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U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
(Mark One)
[X] Quarterly report under Section 13 or 15(d) of the Securities Exchange Act of 1934
For the quarterly period ended March 31, 2003
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[ ] Transition report under Section 13 or 15(d) of the Exchange Act
For the transition period from to
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Commission file number 0-5703
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Siebert Financial Corp.
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(Exact Name of Issuer as Specified in its Charter)
New York 11-1796714
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(State or Other Jurisdiction of Incorporation) (I.R.S. Employer Identification No.)
885 Third Avenue, New York, NY 10022
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(Address of Principal Executive Offices)
(212) 644-2400
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(Issuer's Telephone Number, Including Area Code)
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(Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report)
Indicate by check mark whether the registrant: (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Exchange Act of 1934
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 X No
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Indicate by check mark whether the registrant is an accelerated filer
(as defined in Rule 12b-2 of the Exchange Act).
Yes No X
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State the number of shares outstanding of each of the issuer's classes
of common equity, as of the latest practicable date: As of May 6, 2003, there
were 22,375,985 shares of Common Stock, par value $.01 per share, outstanding.
Unless the context otherwise requires, the "Company" shall mean Siebert
Financial Corp. and its wholly owned subsidiaries and "Siebert" shall mean
Muriel Siebert & Co., Inc., a wholly owned subsidiary of the Company.
Certain statements contained in the "Management's Discussion and
Analysis of Financial Condition and Results of Operations" below and elsewhere
in this document, as well as oral statements that may be made by the Company or
by its officers, directors or employees acting on the Company's behalf, that are
not statements of historical or current fact constitute "forward looking
statements" within the meaning of the Private Securities Litigation Reform Act
of 1995. Such forward looking statements involve risks and uncertainties and
known and unknown factors that could cause the actual results of the Company to
be materially different from the historical results or from any future results
expressed or implied by such forward looking statements, including, without
limitation: changes in general economic and market conditions; fluctuations in
volume and prices of securities; demand for brokerage and investment banking
services; competition within and without the discount brokerage business,
including the offer of broader services; competition from electronic discount
brokerage firms offering lower rates on commissions than the Company; the
prevalence of a flat fee environment; decline in participation in equity or
municipal finance underwritings; limited trading opportunities; the method of
placing trades by the Company's customers; computer and telephone system
failures; the level of spending by the Company on advertising and promotions;
trading errors and the possibility of losses from customer non-payment of
amounts due; other increases in expenses and changes in net capital or other
regulatory requirements. The Company undertakes no obligation to publicly
release the results of any revisions to these forward-looking statements which
may be made to reflect events or circumstances after the date when such
statements were made or to reflect the occurrence of unanticipated events. An
investment in the Company involves various risks, including those mentioned
above and those which are detailed from time to time in the Company's Securities
and Exchange Commission filings.
Part I - FINANCIAL INFORMATION
Item 1. Financial Statements.
Siebert Financial Corp. & Subsidiaries
Consolidated Statements of Financial Condition
March 31, 2003 December 31,
(unaudited) 2002
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ASSETS
Cash and cash equivalents $19,772,000 $22,498,000
Cash equivalents - restricted 1,300,000 1,300,000
Receivable from clearing broker 3,080,000 1,100,000
Securities owned, at market value 5,206,000 5,225,000
Furniture, equipment and leasehold improvements, net 2,490,000 2,616,000
Investment in and advances to equity investee 3,120,000 2,748,000
Intangibles, net 3,130,000 2,302,000
Prepaid expenses and other assets 1,572,000 1,816,000
Deferred tax asset 1,061,000 846,000
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$40,731,000 $40,451,000
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LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable and accrued liabilities 5,417,000 4,784,000
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5,417,000 4,784,000
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Commitments and contingent liabilities
Stockholders' equity:
Common stock, $.01 par value; 49,000,000 shares authorized, 22,968,167 shares
issued and 22,373,699 and 22,395,767 shares
outstanding at March 31, 2003 and December 31, 2002, respectively 229,000 229,000
Additional paid-in capital 17,880,000 17,880,000
Retained earnings 20,081,000 20,377,000
Less: 594,468 and 572,400 shares of treasury stock, at cost at March 31, 2003
and December 31, 2002, respectively (2,876,000) (2,819,000)
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35,314,000 35,667,000
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$40,731,000 $40,451,000
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See notes to consolidated financial statements.
1
Siebert Financial Corp. & Subsidiaries
Consolidated Statements of Operations
(unaudited)
Three Months Ended
March 31,
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2003 2002
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Revenues:
Commissions and fees $4,126,000 $5,225,000
Investment banking 476,000 524,000
Trading profits 197,000 211,000
Income from equity investee 711,000 123,000
Interest and dividends 96,000 138,000
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5,606,000 6,221,000
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Expenses:
Employee compensation and benefits 2,228,000 2,352,000
Clearing fees, including floor brokerage 852,000 931,000
Advertising and promotion 359,000 413,000
Communications 747,000 550,000
Occupancy 264,000 237,000
Other general and administrative 1,667,000 1,299,000
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6,117,000 5,782,000
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(Loss) income before income taxes (511,000) 439,000
(Benefit) provision for income taxes (215,000) 184,000
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Net (loss) income $(296,000) $255,000
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Net (loss) income per share of common stock -
Basic and Diluted $(.01) $.01
Weighted average shares outstanding -
Basic 22,381,216 22,389,247
Weighted average shares outstanding -
Diluted 22,381,216 22,590,701
See notes to consolidated financial statements.
2
Siebert Financial Corp. & Subsidiaries
Consolidated Statements of Cash Flows
(unaudited)
Three Months Ended
March 31,
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2003 2002
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Cash flows from operating activities:
Net (loss) income $ (296,000) $ 255,000
Adjustments to reconcile net (loss) income to net cash used in operating
activities:
Depreciation and amortization 470,000 389,000
Income from equity investee (711,000) (123,000)
Changes in operating assets and liabilities:
Net decrease (increase) in securities owned, at market value 19,000 (1,103,000)
Net (increase) decrease in receivable from clearing broker (480,000) 175,000
Decrease in prepaid expenses and other assets 244,000 166,000
Net decrease in securities sold, not yet purchased, at market value (4,000)
Net change in deferred taxes (215,000) (92,000)
Increase (decrease) in accounts payable and accrued liabilities 633,000 (723,000)
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Net cash used in operating activities (336,000) (1,060,000)
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Cash flows from investing activities:
Purchase of furniture, equipment and leasehold improvements (72,000) (105,000)
Advance to clearing broker (1,500,000)
Purchase of customer accounts (1,100,000)
Net (advances) collections of advances by equity investee (53,000) 409,000
Distribution from equity investee 392,000
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Net cash (used in) provided by investing activities (2,333,000) 304,000
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Cash flows from financing activities:
Repurchase of common stock (57,000)
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Net cash used in financing activities (57,000)
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Net decrease in cash and cash equivalents (2,726,000) (756,000)
Cash and cash equivalents - beginning of period 22,498,000 25,670,000
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Cash and cash equivalents - end of period $ 19,772,000 $ 24,914,000
==================================
Supplemental cash flow disclosures:
Cash paid for:
Income taxes $ 18,000 $ 961,000
See notes to consolidated financial statements.
3
Siebert Financial Corp. & Subsidiaries
Notes to Consolidated Financial Statements
Three Months Ended March 31, 2003 and 2002
(Unaudited)
1. Organization and Basis of Presentation:
The consolidated financial statements include the accounts of Siebert
Financial Corp. (the "Company") and its wholly owned subsidiaries Muriel
Siebert & Co., Inc. ("Siebert") and Siebert Women's Financial Network, Inc.
("WFN"). All material intercompany balances have been eliminated. The
statements are unaudited; however, in the opinion of management, all
adjustments considered necessary to reflect fairly the Company's financial
position and results of operations, consisting of normal recurring
adjustments, have been included.
The accompanying consolidated financial statements do not include all of
the information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting
principles. Accordingly, the statements should be read in conjunction with
the audited financial statements included in the Company's Annual Report on
Form 10-K for the year ended December 31, 2002. Because of the nature of
the Company's business, the results of any interim period are not
necessarily indicative of results for a full year.
2. Stock-Based Compensation
Statement of Financial Accounting Standards ("SFAS") No. 123, Accounting
for Stock-Based Compensation ("SFAS 123") as amended by SFAS No. 148,
(Accounting for Stock-Based Compensation - Transition and Disclosure an
amendment to FASB Statement 123), allows the fair value of stock-based
compensation to be included in expense over the period earned;
alternatively, if the fair value of stock-based compensation awards are not
included in expense, SFAS 123 requires disclosure of net income (loss), on
a pro forma basis, as if expense treatment had been applied. As permitted
by SFAS 123, the Company continues to account for such compensation under
Accounting Principles Board Opinion No. 25 ("APB 25"), Accounting for Stock
Issued to Employees, and related interpretations, pursuant to which no
compensation cost was recognized in connection with the issuance of stock
options, as all options granted under the 1997 Stock Option Plan had an
exercise price equal to or greater than the fair value of the underlying
common stock on the date of grant. Had the Company elected to recognize
compensation expense for the stock option plan, consistent with the method
prescribed by SFAS 123, the Company's net (loss) income and (loss) income
per share for the three months ended March 31, 2003, and 2002 would have
(increased) decreased to the pro forma amounts as follows:
Three Months Ended March 31,
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2003 2002
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Net (loss) income, as reported $(296,000) $255,000
Stock-based employee compensation determined
under APB 25 -- --
Stock-based employee compensation determined
under the fair value based method, net of tax effect (470,000) (75,000)
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Pro forma net (loss) income $(766,000) $180,000
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Net (loss) income per share - basic:
As reported $(.01) $.01
Pro forma $(.03) $.01
Net (loss) income per share - diluted:
As reported $(.01) $.01
Pro forma $(.03) $.01
4
3. Net Capital:
Siebert is subject to the Securities and Exchange Commission's Uniform Net
Capital Rule (Rule 15c3-1), which requires the maintenance of minimum net
capital. Siebert has elected to use the alternative method, permitted by
the rule, which requires that Siebert maintain minimum net capital, as
defined, equal to the greater of $250,000 or two percent of aggregate debit
balances arising from customer transactions, as defined. (The net capital
rule of the New York Stock Exchange also provides that equity capital may
not be withdrawn or cash dividends paid if resulting net capital would be
less than five percent of aggregate debits.) As of March 31, 2003, Siebert
had net capital of approximately $13,687,000 as compared with net capital
requirements of $250,000.
4. Capital Transactions:
On May 15, 2000, the board of directors of the Company authorized a stock
buy back program of up to one million common shares. Shares will be
purchased from time to time in the open market and in private transactions.
Through March 31, 2003, 594,468 shares have been purchased at an average
price of $4.84 per share.
5. Option Grants:
During the period ended March 31, 2003, the Company's Board of Directors
granted options to employees of the Company to purchase an aggregate of
25,000 shares of the Company's common stock at an exercise price of $2.68,
the fair market value on the date of grant. The employee options granted
during the quarter vest 20% per year for five years and expire ten years
from the date of grant.
6. Recent Developments
In April 2002 Siebert entered into an exclusive Strategic Alliance
Agreement with Intuit, Inc. to offer a joint brokerage service to customers
of Quicken and Quicken.com. The joint brokerage service (the "JBS") was
launched in September 2002. Siebert's share of organizational and start-up
expenses were charged to operations in 2002 and revenues from this service
during 2002 were nominal. New accounts added since inauguration of the JBS,
through the first quarter of 2003, have been far below initial
expectations. Charges to the operations of the Company relating to the JBS
during the first quarter of 2003 were approximately $598,000, which
included technology, marketing and content expenses of approximately
$369,000 and certain brokerage and other services expenses of $229,000.
Revenues from the JBS to the Company were nominal during the first quarter
of 2003. The Company and Intuit have been discussing ways of substantially
reducing ongoing costs relating to the JBS until market activity and
customer interest justify a higher level of expenditures, or alternative
courses of action that may be available.
7. Account Purchases:
In January 2003 Siebert agreed to acquire certain retail discount brokerage
accounts from Your Discount Broker, Inc ("YDB") for $1.1 million. These
accounts, which were transferred to Siebert in March 2003, are being
serviced from Siebert's Boca Raton office. As of March 31, 2003, the
purchase price for the customer accounts has been recorded in "Intangibles"
and is being amortized over a five-year period.
8. Siebert Brandford Shank & Co., LLC:
Summarized financial data (presented in thousands) of Siebert Brandford
Shank & Co., LLC, ("SBS") as of and for the three months ended March 31
2003 and 2002 is set forth below. Siebert holds a 49% ownership interest in
SBS.
2003 2002
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Total assets $9,185,000 $14,100,000
Total liabilities, including subordinated liabilities of
$1,200,000 $2,994,000 $9,200,000
Total members' capital $6,191,000 $4,800,000
Total revenues $4,288,000 $2,200,000
Net income $1,450,000 $250,000
5
Siebert charged SBS $60,000 during each period for rent and general and
administrative services, which Siebert believes approximates the cost of
furnishing such services.
Siebert's share of undistributed earnings from SBS amounted to $2,642,000
and $1,955,000 at March 31, 2003 and 2002 respectively. Such amounts may
not be immediately available for distribution to Siebert for various
reasons including the amount of SBS's available cash, the provisions of the
agreement between Siebert and the principals and SBS's continued compliance
with its regulatory and net capital requirements.
9. Commitments and Contingent Liabilities:
On April 30, 2002, Siebert signed a fully disclosed clearing agreement (the
"Clearing Agreement") with the Pershing division of Donaldson, Lufkin &
Jenrette Securities Corporation ("Pershing"). Pursuant to the Clearing
Agreement, Siebert advanced Pershing a total of $1,500,000 in January 2003,
principally for software customization setup of the JBS. Pershing has
agreed that it shall rebate such amount in three equal annual installments,
without interest, over the initial three years of the Clearing Agreement,
provided that if the Clearing Agreement is terminated under certain
circumstances, the amounts so rebated must be repaid to Pershing. Siebert
believes that the advance to Pershing should be treated as an "incremental
expense" that, with any related rebates, would be shared equally with
Intuit under the Strategic Alliance Agreement governing the JBS. Siebert
has also paid $866,000 for a Customer Relationship Management ("CRM")
system purchased to service anticipated customers of the JBS. Siebert
believes that this should also be an incremental expense shared equally
with Intuit. Intuit has indicated that it does not agree with Siebert's
positions with respect to the advance to Pershing and the cost of the CRM
system. In addition, Siebert and Intuit will incur other charges
aggregating approximately $485,000 for the setup of the JBS's website and
related matters. Siebert and Intuit will share equally in the advance of
the other charges. The amount advanced to Pershing is included in
receivable from clearing broker in the Consolidated Statements of Financial
Condition.
The Company is involved in various routine lawsuits of a nature deemed by
the Company customary and incidental to its business. In the opinion of
management, the ultimate disposition of such actions will not have a
material adverse effect on its financial position or results of operations.
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
This discussion should be read in conjunction with the Company's audited
and the unaudited Consolidated Financial Statements and the Notes thereto
contained elsewhere in this Quarterly Report.
Business Environment
The market was very weak in the first quarter of 2003 despite the
record low interest rate environment maintained by the Federal Reserve Bank.
The war in Iraq dominated headlines and the result was a lack of interest in
buying stocks. Competition in the brokerage industry remains intense although
many of Siebert's competitors have been consolidated or have gone out of
business.
6
The Company, like other securities firms, is directly affected by
general economic and market conditions including fluctuations in volume and
prices of securities, changes and prospects for changes in interest rates and
demand for brokerage and investment banking services, all of which can affect
the Company's relative profitability. In periods of reduced market activity,
profitability is likely to be adversely affected because certain expenses,
including salaries and related costs, portions of communications costs and
occupancy expenses remain relatively fixed. Earnings, or loss, for any period
should not be considered representative of any other period.
Recent Developments
In January 2003 Siebert agreed to acquire certain retail discount
brokerage accounts from Your Discount Broker, Inc for $1.1 million. These
accounts, which were transferred to Siebert in March 2003, are being serviced
from Siebert's Boca Raton office. As of March 31, 2003, the purchase price for
the customer accounts has been recorded in "Intangibles" and is being amortized
over a five-year period.
As previously reported, in April 2002 Siebert entered into an exclusive
Strategic Alliance Agreement with Intuit, Inc. to offer a joint brokerage
service (the "JBS") to customers of Quicken and Quicken.com. The JBS was
launched in September 2002. Siebert's share of organizational and start-up
expenses were charged to operations in 2002 and revenues from the JBS during
2002 were nominal. New accounts added since inauguration of the JBS, through the
first quarter of 2003, have been far below initial expectations. Charges to the
operations of the Company relating to the JBS during the first quarter of 2003
were approximately $598,000, which included technology, marketing and content
expenses of approximately $369,000 and certain brokerage and other services
expenses of $229,000. Revenues from the JBS to the Company were nominal during
the first quarter of 2003. The Company and Intuit have been discussing ways of
substantially reducing ongoing costs relating to the JBS until market activity
and customer interest justify a higher level of expenditures, or alternative
courses of action that may be available.
On April 30, 2002, Siebert signed a fully disclosed clearing agreement
(the "Clearing Agreement") with the Pershing division of Donaldson, Lufkin, &
Jenrette Securities Corporation ("Pershing"). Pursuant to the Clearing
Agreement, Siebert advanced Pershing a total of $1.5 million in January 2003,
principally for software customization setup of the JBS. Pershing has agreed
that it shall rebate such amounts in three equal annual installments, without
interest, over the initial three years of the Clearing Agreement, provided that
if the Clearing Agreement is terminated under certain circumstances, the amount
so rebated must be repaid to Pershing. Siebert believes that the advance to
Pershing should be treated as an "incremental expense" that, with any related
rebates, would be shared equally with Intuit under the Strategic Alliance
Agreement governing the JBS. Siebert has also paid $866,000 for a Customer
Relationship Management ("CRM") system purchased to service anticipated
customers of the JBS. Siebert believes that this should also be an incremental
expense shared equally with Intuit. Intuit has indicated that it does not agree
with Siebert's positions with respect to the advance to Pershing and the cost of
the CRM system. In addition, Siebert and Intuit will incur other charges
aggregating approximately $485,000 for the setup of the JBS's website and
related matters. Siebert and Intuit will share equally in the advance of the
other charges.
On May 15, 2000, the board of directors of the Company authorized the
repurchase of up to 1,000,000 shares of the Company's common stock. Shares will
be purchased from time to time, in the discretion of the Company, in the open
market and in private transactions. Through March 31, 2003, 594,468 shares have
been purchased at an average price of $4.84 per share. The Company intends to
continue acquiring shares pursuant to its stock repurchase program based upon
the price of the stock and in accordance with applicable rules and regulations.
Critical Accounting Policies
The Company generally follows accounting policies standard in the
brokerage industry and believes that its policies appropriately reflect its
financial position and results of operations. Management has identified the use
of "Estimates" as its critical accounting policy. These estimates relate
primarily to revenue and expense items in the normal course of business as to
which the Company receives no confirmations, invoices, or other documentation at
the time the books are closed for a period. The Company uses its best judgment,
based on its knowledge of these revenue transactions and expenses incurred, to
estimate the amounts of such revenue and expense. The Company is not aware of
any material differences between the estimates used in closing its books for the
last five years and the actual amounts of revenue received and expenses incurred
when the Company subsequently receives the actual confirmations, invoices or
other documentation. Estimates are also used in determining the useful lives of
tangible and intangible assets, and the fair market value of intangible assets.
Management believes that its estimates are reasonable.
7
Results of Operations
The Company believes that its business is performing relatively well,
given the current difficult business environment for discount and online
brokers. The Company had a net loss of $296,000 for the three months ended March
31, 2003. Excluding the direct expenses of approximately $598,000 and the
nominal revenues attributable to the JBS, the Company would have been profitable
for the three months ended March 31, 2003.
The Company has implemented various cost reduction programs such as
reducing head count and related employee expenses, reducing communication and
market data costs and renegotiating of vendor contracts. The Company continues
to evaluate acquisition opportunities aimed at increasing profitability and
enhancing economies of scale within the Company's existing infrastructure.
Three Months Ended March 31, 2003 Compared to Three Months Ended March 31, 2002
Total revenues for the three months ended March 31, 2003 were $5.6
million, a decrease of $615,000 or 10% from the same period in 2002.
Commission and fee income for the three months ended March 31, 2003 was
$4.1 million, a decrease of $1.1 million or 21% from the same period in 2002 due
to lower trading volume as a result of the continued weak market conditions
prevailing during the first quarter of 2003.
Investment banking revenues for the three months ended March 31, 2003
were $476,000, a decrease of $48,000 or 9.2% from the same period in 2002 due to
less activity in the new issue market.
Income from the Company's equity investment in Siebert Brandford Shank
& Co., LLC, an entity in which the Company holds a 49% equity interest ("SBS"),
for the three months ended March 31, 2003 was $711,000 compared to income of
$123,000, an increase of $588,000 or 478% from the same period in 2002. This
increase was due to increased activity in the municipal bond market. SBS serves
as an underwriter for municipal bond offerings.
Trading profits were $197,000 for the three months ended March 31,
2003, a decrease of $14,000 or 6.6% over the same period in 2002 due to an
overall decrease in trading volume.
8
Interest and dividends for the three months ended March 31, 2003 were
$96,000, a decrease of $42,000 or 30.4% from the same period in 2002 primarily
due to slightly lower cash balances available for temporary investment coupled
with lower interest rates.
Total expenses for the three months ended March 31, 2003 were $6.1
million, an increase of $335,000 or 5.8% from the same period in 2002.
Employee compensation and benefit costs for the three months ended
March 31, 2003 were $2.2 million, a decrease of $124,000 or 5.3% from the same
period in 2002. This decrease was primarily due to a decrease in the number of
employees due to the low trading volumes and a decrease in commission payouts,
offset in part by an increase in employee expenses of $88,000 due to the
Company's participation in the JBS with Intuit described above.
Clearing and floor brokerage costs for the three months ended March 31,
2003 were $852,000, a decrease of $79,000 or 8.5% from the same period in 2002
primarily due to decreased volume of trade executions, offset in part by an
increase in clearing costs of $14,000 due to the Company's participation in the
JBS.
Advertising and promotion expenses for the three months ended March 31,
2003 were $359,000, a decrease of $54,000 or 13.1% from the same period in 2002
primarily due to management's decision to spend less for advertising and
promotion as a result of the continued weakness in the marketplace, offset in
part by an increase in advertising and promotion expenses of $54,000 due to the
Company's participation in the JBS.
Communications expense for the three months ended March 31, 2003, was
$747,000, an increase of $197,000 or 35.8% from the same period in 2002 due
primarily to a higher volume of call traffic and quotes and $96,000 relating to
the Company's participation in the JBS.
Occupancy costs for the three months ended March 31, 2003 were
$264,000, an increase of $27,000 or 11.4% from the same period in 2002. This
increase was primarily due to the month to month rental of office space in
Aventura and Boca Raton, Florida, previously occupied by YDB, as part the
transition of customer accounts from YDB to Siebert, as well as, an increase in
occupancy cost relating to the JBS.
Other general and administrative expenses were $1.7 million, an
increase of $368,000 or 28.3% from the same period in 2002. This increase was
primarily due to costs of $328,000 for the development of products relating to
the JBS.
For the three months ended March 31, 2003, there was a tax benefit of
$215,000 due to the Company's loss before income tax of $511,000. For the three
months ended March 31, 2002, the provision for income taxes was $184,000 due to
income before taxes of $439,000.
9
Liquidity and Capital Resources
The Company's assets are highly liquid, consisting generally of cash,
money market funds and marketable securities. The Company's total assets at
March 31, 2003 were $40.7 million. As of that date, $26.6 million, or 65%, of
total assets were regarded by the Company as highly liquid.
Siebert is subject to the net capital requirements of the SEC, the NYSE
and other regulatory authorities. At March 31, 2003, Siebert's regulatory net
capital was $13.7 million, $13.4 million in excess of its minimum capital
requirement of $250,000.
As described under "Recent Developments" above, Siebert and Intuit will
incur other charges aggregating approximately $485,000 for the setup of the
JBS's website and related matters. Siebert and Intuit will share equally in the
advance of these charges.
The Company also intends to acquire additional shares of its common
stock pursuant to its share buy back program.
Siebert has entered into a Secured Demand Note Collateral Agreement
with SBS under which it is obligated to lend to SBS up to $1.2 million pursuant
to a secured promissory note on a subordinated basis. Amounts pledged by Siebert
under the facility are reflected on the Company's balance sheet as "cash
equivalents - restricted". SBS pays Siebert interest on this amount at the rate
of 10% per annum. The facility expires on August 31, 2004, at which time SBS is
obligated to repay to Siebert any amounts borrowed by SBS thereunder.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Working capital is generally temporarily invested in dollar denominated
money market funds and overnight certificates of deposits. These investments are
not subject to material changes in value due to interest rate movements. The
Company also invests in certain short-term municipal bonds, the values of which
may fluctuate during the period they are held by the Company.
In the normal course of its business, Siebert enters into transactions
in various financial instruments with off-balance sheet risk. This risk includes
both market and credit risk, which may be in excess of the amounts recognized in
the Company's financial statements. Retail customer transactions are cleared
through clearing brokers on a fully disclosed basis. If customers do not fulfill
their contractual obligations, the clearing broker may charge Siebert for any
loss incurred in connection with the purchase or sale of securities at
prevailing market prices to satisfy the customers' obligations. Siebert
regularly monitors the activity in its customer accounts for compliance with its
margin requirements. Siebert is exposed to the risk of loss on unsettled
customer transactions if customers and other counter parties are unable to
fulfill their contractual obligations.
10
Item 4. Controls and Procedures
The Company maintains "disclosure controls and procedures", as such
term is defined under Securities Exchange Act Rule 13a-14(c), that are designed
to ensure that information required to be disclosed in the Exchange Act reports
is recorded, processed, summarized and reported within the time periods
specified in its Securities and Exchange Commission's rules and forms, and that
such information is accumulated and communicated to the Company's management,
including its President and Chief Financial Officer, as appropriate, to allow
timely decisions regarding required disclosures. In designing and evaluating the
disclosure controls and procedures, the Company's management recognized that any
controls and procedures, no matter how well designed and operated, can provide
only reasonable assurance of achieving the desired control objectives and the
Company's management necessarily was required to apply its judgment in
evaluating the cost-benefit relationship of possible controls and procedures.
The Company has carried out an evaluation, within the 90 days prior to the date
of filing of this report, under the supervision and with the participation of
the Company's management, including the Company's President and Chief Financial
Officer, of the effectiveness of the design and operation of the Company's
disclosure controls and procedures. Based upon their evaluation and subject to
the foregoing, the President and Chief Financial Officer concluded that the
Company's disclosure controls and procedures were effective in ensuring that
material information relating to the Company is made known to the President and
Chief Financial Officer by others within the Company during the period in which
this report was being prepared.
There have been no significant changes in the Company's internal
controls or in other factors that could significantly affect these controls
subsequent to the date the Company completed its evaluation, including any
corrective actions with regard to significant deficiencies and material
weaknesses.
11
Part II - OTHER INFORMATION
Item 1. Legal Proceedings
The Company is involved in various routine lawsuits of a nature deemed
by the Company customary and incidental to its business. In the opinion of
management, the ultimate disposition of such actions will not have a material
adverse effect on its financial position or results of operations.
Item 2. Changes in Securities and Use of Proceeds
None
Item 3. Defaults Upon Senior Securities
None
Item 4. Submission of Matters to a Vote of Security Holders
None
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits.
99.1 Certification of Muriel F. Siebert of Periodical Financial
Report under Section 906 of the Sarbanes-Oxley Act of 2002.
99.2 Certification of Joseph M. Ramos, Jr. of Periodical
Financial Report under Section 906 of the Sarbanes-Oxley Act of 2002.
(b) Reports on Form 8-K.
None
II-1
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/ Muriel F. Siebert
---------------------------
Muriel F. Siebert
Chairwoman and President
(principal executive officer)
Dated: May 14, 2003
By: /s/ Joseph M. Ramos, Jr.
---------------------------
Joseph M. Ramos, Jr.
Executive Vice President and
Chief Financial Officer
(principal financial and accounting officer)
Dated: May 14, 2003
II-2
CERTIFICATIONS
I, Muriel F. Siebert, the principal executive officer of the registrant, certify
that:
1. I have reviewed this quarterly report on Form 10-Q of Siebert Financial
Corp.;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this quarterly report;
3. Based on my knowledge, the financial statements, and other information
included in this quarterly report, fairly present in all material respects
the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;
4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
a.) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within
those entities, particularly during the period in which this
quarterly report is being prepared;
b.) evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to the
filing date of this quarterly report (the "Evaluation Date"); and
c.) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on
our evaluation as of the Evaluation date;
5. The registrant's other certifying officer and I have disclosed, based on
our most recent evaluation, to the registrant's auditors and the audit
committee of the registrant's board of directors (or persons performing the
equivalent function):
a) all significant deficiencies in the design or operation of
internal controls which could adversely affect the registrant's
ability to record, process, summarize and report financial data and
have identified for the registrant's auditors any material weaknesses
in internal controls; and
b) any fraud, whether or not material, that involves management
or other employees who have a significant role in the registrant's
internal controls; and
6. The registrant's other certifying officer and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including
any corrective actions with regard to significant deficiencies and material
weaknesses.
Date: May 14, 2003 Signature: /s/ Muriel F. Siebert
---------------------
Name: Muriel F. Siebert
Title: Chairwoman and President
(principal executive officer)
II-3
I, Joseph M. Ramos, Jr., the principal financial and accounting officer of the
registrant, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Siebert Financial
Corp.;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this quarterly report;
3. Based on my knowledge, the financial statements, and other information
included in this quarterly report, fairly present in all material respects
the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;
4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
a.) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within
those entities, particularly during the period in which this
quarterly report is being prepared;
b.) evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to the
filing date of this quarterly report (the "Evaluation Date"); and
c.) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on
our evaluation as of the Evaluation date;
5. The registrant's other certifying officer and I have disclosed, based on
our most recent evaluation, to the registrant's auditors and the audit
committee of the registrant's board of directors (or persons performing the
equivalent function):
a) all significant deficiencies in the design or operation of
internal controls which could adversely affect the registrant's
ability to record, process, summarize and report financial data and
have identified for the registrant's auditors any material weaknesses
in internal controls; and
b) any fraud, whether or not material, that involves management
or other employees who have a significant role in the registrant's
internal controls; and
6. The registrant's other certifying officer and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including
any corrective actions with regard to significant deficiencies and material
weaknesses.
Date: May 14, 2003 Signature: /s/ Joseph M. Ramos, Jr.
--------------------------
Name: Joseph M. Ramos, Jr.
Title: Executive Vice President and
Chief Financial Officer
(principal financial and
accounting officer
II-4