Check the appropriate box:
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SIEBERT FINANCIAL CORP.
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(Name of Registrant As Specified In Charter)
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☒
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No fee required.
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☐
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Fee computed on table below per Exchange Act Rules 14c-5(g) and 0-11.
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1)
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Title of each class of securities to which transaction applies:
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2)
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Aggregate number of securities to which transaction applies:
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3)
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Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee is calculated and state how it was determined):
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4)
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Proposed maximum aggregate value of transaction:
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5)
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Total fee paid:
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☐
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Fee paid previously with preliminary materials.
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☐
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Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form
or Schedule and the date of its filing.
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1)
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Amount Previously Paid:
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2)
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Form, Schedule or Registration Statement No:
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3)
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Filing Party:
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4)
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Date Filed:
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●
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The issuance of 3,298,774 shares of the Company’s restricted common stock (the “Acquisition Shares”) to the shareholders of StockCross Financial Services, Inc. (“StockCross”) as consideration for the merger
of StockCross with and into Muriel Siebert & Co., Inc., our wholly-owned subsidiary (the “Merger”), pursuant to an Agreement and Plan of Merger, dated as of December 31, 2019, by and among the Company, Muriel Siebert & Co., Inc.,
StockCross and each of the shareholders of StockCross (the “Merger Agreement”).
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●
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An amendment to Paragraph THIRD of the Company’s Certificate of Incorporation increasing the authorized shares from 49,000,000 shares of common stock, par value $0.01 per share to 100,000,000 shares of
common stock, par value $0.01 per share (the “Amendment”).
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●
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The issuance of 3,298,774 shares of the Company’s restricted common stock (the “Acquisition Shares”) to the shareholders of StockCross Financial Services, Inc. (“StockCross”) as consideration for the merger
of StockCross with and into Muriel Siebert & Co., Inc., our wholly-owned subsidiary (the “Merger”), pursuant to an Agreement and Plan of Merger, dated as of December 31, 2019, by and among the Company, Muriel Siebert & Co., Inc.,
StockCross and each of the shareholders of StockCross (the “Merger Agreement”).
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●
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An amendment to Paragraph THIRD of the Company’s Certificate of Incorporation increasing the authorized shares from 49,000,000 shares of common stock, par value $0.01 per share to 100,000,000 shares of
common stock, par value $0.01 per share (the “Amendment”).
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Names of Majority
Shareholders
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Number of Shares
of Company
Common Stock Owned
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Percentage of Total Number of Shares of Company Common Issued and Outstanding
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Number of Votes
Voted in Favor of Actions
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Percentage Voting Power Entitled To Vote
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||||||||||||
Gloria E. Gebbia
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7,774,937
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28.6
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%
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7,774,937
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28.6
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%
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||||||||||
Andrew Reich
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584,232
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2.2
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%
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584,232
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2.2
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%
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||||||||||
Charles Zabatta
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260,449
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1.0
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%
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260,449
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1.0
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%
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||||||||||
Richard S. Gebbia
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2,937,319
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10.8
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%
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2,937,319
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10.8
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%
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||||||||||
John M. Gebbia
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1,812,919
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6.7
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%
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1,812,919
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6.7
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%
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||||||||||
Kennedy Cabot Acquisition
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3,527,283
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13.0
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%
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3,527,283
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13.0
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%
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||||||||||
Andrew McDonald
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1,468,305
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5.4
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%
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1,468,305
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5.4
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%
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||||||||||
David Gebbia
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1,034,519
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3.8
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%
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1,034,519
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3.8
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%
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||||||||||
Totals
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19,399,963
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71.4
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%
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19,399,963
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71.4
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%
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•
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changes in general economic and market conditions;
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•
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changes and prospects for changes in interest rates;
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•
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fluctuations in volume and prices of securities;
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•
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changes in demand for brokerage services;
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•
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competition within and without the brokerage business, including the offer of broader services;
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•
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competition from electronic discount brokerage firms offering greater discounts on commissions than we do;
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•
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the prevalence of a flat fee environment;
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•
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no fee brokerage services;
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•
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the method of placing trades by our customers;
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•
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computer and telephone system failures;
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•
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our level of spending on advertising and promotion;
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•
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trading errors and the possibility of losses from customer non-payment of amounts due;
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•
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other increases in expenses and changes in our net capital or other regulatory requirements.
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●
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expansion of the current business lines of facilitation of equity compensation plans; market making, and custody and clearance of accounts
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●
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increase the efficiency of clearing activities within MSCO
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reduce costs due to having one less regulated broker dealer
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produce numerous cost synergy opportunities as well as incremental capital to MSCO
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An increase of $3,481,178 from interest revenue due to a favorable interest rate environment and consolidation of banking institutions, and
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An increase of $1,642,462 in other income, the majority of which was from the expansion of the stock loan department
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A decrease of commission revenue of $101,381 due to market conditions
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A decrease of $824,782 in market-making revenue due to market conditions, and
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A decrease of $1,449,913 in principal transactions due to a reduction in sales force
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An increase of $457,283 of employee compensation and benefits from the expansion of the stock loan area,
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An increase of $794,690 of data processing due to annual increases and expanded processing of correspondent clearing and the expansion of the stock loan business
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$277,550 of occupancy from rent and real estate tax increases
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$307,306 in interest expense due to an unfavorable interest rate environment, and
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$1,423,396 of other expenses due to the expansion of the stock loan department and additional professional fees
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A decrease of $155,832 of clearing expenses due to lower trading volumes
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Net Loss for the year ended December 31, 2018, was $690,532 compared to net income of $123,274 for the year ended December 31, 2017, representing a decrease of $813,806.
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An increase of $265,210 in principal transactions, due to an increase in proprietary sales to customers,
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●
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An increase of $883,798 in interest income, due to a more favorable interest rate environment and consolidation of banking relationships resulting in a higher yield
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A decrease of $49,579 in commissions due to a reduction in unsolicited business and an increased marketing effort in the principal transactions
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A decrease of $103,017 in other income from a reduction in fees charged, and
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A decrease of $154,045 in market making due to unfavorable market conditions
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An increase of $217,628 of employee compensation and benefits for compensation corresponding to increased principal transactions
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An increase of $322,639 of communication and data processing expenses, primarily due to increased technological expenses
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An increase of $33,217 of clearance fees due to a proportional increase in clearing expenses related to the increase in principal transactions, and
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An increase of $159,745 interest expense due to an increase in interest payments on client’s credit balances and subordinated debt
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A decrease of $590,409 of other expenses due a decrease in consulting fees and general office expenses
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A decrease of $31,006 in rent and occupancy expense from a reduction in office expenditures
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Net Income for the nine months ended September 30, 2019 was $534,005 compared to $4,085 for the nine months ended September 30, 2018, representing an increase of $529,920.
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StockCross Shares
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Siebert Shares
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|||||||||||||||||||||||||||
Shares
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Percent
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Pre
Merger
Shares
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Pre
Merger
Percent
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Shares to be Issued in Merger
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Post Merger Shares
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Post Merger Percent
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||||||||||||||||||||||
Executive Officers and Directors
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Gloria E. Gebbia
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427,823
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7.0
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%
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7,774,937
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28.6
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%
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269,865
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8,044,802
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26.4
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%
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Andrew Reich
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55,331
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0.9
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%
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584,232
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2.2
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%
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34,902
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619,134
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2.0
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%
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||||||||||||||||||
Charles Zabatta
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189,934
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3.1
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%
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260,449
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1.0
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%
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119,808
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380,257
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1.2
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%
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||||||||||||||||||
Substantial Shareholders
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||||||||||||||||||||||||||||
Richard S. Gebbia
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1,236,545
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20.1
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%
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2,937,319
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10.8
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%
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779,995
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3,717,314
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12.2
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%
|
||||||||||||||||||
John M. Gebbia
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1,136,545
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18.5
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%
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1,812,919
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6.7
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%
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716,917
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2,529,836
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8.3
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%
|
||||||||||||||||||
Kennedy Cabot
Acquisition
|
—
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—
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3,527,283
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13.0
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%
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—
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3,527,283
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11.6
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%
|
|||||||||||||||||||
Andrew McDonald
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422,500
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6.9
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%
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1,468,305
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5.4
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%
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266,507
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1,734,812
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5.7
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%
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||||||||||||||||||
tZERO Group, Inc.*
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—
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—
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1,377,295
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5.1
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%
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—
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1,377,295
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4.5
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%
|
|||||||||||||||||||
Total
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3,468,678
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56.4
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%
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19,742,739
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72.7
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%
|
2,187,994
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21,930,733
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72.0
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%
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Name and Address of Beneficial Owner (1)
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Shares of
Common
Stock
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Percent of
Class
|
||||||
|
||||||||
Named Executive Officers and Directors
|
||||||||
Gloria E. Gebbia (2)
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17,086,977
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62.9
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%
|
|||||
Andrew H. Reich
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584,232
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2.2
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%
|
|||||
Francis V. Cuttita
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156,000
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0.6
|
%
|
|||||
Charles Zabatta
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260,449
|
1.0
|
%
|
|||||
Jerry M. Schneider
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3,000
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*
|
%
|
|||||
Directors and named executive officers as a group (5
persons)
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18,090,658
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66.6
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%
|
|||||
|
||||||||
Other 5% Shareholders
|
||||||||
Richard S. Gebbia
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2,937,319
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10.8
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%
|
|||||
9464 Wilshire Blvd.
|
||||||||
Beverly Hills, CA 90212
|
||||||||
John M. Gebbia
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1,812,919
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6.7
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%
|
|||||
9464 Wilshire Blvd.
|
||||||||
Beverly Hills, CA 90212
|
||||||||
Kennedy Cabot Acquisition, LLC
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3,527,283
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13.0
|
%
|
|||||
24005 Ventura Blvd Suite 200
|
||||||||
Calabasas CA 91302
|
||||||||
Andrew McDonald
|
1,468,305
|
5.4
|
%
|
|||||
tZERO Group, Inc.(3)
|
1,377,295
|
5.1
|
%
|
|||||
29 Broadway, 30th Floor
|
||||||||
New York, NY 10006
|
|
•
|
our Annual Report on Form 10-K for the year ended December 31, 2018, filed with the SEC on March 29, 2019;
|
|
|
|
|
•
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our Quarterly Report on Form 10-Q for the quarter ended March 31, 2019, filed with the SEC on May 15, 2019;
|
|
|
|
|
•
|
our Quarterly Report on Form 10-Q for the quarter ended June 30, 2019, filed with the SEC on August 14, 2019;
|
|
|
|
|
•
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our Quarterly Report on Form 10-Q for the quarter ended September 30, 2019, filed with the SEC on November 13, 2019;
|
|
|
|
|
•
|
our Current Report on Form 8-K filed with the SEC on January 5, 2018, as amended by Form 8-K/A filed with the SEC on March 19, 2018; our Current Report on Form 8-K filed with the SEC on
January 25, 2019, as amended by Form 8-K/A filed with the SEC on April 8, 2019; and our Current Reports on Form 8-K filed on July 19, 2019, August 1, 2019, October 3, 2019 and December 4, 2019; and
|
|
|
|
|
•
|
our Definitive Proxy Statement on Schedule DEF 14A filed with the SEC on June 19, 2019.
|
/s/ Andrew Reich
|
|
Annex B
|
Amendment to the Certificate of Incorporation
|
Annex D
|
Unaudited financial statements and the accompanying notes of StockCross for the nine month periods ended September 30, 2019 and September 30, 2018
|
Annex E
|
Unaudited pro forma financial statements and the accompanying notes for the nine months ended September 30, 2019 and the fiscal year ended December 31, 2018
|
SIEBERT FINANCIAL CORP. | |||
By: |
/s/ Andrew Reich |
||
Andrew Reich, Chief Financial Officer | |||
CERTIFICATE OF AMENDMENT
OF THE
CERTIFICATE OF INCORPORATION
OF
SIEBERT FINANCIAL CORP.
(Under Section 805 of the Business Corporation Law)
|
GUSRAE KAPLAN NUSBAUM PLLC
120 Wall Street
New York, New York 10005
Telephone (212) 269-1400
Telecopier (212) 809-5449
|
Revenue
|
||||
Interest income
|
$
|
5,435,805
|
||
Other income
|
2,271,573
|
|||
Market making
|
1,457,247
|
|||
Commissions
|
1,151,139
|
|||
Principal transactions
|
393,550
|
|||
10,709,314
|
||||
Expenses
|
||||
Employee compensation and benefits
|
4,712,672
|
|||
Other expenses
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2,912,684
|
|||
Data processing
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1,164,313
|
|||
Rent and occupancy expense
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1,074,236
|
|||
Clearance fees
|
626,049
|
|||
Interest expense
|
215,275
|
|||
10,705,229
|
||||
Gain before (benefit) from income taxes
|
4,085
|
|||
Provision for income tax
|
-
|
|||
Net Income
|
$
|
4,085
|
||
ASSETS
|
||||
Cash
|
$
|
1,602,812
|
||
Cash and securities segregated under federal and other regulations (cash of $168,991,784 and securities with a fair value of $51,731,075)
|
220,722,859
|
|||
Receivable from broker-dealers and clearing organizations
|
6,141,733
|
|||
Receivable from customers
|
85,816,284
|
|||
Securities owned-marketable, at fair value
|
6,634,254
|
|||
Securities borrowed
|
99,525,020
|
|||
Property, equipment and leasehold improvements,
net of accumulated depreciation and amortization |
60,604
|
|||
Other assets
|
1,885,436
|
|||
$
|
422,389,002
|
|||
LIABILITIES AND STOCKHOLDER'S EQUITY
|
||||
Liabilities
|
||||
Payable to customers
|
$
|
304,860,918
|
||
Payable to non-customers
|
23,772,936
|
|||
Drafts payable
|
4,571,133
|
|||
Payable to broker-dealers and clearing organizations
|
2,884,224
|
|||
Securities loaned
|
66,171,775
|
|||
Securities sold, not yet purchased, at fair value
|
47,478
|
|||
Accounts payable, accrued expenses and other liabilities
|
901,115
|
|||
403,209,579
|
||||
Stockholder's Equity
|
||||
Common stock; $.0016 par value, 20,000,000 shares
authorized, 6,152,500 shares issued and outstanding
|
9,844
|
|||
Paid-in capital
|
14,786,489
|
|||
Retained earnings
|
4,383,090
|
|||
19,179,423
|
||||
$
|
422,389,002
|
Cash flows from operating activities
|
||||
Net Income
|
$
|
4,085
|
||
Adjustments to reconcile net income to net cash used in operating activities:
|
||||
Changes in operating assets and liabilities:
|
||||
Cash and securities segregated under federal and other regulations
|
32,160,281
|
|||
Receivable from broker - dealers and clearing organizations
|
(3,444,671
|
)
|
||
Receivable from customers
|
(14,503,643
|
)
|
||
Receivable from non-customers
|
107,992
|
|||
Securities owned, at market value
|
(1,921,815
|
)
|
||
Securities borrowed
|
116,043,472
|
|||
Other assets
|
(526,369
|
)
|
||
Payable to customers
|
(15,392,571
|
)
|
||
Payable to non customers
|
12,526,304
|
|||
Drafts payable
|
1,585,378
|
|||
Payable to broker - dealers and clearing organizations
|
2,211,904
|
|||
Securities loaned
|
(129,434,542
|
)
|
||
Securities sold, but not yet purchased
|
(27,931
|
)
|
||
Accounts payable, accrued expenses and other liabilities
|
(1,032,512
|
)
|
||
Total adjustments
|
(1,648,723
|
)
|
||
Net cash used in operations
|
(1,644,638
|
)
|
||
Cash flows from investing activities
|
||||
Sale of property
|
415,000
|
|||
Net cash provided by investing activities
|
415,000
|
|||
Cash flows from financing activities
|
||||
Proceeds from payment for subscribed stock
|
567,000
|
|||
Net cash provided by financing activities
|
567,000
|
|||
NET CHANGE IN CASH
|
(662,638
|
)
|
||
CASH - BEGINNING
|
2,265,450
|
|||
CASH - END
|
$
|
1,602,812
|
||
Supplemental disclosures of cash flow information:
|
||||
Cash paid during the year for:
|
||||
Interest expense
|
$
|
215,275
|
||
Income taxes
|
$
|
-
|
|
2018 | 171,000 | |
|
2019
|
670,000 | |
2020
|
640,000
|
||
2021
|
176,000
|
||
Thereafter
|
137,000
|
||
$1,794,000
|
Revenue
|
||||
Interest income
|
$
|
6,319,603
|
||
Other income
|
2,168,556
|
|||
Market making
|
1,303,202
|
|||
Commissions
|
1,101,560
|
|||
Principal transactions
|
658,760
|
|||
11,551,681
|
||||
Expenses
|
||||
Employee compensation and benefits
|
4,930,300
|
|||
Other expenses
|
2,302,806
|
|||
Data processing
|
1,486,952
|
|||
Rent and occupancy expense
|
1,043,230
|
|||
Clearance fees
|
659,266
|
|||
Interest expense
|
375,020
|
|||
Depreciation
|
19,469
|
|||
10,817,043
|
||||
Gain before (benefit) from income taxes
|
734,638
|
|||
Provision for income tax
|
200,633
|
|||
Net Income
|
$
|
534,005
|
||
ASSETS
|
||||
Cash
|
$
|
1,661,854
|
||
Cash and securities segregated under federal and other regulations (cash of $193,065,066 and securities with a fair value of $1,304,367)
|
194,369,433
|
|||
Receivable from broker-dealers and clearing organizations
|
2,703,128
|
|||
Receivable from customers
|
95,246,000
|
|||
Receivable from non-customers
|
103,196
|
|||
Securities owned-marketable, at fair value
|
4,063,846
|
|||
Securities borrowed
|
254,585,360
|
|||
Property, equipment and leasehold improvements,
net of accumulated depreciation and amortization |
19,469
|
|||
Software
|
61,000
|
|||
Lease right of use asset, net of amortization
|
1,501,106
|
|||
Deferred tax asset
|
101,191
|
|||
Other assets
|
1,158,894
|
|||
$
|
555,574,477
|
|||
LIABILITIES AND STOCKHOLDER'S EQUITY
|
||||
Liabilities
|
||||
Payable to customers
|
$
|
274,242,870
|
||
Payable to non-customers
|
12,483,158
|
|||
Drafts payable
|
2,777,783
|
|||
Payable to broker-dealers and clearing organizations
|
1,804,548
|
|||
Securities loaned
|
240,334,060
|
|||
Securities sold, not yet purchased, at fair value
|
43,081
|
|||
Accounts payable, accrued expenses and other liabilities
|
700,743
|
|||
Lease liability
|
1,519,422
|
|||
Subordinated debt
|
5,000,000
|
|||
538,905,665
|
||||
Stockholder's Equity
|
||||
Common stock; $.0016 par value, 20,000,000 shares
authorized, 6,152,500 shares issued and outstanding
|
9,844
|
|||
Paid-in capital
|
12,436,489
|
|||
Retained earnings
|
4,222,479
|
|||
16,668,812
|
||||
$
|
555,574,477
|
Cash flows from operating activities
|
||||
Net Income
|
$
|
534,005
|
||
Adjustments to reconcile net income to net cash used in operating activities:
|
||||
Depreciation and amortization
|
19,469
|
|||
Deferred tax asset
|
200,633
|
|||
Changes in operating assets and liabilities:
|
||||
Cash and securities segregated under federal and other regulations
|
10,085,550
|
|||
Receivable from broker - dealers and clearing organizations
|
392,119
|
|||
Receivable from customers
|
(15,338,718
|
)
|
||
Receivable from non-customers
|
(103,196
|
)
|
||
Securities owned, at market value
|
1,671,009
|
|||
Securities borrowed
|
43,381,860
|
|||
Software
|
(61,000
|
)
|
||
Lease right of use asset
|
(1,501,106
|
)
|
||
Other assets
|
77,054
|
|||
Payable to customers
|
(3,541,038
|
)
|
||
Payable to non customers
|
(3,846,998
|
)
|
||
Lease liability
|
1,519,422
|
|||
Drafts payable
|
233,526
|
|||
Payable to broker - dealers and clearing organizations
|
1,109,797
|
|||
Securities loaned
|
(35,905,315
|
)
|
||
Securities sold, but not yet purchased
|
(3,601
|
)
|
||
Accounts payable, accrued expenses and other liabilities
|
(187,887
|
)
|
||
Total adjustments
|
(1,798,420
|
)
|
||
Net cash used in continued operations
|
(1,264,415
|
)
|
||
Cash flows from investing activities
|
-
|
|||
Net cash provided by investing activities
|
-
|
|||
Cash flows from financing activities
|
||||
Proceeds from issuance of subordinated debt
|
2,000,000
|
|||
Treasury stock purchase
|
171,972
|
|||
Return of capital distribution
|
(1,600,000
|
)
|
||
Net cash provided by financing activities
|
571,972
|
|||
NET CHANGE IN CASH
|
(692,443
|
)
|
||
CASH - BEGINNING
|
2,354,297
|
|||
CASH - END
|
$
|
1,661,854
|
||
Supplemental disclosures of cash flow information:
|
||||
Cash paid during the year for:
|
||||
Interest expense
|
$
|
375,020
|
||
Income taxes
|
$
|
-
|
|
2019
|
152,000 | |
2020
|
616,000
|
||
2021
|
176,000
|
||
Thereafter
|
137,000
|
||
$1,081,000
|
●
|
SIEB acquired the remaining 85% of StockCross, pursuant to the terms of a merger agreement (“Merger Agreement”), for approximately $29,750,000 which was paid through the issuance of SIEB common stock and effective January 1,
2020, StockCross was merged with and into MSCO (“the Transaction”).
|
●
|
Prior to the Transaction, the Company, MSCO, and StockCross were under common control and were affiliates. In addition, SIEB’s fully owned subsidiary, Muriel Siebert & Co., Inc. (“MSCO”), owned 15% of StockCross. MSCO had
a clearing agreement with StockCross whereby StockCross provided custody and clearing solutions to MSCO for its securities broker dealer business.
|
1.
|
The historical audited and unaudited financial statements and related notes of SIEB and StockCross for the pertinent reporting periods
|
2.
|
Annual Reports on Form 10-K and Quarterly Reports on Form 10-Q filings filed by SIEB for the pertinent reporting periods
|
3.
|
Form 17A-5 filings filed by MSCO and StockCross for the pertinent reporting periods
|
Siebert
|
StockCross
|
Pro Forma
Adjustments
|
Note
Reference
|
Pro Forma
Combined Siebert
|
|||||||||||||
ASSETS
|
|||||||||||||||||
Cash and cash equivalents
|
$
|
7,229,000
|
$
|
2,354,000
|
$
|
—
|
$
|
9,583,000
|
|||||||||
Cash segregated
|
—
|
204,455,000
|
—
|
204,455,000
|
|||||||||||||
Receivables from customers
|
—
|
79,907,000
|
—
|
79,907,000
|
|||||||||||||
Receivables from clearing and other brokers
|
2,030,000
|
3,095,000
|
(310,000
|
)
|
(i)
|
4,815,000
|
|||||||||||
Receivable from related party
|
1,000,000
|
—
|
(1,000,000
|
)
|
(ii)
|
—
|
|||||||||||
Receivable from lessors
|
171,000
|
—
|
—
|
171,000
|
|||||||||||||
Other receivables
|
96,000
|
691,000
|
—
|
787,000
|
|||||||||||||
Securities borrowed
|
—
|
297,967,000
|
—
|
297,967,000
|
|||||||||||||
Securities owned-marketable, at fair value
|
—
|
5,735,000
|
—
|
5,735,000
|
|||||||||||||
Furniture, equipment and leasehold improvements, net
|
468,000
|
39,000
|
—
|
507,000
|
|||||||||||||
Software, net
|
1,137,000
|
—
|
—
|
1,137,000
|
|||||||||||||
Prepaid expenses and other assets
|
470,000
|
545,000
|
—
|
1,015,000
|
|||||||||||||
Deferred tax assets
|
5,576,000
|
302,000
|
—
|
5,878,000
|
|||||||||||||
$
|
18,177,000
|
$
|
595,090,000
|
$
|
(1,310,000
|
)
|
$
|
611,957,000
|
|||||||||
LIABILITIES AND STOCKHOLDERS’ EQUITY
|
|||||||||||||||||
Payables to customers
|
$
|
—
|
$
|
277,784,000
|
$
|
—
|
$
|
277,784,000
|
|||||||||
Payables to non-customers
|
—
|
16,330,000
|
(1,000,000
|
)
|
(vi)
|
15,330,000
|
|||||||||||
Drafts payable
|
—
|
2,544,000
|
—
|
2,544,000
|
|||||||||||||
Due to clearing brokers and related parties
|
133,000
|
695,000
|
(310,000
|
)
|
(vii)
|
518,000
|
|||||||||||
Accounts payable and accrued liabilities
|
699,000
|
889,000
|
—
|
1,588,000
|
|||||||||||||
Securities loaned
|
—
|
276,239,000
|
—
|
276,239,000
|
|||||||||||||
Securities sold, not yet purchased
|
—
|
47,000
|
—
|
47,000
|
|||||||||||||
Lease incentive obligation
|
171,000
|
—
|
—
|
171,000
|
|||||||||||||
Long term debt
|
—
|
3,000,000
|
—
|
3,000,000
|
|||||||||||||
1,003,000
|
577,528,000
|
(1,300,000
|
)
|
577,221,000
|
|||||||||||||
Commitments and Contingencies
|
|||||||||||||||||
Stockholders’ equity:
|
|||||||||||||||||
Common stock, $.01 par value
|
271,000
|
10,000
|
23,000
|
(viii)
|
304,000
|
||||||||||||
Additional paid-in capital
|
7,641,000
|
14,036,000
|
3,493,000
|
(viii)
|
25,170,000
|
||||||||||||
Retained earnings
|
9,262,000
|
3,688,000
|
(3,688,000
|
)
|
(viii)
|
9,262,000
|
|||||||||||
Treasury stock, at cost
|
—
|
(172,000
|
)
|
172,000
|
(viii)
|
—
|
|||||||||||
17,174,000
|
17,562,000
|
—
|
34,736,000
|
||||||||||||||
$
|
18,177,000
|
$
|
595,090,000
|
$
|
(1,310,000
|
)
|
$
|
611,957,000
|
Siebert
|
StockCross
|
Pro Forma
Adjustments
|
Note
Reference
|
Pro Forma
Combined Siebert
|
|||||||||||||
REVENUE
|
|||||||||||||||||
Margin interest, marketing and distribution fees
|
$
|
10,928,000
|
$
|
2,942,000
|
$
|
—
|
$
|
13,870,000
|
|||||||||
Commissions and fees
|
9,504,000
|
1,626,000
|
—
|
11,130,000
|
|||||||||||||
Principal transactions
|
9,020,000
|
422,000
|
—
|
9,442,000
|
|||||||||||||
Interest
|
106,000
|
4,568,000
|
(305,000
|
)
|
(i)
|
4,369,000
|
|||||||||||
Market making
|
—
|
1,272,000
|
—
|
1,272,000
|
|||||||||||||
Stock loan / stock borrow
|
—
|
1,131,000
|
—
|
1,131,000
|
|||||||||||||
Other income
|
—
|
1,379,000
|
(290,000
|
)
|
(ii)
|
1,089,000
|
|||||||||||
Advisory fees
|
478,000
|
—
|
192,000
|
(iii)
|
670,000
|
||||||||||||
30,036,000
|
13,340,000
|
(403,000
|
)
|
42,973,000
|
|||||||||||||
EXPENSES
|
|||||||||||||||||
Employee compensation and benefits
|
13,817,000
|
5,914,000
|
—
|
19,731,000
|
|||||||||||||
Other general and administrative
|
1,859,000
|
2,071,000
|
—
|
3,930,000
|
|||||||||||||
Professional fees
|
1,963,000
|
1,352,000
|
—
|
3,315,000
|
|||||||||||||
Clearing fees, including execution costs
|
2,852,000
|
839,000
|
(290,000
|
)
|
(ii)
|
3,401,000
|
|||||||||||
Rent and occupancy
|
988,000
|
1,023,000
|
—
|
2,011,000
|
|||||||||||||
Data processing
|
—
|
1,756,000
|
—
|
1,756,000
|
|||||||||||||
Technology and communications
|
1,008,000
|
754,000
|
—
|
1,762,000
|
|||||||||||||
Depreciation and amortization
|
144,000
|
22,000
|
—
|
166,000
|
|||||||||||||
Interest expense
|
—
|
325,000
|
(305,000
|
)
|
(i)
|
20,000
|
|||||||||||
Advertising and promotion
|
45,000
|
56,000
|
—
|
101,000
|
|||||||||||||
22,676,000
|
14,112,000
|
(595,000
|
)
|
36,193,000
|
|||||||||||||
Income / (loss) from continuing operations
|
7,360,000
|
(772,000
|
)
|
192,000
|
6,780,000
|
||||||||||||
Loss from discontinued operations
|
—
|
(158,000
|
)
|
(192,000
|
)
|
(iii)
|
(350,000
|
)
|
|||||||||
Income before provision (benefit) for (from) income taxes
|
7,360,000
|
(930,000
|
)
|
—
|
6,430,000
|
||||||||||||
Provision (benefit) for (from) income taxes
|
(4,602,000
|
)
|
(238,000
|
)
|
—
|
(4,840,000
|
)
|
||||||||||
Net income
|
$
|
11,962,000
|
$
|
(692,000
|
)
|
$
|
—
|
$
|
11,270,000
|
||||||||
Net income per share of common stock
|
|||||||||||||||||
Basic and diluted
|
$
|
0.44
|
$
|
(0.11
|
)
|
—
|
$
|
0.37
|
|||||||||
Weighted average shares outstanding
|
|||||||||||||||||
Basic and diluted
|
27,157,188
|
6,152,000
|
|||||||||||||||
Pro Forma shares used to compute net income per share
|
30,455,962
|
Siebert
|
StockCross
|
Pro Forma
Adjustments
|
Note
Reference
|
Pro Forma
Combined Siebert
|
|||||||||||||
ASSETS
|
|||||||||||||||||
Cash and cash equivalents
|
$
|
4,231,000
|
$
|
1,663,000
|
$
|
—
|
$
|
5,894,000
|
|||||||||
Cash segregated
|
—
|
194,369,000
|
—
|
194,369,000
|
|||||||||||||
Receivables from customers
|
—
|
95,246,000
|
—
|
95,246,000
|
|||||||||||||
Receivables from non-customers
|
—
|
103,000
|
—
|
103,000
|
|||||||||||||
Receivables from clearing and other brokers
|
2,436,000
|
2,703,000
|
(693,000
|
)
|
(i)
|
4,446,000
|
|||||||||||
Receivable from related party
|
1,000,000
|
—
|
(1,000,000
|
)
|
(ii)
|
—
|
|||||||||||
Other receivables
|
103,000
|
587,000
|
—
|
690,000
|
|||||||||||||
Securities borrowed
|
—
|
254,585,000
|
—
|
254,585,000
|
|||||||||||||
Securities owned-marketable, at fair value
|
—
|
4,064,000
|
—
|
4,064,000
|
|||||||||||||
Escrow deposit
|
2,000,000
|
—
|
—
|
2,000,000
|
|||||||||||||
Equity method investment in related party
|
3,509,000
|
—
|
(3,509,000
|
)
|
(iii)
|
—
|
|||||||||||
Furniture, equipment and leasehold improvements, net
|
1,000,000
|
19,000
|
—
|
1,019,000
|
|||||||||||||
Software, net
|
1,806,000
|
—
|
—
|
1,806,000
|
|||||||||||||
Lease right-of-use assets
|
2,501,000
|
1,501,000
|
(162,000
|
)
|
(iv)
|
3,840,000
|
|||||||||||
Prepaid expenses and other assets
|
302,000
|
633,000
|
—
|
935,000
|
|||||||||||||
Deferred tax assets
|
5,105,000
|
101,000
|
66,000
|
(v)
|
5,272,000
|
||||||||||||
$
|
23,993,000
|
$
|
555,574,000
|
$
|
(5,298,000
|
)
|
$
|
574,269,000
|
|||||||||
LIABILITIES AND STOCKHOLDERS’ EQUITY
|
|||||||||||||||||
Payables to customers
|
$
|
—
|
$
|
274,243,000
|
$
|
—
|
$
|
274,243,000
|
|||||||||
Payables to non-customers
|
—
|
12,483,000
|
(1,000,000
|
)
|
(vi)
|
11,483,000
|
|||||||||||
Drafts payable
|
—
|
2,778,000
|
—
|
2,778,000
|
|||||||||||||
Due to clearing brokers and related parties
|
27,000
|
1,805,000
|
(693,000
|
)
|
(vii)
|
1,139,000
|
|||||||||||
Income taxes payable
|
38,000
|
—
|
—
|
38,000
|
|||||||||||||
Accounts payable and accrued liabilities
|
744,000
|
701,000
|
—
|
1,445,000
|
|||||||||||||
Securities loaned
|
—
|
240,334,000
|
—
|
240,334,000
|
|||||||||||||
Securities sold, not yet purchased
|
—
|
43,000
|
—
|
43,000
|
|||||||||||||
Lease liabilities
|
2,817,000
|
1,519,000
|
—
|
4,336,000
|
|||||||||||||
Long term debt
|
—
|
5,000,000
|
—
|
5,000,000
|
|||||||||||||
Other liabilities
|
91,000
|
—
|
—
|
91,000
|
|||||||||||||
3,717,000
|
538,906,000
|
(1,693,000
|
)
|
540,930,000
|
|||||||||||||
Commitments and Contingencies
|
|||||||||||||||||
Stockholders’ equity:
|
|||||||||||||||||
Common stock, $.01 par value
|
271,000
|
10,000
|
23,000
|
(ix)
|
304,000
|
||||||||||||
Additional paid-in capital
|
7,641,000
|
12,436,000
|
774,000
|
(ix)
|
20,851,000
|
||||||||||||
Retained earnings
|
12,364,000
|
4,222,000
|
(4,402,000
|
)
|
(ix)
|
12,184,000
|
|||||||||||
20,276,000
|
16,668,000
|
(3,605,000
|
)
|
33,339,000
|
|||||||||||||
$
|
23,993,000
|
$
|
555,574,000
|
$
|
(5,298,000
|
)
|
$
|
574,269,000
|
Siebert
|
StockCross
|
Pro Forma
Adjustments
|
Note
Reference
|
Pro Forma
Combined Siebert
|
|||||||||||||
REVENUE
|
|||||||||||||||||
Margin interest, marketing and distribution fees
|
$
|
8,499,000
|
$
|
2,662,000
|
$
|
—
|
$
|
11,161,000
|
|||||||||
Commissions and fees
|
6,030,000
|
1,102,000
|
—
|
7,132,000
|
|||||||||||||
Principal transactions
|
5,479,000
|
659,000
|
—
|
6,138,000
|
|||||||||||||
Interest
|
54,000
|
3,657,000
|
(357,000
|
)
|
(i)
|
3,354,000
|
|||||||||||
Market making
|
—
|
1,303,000
|
—
|
1,303,000
|
|||||||||||||
Stock loan / stock borrow
|
—
|
1,353,000
|
—
|
1,353,000
|
|||||||||||||
Other income
|
—
|
816,000
|
(219,000
|
)
|
(ii)
|
597,000
|
|||||||||||
Advisory fees
|
572,000
|
—
|
—
|
572,000
|
|||||||||||||
20,634,000
|
11,552,000
|
(576,000
|
)
|
31,610,000
|
|||||||||||||
EXPENSES
|
|||||||||||||||||
Employee compensation and benefits
|
8,882,000
|
4,930,000
|
—
|
13,812,000
|
|||||||||||||
Other general and administrative
|
1,861,000
|
926,000
|
—
|
2,787,000
|
|||||||||||||
Professional fees
|
1,388,000
|
1,180,000
|
—
|
2,568,000
|
|||||||||||||
Clearing fees, including execution costs
|
1,849,000
|
659,000
|
(219,000
|
)
|
(ii)
|
2,289,000
|
|||||||||||
Rent and occupancy
|
995,000
|
759,000
|
162,000
|
(iv)
|
1,916,000
|
||||||||||||
Data processing
|
—
|
1,487,000
|
—
|
1,487,000
|
|||||||||||||
Technology and communications
|
800,000
|
464,000
|
—
|
1,264,000
|
|||||||||||||
Depreciation and amortization
|
670,000
|
19,000
|
—
|
689,000
|
|||||||||||||
Interest expense
|
—
|
375,000
|
(357,000
|
)
|
(i)
|
18,000
|
|||||||||||
16,445,000
|
10,799,000
|
(414,000
|
)
|
26,830,000
|
|||||||||||||
Earnings of equity method investment in related party
|
84,000
|
—
|
(84,000
|
)
|
(v)
|
—
|
|||||||||||
Income before provision (benefit) for (from) income taxes
|
4,273,000
|
753,000
|
(246,000
|
)
|
4,780,000
|
||||||||||||
Provision (benefit) for (from) income taxes
|
1,171,000
|
218,000
|
(66,000
|
)
|
(vi)
|
1,323,000
|
|||||||||||
Net income
|
$
|
3,102,000
|
$
|
535,000
|
$
|
(180,000
|
)
|
$
|
3,457,000
|
||||||||
Net income per share of common stock
|
|||||||||||||||||
Basic and diluted
|
$
|
0.11
|
$
|
0.09
|
—
|
$
|
0.11
|
||||||||||
Weighted average shares outstanding
|
|||||||||||||||||
Basic and diluted
|
27,157,188
|
6,152,000
|
|||||||||||||||
Pro Forma shares used to compute net income per share
|
30,455,962
|
1.
|
Basis of Presentation
|
2.
|
Purchase Conditions
|
3.
|
Notes to Pro Forma Balance Sheets Adjustments
|
(i)
|
As part of the clearing relationship between MSCO and StockCross, SIEB had a receivable from StockCross for a $75,000 clearing deposit as well as month-end profits generated through StockCross as the clearing broker dealer.
This item was eliminated upon consolidation as the receivable was from StockCross.
|
(ii)
|
As part of the clearing relationship between MSCO and StockCross, SIEB had a receivable from StockCross of $1.0M for a margin deposit held by StockCross for the clearing function. This item was eliminated upon consolidation as
the receivable was from StockCross.
|
(iii)
|
The equity method investment in related party of approximately $3.5M represented MSCO’s 15% investment in StockCross as of September 30, 2019. This asset was eliminated upon consummation of the merger.
|
(iv)
|
Adjustment to align StockCross’ Lease right-of-use assets to SIEB’s accounting policy per the guidance under ASC 842.
|
(v)
|
Increase to the deferred tax assets due to the income tax benefit from the adjustments detailed in the Pro Forma Income Statement for the nine months ended September 30, 2019
|
(vi)
|
As part of the clearing relationship between MSCO and StockCross, StockCross had a payable to SIEB of $1.0M for a margin deposit held by StockCross for the clearing function. This item was eliminated upon consolidation as the
payable was to SIEB.
|
(vii)
|
As part of the clearing relationship between MSCO and StockCross, StockCross had a payable to SIEB for a $75,000 clearing deposit and month-end profits generated through StockCross as the clearing broker dealer. This item was
eliminated upon consolidation as the payable was to SIEB.
|
(viii)
|
Represents an adjustment to increase the common stock of SIEB by the par value of the shares issued in connection with the Transaction and to eliminate the par value of common stock of StockCross, as well as to increase
additional paid-in capital for the net difference.
|
(ix)
|
Represents an adjustment to increase the common stock of SIEB by the par value of the shares issued in connection with the Transaction and to eliminate the par value of common stock of StockCross, as well as to increase
additional paid-in capital for the net difference. Adjustment also reflects the elimination of the 15% ownership of StockCross by MSCO, a fully-owned subsidiary of SIEB, as well as the change in retained earnings from the
adjustments detailed in the Pro Forma Income Statement for the nine months ended September 30, 2019.
|
4.
|
Notes to Pro Forma Income Statements Adjustments
|
(i)
|
In relation to interest paid on clients’ credit balances, StockCross reported gross interest revenue and a corresponding expense while SIEB’s accounting policy is to report interest revenue net of interest expense. To align
StockCross’ reporting to SIEB’s accounting policy, StockCross’ interest expense was deducted from the Interest Expense line item and deducted from the Interest line item.
|
(ii)
|
Reflects the elimination of StockCross’ other income and the corresponding SIEB clearing fees resulting from the fully disclosed clearing relationship between MSCO and StockCross. The income and expense items represented fees
paid by SIEB to StockCross for custody and clearing services.
|
(iii)
|
In June 2018, StockCross ceased being an investment advisory company and all accounts began being serviced by Siebert AdvisorNXT, Inc., a wholly-owned subsidiary of SIEB. StockCross had reported the income under discontinued
operations, which was reclassified to Advisory fees as SIEB was the subsequent owner of the business line through its subsidiary Siebert AdvisorNXT, Inc.
|
(iv)
|
Adjustment reflects expense impact corresponding to alignment of StockCross’ Lease right-of-use assets to SIEB’s accounting policy per the guidance under ASC 842.
|
(v)
|
The earnings that SIEB recognized as part of its equity method investment in StockCross for the nine months ended September 30, 2019 was eliminated upon consolidation.
|
(vi)
|
The adjustment to pre-tax income was tax affected using an estimated effective tax rate of 27.0%.
|
5.
|
Reclassification Adjustments
|
StockCross
Reported Line Item
|
SIEB Line Item
Reclassification
|
Amount
12/31/18
|
Amount
09/30/19
|
Explanation
|
|
Other assets
|
Other receivables
|
691,000
|
587,000
|
Additional breakout not segregated by StockCross
|
|
Other assets
|
Prepaid expenses and other assets
|
545,000
|
633,000
|
Additional breakout not segregated by StockCross
|
StockCross
Reported Line Item
|
SIEB Line Item
Reclassification
|
Amount
12/31/18
|
Amount
09/30/19
|
Explanation
|
|
Revenue
|
|||||
Commissions
|
Commissions and fees
|
1,548,000
|
1,102,000
|
Conform to SIEB line item title
|
|
Interest income
|
Interest
|
4,568,000
|
3,658,000
|
Conform to SIEB line item title
|
|
Interest income*
|
Margin interest, marketing, and distribution fees
|
2,942,000
|
2,662,000
|
Additional breakout not segregated by StockCross
|
|
Other income
|
Commissions and fees
|
78,000
|
—
|
Additional breakout not segregated by StockCross
|
|
Other income
|
Advisory fees
|
192,000
|
—
|
Additional breakout not segregated by StockCross
|
|
Other income
|
Stock loan / stock borrow
|
1,131,000
|
1,353,000
|
Additional breakout not segregated by StockCross
|
|
Expense
|
|||||
Clearing costs
|
Clearing fees, including execution costs
|
839,000
|
659,000
|
Conform to SIEB line item title
|
|
Occupancy
|
Technology and communications
|
214,000
|
121,000
|
Additional breakout not segregated by StockCross
|
|
Occupancy
|
Rent and occupancy
|
1,023,000
|
759,000
|
Conform to SIEB titling of line item
|
|
Occupancy
|
Other general and administrative
|
200,000
|
163,000
|
Additional breakout not segregated by StockCross
|
|
Other expenses
|
Technology and Communications
|
540,000
|
343,000
|
Additional breakout not segregated by StockCross
|
|
Other expenses
|
Other general and administrative
|
2,222,000
|
763,000
|
Conform to SIEB line item title
|
|
Other expenses
|
Professional fees
|
1,352,000
|
1,180,000
|
Additional breakout not segregated by StockCross
|