SIEBERT FINANCIAL CORP - Quarter Report: 2012 June (Form 10-Q)

production in the capital markets and retail operations as well as an increase in health benefits offset by a reduction in headcount for registered representatives.

          Clearing and floor brokerage costs for the six months ended June 30, 2012 were $1.6 million, an increase of $20,000 or 1.2% from the same period in 2011 despite an overall decrease in retail trading volume. The increase in costs reflects a higher volume of retail options trading which costs more to clear as well as an increase in clearing charges for our commission recapture operations.

          Professional fees for the six months ended June 30, 2012 were $1.6 million, a decrease of $1.2 million or 42.8% from the same period in 2011 primarily due to a decrease in legal fees relating to a dispute with a former employee offset by increases in consulting fees relating to our Information Technology department and our commission recapture operations.

          Advertising and promotion expenses for the six months ended June 30, 2012 were $227,000, an increase of $34,000 or 17.6% from the same period in 2011 primarily due to an increase in online advertising.

          Communications expense for the six months ended June 30, 2012 were $1.0 million, a decrease of $98,000 or 9.0% from the same period in 2011 primarily due to a decrease in Bloomberg devices due to fewer employees in the Institutional Trading department and the result of the closing of our Surfside and Naples branches in Florida during the fourth quarter of 2011.

          Occupancy costs for the six months ended June 30, 2012 were $477,000, a decrease of $66,000 or 12.2% from the same period in 2011 due to the closing of our Surfside and Naples branches in Florida during the fourth quarter of 2011.

          Write off of software development costs of $433,000 was due to the Company’s discontinuation of its relationship with a software vendor on June 30, 2012, which had developed and maintained its 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 will be provided by our clearing broker.

          Other general and administrative expenses for the six months ended June 30, 2012 were $1.3 million, a decrease of $69,000 or 5.2% from the same period in 2011 due to a decrease in depreciation, training, subscriptions, computer updates and data storage costs.

          Income from Siebert’s equity investment in SBS, an entity in which Siebert holds a 49% equity interest for the six months ended June 30, 2012, was $701,000, compared to a loss of $1.4 million from the same period in 2011 due to SBS participating in more senior managed or co-managed transactions. Loss from our equity investment in SBSFPC, an entity in which we hold a 33.33% equity interest, for the six months ended June 30, 2012, was $16,000 as compared to a loss of $11,000 from the same period in 2011. The losses in 2012 and 2011 were due to the mark to market loss in positions. Income and loss from equity investees is considered to be integral to our operations and material to the results of operations.

          The tax provision for the six months ended June 30, 2012 and 2011 was $55,000 and $12,000, respectively, representing various minimum state income taxes. There is no provision for other income taxes for the six months ended June 30, 2012 because the Company utilized its net operating loss carry forward for which no benefit was previously recognized. No tax benefit related to the pre-tax loss was recorded for the six months ended June 30, 2011 due to the recording of a full valuation allowance to offset deferred tax assets based on recent losses and the likelihood of realization of such assets.

Liquidity and Capital Resources

          Our assets are highly liquid, consisting generally of cash in money market funds. Our total assets at June 30, 2012 were $35.6 million. As of that date, we regarded $22.8 million, or 64%, of total assets as highly liquid.

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          Siebert is subject to the net capital requirements of the SEC, the NYSE and other regulatory authorities. At June 30, 2012, Siebert’s regulatory net capital was $18.4 million, $18.2 million in excess of its minimum capital requirement of $250,000.

          On January 22, 2008, the Board of Directors of the Company authorized a buy back of up to 300,000 shares of common stock. During the six months ended June 30, 2012, 4,302 shares were purchased at an average price of $1.67 per share.

          Siebert has entered into a Secured Demand Note Collateral Agreement with SBS under which Siebert is obligated to lend to SBS up to $1.2 million on a subordinated basis collateralized by cash equivalents of approximately $1.5 million as of June 30, 2012. Amounts pledged 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, 2014, at which time SBS is obligated to repay to Siebert any amounts borrowed by SBS thereunder.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

          Working capital is generally invested temporarily in dollar denominated money market funds. These investments are not subject to material changes in value due to interest rate movements.

          Retail customer transactions are cleared through clearing brokers on a fully disclosed basis. If customers do not fulfill their contractual obligations, the clearing broker may charge Siebert for any loss incurred in connection with the purchase or sale of securities at prevailing market prices to satisfy the customers’ obligations. Siebert regularly monitors the activity in its customer accounts for compliance with its margin requirements. Siebert is exposed to the risk of loss on unsettled customer transactions if customers and other counter-parties are unable to fulfill their contractual obligations. There were no material losses for unsettled customer transaction as of June 30, 2012.

Item 4. Controls and Procedures

          We carried out an evaluation, under the supervision and with the participation of management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures as of the end of the period covered by this report pursuant to Rule 13a-15(e) or Rule 15d-15(e) of the Securities Exchange of 1934, as amended. Based on that evaluation, our management, including the Chief Executive Officer and Chief Financial Officer, concluded that our disclosure controls and procedures are effective to ensure that the information we are required to disclose in reports that we file or submit under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the Securities and Exchange Commission and to ensure that information required to be disclosed is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding timely disclosure.

           There were no changes in our internal control over financial reporting that occurred during our most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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Part II - OTHER INFORMATION

Item 1. Legal Proceedings

We are involved in various routine lawsuits of a nature deemed to be customary and incidental to our business. In the opinion of management, the ultimate disposition of such actions will not have a material adverse effect on the Company’s financial position or results of operations.

Item 1A. Risk Factors

In addition to the other information set forth in this report, you should carefully consider the factors discussed in Part I, Item 1A. “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2011, which could materially affect our business, financial position and results of operations. There are no material changes from the risk factors set forth in Part I, Item 1A, “Risk Factors,” of our Annual Report on Form 10-K for the year ended December 31, 2011.

Item 2. Unregistered Sale of Equity Securities and Use of Proceeds

On January 23, 2008, our Board of Directors authorized the repurchase of up to 300,000 shares of our common stock. Shares will be purchased from time to time, in our discretion, in the open market and in private transactions. There is no expiration date for our stock repurchase plan. We purchased 452 shares at an average price of $1.82 in the second quarter of 2012.

A summary of our repurchase activity for the three months ended June 30, 2012 is as follows:

Issuer Purchases of Equity Securities

Period	Total Number Of Shares Purchased			Average Price Paid Per Share			Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs			Maximum Number of Shares That May Yet Be Purchased Under The Plans or Programs
April 2012	389			$1.82			113,003			186,997
May 2012							113,003			186,997
June 2012	63			1.80			113,066			186,934
Total	452			$1.82			113,066			186,934

All of the purchases were made in open market transactions.

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Item 6. Exhibits

	31.1	Certification of Muriel F. Siebert pursuant to Exchange Act Rules 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
	31.2	Certification of Joseph M. Ramos, Jr. 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.
	32.1	Certification of Muriel F. Siebert of Periodic Financial Report under Section 906 of the Sarbanes-Oxley Act of 2002.
	32.2	Certification of Joseph M. Ramos, Jr. of Periodic Financial Report under Section 906 of the Sarbanes-Oxley Act of 2002.
	101.INS*	XBRL Instance Document
	101.SCH*	XBRL Taxonomy Extension Schema Document
	101.CAL*	XBRL Taxonomy Extension Calculation Linkbase Document
	101.DEF*	XBRL Taxonomy Extension Definition Linkbase Document
	101.LAB*	XBRL Taxonomy Extension Label Linkbase Document
	101.PRE*	XBRL Taxonomy Extension Presentation Linkbase Document

* XBRL (Extensible Business Reporting Language) information is furnished and not filed or a part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, is deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, and otherwise is not subject to liability under these sections.

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SIGNATURES

          Pursuant to the requirements 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/ Muriel F. Siebert
		Muriel F. Siebert
		Chairwoman and President
		(principal executive officer)
	Dated: August 14, 2012
	By:	/s/ Joseph M. Ramos, Jr.
		Joseph M. Ramos, Jr.
		Executive Vice President and Chief Financial Officer
		(principal financial and accounting officer)
	Dated: August 14, 2012

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