Professional
fees for the three months ended June 30, 2014, were $1.6 million, an increase
of $463,000 or 41.7% from the same period in 2013 primarily due to increases in
legal fees relating to a dispute with a former employee.
Loss
related to arbitration settlement with a former employee for the three months
ended June 30, 2014 amounted to $4.3 million.
Advertising
and promotion expenses for the three months ended June 30, 2014 were $52,000, a
decrease of $24,000 or 31.6% from the same period in 2013 due to a decrease in
online advertising and public relations costs.
Communications
expense for the three months ended June 30, 2014, was $252,000, a decrease of
$76,000 or 23.2% from the same period in 2013 primarily due to a decrease in
real time quotes given to customers, reduction of users on Nasdaq trading and
compliance systems, and cost reduction due to a new phone system.
Occupancy
costs for the three months ended June 30, 2014 were $209,000, a decrease of
$50,000 or 19.3% from the same period in 2013 due to a decrease in our Jersey
City office lease operating expenses, our New York lease expense and the
closing of our West Palm beach office effective March 31, 2014.
Other
general and administrative expenses for the three months ended June 30, 2014
were $630,000, an increase of $72,000 or 12.9% from the same period in 2013 due
to an increase in depreciation from leasehold improvements recognized over the
life of the NY office lease expiring January of 2017.
Income from
Sieberts equity investment in SBS (an entity in which Siebert holds a 49%
equity interest), for the three months ended June 30, 2014, was a loss of
$329,000, compared to a loss of $349,000 from the same period in 2013 due to
SBS participating in fewer senior managed and co-managed transactions. Loss
from our equity investment in SBS Financial Products Company, LLC, an entity in
which we hold a 33.33% equity interest (SBSFPC) for the three months ended
June 30, 2014, was $3,000 as compared to $28,000 for the same period in 2013.
The losses in 2014 were due to operations winding down. In 2013 the loss was
due to mark to market positions.
No tax
benefit related to the pre-tax loss was recorded for the three months ended
June 30, 2014 and June 30, 2013 due to the recording of a full valuation
allowance to offset deferred tax assets based on recent losses and the
likelihood of realization of such assets.
Six Months Ended
June 30, 2014 Compared to Six Months Ended June 30, 2013
Total
revenues for the six months ended June 30, 2014 were $7.4 million, a decrease
of $1.1 million or 13.1% from the same period in 2013.
Commission
and fee income for the six months ended June 30, 2014 was $5.6 million, a
decrease of $272,000 4.6% from the same period in 2013 due to a decrease in
retail customer trading and ticket average, commission recapture business,
institutional participation, and debt market opportunities offset by an
increase in margin debit rebates as a result of higher margin debit balances.
Investment
banking revenues for the six months ended June 30, 2014 were $1.1 million, a
decrease of $336,000 or 22.7% from the same period in 2013 due to our reduced
participation in new issues in the equity and debt capital markets.
Trading
profits were $632,000 for the six months ended June 30, 2014, a decrease of
$510,000 or 44.7% from the same period in 2013 due to an overall decrease in
trading volume in the debt markets.
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Interest
and dividends for the six months ended June 30, 2014 were $29,000, a decrease
of $3,000 or 9.4% from the same period in 2013 primarily due to lower cash
balances.
Total
expenses for the six months ended June 30, 2014 were $13.9 million, an increase
of $3.7 million or 36.0% from the same period in 2013.
Employee
compensation and benefit costs for the six months ended June 30, 2014 were $3.9
million, a decrease of $575,000 or 12.8% from the same period in 2013 due to a
decrease in Bonus and commissions paid based on production in the capital
markets. In addition, savings resulted from a lower headcount in 2014.
Clearing
and floor brokerage costs for the six months ended June 30, 2014 were $975,000
a decrease of $284,000 or 22.6% from the same period in 2013 primarily due to
lower retail customer trading volumes, as well as a decrease in our commission
recapture business.
Professional
fees for the six months ended June 30, 2014 were $2.3 million, an increase of
$382,000 or 19.6% from the same period in 2013 primarily due to increases in
legal fees relating to a dispute with a former employee.
Loss
related to arbitration settlement with a former employee for the six months
ended June 30, 2014 amounted to $4.3 million.
Advertising
and promotion expenses for the six months ended June 30, 2014 were $122,000, a
decrease of $53,000 or 30.3% from the same period in 2013 primarily due to a
decrease in online advertising and public relations costs.
Communications
expense for the six months ended June 30, 2014 were $522,000, a decrease of
$153,000 or 22.7% from the same period in 2013 primarily due to a decrease in
real time quotes given to customers, reduction of users on Nasdaq trading and
compliance systems, and cost reduction due to a new phone system.
Occupancy
costs for the six months ended June 30, 2014 were $452,000, a decrease of
$64,000 or 12.4% from the same period in 2013 due to a decrease in our Jersey
City office lease operating expenses, our New York lease expense and the
closing of our West Palm beach office effective March 31, 2014.
Other
general and administrative expenses for the six months ended June 30, 2014 were
$1.2 million, an increase of $118,000 or 10.6% from the same period in 2013 due
to an increase in depreciation from leasehold improvements written off over the
life of the NY office lease expiring January of 2017.
Income from
Sieberts equity investment in SBS (an entity in which Siebert holds a 49%
equity interest), for the six months ended June 30, 2014, was income of $397,000,
compared to a loss of $951,000 from the same period in 2013 due to SBS
participating in more senior managed and co-managed transactions. Loss from our
equity investment in SBSFPC, an entity in which we hold a 33.33% equity
interest, for the six months ended June 30, 2014, was a loss $3,000 as compared
to a loss of $120,000 from the same period in 2013. The losses in 2014 were the
result of winding down operations. In 2013 the loss was due to mark to market
positions.
No tax
benefit related to the pre-tax loss was recorded for the six months ended June
30, 2014 and June 30, 2013 due to the recording of a full valuation allowance
to offset deferred tax assets based on recent losses and the likelihood of
realization of such assets.
Liquidity and Capital Resources
Our assets
are highly liquid, consisting generally of cash in money market funds. Our
total assets at June 30, 2014 were $26.6 million. As of that date, we regarded
$13.8 million, or 52%, of total assets as highly liquid.
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Siebert is
subject to the net capital requirements of the SEC, the NYSE and other
regulatory authorities. At June 30, 2014, Sieberts regulatory net capital was
$6.7 million, $6.4 million in excess of its minimum capital requirement of
$250,000.
On January 22, 2008, the Board of Directors of
the Company authorized a buy back of up to 300,000 shares of common stock.
During the six months ended June 30, 2014, no shares were purchased.
Siebert has
entered into a Secured Demand Note Collateral Agreement with SBS under which
Siebert is obligated to lend to SBS up to $1.2 million on a subordinated basis
collateralized by cash equivalents of approximately $1.5 million as of June 30,
2014. Amounts obligated to be loaned by Siebert under the facility are
reflected on our balance sheet as cash equivalents restricted. SBS pays
Siebert interest on this amount at the rate of 4% per annum. The facility
expires on August 31, 2015 at which time SBS is obligated to repay to Siebert
any amounts borrowed by SBS thereunder.
Item 3. Quantitative and Qualitative
Disclosures About Market Risk
Working
capital is generally invested temporarily in dollar denominated money market
funds. These investments are not subject to material changes in value due to
interest rate movements.
Retail
customer transactions are cleared through clearing brokers on a fully disclosed
basis. If customers do not fulfill their contractual obligations, the clearing
broker may charge Siebert for any loss incurred in connection with the purchase
or sale of securities at prevailing market prices to satisfy the customers
obligations. Siebert regularly monitors the activity in its customer accounts
for compliance with its margin requirements. Siebert is exposed to the risk of
loss on unsettled customer transactions if customers and other counter-parties
are unable to fulfill their contractual obligations. There were no material
losses for unsettled customer transaction as of June 30, 2014.
Item 4. Controls and Procedures
We carried out an evaluation, under the
supervision and with the participation of management, including our Chief
Executive Officer and Chief Financial Officer, of the effectiveness of the
design and operation of our disclosure controls and procedures as of the end of
the period covered by this report pursuant to Rule 13a-15(e) or Rule 15d-15(e)
of the Securities Exchange of 1934, as amended. Based on that evaluation, our
management, including the Chief Executive Officer and Chief Financial Officer,
concluded that our disclosure controls and procedures are effective to ensure
that the information we are required to disclose in reports that we file or
submit under the Securities Exchange Act of 1934, as amended, is recorded,
processed, summarized and reported within the time periods specified in the
rules and forms of the Securities and Exchange Commission and to ensure that
information required to be disclosed is accumulated and communicated to our
management, including our Chief Executive Officer and Chief Financial Officer,
to allow timely decisions regarding timely disclosure.
There
were no changes in our internal control over financial reporting that occurred
during our most recent fiscal quarter that have materially affected, or are
reasonably likely to materially affect, our internal control over financial
reporting.
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