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, ~~2019~~2020

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

Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer ☐	Accelerated filer ☐
Non-accelerated filer ☒	Smaller reporting company ☒
	Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes ☐ No ☒

Indicate the number of shares outstanding of each of the issuer’s classes of common equity, as of the latest practicable date: As of November ~~13, 2019,~~16, 2020, there were ~~27,157,188~~30,953,710 shares of the registrant’s common ~~stock outstanding.~~stock.

SIEBERT FINANCIAL CORP.

INDEX

PART I - FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

SIEBERT FINANCIAL CORP. & SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION

(unaudited)

	September 30, 2019		December 31, 2018
	(unaudited)				September 30, 2020		December 31, 2019*
ASSETS

Current assets
Cash and cash equivalents	$	4,231,000	$	7,229,000	$	4,536,000	$	4,670,000
Receivables from clearing and other brokers		2,436,000		2,030,000
Escrow deposit		2,000,000		—
Receivable from related party		1,000,000		1,000,000
Receivable from lessors		—		171,000
Cash and securities segregated for regulatory purposes						263,980,000		224,924,000
Receivables from customers						91,842,000		86,331,000
Receivables from broker-dealers and clearing organizations						3,312,000		3,524,000
Other receivables		103,000		96,000		873,000		762,000
Prepaid expenses and other assets		302,000		470,000		1,444,000		970,000
Securities borrowed						283,757,000		193,529,000
Securities owned, at fair value						3,480,000		3,018,000
Total Current assets						653,224,000		517,728,000

Deposits with broker-dealers and clearing organizations						5,094,000		4,951,000
Prepaid service contract – non-current						1,890,000		—
Furniture, equipment and leasehold improvements, net		1,000,000		468,000		850,000		1,150,000
Software, net		1,806,000		1,137,000		1,503,000		1,888,000
Lease right-of-use assets		2,501,000		—		2,813,000		3,951,000
Equity method investment in related party		3,509,000		—
Deferred tax assets		5,105,000		5,576,000		5,239,000		5,388,000
	$	23,993,000	$	18,177,000
Intangible assets, net						850,000		1,022,000
Goodwill						1,989,000		1,989,000
Total Assets					$	673,452,000	$	538,067,000

LIABILITIES AND STOCKHOLDERS’ EQUITY
Liabilities:

Liabilities
Current liabilities
Payables to customers					$	342,156,000	$	308,091,000
Payables to non-customers						9,346,000		8,063,000
Drafts payable						1,635,000		2,834,000
Payables to broker-dealers and clearing organizations						356,000		523,000
Accounts payable and accrued liabilities	$	744,000	$	699,000		2,754,000		2,443,000
Due to clearing brokers and related parties		27,000		133,000
Income taxes payable		38,000		—
Lease incentive obligation		—		171,000
Lease liabilities		2,817,000		—
Other liabilities		91,000		—
Securities loaned						266,777,000		170,443,000
Securities sold, not yet purchased, at fair value						25,000		116,000
Interest payable						—		10,000
Current portion of notes payable - related party						3,000,000		8,000,000
Current portion of lease liabilities						1,633,000		2,227,000
Current portion of long-term debt						997,000		—
Total Current liabilities						628,679,000		502,750,000
		3,717,000		1,003,000
Lease liabilities, less current portion						1,548,000		2,182,000
Notes payable – related party, less current portion						3,000,000		—
Long-term debt, less current portion						3,907,000		—
Total Liabilities						637,134,000		504,932,000

Commitments and Contingencies
Stockholders’ equity:
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
Stockholders’ equity
Common stock, $.01 par value; 100 million shares authorized; 30,653,710 and 30,459,804 shares issued and outstanding as of September 30, 2020 and December 31, 2019, respectively**						306,000		304,000
Additional paid-in capital		7,641,000		7,641,000		21,022,000		19,897,000
Retained earnings		12,364,000		9,262,000		14,990,000		12,934,000
Total Stockholders’ equity						36,318,000		33,135,000
		20,276,000		17,174,000

	$	23,993,000	$	18,177,000
Total Liabilities and stockholders' equity					$	673,452,000	$	538,067,000

*Statement of financial condition as of December 31, 2019 represents the pro forma combination of Siebert and StockCross balances. See “Note 3 – Acquisitions” for additional detail.

**Shares outstanding as of December 31, 2019 represents the combined total of the Company’s shares outstanding and the shares issued for the Company’s acquisition of StockCross. See “Note 1 – Organization and Basis of Presentation” for additional detail.

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

- 1 -

SIEBERT FINANCIAL CORP. & SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF ~~OPERATIONS~~INCOME

(unaudited)

	Three Months Ended September 30,					Nine Months Ended September 30,					Three Months Ended September 30,					Nine Months Ended September 30,
	2019		2018			2019		2018			2020			2019		2020		2019
Revenue:
Revenue
Commissions and fees											$	4,679,000		$	2,273,000	$	15,149,000	$	7,132,000
Margin interest, marketing and distribution fees	$	2,944,000	$	2,731,000		$	8,499,000	$	7,953,000			2,311,000			3,912,000		7,730,000		11,161,000
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			2,342,000			2,327,000		8,126,000		6,138,000
Interest income												915,000			1,061,000		3,155,000		3,417,000
Market making												423,000			330,000		1,508,000		1,303,000
Stock borrow / stock loan												1,267,000			349,000		2,482,000		1,353,000
Advisory fees		211,000		138,000			572,000		309,000			305,000			211,000		810,000		572,000
Interest		23,000		34,000			54,000		69,000
Other income												333,000			290,000		1,035,000		633,000
Total Revenue		7,144,000		7,884,000			20,634,000		23,549,000			12,575,000			10,753,000		39,995,000		31,709,000

Expenses:
Expenses
Employee compensation and benefits		3,157,000		3,668,000			8,882,000		10,619,000			6,584,000			4,809,000		20,489,000		13,812,000
Clearing fees, including execution costs		617,000		631,000			1,849,000		2,212,000			1,270,000			798,000		3,907,000		2,325,000
Technology and communications												1,322,000			441,000		3,256,000		1,264,000
Other general and administrative												455,000			868,000		1,710,000		2,787,000
Data processing												784,000			527,000		2,387,000		1,487,000
Rent and occupancy												694,000			630,000		2,119,000		1,754,000
Professional fees		439,000		477,000			1,388,000		1,572,000			760,000			783,000		2,159,000		2,568,000
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			368,000			244,000		1,193,000		689,000
Advertising and promotion		—		6,000			—		40,000
Referral fees												154,000			—		427,000		—
Interest expense												89,000			31,000		253,000		84,000
Total Expenses		5,717,000		5,800,000			16,445,000		17,423,000			12,480,000			9,131,000		37,900,000		26,770,000

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			95,000			1,622,000		2,095,000		4,939,000
Provision (benefit) for (from) income taxes		353,000		(1,035,000	)		1,171,000		(485,000	)		(486,000	)		349,000		39,000		1,365,000
Net income	$	1,104,000	$	3,119,000		$	3,102,000	$	6,611,000		$	581,000		$	1,273,000	$	2,056,000	$	3,574,000

Net income per share of common stock
Basic and diluted	$	0.04	$	0.11		$	0.11	$	0.24		$	0.02		$	0.04	$	0.07	$	0.12

Weighted average shares outstanding
Basic and diluted		27,157,188		27,157,188			27,157,188		27,157,188			30,653,710			30,455,962		30,565,822		30,455,962

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

- 2 -

SIEBERT FINANCIAL CORP. & SUBSIDIARIES

CONDENSED 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


	Number of Shares Issued		$.01 Par Value		Additional Paid-In Capital		Retained Earnings		Total
Balance – January 1, 2020		27,157,188	$	271,000	$	7,641,000	$	12,869,000	$	20,781,000
Shares issued for StockCross purchase		3,302,616		33,000		12,256,000		65,000		12,354,000
Net income		—		—		—		976,000		976,000
Balance – March 31, 2020		30,459,804	$	304,000	$	19,897,000	$	13,910,000	$	34,111,000
Shares issued for payment of professional services		193,906		2,000		1,125,000		—		1,127,000
Net income		—		—		—		499,000		499,000
Balance – June 30, 2020		30,653,710	$	306,000	$	21,022,000	$	14,409,000	$	35,737,000
Net income		—		—		—		581,000		581,000
Balance – September 30, 2020		30,653,710	$	306,000	$	21,022,000	$	14,990,000	$	36,318,000

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


	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
Shares issued for StockCross purchase		3,302,616		33,000		14,037,000			—		14,070,000
Net income		—		—		—			1,224,000		1,224,000
Balance – March 31, 2019		30,459,804	$	304,000	$	21,678,000		$	10,486,000	$	32,468,000
Net income		—		—		—			1,079,000		1,079,000
Balance – June 30, 2019		30,459,804	$	304,000	$	21,678,000		$	11,565,000	$	33,547,000
Return of capital distribution		—		—		(1,600,000	)		—		(1,600,000	)
Net income		—		—		—			1,273,000		1,273,000
Balance – September 30, 2019		30,459,804	$	304,000	$	20,078,000		$	12,838,000	$	33,220,000

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

- 3 -

SIEBERT FINANCIAL CORP. & SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited)

Nine Months Ended
September 30,

2019 2018
Cash Flows From Operating Activities:

Net income
$
3,102,000

$
6,611,000

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

Deferred income tax expense
471,000

(1,393,000
)
Depreciation and amortization
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:

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
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
38,000

784,000

Lease incentive obligation
(171,000
)

—

Other liabilities
91,000

—

Lease liability
316,000

—

Net cash provided by operating activities

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
(785,000
)

(272,000
)
Purchase of software
(1,086,000
)

(678,000
)
Net cash used in investing activities

(7,380,000
)

(950,000
)

Net (decrease) / increase in cash and cash equivalents

(2,998,000
)

3,576,000

Cash and cash equivalents - beginning of period
7,229,000

3,765,000

Cash and cash equivalents - end of period

$
4,231,000

$
7,341,000

	Nine Months Ended September 30,
	2020			2019
Cash Flows From Operating Activities
Net income	$	2,056,000		$	3,574,000
Adjustments to reconcile net income to net cash provided by / (used in) operating activities:
Deferred income tax expense		148,000			672,000
Depreciation and amortization		1,193,000			689,000

Changes in
Receivables from customers		(5,511,000	)		(15,339,000	)
Receivables from non-customers		—			(103,000	)
Receivables from and deposits with broker-dealers and clearing organizations		69,000			(14,000	)
Securities borrowed		(90,228,000	)		43,382,000
Securities owned, at fair value		(462,000	)		1,671,000
Prepaid expenses and other assets		(586,000	)		167,000
Prepaid service contract – non-current		(763,000	)		—
Payables to customers		34,065,000			(3,541,000	)
Payables to non-customers		1,283,000			(3,847,000	)
Drafts payable		(1,199,000	)		234,000
Payables to broker-dealers and clearing organizations		(167,000	)		1,004,000
Accounts payable and accrued liabilities		311,000			(143,000	)
Securities loaned		96,334,000			(35,905,000	)
Securities sold, not yet purchased, at fair value		(91,000	)		(4,000	)
Interest payable		(10,000	)		—
Lease liabilities		(90,000	)		334,000
Taxes payable		—			14,000
Other liabilities		—			91,000
Net cash provided by / (used in) operating activities		36,352,000			(7,064,000	)

Cash Flows From Investing Activities
Escrow deposit		—			(2,000,000	)
Purchase of furniture, equipment, and leasehold improvements		—			(783,000	)
Purchase of software		(334,000	)		(1,086,000	)
Net cash used in investing activities		(334,000	)		(3,869,000	)

Cash Flows From Financing Activities
Notes payable – related party		(2,000,000	)		2,000,000
Long-term debt		4,904,000			—
Purchase of StockCross common stock		—			(3,425,000	)
Return of capital distribution - StockCross		—			(1,600,000	)
Treasury stock sales - StockCross		—			172,000
Net cash provided by / (used in) financing activities		2,904,000			(2,853,000	)

Net increase / (decrease) in cash and cash equivalents, and cash and securities segregated for regulatory purposes		38,922,000			(13,786,000	)
Cash and cash equivalents, and cash and securities segregated for regulatory purposes - beginning of year		229,594,000			214,038,000
Cash and cash equivalents, and cash and securities segregated for regulatory purposes - end of period	$	268,516,000		$	200,252,000

Cash and cash equivalents - end of period	$	4,536,000		$	5,883,000
Cash and securities segregated for regulatory purposes - end of period		263,980,000			194,369,000
Cash and cash equivalents, and cash and securities segregated for regulatory purposes - end of period	$	268,516,000		$	200,252,000

Supplemental cash flow information
Cash paid during the period for income taxes	$	133,000		$	635,000
Cash paid during the period for interest	$	263,000		$	84,000

Non-cash investing and financing activities
Shares issued for payment of professional services	$	1,127,000		$	—

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

- 4 -

SIEBERT FINANCIAL CORP. & SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

1. Organization and Basis of Presentation

Organization

Overview

Siebert Financial Corp., a New York corporation incorporated in 1934, is a holding company that conducts its retail 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. (“SNXT”), a New York corporation registered with the U.S. Securities and Exchange Commission (“SEC”) as a Registered Investment ~~Advisor~~Adviser 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. ~~It also~~Siebert conducts operations through ~~a fourth~~its wholly-owned subsidiary, Siebert Technologies, LLC. (“STCH”), a Nevada limited liability company and developer of robo-advisory technology. ~~In September 2019,~~Siebert offers prime brokerage services through its wholly-owned subsidiary, WPS Prime Services, LLC, (“WP”), a Delaware limited liability company and a broker-dealer registered with the ~~name of this~~SEC. Siebert also owns StockCross Digital Solutions, Ltd. (“STXD”), an inactive subsidiary ~~was changed from KCA Technologies, LLC. to Siebert Technologies, LLC.~~headquartered in Bermuda. For purposes of this Quarterly Report on Form 10-Q, the terms “Siebert,” “Company,” “we,” “us,” and “our” refer to Siebert Financial Corp., MSCO, SNXT, PWC, STCH, WP, and ~~STCH~~STXD collectively, unless the context otherwise requires.

~~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, with primary operations in New Jersey, Florida, and California. The Company has 1316 branch offices throughout the U.S. and clients around the world. The Company’s SEC filings are available through the Company’s website at ~~www.siebertnet.com,~~www.siebert.com, where investors can obtain copies of the Company’s public filings free of charge. 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~~2020 and ~~2018~~2019 were derived from its operations in the U.S.

~~Basis~~As of ~~Presentation~~September 30, 2020, the Company is comprised of a single operating segment based on the factors related to management’s decision-making framework as well as management evaluating performance and allocating resources based on assessments of the Company from a consolidated perspective.

WPS Prime Services, LLC

As previously disclosed in a Current Report on Form 8-K filed on June 26, 2020, on June 22, 2020, the Company and WPS Acquisitions, LLC entered into an agreement pursuant to which the Company at closing would have sold all of the member interests in WP to WPS Acquisitions, LLC for a purchase price of $7.3 million. As reported in a Current Report on Form 8-K filed on July 30, 2020, effective July 24, 2020, the agreement was terminated by the Company.

Acquisition of StockCross

As previously disclosed in a Current Report on Form 8-K filed on January 25, 2019, the Company purchased approximately 15% of the outstanding shares of StockCross Financial Services, Inc. (“StockCross”). Subsequently, as previously disclosed in a Current Report on Form 8-K filed on January 7, 2020, the Company acquired the remaining 85% of StockCross’ outstanding shares in exchange for 3,298,774 shares of the Company’s common stock. Effective January 1, 2020, StockCross was merged with and into MSCO, and as of January 1, 2020, all clearing and other services provided by StockCross are performed by MSCO.

Change in Reporting Entity

As of the date of the Company’s acquisition of StockCross, the Company and StockCross were entities under common control of Gloria E. Gebbia, the Company’s principal stockholder, and members of her immediate family (collectively, the “Gebbia Family”). The acquisition represented a change in reporting entity and as such, the companies have been presented on a combined basis for all periods presented in the unaudited condensed consolidated financial statements (“financial statements”). See “Note 3 – Acquisitions” for additional detail on the transaction with StockCross and the corresponding accounting.

- 5 -

COVID-19

The challenges posed by the COVID-19 pandemic on the global economy increased significantly starting in the first quarter of 2020. COVID-19 has spread across the globe during 2020 and has impacted economic activity worldwide. In response to COVID-19, national and local governments around the world have instituted certain measures, including travel bans, prohibitions on group events and gatherings, shutdowns of certain businesses, curfews, shelter-in-place orders and recommendations to practice social distancing.

The Company instituted a number of temporary closures of branch offices; however, as of the date of the filing of this report, all of the Company’s branch offices have been re-opened while maintaining compliance with federal, state and local mandates and guidelines. The Company has taken significant steps to ensure that its employees and customers are operating in a safe environment by implementing measures such as social distancing, sanitizing workstations, temperature checks, requiring masks, and alternating staff. The impact from the COVID-19 pandemic has caused the revenue and income of the Company to decrease; however, the Company has implemented various initiatives to offset this decline.

The Company is actively monitoring the impact of COVID-19 on the Company’s business, financial condition, liquidity, operations, employees, clients and business partners. Based on management’s assessment as of September 30, 2020, the ultimate impact of COVID-19 on the Company’s business, results of operations, financial condition and cash flows is dependent on future developments, including the duration of the pandemic and the related length of its impact on the global economy, which are uncertain and cannot be predicted at this time.

See “Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations” for additional detail on COVID-19 and its impact on the Company.

Basis of Presentation

The ~~unaudited condensed consolidated~~ financial statements 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 condensed consolidated~~ financial statements contain all adjustments (consisting of normal recurring entries) necessary to fairly present such interim results. Interim results are not necessarily indicative of the results of operations which may be expected for a full year or any subsequent period. These ~~unaudited condensed consolidated~~ financial statements should be read in conjunction with the financial statements and notes thereto in the Company’s Annual Report on Form 10-K for the year ended December 31, ~~2018~~2019 (“~~2018~~2019 Form 10-K”). 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 current year’s presentation. The reclassifications consisted of breaking out certain commissions and fees 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 current year presentation. These reclassifications have no effect on previously reported total revenue, total expenses, or net income.

~~- 5 -~~

Significant Accounting Policies

The Company’s significant accounting policies are included in “Note 2 – Summary of Significant Accounting Policies” in the Company’s ~~2018~~2019 Form 10-K. ~~There~~The following changes to the Company’s significant accounting policies as of September 30, 2020 are primarily due to the acquisition of StockCross. Other than the updates indicated below and in “Note 2 – New Accounting Standards,” there have been no significant changes to ~~these~~the Company’s significant accounting ~~policies~~policies.

Cash and Securities Segregated For Regulatory Purposes

MSCO is subject to Exchange Act Rule 15c3-3, referred to as the “Customer Protection Rule,” which requires segregation of funds in a special reserve account for the exclusive benefit of customers. Effective upon the Company’s acquisition of StockCross on January 1, 2020, the requirements and special reserve accounts of MSCO and StockCross were combined. See “Note 15 – Capital Requirements” for additional detail.

Receivables From and Payables To Customers

Accounts receivable from and payable to customers include amounts due and owed on cash and margin transactions. Securities owned by customers are held as collateral for receivables. Receivables from customers are reported at their outstanding principal balance, adjusted for any allowance for doubtful accounts. An allowance is established when collectability is not reasonably assured. When the receivable from a brokerage client is considered to be impaired, the amount of impairment is generally measured based on the fair value of the securities acting as collateral, which is measured based on current prices from independent sources such as listed market prices or broker-dealer price quotations. Securities beneficially owned by customers, including those that collateralize margin or other similar transactions, are not reflected in the statements of financial condition. No valuation allowance for doubtful accounts was necessary as of September 30, 2020 and December 31, 2019.

- 6 -

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

Accounts receivable from and payable to broker-dealers and clearing organizations includes amounts due from / to introducing broker-dealers, fail-to-deliver and fail-to-receive items, and amounts receivable for unsettled regular-way transactions. Deposits with broker-dealers and clearing organizations include amounts held on deposit with broker-dealers and clearing organizations and are included in the line item “Deposits with broker-dealers and clearing organizations.”

MSCO customer transactions for the nine months ended September 30, 2020 were both self-cleared and cleared on a fully disclosed basis through National Financial Services Corp. (“NFS”). MSCO customer transactions for the nine months ended September 30, 2019 ~~except as described in~~were cleared on a fully disclosed basis through NFS and StockCross, the ~~sections “Equity Method Investments”~~former of which was an affiliate. As of January 1, 2020, all clearing 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,~~other services provided by StockCross 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 operations~~.performed by MSCO.

The Company operates on a month to month basis with its broker-dealers and clearing organizations and their fees are offset against the Company's revenues on a monthly basis. As of September 30, 2020, the Company’s cash clearing deposits with NFS were $50,000. As of December 31, 2019, MSCO’s cash clearing deposits with NFS and StockCross were $50,000 and $75,000, respectively. Upon the closing of the Company’s acquisition of StockCross on January 1, 2020, all MSCO deposits with StockCross were eliminated. As of September 30, 2020 and December 31, 2019, MSCO had deposits with and other non-current receivables from multiple broker-dealers and clearing organizations of approximately $2.1 million and $1.9 million, respectively.

WP’s customer transactions clear on a fully disclosed basis through two clearing broker-dealers, The Goldman Sachs Group, Inc. (“Goldman Sachs”) and Pershing LLC (“Pershing”). Amounts payable to broker-dealers and clearing organizations are offset against amounts receivables from broker-dealers and clearing organizations. Receivables from these broker-dealers and clearing organizations are subject to clearing agreements and include the net receivable from net monthly revenues as well as cash on deposit. As of both September 30, 2020 and December 31, 2019, WP’s cash clearing deposits with Goldman Sachs and Pershing were approximately $2 million and $1 million, respectively.

The Company evaluates ~~its equity method investments whenever events or changes in circumstance indicate that~~receivables from broker-dealers and clearing organizations and other receivables for collectability noting no amount was considered uncollectable as of September 30, 2020 and December 31, 2019. No valuation allowance is recognized for these receivables as the ~~carrying amounts~~Company does not have a history of ~~such investments may be impaired. If a decline~~losses from these receivables and does not anticipate losses in the future. See “Note 11 – Revenue Recognition” for additional detail on the accounting policies for the revenue related to these receivables.

Securities Borrowed and Securities Loaned

Securities borrowed are recorded at the amount of cash collateral advanced. Securities borrowed transactions require the Company to deposit cash, letters of credit, or other collateral with the lender. Securities loaned are recorded at the amount of cash collateral received. For securities borrowed and loaned, the Company monitors the market value of ~~an equity method investment is determined~~the securities and obtains or refunds collateral as necessary.

Securities Owned, at Fair Value

Securities owned, at fair value represent marketable securities owned by the Company at trade-date valuation. See “Note 6 – Fair Value Measurements” for additional detail.

Payables to ~~be other than temporary, a loss is recorded in earnings in~~Non-Customers

Accounts payable to non-customers includes amounts due on cash and margin transactions on accounts owned and controlled by principal officers, directors and stockholders of the ~~current period.~~Company. Payables to non-customers amounts include any amounts received from interest on credit balances.

Payables to non-customers also include amounts due on cash transactions owned and controlled by the Company’s proprietary accounts of introducing broker-dealers. Effective upon the Company’s acquisition of StockCross on January 1, 2020, the Company no longer had any proprietary accounts of introducing broker-dealers.

Securities Sold, Not Yet Purchased, at Fair Value

Securities sold, not yet purchased, at fair value represent marketable securities sold by the Company prior to purchase at trade-date valuation. See “Note 6 – Fair Value Measurements” for additional detail.

- 7 -

2. New Accounting Standards

Recently Adopted Accounting Pronouncements

ASU ~~2016-02~~2018-15 – 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 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, 2019, the Company recognized lease right-of-use assets of approximately $2.5 million and corresponding lease liabilities of approximately $2.8 million.

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~~Accounting Standards Update (“ASU”) 2018-15, ~~Intangibles—~~Intangibles, Goodwill and ~~Other—~~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~~adopted this new ~~standard.~~standard on January 1, 2020. See “Note 5 – Prepaid Service Contract” for additional detail.

ASU 2018-13 - In August 2018, the FASB issued ASU 2018-13, Fair value Measurement (Accounting Standards Codification (“ASC”) 820): Disclosure Framework-Changes to the Disclosure Requirements for Fair Value Measurement. ASU 2018-13 removes certain disclosures, modifies certain disclosures and adds additional disclosures. The standard is effective for annual periods, including interim periods within those annual periods, beginning after December 15, 2019 and early adoption is permitted. The Company adopted the new standard on its effective date, January 1, 2020, and determined it was immaterial to the Company’s financial statements as of September 30, 2020.

ASU 2018-07 - In June 2018, the FASB issued ASU No. 2018-07, Compensation - Stock Compensation (Topic 718). ASU 2018-07 is intended to reduce cost and complexity of financial reporting for non-employee share-based payments. Currently, the accounting requirements for non-employee and employee share-based payments are significantly different. ASU 2018-07 expands the scope of Topic 718, which currently only includes share-based payments to employees, to include share-based payments to non-employees for goods or services. Consequently, the accounting for share-based payments to non-employees and employees will be substantially aligned. This ASU supersedes Subtopic 505-50, “Equity - Equity-Based Payments to Nonemployees.” The amendments to ASU 2018-07 are effective for fiscal years beginning after December 15, 2019, and interim periods within fiscal years beginning after December 15, 2020. Early adoption is permitted, but no earlier than a company’s adoption date of ASU No. 2014-09, (Topic 606), “Revenue from Contracts with Customers.” The Company adopted this accounting pronouncement on January 1, 2020.

Management has evaluated other recently issued accounting pronouncements and does not believe that any of these pronouncements will have a significant impact on the Company’s financial statements and related disclosures as of September 30, 2020.

3. ~~Capital Requirements~~Acquisitions

~~MSCO is subject~~StockCross

Overview of Acquisition

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

Prior to being acquired by the Company, StockCross and the Company were affiliated entities through common ownership and had various related party transactions. In January 2019, the Company acquired approximately 15% ownership of StockCross. Effective January 1, 2020, pursuant to an Agreement and Plan of Merger, the Company acquired the remaining 85% of StockCross’ outstanding shares and StockCross was merged with and into MSCO. The purchase price paid was approximately $29,750,000 or 3,298,774 shares of the Company’s restricted common stock which was issued in connection with the acquisition. Prior 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,acquisition, MSCO had a clearing agreement with StockCross whereby StockCross provided custody and clearing services to MSCO for its securities broker-dealer business; however, as of January 1, 2020, all clearing and other services provided by StockCross are performed by MSCO.

Accounting for Acquisition

Prior to and as of the date of the acquisition, the Company and StockCross were entities under common control of the Gebbia Family. As such, the acquisition was accounted for as a transaction between entities under common control.

A common-control transaction is similar to a business combination for the Company as it is the entity that received the net ~~capital~~assets of ~~approximately $5.7 million, which was approximately $5.4 million~~StockCross; however, this common-control transaction does not meet the definition of a business combination in ~~excess of required~~accordance with GAAP because there is no change in control over the 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 required net capital of $250,000.~~assets.

- 68 -

~~MSCO claims exemption from~~The acquisition represented a change in reporting entity. As such, upon the ~~reserve requirements~~closing of the acquisition, the net assets of the Company were combined with those of StockCross at their historical carrying amounts. The companies have been presented on a combined basis for all periods presented in the financial statements in a manner similar to a pooling of interests, as the period of common control existed prior to the periods presented in the financial statements. Accordingly, the historical financial statements of the Company have been presented under the ~~SEC’s Rule 15c-3-3 pursuant~~“as if pooling” method.

Prior to ~~paragraph (k)(2)(ii) as it clears~~the Company’s acquisition of StockCross, StockCross sold its ~~customer~~treasury stock totaling $172,000 to third parties and the Company purchased approximately 15% of the outstanding shares of StockCross from an unrelated party for $3,665,000. On September 5, 2019, StockCross made a return of capital distribution in the aggregate amount of $1.6 million, of which the Company received approximately 15%, or $241,000. All of these cash transactions ~~through one unaffiliated~~are reflected in the “Cash flows from financing activities” section of the statements of cash flows for the nine months ended September 30, 2019.

Assets Acquired and ~~one affiliated clearing firm on a fully disclosed basis.~~Liabilities Assumed

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

	Historical Carrying Value

Assets acquired
Cash and cash equivalents	$	1,588,000
Cash and securities segregated for regulatory purposes		224,814,000
Receivables from customers		86,331,000
Receivables from broker-dealers and clearing organizations		3,105,000
Other receivables		627,000
Prepaid expenses and other assets		346,000
Securities borrowed		193,529,000
Securities owned, at fair value		3,018,000
Furniture, equipment and leasehold improvements, net		19,000
Lease right-of-use assets		1,141,000
Deferred tax assets		407,000
Total Assets acquired		514,925,000

Liabilities assumed
Payables to customers		308,091,000
Payables to non-customers		9,151,000
Drafts payable		2,834,000
Payables to broker-dealers and clearing organizations		1,406,000
Accounts payable and accrued liabilities		963,000
Securities loaned		170,443,000
Securities sold, not yet purchased, at fair value		28,000
Notes payable – related party		5,000,000
Lease liabilities		1,295,000
Total Liabilities assumed		499,211,000

Net Assets acquired	$	15,714,000

Pro Forma Statements

The following pro forma financial statements present the statements of income of the Company as if the acquisition of StockCross had occurred on January 1, 2019, inclusive of pro forma adjustments (unaudited). The combined results of these pro forma financial statements are also reflected in the Company’s ~~cash~~financial statements for the periods presented for 2019. StockCross’ financial statements have already been consolidated in the Company’s financial statements for the periods presented for 2020:

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Statements of Operations

Three Months Ended September 30, 2019 (unaudited)

	Three Months Ended September 30, 2019
	Siebert		StockCross		Pro Forma Adjustments			Total Combined Siebert

Revenue
Commissions and fees	$	1,925,000	$	348,000	$	—		$	2,273,000
Margin interest, marketing and distribution fees		2,944,000		968,000		—			3,912,000
Principal transactions		2,041,000		286,000		—			2,327,000
Interest income		23,000		1,038,000		—			1,061,000
Market making		—		330,000		—			330,000
Stock borrow / stock loan		—		349,000		—			349,000
Advisory fees		211,000		—		—			211,000
Other income		—		351,000		(61,000	)		290,000
Total Revenue		7,144,000		3,670,000		(61,000	)		10,753,000

Expenses
Employee compensation and benefits		3,157,000		1,652,000		—			4,809,000
Clearing fees, including execution costs		617,000		242,000		(61,000	)		798,000
Technology and communications		291,000		150,000		—			441,000
Other general and administrative		589,000		279,000		—			868,000
Data processing		—		527,000		—			527,000
Rent and occupancy		380,000		250,000		—			630,000
Professional fees		439,000		344,000		—			783,000
Depreciation and amortization		244,000		—		—			244,000
Interest expense		—		31,000		—			31,000
Total Expenses		5,717,000		3,475,000		(61,000	)		9,131,000

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

Income before provision (benefit) for (from) income taxes		1,457,000		195,000		(30,000	)		1,622,000
Provision (benefit) for (from) income taxes		353,000		4,000		(8,000	)		349,000
Net income / (loss)	$	1,104,000	$	191,000	$	(22,000	)	$	1,273,000

Net income per share of common stock
Basic and diluted	$	0.04	$	0.03				$	0.04

Weighted average shares outstanding
Basic and diluted		27,157,188		6,152,500

Pro forma shares used to compute net income per share									30,455,962

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Nine Months Ended September 30, 2019 (unaudited)

	Nine Months Ended September 30, 2019
	Siebert		StockCross		Pro Forma Adjustments			Total Combined Siebert

Revenue
Commissions and fees	$	6,030,000	$	1,102,000	$	—		$	7,132,000
Margin interest, marketing and distribution fees		8,499,000		2,662,000		—			11,161,000
Principal transactions		5,479,000		659,000		—			6,138,000
Interest income		54,000		3,363,000		—			3,417,000
Market making		—		1,303,000		—			1,303,000
Stock borrow / stock loan		—		1,353,000		—			1,353,000
Advisory fees		572,000		—		—			572,000
Other income		—		816,000		(183,000	)		633,000
Total Revenue		20,634,000		11,258,000		(183,000	)		31,709,000

Expenses
Employee compensation and benefits		8,882,000		4,930,000		—			13,812,000
Clearing fees, including execution costs		1,849,000		659,000		(183,000	)		2,325,000
Technology and communications		800,000		464,000		—			1,264,000
Other general and administrative		1,861,000		926,000		—			2,787,000
Data processing		—		1,487,000		—			1,487,000
Rent and occupancy		995,000		759,000		—			1,754,000
Professional fees		1,388,000		1,180,000		—			2,568,000
Depreciation and amortization		670,000		19,000		—			689,000
Interest expense		—		84,000		—			84,000
Total Expenses		16,445,000		10,508,000		(183,000	)		26,770,000

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

Income before provision (benefit) for (from) income taxes		4,273,000		750,000		(84,000	)		4,939,000
Provision (benefit) for (from) income taxes		1,171,000		218,000		(24,000	)		1,365,000
Net income / (loss)	$	3,102,000	$	532,000	$	(60,000	)	$	3,574,000

Net income per share of common stock
Basic and diluted	$	0.11	$	0.09				$	0.12

Weighted average shares outstanding
Basic and diluted		27,157,188		6,152,500

Pro forma shares used to compute net income per share									30,455,962

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Statements of Financial Condition

	As of December 31, 2019
	Siebert		StockCross		Pro Forma Adjustments (unaudited)			Total Combined Siebert (unaudited)

ASSETS
Cash and cash equivalents	$	3,082,000	$	1,588,000	$	—		$	4,670,000
Cash and securities segregated for regulatory purposes		110,000		224,814,000		—			224,924,000
Receivables from customers		—		86,331,000		—			86,331,000
Receivables from broker-dealers and clearing organizations		3,067,000		1,265,000		(808,000	)		3,524,000
Receivables from related party		1,000,000		—		(1,000,000	)		—
Other receivables		223,000		627,000		(88,000	)		762,000
Prepaid expenses and other assets		624,000		346,000		—			970,000
Securities borrowed		—		193,529,000		—			193,529,000
Securities owned, at fair value		—		3,018,000		—			3,018,000
Total Current assets		8,106,000		511,518,000		(1,896,000	)		517,728,000

Deposits with broker-dealers and clearing organizations		3,186,000		1,840,000		(75,000	)		4,951,000
Furniture, equipment and leasehold improvements, net		1,131,000		19,000		—			1,150,000
Software, net		1,888,000		—		—			1,888,000
Lease right-of-use assets		2,810,000		1,141,000		—			3,951,000
Equity method investment in related party		3,360,000		—		(3,360,000	)		—
Deferred tax assets		4,981,000		407,000		—			5,388,000
Intangible assets, net		1,022,000		—		—			1,022,000
Goodwill		1,989,000		—		—			1,989,000
Total Assets	$	28,473,000	$	514,925,000	$	(5,331,000	)	$	538,067,000

LIABILITIES AND STOCKHOLDERS’ EQUITY
Payables to customers	$	—	$	308,091,000	$	—		$	308,091,000
Payables to non-customers		—		9,151,000		(1,088,000	)		8,063,000
Drafts payable		—		2,834,000		—			2,834,000
Payables to broker-dealers and clearing organizations		—		1,406,000		(883,000	)		523,000
Payables to related parties		7,000		—		(7,000	)		—
Accounts payable and accrued liabilities		1,473,000		963,000		7,000			2,443,000
Securities loaned		—		170,443,000		—			170,443,000
Securities sold, not yet purchased, at fair value		88,000		28,000		—			116,000
Interest payable		10,000		—		—			10,000
Current portion of notes payable - related party		3,000,000		5,000,000		—			8,000,000
Current portion of lease liabilities		1,291,000		936,000		—			2,227,000
Total Current liabilities		5,869,000		498,852,000		(1,971,000	)		502,750,000

Lease liabilities, less current portion		1,823,000		359,000		—			2,182,000
Total Liabilities		7,692,000		499,211,000		(1,971,000	)		504,932,000

Commitments and Contingencies
Stockholders’ equity
Common stock, $.01 par value		271,000		10,000		23,000			304,000
Additional paid-in capital		7,641,000		12,436,000		(180,000	)		19,897,000
Retained earnings		12,869,000		3,268,000		(3,203,000	)		12,934,000
Total Stockholders’ equity		20,781,000		15,714,000		(3,360,000	)		33,135,000

Total Liabilities and stockholders' equity	$	28,473,000	$	514,925,000	$	(5,331,000	)	$	538,067,000

- 12 -

Pro Forma Adjustments

The pro forma results include adjustments made for the consolidation of both entities. The statements of income reflects the elimination of StockCross’ other income and ~~cash equivalents are unrestricted~~the Company’s corresponding custody and ~~are used to fund working capital needs. The~~clearing fees resulting from the fully disclosed clearing relationship between MSCO and StockCross. In addition, the Company’s ~~total assets~~earnings recognized as part of its equity method investment in StockCross for the three and nine months ended September 30, 2019 were ~~approximately $24.0 million,~~eliminated upon consolidation. These adjustments to pre-tax income were tax affected using an estimated effective tax rate of ~~which $4.2 million, or approximately 18%,~~28.0%.

The statements of financial condition reflects the elimination of intercompany payables and receivables between the Company and StockCross as part of their ongoing business relationship, as well as reflects the elimination of the Company’s 15% ownership of StockCross. The statements of financial condition reflects an adjustment to increase the Company’s common stock by the par value of the shares issued in connection with the transaction and to eliminate the par value of StockCross’ common stock. The adjustments also increase additional paid-in capital for the net difference, as well as the change in retained earnings from the adjustments in the statements of operations.

Pro forma data may not be indicative of the results that would have been obtained had these events occurred at the beginning of the periods presented, nor is ~~highly liquid.~~it intended to be a projection of future results.

Overview of Acquisition

As previously disclosed in the Company’s 2019 Form 10-K, the Company completed its acquisition of 100% of the member interests in WP and effective December 1, 2019, WP became a wholly-owned subsidiary of the Company. The acquisition was accounted for under the acquisition method of accounting for business combinations pursuant to ASC 805 - Business Combinations and resulted in $1,989,000 of goodwill.

Pro Forma Statements

The following pro forma summary presents the statements of income of the Company as if the acquisition of WP had occurred on January 1, 2019, inclusive of pro forma adjustments (unaudited). WP’s financial statements have already been consolidated as part of the Company’s ~~total~~financial statements for the periods presented for 2020.

	Three Months Ended September 30, 2019		Nine Months Ended September 30, 2019
Revenue	$	14,372,000	$	41,191,000
Operating income	$	1,905,000	$	3,693,000
Net income	$	1,577,000	$	2,407,000

The pro forma results include adjustments made for the consolidation of both entities. These adjustments take into consideration the interest expense on the promissory note used in financing the acquisition, the amortization of the acquired intangible assets, as well as the tax effect of ~~December 31, 2018 were approximately $18.2 million,~~pro forma adjustments using an estimated combined statutory rate of ~~which $7.2 million, or approximately 40%,~~28.0%.

4. Receivables ~~from~~From, Payables To, and ~~Payable to Brokers, Dealers~~Deposits With Broker-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~~payables to, ~~brokers, dealers~~and deposits with broker-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

- 13 -

	As of September 30, 2020		As of December 31, 2019
Receivables from and deposits with broker-dealers and clearing organizations
DTCC / OCC / NSCC	$	3,678,000	$	3,059,000
Goldman Sachs		2,105,000		2,841,000
Pershing Capital		1,279,000		1,192,000
NFS		1,113,000		1,328,000
Securities fail-to-deliver		207,000		43,000
Globalshares		24,000		2,000
ICBC		—		10,000
Total Receivables from and deposits with broker-dealers and clearing organizations	$	8,406,000	$	8,475,000

Payables to broker-dealers and clearing organizations
Securities fail-to-receive	$	356,000	$	523,000
Total Payables to broker-dealers and clearing organizations	$	356,000	$	523,000

5. Prepaid Service Contract

On April 21, 2020, MSCO entered into a Master Services Agreement (“MSA”), with InvestCloud, Inc. (“InvestCloud”). Pursuant to the MSA, InvestCloud agreed to provide MSCO with the InvestCloud Platform, a new client and back end interface and related functionalities for MSCO’s key operations. MSCO agreed to pay InvestCloud as consideration therefore during the initial three-year term an annual license fee of $600,000 as well as an upfront professional service fee of $1.0 million for one-time configuration, installation and customization of the software. Following the initial three year term, the MSA will automatically renew for additional one-year terms unless terminated by MSCO upon 120 days’ notice.

In connection with the MSA, InvestCloud entered into a Side Letter Agreement (“Side Letter”) with the Company pursuant to which InvestCloud acquired 193,906 shares of the Company’s restricted common stock (the “Shares”) at a per share price of $5.81 (the Company’s share price as of the close of May 12, 2020) for a total of $1.1 million for professional services to integrate the InvestCloud Platform into Siebert’s existing systems and Robo-Advisor. The Shares were issued to InvestCloud on May 12, 2020 without registration under the Securities Act of 1933 in reliance upon the exemption provided in Section 4(a)(2) thereunder. This transaction is reflected in the “Non-cash investing and financing activities” section of the statements of cash flows.

In accordance with ASU 2018-15, Intangibles, Goodwill and Other Internal-Use Software, the Company initially recorded a prepaid asset equal to the $2.1 million of the total professional services related to the development work performed by InvestCloud, which is within the line item “Prepaid service contract – non-current” on the statements of financial condition. The Company will amortize this asset over the 3-year term of the contract, a period during which the arrangement is noncancelable. The license fees related to Siebert’s use of the InvestCloud Platform are prepaid three months in advance and are within the line item “Prepaid expenses and other assets” on the statements of financial condition. These prepaid license fees are amortized over the three month term. The amortization for all the prepaid assets related to InvestCloud development is within the line item titled “Technology and Communications” on the statements of income.

6. Fair Value Measurements

Overview

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

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

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

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

Level 3 - Unobservable inputs for the asset or liability.

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

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

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

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

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

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.

Equity securities: Equity securities are valued based on quoted prices from the exchange. To the extent these securities are actively traded, valuation adjustments are not applied, and they are categorized in level 1 of the fair value hierarchy. Securities quoted in inactive markets or with observable inputs are categorized into level 2. If there are no observable inputs or quoted prices, securities are categorized as level 3 assets in the fair value hierarchy. Level 3 assets are not actively traded and subjective estimates based on managements’ assumptions are utilized for valuation.

Mutual funds: Mutual funds are valued based on the closing net asset value of the publicly traded mutual funds. These securities are actively traded and therefore valuation adjustments are not applied. As such, mutual funds are categorized in level 1 of the fair value hierarchy.

Certificates of deposit: Certificates of deposit included in investments are valued at cost, which approximates fair value. When certificates of deposits are held directly with banking institutions and issued directly to the Company, these are categorized within cash and cash equivalents in level 2 of the fair value hierarchy. When certificates of deposits are available for trading, they are categorized within securities owned, at fair value in level 2 of the fair value hierarchy.

Fair Value Hierarchy Tables

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

- 15 -

	As of September 30, 2020
	Level 1		Level 2		Level 3		Total
Assets
Cash and cash equivalents
Certificates of deposit	$	—	$	142,000	$	—	$	142,000

Securities owned, at fair value
U.S. government securities*	$	2,028,000	$	—	$	—	$	2,028,000
Certificates of deposit		—		91,000		—		91,000
Corporate bonds		—		120,000		—		120,000
Equity securities		765,000		343,000		—		1,108,000
Mutual funds		133,000		—		—		133,000
Total Securities owned, at fair value	$	2,926,000	$	554,000	$	—	$	3,480,000

Liabilities
Securities sold, not yet purchased, at fair value
Equity securities	$	—	$	25,000	$	—	$	25,000
Total Securities sold, not yet purchased, at fair value	$	—	$	25,000	$	—	$	25,000

*As of September 30, 2020, U.S. government securities mature on 08/31/2021

	As of December 31, 2019
	Level 1		Level 2		Level 3		Total
Assets
Cash and cash equivalents
Certificates of deposit	$	—	$	142,000	$	—	$	142,000

Segregated securities
U.S. government securities	$	1,311,000		—		—	$	1,311,000

Securities owned, at fair value
U.S. government securities	$	2,007,000	$	—	$	—	$	2,007,000
Corporate bonds		—		25,000		—		25,000
Equity securities		453,000		245,000		288,000		986,000
Total Securities owned, at fair value	$	2,460,000	$	270,000	$	288,000	$	3,018,000

Liabilities
Securities sold, not yet purchased, at fair value
Equity securities	$	88,000	$	28,000	$	—	$	116,000
Total Securities sold, not yet purchased, at fair value	$	88,000	$	28,000	$	—	$	116,000

	Changes in Level 3 Equity Assets
	Nine Months Ended September 30, 2020
	Amount			Valuation Technique	Reason for Change
Balance – January 1, 2020	$	288,000		Liquidation value based on valuation report
Transfers out of level 3		(288,000	)		Sale of equity security
Balance – September 30, 2020	$	—

The following represents financial instruments in which the ending balances as of September 30, 2020 and December 31, 2019 are not carried at fair value in the statements of financial condition:

Short-term financial instruments: The carrying value of short-term financial instruments, including cash and securities segregated for regulatory purposes are recorded at amounts that approximate the fair value of these instruments. These financial instruments generally expose the Company to limited credit risk and have no stated maturities or have short-term maturities and carry interest rates that approximate market rates. Cash and securities segregated for regulatory purposes are classified as level 1. Securities segregated for regulatory purposes consist of treasury notes which are categorized in the above tables as level 1 assets.

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Receivables and other assets: Receivables from broker-dealers and clearing organizations, receivables from customers, other receivables, and other assets are recorded at amounts that approximate fair value and are classified as level 2 under the fair value hierarchy.

Securities borrowed and securities loaned: Securities borrowed and securities loaned are recorded at amounts which approximate fair value and are primarily classified as level 2 under the fair value hierarchy. The Company’s securities borrowed and securities loaned balances represent amounts of equity securities borrow and loan contracts and are marked-to-market daily in accordance with standard industry practices which approximate fair value.

Payables: Payables to customers, payables to non-customers, drafts payable, payables to broker-dealers and clearing organizations, accounts payable and accrued liabilities, and interest payable are recorded at amounts that approximate fair value due to their short-term nature and are classified as level 2 under the fair value hierarchy.

Notes payable – related party: The carrying amount of the notes payable – related party approximates fair value due to the relative short-term nature of the borrowing. Under the fair value hierarchy, the notes payable – related party is classified as level 2.

Line of credit: The carrying amount of the line of credit with East West Bank approximates fair value due to the relative short-term nature of the borrowing. Under the fair value hierarchy, the line of credit is classified as level 2.

7. 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, 2019, the Company adopted ASU 2016-02, Leases (Topic 842) and all subsequent ASUs that modified Topic 842. For the Company, Topic 842 affected the accounting treatment for operating lease agreements in which the Company is the lessee.

As of September 30, ~~2019,~~2020, the Company rents office space under operating leases expiring in ~~2019~~2021 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. The Company acquired two leases from its acquisition of StockCross, the impact of which is reflected in the following disclosures.

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

—

As of September 30, 2020, the Company does not believe that any of the renewal options under the existing leases are reasonably certain to be exercised; however, the Company will continue to assess and monitor the lease renewal options on an ongoing basis.

~~- 7 -~~

	As of September 30, 2020		As of December 31, 2019
Assets
Lease right-of-use assets	$	2,813,000	$	3,951,000
Liabilities
Lease liabilities	$	3,181,000	$	4,409,000

The calculated amounts of the lease right-of-use assets and lease liabilities in the table above are impacted by the length of the lease term and the discount rate used to present value the minimum lease payments. As of September 30, 2019, the Company does not believe that any of the renewal options under the existing leases are reasonably certain to be exercised; however, the Company will continue to assess and monitor the lease renewal options on an ongoing basis. 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~~statements of ~~operations~~income rather than capitalizing them as lease right-of-use assets. The Company determined a discount rate of 5.0% would approximate the Company’s cost to obtain financing given its size, growth, and risk profile.

Lease Term and Discount Rate		As of September 30, 2020
Weighted average remaining lease term – operating leases (in years)	~~3.5~~		2.3
Weighted average discount rate – operating leases	~~5.0%~~		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 usually 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

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	Three Months Ended September 30,				Nine Months Ended September 30,
	2020		2019		2020		2019
Operating lease cost	$	609,000	$	509,000	$	1,755,000	$	1,268,000
Short-term lease cost		20,000		81,000		83,000		321,000
Variable lease cost		65,000		40,000		281,000		165,000
Sublease income		—		—		—		—
Total Rent and occupancy	$	694,000	$	630,000	$	2,119,000	$	1,754,000

Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows from operating leases	$	614,000	$	512,000	$	1,845,000	$	1,338,000

Lease right-of-use assets obtained in exchange for new lease liabilities
Operating leases	$	278,000	$	—	$	2,353,000	$	4,943,000

Lease Commitments

Future annual minimum payments for operating leases with initial terms of greater than one year as of September 30, ~~2019~~2020 were as follows:

Year	Amount		Amount
2019	$	259,000
2020		992,000	$	606,000
2021		759,000		1,403,000
2022		513,000		755,000
2023		493,000		543,000
2024		56,000		56,000
Thereafter		—
Remaining balance of lease payments		3,072,000		3,363,000
Difference between undiscounted cash flows and discounted cash flows		255,000		182,000
Lease liabilities	$	2,817,000	$	3,181,000

As of September 30, 2020, the Company had an operating lease agreement for an office space in Beverly Hills, CA with a term of approximately 5 years. The total commitment of the lease is approximately $1.5 million, and the lease will commence on March 1, 2021.

Rent and ~~related operating~~occupancy expenses were ~~$380,000~~$694,000 and ~~$248,000~~$630,000 for the three months ended September 30, ~~2019~~2020 and ~~2018,~~2019, respectively. Rent and ~~related operating~~occupancy expenses were ~~$995,000~~$2,119,000 and ~~$737,000~~$1,754,000 for the nine months ended September 30, ~~2019~~2020 and ~~2018,~~2019, respectively.

~~6. Equity Method Investments~~8. Goodwill and Intangible Assets, Net

~~In January~~Goodwill

As of September 30, 2020 and December 31, 2019, the ~~Company purchased approximately 15%~~Company’s carrying amount of ~~StockCross’ outstanding shares. The number~~goodwill was $1,989,000, all of ~~shares purchased by~~which came from the Company’s acquisition of WP.

Intangible Assets, Net

As a result of the Company’s acquisition of WP, the Company ~~was 922,875 at a per share price~~had intangible assets consisting of ~~approximately $3.97. The~~WP’s customer relationships and WP’s trade name, the fair values of which were $987,000 and $70,000, respectively, as of the acquisition date. Pursuant to the Company’s ~~ownership~~agreement with the original owners of WP, the Company agreed to discontinue using the name of Weeden Prime Services, LLC and filed to change it to WPS Prime Services, LLC in ~~StockCross is accounted for under~~May 2020. As of September 30, 2020, the ~~equity method of accounting.~~WP trade name has been fully amortized.

- 818 -

Impairment

For the nine months ended September 30, 2020, management concluded that there have been no impairments to the carrying value of the Company’s goodwill and other tangible and intangible assets.

9. Long-Term Debt

Line of Credit with East West Bank

As previously reported in a Current Report on Form 8-K filed July 28, 2020, on July 22, 2020, the Company entered into a Loan and Security Agreement with East West Bank. In ~~determining whether~~accordance with the ~~investment~~terms of this agreement, the Company has the ability to borrow term loans in ~~StockCross~~an aggregate principal amount not to exceed $10 million during the two-year period after July 22, 2020. The Company’s obligations under the agreement are secured by a lien on all of the Company’s cash, dividends, stocks and other monies and property from time to time received or receivable in exchange for the Company’s equity interests in and any other rights to payment from the Company’s subsidiaries; any deposit accounts into which the foregoing is deposited and all substitutions, products, proceeds (cash and non-cash) arising out of any of the foregoing. Each term loan will have a term of four years, beginning when the draw is made. The repayment schedule will utilize a five-year (60 month) amortization period, with a balloon on the remaining amount due at the end of four years.

Term loans made pursuant to the agreement shall bear interest, at the Company’s option, (i) at the prime rate, as reported by the Wall Street Journal, or (ii) 3.0% above the LIBOR rate, provided that the minimum interest rate on any term loan will not be less than 3.25%. In addition to the foregoing, on the date that each term loan is made, the Company shall pay to the lender an origination fee equal to 0.25% of the principal amount of such term loan. Pursuant to the loan agreement, the Company paid all lender expenses in connection with the loan agreement.

This agreement contains certain financial and non-financial covenants. The financial covenants are that the Company must maintain a debt service coverage ratio of 1.35 to 1, an effective tangible net worth of a minimum of $25 million, and MSCO must maintain a net capital ratio that is not less than 10% of aggregate debit items. Certain other non-financial covenants include that the Company must promptly notify East West Bank of the creation or acquisition of any subsidiary that at any time owns assets with a value of $100,000 or greater. As of September 30, 2020 and the date of the filing of this report, the Company was in compliance with all of its covenants related to this agreement.

In addition, the Company’s obligations under the agreement are guaranteed pursuant to a guarantee agreement by and among, John J. Gebbia, individually and as a co-trustee of the John and Gloria Living Trust, U/D/T December 8, 1994 (the “Trust”) and Gloria E. Gebbia, individually and as a co-trustee of the Trust.

As of September 30, 2020, the Company has drawn down a term loan of approximately $4.9 million under this agreement. The Company has incurred interest expense in relation to this term loan of $15,000 for both the three and nine months ended September 30, 2020.

10. Notes Payable - Related Party

As of September 30, 2020, the Company had various notes payable to Gloria E. Gebbia, the Company’s principal stockholder, the details of which are presented below:

Description	Issuance Date	Face Amount
4% due December 2, 2020	December 2, 2019	$	3,000,000

Subordinated to MSCO*
4% due November 30, 2021**	November 30, 2018	$	3,000,000

Total Notes payable – related party		$	6,000,000

*The note payable subordinated to MSCO was acquired as part of the acquisition of StockCross.

**This note payable was renewed on November 30, 2019 for a term of one year. Subsequently, a rate adjustment and extension of its maturity with permissive prepayment was completed on March 3, 2020.

Notes subordinated to MSCO are subordinated to the claims of general creditors, approved by FINRA, and are included in MSCO’s calculation of net capital and the capital requirements under FINRA and SEC regulations.

- 19 -

The Company’s interest expense incurred for these notes for the three months ended September 30, 2020 and 2019 was $104,000 and $24,000, respectively. The Company’s interest expense incurred for these notes for the nine months ended September 30, 2020 and 2019 was $220,000 and $66,000, respectively. The Company’s interest payable was $0 and $10,000 as of September 30, 2020 and December 31, 2019, respectively. Effective March 3, 2020, the interest rate on the loan due November 30, 2021 was renegotiated from 2.75% to 4%. There was no consideration paid or received as part of this renegotiation.

11. Revenue Recognition

Overview of Revenue

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

Margin Interest, Marketing and Distribution fees

Margin interest, marketing and distribution fees consists of two components: margin interest and 12b1 fees resulting from rebates in money market funds. Margin interest is the net interest charged to customers for holding financed margin positions, and 12b1 fees are fees paid to the Company related to trailing payments from money market funds. Margin interest, marketing and distribution fees are recorded as earned.

Commissions and Fees

The Company earns commission revenue for executing trades for clients in individual equities, options, insurance products, futures, fixed income securities, as well as certain third-party mutual funds and ETFs. Commission revenue associated with combined trade execution and clearing services, as well as trade execution services on a standalone basis, is recognized at a point in time on the trade date when the performance obligation is satisfied. The performance obligation is satisfied on the trade date because that is when the underlying financial instrument or purchaser is identified, the pricing is agreed upon and the risks and rewards of ownership have been transferred to / from the customer.

Principal Transactions

Principal transactions primarily represent riskless transactions in which the Company, after executing a solicited order, buys or sells securities as principal and at the same time buys or sells the securities with a markup or markdown to satisfy the order. Principal transactions are recognized at a point in time on the trade date when the performance obligation is satisfied. The performance obligation is satisfied on the trade date because that is when the underlying financial instrument or purchaser is identified, the pricing is agreed upon and the risks and rewards of ownership have been transferred to / from the customer.

Market Making

Market making is revenue generated from the buying and selling of securities. Market making transactions are recorded on a trade-date basis as the securities transactions occur. The performance obligation is satisfied on the trade date because that is when the underlying financial instrument or purchaser is identified, the pricing is agreed upon, and the risks and rewards of ownership have been transferred to / from the counterparty. Securities owned are recorded at fair market value at the end of the reporting period.

Stock Borrow / Stock Loan

The Company borrows securities on behalf of retail clients to facilitate short trading, loans excess margin securities from client accounts, facilitates borrow and loan contracts for broker-dealer counterparties, and provides stock locate services to broker-dealer counterparties. The Company does not utilize stock borrow / stock loan activities for the purpose of financing transactions. Stock borrow / stock loan revenue is reported on a monthly basis net of expense. The performance obligation is satisfied on the contract date because that is when the underlying financial instrument or purchaser is identified, the pricing is agreed upon, and the risks and rewards of ownership have been transferred to / from the counterparty.

For the three months ended September 30, 2020, stock borrow / stock loan revenue was $1,267,000 ($2,499,000 gross revenue less $1,232,000 expenses). For the three months ended September 30, 2019, stock borrow / stock loan revenue was $349,000 ($2,111,000 gross revenue minus $1,762,000 expenses).

For the nine months ended September 30, 2020, stock borrow / stock loan revenue was $2,482,000 ($6,170,000 gross revenue less $3,688,000 expenses). For the nine months ended September 30, 2019, stock borrow / stock loan revenue was $1,353,000 ($8,381,000 gross revenue minus $7,028,000 expenses).

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Advisory Fees

The Company earns advisory fees associated with managing client assets. The performance obligation related to this revenue stream is satisfied over time; however, the advisory fees are variable as they are charged as a percentage of the client’s total asset value, which is determined at the end of the quarter.

Interest Income

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

Other Income

Other income represents fees generated from correspondent clearing fees, corporate services client fees, payment for order flow, and transactional fees generated from client accounts. Transactional fees are recorded concurrently with the related activity. Other income is recorded as earned.

Categorization of Revenue

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

	Three Months Ended September 30,				Nine Months Ended September 30,
Revenue Category	2020		2019		2020		2019		Timing of Recognition

Trading Execution and Clearing Services
Commissions and fees	$	4,679,000	$	2,273,000	$	15,149,000	$	7,132,000	Recorded on trade date
Principal transactions		2,342,000		2,327,000		8,126,000		6,138,000	Recorded on trade date
Market making		423,000		330,000		1,508,000		1,303,000	Recorded on trade date
Stock borrow / stock loan		1,267,000		349,000		2,482,000		1,353,000	Recorded as earned
Advisory fees		305,000		211,000		810,000		572,000	Recorded as earned
Total Trading Execution and Clearing Services		9,016,000		5,490,000		28,075,000		16,498,000

Other Income
Margin interest, marketing and distribution fees
Margin interest		2,130,000		3,068,000		6,465,000		8,755,000	Recorded as earned
12b1 fees		181,000		844,000		1,265,000		2,406,000	Recorded as earned
Total Margin interest, marketing and distribution fees		2,311,000		3,912,000		7,730,000		11,161,000

Interest income		915,000		1,061,000		3,155,000		3,417,000	Recorded as earned
Other income		333,000		290,000		1,035,000		633,000	Recorded as earned

Total Other Income		3,559,000		5,263,000		11,920,000		15,211,000

Total Revenue	$	12,575,000	$	10,753,000	$	39,995,000	$	31,709,000

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

Revenue Stream	Performance Obligation
Commissions and fees, Principal transactions, Market making, Stock borrow / stock loan, Advisory fees	Provide financial services to customers and counterparties
Margin interest, marketing and distribution fees, Interest income, Other income	n / a

- 21 -

Soft Dollar Arrangement

As a result of the acquisition of WP, the Company has soft dollar and commission sharing arrangements with customers that fall both within, and outside of, the safe harbor provisions of Rule 28(e) of the Securities Exchange Act of 1934 ("Rule 28(e)"), as amended. These soft dollar arrangements were determined to be a separate performance obligation that should be accounted for under the equity method of accounting, 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 interdependencyallocated a portion 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.transaction price.

Under ~~the equity method,~~these arrangements, the Company ~~recognizes its share~~charges additional dollars on customer trades and uses these fees to pay third parties for research, brokerage services, market data, and related expenses (“research services”) on behalf of ~~StockCross’ earnings~~clients. The Company is an agent in these arrangements, as it does not control the research services before they are transferred to the customer. As such, the revenue from these agreements are recognized net of cost in the ~~earnings~~statements of ~~equity method investment~~income in ~~related party~~the line item ~~in the condensed consolidated statements of operations.~~ “Commissions and fees.”

The Company ~~has elected to classify distributions received from equity method investees using the cumulative earnings approach. For~~paid client expenses of approximately $142,000 and $494,000 for the three months and nine months ended September 30, ~~2019, the earnings recognized from the Company’s investment in StockCross were $30,000~~2020, respectively. The Company had an outstanding receivable and ~~$84,000, respectively. This investment is reported~~payable of approximately $5,000 and $150,000, respectively, as of September 30, 2020. The receivable and payable are in the ~~equity method investment in related party asset in~~line items “Other receivables” and “Accounts payable and accrued liabilities,” respectively, on the ~~condensed consolidated statements~~statement 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, 2020 and December 31, 2019, no allowance for uncollectible commissions was necessary as the ~~carrying amount of~~Company believes all commissions receivable and prepaid research services expenses will be realized.

Other Items

For the ~~investment in StockCross was approximately $3,509,000.~~nine months ended September 30, 2020 and 2019, there were no costs capitalized related to obtaining or fulfilling a contract with a customer, and thus the Company has no balances for contract assets or contract liabilities.

The Company ~~evaluates~~concludes that its ~~equity method investments for impairment when events or changes indicate~~revenue streams have the ~~carrying value may not be recoverable. If~~same underlying economic factors, and as such, no disaggregation of revenue is required.

12. Referral Fees

Upon the ~~impairment is determined to be other-than-temporary,~~acquisition of WP, the Company ~~will recognize an impairment loss equal~~has agreements with various third parties to share commissions and pay fees as defined in the ~~difference between~~respective agreements. These expenses totaled approximately $154,000 and $427,000 for the ~~expected realizable value~~three and nine months ended September 30, 2020, respectively, which are presented in the ~~carrying value~~line item “Referral fees” in the statements of income.

13. Income Taxes

The Company’s provision for income taxes consists of federal and state taxes, as applicable, in amounts necessary to align the Company’s year-to-date tax provision with the effective rate that it expects to achieve for the full year. Each quarter the Company updates its estimate of the ~~investment.~~annual effective tax rate and records cumulative adjustments as necessary. As of September 30, 2020, the Company has concluded that its deferred tax assets are realizable on a more-likely-than-not basis with the exception of certain New Jersey net operating losses.

CARES Act

On March 27, 2020, the Coronavirus Aid, Relief and Economic Security Act (“CARES Act”) was enacted in response to COVID-19 pandemic. Under ASC 740, the effects of changes in tax rates and laws are recognized in the period which the new legislation is enacted. The CARES Act made various tax law changes including among other things (i) increased the limitation under IRC Section 163(j) for 2019 and 2020 to permit additional expensing of interest (ii) enacted a technical correction so that qualified improvement property can be immediately expensed under IRC Section 168(k) and (iii) made modifications to the federal net operating loss rules including permitting federal net operating losses incurred in 2018, 2019, and 2020 to be carried back to the five preceding taxable years in order to generate a refund of previously paid income taxes and (iv) enhanced recoverability of AMT tax credits. The CARES Act did not have a significant impact on the Company’s financial statements as of September 30, 2020.

Income Tax / Benefit and Effective Tax Rate

For the three months ended September 30, 2020, the Company recorded an income tax benefit of $486,000 on income before benefit from income taxes of $95,000. The effective tax rate for the three months ended September 30, 2020 was (511.6)%. The effective tax rate was lower than the federal statutory rate of 21% as the Company recorded a discrete tax benefit related to the anticipated filing of amended 2017 through 2019 federal tax returns in order to claim a refund of previously paid taxes coupled with the recognition of additional deferred tax assets for federal net operating losses as the Company determined that it can utilize additional net operating losses under Section 382.

- 22 -

For the nine months ended September 30, 2020, the Company recorded an income tax provision of $39,000 on income before provision for income taxes of $2,095,000. The effective tax rate for the nine months ended September 30, 2020 was 1.9%. The effective tax rate was lower than the federal statutory rate of 21% as the Company recorded a discrete tax benefit related to the anticipated filing of amended 2017 through 2019 federal tax returns in order to claim a refund of previously paid taxes coupled with the recognition of additional deferred tax assets for federal net operating losses as the Company determined that it can utilize additional net operating losses under Section 382.

For the three and nine months ended September 30, 2019, the Company recorded an income tax provision of $349,000 and $1,365,000, respectively. The effective tax rate for the three and nine months ended September 30, 2019 was 21.5% and 27.6%, respectively. The effective tax rate differs from the statutory rate of 21% primarily related to state taxes.

Uncertain Tax Positions

Income tax benefits are recognized for a tax position when, in management’s judgment, it is more likely than not that the position will be sustained upon examination by a taxing authority. For a tax position that meets the more-likely-than-not recognition threshold, the tax benefit is measured as the largest amount that is judged to have a greater than 50% likelihood of being realized upon ultimate settlement with a taxing authority.

As of September 30, 2020, the Company recorded an uncertain tax position of $1,041,000 attributable to the Company’s 2017 to 2019 amended tax returns as the Company’s anticipated tax refunds exceed the amount that meets the more-likely-than-not recognition threshold. The net impact from the uncertain tax position was recorded as a reduction of the Company’s income tax receivable. The Company expects to receive an income tax refund of approximately $248,000 by the first quarter of 2021. In the event that the Company concludes that the Company is subject to interest and / or penalties arising from uncertain tax positions, the Company will present interest and penalties as a component of income taxes.

The Company recognized the anticipated refunds in three months ended September 30, 2020, as this is the period the Company concluded it would amend its federal tax returns and file refund claims as well as calculated the amount of refund to be received.

14. 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 $581,000 and $1,273,000 for the three months ended September 30, 2020 and 2019, respectively. The Company had net income of $2,056,000 and $3,574,000 for the nine months ended September 30, 2020 and 2019, respectively.

15. Capital Requirements

MSCO and StockCross

Net Capital

MSCO is subject to the Uniform Net Capital Rules of the SEC (Rule 15c3-1) of the Securities Exchange Act of 1934. Under the alternate method permitted by this rule, net capital, as defined, shall not be less than the lower of $1 million or 2% of aggregate debit items arising from customer transactions. As of September 30, 2020, MSCO’s net capital was $27.9 million, which was approximately $25.6 million in excess of its required net capital of $2.3 million, and its percentage of aggregate debit balances to net capital was 24.4%.

As of December 31, 2019, MSCO’s net capital was $4.4 million, which was $4.2 million in excess of its required net capital of $250,000. As of December 31, 2019, StockCross’ net capital was $18.8 million, which was $16.7 million in excess of its required net capital of $2.1 million, and its percentage of aggregate debit balances to net capital was 17.6%. Effective upon the Company’s acquisition of StockCross on January 1, 2020, the capital of MSCO and StockCross was combined.

Special Reserve Account

MSCO is subject to Customer Protection Rule 15c3-3 which requires segregation of funds in a special reserve account for the exclusive benefit of customers. As of September 30, 2020, MSCO had cash deposits of $264.0 million in the special reserve accounts which was $16.6 million in excess of the deposit requirement of $247.4 million. After adjustments for deposit(s) and / or withdrawal(s) made on October 1, 2020, MSCO had $7.1 million in excess of the customer reserve requirement.

- 23 -

As of December 31, 2019, MSCO did not have any special reserve accounts. As of December 31, 2019, StockCross had deposits of $223.4 million (cash of $222.1 million and securities with fair value of $1.3 million) in the ~~investment~~special reserve account which was $4 million in excess of the deposit requirement of $219.4 million. After adjustments for deposit(s) and / or withdrawal(s) made on January 2, 2020, StockCross had $1 million in excess of the customer reserve requirement. Effective upon the Company’s acquisition of StockCross on January 1, 2020, the requirements and special reserve accounts of MSCO and StockCross were combined.

As of December 31, 2019, StockCross was also subject to the PAB Account Rule 15c3-3 of the SEC which requires segregation of funds in a special reserve account for the exclusive benefit of proprietary accounts of introducing broker-dealers. As of December 31, 2019, StockCross had segregated cash of $1.4 million under rule 15c3-3. As of December 31, 2019, StockCross had $1.4 million in the special reserve account which was $282,000 in deficit of the deposit requirement of $1.7 million. After adjustments for deposit(s) and / or withdrawal(s) made on January 2, 2020, StockCross had $218,000 in excess of the PAB reserve requirement. Effective upon the Company’s acquisition of StockCross on January 1, 2020, MSCO no longer had a PAB requirement.

Net Capital

WP, as a member of FINRA, is subject to the SEC Uniform Net Capital Rule 15c3-1. This rule requires the maintenance of minimum net capital and that the ratio of aggregate indebtedness to net capital, both as defined, shall not ~~estimated because there were no identified events~~exceed 15 to 1 and that equity capital may not be withdrawn, or ~~changes~~cash dividends paid if the resulting net capital ratio would exceed 10 to 1. WP is also subject to the CFTC's minimum financial requirements which require that WP maintain net capital, as defined, equal to the greater of its requirements under Regulation 1.17 under the Commodity Exchange Act or Rule 15c3-1.

As of September 30, 2020, WP’s net capital was approximately $3.7 million which was $3.5 million in ~~circumstances~~excess of its minimum requirement of $250,000 under 15c3-1. As of December 31, 2019, WP’s net capital was approximately $3.9 million which was $3.7 million in excess of its minimum requirement of $250,000 under 15c3-1.

16. Financial Instruments with Off-Balance Sheet Risk

The Company enters into various transactions to meet the needs of customers, conduct trading activities, and manage market risks and is, therefore, subject to varying degrees of market and credit risk.

In the normal course of business, the Company's customer activities involve the execution, settlement, and financing of various customer securities transactions. These activities may expose the Company to off-balance sheet risk in the event the customer or other broker is unable to fulfill its contracted obligations and the Company has to purchase or sell the financial instrument underlying the contract at a loss.

The Company's customer securities activities are transacted on either a cash or margin basis. In margin transactions, the Company extends credit to its customers, subject to various regulatory and internal margin requirements, collateralized by cash and securities in the customers' accounts. In connection with these activities, the Company executes and clears customer transactions involving the sale of securities not yet purchased, substantially all of which are transacted on a margin basis subject to individual exchange regulations.

Such transactions may expose the Company to off-balance sheet risk in the event margin requirements are not sufficient to fully cover losses that customers may ~~have a significant adverse effect on~~incur. In the ~~fair~~event the customer fails to satisfy obligations, the Company may be required to purchase or sell financial instruments at prevailing market prices to fulfill the customer's obligations.

The Company seeks to control the risks associated with its customer activities by requiring customers to maintain margin collateral in compliance with various regulatory and internal guidelines. The Company monitors required margin levels daily and pursuant to such guidelines, requires customers to deposit additional collateral or to reduce positions when necessary.

The Company's customer financing and securities settlement activities may require the Company to pledge customer securities as collateral in support of various secured financing sources such as bank loans and securities loaned. In the event the counterparty is unable to meet its contractual obligation to return customer securities pledged as collateral, the Company may be exposed to the risk of acquiring the securities at prevailing market prices in order to satisfy its customer obligations. The Company controls this risk by monitoring the market value of securities pledged on a daily basis and by requiring adjustments of collateral levels in the ~~investment~~event of excess market exposure. In addition, the Company establishes credit limits for such activities and ~~thus, no impairment was recorded.~~monitors compliance on a daily basis.

- 24 -

~~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

7.17. 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.~~statements.

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.

~~- 9 -~~

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~~of $412,000 and $136,000 ~~and $374,000~~ for the three months ended September 30, 2020 and 2019, ~~and 2018,~~ respectively. ~~The~~As part of this plan, the Company recognized expenses ~~totaling~~of $962,000 and $594,000 ~~and $874,000~~ for the nine months ended September 30, ~~2019~~2020 and ~~2018,~~2019, respectively.

The Company had an accrual of ~~$48,000~~$78,000 as of September 30, ~~2019,~~2020, which represents the historical estimate of future claims to be recognized for claims incurred prior to the period.

The Company believes that its present insurance coverage and reserves are sufficient to cover currently estimated exposures, but there can be no assurance that the Company will not incur liabilities in excess of recorded reserves or in excess of its insurance limits.

~~8. Revenue Recognition~~

The primary sources of revenue for the Company are as 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 recognition and measurement of revenue is based on the assessment of individual contract terms. The amount of revenue 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 whether constraints on variable consideration should be applied due to 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~~

~~- 10 -~~

~~Disaggregation of Revenue – Legacy Siebert vs. StockCross Accounts~~

The following table presents a breakdown of the Company’s 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,

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

~~9. Provision (Benefit) For (From) Income Taxes~~

~~Provision (benefit) for (from) income taxes consists of the following:~~

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 unrecognized tax benefits, if any, and;

Deferred income tax expense (benefit), which represents the 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.

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

~~- 11 -~~

~~The following table presents the components of provision (benefit) for (from) for income taxes for the 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 )

~~Effective Tax Rate~~

For interim financial reporting, 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.~~18. Related Party Disclosures

StockCross

StockCross and the Company ~~are~~were under common ownership, and prior to January 1, 2020, StockCross ~~serves~~served as one of the ~~two~~ clearing ~~brokers~~broker-dealers for the Company. The StockCross ~~has a~~ clearing agreement with ~~MSCO in which~~the Company provided that StockCross ~~passes~~passed through all revenue and ~~charges MSCO~~charged the Company for related clearing expenses. Outside of the clearing agreement, ~~MSCO has~~the Company had an expense sharing agreement with StockCross for its Beverly Hills and Jersey City branch offices, and StockCross ~~pays~~paid some vendors for miscellaneous expenses which it ~~passes~~passed 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.~~ Company.

In January 2019, the Company purchased approximately 15% of StockCross’ outstanding ~~shares and in July 2019~~shares. Effective January 1, 2020, the Company ~~entered into a binding letter of intent to purchase~~acquired the remaining 85% of ~~StockCross. For~~StockCross in exchange for 3,298,774 shares of the ~~three months~~Company’s common stock and ~~nine months ended September 30, 2019,~~StockCross was merged with and into MSCO. Upon the closing of this transaction on January 1, 2020, all receivables and payables between the Company and StockCross as well as any earnings ~~recognized~~ from the Company’s ~~15%~~equity method investment in StockCross ~~was $30,000 and $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.~~were eliminated upon consolidation.

- 1225 -

Kennedy Cabot Acquisition, ~~(“KCA”)~~LLC

~~KCA~~

Kennedy Cabot Acquisition, LLC (“KCA”) is an affiliate of the Company and ~~StockCross.~~is under common ownership with the Company. To gain efficiencies and economies of scale with billing and administrative functions, KCA serves as a paymaster for the Company for payroll and ~~StockCross for compensation and benefits expenses,~~related functions, the entirety of which KCA passes through to the subsidiaries of the Company ~~and StockCross~~ proportionally. In addition, KCA has purchased the naming rights ~~for~~of the Company for the Company to use.

~~PWC~~KCA sponsors a 401(k) profit sharing plan which covers substantially all of the Company’s employees. Employee contributions to the plan are at the discretion of eligible employees. There were no contributions by the Company or KCA to the plan for the nine months ended September 30, 2020 and 2019.

In January 2020, MSCO sold approximately $290,000 worth of a private equity security to KCA at cost.

Park Wilshire Companies, Inc.

PWC brokers the insurance policies for related parties. Revenue for PWC from related parties was ~~$3,000~~$21,000 and ~~$67,000~~$3,000 for the three months ~~and nine months~~ ended September 30, 2020 and 2019, respectively. Revenue for PWC from related parties was ~~$16,000~~$65,000 and ~~$61,000~~$67,000 for the ~~three and~~ nine months ended September 30, ~~2018.~~2020 and 2019, respectively.

Gloria E. Gebbia and John J. Gebbia

The Company has entered into various debt agreements with Gloria E. Gebbia, the Company’s principal stockholder. See “Note 10 – Notes Payable - Related Party” for additional detail.

In addition, the Company’s obligations under its Agreement with East West Bank are guaranteed pursuant to a guarantee agreement by and among, John J. Gebbia, individually and as a co-trustee of the John and Gloria Living Trust, U/D/T December 8, 1994 (the “Trust”) and Gloria E. Gebbia, individually and as a co-trustee of the Trust. See “Note 9 – Long-Term Debt” for additional detail.

Gebbia Sullivan County Land Trust

The Company operates on a month-to-month lease agreement for its branch office in Omaha, Nebraska with the Gebbia Sullivan County Land Trust, the trustee of which is a relative of the Gebbia Family. For both the three months ended September 30, 2020 and 2019, rent expense was $15,000 for this branch office. For both the nine months ended September 30, 2020 and 2019, rent expense was $45,000 for this branch office.

~~12.~~19. Subsequent Events

The Company has evaluated events that have occurred subsequent to September 30, 2020 and through November 16, 2020, the date of the filing of this report.

~~There~~

On November 10, 2020, the Company issued 150,000 shares of its restricted common stock (the “Shares”) to each of Anthony Palmeri and Gerard Losurdo, each new employees of MSCO, as part of their employment agreements. Mr. Palmeri and Mr. Losurdo each paid the Company approximately $400,000 for their Shares, which was equal to 70% of the closing price of the common stock as reported on Nasdaq on November 9, 2020. The Shares issued to Mr. Palmeri and Mr. Losurdo are subject to a three-year restriction on transfer commencing on the day of issuance. The issuance of the Shares were each approved by unanimous written consent of the Company's board of directors. The shares were issued to Mr. Palmeri and Mr. Losurdo as part of their employment agreements in accordance with Nasdaq Listing Rule 5635(c)(4). The Shares were issued without registration under the Securities Exchange Act of 1933, as amended in reliance upon the exemption provided in Section 4(a)(2) thereunder.

Other than the event described above, 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, ~~2019.~~

2020.

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Introduction

The following Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) is intended to help the reader understand the results of our operations and financial condition. This MD&A is provided as a supplement to, and should be read in conjunction with, our financial statements and accompanying notes to financial statements.

Forward-Looking Statements

The statements contained in the following MD&A and 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 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 similar words or expressions. In addition, any statements that refer to expectations, projections, or other characterizations of future events or circumstances are forward-looking statements.

These forward-looking statements, which reflect our 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, global economic downturns resulting from extraordinary events such as the COVID-19 pandemic 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 on our ~~2018~~2019 Form 10-K, and our ~~condensed consolidated~~ financial statements and the notes thereto contained elsewhere in this Quarterly Report on Form 10-Q.

Executive Overview

We operate as a financial services company and provide a wide variety of financial services to our clients. Results in the businesses in which we operate are highly correlated to general economic conditions and, more specifically, to the direction of the U.S. equity and fixed-income markets. Market volatility, overall market conditions, interest rates, economic, political and regulatory trends, and industry competition are among the factors which could affect us and which are unpredictable and beyond our control. These factors affect the financial decisions made by market participants who include investors and competitors, impacting their level of participation in the financial markets. In addition, in periods of reduced financial market activity, profitability is likely to be adversely affected because certain expenses remain relatively fixed, including salaries and related costs, ~~occupancy expenses and components~~portions of communications ~~costs.~~costs and occupancy expenses. Accordingly, earnings for any period should not be considered representative of earnings to be expected for any other period.

~~Significant Event~~

~~As reported~~COVID-19

Impact

Overview

In March 2020, the World Health Organization declared the spread of COVID-19 a worldwide pandemic. In response to COVID-19, national and local governments around the world have instituted certain measures, including travel bans, prohibitions on group events and gatherings, shutdowns of certain businesses, curfews, shelter-in-place orders and recommendations to practice social distancing. The COVID‑19 pandemic has adversely impacted the economic environment, leading to lower interest rates across the curve, lower equity market valuations and heightened volatility in ~~a current report~~the financial markets. We are actively monitoring the impact of COVID-19 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.~~our business, financial condition, liquidity, operations, employees, clients and business partners.

- 1427 -

Financial Impact

During the first quarter of 2020, the Federal Reserve cut the federal funds target overnight rate twice for a total of 150 basis points to near zero. This decline in interest rates has led to a decrease in our revenue from margin interest, marketing and distribution fees and interest income and may continue to have a negative impact on these revenue streams in the foreseeable future.

Our commissions and fees and principal transaction revenues decreased due to the high market volatility; however, revenue from our institutional customer base has declined only slightly since the first quarter of 2020. We note that the revenue from our business lines acquired from StockCross that are not directly correlated to interest rates such as market making, stock loan and other income have either increased or been relatively flat from the first quarter of 2020.

Management Response

Operations

In response to the pandemic and for the protection of our employees, clients and business partners, we implemented remote work arrangements for nearly 100% of our employees, restricted business travel and temporarily closed some of our branch offices. With our ability to meet a vast majority of our clients' needs through our technology-based platforms and services, these arrangements did not materially affect our ability to maintain our business operations.

As of the date of this report, we have reopened our branch offices while ensuring compliance with federal, state, and local laws as well as health and safety guidelines. We have taken significant steps to ensure that our employees and customers are operating in a safe environment by implementing measures such as social distancing, sanitizing workstations, temperature checks, requiring masks, and alternating staff. Throughout this challenging time, our unwavering focus on continuing to earn our clients’ trust is made possible by the significant contributions of our employees, and we remain committed to serving our clients while protecting our employees’ wellbeing.

Expense Reduction

To offset the decrease in our earnings associated with COVID-19, we have reduced the salary of higher-level employees and made a reduction in force in certain areas of our business. In addition, all members of our board of directors have either reduced their annual fees or are currently functioning without an annual fee.

We are strategically evaluating our clearing relationship opportunities within our institutional operations to gain more income. We are assessing all of our vendors to identify areas where we can optimize our cost structure while maintaining operational efficiency and quality of the customer experience. As of the date of this report, we are actively involved in contract negotiations with key vendors to reduce many of our fixed costs.

In addition, we have evaluated our branch offices and are transitioning out of legacy office space into more cost-efficient locations. We anticipate the benefits of these transitions to provide cost reductions beginning in the second quarter of 2021 and are looking into ways to further consolidate our office space.

We do not believe any of the changes listed above will have a negative impact on the operations or financials of our business.

Liquidity and Capital Resources

The situation surrounding COVID-19 has not materially impacted our position or future outlook related to liquidity as we have been able to meet all obligations and believe we will be able to do so in the foreseeable future.

Conclusion

We note that the ultimate impact of COVID-19 on our business, results of operations, financial condition and cash flows is dependent on future developments, including the duration of the pandemic and the related length of its impact on the global economy, which are uncertain and cannot be predicted at this time. We are currently monitoring the COVID-19 situation and will continue to respond to meet the demands of our clients as well as protect our employees.

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Acquisitions

StockCross

Overview

In January 2019, we acquired approximately 15% ownership of StockCross which was accounted for under the equity method. Effective January 1, 2020, we acquired the remaining 85% of StockCross’ outstanding shares in exchange for 3,298,774 shares of our common stock and StockCross was merged with and into MSCO. As of January 1, 2020, the business and operations of StockCross became part of MSCO, and all clearing and other services provided by StockCross are performed by MSCO. In addition, as of January 1, 2020, our equity method investment in StockCross was eliminated.

Accounting for Acquisition

Prior to and as of the date of our acquisition of StockCross, Siebert and StockCross were entities under common control of the Gebbia Family. The acquisition represented a change in reporting entity and as such, the companies have been presented on a combined basis for all periods presented in the financial statements. This presentation is reflected in the section below comparing statements of income and statements of financial condition to prior periods.

We acquired various assets and liabilities from StockCross as of the acquisition date, the fair values of which were assumed to be the historical carrying amounts. The excess of the purchase price over the fair value of the net assets acquired was eliminated due to the transaction being between entities under common control. See “Note 3 – Acquisitions” for additional detail on the transaction with StockCross and the corresponding accounting.

Recent Results

The new business lines acquired from StockCross have added additional revenue streams to our statements of income. These new revenue streams include interest income from clearing operations, market making, and stock borrow / stock loan, all of which have contributed approximately $5.3 million of revenue for the nine months ended September 30, 2020. In terms of our existing revenue streams, StockCross added incremental commissions and fees, margin interest, marketing and distribution fees, and principal transactions from their client base and operations. Our existing expenses primarily related to compensation, occupancy as well as clearing and technology costs have also increased from the corresponding increase in StockCross revenue and operations. See “Note 11 – Revenue Recognition” for further detail on our revenue streams and corresponding accounting policies.

The acquisition of StockCross has also impacted our statements of financial condition as the nature of StockCross’ business requires the presentation of various customer and securities assets and corresponding liabilities on the statements of financial condition. StockCross has added new assets to our statements of financial condition such as cash and securities segregated for regulatory purposes, receivables from customers, and securities borrowed as well as new liabilities such as payables to customers, payables to non-customers and securities loaned. StockCross has also added incremental assets and liabilities to the majority of our existing items within our statements of financial condition such as receivables from broker-dealers and clearing organizations and notes payable – related party.

Further, as of January 1, 2020, the acquisition of StockCross added approximately $1.5 billion in retail customer net worth and approximately 30,000 retail accounts to Siebert.

Overview

Effective December 1, 2019, we acquired all of the issued and outstanding membership interests of WP, a prime brokerage services provider, for a cash consideration of approximately $7.1 million, and WP became a wholly-owned subsidiary of Siebert.

The acquisition resulted in approximately $1,989,000 of goodwill and we acquired two intangible assets, WP’s customer relationships and WP’s trade name. We also acquired other assets consisting mostly of receivables from broker-dealers and clearing organizations and assumed liabilities consisting mostly of accounts payable and accrued expenses.

As previously disclosed in a Current Report on Form 8-K filed on June 26, 2020, on June 22, 2020, we entered into an agreement pursuant to which upon closing we would have sold all our member interests in WP to WPS Acquisitions, LLC for a purchase price of $7.3 million. As reported in a Current Report on Form 8-K filed on July 30, 2020, effective July 24, 2020, we terminated the agreement.

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Client Account and Activity Metrics

The following tables set forth metrics we use in analyzing our client account and activity trends for the periods ~~indicated:~~indicated. Retail customers are customers who have accounts with MSCO; institutional customers were acquired from WP as part of the acquisition effective December 1, 2019.

We acquired StockCross in January 2020; however, the client account and client activity metrics for Siebert and StockCross have been presented on a combined basis for all periods shown below to maintain consistency to the presentation of the financial statements. As such, the results of StockCross are included in metrics for the 2019 data shown below.

Client Account Metrics – Total Assets Under Management

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

	As of September 30,
	2020		2019
Total assets under management (in billions)	$	14.5	$	12.5

Below is a breakout of the account and activity metrics of our various customer bases.

Client Account Metrics – Retail Customers

	As of September 30,
	2020		2019
Retail customer net worth (in billions)	$	13.1	$	12.5
Retail customer margin debit balances (in billions)	$	0.4	$	0.4
Retail customer credit balances (in billions)	$	0.6	$	0.6
Retail customer money market fund value (in billions)	$	0.7	$	0.6
Retail customer accounts		110,044		105,470

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

debits

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

Retail customer credit balances represents client cash held in brokerage ~~accounts.~~accounts

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

Retail customer accounts represents the number of retail ~~customers. Effective~~customers

Client Account Metrics – Institutional Customers

		As of September 30, 2020
Institutional customer net worth (in billions)		$	1.4

Institutional customer net worth represents the total value of securities and cash in the institutional customer accounts after deducting margin debits and short positions. We did not have institutional customers until our purchase of WP in December ~~2018, the retail customer accounts metric was revised to include all retail accounts regardless of the amount of assets. Prior periods have been updated to conform to the current presentation.~~2019.

Client Activity Metrics

	Three Months Ended September 30,				Nine Months Ended September 30,				Three Months Ended September 30,				Nine Months Ended September 30,
	2019		2018		2019		2018		2020		2019		2020		2019
Total retail trades		65,828		82,120		199,668		262,610		112,264		75,969		353,580		230,267
Average commission per retail trade	$	17.31	$	23.43	$	18.40	$	22.87	$	15.55	$	17.38	$	15.32	$	18.35

Total retail trades represents retail trades that generate ~~commissions.~~commissions

Average commission per retail trade represents the average commission generated for all types of retail customer ~~trades.~~trades

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Statements of ~~Operations~~Income and Financial Condition

Overview

We acquired StockCross in January 2020; however, Siebert and StockCross have been presented on a combined basis for all periods presented. As such, the results of StockCross are included in the statements of income and statements of financial condition discussed below.

We acquired WP in December 2019 which added various revenue streams and corresponding expenses to our statement of income for the three and nine months ended September 30, 2020. As such, the results of WP’s operations impact our comparisons for the statements of income and statements of financial condition discussed below.

Statements of Income for the Three Months Ended September 30, ~~2019~~2020 and ~~2018~~2019

~~Net Income~~Revenue

~~Net income~~Commissions and fees for the three months ended September 30, ~~2019 was $1,104,000, decreasing~~2020 were $4,679,000 and increased by ~~$2,015,000 or 65%~~$2,406,000 from the corresponding period in ~~2018,~~the prior year, primarily due to the ~~partial release~~addition of ~~the valuation allowance of historical net operating losses in the third quarter of 2018 as well as a reduction in principal transactions and commission~~WP’s commissions and fees ~~revenues as a result of slower market conditions~~ in ~~the third quarter of 2019.~~

~~Revenue~~

Total revenue for the three months ended September 30, 2019 was $7,144,000, decreasing by $740,000 or 9% from the corresponding period in 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 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 industry.2020.

Margin interest, marketing and distribution fees for the three months ended September 30, ~~2019~~2020 were ~~$2,944,000, increasing~~$2,311,000 and decreased by ~~$213,000 or 8%~~$1,601,000 from the corresponding period in ~~2018,~~the prior year, primarily due to ~~a slight rise~~the declining interest rate environment, partially offset by the addition of WP’s margin interest income in ~~interest rates.~~

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

~~- 15 -~~

2020.

Principal transactions for the three months ended September 30, ~~2019~~2020 were ~~$2,041,000, decreasing~~$2,342,000 and increased by ~~$593,000 or 23%~~$15,000 from the corresponding period in ~~2018,~~the prior year.

Interest income for the three months ended September 30, 2020 was $915,000 and decreased by $146,000 from the corresponding period in the prior year, primarily due to ~~slower~~the declining interest rate environment, partially offset by the addition of WP’s interest income in 2020.

Market making for the three months ended September 30, 2020 was $423,000 and increased by $93,000 from the corresponding period in the prior year, primarily due to favorable market conditions during the three months ended September 30, 2020.

Stock borrow / stock loan for the three months ended September 30, 2020 was $1,267,000 and increased by $918,000 from the corresponding period in the ~~third quarter~~prior year, primarily due to the organic growth of ~~2019 negatively impacting overall demand for retail products.~~the business, the expansion of our stock locate function, and strong market conditions.

Advisory fees for the three months ended September 30, ~~2019~~2020 were ~~$211,000, increasing~~$305,000 and increased by ~~$73,000 or 53%~~$94,000 from the corresponding period in ~~2018,~~the prior year, primarily due to overall expansion of the advisory business line which included revenue growth related to ~~SNXT’s~~our Robo-Advisor.

~~Interest~~Other income for the three months ended September 30, ~~2019~~2020 was ~~$23,000, decreasing~~$333,000 and increased by ~~$11,000 or 32%~~$43,000 from the corresponding period in ~~2018,~~the prior year, primarily due to ~~lower cash balances.~~an increase in miscellaneous account fees.

Operating Expenses

~~Total expenses for the three months ended September 30, 2019 were $5,717,000, decreasing by $83,000 or 1% from the corresponding period in 2018, primarily due to a reduction in miscellaneous expenses.~~

Employee compensation and benefits for the three months ended September 30, ~~2019~~2020 were ~~$3,157,000, decreasing~~$6,584,000 and increased by ~~$511,000 or 14%~~$1,775,000 from the corresponding period in ~~2018,~~the prior year, primarily due to ~~lower~~the addition of WP salaries and commission payouts ~~associated with the decrease~~ in ~~commissions and fees and principal transaction revenues.~~2020.

Clearing fees, including execution costs for the three months ended September 30, ~~2019~~2020 were ~~$617,000, decreasing~~$1,270,000 and increased by ~~$14,000 or 2%~~$472,000 from the corresponding period in ~~2018,~~the prior year, primarily due to the ~~decrease~~addition of WP’s operations in ~~clearing and execution services associated with the lower level of overall client activity.~~2020.

~~Professional fees~~Technology and communications expenses for the three months ended September 30, ~~2019~~2020 were ~~$439,000, decreasing~~$1,322,000 and increased by ~~$38,000 or 8%~~$881,000 from the corresponding period in ~~2018,~~the prior year, primarily due to ~~a reduction~~the addition of WP’s technology operations in ~~legal fees.~~2020 as well as development work with InvestCloud related to our online platform and Robo-Advisor.

Other general and administrative expenses for the three months ended September 30, ~~2019~~2020 were ~~$589,000, increasing~~$455,000 and decreased by ~~$88,000 or 18%~~$413,000 from the corresponding period in ~~2018,~~the prior year, primarily due to ~~incremental~~a reduction in office expense as well as travel-related expenses ~~related~~due to ~~the Miami office.~~COVID-19.

~~Technology and communications~~

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Data processing expenses for the three months ended September 30, ~~2019~~2020 were ~~$291,000, increasing~~$784,000 and increased by ~~$63,000 or 28%~~$257,000 from the corresponding period in ~~2018,~~the prior year, primarily due to ~~a higher level of technological infrastructure expansion.~~increased technology costs related to clearing operations.

Rent and occupancy expenses for the three months ended September 30, ~~2019~~2020 were ~~$380,000, increasing~~$694,000 and increased by ~~$132,000 or 53%~~$64,000 from the corresponding period in ~~2018,~~the prior year, primarily due to the increase in rent from ~~our office space~~the addition of WP’s offices in ~~Jersey City and Miami.~~2020.

~~Depreciation and amortization~~Professional fees for the three months ended September 30, ~~2019 was $244,000, increasing~~2020 were $760,000 and decreased by ~~$203,000 or 495%~~$23,000 from the corresponding period in ~~2018,~~the prior year, primarily due to a reduction in legal fees.

Depreciation and amortization expenses for the three months ended September 30, 2020 were $368,000 and increased by $124,000 from the corresponding period in the prior year, primarily due to the depreciation and amortization of incremental ~~leasehold improvements~~purchases of fixed assets and software ~~development assets.~~as well as the amortization related to the intangible assets acquired from WP.

~~Advertising and promotion expenses~~Referral fees for the three months ended September 30, ~~2019~~2020 were ~~$0, decreasing~~$154,000 and increased by ~~$6,000~~$154,000 from the corresponding period in ~~2018,~~the prior year, primarily due to the ~~elimination of miscellaneous advertising costs.~~commission payouts to other institutional brokers for WP in 2020.

~~Earnings of Equity Method Investment in Related Party~~

~~Earnings of equity method investment in related party~~Interest expense for the three months ended September 30, ~~2019 were $30,000~~2020 was $89,000 and increased by $58,000 from the corresponding period in the prior year, primarily due to the ~~Company recognizing its proportional earnings from StockCross for~~interest on the ~~three months ended September 30, 2019.~~promissory note to finance part of the acquisition of WP.

Provision (Benefit) For (From) Income Taxes

~~Provision (benefit) for (from)~~Benefit from income taxes for the three months ended September 30, ~~2019~~2020 was ~~$353,000, increasing by $1,388,000 or 134%~~$486,000, a decrease of income tax expense of $835,000 from the corresponding period in ~~2018,~~the prior year, primarily due to a discrete tax benefit related to the ~~partial release~~anticipated filing of amended 2017 through 2019 federal tax returns in order to claim a refund of previously paid taxes coupled with the ~~valuation allowance~~recognition of ~~historical~~additional deferred tax assets for federal net operating losses ~~in the third quarter of 2018.~~as we determined that we can utilize additional net operating losses under Section 382.

Statements of ~~Operations~~Income for the Nine Months Ended September 30, ~~2019~~2020 and ~~2018~~2019

~~Net Income~~Revenue

~~Net income~~Commissions and fees for the nine months ended September 30, ~~2019 was $3,102,000, decreasing~~2020 were $15,149,000 and increased by ~~$3,509,000 or 53%~~$8,017,000 from the corresponding period in ~~2018,~~the prior year, primarily due to ~~a reduction in principal transactions and commission~~the addition of WP’s commissions and fees ~~revenues as a result of market volatility~~ in 2019, partially offset by the decrease in operating expenses such as commission payouts related to those revenue streams. In addition, net income decreased on a comparative basis due to the partial release of the valuation allowance of historical net operating losses in the third quarter of 2018.

~~- 16 -~~

~~Revenue~~

Total revenue for the nine months ended September 30, 2019 was $20,634,000, decreasing by $2,915,000 or 12% from the corresponding period in 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 industry.2020.

Margin interest, marketing and distribution fees for the nine months ended September 30, ~~2019~~2020 were ~~$8,499,000, increasing~~$7,730,000 and decreased by ~~$546,000 or 7%~~$3,431,000 from the corresponding period in ~~2018,~~the prior year, primarily due to ~~a slight rise~~the declining interest rate environment, partially offset by the addition of WP’s margin interest income in ~~interest rates.~~

Commissions and fees for the nine months ended September 30, 2019 were $6,030,000, decreasing by $1,350,000 or 18% from the corresponding period in 2018, primarily due to market volatility in 2019 negatively impacting overall demand for retail products.2020.

Principal transactions for the nine months ended September 30, ~~2019~~2020 were ~~$5,479,000, decreasing~~$8,126,000 and increased by ~~$2,359,000 or 30%~~$1,988,000 from the corresponding period in ~~2018,~~the prior year, primarily due to strong market ~~volatility~~conditions during early 2020.

Interest income for the nine months ended September 30, 2020 was $3,155,000 and decreased by $262,000 from the corresponding period in ~~2019 negatively impacting overall demand~~the prior year, primarily due to the declining interest rate environment, partially offset by the addition of WP’s interest income in 2020.

Market making for ~~retail products.~~the nine months ended September 30, 2020 was $1,508,000 and increased by $205,000 from the corresponding period in the prior year, primarily due to favorable market conditions during 2020.

Stock borrow / stock loan for the nine months ended September 30, 2020 was $2,482,000 and increased by $1,129,000 from the corresponding period in the prior year, primarily due to the organic growth of the business, the expansion of our stock locate function, and strong market conditions.

Advisory fees for the nine months ended September 30, ~~2019~~2020 were ~~$572,000, increasing~~$810,000 and increased by ~~$263,000 or 85%~~$238,000 from the corresponding period in ~~2018,~~the prior year, primarily due to overall expansion of the advisory business line which included revenue growth related to ~~SNXT’s~~our Robo-Advisor.

~~Interest~~Other income for the nine months ended September 30, ~~2019~~2020 was ~~$54,000, decreasing~~$1,035,000 and increased by ~~$15,000 or 22%~~$402,000 from the corresponding period in ~~2018,~~the prior year, primarily due to ~~lower cash balances.~~the addition of WP’s business in 2020 and an increase in miscellaneous account fees.

- 32 -

Operating Expenses

Total expenses for the nine months ended September 30, 2019 were $16,445,000, decreasing by $978,000 or 6% from the corresponding period in 2018, primarily due to 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 expansion of our Jersey City office and the establishment of our Miami office as well as the increase in depreciation and amortization of incremental assets.

Employee compensation and benefits for the nine months ended September 30, ~~2019~~2020 were ~~$8,882,000, decreasing~~$20,489,000 and increased by ~~$1,737,000 or 16%~~$6,677,000 from the corresponding period in ~~2018,~~the prior year, primarily due to ~~lower~~the addition of WP salaries and commission payouts ~~associated with~~in 2020 as well as increased commission payouts corresponding to the ~~decrease~~increase in ~~commissions and fees and~~ principal transaction ~~revenues.~~revenue.

Clearing fees, including execution costs for the nine months ended September 30, ~~2019~~2020 were ~~$1,849,000, decreasing~~$3,907,000 and increased by ~~$363,000 or 16%~~$1,582,000 from the corresponding period in ~~2018,~~the prior year, primarily due to the ~~decrease~~addition of WP’s operations in ~~clearing and execution services associated with the lower level demand for retail products.~~2020.

~~Professional fees~~Technology and communications expenses for the nine months ended September 30, ~~2019~~2020 were ~~$1,388,000, decreasing~~$3,256,000 and increased by ~~$184,000 or 12%~~$1,992,000 from the corresponding period in ~~2018,~~the prior year, primarily due to ~~a reduction~~the addition of WP’s technology operations in ~~legal fees.~~2020 as well as development work with InvestCloud related to our online platform and Robo-Advisor.

Other general and administrative expenses for the nine months ended September 30, ~~2019~~2020 were ~~$1,861,000, increasing~~$1,710,000 and decreased by ~~$501,000 or 37%~~$1,077,000 from the corresponding period in ~~2018,~~the prior year, primarily due ~~to incremental office expenses related~~ to the expansion of our Jersey City branch office and the establishment of our Miami ~~office.~~branch office occurring in the corresponding period in the prior year as well as a reduction in travel related expenses in 2020 due to COVID-19.

~~Technology and communications~~Data processing expenses for the nine months ended September 30, ~~2019~~2020 were ~~$800,000, increasing~~$2,387,000 and increased by ~~$8,000 or 1%~~$900,000 from the corresponding period in ~~2018.~~the prior year, primarily due to increased technology costs related to clearing operations.

Rent and occupancy expenses for the nine months ended September 30, ~~2019~~2020 were ~~$995,000, increasing~~$2,119,000 and increased by ~~$258,000 or 35%~~$365,000 from the corresponding period in ~~2018,~~the prior year, primarily due to the increase in rent from ~~our office space~~the addition of WP’s offices in ~~Jersey City and Miami.~~2020.

~~Depreciation and amortization~~Professional fees for the nine months ended September 30, ~~2019~~2020 were ~~$670,000, increasing~~$2,159,000 and decreased by ~~$579,000 or 636%~~$409,000 from the corresponding period in ~~2018,~~the prior year, primarily due to a reduction in legal fees.

Depreciation and amortization expenses for the nine months ended September 30, 2020 were $1,193,000 and increased by $504,000 from the corresponding period in the prior year, primarily due to the depreciation and amortization of incremental ~~leasehold improvements~~purchases of fixed assets and software ~~development assets.~~as well as the amortization related to the intangible assets acquired from WP.

~~- 17 -~~

~~Advertising and promotion expenses~~Referral fees for the nine months ended September 30, ~~2019~~2020 were ~~$0, decreasing~~$427,000 and increased by ~~$40,000~~$427,000 from the corresponding period in ~~2018,~~the prior year, primarily due to the ~~elimination of miscellaneous advertising costs.~~commission payouts to other institutional brokers for WP in 2020.

~~Earnings of Equity Method Investment in Related Party~~

~~Earnings of equity method investment in related party~~Interest expense for the nine months ended September 30, ~~2019~~2020 was ~~$84,000~~$253,000 and increased by $169,000 from the corresponding period in the prior year, primarily due to the ~~Company recognizing its proportional earnings from StockCross for~~interest on the ~~nine months ended September 30, 2019.~~promissory note to finance part of the acquisition of WP.

Provision (Benefit) For (From) Income Taxes

Provision ~~(benefit)~~ for ~~(from)~~ income taxes for the nine months ended September 30, ~~2019~~2020 was ~~$1,171,000, increasing~~$39,000 and decreased by ~~$1,656,000 or 341%~~$1,326,000 from the corresponding period in ~~2018,~~the prior year, primarily due to a discrete tax benefit related to the ~~partial release~~anticipated filing of amended 2017 through 2019 federal tax returns in order to claim a refund of previously paid taxes coupled with the ~~valuation allowance~~recognition of ~~historical~~additional deferred tax assets for federal net operating losses ~~in the third quarter of 2018.~~as we determined that we can utilize additional net operating losses under Section 382.

Statements of Financial Condition as of September 30, ~~2019~~2020 and December 31, ~~2018~~2019

Assets

Assets as of September 30, ~~2019~~2020 were ~~$23,993,000~~$673,452,000 and increased by ~~$5,816,000 or 32%~~$135,385,000 from ~~assets as of~~ December 31, ~~2018,~~2019, primarily due to the ~~lease right-of-use assets recorded per the new lease accounting guidance, an~~ increase in ~~furniture, equipment~~securities borrowed 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 millioncash and ~~corresponding decrease in cash, with no net change to total assets.~~securities segregated for regulatory purposes.

Liabilities

Liabilities as of September 30, ~~2019~~2020 were ~~$3,717,000~~$637,134,000 and increased by ~~$2,714,000 or 271%~~$132,202,000 from ~~liabilities as of~~ December 31, ~~2018,~~2019, primarily due to the ~~lease liabilities recorded per the new lease accounting guidance.~~increase in securities loaned and payables to customers.

- 33 -

Liquidity and Capital Resources

~~Our~~Overview

We believe that our operating cash flows, cash and cash equivalents, borrowing capacity under the notes payable – related party, line of credit with East West Bank, and overall access to capital markets are ~~unrestricted and are used~~sufficient 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~~operating, investing and ~~cash equivalents~~financing requirements for the next twelve months.

Net Capital and were considered highly liquid. Our total assets as of December 31, 2018 were approximately $18.2 million, of which $7.2 million, or approximately 40% consisted of cash and cash equivalents and were considered highly liquid.Special Reserve Account

MSCO is subject to ~~regulatory requirements that are intended to ensure its liquidity and general financial soundness. Under~~ the ~~SEC's~~ Uniform Net Capital ~~Rule (Exchange~~Rules of the SEC (Rule 15c3-1) of the Securities Exchange Act ~~Rule 15c3-1), MSCO is required to maintain, at all times, at least~~of 1934. Under the ~~minimum level of~~alternate method permitted by this rule, net capital, ~~required under Rule 15c3-1.~~as defined, shall not be less than the lower of $1 million or 2% of aggregate debit items arising from customer transactions. Since ~~our~~MSCO’s aggregate debits may fluctuate, ~~significantly, our~~MSCO’s minimum net capital requirements may also fluctuate ~~significantly~~ from period to period. ~~Siebert~~In addition, MSCO is subject to Customer Protection Rule 15c3-3 which requires segregation of funds in a special reserve account for the exclusive benefit of customers.

WP, as a member of FINRA, is subject to the SEC Uniform Net Capital Rule 15c3-1. This rule requires the maintenance of minimum net capital and that the ratio of aggregate indebtedness to net capital, both as defined, shall not exceed 15 to 1 and that equity capital may ~~make~~not be withdrawn, or cash dividends paid if the resulting net capital ~~contributions~~ratio would exceed 10 to ~~MSCO, if necessary,~~1. WP is also subject to ~~meet~~the CFTC's minimum financial requirements which require that WP maintain net capital, as defined, equal to the greater of its requirements under Regulation 1.17 under the Commodity Exchange Act or Rule 15c3-1.

See “Note 15 – Capital Requirements” for more detail on our capital requirements.

~~MSCO may~~Line of Credit with East West Bank

On July 22, 2020, we entered into a Loan and Security Agreement with East West Bank. In accordance with the terms of this agreement, we have the ability to borrow term loans in an aggregate principal amount 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~~exceed $10 million during the two-year period after July 22, 2020. Our obligations under the agreement are guaranteed pursuant to a ~~net capital amount of less than (a) 5% of aggregate debit balances or (b) 120% of its minimum dollar requirement.~~guarantee agreement by and among, John J. Gebbia, Gloria E. Gebbia and a trust for which they are mutually co-trustees.

As of September 30, ~~2019, MSCO had net capital of~~2020, we have drawn down approximately ~~$5.7~~$4.9 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 approximately $8.9 million, which was approximately $8.7 million in excess of its minimum capital requirement of $250,000.

under this agreement. ~~- 18 -~~See “Note 9 – Long-Term Debt” for more detail on this agreement.

Contractual Obligations

Leases

Future annual minimum payments for operating leases with initial terms of greater than one year as of September 30, ~~2019~~2020 were as follows:

Year	Amount		Amount
2019	$	259,000
2020		992,000	$	606,000
2021		759,000		1,403,000
2022		513,000		755,000
2023		493,000		543,000
2024		56,000		56,000
Thereafter		—
Remaining balance of lease payments	$	3,072,000
Total			$	3,363,000

~~There~~As of September 30, 2020, we had an operating lease agreement for an office space in Beverly Hills, CA with a term of approximately 5 years. The total commitment of the lease is approximately $1.5 million, and the lease will commence on March 1, 2021. See “Note 7 – Leases” for more detail on our lease arrangements and corresponding disclosures.

Notes Payable – Related Party

As of September 30, 2020, we have ~~been no material changes~~$6 million in notes payable to Gloria E. Gebbia, $3 million of which matures in December 2020 and $3 million of which matures in November 2021. See “Note 10 – Notes Payable - Related Party” for more detail.

- 34 -

Prepaid Service Contract

We have entered into an agreement with InvestCloud for development work related to our ~~contractual obligations outside~~online platform as well as Robo-Advisor. As part of this agreement, we have an obligation to pay for the ~~ordinary course of business since December 31, 2018.~~license fees associated with the InvestCloud Platform for a three year term. See “Note 5 – Prepaid Service Contract” for more detail.

Off-Balance Sheet Arrangements

~~Retail customer~~Customer transactions are cleared through ~~two~~our clearing ~~brokers~~firms on a fully disclosed basis. If customers do not fulfill their contractual obligations, ~~the clearing brokers~~we may ~~charge us for any~~incur 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 infor the ~~last five years.~~nine months ended September 30, 2020 and 2019.

Impairment

We have concluded that as of September 30, 2020, there have been no impairments to the carrying value of Siebert’s goodwill and other tangible and intangible assets.

Segment

We concluded as of September 30, 2020, Siebert is comprised of a single operating segment based on the factors related to management’s decision-making framework as well as management evaluating performance and allocating resources based on assessments of Siebert from a consolidated perspective.

Related Party Disclosures

During the course of business, we enter into various agreements and transactions with related parties. See “Note 18 – Related Party Disclosures” for more detail on our related party disclosures.

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~~ “Item 2 – Management’s Discussion and Analysis of Financial Condition and Results of Operations – Critical Accounting ~~Policies~~Policies” in our ~~2018~~2019 Form 10-K. ~~Except as described above, there~~There have been no changes to critical accounting estimates ~~during~~as of September 30, 2020.

Uncertain Tax Positions

Income tax benefits are recognized for a tax position when, in management’s judgment, it is more likely than not that the ~~nine~~position will be sustained upon examination by a taxing authority. For a tax position that meets the more-likely-than-not recognition threshold, the tax benefit is measured as the largest amount that is judged to have a greater than 50% likelihood of being realized upon ultimate settlement with a taxing authority.

As of September 30, 2020, we recorded an uncertain tax position of $1,041,000 attributable to our 2017 to 2019 amended tax returns as our anticipated tax refunds exceed the amount that meets the more-likely-than-not recognition threshold. The net impact from the uncertain tax position was recorded as a reduction of our income tax receivable. We expect to receive an income tax refund of approximately $248,000 by the first quarter of 2021. In the event that we conclude that we are subject to interest and/or penalties arising from uncertain tax positions, we will present interest and penalties as a component of income taxes.

We recognized the anticipated refunds in three months ended September 30, 2020, as this is the period we concluded we would amend our federal tax returns and file refund claims as well as calculated the amount of refund to be received.

Fair Value Measurements

We have securities that are valued using the fair value framework under ASC 820 within our assets and liabilities as of September 30, 2020 and December 31, 2019. The majority of the assets are level 1 U.S. government securities and equity securities as well as level 2 equity securities that are in the line items “Cash and securities segregated for regulatory purposes” and “Securities owned, at fair value.” The liabilities consist of relatively small amounts of level 1 and level 2 equity securities in the line item “Securities sold, not yet purchased, at fair value.” See “Note 6 – Fair Value Measurements” for more detail.

- 1935 -

New Accounting Pronouncements

We have adopted certain new accounting pronouncements during the reporting period. See “Note 2 – New Accounting Standards” for more detail on the new accounting pronouncements and their impact on our financial statements.

- 36 -

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Financial Instruments Held For Trading Purposes

We do not directly engage in derivative transactions, have no interest in any special purpose entity and have no liabilities, contingent or otherwise, for the debt of another entity.

Financial Instruments Held For Purposes Other Than Trading

We generally invest our cash and cash equivalents temporarily in dollar denominated bank account(s). These investments are not subject to material changes in value due to interest rate movements.

Retail customer transactions are cleared through ~~two~~ clearing brokers on a fully disclosed ~~basis.~~basis and are also self-cleared by MSCO. 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.~~obligations may be incurred by the Company. 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.

- 2037 -

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/~~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/~~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/~~President / Chief Financial Officer, to allow timely decisions regarding required disclosure.

Based on its evaluation, our management, including our Executive Vice ~~President/~~President / Chief Financial Officer, concluded that as of the 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 internal control over financial reporting (as defined in Exchange Act Rule 13a-15(f)) was identified during the end of the period covered by this report, that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

- 2138 -

PART II - OTHER INFORMATION

ITEM 1. 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 1A. RISK FACTORS

In addition to the other information set forth in this report, investors should carefully consider the risk factors discussed in Part I - Item 1A - Risk Factors, in our ~~2018~~2019 Form 10-K, ~~which could materially affect our business, financial position, and results of operations. There have been no material changes from~~as supplemented by the risk factors ~~disclosed in our 2018 Form 10-K other than the changes disclosed~~included in our Quarterly Report on Form 10-Q for the period ended March 31, ~~2019.~~2020. Each of such risk factors could materially affect our business, financial position, and results of operations. Other than the supplemental risk factors provided in the Quarterly Report on Form 10-Q for the period ended March 31, 2020, there have been no material changes from the risk factors disclosed in our 2019 Form 10-K.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

None. See “Note 19 – Subsequent Events” for more detail on shares of our restricted common stock issued on November 10, 2020, subsequent to the end of the reporting period.

- 2239 -

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		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

- 2340 -

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 ~~13, 2019~~16, 2020

- 2441 -

	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

	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

	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