-----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, OzII7v/CAicDjTxLGdy/ysL+lg0IJLUla8eRVuCJ2ujkMzhbpStGSM8VfrBlDxw0 H/Xi5CjizqQpQwp03eDG5g== 0001089355-01-000289.txt : 20010409 0001089355-01-000289.hdr.sgml : 20010409 ACCESSION NUMBER: 0001089355-01-000289 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20001231 FILED AS OF DATE: 20010402 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: 10-K SEC ACT: SEC FILE NUMBER: 000-05703 FILM NUMBER: 1590315 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: 885 THIRD AVENUE STREET 2: SUITE 1720 CITY: NEW YORK STATE: NY ZIP: 10022 FORMER COMPANY: FORMER CONFORMED NAME: MICHAELS J INC DATE OF NAME CHANGE: 19950221 10-K 1 0001.txt ANNUAL REPORT ================================================================================ UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D. C. 20549 FORM 10-K (Mark One) [X] ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2000 [ ] TRANSITION REPORT UNDER 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 (I.R.S. Employer incorporation or organization) Identification No.) 885 Third Avenue, New York , New York 10022 - -------------------------------------------------------------------------------- (Address of principal executive offices) (Zip Code) Registrant's telephone number (212) 644-2400 Securities registered under Section 12(b) of the Exchange Act: Title of each class Name of each exchange on which registered None None ---- ---- Securities registered under Section 12(g) of the Exchange Act: Common Stock, par value $.01 per share - -------------------------------------------------------------------------------- (Title of class) 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 [ ] Indicate by check mark if disclosure of delinquent filers in response to Item 405 of Regulation S-K (ss. 229.405) is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [ ] The number of shares of the Registrant's outstanding Common Stock, as of March 23, 2001, was 22,592,805 shares. The aggregate market value of the Registrant's Common Stock held by non-affiliates of the Registrant (based on the closing price of the Common Stock as reported by the NASDQ National Market on March 23, 2000 and the assumption for this computation only that all directors and executive officers are affiliates) was $12,566,306. Documents Incorporated by Reference: Proxy Statement to be filed pursuant to Regulation 14A of the Exchange Act on or before April 30, 2001, incorporated by reference into Parts II and III. =============================================================================== Special Note Regarding Forward-Looking Statements Except for historical information contained in this Annual Report on Form 10-K, the matters discussed in this report contain certain forward-looking statements that involve risks and uncertainties that could cause actual results to differ materially from those anticipated in the forward-looking statements. Factors that may cause such differences include, but are not limited to: the volume of trading of securities on stock exchanges and in the over-the-counter markets; the method of placing trades by our customers; computer and telephone system failures; the effects of competitors pricing and technology developments, telephone waiting time for servicing of accounts; the effects of industry regulation and changing industry practices, customs; changes in revenues and profit margin due to the cyclical securities markets; the level of spending on advertising and promotion; short or long-term decline in securities prices and trading volumes; and, the effect of losses from customer non-payment of balances due. PART I Item 1. BUSINESS General Siebert Financial Corp. (the "Company") is a holding company that conducts its retail discount brokerage and investment banking business through its wholly-owned subsidiary, Muriel Siebert & Co., Inc., a Delaware corporation ("Siebert") and its financial institution, offering financial products and financial education for women by women, through Siebert Women's Financial Network, Inc., also a Delaware Corporation. Muriel Siebert, the first woman member of the New York Stock Exchange, is the Chairwoman and President and owns approximately 88% of the outstanding common stock, par value $.01 per share (the "Common Stock") of the Company. Siebert Financial Corp. became a reporting company through a merger, effective on November 8, 1996, with J. Michaels, Inc. ("JMI"), a company incorporated in the State of New York in 1934, with which it was not previously associated. Following the merger, JMI's fiscal year was changed to December 31 and its name was changed to Siebert Financial Corp. Business Overview Siebert's principal activity is providing internet and traditional discount brokerage and related services to retail investors. Through its Capital Markets division, Siebert also offers institutional clients equity execution services on an agency basis as well as equity and fixed income underwriting and investment banking services. The Company believes that it is the largest Woman-Owned Business Enterprise ("WBE") in the capital markets business in the country through Siebert and the largest Minority and Women's Business Enterprise ("MWBE") in the tax-exempt underwriting business in the country through its 49% interest in Siebert, Brandford, Shank & Co.,LLC ("SBS"), which was formed in Delaware in 1998. 2 The Retail Division Discount Brokerage and Related Services. Siebert became a discount broker on May 1, 1975, a date that would later come to be known as "May Day." Siebert believes that it has been in business and a member of The New York Stock Exchange, Inc. (the "NYSE") longer than any other discount broker. In 1998 Siebert began to offer its customers access to their accounts through SiebertNet, its Internet website. Siebert's focus in its discount brokerage business is to serve retail clients seeking a wide selection of quality investment services, including trading with a broker on the telephone, through a wireless device or via the Internet, at commissions that are substantially lower than those of full-commission firms and competitive with the national discount brokerage firms. Siebert clears all securities transactions on a fully disclosed basis through National Financial Services Corp. ("NFSC"), a wholly owned subsidiary of Fidelity Investments. NFSC, with over $9 billion in assets, adds state-of-the-art technology as well as back-office experience to the operations of Siebert supplementing Siebert's in-house systems. Siebert serves investors who make their own investment decisions. Siebert seeks to assist its customers in their investment decisions by offering a number of value added services, including easy access to account information. The firm provides its customers with information via toll-free 800 service direct to its representatives, Monday through Friday between 7:30 a.m. and 7:30 p.m. Eastern Time. Through its SiebertNet, Mobile Broker, inter-active voice recognition and Siebert MarketPhone services, 24-hour access is available to customers. Independent Retail Execution Services. Siebert offers what it believes to be the best possible trade executions for customers. Siebert does not make markets in securities, nor does it position against customer orders. Siebert's listed orders are routed in a manner to afford all customers the opportunity for price improvement on all orders. Through a service called NYSE Prime1, Siebert also has the ability to document to customers all price improvements received on orders executed on the NYSE when orders are filled at better than the National Best Bid/Offer. The firm's OTC orders are executed through a network of NASDAQ market makers with no single market maker executing all trades. Additionally, the firm offers customers execution services through the SelectNet2 and Instinet3 systems for an additional fee. These systems give customers access to all Electronic Communication Networks listed on SelectNet and to Instinet before and after regular market hours. Siebert believes that its OTC executions afford its customers the best possible opportunity for consistent price improvement. Siebert does not have any affiliation with market makers and therefore does not execute OTC trades through affiliated market makers. Siebert offers customers the ability to execute online trades in U.S. Treasury bonds and notes through E-bond, operated by Cantor Fitzgerald, a large dealer in U.S. Treasury securities. Customers may also indicate online interest, in buying, selling or shopping for competitive yields of fixed income securities, including municipal bonds, corporate bonds, mortgage-backed securities, Government Sponsored Enterprises, Unit Investment Trusts or Certificates of Deposit. These transactions are executed by registered representatives. Retail Customer Service. Siebert believes that superior customer service enhances its ability to compete with larger discount brokerage firms and therefore provides retail customers, at no additional charge, with personal service via toll-free access to dedicated customer support personnel for all of its products and services. Customer service personnel are located in each branch office of the firm. - -------- 1 NYSE Prime is a service mark of the New York Stock Exchange, Inc. 2 SelectNet is a trademark of NASDAQ Stock Market, Inc. 3 Instinet is a trademark of Reuters Group PLC. 3 Retirement Accounts. Siebert offers customers a variety of self-directed retirement accounts for which it acts as agent on all transactions. Custodial services are provided through an affiliate of NFSC, the firm's clearing agent, which also serves as trustee for such accounts. Each IRA, SEP IRA, ROTH IRA, 401(k) and KEOGH account can be invested in mutual funds, stocks, bonds and other investments in a consolidated account. Customer Financing. Customers margin accounts are carried through Siebert's clearing agent, which lends customers a portion of the market value of certain securities held in the customer's account. Margin loans are collateralized by these securities. Customers may sell securities short in a margin account, subject to minimum equity and applicable margin requirements, and the availability of such securities to be borrowed. In permitting a customer to engage in transactions, Siebert assumes the risk of its customers' failure to meet the customer's obligations in the event of adverse changes in the market value of the securities positions. Both Siebert and its clearing agent reserve the right to set margin requirements higher than those established by the Federal Reserve Board. Risk Management. The two principal risks the Company faces relate to systems and credit. The Company's systems, including communications and trading, are critical to the Company's operations. Although the Company maintains redundancy in certain systems, failures in these systems nevertheless could have a material adverse affect on the Company's operations. The principal credit risk facing the Company relates to customers who fail to pay for their purchases or who fail to maintain the minimum required collateral for amounts borrowed against securities positions. Information and Communications Systems. Siebert's operations rely heavily on information processing and communications systems. The system for processing securities transactions is highly automated. Registered representatives are equipped with computer terminals that can access customer account information, obtain securities prices and related information and enter and confirm orders online. To support its customer service delivery systems, as well as other applications such as clearing functions, account administration, record keeping and direct customer access to investment information, Siebert maintains a computer network. Through its clearing agent, Siebert's computers are also linked to the major registered United States securities exchanges, the National Securities Clearing Corporation and The Depository Trust Company. Failure of the information processing or communication systems for a significant period of time could limit the ability to process a large volume of transactions accurately and rapidly. This could cause Siebert to be unable to satisfy its obligations to customers and other securities firms, and could result in regulatory violations. External events, such as an earthquake or power failure, loss of external information feeds, such as security price information, as well as internal malfunctions, such as those that could occur during the implementation of system modifications, could render part or all of such systems inoperative. To enhance the reliability of the system and integrity of data, Siebert maintains carefully monitored backup and recovery functions. These include logging of all critical files intra-day, duplication and storage of all critical data outside of its central computer site each evening, and trading facilities for backup and communications in each of its branches. 4 CREDIT MANAGEMENT. 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 the allowance of certain transactions. When transactions occur outside normal guidelines, 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 position and minimize any loss. Siebert has not had significant credit losses in the last five years. Current Developments. In 2000 the Company acquired the Women's Financial Network and HerDollar.com, both websites in the development stage providing financial information and education targeted primarily to women. The two websites were combined to form WFN.com ("WFN"), the Woman's Financial Network at Siebert. WFN.com, ("WFN") offering a broad range of investment information and financial educational materials, as well as tools, small business center community, investment club exchange, online workbooks all intended to help users to better understand and more effectively manage both their professional and personal lives. WFNInvest is a division of Siebert that offers online brokerage services similar to, and under similar terms and conditions as those offered by Siebert. WFN.com will have a formal re-launch in early April 2001. The Company presently is installing a new company wide telephone system. . This system permits the automatic routing of calls to the next available agent in a designated skill set, regardless of physical location, at times that all lines in the office originally called are busy. The system also permits detailed analysis of calls, including times and the nature of the calls, offering management tools to increase efficiency and customer service. The Company is also rolling out its new proprietary, custom built, Customer Relationship Management System that enables representatives to have all customer data on a computer screen, thereby aiding the resolution of questions on the first call. The information will be available to customers online during 2001 enabling customers to research and answer many of their questions online without help from a representative. On May 15, 2000, Siebert opened a branch in Freemont, California. The branch caters to a Mandarin speaking clientele and offers all of the products and services offered by Siebert. In June 2000 a branch was opened in Ft. Lauderdale, Florida. A portion of the space in that location will be used as a customer service call center unless it is required to service new customers originated by the branch.. Capital Markets Division In 1991, Siebert created its Capital Markets division, which serves as a co-manager, underwriting syndicate member, or selling group member on a wide spectrum of securities offerings for corporations and Federal agencies. Principal activities of the Capital Markets Division are investment banking and institutional equity execution services. During 1996, Siebert formed the Siebert, Brandford, Shank division of the investment banking group to enhance the activities of Siebert's tax exempt underwriting. The operations of the Siebert, Brandford, Shank division were moved on July 1, 1998 to a newly formed entity, SBS. Two individuals, Mr. Napoleon Brandford and Ms. Suzanne F. Shank, own 51% of the equity and are entitled to 51% of the net profits of SBS and Siebert is entitled to the balance. SBS has made Siebert a more significant factor in the tax exempt underwriting area, and is expected to enhance Siebert's government and institutional relationships as well as the breadth of products that can be made available to retail clients. 5 In addition to occupying a portion of Siebert's existing offices in New York, SBS operates out of offices in San Francisco, Seattle, Houston, Chicago, Detroit, Los Angeles, Washington, DC and Dallas. To date, the Siebert, Brandford, Shank division and SBS have co-managed offerings of approximately $85 billion and senior managed offerings of approximately $3.7 billion. Clients include the States of California, Washington, Texas, Ohio and Michigan and the Cities of Chicago, Detroit, Los Angeles, Houston, Dallas, Denver and St. Louis. Certain risks are involved in the underwriting of securities. Underwriting syndicates agree to purchase securities at a discount from the initial public offering price. If the securities must be sold below the syndicate cost, an underwriter is exposed to losses on the securities that it has committed to purchase. In the last several years, investment banking firms have increasingly underwritten corporate and municipal offerings with fewer syndicate participants or, in some cases, without an underwriting syndicate. In these cases, the underwriter assumes a larger part or all of the risk of an underwriting transaction. Under Federal securities laws, other laws and court decisions, an underwriter is exposed to substantial potential liability for material misstatements or omissions of fact in the prospectus used to describe the securities being offered. While municipal securities are exempt from the registration requirements of the Securities Act of 1933, underwriters of municipal securities nevertheless are exposed to substantial potential liability in connection with material misstatements or omissions of fact in the offering documents prepared in connection with offerings of such securities. Advertising, Marketing and Promotion Siebert develops and maintains its retail customer base through printed advertising in financial publications, broadcast commercials over national and local cable TV channels, as well as promotional efforts and public appearances by Ms. Siebert. Additionally, a significant portion of the firm's new business is developed directly from referrals by satisfied customers. WFN, is intended to target new retail customers for WFNInvest, a division of Siebert. Competition Siebert encounters significant competition from full-commission, online and discount brokerage firms, as well as from financial institutions, mutual fund sponsors and other organizations many of which are significantly larger and better capitalized than Siebert. There are currently over 150 online brokerage firms. The general financial success of the securities industry over the past several years has strengthened existing competitors, although the reduced volume of trading starting in late January 2001 is leading to a consolidation in the industry. Siebert believes that additional competitors such as banks, insurance companies, providers of online financial and information services and others will continue to be attracted to the online brokerage industry as they expand their product lines. Many of these competitors are larger, more diversified, have greater capital resources, and offer a wider range of services and financial products than Siebert. Some such firms are offering their services over the facilities of the Internet and have devoted more resources to and have more elaborate web sites than the Company. Siebert competes with a wide variety of vendors of financial services for the same customers. Siebert believes that its main competitive advantages are excellent executions, high quality customer service, responsiveness, cost and products offered and the breadth of product line. Regulation The securities industry in the United States is subject to extensive regulation under both Federal and state laws. The SEC is the Federal agency charged with administration of the Federal securities laws. Siebert is registered as a broker-dealer with the SEC, the NYSE and the National Association of Securities Dealers ("NASD"). Much of the regulation of broker-dealers has been delegated to self-regulatory organizations, principally 6 the NASD and national securities exchanges such as the NYSE which is Siebert's primary regulator with respect to financial and operational compliance. These self-regulatory organizations adopt rules (subject to approval by the SEC) governing the industry and conduct periodic examinations of broker-dealers. Securities firms are also subject to regulation by state securities authorities in the states in which they do business. Siebert is registered as a broker-dealer in 49 states, the District of Columbia and Puerto Rico. The principal purpose of regulations and discipline of broker-dealers is the protection of customers and the securities markets, rather than protection of creditors and stockholders of broker-dealers. The regulations to which broker-dealers are subject cover all aspects of the securities business, including training of personnel, sales methods, trading practices among broker-dealers, uses and safekeeping of customers' funds and securities, capital structure of securities firms, record keeping, fee arrangements, disclosure to clients, and the conduct of directors, officers and employees. Additional legislation, changes in rules promulgated by the SEC and by self-regulatory organizations or changes in the interpretation or enforcement of existing laws and rules may directly affect the method of operation and profitability of broker-dealers and investment advisers. The SEC, self-regulatory organizations and state securities authorities may conduct administrative proceedings which can result in censure, fine, cease and desist orders or suspension or expulsion of a broker-dealer or an investment adviser, its officers or its employees. Neither the Company nor Siebert has been the subject of any such administrative proceedings. As a registered broker-dealer and NASD member organization, Siebert is required by Federal law to belong to the Securities Investor Protection Corporation ("SIPC") which provides, in the event of the liquidation of a broker-dealer, protection for securities held in customer accounts held by the firm of up to $500,000 per customer, subject to a limitation of $100,000 on claims for cash balances. The SIPC is funded through assessments on registered broker-dealers. In addition, Siebert, through its clearing agent, has purchased from private insurers additional account protection up to the net asset value of each account. as defined, for customer securities positions only. Stocks, bonds, mutual funds and money market funds are considered securities and are protected on a share basis for the purposes of SIPC protection and the additional protection. Neither SIPC protection nor the additional protection applies to fluctuations in the market value of securities. Siebert is also authorized by the Municipal Securities Rulemaking Board to effect transactions in municipal securities on behalf of its customers and has obtained certain additional registrations with the SEC and state regulatory agencies necessary to permit it to engage in certain other activities incidental to its brokerage business. Margin lending arranged by Siebert is subject to the margin rules of the Board of Governors of the Federal Reserve System and the NYSE. Under such rules, broker-dealers are limited in the amount they may lend in connection with certain purchases and short sales of securities and are also required to impose certain maintenance requirements on the amount of securities and cash held in margin accounts. In addition, those rules and rules of the Chicago Board Options Exchange govern the amount of margin customers must provide and maintain in writing uncovered options. Net Capital Requirements As a registered broker-dealer, Siebert is subject to the SEC's Uniform Net Capital Rule (Rule 15c3-1) (the "Net Capital Rule"), which has also been adopted through incorporation by reference in NYSE Rule 325. Siebert is a member firm of the NYSE and the NASD. The Net Capital Rule specifies minimum net capital requirements for all registered broker-dealers and is designed to measure financial integrity and liquidity. Failure to maintain the required regulatory net capital may subject a firm to suspension or expulsion by the NYSE and the NASD, certain punitive actions by the SEC and other regulatory bodies and, ultimately, may require a firm's liquidation. 7 Regulatory net capital is defined as net worth (assets minus liabilities), plus qualifying subordinated borrowings, less certain deductions that result from excluding assets that are not readily convertible into cash and from conservatively valuing certain other assets. These deductions include charges that discount the value of firm security positions to reflect the possibility of adverse changes in market value prior to disposition. The Net Capital Rule requires notice of equity capital withdrawals to be provided to the SEC prior to and subsequent to withdrawals exceeding certain sizes. The Net Capital Rule also allows the SEC, under limited circumstances, to restrict a broker-dealer from withdrawing equity capital for up to 20 business days. The firm falls within the provisions of Rule 240.15c3-1(a)(1)(ii) promulgated by the SEC. 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 2 percent of aggregate debit balances arising from customer transactions, as defined. (The net capital rule of the NYSE also provides that equity capital may not be withdrawn or cash dividends paid if resulting net capital would be less than 5 percent of aggregate debits.) At December 31, 2000 and 1999, Siebert had net capital of $ 18.0 million and $15.4 million, respectively, and net capital requirements of $250,000 under Regulation 240.15c3-1(a)(1)(ii). Siebert is not subject to SEC Rule 15c3-3 and claims exemption from the reserve requirement under Section 15c3-3(k)(2)(ii). The firm maintains net capital in excess of the SEC Rule 17a-11 requirement. Employees As of March 14, 2001, the Company had approximately 138 employees, five of whom were corporate officers. None of the employees is represented by a union, and the Company believes that relations with its employees are good. 8 Item 2. PROPERTIES. Siebert currently maintains nine retail discount brokerage offices. Customers can visit the offices to obtain market information, place orders, open accounts, deliver and receive checks and securities, and obtain related customer services in person. Nevertheless, most of Siebert's activities are conducted by telephone and mail. Siebert operates its business out of the following 9 leased offices:
Approximate Expiration Date of Office Area in Square Current Renewal Location Feet Lease Terms - -------- ---- ----- ----- Corporate Headquarters, Retail and Investment Banking Office 885 Third Ave. 7,828 SF 4/30/03 None New York, NY 10022 Retail Offices 1,000 SF 12/31/02 None 9693 Wilshire Boulevard Beverly Hills, CA 90212 4400 North Federal Highway 1,038 SF 2/28/02 None Boca Raton, FL 33431 111 Pavonia Avenue 7,700 SF 6/30/04 Partial Jersey City, NJ 07310 to 5 year option 6/30/05 400 Fifth Avenue - South 1,008 SF 4/30/02 None Naples, FL 33940 240A South County Road 770 SF 12/31/02 2 year option Palm Beach, FL 33480 9569 Harding Avenue 1,150 SF Month None Surfside, FL 33154 to month 44260 Fremont Blvd. 1,100 Month None Freemont, CA 94538 to month 6210 N. Federal Highway 1,200 2/28/03 3 year option Fort Lauderdale, FL 33308
The Company believes that its properties are in good condition and are suitable and adequate for the Company's business operations. 9 Item 3. LEGAL PROCEEDINGS The Company is involved in various routine litigation that it believes is customary and incidental to its business. In the opinion of management, the ultimate disposition of these actions will not, in the aggregate, have a material adverse effect on the financial position or results of operations of the Company. Item 4. SUBMISSION OF MATTERS TO A VOTE OF SHAREHOLDERS None 10 Part II Item 5. PRICE RANGE OF COMMON STOCK The Common Stock trades on the NASDAQ National Market System under the symbol "SIEB". The high and low sales prices of the Common Stock reported by NASDAQ SmallCap Market during the following periods were: High Low First Quarter - 1999 ............................. $ 70.63 $ 8.50 Second Quarter - 1999 ............................ $ 58.00 $ 18.50 Third Quarter - 1999 ............................. 30.44 $ 14.50 Fourth Quarter - 1999 ............................ $ 22.84 $ 13.50 First Quarter - 2000 ............................. $ 17.00 $ 9.00 Second Quarter - 2000 ............................ $ 14.00 $ 6.81 Third Quarter - 2000 ............................. $ 9.94 $ 6.81 Fourth Quarter - 2000 ............................ $ 8.00 $ 3.45 January 1, 2000 - March 23, 2001 ................. $ 6.50 $ 4.63 The closing bid price of the Common Stock on the NASDAQ National System on March 23, 2001 was $ 4.63 per share and there were 171 holders of record of the Common Stock. Dividend Policy The Company paid cash dividends of $.04 to its shareholders on June 28, 2000, January 18, April 15, July 16, and October 29, 1999; and $.0225, $.0225, $.03 and $.03 on March 16, June 23, September 25 and December 30, 1998, respectively. Ms. Siebert, the majority shareholder of the Company, waived her right to receive the dividends declared by the Company to date. The Board of Directors of the Company considers the declaration of dividends quarterly. Subject to statutory and regulatory constraints, prevailing financial conditions and future earnings, the Company may pay cash dividends on its Common Stock. In considering whether to pay such dividends, the Company's Board of Directors will review the earnings of the Company, its capital requirements, its economic forecasts and such other factors as are deemed relevant. Some portion of the Company's earnings will be retained to provide capital for the operation and expansion of its business. 11 Item 6. SELECTED FINANCIAL INFORMATION (In thousands except per share data)
2000 1999 1998 1997 1996 ---- ---- ---- ---- ---- Income statement data: Total Revenues ..................................... $ 44,341 $ 36,118 $ 30,491 $ 31,266 $ 29,665 Net income (1) ..................................... 7,999 4,603 4,313 2,618 1,964 Net income per share of common stock (1) Basic ........................................... .35 .20 .20 .12 .09 Diluted ......................................... .34 .20 .19 .12 .09 Weighted average shares outstanding(basic) ......... 22,886,100 22,725,452 21,598,406 21,549,484 21,543,588 Weighted average shares outstanding (diluted) ...... 23,265,897 23,238,100 22,241,860 21,549,484 21,543,588 Statement of financial condition data (at year-end): Total assets ..................................... $ 40,636 $ 32,305 $ 21,494 $ 18,510 $ 15,354 Total liabilities excluding subordinated ......... $ 3,952 $ 2,851 $ 4,194 $ 5,493 $ 4,918 borrowings Subordinated borrowings to majority shareholder .. $ - $ - $ 3,000 $ 3,000 $ 3,000 Stockholders' equity ............................. $ 36,684 $ 29,454 $ 14,300 $ 10,017 $ 7,446
(1) Amounts for 1996 give effect to the income taxes that would have been paid if the Company did not file as an S Corporation. 12 Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS This discussion should be read in conjunction with the Company's audited Consolidated Financial Statements and the Notes thereto contained elsewhere in this Annual Report. Market conditions during the first quarter of 2000 reflected a continuation of the 1996 bull market characterized by record volume, record high market levels and large daily swings in the market averages. Concerns about oil prices and a slowing economy, however, led to lower trading volume in the markets overall during the second and third quarters. During the fourth quarter, uncertainties over interest rates, inflation, the price of oil and high stock valuations in the technology weighted NASDAQ led to continued lower volumes and generally bearish market conditions. Bearish sentiments continue to affect the markets through the first quarter of 2001 and market volumes continued light, especially when compared to the record volume levels of the first quarter of 2000. Meanwhile, competition continued to intensify among all types of brokerage firms including established discount brokers and new firms entering the on-line brokerage business. Electronic trading continues to account for an increasing amount of trading activity with some firms offering very low or even free flat rate trading execution fees that are difficult for any conventional discount firm to meet. Some of these flat fee or free brokers, however impose asset based charges for services such as mailing, transfers and handling exchanges which the Company does not currently impose, and also direct their executions to captive market makers. Continued competition could limit the Company's growth or even lead to a decline in the Company's customer base which would adversely affect its results of operations. Industry-wide changes in trading practices, such as the advent of decimal pricing and the increasing use of Electronic Communications Networks, are expected to put continuing pressure on fees earned by discount brokers for the sale of order flow while increasing volatility. On May 15, 2000, the Boaqrd of Directors of the Company authorized a buy back of up to one million shares of common stock. Shares will be purchased from time to time in the open market and in private transactions. Through March 23, 2001, 345,900 shares were purchased at an average price of $5.27. 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. Further, expenditures associated with the planned development and promotion of the Company's financial website for women, WFN, the Women's Financial Network at Siebert ("WFN"), may have an adverse affect on the Company's future earnings. The Company believes that revenues from new accounts expected to be generated by the website will be sufficient to offset the operating and promotional cost for its website over the long term. However, there can be no assurance that a sufficient number of new accounts will be generated to offset the costs or produce significant profits. 13 Results of Operations Year Ended December 31, 2000 Compared to Year Ended December 31, 1999 Revenues. Total revenues for 2000 were $44.3 million, an increase of $8.2 million or 22.7%, over 1999. Commission and fee income increased $7.9 million, or 24.2%, over the prior year to $40.3 million due to higher trading volume, particularly in the first quarter, partially offset by lower commissions earned per trade resulting from the increased lower priced electronic trading, reductions on other related services caused by increased competition from ultra low cost flat fee brokers and a reduction of per share order flow fees. Investment banking revenues increased $.4 million, or 29.9%, from the prior year to $1.7 in 2000, primarily due to the Company's involvement at the co-manager level in fixed income securities offerings. Loss from equity investee was $300,000 compared to the prior year's profit of $100,000, due in part to the decreased number of municipal bond offerings as interest rate concerns affected this market too. Trading profits declined $300,000, or 31.2%, from the prior year to $700,000 primarily due to reduced proprietary trading activity and investment of the Company's capital in lower risk investments, including money market funds. Income from interest and dividends increased $700,000, or 58.7%, from the prior year to $1.9 million primarily due to higher cash balances as a result of the Company's rights offering completed in January, 1999. Expenses. Total expenses for 2000 were $30.5 million, an increase of $2.3 million, or 8.2%, from the prior year. Employee compensation and benefit costs increased $1.7 million, or 15.2%, from the prior year to $12.9 million primarily due to an increase in management headcount, and new management employees associated with WFN, offset in part by a reduction in line personnel. Clearing and floor brokerage fees increased $100,000, or 2.5%, from the prior year to $6.1 million due to increased volume of trades executed, offset in part by a lower per ticket charge to the Company under a new clearing agreement entered into in 2000. Advertising and promotion expense decreased $600,000, or 17.6%, from the prior year to $2.8 million primarily due to a decreased level of promotional advertising. Communications expense increased $600,000, or 22.4%, over the prior year, to $3.0 million primarily due to increased quote usage by customers and news services offered by the Company, coupled with an increase in the volume of the Company's business and communication expenses incurred by WFN. Occupancy costs increased $200,000, or 40.5%, from the prior year to $800,000 principally due to the execution of new leases entered into by the Company in connection with the planned move of the Company's operations to Jersey City, New Jersey and the opening of the Company's Fort Lauderdale call center. Interest expense decreased $100,000, from the prior year to $20,000, primarily due to decreased activity in the Company's proprietary trading accounts. In July 1999, management decided to reduce trading activity and instead invest the Company's capital in lower risk investments, including money market funds. 14 General and Administrative. General and administrative expenses increased $400,000, or 9.1%, from the prior year to $4.9 million primarily due to higher depreciation expense resulting from fixed asset purchases and higher consulting costs. Taxes. Provision for income taxes increased $2.5 million, or 75.7%, from the prior year to $5.9 million due to an increase in net income before income tax to $13.9 million in 2000 from $7.9 million in 1999. Year Ended December 31, 1999 Compared to Year Ended December 31, 1998 Revenues. Total revenues for 1999 were $36.1 million, an increase of $5.6 million or 18.5%, over 1998. Commission and fee income increased $8.4 million, or 34.9%, over the prior year to $32.5 million due to higher trading volume partially offset by lower commissions earned per trade resulting from the increased lower priced electronic trading, reductions on other related services caused by increased competition from ultra low cost flat fee brokers and a reduction of per share order flow fees. The portion of trades executed on SiebertNet continues to increase, amounting to approximately 46% of retail trades executed for the year ending December 31, 1999 compared to 16% for 1998. Investment banking revenues decreased $1.9 million, or 59.6%, from the prior year to $1.3 in 1998, which included investment banking revenues of SBS for the six months ended June 30, 1998. SBS generates a majority of its revenues in the tax-exempt underwriting area. Income from equity investee decreased $1.1 million or 91.5% from the prior year to $100,000 due in part to the decreased number of municipal bond offerings as interest rates trended higher. Trading profits declined $249,000, or 19.4%, from the prior year to $1.0 million primarily due to reduced income opportunities in the trading of listed bond funds, the firm's principal trading activity. Additionally, In July 1999, management curtailed proprietary trading activity and invested the Company's capital in lower risk investments, including money market funds. Income from interest and dividends increased $527,000, or 78.7%, from the prior year to $1,197,000 primarily due to higher cash balances as a result of the Company's rights offering. Expenses. Total expenses for 1999 were $28.1 million, an increase of $5.1 million, or 22.3%, from the prior year. Employee compensation and benefit costs increased $258,000, or 2.4%, from the prior year to $11.2 million primarily due to increase in the Company's headcount, offset in part by the treatment of SBS as a separate entity from July, 1998. Clearing and floor brokerage fees increased $1.9 million, or 46.6%, from the prior year to $5.9 million due to increased volume of tickets executed, offset in part by lower per ticket charges. Additionally, the Company received a refund of $1 million in connection with a renegotiated clearing agreement during 1998, the effect of which was to decrease clearing and floor brokerage fees during 1998. Advertising and promotion expense increased $1.4 million, or 69.5%, from the prior year to $3.4 million primarily due to increased spot television advertising and increased media costs. Communications expense increased $665,000, or 36.8%, over the prior year, to $2.5 million primarily due to increased quote usage by customers and news services offered by the Company, coupled with an increase in the volume of the Company's business. 15 Occupancy costs decreased $112,000, or 16.8%, from the prior year to $553,000 principally due to the treatment of SBS as a separate entity from July 1998, partially offset by a lease extension option cancellation fee of approximately $33,000 paid during 1998. Interest expense decreased $172,000, or 52.6%, from the prior year to $155,000, primarily due to decreased activity in the Company's proprietary trading accounts. In July 1999, management curtailed proprietary trading activity and invest the Company's capital in lower risk investments, including money market funds. General and Administrative. General and administrative expenses increased $1.2 million, or 37.7%, from the prior year to $4.5 million primarily due to merger costs in connection with the acquisition of Peck, higher consulting fees and the cost of outsourcing fulfillment of an increased number of new account leads. Taxes. Provision for income taxes increased $191,000, or 6.1%, from the prior year to $3.3 million primarily due to an increase in net income before income tax to $7.9 million in 1999 from $7.5 million in 1998. Liquidity and Capital Resources The Company'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 December 31, 2000 were $40.6 million. As of December 31, 2000, $32.7 million or 80.6% 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 December 31, 2000, Siebert's regulatory net capital was $18.0 million, $17.8 million in excess of its minimum capital requirement of $250,000. Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Financial Instruments Held For Trading Purposes: Through Siebert, the Company maintains inventories in Exchange-listed and NASDAQ equity securities on both a long and short basis. The fair value of all securities at December 31, 2000 was approximately $6.3 million in long positions and approximately $2,000 in short positions. The fair value of all securities at December 31, 1999 was approximately $2.7 million in long positions and approximately $50,000 in short positions. Using a hypothetical 10% increase or decrease in prices, the potential loss in fair value, respectively, could be approximately $630,000 and $ 270,000, respectively, due to the offset of change in fair value in long and short positions. Financial Instruments Held For Purposes Other Than Trading: 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. Item 8. FINANCIAL STATEMENTS. See financial statements and supplementary data required pursuant to this item beginning on page F-1 of this Report on Form 10-K. 16 Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS IN ACCOUNTING AND FINANCIAL DISCLOSURE. None. 17 PART III Item 10. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT. (a) Identification of Directors (b) Identification of Executive Officers The executive officers of the Company are: Name Age Position Muriel F. Siebert 68 Chairwoman and President Daniel Jacobson 72 Vice Chairman Nicholas P. Dermigny 43 Executive Vice President and Chief Operating Officer Mitchell M. Cohen 45 Executive Vice President, Chief Financial Officer and Assistant Secretary Daniel Iesu 41 Secretary Certain information regarding each executive officer's business experience is set forth below. Muriel F. Siebert has been Chairwoman, President and a director of Siebert since 1967 and the Company since November 8, 1996. The first woman member of the New York Stock Exchange on December 28, 1967, Ms. Siebert served as Superintendent of Banks of the State of New York from 1977 to 1982. She is a director of the New York State Business Council, the National Women's Business Council, the International Women's Forum and the Boy Scouts of Greater New York. Daniel Jacobson has been Vice Chairman and a director of the Company since May 4, 1999. He was a partner in Richard A. Eisner & Company, LLP from June 1, 1994 until May 1, 1999. He is a director and chairman of the audit committee of Barnwell Industries, Inc. Mr. Jacobson is an attorney and certified public accountant. Nicholas P. Dermigny has been Executive Vice President and Chief Operating Officer of Siebert since joining the firm in 1989 and the Company since November 8, 1996. Prior to 1993, he was responsible for the retail division. Mr. Dermigny became an officer and director of the Company on November 8, 1996. Mitchell M. Cohen has been Executive Vice President, Chief Financial Officer and Assistant Secretary of Siebert since November 9, 1998. From December 1996 to October 1998, Mr. Cohen served as Chief Financial Officer of Everything's Jake. From May 1994 to November 1996, Mr. Cohen served as Chief Financial Officer of three firms including two broker-dealers. From January 1993 to May 1994, Mr. Cohen was an audit manager for Goldstein, Golub, Kessler & Co. P.C, a public accounting firm. Prior to these positions, Mr. Cohen was Chief Financial Officer of Ehrlich Bober Financial Corp., an investment banking firm listed on the American Stock Exchange. Daniel Iesu has been Secretary of Siebert since October 1996 and the Company since November 8, 1996. He has been Controller of Siebert since 1989. 18 Item 11. EXECUTIVE COMPENSATION. The information required by this item is incorporated by reference from the Company's definitive proxy statement to be filed by the Company pursuant to Regulation 14A on or prior to April 30, 2001 Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT. The information required by this item is incorporated by reference from the Company's definitive proxy statement to be filed by the Company pursuant to Regulation 14A on or prior to April 30, 2001. Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS. The information required by this item is incorporated by reference from the Company's definitive proxy statement to be filed by the Company pursuant to Regulation 14A on or prior to April 30, 2001. Item 14. EXHIBITS AND REPORTS ON FORM 8-K. (a) Exhibits The exhibits required by Item 601 of the Regulations S-K filed as part of, or incorporated by reference in, this report are listed in the accompanying Exhibit Index. (b) Reports on Form 8-K None. 19 INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Page SIEBERT FINANCIAL CORP. Report of Independent Auditors F-1 Consolidated Statements of Financial Condition at December 31, 2000 and 1999 F-2 Consolidated Statements of Income for each of the years in the three-year period ended December 31, 2000 F-3 Consolidated Statements of Changes in Stockholders' Equity for each of the years in the three-year period ended December 31, 2000 F-4 Consolidated Statements of Cash Flows for each of the years in the three-year period ended December 31, 2000 F-5 Notes to Consolidated Financial Statements F-6
REPORT OF INDEPENDENT AUDITORS Board of Directors Siebert Financial Corp. New York, New York We have audited the accompanying consolidated statements of financial condition of Siebert Financial Corp. and its wholly owned subsidiaries as of December 31, 2000 and December 31, 1999, and the related consolidated statements of income, changes in stockholders' equity and cash flows for each of the years in the three-year period ended December 31, 2000. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Siebert Financial Corp. and its wholly owned subsidiaries as of December 31, 2000 and December 31, 1999, and the consolidated results of their operations and their consolidated cash flows for each of the years in the three-year period ended December 31, 2000 in conformity with accounting principles generally accepted in the United States of America. Richard A. Eisner & Company, LLP New York, New York February 14, 2001 F-1 SIEBERT FINANCIAL CORP. AND SUBSIDIARIES Consolidated Statements of Financial Condition
December 31, ----------------------------------- 2000 1999 ---- ---- ASSETS Cash and cash equivalents $ 26,370,000 $ 22,882,000 Cash equivalents - restricted 1,300,000 1,300,000 Receivable from clearing broker 124,000 2,358,000 Securities owned, at market value 6,271,000 2,653,000 Furniture, equipment and leasehold improvements, net 1,956,000 729,000 Investment in and advances to affiliate 981,000 1,097,000 Intangibles, net 2,375,000 Prepaid expenses and other assets 1,259,000 1,286,000 ---------------- ---------------- $ 40,636,000 $ 32,305,000 ================ ================ LIABILITIES AND STOCKHOLDERS' EQUITY Liabilities: Securities sold, not yet purchased, at market value $ 2,000 $ 50,000 Accounts payable and accrued liabilities 3,950,000 2,801,000 ---------------- ---------------- 3,952,000 2,851,000 ---------------- ---------------- Commitments and contingent liabilities Stockholders' equity: Common stock, $.01 par value; 49,000,000 shares authorized, 22,911,187 shares outstanding at December 31, 2000 and 22,889,687 at December 31, 1999 229,000 228,000 Additional paid-in capital 17,736,000 17,582,000 Retained earnings 19,522,000 11,644,000 Less: 148,700 shares of treasury stock, at cost (803,000) ---------------- ---------------- 36,684,000 29,454,000 ---------------- ---------------- $ 40,636,000 $ 32,305,000 ================ ================ See notes to consolidated financial statements. F-2 Consolidated Statements of Income Year Ended December 31, --------------------------------------------------------- 2000 1999 1998 ----------------- ----------------- ----------------- Revenues: Commissions and fees $ 40,322,000 $ 32,452,000 $ 24,059,000 Investment banking 1,731,000 1,332,000 3,296,000 Trading profits 713,000 1,037,000 1,286,000 Income (loss) from equity investee (324,000) 100,000 1,180,000 Interest and dividends 1,899,000 1,197,000 670,000 ----------------- ----------------- ----------------- 44,341,000 36,118,000 30,491,000 ----------------- ----------------- ----------------- Expenses: Employee compensation and benefits 12,884,000 11,183,000 10,925,000 Clearing fees, including floor brokerage 6,088,000 5,942,000 4,053,000 Advertising and promotion 2,790,000 3,386,000 1,998,000 Communications 3,022,000 2,470,000 1,805,000 Occupancy 778,000 553,000 665,000 Interest 23,000 155,000 327,000 Other general and administrative 4,901,000 4,492,000 3,262,000 ----------------- ----------------- ----------------- 30,486,000 28,181,000 23,035,000 ----------------- ----------------- ----------------- Income before provision for income taxes 13,855,000 7,937,000 7,456,000 Provision for income taxes - current 5,856,000 3,334,000 3,143,000 ----------------- ----------------- ----------------- Net income $ 7,999,000 $ 4,603,000 $ 4,313,000 ================= ================= ================= Net income per share of common stock - basic $.35 $.20 $.20 Net income per share of common stock - diluted $.34 $.20 $.19 Weighted average shares outstanding - basic 22,886,100 22,725,452 21,598,406 Weighted average shares outstanding - diluted 23,265,897 23,238,100 22,241,860 See notes to consolidated financial statements. F-3 Consolidated Statements of Changes In Stockholders' Equity Common Stock -------------------- Number Additional of $.01 Par Paid-in Retained Shares Value Capital Earnings ------ ----- ------- -------- Balance - January 1, 1998 21,550,440 $ 215,000 $ 6,585,000 $ 3,217,000 Net income - - - 4,313,000 Issuance of shares in connection with Restricted Stock Award Plan, net of 7,200 shares forfeited 38,000 - - - Non-cash compensation in connection with Restricted Stock Award Plan - - 91,000 - Issuance of shares in connection with exercise of employee stock options 16,520 - 38,000 - Dividends on common stock ($.12 per share) - - - (159,000) ------------- ----------- --------------- -------------- Balance - December 31, 1998 21,604,960 215,000 6,714,000 7,371,000 Net income 4,603,000 Issuance of shares in connection with rights offering, net of expenses 961,087 10,000 6,919,000 Issuance of shares in connection with Restricted Stock Award Plan, net of 850 shares forfeited 3,400 - - - Non-cash compensation in connection with Restricted Stock Award Plan 50,000 Issuance of shares in connection with exercise of employee stock options 320,240 3,000 744,000 - Tax benefit arising from exercise of employer stock options 3,155,000 Dividends on common stock ($.12 per share) - - - (330,000) ------------- ----------- --------------- -------------- Balance - December 31, 1999 22,889,687 228,000 17,582,000 11,644,000 Net income 7,999,000 Treasury share purchases Non-cash compensation in connection with Restricted Stock Award Plan 40,000 Issuance of shares in connection with exercise of employee stock options 21,500 1,000 57,000 - Tax benefit arising from exercise of employee stock options 57,000 Dividends on common stock ($.04 per share) - - - (121,000) ------------- ----------- --------------- -------------- Balance - December 31, 2000 22,911,187 $ 229,000 $ 17,736,000 $ 19,522,000 ============= =========== =============== ============== Treasury Stock ---------------------- Number of Shares Amount Total ------ ------ ----- Balance - January 1, 1998 10,017,000 Net income 4,313,000 Issuance of shares in connection with Restricted Stock Award Plan, net of 7,200 shares forfeited - Non-cash compensation in connection with Restricted Stock Award Plan 91,000 Issuance of shares in connection with exercise of employee stock options 38,000 Dividends on common stock ($.12 per share) (159,000) -------------- Balance - December 31, 1998 14,300,000 Net income 4,603,000 Issuance of shares in connection with rights offering, net of expenses 6,929,000 Issuance of shares in connection with Restricted Stock Award Plan, net of 850 shares forfeited - Non-cash compensation in connection with Restricted Stock Award Plan 50,000 Issuance of shares in connection with exercise of employee stock options 747,000 Tax benefit arising from exercise of employer stock options 3,155,000 Dividends on common stock ($.12 per share) (330,000) -------------- Balance - December 31, 1999 29,454,000 Net income 7,999,000 Treasury share purchases 148,700 $ (803,000) (803,000) Non-cash compensation in connection with Restricted Stock Award Plan 40,000 Issuance of shares in connection with exercise of employee stock options 58,000 Tax benefit arising from exercise of employee stock options 57,000 Dividends on common stock ($.04 per share) (121,000) ------------ -------------- -------------- Balance - December 31, 2000 148,700 $ (803,000) $ 36,684,000 ============ ============== ============== See notes to consolidated financial statements. F-4 Consolidated Statements of Cash Flows Year Ended December 31, ------------------------------------------------- 2000 1999 1998 --------------- --------------- ------------- Cash flows from operating activities: Net income $ 7,999,000 $ 4,603,000 $ 4,313,000 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 518,000 382,000 184,000 (Income) loss from equity investee 325,000 (100,000) (1,180,000) Non-cash compensation 40,000 50,000 91,000 Tax benefit of exercised employee stock options 57,000 3,155,000 Changes in operating assets and liabilities: Net (increase )decrease in securities owned, at market value (3,618,000) 2,728,000 1,526,000 Net change in receivable from clearing broker 2,234,000 342,000 (457,000) Increase in prepaid expenses and other assets (89,000) (182,000) (491,000) Net decrease in securities sold, not yet purchased, at market value (48,000) (517,000) (1,471,000) Increase (decrease) in accounts payable and accrued liabilities 1,149,000 (747,000) 93,000 Net change in advances to equity investee (263,000) (514,000) --------------- --------------- ------------- Net cash provided by operating activities 8,304,000 9,200,000 2,608,000 --------------- --------------- ------------- Cash flows from investing activities: Purchase of intangibles (2,375,000) Purchase of furniture, equipment and leasehold improvements (1,629,000) (318,000) (358,000) Distributions from affiliate 54,000 998,000 Loans to affiliate (4,000,000) Repayment of loans - affiliate 4,000,000 --------------- --------------- ------------- Net cash (used in) provided by investing activities (3,950,000) 680,000 (358,000) --------------- --------------- ------------- Cash flows from financing activities: Purchase of treasury shares (803,000) Issuance of shares, net of expenses 6,929,000 Proceeds from exercise of options 58,000 747,000 38,000 Dividend on common stock (121,000) (409,000) (80,000) Repayment of subordinated loan - stockholder (1,000,000) --------------- --------------- ------------- Net cash (used in) provided by financing activities (866,000) 6,267,000 (42,000) --------------- --------------- ------------- Net increase in cash and cash equivalents 3,488,000 16,147,000 2,208,000 Cash and cash equivalents - beginning of year 22,882,000 6,735,000 4,527,000 --------------- --------------- ------------- Cash and cash equivalents - end of year $ 26,370,000 $ 22,882,000 $ 6,735,000 =============== =============== ============= Supplemental cash flow disclosures: Cash paid for: Interest $ 23,000 $ 155,000 $ 382,000 Income taxes $ 5,812,000 $ 566,000 $ 3,522,000 Noncash investing and financing activities: Dividends declared $ 79,000 Tax benefit of employee stock options $ 57,000 $ 3,155,000 Return of secured demand note receivable and concellation of subordinated notes payable $ 2,000,000
See notes to consolidated financial statements. F-5 SIEBERT FINANCIAL CORP. AND SUBSIDIARIES Notes to Consolidated Financial Statements NOTE A - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES [1] Organization and basis of presentation: Siebert Financial Corp. ("Financial"), through its wholly owned subsidiary, Muriel Siebert & Co., Inc. ("Siebert"), engages in the business of providing discount brokerage services for customers, investment banking services for institutional clients and trading securities for its own account, and, through its new wholly owned subsidiary, Siebert Women's Financial Network, Inc. ("WFN"), engages in providing products, services and information all uniquely devoted to women's financial needs. All significant intercompany accounts have been eliminated. Financial, Siebert and WFN collectively are referred to herein as the "Company". The municipal bond investment banking business was conducted by the Siebert Brandford Shank division until July 1, 1998. Since that date it is being conducted by Siebert Brandford Shank & Co., LLC ("SBS"), an investee, which is accounted for by the equity method of accounting (see Note B). The equity method provides that Siebert record its share of SBS' earnings or losses. On May 28, 1999, the Company consummated a merger with Andrew Peck Associates, Inc. ("Peck"). Under the terms of the agreement, Peck was merged with and into Siebert and the separate existence of Peck ceased. All of the common stock of Peck outstanding was converted into 600,000 shares of the Company's common stock. The merger is accounted for as a pooling of interests. Accordingly, the Company's financial statements for 1999 and 1998 have been restated to include the results of Peck. The following information presents certain income statement data of the separate companies for the periods preceding the merger: January 1, 1999 Through May 28, 1999 (unaudited) 1998 ------------ ------------- Revenues: Company $ 12,929,000 $ 25,661,000 Peck 2,504,000 4,830,000 ------------ ------------- $ 15,433,000 $ 30,491,000 ============ ============= Net income: Company $ 2,023,000 $ 4,313,000 Peck 0 0 ------------ ------------- $ 2,023,000 $ 4,313,000 =========== ============= There were no transactions between the Company and Peck prior to the merger. In several transactions during September and October of 2000, WFN acquired WFN Women's Financial Network, Inc. and HerDollar.com, Inc., respectively, companies in the development stage which had yet to commence principal operations, had no significant revenue and had assets consisting principally of websites, content and domain names with no significant book value, for aggregate consideration of $2,375,000 including costs. The transactions have been accounted for as purchases of intangible assets allocated to domain name, website and content, and a noncompete agreement. F-6 NOTE A - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) [2] Security transactions: Security transactions, commissions, revenues and expenses are recorded on a trade date basis. Siebert clears all its security transactions through an unaffiliated clearing firm on a fully disclosed basis. Accordingly, Siebert does not hold funds or securities for or owe funds or securities to its customers. Those functions are performed by the clearing firm which is highly capitalized. [3] Income taxes: The Company accounts for income taxes utilizing the asset and liability approach requiring the recognition of deferred tax assets and liabilities for the expected future tax consequences of temporary differences between the basis of assets and liabilities for financial reporting purposes and tax purposes. Financial files a consolidated federal income tax return which includes Siebert and WFN. [4] Furniture, equipment and leasehold improvements: Property and equipment is stated at cost and depreciation is calculated using the straight-line method over the lives of the assets, generally five years. Leasehold improvements are amortized over the period of the lease. [5] Cash equivalents: For purposes of reporting cash flows, cash equivalents include money market funds. [6] Advertising costs: Advertising costs are charged to expense as incurred. [7] Use of estimates: The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. [8] Earnings per share: Earnings per basic share are calculated by dividing net income by the weighted average outstanding shares during the period. Earnings per diluted share are calculated by dividing net income by the basic shares and all dilutive securities, which consist of options. The treasury stock method is used to reflect the dilutive effect of outstanding options, which, for 2000, 1999 and 1998 amounted to 379,797, 512,648 and 643,454 additional shares respectively added to the basic weighted average outstanding shares of 22,886,100, 22,725,452 and 21,598,406 in 2000, 1999 and 1998, respectively. [9] Investment banking: Investment banking revenues include gains and fees, net of syndicate expenses, arising from underwriting syndicates in which the Company participates. Investment banking management fees are recorded on the offering date, sales concessions on the settlement date and underwriting fees at the time the underwriting is completed and the income is reasonably determinable. F-7 NOTE A - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) [10] Cash equivalents - restricted: Cash equivalents - restricted represents cash invested in a money market account which is pledged as collateral for a secured demand note in the amount of $1,200,000 executed in favor of SBS. [11] Accounting for stock options: The Company accounts for stock options in accordance with Accounting Principles Board Opinion No. 25 ("APB Opinion 25"), "Accounting for Stock Issued to Employees" using intrinsic values with appropriate disclosures in conformity with the fair values based method of Statement of Financial Accounting Standards No. 123 (See Note G). [12] Software development cost: In accordance with Statement of Position ("SOP") 98-1, "Accounting for the Costs of Computer Software Developed or Obtained for Internal Use", costs related to the development of software for use in operations and in connection with the Company's internet websites, other than those costs incurred during the application development stage, are expensed as incurred. Costs incurred during the application development stage are capitalized and amortized using the straight-line method over an estimated useful life of three years beginning when the software is ready for its intended use. Costs relating to the application development stage during 2000, 1999 and 1998 were not material. [13] Intangibles: Purchased intangibles will principally be amortized using the straight-line method over the assigned useful lives, principally three years. NOTE B - INVESTMENT IN AFFILIATE In March 1997, Siebert and two individuals (the "Principals") formed SBS to succeed to the tax-exempt underwriting business of the Siebert Brandford Shank division of Siebert when regulatory requirements permitted. The agreements with the Principals provide that profits will be shared 51% to the Principals and 49% to Siebert. Losses incurred in the amount of approximately $631,000 through June 30, 1998 were recouped by Siebert prior to any profit allocation to the Principals. Siebert invested $392,000 as its share of the members' capital of SBS. Through June 30, 1998, Siebert operated the division's business in accordance with the terms of the agreements with the Principals. Effective July 1, 1998, SBS met the regulatory requirements and commenced operations. In 1998, the Company loaned an aggregate of $4,000,000 to SBS, which was subsequently repaid, pursuant to Temporary Subordination Agreements. In 1999, Muriel F. Siebert, the Chairwoman of the Company, pledged a portion of her shares of the Company's common stock to collateralize SBS's obligation under a $5,000,000 Revolving Subordinated Loan Agreement. F-8 NOTE B - INVESTMENT IN AFFILIATE (CONTINUED) Summarized financial data of SBS is as follows:
2000 1999 1998 ---- ---- ---- Total assets $ 3,413,000 $ 10,519,000 $ 6,234,000 Total liabilities including subordinated liabilities of $1,200,000, $6,200,000 and $1,200,000 2,807,000 9,143,000 3,685,000 Total members' capital 605,000 1,376,000 2,549,000 Total revenues 5,568,000 6,535,000 4,817,000 Net (loss) income (661,000) 204,000 1,750,000
During 2000, 1999 and 1998, Siebert charged SBS $240,000, $265,000 and $150,000 respectively, for rent and general and administrative services, which Siebert believes approximates the cost of furnishing such services. NOTE C - SUBORDINATED BORROWINGS AND SECURED DEMAND NOTE RECEIVABLE In 1999, Siebert returned $2,000,000 of secured demand notes receivable and $1,000,000 in cash in exchange for the cancellation of $3,000,000 of subordinated notes payable. The subordinated borrowings were available in computing net capital under the Securities and Exchange Commission's (the "SEC") Uniform Net Capital Rule. Interest paid on subordinated borrowings was $120,000 and $160,000 in 1999 and 1998, respectively. NOTE D - FURNITURE, EQUIPMENT AND LEASEHOLD IMPROVEMENTS, NET Furniture, equipment and leasehold improvements consist of the following:
December 31, ------------------------------- 2000 1999 -------------- -------------- Equipment $ 2,077,000 $ 1,077,000 Leasehold improvements 504,000 137,000 Furniture and fixtures 196,000 97,000 -------------- -------------- 2,777,000 1,311,000 Less accumulated depreciation and amortization 821,000 582,000 -------------- -------------- $ 1,956,000 $ 729,000 ============== ==============
Depreciation and amortization expense for the years ended December 31, 2000, 1999 and 1998 amounted to $402,000, $264,000 and $184,000, respectively. F-9 NOTE E - INCOME TAXES Income tax expense consists of the following:
Year Ended December 31, ----------------------------------------------- 2000 1999 1998 -------------- --------------- -------------- Federal income tax $ 4,194,000 $ 2,388,000 $ 2,233,000 State and local income tax 1,662,000 946,000 910,000 -------------- --------------- -------------- Income tax expense $ 5,856,000 $ 3,334,000 $ 3,143,000 ============== =============== ============== A reconciliation between the income tax expense and income taxes computed by applying the statutory Federal income tax rate to income before taxes is as follows: Year Ended December 31, ----------------------------------------------- 2000 1999 1998 -------------- --------------- -------------- Expected income tax provision at statutory Federal tax rate $ 4,711,000 $ 2,699,000 $ 2,535,000 State and local taxes, net of Federal tax effect 1,145,000 635,000 718,000 Effect of refund of prior years' local taxes, net of Federal and state tax effect (110,000) --------------- --------------- --------------- Income tax expense $ 5,856,000 $ 3,334,000 $ 3,143,000 =============== =============== ===============
There are no significant temporary differences which give rise to deferred tax assets or liabilities at December 31, 2000 and 1999. In 2000 and 1999, the Company reduced current taxes payable by $57,000 and $3,155,000, respectively, resulting from the deductibility of the difference between the exercise price of nonqualifying stock options granted by the Company and the market value of the stock on the dates of exercise. The tax benefit was recorded as a credit to paid-in capital. NOTE F - STOCKHOLDERS' EQUITY Siebert is subject to the SEC'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 2 percent of aggregate debit balances arising from customer transactions, as defined. At December 31, 2000 and 1999, Siebert had net capital of approximately $17,980,000 and $15,475,000, respectively, as compared with net capital requirements of $250,000. Siebert claims exemption from the reserve requirement under Section 15c3-3(k)(2)(ii). The principal shareholder waived her right to receive her portion of dividends declared in 1998, 1999 and 2000. On January 15, 1999, the Company completed a rights offering in which shareholders received one right to purchase one share of the Company's common stock at $7.50 for each share that they owned; approximately 961,000 rights were exercised raising approximately $6,900,000 after the payment of offering expenses of approximately $270,000. F-10 NOTE F - STOCKHOLDERS' EQUITY (CONTINUED) The 1998 Restricted Stock Award Plan (the "Award Plan"), provides for awards of not more than 60,000 shares of the Company's common stock, subject to adjustments for stock splits, stock dividends and other changes in the Company's capitalization, to key employees, to be issued either immediately after the award or at a future date. As provided in the Award Plan and subject to restrictions, shares awarded may not be disposed of by the recipients for a period of one year from the date of the award. Cash dividends on shares awarded are held by the Company for the benefit of the recipients and are paid upon lapse of the restrictions. During 1998 and 1999, respectively, the Company awarded employees 38,000 and 3,400 shares under the Award Plan, net of forfeiture of 7,200 and 850 shares. The shares, which vest one year from the dates of grant, were valued at market value on the dates of grant and are being charged to expense over the vesting periods. The Company recorded non-cash compensation charges of $91,000, $50,000 and $40,000 in 1998, 1999 and 2000, respectively, relating to the shares awarded under the Award Plan. On May 15, 2000, the Board of Directors of the Company authorized a buy back of up to one million shares of common stock. Shares will be purchased from time to time in the open market and in private transactions. Through December 31, 2000, 148,700 shares were purchased at an average price of $5.40. NOTE G - OPTIONS The Company's 1997 Stock Option Plan (the "Plan") authorizes the grant of options to purchase up to an aggregate of 2,100,000 shares, subject to adjustment in certain circumstances. Both non-qualified options and options intended to qualify as "Incentive Stock Options" under Section 422 of the Internal Revenue Code, as amended, may be granted under the Plan. A Stock Option Committee of the Board of Directors administers the Plan. The committee has the authority to determine when options are granted, the term during which an option may be exercised (provided no option has a term exceeding 10 years), the exercise price and the exercise period. The exercise price shall generally be not less than the fair market value on the date of grant. No option may be granted under the Plan after December 2007. In March 1997, the Company granted to non-employee directors options to purchase 120,000 shares of the Company's common stock at an exercise price of $2.313 per share. The options expire five years from the date of grant. In May 1997, pursuant to the Plan, the Company granted options to certain of its employees to purchase 799,000 shares of its common stock at an exercise price of $2.313 per share. In November 1997, pursuant to the Plan, the Company granted options to an employee to purchase 40,000 shares of the Company's common stock at an exercise price of $2.219 per share. In February 1998 and November 1998, the Company granted options to purchase 76,000 and 10,000 shares, respectively, of the Company's common stock at exercise prices of $2.688 and $6.625 per share, respectively. During 1999, the Company granted 34,500 options to employees to purchase the Company's common stock at exercise prices ranging from $17.81 to $32.50. All employee options vest 20% per year for five years and expire ten years from the date of grant. F-11 NOTE G - OPTIONS (CONTINUED) A summary of the Company's stock option transactions for the three years ended December 31, 2000 is presented below:
2000 1999 1998 ------------------------- ------------------------- ------------------------ Weighted Weighted Weighted Average Average Average Exercise Exercise Exercise Shares Price Shares Price Shares Price ----------- ---------- ----------- -------- ----------- --------- Outstanding - beginning of year 521,700 $4.15 870,800 $ 2.39 925,200 $2.31 Granted 34,500 $27.33 86,000 $3.15 Forfeited (5,600) $22.35 (63,360) $ 2.31 (123,880) $2.31 Exercised (21,500) $2.70 (320,240) $ 2.31 (16,520) $2.31 ----------- ----------- ----------- Outstanding - end of year 494,600 $3.93 521,700 $ 4.15 870,800 $2.39 =========== =========== =========== Exercisable at end of year 182,250 $3.02 53,840 $ 2.69 254,560 $2.31 =========== =========== Weighted average fair value of options granted $12.13 $1.44 The following table summarizes information related to options outstanding at December 31, 2000: Options Outstanding Options Exercisable ------------------------------------------------------ ----------------------------- Weighted Weighted Range Weighted Average Average Average Exercise Number Remaining Exercise Number Exercise Prices Outstanding Contractual Life Price Exercisable Price ------ ----------- ---------------- ----- ----------- ----- $ 2.31 408,000 6.42 Years $ 2.31 $ 2.69 49,100 7.08 Years $ 2.69 176,250 $2.31 $ 6.63 8,000 7.83 Years $ 6.63 2,000 $6.63 $17.81 9,500 8.25 Years $17.81 $32.50 20,000 8.33 Years $32.50 4,000 $32.50 ------------ ----------- $2.31 - $32.50 494,600 6.62 Years $ 3.93 182,250 $3.02 ============ ===========
The fair value of stock options is estimated at the grant date using the Black-Scholes option pricing model with the following weighted average assumptions. 1999 1998 ---- ---- Risk free interest rate 5.11 5.55 Expected life of options in years 3 10 Expected dividend yield .47% 2% Expected volatility 62% 40% F-12 NOTE G - OPTIONS (CONTINUED) The Company applies APB Opinion 25 and related Interpretations in accounting for its employee/director option grants. Accordingly, no compensation cost has been recognized for its stock option grants. The pro forma effect of applying SFAS No. 123 on net income for the years ended December 31, 2000, 1999 and 1998 is not necessarily representative of the effects on reported net income for future years due to, among other things, (1) the vesting period of stock options and (2) the fair value of additional stock options in future years. Had compensation costs for the Company's stock option grants been determined based on the fair value at the grant dates for awards, the Company's net income and earnings per share would have reduced to the pro forma amounts indicated below.
Year Ended December 31, --------------------------------------------- 2000 1999 1998 ---------- ---------- ---------- Net Income As reported $7,999,000 $4,603,000 $4,313,000 Pro forma $7,750,000 $4,334,000 $4,098,000 Net Income Per Share - Basic As reported $.35 $.20 $.20 Pro forma $.34 $.19 $.19 Net Income Per Share -Diluted As reported $.34 $.20 $.19 Pro forma $.33 $.19 $.18
At December 31, 2000, 1,760,340 shares of the Company's common stock have been reserved for future issuance under the Plan, the Award Plan and for options granted to directors. NOTE H - CLEARING AGREEMENT In 1998, Siebert signed a new agreement with its clearing broker which provides, among other things, for reduced ticket charges and execution fees. The agreement provided for retroactive effect at the new rates and resulted in a refund of $1,000,000 in 1998. NOTE I - FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK AND CONCENTRATIONS OF CREDIT RISK In the normal course of 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 statement of financial condition. Retail customer transactions are cleared through clearing brokers on a fully disclosed basis. In the event that customers are unable to 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 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 in the event customers and other counterparties are unable to fulfill contractual obligations. Securities transactions entered into as of December 31, 2000 settled with no adverse effect on Siebert's financial condition. F-13 NOTE J - COMMITMENTS AND CONTINGENT LIABILITIES The Company rents office space under long-term operating leases expiring in various periods through 2005. These leases call for base rent plus escalations for taxes and operating expenses. Future minimum base rental payments under these operating leases are as follows: Year Ending December 31, Amount ------------ ------ 2001 $ 732,000 2002 696,000 2003 351,000 2004 223,000 2005 223,000 ------------- $ 2,225,000 ============= Rent expense, including escalations for operating costs, amounted to approximately $583,000, $376,000 and $591,000 for the years ended December 31, 2000, 1999 and 1998, respectively. Rent is being charged to expense over the entire lease term on a straight-line basis. Siebert is party to certain claims, suits and complaints arising in the ordinary course of business. In the opinion of management, all such claims, suits and complaints are without merit, or involve amounts which would not have a significant effect on the financial position of the Company. Siebert sponsors a defined contribution retirement plan under Section 401(k) of the Internal Revenue Code that covers substantially all employees. Participant contributions to the plan are voluntary and are subject to certain limitations. Siebert may also make discretionary contributions to the plan. No contributions were made by Siebert in 2000, 1999 and 1998. Siebert executed a demand note payable in favor of SBS in the amount of $1,200,000 collaterized by approximately $1,300,000 of cash equivalents which are reported as "cash equivalents - restricted". This obligation is not included in the Company's statement of financial condition because it has not been drawn down by SBS. NOTE K - FAIR VALUE OF FINANCIAL INSTRUMENTS The carrying amounts reflected in the consolidated statements of financial condition for cash, cash equivalents, receivable from broker, secured demand notes receivable, accounts payable and accrued liabilities and subordinated borrowings approximate fair value due to the short term maturities of those instruments. Securities owned and securities sold, not yet purchased are carried at market value, in accordance with industry practice for broker-dealers in securities. F-14 NOTE L - SUMMARIZED QUARTERLY FINANCIAL DATA (UNAUDITED)
2000 1999 ----------------------------------------------------- ------------------------------------------------ First Second Third Fourth First Second Third Fourth Quarter Quarter Quarter Quarter Quarter Quarter Quarter Quarter ------- ------- ------- ------- ------- ------- ------- ------- Revenues $ 13,621,000 $ 10,598,000 $9,999,000 $10,122,000 $8,550,000 $9,255,000 $7,783,000 $10,530,000 Net income $ 3,206,000 $ 1,754,000 $1,754,000 $ 1,285,000 $1,031,000 $1,369,000 $ 643,000 $ 1,560,000 Earnings per share: Basic $.14 $0.08 $0.08 $0.06 $.05 $0.06 $0.03 $0.07 Diluted $.14 $0.08 $0.08 $0.06 $.04 $0.06 $0.03 $0.07
F-15 SIGNATURES In accordance with Section 13 or 15(d) of the Exchange Act, the registrant 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 Chair and President Date: March 28, 2001 In accordance with the Exchange Act, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
Name Title Date ---- ----- ---- /s/ Muriel F. Siebert - ----------------------- March 28 2001 Muriel F. Siebert Chair, President and Director (principal executive officer) /s/ Nicholas P. Dermigny - ------------------------- March 28, 2001 Nicholas P. Dermigny Executive Vice President, Chief Operating Officer and Director /s/ Mitchell M. Cohen March 28, 2001 - ------------------------------------ Mitchell M. Cohen Chief Financial Officer and Assistant Secretary (principal financial and accounting officer) /s/ Patricia L. Francy March 28, 2001 - ------------------------------------ Patricia L. Francy Director /s/ Jane H. Macon March 28, 2001 - ------------------------------------ Jane H. Macon Director /s/ Daniel Jacobson March 28, 2001 - ------------------------------------ Daniel Jacobson Director
20 SIEBERT FINANICIAL CORP. & SUBSIDIARY EXHIBIT INDEX Exhibit Number Description of Exhibit - ------ ---------------------- 2.1 Plan and Agreement of Merger between J. Michaels, Inc. ("JMI") and Muriel Siebert Capital Markets Group, Inc. ("MSCMG"), dated as of April 24, 1996 ("Merger Agreement") (incorporated by reference to Siebert Financial Corp.'s Form 10-K for the fiscal year ended December 31, 1996) 2.2 Amendment No. 1 to Merger Agreement, dated as of June 28, 1996 (incorporated by reference to Siebert Financial Corp.'s Form 10-K for the fiscal year ended December 31, 1996) 2.3 Amendment No. 2 to Merger Agreement, dated as of September 30, 1996 (incorporated by reference to Siebert Financial Corp.'s Form 10-K for the fiscal year ended December 31, 1996) 2.4 Amendment No. 3 to Merger Agreement, dated as of November 7, 1996 (incorporated by reference to Siebert Financial Corp.'s Form 10-K for the fiscal year ended December 31, 1996) 3.1 Certificate of Incorporation of Siebert Financial Corp., formerly known as J. Michaels, Inc. originally filed on April 9, 1934, as amended and restated to date (incorporated by reference to Siebert Financial Corp.'s Form 10-K for the fiscal year ended December 31, 1997) 3.2 By-laws of Siebert Financial Corp. (incorporated by reference to Siebert Financial Corp.'s Registration Statement on Form S-1 (File No. 333-49843) filed with the Securities and Exchange Commission on April 10, 1998) 10.1 Siebert Financial Corp. 1998 Restricted Stock Award Plan (incorporated by reference to Siebert Financial Corp.'s Form 10-K for the fiscal year ended December 31, 1997) 10.2 10(a) Siebert Financial Corp. 1997 Stock Option Plan (incorporated by reference to Siebert Financial Corp.'s Form 10-K for the fiscal year ended December 31, 1996) 10.4 LLC Operating Agreement, among Siebert, Brandford, Shank & Co., LLC, Muriel Siebert & Co., Inc., Napoleon Brandford III and Suzanne F. Shank, dated as of March 10, 1997 (incorporated by reference to Siebert Financial Corp.'s Form 10-K for the fiscal year ended December 31, 1996) 10.5 Services Agreement, between Siebert, Brandford, Shank & Co., LLC and Muriel Siebert & Co., Inc., dated as of March 10, 1997 (incorporated by reference to Siebert Financial Corp.'s Form 10-K for the fiscal year ended December 31, 1996) 21 10.6 Siebert Financial Corp. 1998 Restricted Stock Award Plan (incorporated by reference to Siebert Financial Corp.'s Form 10-K for the fiscal year ended December 31, 1997) 10.7 Stock Option Agreement, dated March 11, 1997, between the Company and Patricia L. Francy (incorporated by reference to Siebert Financial Corp.'s Registration Statement on Form S-8 (File No. 333-72939) filed with the Securities and Exchange Commission on February 25, 1999) 10.8 Stock Option Agreement, dated March 11, 1997, between the Company and Jane H. Macon (incorporated by reference to Siebert Financial Corp.'s Registration Statement on Form S-8 (File No. 333-72939) filed with the Securities and Exchange Commission on February 25, 1999) 22 10.9 Stock Option Agreement, dated March 11, 1997, between the Company and Monte E. Wetzler (incorporated by reference to Siebert Financial Corp.'s Registration Statement on Form S-8 (File No. 333-72939) filed with the Securities and Exchange Commission on February 25, 1999) 10.10 Employment Agreement, dated as of April 9, 1999, between the Company and Daniel Jacobson (incorporated by reference to Siebert Financial Corp.'s Form 10-Q for the quarter ended September 30, 1999) 21 Subsidiaries of the registrant (incorporated by reference to Siebert Financial Corp.'s Registration Statement on Form S-1 (File No. 333-49843) filed with the Securities and Exchange Commission on April 10, 1998) 23 Consent of Independent Auditors 23 EX-21 2 0002.txt SUBSIDIARIES OF THE REGISTRANT SIEBERT FINANCIAL CORP. AND SUBSIDIARY EXHIBIT 21.1 - SUBSIDIARIES OF THE REGISTRANT Muriel Siebert & Co., Inc., a Delaware Corporation. Siebert Women's Financial Network, Inc., a Delaware Corporation EX-23 3 0003.txt CONSENT OF INDEPENDENT AUDITORS EXHIBIT 23 INDEPENDENT AUDITORS' CONSENT We consent to the incorporation by reference in (1) the Registration Statement on Form S-8, File No. 333-43837, (2) the Registration Statement on Form S-8, File No. 333-43839, (3) the Registration Statement on Form S-8, File No. 333-72939 and (4) the Registration Statement on Form S-3, File No. 333-81037 of our report dated February 14, 2001 on our audit of the consolidated financial statements of Siebert Financial Corp. and subsidiaries ("Siebert") included in the Annual Report on Form 10-K of Siebert for the year ended December 31, 2000. /s/ Richard A. Eisner & Company, LLP New York, New York March 28, 2001 -----END PRIVACY-ENHANCED MESSAGE-----