Results of Operations
Year Ended December
31, 2014 Compared to Year Ended December 31, 2013
Revenues.
Total revenues for 2014 were $15.9 million, a decrease of $549,000, or 3.3%,
from 2013. Commission and fee income decreased $1.2 million, or 9.9%, from the
prior year to $10.8 million primarily due to a decrease in retail trading and
in the average commission charged per retail trade. Capital Markets Division
was sold to our affiliate SBSF on November 4, 2014 resulting in reduced
institutional trading commissions and investment banking revenues. Commission
recapture operations were shut down on September 30, 2014.
Investment
banking revenues decreased $588,000 or 24.3%, from the prior year to $1.8
million in 2014 due to our participation in fewer new issues in the equity and
debt capital markets. The Capital Markets division was sold on November 4, 2014
to our affiliate.
Trading
profits decreased $625,000, or 31.6%, from the prior year to $1.4 million in
2014 primarily due to an overall decrease in trading volume primarily in the
debt markets.
The Company
recorded a gain on the sale of our Capital Markets Segment of $ 1,820,000,
which reflected the fair value of the purchase obligation (transferred assets
of the Companys capital markets business, consisted of customer accounts and
goodwill, which had no carrying value to the Company. Such fair value was based
on the present value of estimated annual installments to be received during
2016 through 2020 from forecasted net income of the transferred business plus a
final settlement in 2021, discounted at 11.5% (representing SBSs weighted
average cost of capital), the sale was for $3,000,000 recorded at a discount.
The
discount recorded for the purchase obligation will be amortized as interest
income using an effective yield initially calculated based on the original
carrying amount of the obligation and estimated annual installments to be
received and adjusted in future periods to reflect actual installments received
and changes in estimates of future installments. Interest income recognized on
the obligation for the period from November 4, 2014 to December 31, 2014
amounted to $36,641 based on a yield of approximately 12%.
Income
from interest and dividends increased $32,000, or 51.6%, from the prior year to
$94,000 in 2014 primarily due to accrued interest on our receivable from
business sold to affiliate (see above paragraph).
Expenses.
Total expenses for 2014 were $22.5 million, an increase of $247,000, or 1.1%,
from the prior year.
Employee
compensation and benefit costs decreased $995,000, or 10.7%, from the prior
year to $8.3 million in 2014. This decrease was due a reduction in head count
from the previous year.
Clearing
and floor brokerage fees decreased $717,000, or 30.1%, from the prior year to
$1.7 million in 2014 primarily due to lower retail trading volumes, lower
execution charges for institutional equity trading, as well as shutting down
our rebate recapture business on September 30, 2014.
Professional
fees decreased $1.0 million, or 18.6% from the prior year to $4.3 million in
2014 primarily due to a decrease in legal fees relating to a dispute with a
former employee (see settlement of case below).
In July
2014, the Company entered into a settlement agreement in regard to a dispute
with a former employee, in which the former employee sought, among other
things, damages arising from his separation from the Company. The Company asserted
counter claims in the arbitration. Pursuant to the settlement, the Company paid
$4,300,000 to the former employee, and the claims and counterclaims have been
dismissed and released.
Advertising
and promotion expense decreased $157,000, or 38.8%, from the prior year to
$248,000 in 2014 due to a decrease in online and print advertising.
Communications
expense decreased $431,000, or 33.3%, from the prior year to $865,000 in 2014
due to a new phone system and phone vendor. Quote fees were down as well due to
the reduction in Bloomberg terminals due to the sale of our Capital Markets
segment on November 4, 2014. Retail trading revenues were down causing quotes
to go down.
Occupancy
costs decreased $258,000, or 24.7%, from the prior year to $788,000 in 2014 due
to our Palm Beach branch closing on March 31, 2014, reduction in our Jersey
City branch operating expenses, and New York rent rebates as per our lease.
Impairment
of intangibles of $300,000 in 2013 was the result of the Company writing down
the carrying value of its unamortized intangible assets to zero.
Other
general and administrative expenses decreased $212,000, or 9.4%, from the prior
year to $2.0 million in 2014 due decreases in office expense in travel, entertainment,
computer security updates, and registration expense.
- 18 -
Income
from our equity investment in SBSF, an entity in which Siebert holds a 49%
equity interest, for 2014 was $84,000 compared to income of $94,000 for 2013, a
decrease of $10,000, primarily due to SBSF participating in fewer municipal
bond offerings as senior- and co-manager. Losses from our equity investment in
SBSFPC, an entity in which we hold a 33% equity interest, for 2014 was a loss
of $17,000 as compared to a loss of $159,000 from the same period in 2013. This
decrease was principally due to SBSFPC winding down and shutting down their
operations in 2014.
Taxes.
The tax provision for the year ended December 31, 2014 and 2013 was $0 and
$19,000, respectively. The provision for income taxes for 2013 represents New
York State, New York City and Internal Revenue Service payments. The Company
has recorded a valuation allowance to fully offset our deferred tax asset at
December 31, 2014 and 2013.
Results of Operations
Year Ended December
31, 2013 Compared to Year Ended December 31, 2012
Revenues.
Total revenues for 2013 were $16.4 million, a decrease of $4.6 million, or
21.8%, from 2012. Commission and fee income decreased $2.7 million, or 18.4%,
from the prior year to $11.9 million primarily due to a decrease in average
commission charged per trade as a result of a decrease in retail options
trading by one customer, which accounted for approximately 18% of total
commission and fees in 2012, as well as an decrease in our institutional
trading commissions and our commission recapture operations.
Investment
banking revenues decreased $1.5 million, or 38.3%, from the prior year to $2.4
million in 2013 due to our participation in fewer new issues in the equity and
debt capital markets.
Trading
profits decreased $384,000, or 16.3%, from the prior year to $2.0 million in
2013 primarily due to a fixed income sales- trader being on medical leave.
Income
from interest and dividends decreased $14,000, or 18.4%, from the prior year to
$62,000 in 2013 primarily due to lower cash balances.
Expenses.
Total expenses for 2013 were $22.2 million, an increase of $303,000, or 1.4%,
from the prior year.
Employee
compensation and benefit costs decreased $783,000, or 7.8%, from the prior year
to $9.3 million in 2013. This decrease was due to lower commission and bonus
payouts based on production offset by severance paid to former key employees
released in 2013.
Clearing
and floor brokerage fees decreased $360,000, or 13.1%, from the prior year to
$2.4 million in 2013 primarily due to lower retail trading volumes as well as
execution charges for institutional equity customers.
Professional
fees increased $2.2 million, or 70.4% from the prior year to $5.3 million in
2013 primarily due to an increase in legal fees relating to a dispute with a
former employee.
Advertising
and promotion expense decreased $13,000, or 3.1%, from the prior year to $405,000
in 2013 due to an increase in online advertising.
Communications
expense decreased $305,000, or 19.1%, from the prior year to $1.3 million in
2013 due to the elimination of costs associated with the discontinuance of our
website developed and maintained by a software vendor as of June 2012.
Occupancy
costs increased $139,000, or 15.3%, from the prior year to $1.0 million in 2013
due to the lease in New York.
Impairment
of intangibles of $300,000 in 2013 was the result of the Company writing down
the carrying value of its unamortized intangible assets to zero.
Write
off of software development costs of $433,000 in 2012 was due to the Companys
discontinuation of its relationship with a software vendor on June 30, 2012,
which had developed and maintained our website. As a result, the Company wrote
off its remaining unamortized carrying value of development costs of $433,000.
Effective July 1, 2012, such services are provided by our clearing broker.
Other
general and administrative expenses decreased $129,000 or 5.4% from the prior
year to $2.2 million in 2013 due to decreases in depreciation, computer
security updates, and registration expense offset by increases in office
expenses, sipc expenses, and state and local taxes.
Income
from our equity investment in SBS, an entity in which Siebert holds a 49%
equity interest, for 2013 was $94,000 compared to income of $774,000 for 2012,
a decrease of $680,000, primarily due to SBS participating in less municipal
bond offerings as senior- and co-manager. Losses from our equity investment in
SBSFPC, an entity in which we hold a 33% equity interest, for 2013 was $159,000
as compared to income of $32,000 from the same period in 2012. This decrease
was principally due to
- 19 -
SBSFPC
terminating swap position and mark to market positions. Results of operations
of equity investees are considered to be integral to our operations and
material to the results of operations.
Taxes.
The tax provision for the year ended December 31, 2013 and 2012 was $19,000 and
$34,000, respectively. The provision for income taxes for 2013 represents New
York State, New York City and Internal Revenue Service payments. The Company
has recorded a valuation allowance to fully offset our deferred tax asset at
December 31, 2013 and 2012.
Liquidity and
Capital Resources
Our
assets are highly liquid, consisting generally of cash and money market funds.
Our total assets at December 31, 2014 were $20.7 million, of which we regarded
$7.7 million, or 37.2%, as highly liquid.
Siebert
is subject to the net capital requirements of the SEC, the NYSE and other
regulatory authorities. At December 31, 2014, Sieberts regulatory net capital
was $5.1 million, which was $4.8 million in excess of its minimum capital
requirement of $250,000.
Siebert
has entered into a Secured Demand Note Collateral Agreement with SBS under which it is obligated to loan to
SBS up to $1.2 million on a subordinated basis collateralized by cash
equivalents of approximately $1.5 million as of December 31, 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.
Contractual
Obligations
Below
is a table that presents our obligations and commitments at December 31, 2014:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Payment Due By Period
|
|
Contractual Obligations
|
|
Total
|
|
Less Than
1 Year
|
|
1-3 Years
|
|
3-5 Years
|
|
More Than
Five Years
|
|
Operating lease obligations
|
|
$
|
1,177,000
|
|
$
|
615,000
|
|
$
|
562,000
|
|
$
|
0
|
|
$
|
0
|
|
Off-Balance Sheet Arrangements
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 customer
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 counterparties
are unable to fulfill their contractual obligations. There were no material
losses for unsettled customer transactions in 2014.
|
|
Item 7A.
|
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
|
Financial Instruments Held For Trading
Purposes:
Through
Siebert, we maintain inventories in exchange-listed equity securities and
municipal securities on both a long and short basis. We did not have any short
positions at December 31, 2014. The Company does not directly engage in
derivative transactions, has no interest in any special purpose entity and has
no liabilities, contingent or otherwise, for the debt of another entity except
for Sieberts obligation under its Secured Demand Note Collateral Agreement of
$1.2 million executed in favor of SBS. SBS pays Siebert interest on this amount
at the rate of 4% per annum. Siebert earned interest of $48,000 in 2014, 2013
and 2012, from SBS.
Financial Instruments Held For Purposes Other
Than Trading:
We
generally invest working capital temporarily in dollar denominated money market
funds and commercial paper. 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 counterparties
are unable to fulfill their contractual obligations. There were no material
losses for unsettled customer transactions in 2014.
- 20 -
|
|
Item 8.
|
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
|
See
financial statements and supplementary data required pursuant to this item
beginning on page F-1 of this Annual Report on Form 10-K.
|
|
Item 9.
|
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
|
None.
|
|
Item 9A.
|
CONTROLS AND PROCEDURES
|
We
carried out an evaluation, under the supervision and with the participation of
management, including our former 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 of Securities Exchange of 1934, as amended. Based on that
evaluation, our management, including our former 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 former Chief
Executive Officer and Chief Financial Officer, to allow timely decisions
regarding timely disclosure.
Managements Report on Internal Control over
Financial Reporting
Our
management is responsible for establishing and maintaining adequate internal
control over financial reporting (as that term is defined in Exchange Act Rule
13a-15(f)). To evaluate the effectiveness of our internal control over
financial reporting, we use the 2013 framework in Internal ControlIntegrated
Framework issued by the Committee of Sponsoring Organizations of the Treadway
Commission (the 2013 COSO Framework). Using the 2013 COSO Framework, our
management, including our former Chief Executive Officer and Chief Financial
Officer, evaluated our internal control over financial reporting and concluded
that our internal control over financial reporting was effective as of December
31, 2014.
Changes in Internal Control over Financial
Reporting
There
were no changes in our internal control over financial reporting during the most
recently completed fiscal quarter that materially affected, or are reasonably
likely to materially affect, our internal control over financial reporting.
Limitation of the Effectiveness of Internal
Controls
None
|
|
Item 9B.
|
OTHER INFORMATION
|
None
- 21 -
PART III
|
|
Item 10.
|
DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
|
(a)
Identification of Directors
This
information is incorporated by reference from our definitive proxy statement to
be filed by the Company pursuant to Regulation 14A on or prior to April 30,
2015.
(b)
Identification of Executive Officers
|
|
|
|
|
|
|
Name
|
|
Age
|
|
Position
|
|
|
|
|
|
|
|
Joseph M.
Ramos, Jr.
|
|
56
|
|
Executive
Vice President, Chief Operating Officer, Chief Financial Officer and
Secretary
|
Certain
information regarding each executive officers business experience is set forth
below.
Joseph
M. Ramos, Jr.
has been Executive Vice President, Chief Financial Officer and Assistant
Secretary of Siebert since February 10, 2003, Chief Financial Officer of
Siebert, Brandford, Shank, &Co., L.L.C. since April 20, 2009 and Chief
Operating Officer Since June 10, 2013. From May 1999 to February 2002, Mr.
Ramos served as Chief Financial Officer of Internet Financial Services, Inc.
From November 1996 to May 1999, Mr. Ramos served as Chief Financial Officer of
Nikko Securities International, Inc. From September 1987 to March 1996, Mr.
Ramos worked at Cantor Fitzgerald and held various accounting and management
positions, the last as Chief Financial Officer of their registered
broker-dealer based in Los Angeles. From October 1982 to September 1987, Mr.
Ramos was an audit manager for Deloitte &Touche LLP, a public accounting
firm. Mr. Ramos is a Certified Public Accountant licensed in the State of New
York.
(c)
Compliance with Section 16(a) of the Exchange Act
This
information is incorporated by reference from our definitive proxy statement to
be filed pursuant to Regulation 14A on or prior to April 30, 2015.
(d)
Code of Ethics
We
have adopted a financial code of ethics that applies to our principal executive
officer, principal financial officer, principal accounting officer and all
other employees performing similar functions. This financial code of ethics is
posted on our website. The Internet address for our website is
http://www.siebertnet.com. We intend to satisfy the disclosure requirement
under Item 5.05 of Form 8-K regarding an amendment to, or waiver from, a
provision of this code of ethics by either filing a Form 8-K or posting such
information on our website, at the address and location specified above, within
four business days following the date of such amendment or waiver.
The
information required by this item not set forth herein is incorporated by
reference to our definitive proxy statement to be filed pursuant to Regulation
14A on or prior to April 30, 2015.
|
|
Item 11.
|
EXECUTIVE COMPENSATION
|
The
information required by this item is incorporated by reference from our
definitive proxy statement to be filed pursuant to Regulation 14A on or prior
to April 30, 2015.
|
|
Item 12.
|
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED STOCKHOLDER MATTERS
|
The
information required by this item is incorporated by reference from our
definitive proxy statement to be filed pursuant to Regulation 14A on or prior
to April 30, 2015.
|
|
Item 13.
|
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
INDEPENDENCE
|
The
information required by this item is incorporated by reference from our
definitive proxy statement to be filed pursuant to Regulation 14A on or prior
to April 30, 2015.
|
|
Item 14.
|
PRINCIPAL ACCOUNTING FEES AND SERVICES
|
The
information required in this item is incorporated by reference from our
definitive proxy statement to be filed pursuant to Regulation 14A on or prior
to April 30, 2015.
- 22 -
PART IV
|
|
Item 15.
|
EXHIBITS, FINANCIAL STATEMENT SCHEDULES
|
The
exhibits required by Item 601 of Regulation S-K filed as part of, or
incorporated by reference in, this Annual Report are listed in the accompanying
Exhibit Index.
|
|
|
|
(a)
|
The
following documents are filed as part of this report:
|
|
|
|
|
1.
|
Financial
Statements
|
The consolidated
Financial statements for the year ended December 31, 2014 commence on page F-1
of this Annual Report on Form 10-K.
|
|
|
|
2.
|
Financial
Statement Schedules
|
|
|
|
|
|
None.
|
|
|
|
|
3.
|
Exhibits
|
The exhibits
required by Item 601 of Regulation S-K filed as part of, or incorporated by
reference in, this report are listed in the accompanying Exhibit Index. Exhibit
Numbers 10.1, 10.2 and 10.6 are management contracts, compensatory plans or
arrangements.
- 23 -
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
|
|
|
|
|
Page
|
SIEBERT FINANCIAL CORP.
|
|
|
|
|
|
Report of Independent Registered Public Accounting Firm
|
|
F-1
|
|
|
|
Consolidated Statements of Financial Condition at December 31, 2014
and 2013
|
|
F-2
|
|
|
|
Consolidated Statements of Operations for each of the years in the
three-year period ended December 31, 2014
|
|
F-3
|
|
|
|
Consolidated
Statements of Changes in Stockholders Equity for each of the years in the
three-year period ended December 31, 2014
|
|
F-4
|
|
|
|
Consolidated Statements of Cash Flows for each of the years in the
three-year period ended December 31, 2014
|
|
F-5
|
|
|
|
Notes to Consolidated Financial Statements
|
|
F-6
|
|
|
|
SIEBERT, BRANDFORD, SHANK FINANCIAL, L.L.C.
AND SUBSIDIARY AT 2014 AND SIEBERT, BRANDFORD, SHANK & CO., L.L.C. AT 2013
|
|
|
|
|
|
Report of Independent Registered Public Accounting Firm
|
|
F-15
|
|
|
|
Statements of Financial Condition at December 31, 2014 and 2013
|
|
F-16
|
|
|
|
Statements of Operations for each of the years in the three-year
period ended December 31, 2014
|
|
F-17
|
|
|
|
Statements of Changes in Members Capital for each of the years in
the three-year period ended December 31, 2014
|
|
F-18
|
|
|
|
Statements of Cash Flows for each of the years in the three-year period
ended December 31, 2014
|
|
F-19
|
|
|
|
Notes to Financial Statements
|
|
F-20
|
REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Board
of Directors and Shareholders
Siebert
Financial Corp.
We
have audited the accompanying consolidated statements of financial condition of Siebert Financial Corp. and subsidiaries (the
Company) as of December 31, 2014 and 2013, and the related consolidated statements of operations, changes in stockholders
equity and cash flows for each of the years in the three-year period ended December 31, 2014. These financial statements are the
responsibility of the Companys management. Our responsibility is to express an opinion on these financial statements based on
our audits.
We
conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those
standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are
free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control
over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing
audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness
of the Companys internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining,
on a test basis, evidence supporting the amounts and disclosures in the financial statements, 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 subsidiaries as of December 31, 2014 and 2013, and the consolidated results of their operations
and their cash flows for each of the years in the three-year period ended December 31, 2014, in conformity with accounting principles
generally accepted in the United States of America.
/s/
EisnerAmper LLP
New York, New York
March 31, 2015
F-1
SIEBERT FINANCIAL CORP. AND SUBSIDIARIES
CONSOLIDATED
STATEMENTS OF FINANCIAL CONDITION
|
|
|
|
|
|
|
|
|
|
December
31,
|
|
|
|
2014
|
|
2013
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
and cash equivalents
|
|
$
|
6,749,000
|
|
$
|
15,424,000
|
|
Cash
equivalents - restricted
|
|
|
1,532,000
|
|
|
1,532,000
|
|
Receivable
from brokers
|
|
|
788,000
|
|
|
1,105,000
|
|
Receivable
from business sold to affiliate net of unamortized discount of $1,143,000
|
|
|
1,857,000
|
|
|
|
|
Securities
owned, at fair value
|
|
|
488,000
|
|
|
406,000
|
|
Furniture,
equipment and leasehold improvements, net
|
|
|
609,000
|
|
|
712,000
|
|
Investments
in and advances to affiliates
|
|
|
7,979,000
|
|
|
8,022,000
|
|
Prepaid
expenses and other assets
|
|
|
718,000
|
|
|
751,000
|
|
Intangibles,
net
|
|
|
8,000
|
|
|
18,000
|
|
|
|
|
|
|
|
|
|
|
|
$
|
20,728,000
|
|
$
|
27,970,000
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts
payable and accrued liabilities
|
|
$
|
2,176,000
|
|
$
|
2,861,000
|
|
|
|
|
|
|
|
|
|
Commitments
and contingent liabilities - Note I
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders equity:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common
stock, $.01 par value; 49,000,000 shares authorized, 23,211,846 shares issued, 22,085,126
shares outstanding
|
|
|
232,000
|
|
|
232,000
|
|
Additional paid-in capital
|
|
|
19,490,000
|
|
|
19,490,000
|
|
Retained
earnings
|
|
|
3,590,000
|
|
|
10,147,000
|
|
Less: 1,126,720 shares of treasury stock,
at cost
|
|
|
(4,760,000
|
)
|
|
(4,760,000
|
)
|
|
|
|
|
|
|
|
|
|
|
|
18,552,000
|
|
|
25,109,000
|
|
|
|
|
|
|
|
|
|
|
|
$
|
20,728,000
|
|
$
|
27,970,000
|
|
See notes to consolidated financial statements.
F-2
CONSOLIDATED
STATEMENTS OF OPERATIONS
|
|
|
|
|
|
|
|
|
|
|
|
|
Year
Ended December 31,
|
|
|
|
2014
|
|
2013
|
|
2012
|
|
Revenue:
|
|
|
|
|
|
|
|
|
|
|
Commissions
and fees
|
|
$
|
10,757,000
|
|
$
|
11,945,000
|
|
$
|
14,630,000
|
|
Investment
banking
|
|
|
1,830,000
|
|
|
2,418,000
|
|
|
3,917,000
|
|
Trading
gains, net
|
|
|
1,351,000
|
|
|
1,976,000
|
|
|
2,360,000
|
|
Gain
on the disposition of business to affiliate
|
|
|
1,820,000
|
|
|
|
|
|
|
|
Interest
and dividends
|
|
|
57,000
|
|
|
62,000
|
|
|
76,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
15,815,000
|
|
|
16,401,000
|
|
|
20,983,000
|
|
|
|
|
|
|
|
|
|
|
|
|
Expenses:
|
|
|
|
|
|
|
|
|
|
|
Employee
compensation and benefits
|
|
|
8,267,000
|
|
|
9,262,000
|
|
|
10,045,000
|
|
Clearing
fees, including floor brokerage
|
|
|
1,665,000
|
|
|
2,382,000
|
|
|
2,742,000
|
|
Professional
fees
|
|
|
4,310,000
|
|
|
5,293,000
|
|
|
3,106,000
|
|
Loss
related to arbitration settlement
|
|
|
4,300,000
|
|
|
|
|
|
|
|
Advertising
and promotion
|
|
|
248,000
|
|
|
405,000
|
|
|
418,000
|
|
Communications
|
|
|
865,000
|
|
|
1,296,000
|
|
|
1,601,000
|
|
Occupancy
|
|
|
788,000
|
|
|
1,046,000
|
|
|
907,000
|
|
Impairment
of intangibles
|
|
|
|
|
|
300,000
|
|
|
300,000
|
|
Write
off of software development costs
|
|
|
|
|
|
|
|
|
433,000
|
|
Other
general and administrative
|
|
|
2,033,000
|
|
|
2,245,000
|
|
|
2,374,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
22,476,000
|
|
|
22,229,000
|
|
|
21,926,000
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from equity investees, including,
in 2014, interest on receivable of $37,000
|
|
|
104,000
|
|
|
(65,000
|
)
|
|
806,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss
before income taxes
|
|
|
(6,557,000
|
)
|
|
(5,893,000
|
)
|
|
(137,000
|
)
|
Provision for income taxes
|
|
|
|
|
|
19,000
|
|
|
34,000
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss
|
|
$
|
(6,557,000
|
)
|
$
|
(5,912,000
|
)
|
$
|
(171,000
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Net loss per share of common stock
basic and diluted
|
|
$
|
(0.30
|
)
|
$
|
(0.27
|
)
|
$
|
(0.01
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
average shares outstanding basic and diluted
|
|
|
22,085,126
|
|
|
22,087,324
|
|
|
22,100,759
|
|
See notes to consolidated financial statements.
F-3
CONSOLIDATED
STATEMENTS OF CHANGES IN STOCKHOLDERS EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common
Stock
|
|
Treasury
Stock
|
|
|
|
|
|
Number
Of
Shares
|
|
$.01
Par
Value
|
|
Additional
Paid -In
Capital
|
|
Retained
Earnings
|
|
Number
Of
Shares
|
|
Amount
|
|
Total
|
|
Balance
- January 1, 2012
|
|
|
23,211,846
|
|
|
232,000
|
|
|
19,490,000
|
|
|
16,230,000
|
|
|
1,106,347
|
|
|
(4,728,000
|
)
|
|
31,224,000
|
|
Net loss
|
|
|
|
|
|
|
|
|
|
|
|
(171,000
|
)
|
|
|
|
|
|
|
|
(171,000
|
)
|
Treasury
share purchases
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8,107
|
|
|
(13,000
|
)
|
|
(13,000
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance - December 31, 2012
|
|
|
23,211,846
|
|
|
232,000
|
|
|
19,490,000
|
|
|
16,059,000
|
|
|
1,114,454
|
|
|
(4,741,000
|
)
|
|
31,040,000
|
|
Net
loss
|
|
|
|
|
|
|
|
|
|
|
|
(5,912,000
|
)
|
|
|
|
|
|
|
|
(5,912,000
|
)
|
Treasury share purchases
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12,266
|
|
|
(19,000
|
)
|
|
(19,000
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
- December 31, 2013
|
|
|
23,211,846
|
|
|
232,000
|
|
|
19,490,000
|
|
|
10,147,000
|
|
|
1,126,720
|
|
|
(4,760,000
|
)
|
|
25,109,000
|
|
Net loss
|
|
|
|
|
|
|
|
|
|
|
|
(6,557,000
|
)
|
|
|
|
|
|
|
|
(6,557,000
|
)
|
Balance
- December 31, 2014
|
|
|
23,211,846
|
|
|
232,000
|
|
|
19,490,000
|
|
|
3,590,000
|
|
|
1,126,720
|
|
|
(4,760,000
|
)
|
|
18,552,000
|
|
See notes to consolidated financial statements.
F-4
CONSOLIDATED
STATEMENTS OF CASH FLOWS
|
|
|
|
|
|
|
|
|
|
|
|
|
Year
Ended December 31,
|
|
|
|
2014
|
|
2013
|
|
2012
|
|
Cash
Flows From Operating Activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(6,557,000
|
)
|
$
|
(5,912,000
|
)
|
$
|
(171,000
|
)
|
Adjustments
to reconcile net loss to net cash used in operating activities:
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
|
267,000
|
|
|
130,000
|
|
|
284,000
|
|
Gain
on the disposition of business sold to affiliate
|
|
|
(1,820,000
|
)
|
|
|
|
|
|
|
(Income) loss from equity investees
|
|
|
(67,000
|
)
|
|
65,000
|
|
|
(806,000
|
)
|
Interest
accrued on receivable from business sold to affiliate
|
|
|
(37,000
|
)
|
|
|
|
|
|
|
Distributions from equity investees
|
|
|
13,000
|
|
|
1,212,000
|
|
|
97,000
|
|
Write
off of software development costs
|
|
|
|
|
|
|
|
|
433,000
|
|
Impairment of intangibles
|
|
|
|
|
|
300,000
|
|
|
300,000
|
|
Changes
in:
|
|
|
|
|
|
|
|
|
|
|
Securities
owned, at fair value
|
|
|
(82,000
|
)
|
|
(151,000
|
)
|
|
(5,000
|
)
|
Receivable
from affiliate
|
|
|
(76,000
|
)
|
|
|
|
|
|
|
Receivable
from brokers
|
|
|
317,000
|
|
|
818,000
|
|
|
(890,000
|
)
|
Prepaid
expenses and other assets
|
|
|
33,000
|
|
|
149,000
|
|
|
(73,000
|
)
|
Accounts
payable and accrued liabilities
|
|
|
(685,000
|
)
|
|
445,000
|
|
|
(1,183,000
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Net
cash used in operating activities
|
|
|
(8,694,000
|
)
|
|
(2,944,000
|
)
|
|
(2,014,000
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Cash Flows From Investing Activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchase
of furniture, equipment and leasehold improvements
|
|
|
(154,000
|
)
|
|
(520,000
|
)
|
|
(262,000
|
)
|
Distributions from equity investees
|
|
|
173,000
|
|
|
6,000
|
|
|
|
|
(Payment)
collection of advances made to equity investees
|
|
|
|
|
|
(1,000
|
)
|
|
24,000
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
cash provided by/ (used in) investing activities
|
|
|
19,000
|
|
|
(515,000
|
)
|
|
(238,000
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Cash
Flows From Financing Activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchase of treasury shares
|
|
|
|
|
|
(19,000
|
)
|
|
(13,000
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Net
decrease in cash and cash equivalents
|
|
|
(8,675,000
|
)
|
|
(3,478,000
|
)
|
|
(2,265,000
|
)
|
Cash and cash equivalents - beginning of
year
|
|
|
15,424,000
|
|
|
18,902,000
|
|
|
21,167,000
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
and cash equivalents - end of year
|
|
$
|
6,749,000
|
|
$
|
15,424,000
|
|
$
|
18,902,000
|
|
Supplemental Cash Flow Disclosures:
|
|
|
|
|
|
|
|
|
|
|
Cash
for:
|
|
|
|
|
|
|
|
|
|
|
Income
taxes paid (received), net
|
|
$
|
|
|
$
|
19,000
|
|
$
|
34,000
|
|
See notes to consolidated financial statements.
F-5
SIEBERT FINANCIAL
CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note A - Business:
|
|
|
Siebert Financial Corp. (Financial), through its wholly - owned
subsidiary, Muriel Siebert &Co., Inc. (Siebert), engages in the business of providing discount
brokerage services for retail customers, investment banking and equity execution services for institutional clients (representing
the capital markets business) and trading securities for its own account. In addition, in 2014 we began business as a registered investment advisor through our wholly-owned
subsidiary, Siebert Investment Advisors, Inc. (SIA). On November 4, 2014, Siebert sold its
capital markets business to an affiliate (see Note B). Another wholly owned subsidiary, Sieberts Womens
Financial Network Inc. (WFN) engaged in providing products, services and information devoted to womens
financial needs. In the fourth quarter of 2013, management decided to substantially reduce the resources allocated
to the WFN operation (see Note F). The accompanying consolidated financial statements include the accounts of
Financial and its subsidiaries. All significant intercompany accounts and transactions have been eliminated. Financial,
Siebert, WFN and SIA collectively are referred to herein as the Company.
|
|
|
|
The municipal bond investment banking business is conducted by Siebert, Brandford,
Shank &Co., L.L.C., a wholly-owned subsidiary of Siebert, Brandford, Shank Financial, L.L.C. (SBSF),
and related derivatives transactions were conducted by SBS Financial Products Company, LLC (SBSFP),
non - controlled investees in which the Company has a 49% and 33% equity interest respectively. Such investees are accounted
for by the equity method of accounting (see Note D). The equity method provides that the Company records its share
of the investees earnings or losses in its results of operations with a corresponding adjustment to the
carrying value of its investment. In addition, the investment is adjusted for capital contributions to and distributions
from the investees. Operations of equity investee SBSF are considered integral to the Companys operations.
Operations of equity investee SBSFP ceased in December 2014.
|
Note B SALE OF BUSINESS
|
|
|
On November 4, 2014, the Company, which held a 49% membership interest in,
and the other members of, Siebert Brandford Shank &Co., LLC (SBS), contributed their SBS membership
interest into a newly formed Delaware limited liability company, Siebert Brandford Shank Financial, L.L.C. (SBSF),
in exchange for the same percentage interests in SBSF. On the same day the Company entered an Asset Purchase Agreement
(the Purchase Agreement) with SBS and SBSF, pursuant to which the Company sold substantially all of
the assets relating to the Companys capital markets business to SBSF. Pursuant to the Purchase Agreement,
SBSF assumed post-closing liabilities relating to the transferred business.
|
|
|
|
The Purchase Agreement provides for an aggregate purchase price for the disposition
of $3,000,000, payable by SBSF after closing in annual installments commencing on March 1, 2016 and continuing
on each of March 1, 2017, 2018, 2019 and 2020. The transferred business was contributed by SBSF to, and operated
by SBS. The amount payable to the Company on each annual payment date will equal 50% of the net income attributable
to the transferred business recognized by SBS in accordance with generally accepted accounting principles during
the fiscal year ending immediately preceding the applicable payment date; provided that, if net income attributable
to the transferred business generated prior to the fifth annual payment date is insufficient to pay the remaining
balance of the purchase price in full on the fifth annual payment date, then the unpaid amount of the purchase
price will be paid in full on March 1, 2021.Transferred assets of the Companys capital markets business,
consisted of customer accounts and goodwill, which had no carrying value to the Company, and the Company recorded
a gain on sale of $1,820,000, which reflected the fair value of the purchase obligation. Such fair value (Level
3) was based on the present value of estimated annual installments to be received during 2016 through 2020 from
forecasted net income of the transferred business plus a final settlement in 2021, discounted at 11.5% (representing
SBSs weighted average cost of capital).
|
|
|
|
The discount recorded for the purchase obligation will be amortized as interest
income using an effective yield initially calculated based on the original carrying amount of the obligation and
estimated annual installments to be received and adjusted in future periods to reflect actual installments received
and changes in estimates of future installments. Interest income recognized on the obligation for the period from
November 4, 2014 to December 31, 2014 amounted to $36,641 based on a yield of approximately 12%.
|
|
|
|
As a result of the Companys continuing involvement in the capital markets
business through the its 49% ownership in SBSF, results of operations of the capital markets business and the
gain on sale were not reflected as discontinued operations in the accompanying financial statements.
|
F-6
Note C - Summary Of Significant Accounting Policies
|
|
[1]
|
Cash Equivalents:
|
|
|
|
Cash equivalents consist of highly liquid investments purchased with an original
maturity of 3 months or less. Cash equivalents are carried at fair value and amount to $6,179,000 and $14,839,000
at December 31, 2014 and 2013, respectively, consisting of money market funds.
|
|
|
|
Cash equivalents restricted of $1,532,000 at December 31, 2014 and
2013 representing cash invested in a money market fund which serves as collateral for a secured demand note payable
in the amount of $1,200,000 to SBS (see Note J).
|
|
|
[2]
|
Securities:
|
|
|
|
Securities owned are carried at fair value with realized and unrealized gains
and losses reflected in trading profits. Siebert clears all its security transactions through unaffiliated clearing
firms 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 firms.
|
|
|
[3]
|
Fair value of financial instruments:
|
|
|
|
Authoritative accounting guidance defines fair value, establishes a framework
for measuring fair value and establishes a fair value hierarchy. Fair value is the price that would be received
to sell an asset or paid to transfer a liability in an orderly transaction between participants at the measurement
date. Fair value measurements are not adjusted for transaction costs. The fair value hierarchy prioritizes inputs
to valuation techniques used to measure fair value into three levels:
|
|
|
|
Level 1 Unadjusted quoted prices in active markets for identical assets
or liabilities.
|
|
|
|
Level 2 Inputs other than quoted market prices that are observable,
either directly or indirectly, and reasonably available.
|
|
|
|
Level 3 Unobservable inputs which reflect the assumptions that management
develops based on available information about the assumptions market participants would use in valuing the asset
or liability.
|
|
|
|
The classification of financial instruments valued at fair value as of December
31, 2014 is as follows:
|
|
|
|
|
|
|
|
|
|
|
2014
|
|
2013
|
|
Financial Instrument
|
|
Level
1
|
|
Level
1
|
|
Cash equivalents
|
|
$
|
7,711,000
|
|
$
|
16,371,000
|
|
Securities
|
|
|
488,000
|
|
|
406,000
|
|
|
|
$
|
8,199,000
|
|
$
|
16,777,000
|
|
|
|
|
Securities consist of common stock, which is valued on the last business day
of the year at the last available reported sales price on the primary securities exchange.
|
|
|
[4]
|
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 net
operating loss carryforwards and temporary differences between the basis of assets and liabilities for financial
reporting purposes and tax purposes.
|
|
|
[5]
|
Furniture, Equipment and Leasehold Improvements:
|
|
|
|
Furniture, equipment and leasehold improvements are stated at cost, net of
accumulated depreciation and amortization. Depreciation is calculated using the straight-line method over the
estimated useful lives of the assets, generally five years. Leasehold improvements are amortized over the shorter
of the estimated useful life of the improvements or period of the lease.
|
|
|
[6]
|
Advertising Costs:
|
|
|
|
Advertising costs are charged to expense as incurred.
|
F-7
Note C - Summary Of Significant Accounting Policies (continued)
|
|
[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]
|
Per Share Data:
|
|
|
|
Basic earnings (loss) per share is calculated by dividing net income (loss)
by the weighted average outstanding common shares during the year. Diluted earnings per share is calculated by
dividing net income by the number of shares outstanding under the basic calculation and adding all dilutive securities,
which consist of options. As the Company incurred a net loss for each of the years ended December 31, 2014, 2013
and 2012, basic and diluted net loss per common share are the same for each year as the effect of stock options
is anti-dilutive. In 2014, 2013 and 2012, 265,000, 350,000 and 400,000 common shares, respectively, issuable upon
the exercise of options were not included in the computation.
|
|
|
[9]
|
Revenue:
|
|
|
|
Commission revenues and related clearing expenses are recorded on a trade-date
basis. Fees, consisting principally of revenue participation with the Companys clearing broker in distribution
fees and interest are recorded as earned. In 2014, fees also include investment advisory fees, which are recorded as earned.
|
|
|
|
Investment banking revenue includes 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.
|
|
|
|
Trading gains and losses are also recorded on a trade-date basis and principally
represent riskless principal transactions which the Company, after receiving an order, buys or sells securities
as principal and at the same time sells or buys the securities with a markup or markdown to satisfy the order.
|
|
|
|
Interest is recorded on an accrual basis and dividends are recorded on the
ex-dividend date.
|
|
|
[10]
|
Stock-Based Compensation:
|
|
|
|
Share-based payments to employees, including grants of employee stock options,
are recognized in the statement of operations as an operating expense, based on their fair values on the grant
date. Share-based compensation costs are recognized on a straight-line basis over the requisite service periods
of awards which would normally be the vesting period of the options.
|
|
|
[11]
|
Intangibles:
|
|
|
|
Purchased intangibles which have finite useful lives are principally being
amortized using the straight-line method over estimated useful lives of three to five years. Domain names and
other intellectual property which are deemed to have an indefinite useful life are not amortized but are tested
for impairment annually or more frequently if events or changes in circumstances indicate that the asset might
be impaired. The impairment test for indefinite-lived intangibles consists of a comparison of their fair value
with their carrying amount (see note F).
|
|
|
[12]
|
Valuation of Long-Lived Assets:
|
|
|
|
The Company evaluates the recoverability of its long-lived assets including
amortizable intangibles and recognizes an impairment loss in the event the carrying value of these assets exceeds
the estimated future undiscounted cash flows attributable to these assets. The Company assesses potential impairment
to its long-lived assets when events or changes in circumstances indicate that its carrying value may not be recoverable.
Should impairment exist, the impairment loss would be measured based on the excess of the carrying value of the
assets over their fair value.
|
F-8
Note D - Investment In Affiliates
Investment in and advances to, equity in income / (loss) of, and distributions received from,
affiliates consist of the following:
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2014
|
|
|
SBSF
|
|
SBSFPC
|
|
TOTAL
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment and advances
|
|
$
|
7,979,000
|
|
|
|
|
|
7,979,000
|
|
Income (loss) from equity investees
|
|
$
|
84,000
|
|
|
(17,000
|
)
|
|
67,000
|
|
Distributions
|
|
$
|
13,000
|
|
|
173,000
|
|
|
186,000
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2013
|
|
|
SBS
|
|
SBSFPC
|
|
TOTAL
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment and advances
|
|
$
|
7,832,000
|
|
|
190,000
|
|
|
8,022,000
|
|
Income (loss) from equity investees
|
|
$
|
94,000
|
|
|
(159,000
|
)
|
|
(65,000
|
)
|
Distributions
|
|
$
|
1,212,000
|
|
|
6,000
|
|
|
1,218,000
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2012
|
|
|
SBS
|
|
SBSFPC
|
|
TOTAL
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from equity
investees
|
|
$
|
774,000
|
|
$
|
32,000
|
|
$
|
806,000
|
|
Distributions
|
|
$
|
95,000
|
|
$
|
2,000
|
|
$
|
97,000
|
|
Siebert and two individuals (the Principals) formed SBS to succeed to the tax-exempt
underwriting business of the Siebert Brandford Shank division of Siebert. The agreements with the Principals provide that profits
will be shared 51% to the Principals and 49% to Siebert.
Pursuant to the terms of the Operating Agreement, Financial and each of the Principals owned
a 33.33% interest in SBSFPC which engaged in derivatives transactions related to the municipal underwriting business. The Operating
Agreement provides that income/(loss) be shared 66.66% by the Principals and 33.33% by Financial. SBSFPC ceased operations in
December 2014.
Summarized consolidated financial data of SBSF and SBS in 2014 and financial data for SBS
in 2013 and 2012 is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
2014
|
|
2013
|
|
2012
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
assets, including secured demand note of $1,200,000 in each year due from Siebert
|
|
$
|
28,518,000
|
|
$
|
22,999,000
|
|
|
|
|
Total liabilities, including
subordinated liabilities $1,200,000 in each year and a purchase obligation of $1,857,000 in 2014 due to Siebert
|
|
|
12,458,000
|
|
|
7,083,000
|
|
|
|
|
Total members capital
|
|
|
16,060,000
|
|
|
15,916,000
|
|
|
|
|
Regulatory minimum net capital requirement
|
|
|
250,000
|
|
|
250,000
|
|
|
|
|
Total revenue
|
|
|
24,806,000
|
|
|
24,965,000
|
|
$
|
28,246,000
|
|
Net income
|
|
|
171,000
|
|
|
193,000
|
|
|
1,579,000
|
|
During 2014, 2013 and 2012 Siebert charged SBS $100,000, $100,000, and $75,000 for each year,
respectively, for general and administrative services, which Siebert believes approximates the cost of furnishing such services.
In addition, during each of the years 2014, 2013 and 2012, Siebert earned interest income of $48,000 from SBS in connection with
subordinated loans available or made to SBS and Siebert paid SBS interest earned on restricted cash equivalents of $1,028, $1,500
and $2,900 in 2014, 2013 and 2012, respectively. In addition, in 2014, Siebert earned interest income of $36,641 from SBSF on
the purchase obligation in connection with the sale of the capital markets business (see Note B).
Sieberts share of undistributed earnings from SBSF at December 31, 2014 amounted to
$7,477,000 and from SBS at December 31, 2013 amounted to $7,407,000. Undistributed earnings may not be immediately available for
distribution to Siebert for various reasons including the amount of SBSFs available cash, the provisions of the agreement
between Siebert and the Principals and SBSFs continued compliance with its regulatory net capital requirements.
Summarized financial data of SBSFPC is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
2014
|
|
2013
|
|
2012
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
26,000
|
|
$
|
584,000
|
|
|
|
|
Total liabilities
|
|
|
26,000
|
|
|
15,000
|
|
|
|
|
Total members capital
|
|
|
0
|
|
|
569,000
|
|
|
|
|
Total revenue
|
|
|
0
|
|
|
(222,000
|
)*
|
$
|
293,000
|
|
Net income (loss)
|
|
|
(51,000
|
)
|
|
(478,000
|
)
|
|
98,000
|
|
*Negative balance was attributable to loss in derivative contracts
F-9
Note D - Investment In Affiliates (continued)
In July 2013, as a result of the filing of a bankruptcy petition by the City of Detroit, SBSFPC
unwound certain derivative contracts with a financial institution pursuant to the terms of the contracts. The contracts were recorded
as liabilities with a carrying value of $123,063,000. In connection therewith, SBSFPC assigned certain derivative contracts with
the City of Detroit to the financial institution, which were recorded as assets with a carrying value of $123,063,000. No gain
or loss was recognized by SBSFPC as a result of the unwinding and assignment of these derivative contracts and SBSFPC has no continuing
obligations or rights with respect to the derivative contracts. During the quarter ended March 31, 2013 SBSFPC incurred a loss
of $241,000 on the write down in value of the derivative contracts with the City of Detroit to adjust their carrying value to
the carrying value of the derivative contracts with the financial institution. The Company received distributions from SBSFPC of
$173,000 during 2014 and $6,000 during 2013 which is shown on the statement of cash flows as an investing activity as they represent
a return of capital.
Effective September 16, 2013, Suzanne Shank, one of the Principals having 25.5% ownership
in SBS and 33.3% interest in SBSFP became the Companys chief executive officer. On March 3, 2015 Ms. Shank completed her
role as acting chief executive officer of the Company to devote full time to her continuing position as chief executive officer
of SBSF.
Note E - Furniture, Equipment And Leasehold Improvements, Net
Furniture, equipment and leasehold improvements consist of the following:
|
|
|
|
|
|
|
|
|
|
December
31,
|
|
|
|
2014
|
|
2013
|
|
|
|
|
|
|
|
|
|
Equipment
|
|
$
|
524,000
|
|
$
|
518,000
|
|
Leasehold improvements
|
|
|
546,000
|
|
|
427,000
|
|
Furniture and fixtures
|
|
|
43,000
|
|
|
14,000
|
|
|
|
|
1,113,000
|
|
|
959,000
|
|
Less accumulated depreciation and amortization
|
|
|
(504,000
|
)
|
|
(247,000
|
)
|
|
|
|
|
|
|
|
|
|
|
$
|
609,000
|
|
$
|
712,000
|
|
Depreciation and amortization expense for the years ended December 31, 2014, 2013 and 2012
amounted to $257,000, $120,000 and $274,000, respectively.
Due to the Companys discontinuation of its relationship with a software vendor on June
30, 2012, which had developed and maintained the Companys website, the Company wrote-off remaining related software development
costs of $433,000. The unamortized carrying value of such development costs consisted of $1,856,000 of cost net of $1,423,000
of accumulation amortization. Effective July 1, 2012, such services are provided by the Companys clearing broker.
Note F - Intangible Assets
In 2000, WFN acquired the stock of Womens Financial Network, Inc. and HerDollar.com,
Inc., companies in the development stage which had yet to commence principal operations and had no significant revenue for aggregate
consideration of $2,310,000, including costs. The transactions were accounted for as purchases of assets consisting of domain
name, website and content, and a non-compete agreement (the Acquired Intangible Assets). Related deferred tax assets
attributable to net operating loss carryforwards of the acquired companies and deferred tax liabilities attributable to the excess
of the statement bases of the acquired assets over their tax bases were reflected as an adjustment to the carrying amount of such
intangibles (see Note G).
Intangible assets consist of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December
31, 2014
|
|
December
31, 2013
|
|
|
|
Gross
Carrying
Amount
|
|
Accumulated
Amortization
|
|
Gross
Carrying
Amount
|
|
Amortization
Accumulated
|
|
Amortizable intangible assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Website, content and non-compete
|
|
$
|
1,850,000
|
|
|
1,850,000
|
|
$
|
1,850,000
|
|
$
|
1,850,000
|
|
Retail brokerage accounts
|
|
|
2,638,000
|
|
|
2,630,000
|
|
|
2,638,000
|
|
|
2,620,000
|
|
|
|
$
|
4,488,000
|
|
|
4,480,000
|
|
$
|
4,488,000
|
|
$
|
4,470,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization expense
|
|
|
|
|
$
|
10,000
|
|
|
|
|
$
|
10,000
|
|
F-10
Note F - Intangible Assets (continued)
During 2012, the Company recorded impairment charges and wrote down the carrying value of
its unamortized intangible assets consisting of domain name and intellectual property by $300,000, representing the excess of
carrying value over its fair value due to a continuing decline in the Companys revenue attributable to such intangibles.
During the fourth quarter of 2013, as a result of managements continuing strategic review of its operations, the Company
determined to substantially reduce the amount of resources allocated to the WFN domain. Accordingly, the Company wrote off the
remaining carrying value of the intangible asset of $300,000. No significant residual value is estimated for the asset.
Note G - Income Taxes
Financial files a consolidated federal income tax return with its subsidiaries.
Income tax expense consists of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
Year
Ended December 31,
|
|
|
|
2014
|
|
2013
|
|
2012
|
|
|
|
|
|
|
|
|
|
|
|
|
Federal income tax expense:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
|
|
$
|
|
|
$
|
19,000
|
|
$
|
|
|
Deferred
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
19,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
State and local:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
|
|
|
|
|
|
|
|
|
34,000
|
|
Deferred
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
34,000
|
|
|
|
|
|
|
|
|
|
|
|
|
Total:
|
|
|
|
|
|
|
|
|
|
|
Current
|
|
|
|
|
|
19,000
|
|
|
34,000
|
|
Deferred
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
|
|
$
|
19,000
|
|
$
|
34,000
|
|
Reconciliation between the income tax provision and income taxes computed by applying the
statutory Federal income tax rate to loss before income taxes is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
Year
Ended December 31,
|
|
|
|
2014
|
|
2013
|
|
2012
|
|
|
|
|
|
|
|
|
|
|
|
|
Expected income tax benefit
at statutory Federal tax rate (34%)
|
|
$
|
(2,229,000
|
)
|
$
|
(2,004,000
|
)
|
$
|
(47,000
|
)
|
State and local taxes, net of Federal tax effect
|
|
|
(459,000
|
)
|
|
(413,000
|
)
|
|
22,000
|
|
Increase in valuation allowance
|
|
|
2,551000
|
|
|
2,342,000
|
|
|
|
|
Permanent difference
|
|
|
39,000
|
|
|
46,000
|
|
|
36,000
|
|
Other
|
|
|
98,000
|
|
|
48,000
|
|
|
23,000
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax expense
|
|
$
|
0
|
|
$
|
19,000
|
|
$
|
34,000
|
|
F-11
Note G - Income Taxes (Continued)
The principal items giving rise to deferred tax assets (liabilities) are as follows:
|
|
|
|
|
|
|
|
|
|
December
31,
|
|
|
|
2014
|
|
2013
|
|
Deferred tax assets:
|
|
|
|
|
|
|
|
Net operating loss credit carryforwards
|
|
$
|
8,046,000
|
|
$
|
4,670,000
|
|
Alternative minimum tax carryforward
|
|
|
9,000
|
|
|
15,000
|
|
Employee stock based compensation
|
|
|
237,000
|
|
|
237,000
|
|
Retail brokerage accounts
|
|
|
211,000
|
|
|
281,000
|
|
Contribution carryover
|
|
|
223,000
|
|
|
347,000
|
|
Furniture, equipment and leasehold
improvements
|
|
|
115,000
|
|
|
96,000
|
|
Accrued expenses
|
|
|
337,000
|
|
|
83,000
|
|
Investment in affiliate (a)
|
|
|
736,000
|
|
|
1,001,000
|
|
Accrued compensation and other
|
|
|
|
|
|
44,000
|
|
Capital loss carryforwards
|
|
|
24,000
|
|
|
|
|
Other
|
|
|
30,000
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
9,968,000
|
|
|
6,774,000
|
|
Valuation allowance
|
|
|
(9,218,000
|
)
|
|
(6,774,000
|
)
|
|
|
|
|
|
|
|
|
Net deferred tax assets
|
|
|
750,000
|
|
|
|
|
Deferred tax liability:
|
|
|
|
|
|
|
|
Receivable from affiliate
(b)
|
|
|
(750,000
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
0
|
|
$
|
0
|
|
|
|
|
|
(a)
|
Attributable to non-deductible bonus accrued at December 31, 2014 and 2013
by an affiliate, which will be deductible in 2015 and 2014, respectively.
|
|
|
|
|
(b)
|
Relates to receivable from business sold to affiliate treated as an installment
sale for tax purposes.
|
Due to cumulative losses incurred by the Company during the current and prior two years, the
Company is unable to conclude that it is more likely than not that it will realize its deferred tax asset in excess of the deferred
tax liability and, accordingly, has recorded a valuation allowance to fully offset such amount at December 31, 2014 and 2013.
At December 31, 2014, the Company has state net operating loss carryforwards aggregating $23.6
million, which expires through 2034 in various states. In addition, the Company has federal net operating loss carryforwards of
$18.1 million at December 31, 2014, which expires through 2034. The Company also has additional federal net operating loss carryforwards
of $410,000 at December 31, 2014 which is attributable to WFN and expires through 2020. Utilization of WFNs federal net
operating loss carryforwards is subject to annual limitations under Section 382 of the Internal Revenue Code.
The Company applied the more-likely-than not recognition threshold to all tax
positions taken or expected to be taken in a tax return which resulted in no unrecognized tax benefits reflected in the financial
statements as of December 31, 2014. The Company classifies interest and penalties that would accrue according to the provisions
of relevant tax law as income taxes.
The provision for income taxes in 2013 represents a federal minimum tax assessment of $19,000
including $4,000 of interest and penalties, relating to the year 2012.The provision for income taxes in 2012 represents a state
tax assessment of 34,000 relating to years 2007, 2008 and 2009 based on a tax examination completed by New York State in 2012.
Tax years 2011 and thereafter are subject to examinations by federal and certain state authorities. For other states the 2009
through 2013 tax years remain open for examinations. The Company is currently under tax examination by New York State for the
tax years 2010 and 2011.
Note H - Stockholders Equity
Siebert is subject to the SECs 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. The Net Capital Rule of the New York Stock Exchange also provides that equity
capital may not be withdrawn or cash dividends paid if resulting net capital would be less than 5% of aggregate debits. At December
31, 2014 and 2013, Siebert had net capital of approximately $5,100,000 and $13,000,000, respectively, as compared with net capital
requirements of $250,000. Siebert claims exemption from the reserve requirement under Section 15c3-3(k)(2)(ii) as it clears its
customer transactions through an unaffiliated clearing firm on a fully disclosed basis.
F-12
Note h - Stockholders Equity (continued)
On January 23, 2008, the Board of Directors of the Company authorized a buy back of up to
300,000 shares of common stock. Shares will be purchased from time to time in the open market and in private transactions. During
2012 and 2013, the Company repurchased 8,107 and 12,266 shares of common stock at an average price of $1.67 and $1.56, respectively.
No shares were purchased during 2014. As of December 31, 2014, 129,137 of common shares have been repurchased pursuant to such
authorization.
Note I - Options
The Companys 2007 Long-Term Incentive Plan (the Plan) authorizes the grant
of options to purchase up to an aggregate of 2,000,000 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
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 not be less than the fair market value
on the date of grant. No option may be granted under the Plan after December 2017. Generally, employee options vest 20% per year
for five years and expire ten years from the date of grant. At December 31, 2014, options for 1,760,000 shares of common stock
are available for grant under the Plan.
A summary of the Companys stock option transactions for the three years ended December
31, 2014 is presented below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2014
|
|
2013
|
|
2012
|
|
|
|
|
|
|
|
|
|
|
|
Shares
|
|
Weighted
Average
Exercise
Price
|
|
Shares
|
|
Weighted
Average
Exercise
Price
|
|
Shares
|
|
Weighted
Average
Exercise
Price
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding
- beginning of the year
|
|
|
350,000
|
|
|
3.10
|
|
|
400,000
|
|
|
3.33
|
|
|
1,228,200
|
|
$
|
3.88
|
|
Cancelled
|
|
|
(60,000
|
)
|
|
3.05
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Forfeited
|
|
|
|
|
|
|
|
|
(25,000
|
)
|
|
5.06
|
|
|
|
|
|
|
|
Expired
|
|
|
(25,000
|
)
|
|
4.04
|
|
|
(25,000
|
)
|
|
4.75
|
|
|
(828,200
|
)
|
$
|
4.14
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding
- end of year
|
(a)
|
|
265,000
|
|
|
3.02
|
|
|
350,000
|
|
|
3.10
|
|
|
400,000
|
|
$
|
3.33
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fully vested and exercisable
at end of year
|
(a)
|
|
265,000
|
|
|
3.02
|
|
|
350,000
|
|
|
3.10
|
|
|
400,000
|
|
$
|
3.33
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a)
|
Weighted average remaining contractual terms of 3.51 years and no aggregate
intrinsic value.
|
For the year ended December 31, 2014, 2013 and 2012, no stock options were granted.
As of December 31, 2014, there was no unrecognized compensation cost.
Note J - Commitments, Contingencies And Other
|
|
|
|
(1)
|
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 customer 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
are unable to fulfill their contractual obligations. There were no material losses for unsettled customer transactions
in 2014, 2013 or 2012. Credit risk represents the potential loss that would occur if counterparties fail to perform
pursuant to the terms of their obligations. The Company is subject to credit risk to the extent a custodian or
broker with whom it conducts business is unable to fulfill contractual obligations.
|
|
|
|
|
(2)
|
In 2012, Siebert was named as one of the defendants in a class action pending
in the United States District Court, Southern District of New York. The complaint was brought on behalf of a class
of purchasers in a public offering by Lehman Brothers Holdings, Inc. of $1,500,000,000 of 6.75% Subordinated Notes
due 2017 (the Notes) as to Siebert and certain smaller issuances of other securities. The complaint
asserted that Siebert and other underwriters of the Notes violated Section 11 of The Securities Act of 1933 in that relevant offering materials were false and
misleading. Siebert had agreed to purchase $15 million of the Notes and $462,953 of the other securities as an
underwriter in the offerings. Siebert and the plaintiffs class agreed to resolve all claims against Siebert
in consideration of a $1 million payment by Siebert which was accrued and
|
F-13
|
|
|
|
Note J - Commitments, Contingencies And
Other (continued)
|
|
|
|
|
charged to expense in 2011 and paid in 2012. In the prior year certain
plaintiffs did not agree to a settlement or purchased securities which were not covered by the settlement.
In 2013, all such claims were either dismissed or settled for an amount that was not material.
|
|
|
|
|
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
or results of operations of the Company.
|
|
|
|
(3)
|
In July 2014, the Company entered into a settlement agreement in
regards to a dispute with a former employee, in which the former employee sought, among other things,
damages arising from his separation from the Company. The Company asserted counter claims in the arbitration.
Pursuant to the settlement, the Company paid $4,300,000 to the former employee, and the claims and counterclaims
have been dismissed and released. The accompanying 2014 statement of operations reflects a charge to
give effect to the settlement.
|
|
|
|
(4)
|
The Company rents discount retail brokerage and other office space
under long-term operating leases expiring in various periods through 2017. 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
|
|
|
|
|
|
2015
|
|
|
615,000
|
|
2016
|
|
|
482,000
|
|
2017
|
|
|
80,000
|
|
|
|
|
|
|
|
|
$
|
1,177,000
|
|
|
|
|
|
|
|
|
|
|
Rent expense, including escalations for operating costs, amounted
to approximately $788,000, $1,046,000 and $907,000 for the years ended December 31, 2014, 2013 and 2012,
respectively. Rent is being charged to expense over the entire lease term on a straight-line basis.
|
|
|
|
(5)
|
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 2014, 2013 and 2012.
|
|
|
|
(6)
|
Siebert is party to a Secured Demand Note Collateral Agreement with
SBS which obligates Siebert to lend SBS, on a subordinated basis, up to $1,200,000. The secured demand
note payable held by SBS and a related $1,200,000 receivable due from SBS are included in investments
in and advances to equity investees in the accompanying consolidated statement of financial condition.
Amounts that Siebert is obligated to lend under this arrangement are collateralized by cash equivalents
of $1,532,000. Any amounts loaned will bear interest at 4% per annum and are repayable on August 31,
2015.
|
|
|
|
(7)
|
During 2012, commission income earned from one customer accounted
for approximately 12% of total revenue.
|
Note k - Summarized Quarterly Financial Data (Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2014
|
|
2013
|
|
|
|
First
Quarter
|
|
Second
Quarter
|
|
Third
Quarter
|
|
Fourth
Quarter
|
|
First
Quarter
|
|
Second
Quarter
|
|
Third
Quarter
|
|
Fourth
Quarter
|
|
Revenue
|
|
$
|
3,718,000
|
|
|
3,705,000
|
|
|
3,454,000
|
|
|
4,975,000
|
|
$
|
4,266,000
|
|
|
4,278,000
|
|
|
3,666,000
|
|
|
4,191,000
|
|
Net income (loss)
|
|
$
|
28,000
|
|
|
(6,077,000
|
)*
|
|
(1,456,000
|
)
|
|
948,000
|
|
$
|
(1,369,000
|
)
|
|
(1,353,000
|
)
|
|
(1,644,000
|
)
|
|
(1,546,000
|
)
|
Earnings (loss) per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
.00
|
|
|
(.28
|
)
|
|
(.07
|
)
|
|
.04
|
|
$
|
(.06
|
)
|
|
(.06
|
)
|
|
(.07
|
)
|
|
(.07
|
)
|
Diluted
|
|
$
|
.00
|
|
|
(.28
|
)
|
|
(.07
|
)
|
|
.04
|
|
$
|
(.06
|
)
|
|
(.06
|
)
|
|
(.07
|
)
|
|
(.07
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Includes
$4,300,000 (0.19 per share) loss related to arbitration settlement (see Note J3).
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-14
REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Board
of Managers
Siebert Brandford Shank Financial, L.L.C.
Siebert Brandford Shank & Co., L.L.C.
New York, New York
We
have audited the accompanying statements of financial condition of Siebert Brandford Shank Financial L.L.C. and subsidiary (the Company) as
of December 31, 2014 and of Siebert, Brandford, Shank & Co., L.L.C. at December 31, 2013 (the Company),
and the related statements of operations, changes in members capital and cash flows for each of the years in the three-year
period ended December 31, 2014. These financial statements are the responsibility of the Companys management. Our responsibility
is to express an opinion on these financial statements based on our audits.
We
conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those
standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are
free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control
over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing
audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness
of the Companys internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes
examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, 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 Brandford Shank Financial L.L.C. and subsidiary as of December 31, 2014 and the financial position of Siebert, Brandford,
Shank & Co., L.L.C. at December 31, 2013, and the results of their operations and their cash flows for each of the years in
the three-year period ended December 31, 2014, in conformity with accounting principles generally accepted in the United States
of America.
/s/ EisnerAmper LLP
New York, New York
February 26, 2015
F-15
Statements of Financial
Condition
|
|
|
|
|
|
|
|
|
|
December
31,
|
|
|
|
2014
|
|
2013
|
|
|
|
SIEBERT,
BRANDFORD, SHANK FINANCIAL, L.L.C. AND
SUBSIDIARY
|
|
SIEBERT,
BRANDFORD, SHANK & CO., L.L.C.
|
|
|
|
|
|
|
|
|
|
ASSETS
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
20,065,062
|
|
$
|
19,787,407
|
|
Accounts
receivable
|
|
|
1,593,614
|
|
|
562,147
|
|
Due from broker
|
|
|
2,522,557
|
|
|
8,158
|
|
Secured
demand note
|
|
|
1,200,000
|
|
|
1,200,000
|
|
Goodwill - Note B
|
|
|
1,001,000
|
|
|
|
|
Issuer
relationships, net of amortization of $41,212 - Note B
|
|
|
777,788
|
|
|
|
|
Furniture, equipment and
leasehold improvements, net
|
|
|
684,736
|
|
|
822,133
|
|
Other
assets
|
|
|
673,276
|
|
|
618,743
|
|
|
|
|
|
|
|
|
|
|
|
$
|
28,518,033
|
|
$
|
22,998,588
|
|
|
|
|
|
|
|
|
|
LIABILITIES
AND MEMBERS CAPITAL
|
|
|
|
|
|
|
|
Liabilities:
|
|
|
|
|
|
|
|
Payable
to affiliate
|
|
$
|
104,320
|
|
$
|
28,264
|
|
Asset purchase obligation
payable to affiliate, net of unamortized discount of $1,143,359
|
|
|
1,856,641
|
|
|
|
|
Accounts
payable and accrued expenses
|
|
|
4,747,648
|
|
|
4,006,608
|
|
Bank Overdraft
|
|
|
|
|
|
1,225,779
|
|
Deferred
rent
|
|
|
549,287
|
|
|
622,075
|
|
|
|
|
7,257,896
|
|
|
|
|
|
|
|
|
|
|
5,882,726
|
|
|
|
|
|
|
|
|
|
Subordinated debt
|
|
|
5,200,000
|
|
|
1,200,000
|
|
|
|
|
|
|
|
|
|
Total
liabilities
|
|
|
12,457,896
|
|
|
7,082,726
|
|
Commitments (Note G)
|
|
|
|
|
|
|
|
Members
capital
|
|
|
16,060,137
|
|
|
15,915,862
|
|
|
|
|
|
|
|
|
|
|
|
$
|
28,518,033
|
|
$
|
22,998,588
|
|
See notes to financial statements
F-16
Statements of Operations
|
|
|
|
|
|
|
|
|
|
|
|
|
Years
Ended December 31,
|
|
|
|
2014
|
|
2013
|
|
2012
|
|
|
|
SIEBERT,
BRANDFORD, SHANK FINANCIAL, L.L.C.
AND SUBSIDIARY
|
|
SIEBERT,
BRANDFORD, SHANK & CO., L.L.C.
|
|
SIEBERT,
BRANDFORD, SHANK & CO., L.L.C.
|
|
Revenues:
|
|
|
|
|
|
|
|
|
|
|
Investment banking
|
|
$
|
20,949,508
|
|
$
|
20,847,546
|
|
$
|
23,092,819
|
|
Trading
profits
|
|
|
3,670,726
|
|
|
4,114,958
|
|
|
5,149,140
|
|
Commissions
|
|
|
182,771
|
|
|
|
|
|
|
|
Interest
and other
|
|
|
3,395
|
|
|
2,817
|
|
|
4,389
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
24,806,400
|
|
|
24,965,321
|
|
|
28,246,348
|
|
|
|
|
|
|
|
|
|
|
|
|
Expenses:
|
|
|
|
|
|
|
|
|
|
|
Employee compensation and
benefits
|
|
|
17,819,595
|
|
|
18,619,549
|
|
|
20,541,452
|
|
Clearing
fees
|
|
|
383,538
|
|
|
122,209
|
|
|
129,694
|
|
Communications
|
|
|
929,496
|
|
|
889,207
|
|
|
905,970
|
|
Occupancy
|
|
|
1,186,967
|
|
|
1,088,755
|
|
|
1,052,908
|
|
Professional fees
|
|
|
895,951
|
|
|
528,313
|
|
|
591,175
|
|
Interest,
including amortization of discount (including $84,691, 48,000 and 48,000 to affiliate)
|
|
|
136,936
|
|
|
48,000
|
|
|
66,718
|
|
State and local income tax
|
|
|
31,901
|
|
|
36,326
|
|
|
78,706
|
|
General
and administrative (including $100,000, 100,000 and 75,000 to affiliate)
|
|
|
3,251,269
|
|
|
3,440,071
|
|
|
3,300,549
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
24,635,653
|
|
|
24,772,430
|
|
|
26,667,172
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income
|
|
$
|
170,747
|
|
$
|
192,891
|
|
$
|
1,579,176
|
|
See notes to financial statements
F-17
SIEBERT, BRANDFORD, SHANK FINANCIAL, L.L.C. AND SUBSIDIARY
Statements of Changes in
Members Capital
|
|
|
|
|
Balance - January 1, 2012 (a)
|
|
$
|
16,811,116
|
|
Distributions to members
|
|
|
(193,792
|
)
|
Net
income
|
|
|
1,579,176
|
|
|
|
|
|
|
Balance - December 31, 2012
(a)
|
|
|
18,196,500
|
|
Distributions
to members
|
|
|
(2,473,529
|
)
|
Net income
|
|
|
192,891
|
|
|
|
|
|
|
Balance
- December 31, 2013 (a)
|
|
|
15,915,862
|
|
Distributions to members
|
|
|
(26,472
|
)
|
Net
income
|
|
|
170,747
|
|
|
|
|
|
|
Balance - December 31, 2014
|
|
$
|
16,060,137
|
|
(a) Represents members capital of Siebert, Brandford,
Shank & Co., L.L.C.
See notes to financial statements
F-18
Statements of Cash Flows
|
|
|
|
|
|
|
|
|
|
|
|
|
Years
Ended December 31,
|
|
|
|
2014
|
|
2013
|
|
2012
|
|
|
|
SIEBERT,
BRANDFORD, SHANK FINANCIAL, L.L.C. AND
SUBSIDIARY
|
|
SIEBERT,
BRANDFORD, SHANK & CO., L.L.C.
|
|
SIEBERT,
BRANDFORD, SHANK & CO., L.L.C.
|
|
Cash flows from operating
activities:
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
170,747
|
|
$
|
192,891
|
|
$
|
1,579,176
|
|
Adjustments to reconcile
net income to net cash (used in) /provided by operating activities:
|
|
|
|
|
|
|
|
|
|
|
Amortization of discount
on obligation due affiliate
|
|
|
36,641
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
|
267,973
|
|
|
250,154
|
|
|
266,093
|
|
Changes in:
|
|
|
|
|
|
|
|
|
|
|
Accounts receivable
|
|
|
(1,031,467
|
)
|
|
395,913
|
|
|
(739,538
|
)
|
Due to/from broker
|
|
|
(2,514,399
|
)
|
|
(2,328,918
|
)
|
|
2,323,885
|
|
Securities owned, at fair
value
|
|
|
0
|
|
|
11,264,998
|
|
|
(11,264,998
|
)
|
Other assets
|
|
|
(54,533
|
)
|
|
139,264
|
|
|
81,554
|
|
Payable to (receivable from)
affiliates
|
|
|
76,056
|
|
|
36,929
|
|
|
(27,506
|
)
|
Accounts payable and accrued
expenses
|
|
|
741,040
|
|
|
(1,368,577
|
)
|
|
(1,277,796
|
)
|
Bank overdraft
|
|
|
(1,225,779
|
)
|
|
1,225,779
|
|
|
|
|
Deferred rent
|
|
|
(72,788
|
)
|
|
(9,740
|
)
|
|
(54,848
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Net cash (used in) /provided
by operating activities
|
|
|
(3,606,509
|
)
|
|
9,798,693
|
|
|
(9,113,978
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from investing
activities:
|
|
|
|
|
|
|
|
|
|
|
Purchase of leasehold improvements
and equipment
|
|
|
(89,364
|
)
|
|
(47,759
|
)
|
|
(63,381
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from financing
activities:
|
|
|
|
|
|
|
|
|
|
|
Distributions to members
|
|
|
(26,472
|
)
|
|
(2,473,529
|
)
|
|
(193,792
|
)
|
Subordinated borrowings
|
|
|
9,000,000
|
|
|
|
|
|
|
|
Subordinated repayments
|
|
|
(5,000,000
|
)
|
|
|
|
|
(6,000,000
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by/ (used
in) financing activities
|
|
|
3,973,528
|
|
|
(2,473,529
|
)
|
|
(6,193,792
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Net increase/(decrease) in
cash and cash equivalents
|
|
|
277,655
|
|
|
7,277,405
|
|
|
(15,371,151
|
)
|
Cash and cash equivalents
- beginning of year
|
|
|
19,787,407
|
|
|
12,510,002
|
|
|
27,881,153
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
- end of year
|
|
$
|
20,065,062
|
|
$
|
19,787,407
|
|
$
|
12,510,002
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental disclosures
of cash flow information:
|
|
|
|
|
|
|
|
|
|
|
Taxes paid
|
|
$
|
24,323
|
|
$
|
28,177
|
|
$
|
101,517
|
|
Interest paid
|
|
$
|
100,295
|
|
$
|
48,000
|
|
$
|
66,718
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-cash investing and financing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Note payable for purchase of
business from affiliate
|
|
$
|
1,820,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Intangible assets acquired related to business acquired from affiliate:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuer relationships
|
|
$
|
(819,000
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Goodwill
|
|
$
|
(1,001,000
|
)
|
|
|
|
|
|
|
See notes to financial statements
F-19
SIEBERT, BRANDFORD, SHANK FINANCIAL, L.L.C. AND SUBSIDIARY
Notes to Financial Statements
December 31, 2014 and 2013
NOTE A BUSINESS ORGANIZATION:
Siebert, Brandford, Shank Financial, L.L.C. (SBSF or the Company)
was organized on November 4, 2014 and through its wholly owned subsidiary, Siebert, Brandford, Shank & Co., L.L.C. (SBS),
engages in the business of tax-exempt underwriting and related trading activities and, commencing on November 4, 2014, the capital
markets business (see Note B). The Company qualifies as a Minority and Women Owned Business Enterprise in certain municipalities.
NOTE B BUSINESS ACQUISITION
On November 4, 2014, the members of SBS contributed their membership interest
into a newly formed Delaware limited liability company, Siebert Brandford Shank Financial, L.L.C. (SBSF), in exchange
for the same percentage interests in SBSF. On the same day Muriel Siebert & Co., Inc., (Siebert) entered an Asset
Purchase Agreement (the Purchase Agreement) with SBS and SBSF, pursuant to which Siebert sold substantially all of
the assets relating to Sieberts capital markets business to SBSF. Pursuant to the Purchase Agreement, SBSF assumed post-closing
liabilities relating to the transferred business. An individual having a 25.5% membership interest in SBS prior to the contribution
of membership interests to SBSF, is Sieberts chief executive officer.
The Purchase Agreement provides for an aggregate purchase price for the disposition
of $3,000,000, payable by SBSF after closing in annual installments commencing on March 1, 2016 and continuing on each of March
1, 2017, 2018, 2019 and 2020. The transferred business was contributed by SBSF to, and operated by SBS. The amount payable on
each annual payment date will equal 50% of the net income attributable to the transferred business recognized by SBS in accordance
with generally accepted accounting principles during the fiscal year ending immediately preceding the applicable payment date;
provided that, if net income attributable to the transferred business generated prior to the fifth annual payment date is insufficient
to pay the remaining balance of the purchase price in full on the fifth annual payment date, then the unpaid amount of the purchase
price will be paid in full on March 1, 2021.
The fair value (Level 3 see Note C(3)) of the $3,000,000 purchase obligation was determined
to be $1,820,000, based on the present value of estimated annual installments to be paid during 2016 through 2020 from forecasted
net income of the transferred business plus a final settlement in 2021, discounted at 11.5% (representing SBSs weighted
average cost of capital). The discount of $1,180,000 recorded for the purchase obligation is being amortized as interest expense
using an effective yield initially calculated based on the original carrying amount of the obligation and estimated annual installments
to be paid and adjusted in future periods to reflect actual installments paid and changes in estimates of future installments.
Interest expense recognized on the obligation for the period from November 4, 2014 to December 31, 2014 amounted to $36,641 based
on a yield of approximately 12%.
Transferred assets of Sieberts capital markets business, consisted of
issuer relationships and goodwill. Issuer relationships, were recorded at $819,000 representing their fair value at the date of
acquisition determined based on a discounted cash flow analysis (Level 3). Goodwill, which includes employees of Siebert who transferred
to SBS, was recorded at $1,001,000, representing the excess of the fair value ($1,820,000) of SBSFs purchase obligation to
Siebert over the fair value of the issuer relationships.
Since the date of acquisition, revenue of $199,000 and net loss of $129,000
attributable to the capital markets business is included in the accompanying statement of operations.
The following represents the unaudited pro forma amounts of revenue and net
income of the Company for the year ended December 31, 2014, assuming the capital markets business had been acquired as of January
1, 2014:
|
|
|
|
|
Revenue
|
|
$
|
27,729,000
|
|
Net Income
|
|
$
|
672,000
|
|
The above net income reflects the additional amortization that would have been
charged assuming the fair value adjustment to customer accounts had been applied as of January 1, 2014 and amortization of discount
on the purchase obligation for the entire year.
F-20
NOTE C SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
|
|
|
[1]
|
Principles of Consolidation:
|
|
|
|
|
Commencing on November 4, 2014, the accompanying financial statements
include the accounts of SBSF and its wholly-owned subsidiary SBS after elimination of intercompany balances
and transactions. Prior thereto, the financial statements represent those of SBS. The creation of SBSF
and related transfer thereto of the members interest in SBS did not result in any change in the
carrying value of the existing assets or liabilities of SBS in the consolidated financial statements
as both entities were under common control.
|
|
|
[2]
|
Revenues:
|
|
|
|
Investment banking revenues include gains and fees, net of syndicate
expenses, arising primarily from municipal bond offerings in which the Company acts as an underwriter
or agent. 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
|
|
|
|
Security transactions are recorded on a trade-date basis. Securities
owned are valued at fair value. The resulting realized and unrealized gains and losses are reflected
as trading profits.
|
|
|
|
Commission revenue which relates to the capital market business
are recorded on a trade date basis.
|
|
|
|
Dividends are recorded on the ex-dividend date, and interest income
is recognized on an accrual basis.
|
|
|
[3]
|
Fair value:
|
|
|
|
Authoritative accounting guidance defines fair value, establishes
a framework for measuring fair value and establishes a fair value hierarchy. Fair value is the price
that would be received to sell an asset or paid to transfer a liability in an orderly transaction between
market participants at the measurement date. Fair value measurements are not adjusted for transaction
costs. The fair value hierarchy prioritizes inputs to valuation techniques used to measure fair value
into three levels:
|
|
|
|
Level 1
|
Unadjusted quoted prices in active markets for identical assets or liabilities.
|
|
|
|
|
Level 2
|
Inputs other than quoted market prices that are observable, either directly
or indirectly, and reasonably available.
|
|
|
|
|
Level 3
|
Unobservable inputs which reflect the assumptions that the managing members
develop based on available information about the assumptions market participants would use in valuing the asset
or liability.
|
|
|
|
See Note C(4) for financial instruments measured at fair value.
|
F-21
SIEBERT, BRANDFORD, SHANK FINANCIAL, L.L.C. AND SUBSIDIARY
Notes to Financial Statements
December 31, 2014 and 2013
NOTE C SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
|
|
|
[4]
|
Cash equivalents:
|
|
|
|
|
Cash equivalents represent short-term, highly liquid investments
which are readily convertible to cash and have maturities of three months or less at time of purchase.
Cash equivalents, which are valued at fair value, consist of money market funds which amounted to $15,965,885
and $19,787,407 at December 31, 2014 and 2013, respectively (Level 1). The Company maintains its assets
with financial institutions which may at times exceed federally insured limits. In the event of financial
institutions insolvency, recovery of the assets may be limited.
|
|
|
|
[5]
|
Furniture, equipment and leasehold improvements, net:
|
|
|
|
|
Furniture, equipment and leasehold improvements are stated at cost,
net of accumulated depreciation and amortization. Depreciation is calculated using the straight-line
method over the estimated useful lives of the assets, generally five years. Leasehold improvements are
amortized over the period of the lease.
|
|
|
|
[6]
|
Intangible Assets
|
|
|
|
|
Issuer relationships, which were recorded in connection with the
acquisition of the capital markets business (see Note B), are being amortized by the straight-line method
over 2.9 years.
|
|
|
|
|
Intangible assets with finite lives are tested for recoverability
whenever events or changes in circumstances indicate that the carrying amount may not be recoverable.
The Company assesses the recoverability of its intangible assets by determining whether the unamortized
balance can be recovered over the assets remaining useful life through undiscounted estimated
future cash flows. If undiscounted estimated future cash flows indicate that the unamortized amounts
will not be recovered, an adjustment will be made to reduce such amounts to fair value based on estimated
future cash flows discounted at a rate commensurate with the risk associated with achieving such cash
flows.
|
|
|
|
[7]
|
Goodwill
|
|
|
|
|
Goodwill, which was recorded in connection with the acquisition
of the capital markets business (see Note B), is not subject to amortization and is tested for impairment
annually, or more frequently if events or changes in circumstances indicate that the asset may be impaired.
The impairment test consists of a comparison of the fair value of the reporting unit with the carrying
amount its net assets, including goodwill. Fair value is typically based upon estimated future cash
flows discounted at a rate commensurate with the risk involved or market-based comparables. If the
carrying amount of the Companys net assets exceeds the fair value of the reporting unit, then
an analysis will be performed to compare the implied fair value of goodwill with the carrying amount
of goodwill. An impairment loss will be recognized in an amount equal to the excess of the carrying
amount over its implied fair value.
|
|
|
|
[8]
|
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.
|
|
|
|
[9]
|
Income taxes:
|
|
|
|
|
The Company is not subject to federal income taxes. Instead, the
members are required to include in their income tax returns their respective share of the Companys
income or loss. The Company is subject to tax in certain state and local jurisdictions. Deferred taxes
are not significant.
|
F-22
NOTE D - SUBORDINATED BORROWINGS AND SECURED DEMAND NOTE RECEIVABLE
The subordinated debt at December 31, consists of the following:
|
|
|
|
|
|
|
|
|
|
2014
|
|
2013
|
|
|
|
|
|
|
|
|
|
Payable to affiliate (a)
|
|
$
|
1,200,000
|
|
$
|
1,200,000
|
|
Payable to clearing broker (b)
|
|
$
|
4,000,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
5,200,000
|
|
$
|
1,200,000
|
|
|
|
|
|
(a)
|
Consists of a Secured Demand Note Collateral Agreement payable
to Siebert, an indirect member of the Company, bearing 4% interest and due August 31, 2015, at which time
SBS is obligated to repay Siebert any amounts borrowed. Interest expense paid to Siebert in each of 2014, 2013
and 2012 amounted to $48,000.
|
|
|
|
|
|
The secured demand note receivable of $1,200,000 is collateralized
by cash equivalents of Siebert of approximately $1,544,000 at December 31, 2014. Interest earned on the collateral
amounted to approximately $1,028, $1,500 and $2,900 in 2014, 2013 and 2012, respectively.
|
|
|
|
|
(b)
|
On December 9, 2014, SBS entered into a temporary subordinated
loan agreement with National Financial Services, its clearing broker, in the amount of $4,000,000 bearing interest
at the federal funds rate plus 6% and maturing January 22, 2015. The note was repaid on January 22, 2015. Interest
expense accrued in 2014 amounted to approximately $16,000.
|
|
|
|
|
|
The subordinated borrowings are available in computing net
capital under the Securities and Exchange Commissions (SEC) Uniform Net Capital Rule. To the
extent that such borrowing is required for the Companys continued compliance with minimum net capital requirements,
it may not be repaid.
|
|
|
|
|
|
On March 24, 2014, SBS entered into a temporary subordinated
loan agreement with National Financial Services, its clearing broker, in the amount of $5,000,000 bearing interest
at the federal funds rate plus 6% and maturing May 5, 2014. The note was repaid on May 5, 2014. Interest expense
paid was $36,542.
|
F-23
SIEBERT, BRANDFORD, SHANK FINANCIAL, L.L.C. AND SUBSIDIARY
Notes to Financial Statements
December 31, 2014 and 2013
NOTE E - FURNITURE, EQUIPMENT AND LEASEHOLD IMPROVEMENTS, NET
Furniture, equipment, and leasehold improvements consist of the following:
|
|
|
|
|
|
|
|
|
|
December
31,
|
|
|
|
2014
|
|
2013
|
|
|
|
|
|
|
|
|
|
Equipment
|
|
$
|
926,654
|
|
$
|
896,376
|
|
Furniture and leasehold improvements
|
|
|
1,718,826
|
|
|
1,659,740
|
|
|
|
|
|
|
|
|
|
|
|
|
2,645,480
|
|
|
2,556,116
|
|
Less accumulated depreciation and amortization
|
|
|
1,960,744
|
|
|
1,733,983
|
|
|
|
|
|
|
|
|
|
|
|
$
|
684,736
|
|
$
|
822,133
|
|
Depreciation and amortization expense for 2014, 2013 and 2012 amounted to $226,761, $250,154
and $266,093 respectively.
NOTE F - NET CAPITAL
SBS is subject to the SECs Uniform Net Capital Rule 15c3-1, which requires the maintenance
of minimum net capital and that the ratio of aggregate indebtedness to net capital, both as defined, shall not exceed 15 to 1.
At December 31, 2014 and 2013, SBS had net capital of $22,807,796 and $18,271,172, respectively, which was $22,557,796 and $18,021,172,
respectively, in excess of its required net capital and its ratio of aggregate indebtedness to net capital was 0.10 and 0.16 to
1, respectively. SBS claims exemption from the reserve requirements under Section 15c3-3(k)(2)(ii).
NOTE G - COMMITMENTS
SBS rents office space under long-term operating leases expiring through 2020. These leases
call for base rent plus escalations for property taxes and other operating expenses. Future minimum base rent under these operating
leases as of December 31, 2014 are as follows:
|
|
|
|
|
Year Ending
|
|
|
|
|
December
31,
|
|
Amount
|
|
|
|
|
|
|
|
|
|
|
|
2015
|
|
|
1,043,000
|
|
2016
|
|
|
886,000
|
|
2017
|
|
|
639,000
|
|
2018
|
|
|
627,000
|
|
2019
|
|
|
587,000
|
|
Thereafter
|
|
|
185,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
3,967,000
|
|
Rent expense, including taxes and operating expenses for 2014, 2013 and 2012
amounted to $1,186,967, $1,088,755, and $1,052,908 respectively.
In prior years, SBS purchased leasehold improvements of approximately $620,000 which were
reimbursed by the landlord. SBS recorded such reimbursement as a credit to deferred rent liability, which is being recognized
as a reduction of rental expense on a straight-line basis over the term of the lease.
Rent expense is being charged to operations on a straight-line basis resulting in a deferred
rent liability which, including the reimbursement discussed above amounted to $549,287 at December 31, 2014 and $622,075 at December
31, 2013.
F-24
SIEBERT, BRANDFORD, SHANK FINANCIAL, L.L.C. AND SUBSIDIARY
Notes to Financial Statements
December 31, 2014 and 2013
NOTE H - ACCOUNTS PAYABLE AND ACCRUED EXPENSES
Accounts payable and accrued expenses consist of the following:
|
|
|
|
|
|
|
|
|
|
December
31,
|
|
|
|
2014
|
|
2013
|
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
$
|
313,285
|
|
$
|
171,761
|
|
Accrued bonus and other employee compensation
|
|
|
4,233,521
|
|
|
3,785,271
|
|
Other accrued expenses
|
|
|
200,842
|
|
|
49,576
|
|
|
|
|
|
|
|
|
|
|
|
$
|
4,747,648
|
|
$
|
4,006,608
|
|
NOTE I - OTHER
During each of 2014 and 2013, SBS was charged $100,000 by Siebert for general and administrative
services. During 2012 SBS was charged $75,000 by Siebert for general and administrative services. In January 2014, SBS transferred
funds from its money market accounts to its bank account to cover the $1,225,779 overdraft at December 31, 2013.
F-25
SIGNATURES
Pursuant to the requirements of
Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized.
SIEBERT FINANCIAL CORP.
|
|
|
|
By:
|
/s/ Joseph M. Ramos, Jr.
|
|
|
Joseph M. Ramos, Jr.
|
|
|
Executive Vice President, Chief Operating Officer, Chief Financial Officer
and Secretary
|
|
|
(principal executive, financial and accounting officer)
|
|
|
|
|
Date:
|
March 31, 2015
|
Pursuant to the requirements of
the Securities Exchange Act of 1934, 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
|
|
|
Executive Vice President, Chief Operating Officer and Chief
|
|
|
/s/ Joseph M. Ramos, Jr.
|
|
Financial Officer and Secretary (principal financial and accounting
|
|
March 31, 2015
|
Joseph M. Ramos, Jr.
|
|
officer)
|
|
|
|
|
|
|
|
/s/ Patricia L. Francy
|
|
Director
|
|
March 31, 2015
|
Patricia L. Francy
|
|
|
|
|
|
|
|
|
|
/s/ Jane H. Macon
|
|
Director
|
|
March 31, 2015
|
Jane H. Macon
|
|
|
|
|
|
|
|
|
|
/s/ Robert P. Mazzarella
|
|
Director
|
|
March 31, 2015
|
Robert P. Mazzarella
|
|
|
|
|
|
|
|
|
|
/s/ Nancy Peterson Hearn
|
|
Director
|
|
March 31, 2015
|
Nancy Peterson Hearn
|
|
|
|
|
|
|
|
EXHIBIT INDEX
|
|
|
|
Exhibit No.
|
|
Description
Of Document
|
|
|
|
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 Annual Report on 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 Annual Report on Form 10-K for the fiscal year ended December 31,
1996)
|
|
|
|
2.3
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Amendment No. 2 to Merger Agreement, dated as of September 30, 1996 (incorporated
by reference to Siebert Financial Corp.s Annual Report on Form 10-K for the fiscal year ended December 31,
1996)
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2.4
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Amendment No. 3 to Merger Agreement, dated as of November 7, 1996 (incorporated
by reference to Siebert Financial Corp.s Annual Report on Form 10-K for the fiscal year ended December 31,
1996)
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3.1
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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 Annual Report on Form 10-K for the fiscal year ended December 31, 1997)
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3.2
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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)
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10.1**
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Siebert Financial Corp. 1998 Restricted Stock Award Plan (incorporated by
reference to Siebert Financial Corp.s Annual Report on Form 10-K for the fiscal year ended December 31,
1997)
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10.2**
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Siebert Financial Corp. 1997 Stock Option Plan (incorporated by reference
to Siebert Financial Corp.s Annual Report on Form 10-K for the fiscal year ended December 31, 1996)
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10.3
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Siebert, Brandford, Shank & Co., LLC Operating Agreement, among Siebert,
Brandford, Shank & Co., L.L.C., 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 Annual Report on Form
10-K for the fiscal year ended December 31, 1996)
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10.4
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Services Agreement, between Siebert, Brandford, Shank & Co., L.L.C. and
Muriel Siebert & Co., Inc., dated as of March 10, 1997 (incorporated by reference to Siebert Financial Corp.s
Annual Report on Form 10-K for the fiscal year ended December 31, 1996)
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10.5
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Operating Agreement of SBS Financial Products Company, LLC, dated effective
as of April 19, 2005, by and among Siebert Financial Corp., Napoleon Brandford III and Suzanne Shank. (incorporated
by reference to Siebert Financial Corp.s Current Report on Form 8-K filed with the Securities and Exchange
Commission on May 17, 2005)
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10.6**
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Siebert Financial Corp. 2007 Long-Term Incentive Plan (incorporated by reference
to Siebert Financial Corp.s Registration Statement on Form S-8 (File No. 333-144680) filed with the Securities
and Exchange Commission on July 18, 2007)
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10.7*
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Fully Disclosed Clearing Agreement, by and between National Financial Services
LLC and Muriel Siebert & Co., Inc. dated May 5, 2010. (incorporated by reference to Siebert Financial Corp.s
Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission on August 16, 2010)
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21
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Subsidiaries of the registrant (incorporated by reference to Siebert Financial
Corp.s Annual Report on Form 10-K for the year ended December 31, 2001)
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23
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Consent of Independent Auditors
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31.1
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Certification of Joseph M. Ramos, Jr. pursuant to Securities Exchange Act
Rules 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
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32.1
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Certification of Joseph M. Ramos, Jr. of Periodic Financial Report under Section
906 of the Sarbanes-Oxley Act of 2002
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*
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Portions of the indicated document have been afforded confidential treatment
and have been filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the General
Rules and Regulations promulgated under the Securities Exchange Act of 1934, as amended.
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**
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Management contract or compensatory plan or arrangement.
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EXHIBIT 23
CONSENT OF INDEPENDENT
REGISTERED PUBLIC ACCOUNTING FIRM
We consent to the incorporation by reference
in the Registration Statements (Form S-8 No. 333-144680, No. 333-43837, No. 333-43839, No. 333-72939 and No. 333-102701, and Form
S-3 No. 333-81037) of Siebert Financial Corp. and in the related prospectus of our report dated March 31, 2015, with respect to
the consolidated financial statements of Siebert Financial Corp. and our report dated February 26, 2015 with respect to the financial
statements of Siebert Brandford Shank Financial, L.L.C. and subsidiary and Siebert, Brandford, Shank & Co., L.L.C. included in this Annual Report on Form 10-K for the year ended December
31, 2014.
/s/ EisnerAmper LLP
New York, New York
March 31, 2015
Exhibit 31.1
CERTIFICATION
PURSUANT TO EXCHANGE ACT RULE 13a-14(a) AND 15d-14(a),
AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I of Joseph M.
Ramos, Jr., certify that:
1. I have
reviewed this annual report on Form 10-K of Siebert Financial Corp.;
2. Based on my
knowledge, this report does not contain any untrue statement of a material fact
or omit to state a material fact necessary to make the statements made, in
light of the circumstances under which such statements were made, not
misleading with respect to the period covered by this report;
3. Based on my
knowledge, the financial statements, and other financial information included
in this report, fairly present in all material respects the financial
condition, results of operations and cash flows of the registrant as of, and
for, the periods presented in this report;
4. The
registrants other certifying officer and I are responsible for establishing
and maintaining disclosure controls and procedures (as defined in Exchange Act
Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting
(as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant
and have:
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(a) Designed
such disclosure controls and procedures, or caused such disclosure controls
and procedures to be designed under our supervision, to ensure that material
information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities,
particularly during the period in which this report is being prepared;
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(b) Designed
such internal control over financial reporting, or caused such internal
control over financial reporting to be designed under our supervision, to
provide reasonable assurance regarding the reliability of financial reporting
and the preparation of financial statements for external purposes in
accordance with generally accepted accounting principles;
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I Evaluated
the effectiveness of the registrants disclosure controls and procedures and
presented in this report our conclusions about the effectiveness of the
disclosure controls and procedures, as of the end of the period covered by
this report based on such evaluation;and
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(d)
Disclosed in this report any change in the registrants internal control over
financial reporting that occurred during the registrants most recent fiscal
quarter (the registrants fourth fiscal quarter in the case of an annual
report) that has materially affected, or is reasonably likely to materially
affect, the registrants internal control over financial reporting;and
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5. The
registrants other certifying officer and I have disclosed, based on our most
recent evaluation of internal control over financial reporting, to the
registrants auditors and the audit committee of the registrants board of
directors (or persons performing the equivalent functions):
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(a) All
significant deficiencies and material weaknesses in the design or operation
of internal control over financial reporting which are reasonably likely to
adversely affect the registrants ability to record, process, summarize and
report financial information;and
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(b) Any
fraud, whether or not material, that involves management or other employees
who have a significant role in the registrants internal control over financial
reporting.
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/s/ Joseph
M. Ramos, Jr.
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Date: March 31, 2015
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Joseph M.
Ramos, Jr.
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Executive Vice President, Chief Operating
Officer, Chief
Financial Officer and Secretary
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(principal
executive, financial and accounting officer)
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Exhibit 32.1
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection
with the Annual Report of Siebert Financial Corp. (the Company) on Form 10-K
for the year ended December 31, 2014, as filed with the Securities and Exchange
Commission (the Report), I, Joseph M. Ramos, Jr, in my capacity as Chief
Financial Officer, Chief Operating Officer and Secretary hereby certify,
pursuant to 18 U.S.C. ss. 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002, that to my knowledge:
(1) The Report
filed by the Company with the Securities and Exchange Commission fully complies
with the requirements of Section 13(a) of the Securities and Exchange Act of
1934;and
(2) The
information contained in the Report fairly presents, in all material respects,
the financial condition and results of operations of the Company for the period
covered by the report.
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/s/ Joseph
M. Ramos, Jr.
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Date: March 31, 2015
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Joseph M.
Ramos, Jr.
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Executive Vice President, Chief Operating
Officer, Chief
Financial Officer and Secretary
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(principal
executive, financial and accounting officer)
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A signed
original of this written statement required by Section 906, or other documents
authenticating, acknowledging, or otherwise adopting the signature that appears
in typed form within the electronic version of this written statement required
by section 906, has been provided to Siebert Financial Corp. and will be
retained by Siebert Financial Corp. and furnished to the Securities and
Exchange Commission or its staff upon request.
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