Benefit) from income taxes	$	(1,035,000	)	$	(485,000	)

	Three Months Ended September 30, 2018			Nine Months Ended September 30, 2018
Expected income tax at statutory federal tax rate (21%)	$	438,000		$	1,286,000
Tax amortization of intangible assets		(70,000	)		(210,000	)
Depreciation		8,000			19,000
Net operating loss		(47,000	)		(141,000	)
Temporary differences - charitable contributions		4,000			(57,000	)
State taxes		25,000			11,000
Reversal of valuation allowance		(1,393,000	)		(1,393,000	)
Total (Benefit) from income taxes	$	(1,035,000	)	$	(485,000	)

Net operating loss carryforwards	$	6,619,000
Valuation allowance		(5,226,000	)
Net deferred tax asset	$	1,393,000

	Three Months				Nine Months
	Ended September 30,				Ended September 30,
Retail Customer Activity	2018		2017		2018		2017
Total retail trades		82,120		50,025		262,610		155,043
Average commission per retail trade	$	23.43	$	20.35	$	22.87	$	20.63

	As of September 30,
Retail Customer Metrics	2018		2017
Retail customer net worth (in billions)	$	11.7	$	7.5
Retail customer money market fund value (in billions)	$	0.6	$	0.7
Retail free credit balances (in billions)	$	0.4	$	0.3
Retail customer margin debit balances (in billions)	$	0.4	$	0.3
Retail customer accounts with positions		39,247		27,020