Summary of SIEBERT FINANCIAL CORP

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

This discussion should be read in conjunction with the our audited consolidated financial statements as of and for the year ended December 31, 2007, and the unaudited consolidated financial statements and the notes thereto contained elsewhere in this Quarterly Report.

Business Environment

The financial crisis affecting the global economy has created historic volatility in the market place. Our working capital is invested in short term United States Treasury Bills, and to date the financial crisis has not had a material effect on our liquidity or financial position.

Like other securities firms, we are directly affected by general economic and market conditions including fluctuations in volume and prices of securities, changes and prospects for changes in interest rates and demand for brokerage and investment banking services, all of which can affect our relative profitability. In periods of reduced market activity, profitability is likely to be adversely affected because certain expenses, including salaries and related costs, portions of communications costs and occupancy expenses remain relatively fixed. Earnings, or loss, for any period should not be considered representative of any other period.

Recent Developments

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 nine months ended September 30, 2008, 8,112 shares have been purchased at an average price of $3.30 per share, including 500 shares from a buy back authorized in 2000.

On June 9, 2008, our Board of Directors declared a dividend of ten cents per share on common stock, which was paid on June 30, 2008 to shareholders of record at the close of business on June 23, 2008. Our Chief Executive Officer waived the right to receive the dividend in excess of the aggregate amount paid to other shareholders.

Critical Accounting Policies

We generally follow accounting policies standard in the brokerage industry and believe that our policies appropriately reflect our financial position and results of operations. Our management makes significant estimates that affect the reported amounts of assets, liabilities, revenues and expenses and the related disclosure of contigent assets and liabilities included in the financial

statements. The estimates relate primarily to revenue and expense items in the normal course of business as to which we receive no confirmations, invoices, or other documentation at the time the books are closed for a period. We use our best judgment, based on our knowledge of these revenue transactions and expenses incurred, to estimate the amounts of such revenue and expense. We are not aware of any material differences between the estimates used in closing our books for the last five years and the actual amounts of revenue and expenses incurred when we subsequently received the actual confirmations, invoices or other documentation. Estimates are also used in determining the useful lives of intangible assets, and the fair market value of intangible assets and securities. Our management believes that its estimates are reasonable.

Results of Operations

We believe that our business reflects the current difficult business environment for discount and online and institutional brokers. We had net loss of $931,000 and $491,000 for the three months and nine months ended September 30, 2008, respectively.

Three Months Ended September 30, 2008 Compared to Three Months Ended September 30, 2007

Total revenues for the three months ended September 30, 2008 were $7.2 million, a decrease of $285,000 or 3.8% from the same period in 2007.

Commission and fee income for the three months ended September 30, 2008 were $6.1 million, a decrease of $44,000 or 1% from the same period in 2007. Commissions generated by retail customers decreased due to a decrease in trading volumes as well as a decrease in the average commission charged per trade offset by an increase in institutional trading and from the commission recapture operations.

Investment banking revenues for the three months ended September 30, 2008 were $400,000, a decrease of $313,000 or 43.9% due to our participation in less new issues in the equity and debt capital markets.

Trading profits were $549,000 for the three months ended September 30, 2008, an increase of $359,000 or 189.0% over the same period in 2007 due to the addition of a debt sales-trader and an increase in trading volume.

Interest and dividends for the three months ended September 30, 2008 were $164,000, a decrease of $287,000 or 63.6% from the same period in 2007 primarily due to lower yields on investments in U.S. Treasury Bills.

Total expenses for the three months ended September 30, 2008 were $8.9 million, an increase of $936,000 or 11.8% from the same period in 2007.

Employee compensation and benefit costs for the three months ended September 30, 2008 were $3.0 million, an increase of $409,000 or 15.8% from the same period in 2007. This increase was primarily due to the expensing of stock options granted to directors of our Company which vest immediately and an increase in health insurance offset by a decrease in the staff bonus accrual.

Clearing and floor brokerage costs for the three months ended September 30, 2008 were $1.7 million, an increase of $454,000 or 36.6% from the same period in 2007 primarily due to an increase in listed floor executions for institutional customers executed at the New York Stock Exchange, increased volume relating to the commission recapture operations and increased volume of trade executions for retail customers.

Professional fees for the three months ended September 30, 2008, were $2.3 million, an increase of $92,000 or 4.1% from the same period in 2007 due to an increase in legal fees relating to a dispute with a former employee.

Advertising and promotion expenses for the three months ended September 30, 2008 were $253,000, an increase of $133,000 or 110.8% from the same period in 2007 primarily due to an increase in print advertising and direct mailings to our retail customer base in the third quarter of 2008.

Communications expense for the three months ended September 30, 2008, was $597,000, a decrease of $156,000 or 20.7% from the same period in 2007 primarily due to initial and one-time costs associated with our new website in the third quarter of 2007. The website was launched in the fourth quarter of 2008.

Occupancy costs for the three months ended September 30, 2008 were $338,000, an increase of $21,000 or 6.6% from the same period in 2007 due to an increase in rent in the Florida branches and New Jersey office offset by a reduction in rent for our California branch.

Other general and administrative expenses for the three months ended September 30, 2008 were $673,000, a decrease of $17,000 or 2.5% from the same period in 2007 due to the decrease in depreciation and amortization expenses, postage, printing, insurance, travel and entertainment, and registration fees offset by increases in exchange fees and transportation costs.

Income from Siebert's equity investment in Siebert Brandford Shank & Co., LLC, an entity in which Siebert holds a 49% equity interest ("SBS"), for the three months ended September 30, 2008, was $103,000 compared to a loss of $434,000 from the same period in 2007 primarily due to SBS participating in more municipal bond offerings. SBS serves as an underwriter for municipal bond offerings. Income from our equity investment in SBS Financial Products Company, LLC, an entity in which we hold a 33% equity

interest ("SBSFPC") for the three months ended September 30, 2008, was $5,000 compared to income from our equity investment in SBSFPC of $39,000, a decrease of $34,000 from the same period in 2007. This decrease was due to a decrease in the number and size of the transactions SBSFPC entered into in the third quarter of 2008. Loss and income from equity investees is considered to be integral to our operations and material to the results of operations.

The tax benefit for the three months ended September 30, 2008 and 2007 was $675,000 and $293,000, respectively, due to our loss before benefit of $1.6 million and $888,000 for the three months ended September 30, 2008 and 2007, respectively. Such provisions represented effective tax rates of approximately 42%, respectively.

Nine Months Ended September 30, 2008 Compared to Nine Months Ended September 30, 2007

Total revenues for the nine months ended September 30, 2008 were $22.4 million, a decrease of $1.2 million or 5.2% from the same period in 2007.

Commission and fee income for the nine months ended September 30, 2008 was $18.1 million, a decrease of $1.2 million or 6.1% from the same period in 2007 due to a decrease in institutional trading and retail customers trading. Retail customer volumes increased however the average commission charged per trade decreased due to more retail customers executing trades online via the Internet, which has a lower commission charge per ticket.

Investment banking revenues for the nine months ended September 30, 2008 were $2.8 million, an increase of $179,000 or 6.7% from the same period in 2007 due to our participation in more new issues in the equity and debt capital markets.

Trading profits were $801,000 for the nine months ended September 30, 2008, an increase of $406,000 or 102.8% over the same period in 2007 due to the addition of a debt sales-trader and an increase in trading volume.

Interest and dividends for the nine months ended September 30, 2008 were $707,000, a decrease of $630,000 or 47.1% from the same period in 2007 primarily due to lower yields on investments in U.S. Treasury Bills.

Total expenses for the nine months ended September 30, 2008 were $25.0 million, an increase of $2.4 million or 10.6% from the same period in 2007.

Employee compensation and benefit costs for the nine months ended September 30, 2008 were $8.9 million, an increase of $354,000 or 4.2% from the same period in 2007. This increase was primarily due to the expensing of stock options granted to directors of our Company which vest immediately and an increase in health insurance offset by a decrease in the staff bonus accrual.

Clearing and floor brokerage costs for the nine months ended September 30, 2008 were $4.8 million, an increase of $566,000 or 13.5% from the same period in 2007 primarily due to an increase in volume of trade executions for retail customers and volume relating to the commission recapture operation offset by a decrease in listed floor executions for institutional customers executed at the New York Stock Exchange.

Professional fees for the nine months ended September 30, 2008, were $5.5 million, an increase of $983,000 or 21.6% from the same period in 2007 primarily due to an increase in legal fees relating to a dispute with a former employee, consulting fees relating to the commission recapture business and compliance with Sarbanes-Oxley and consultants assisting with the development of the front end computer system.

Advertising and promotion expenses for the nine months ended September 30, 2008 were $857,000, an increase of $219,000 or 34.3% from the same period in 2007 primarily due to an increase in print advertising and direct mailings to our retail customer base in the third quarter of 2008.

Communications expense for the nine months ended September 30, 2008, was $1.9 million, an increase of $349,000 or 22.7% from the same period in 2007 primarily due to an increase in costs associated with our new website which was launched in the fourth quarter of 2008.

Occupancy costs for the nine months ended September 30, 2008 were $981,000, an increase of $22,000 or 2.3% from the same period in 2007 due to an increase in rent in the Florida branches and New Jersey office offset by a reduction in rent for our California branch.

Other general and administrative expenses for the nine months ended September 30, 2008 were $2.1 million a decrease of $93,000 or 4.3% from the same period in 2007. The decrease was a result of decreases in depreciation and amortization, placement fees, travel and entertainment, insurance and printing costs offset by increases in subscriptions, computer related expenses and office expenses.

Income from the Siebert's equity investment in Siebert Brandford Shank & Co., LLC, an entity in which Siebert holds a 49% equity interest ("SBS") for the nine months ended September 30, 2008, was $1.7 million, compared to income of $968,000, an increase of $732,000 or 75.6% from the same period in 2007. The increase was due to SBS participating in more municipal bond offerings. SBS serves as an underwriter for municipal bond offerings. Loss from our equity investment in SBS Financial Products

Company, LLC an entity in which we hold a 33% equity interest ("SBSFPC") for the nine months ended September 30, 2008, was $13,000 as compared to a loss from our equity investment in SBSFPC of $7,000 from the same period in 2007. This decrease was due to a limited number of transactions SBSFPC entered into in 2008 due to the competitive market place creating very narrow margins. Income and loss from equity investees is considered to be integral to our operations and material to the results of operations.

The tax benefit for the nine months ended September 30, 2008 was $362,000 based on our loss before income tax of $853,000. The tax provision for the nine months ended September 30, 2007 were $939,000 based on our income before tax of $2.1 million. Such provisions represented effective tax rates of 42% and 46%, respectively.

Liquidity and Capital Resources

Our assets are highly liquid, consisting generally of cash, money market funds and commercial paper. Our total assets at September 30, 2008 were $46 million. As of that date, $33.3 million, or 72%, of total assets were regarded by us as highly liquid.

Siebert is subject to the net capital requirements of the SEC, the NYSE and other regulatory authorities. At September 30, 2008, Siebert's regulatory net capital was $28.2 million, $28.0 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 lend to SBS up to $1.2 million pursuant to a secured promissory note on a subordinated basis. 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, 2010, at which time SBS is obligated to repay to Siebert any amounts borrowed by SBS thereunder. As of September 30, 2008, no amount were outstanding under the note.