-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, IvifA6aMiBFHRweJZH2CdD5ISSB9AimND1PvehLakJp8g7NtX6Sy4KUHI5NhDLM3 ZwU+9gOfigIawxgEQppwqQ== 0001000096-97-000325.txt : 19970520 0001000096-97-000325.hdr.sgml : 19970520 ACCESSION NUMBER: 0001000096-97-000325 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19970331 FILED AS OF DATE: 19970515 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: SIEBERT FINANCIAL CORP CENTRAL INDEX KEY: 0000065596 STANDARD INDUSTRIAL CLASSIFICATION: SECURITY BROKERS, DEALERS & FLOTATION COMPANIES [6211] IRS NUMBER: 111796714 STATE OF INCORPORATION: NY FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10QSB SEC ACT: 1934 Act SEC FILE NUMBER: 000-05703 FILM NUMBER: 97607246 BUSINESS ADDRESS: STREET 1: 885 THIRD AVENUE STREET 2: SUITE 1720 CITY: NEW YORK STATE: NY ZIP: 10022 BUSINESS PHONE: 2126442400 MAIL ADDRESS: STREET 1: 182 SMITH ST CITY: BROOKLYN STATE: NY ZIP: 11201 FORMER COMPANY: FORMER CONFORMED NAME: MICHAELS J INC DATE OF NAME CHANGE: 19950221 10QSB 1 QUARTERLY REPORT - MARCH 31, 1997 SECURITIES AND EXCHANGE COMMISSION Washington, D. C. 20549 FORM 10-QSB Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the quarterly period ended March 31, 1997 Commission file number 0-5703 SIEBERT FINANCIAL CORP. --------------------------------------------------------------- (Exact name of small business issuer as specified in its charter) New York 11-1796714 ------------------------------- --------------------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification Number) 885 Third Avenue, Suite 1720 New York, New York 10022 -------------------------------------- (Address of principal executive offices) Issuer's telephone number, including area code: (212) 644-2400 Former name, former address and former fiscal year, if changed since last report: None Check whether the Issuer: (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 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 --------- --------- State the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practical date: 5,237,610 shares of Common Stock outstanding on May 8, 1997. Transitional Small Business Disclosure Format: Yes X No ------- -------- PART I - FINANCIAL INFORMATION Item 1. Financial Statements SIEBERT FINANCIAL CORP. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF INCOME (Unaudited) For the Three Months Ended March 31, -------------------------- 1997 1996 ---------- ---------- Revenues: Commissions $4,954,280 $5,080,919 Trading profits 301,413 483,656 Interest and dividends 136,502 199,483 Investment banking 287,049 719,376 ---------- ---------- Total revenues 5,679,244 6,483,434 ---------- ---------- Expenses: Salaries, commissions and employee benefits 1,821,896 1,747,867 Clearing fees, including floor brokerage 1,132,850 1,116,018 Advertising and promotion 901,086 1,214,722 Communications 432,162 315,065 Interest 92,075 69,386 Rent and occupancy 162,755 89,793 Other general and administrative 705,834 603,382 ---------- ---------- Total expenses 5,248,658 5,156,233 ---------- ---------- Income before provision for taxes 430,586 Provision for income taxes - current 182,103 ---------- Net income $ 248,483 ========== Net income - historical 1,327,201 Pro forma provision for income taxes (1) 584,000 ---------- Pro forma net income $ 743,201 ========== Per share of common stock: Net income $ 0.05 ========== Pro forma net income $ 0.14 ========== Weighted average common shares deemed outstanding 5,236,485 5,235,897 ========== ========== (1) The pro forma provision for income taxes represents income taxes which would have been provided had Siebert operated as a C Corporation. The accompanying notes to financial statements are an integral part thereof. - 2 - SIEBERT FINANCIAL CORP. AND SUBSIDIARY CONSOLIDATED BALANCE SHEET (Unaudited) ASSETS March 31, 1997 ----------- Cash and cash equivalents $3, 576,171 Securities owned, at market value 9,330,010 Receivable from brokers and dealers -- Secured demand note receivable from majority shareholder 2,000,000 Property and equipment, net 488,791 Investment in affiliate 392,000 Prepaid expenses and other assets 520,226 ----------- T O T A L $16,307,198 =========== LIABILITIES AND SHAREHOLDERS' EQUITY Payable to brokers and dealers $ 2,976,365 Accounts payable and accrued liabilities 2,527,171 Securities sold, not yet purchased, at market value 482,555 ----------- T o t a l 5,986,091 ----------- Commitments and contingencies Liabilities to majority shareholder subordinated to claims of general creditors 3,000,000 Shareholders' equity: Common stock, $.01 par value, 49,000,000 shares authorized, 5,237,610 shares outstanding at March 31, 1997 52,376 Additional paid-in capital 6,742,091 Retained earnings 526,640 ----------- Total shareholders' equity 7,321,107 ----------- T O T A L $16,307,198 =========== The acocmpanying notes to financial statements are an integral part hereof, - 3 -
SIEBERT FINANCIAL CORP. AND SUBSIDIARY CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY (Unaudited) Common Stock ------------ Number Additional of $.01 Par Paid-In Retained Shares Value Capital Earnings Total ------ ----- ------- -------- ----- Balance, December 31, 1996 5,235,897 $52,359 $6,771,049 $278,157 $7,101,565 Cost of issuance of shares to shareholders rounding up to nearest 100 shares, net of proceeds of offering 1,713 17 (28,958) (28,941) Net income for period 248,483 248,483 --------- ------- ---------- -------- ---------- Balance, March 31, 1997 5,237,610 $52,376 $6,742,091 $526,640 $7,321,107 ========= ======= ========== ======== ========== The accompanying notes to financial statements are an integral part hereof. - 4 -
SIEBERT FINANCIAL CORP. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) Three months ended March 31, ------------------------- 1997 1996 ----------- ---------- Cash flows from operating activities: Net income $ 248,483 $ 1,327,201 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 37,996 19,219 Changes in operating assets and liabilities: (Increase) in prepaid expenses and other assets (86,488) (4,161) Net decrease in securities owned, at market value 786,238 5,065,122 Net change in receivable from/payable to brokers and dealers 4,117,804 (692,159) (Decrease) in accounts payable and accrued liabilities (296,829) (5,253,581) Net (decrease) in securities sold, net yet purchased, at market value (964,588) (247,355) ----------- ----------- Net cash provided by operating activities 3,842,616 214,286 ----------- ----------- Cash flows from investing activities: Purchase of property and equipment (76,533) (10,091) Investment in inactive affiliate (392,000) ----------- ----------- Net cash (used in) investing activities (468,533) (10,091) ----------- ----------- Cash flows from financing activities: Subordinated loan borrowings from majority shareholder 500,000 Cost of issuance of shares to shareholders rounding up to nearest 100 shares, net of proceds of offering (28,941) ----------- ----------- NET INCREASE IN CASH AND CASH EQUIVALENTS 3,345,142 704,195 Cash and cash equivalents - beginning of period 231,029 164,071 ----------- ----------- CASH AND CASH EQUIVALENTS - END OF PERIOD $ 3,576,171 $ 868,266 =========== =========== Supplemental disclosure of cash flow information: Cash paid for: Interest totaled $92,075 in 1997 and $69,386 in 1996. Income and franchise taxes totaled $50,075 in 1997 and $11,000 in 1996. The accompanying notes to financial statements are an integral part hereof. -5-
SIEBERT FINANCIAL CORP. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS March 31, 1997 (Unaudited) (1) Basis of Presentation The consolidated financial statements include the accounts of Siebert Financial Corp. (the "Company") and subsidiary. 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, 1996. 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) Net Capital At March 31, 1997 and 1996, Siebert had net capital of $7,604,150 and $7,474,113, respectively, as compared with net capital requirements of $250,000. (3) Issuance of Shares In an offering commenced January 23, 1997 and extended to March 21, 1997, Siebert offered existing shareholders with "odd lots" following the merger effected with J. Michaels, Inc. and reverse split in November 1996 the opportunity to "round up" their shares to the next nearest 100 shares. 1,713 shares were issued with proceeds to Siebert of $16,059. Costs related to the offering approximated $45,000. (4) Investment in Inactive Affiliate Siebert invested $392,000 and two of its officers invested $408,000 in Members' Capital in Siebert, Brandford, Shank & Co., LLC, a new limited liability company and broker dealer which will succeed to the business of Siebert's Siebert, Brandford, Shank Division as soon as all regulatory requirements have been completed. Siebert will also provide additional regulatory capital in the form of a $1.2 million 10% secured demand note. From April 1, 1997, any further net operating losses will be shared between the principals (51%) and Siebert (49%) from the capital of the new company; prior operating losses absorbed by Siebert, including the March quarter, will be recovered before future profits, after interest on capital contributions at 10%, are shared on a similar 51%/49% basis. - 6 - Item 2. Management's Discussion and Analysis or Plan of Operations This discussion should be read in conjunction with the Company's unaudited Consolidated Financial Statements and the Notes thereto contained elsewhere in this Quarterly Report. Business Environment Market conditions during the first few months of 1997 reflected a continuation of the 1996 bull market characterized by record volume and record high market levels. At the same time, competition has continued to intensify both among all classes of brokerage firms and within the discount brokerage business as well as from new firms not previously in the discount brokerage business. Electronic trading continues to grow as a retail discount market segment with some firms offering very low flat rate trading execution fees that are difficult for any conventional discount firm to meet. Many of the flat fee brokers, however, impose charges for services such as mailing, transfers and handling exchanges which Siebert does not and also direct their executions to captive market makers. Increased competition, broader service offerings or the prevalence of a flat fee environment could also limit Siebert's growth or even lead to a decline in Siebert's customer base which would adversely affect its results of operations. 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. Accordingly, earnings for any period should not be considered representative of any other period. Recent Developments For the three months ended March 31, 1997, revenues were $5.7 million and net income and earnings per share were $248,000 and $.05, respectively. Revenues for the three months ended March 31, 1996, were $6.5 million and pro forma net income and earnings per share were $743,000 and $.14, respectively. The net income and per share results for last year are pro forma for the merger effected with J. Michaels, Inc. and reverse split in November 1996. Overall revenue for the first quarter trailed last year by 12% while overall expenses increased 2%. Decreases in trading profits, interest and dividend income and corporate syndicate revenues contributed to the overall decrease in revenues. Retail discount brokerage operating income increased about 20% to approximately $1.2 million before start-up operating losses of about $350,000 for the quarter for three branch offices which were opened in late 1996. Tax exempt investment banking revenue increased to $300,000; however, operations resulted in a pre-tax operating loss of $600,000, $350,000 more than the prior quarter, because of the start-up of the newly formed Siebert, Brandford, Shank Division which added the cost of 26 municipal investment banking professionals and related offices. As planned, the operations of the Division will be transferred to a jointly owned company with the principals, formed as of April 1, 1997, and from that date any further net operating losses - 7 - will be shared between the principals (51%) and Siebert (49%); prior operating losses absorbed by Siebert, including the March quarter, will be recovered before future profits, after interest on capital contributions at 10%, are shared on a similar 51%/49% basis. The new company, Siebert, Brandford, Shank & Co., LLC, appears to be gathering momentum in its marketplace and improving results are expected as the year progresses. Recent appointments as lead manager for offerings anticipated to raise $160 million in the aggregate are expected to take place in the second and third quarters of 1997; awarding clients include Detroit Water, Detroit Public Schools and the State of California. Results of Operations Three Months ended March 31, 1997 Compared to Three Months ended March 31, 1996 Total revenues for the first three months of 1997 were approximately $5.7 million, a decrease of approximately $800,000 or 12 % over the first three months of 1996. Revenues decreased in all categories although commissions declined only slightly. Commissions and fees decreased $127,000 or 2 % to approximately $5.0 million. Both quarters reflected strong bull markets but reduced advertising in the current quarter may have contributed to the slight reduction in commissions. Trading profits decreased $182,000 or 38 % to $301,000 continuing to reflect less volatile markets and reduced trading opportunities in the firm's principal proprietary trading activity, listed bond funds. Interest and dividends decreased $63,000 or 32 % to $137,000 due to decreases in long proprietary trading positions and in trading strategies which generated dividend income. Investment banking income decreased $432,000 or 60% to $287,000 due primarily to decreased participation in equity underwritings over the prior year period due to a sharp fall off in large underwritings and a trend to smaller syndicates that make it difficult for non-originating firms to participate in offerings. Total costs and expenses for the first three months of 1997 were $ 5.2 million, an increase of $92,000 or 2% over the first three months of 1996. Costs increased in all categories except advertising and promotion. Compensation and benefit costs increased $74,000 or 4% to $1.8 million due to the addition of the additional tax exempt investment banking staff offset by reduced incentive compensation provisions due to reduced contractual performance incentives and discretionary staff bonuses. Clearing and brokerage fees increased $17, 000 or 2% to $1.1 million. Such costs increased slightly while commissions declined slightly because of a refund of charges in the year ago quarter from a prior period and a small shift in the current quarter to products having relatively higher clearing charges. Advertising and promotion expense decreased $314,000 or 26% to $900,000 million due to reduced promotional charitable contributions related to the - 8 - decrease in equity syndicate business and reduced national advertising and related production costs offset to some extent by a series of special promotional mailing programs. Communications expense increased $117,000 or 37% to $432,000 as more retail client services were offered directly on-line and due to the activities of the additional tax exempt investment banking staff. Interest expense increased $23,000 or 33% to $92,000 due an increase in subordinated borrowings and greater use of margin borrowings by proprietary trading activities. Rent and occupancy costs increased $73, 000 or 81% to $163,000 due to opening three new retail offices and seven new tax exempt investment banking offices in the fourth quarter of 1996. Other general and administrative expenses increased $102,000 or 17% to $705,000 primarily reflecting travel and related expenses related to the new business activity of the much larger tax exempt investment banking staff and a range of miscellaneous costs associated with opening new retail offices. The provision for income taxes and net income compared to the pro forma provision for income taxes and pro forma net income each decreased about 68% due to a similar decrease in income before provision for taxes. Liquidity and Capital Resources Siebert's assets are highly liquid, consisting generally of cash, money market funds and securities freely salable in the open market. Siebert's total assets at March 31, 1997 were $16.3 million, of which $2.0 million took the form of a secured demand note. $12.9 million or 79% of total assets were highly liquid. Siebert is subject to the net capital requirements of the Securities and Exchange Commission, the New York Stock Exchange and other regulatory authorities. At March 31, 1997, Siebert's net capital was $ 7.6 million, $7.3 million in excess of its minimum capital requirement of $250,000. Risk Management The principal credit risk to which Siebert is exposed on a regular basis is to customers who fail to pay for their purchases or who fail to maintain the minimum required collateral for amounts borrowed against securities positions. Siebert has established policies with respect to maximum purchase commitments for new customers or customers with inadequate collateral to support a requested purchase. Managers have some flexibility in allowing certain transactions. When transactions occur outside normal guidelines, such accounts are monitored closely until their payment obligation is completed; if the customer does not meet the commitment, steps are taken to close out the purchase and minimize any losses. Siebert has a risk unit specifically responsible for monitoring all customer positions for the maintenance of required collateral. The unit also monitors accounts that may be concentrated unduly in one or more securities - 9 - whereby a significant decline in the value of a particular concentrated security could reduce the value of the account's collateral below the account's loan obligation. Siebert has not had significant credit losses in the last five years. PART II - OTHER INFORMATION Item 6 - Exhibits and Reports on Form 8-K (a) Exhibits 27 - Financial Data Schedule (Edgar filing only) (b) Reports on Form 8-K On March 5, 1997, the Company filed a Current Report on Form 8-K disclosing pursuant to Item 8 of such Form a change in the Company's fiscal year from March 31 to December 31 of each year, such change to take effect as of December 31, 1996. SIGNATURES In accordance with the requirements of the Exchange Act, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. SIEBERT FINANCIAL CORP. Date: May 14, 1997 By: /s/ Muriel F. Siebert ---------------------------------------- Muriel F. Siebert Chair and President (on behalf of the registrant) Date: May 14, 1997 By: /s/ T. K. Flatley ---------------------------------------- T. K. Flatley Executive Vice President and Assistant Secretary (Principal Financial and Accounting Officer) - 10 - EX-27 2 FINANCIAL DATA SCHEDULE
5 3-MOS DEC-31-1997 MAR-31-1997 3,576,171 9,330,010 2,000,000 0 0 15,426,407 778,119 289,328 16,307,198 5,986,091 3,000,000 0 0 52,376 7,268,731 16,307,198 0 5,679,244 0 5,248,658 0 0 0 430,586 182,103 0 0 0 0 248,483 .05 0
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