This discussion should be read in conjunction with our audited consolidated financial statements as of and for the year ended December 31, 2011, and our unaudited consolidated financial statements and the notes thereto contained elsewhere in this Quarterly Report.

Business Environment

Our working capital is invested primarily in money market funds, so that liquidity has not been materially affected. The crisis did have the effect of reducing participation in the securities market by our retail and institutional customers, which had an adverse effect on our revenues. However the market has improved in the first quarter of 2012 and consequently so have our revenues. Our affiliate, Siebert, Brandford, Shank & Co., L.L.C. had a loss for the current period of approximately $299,000. This resulted in a loss to the Company of $146,000 for the current three month period. Our expenses include the costs of an arbitration proceeding commenced by a former employee following the termination of his employment, which remains unresolved. The Company believes that the action is without merit, but the costs of defense, which are included as professional expenses, have adversely affected the Company's results of operations and may continue to affect the results of operations until the action is completed. Competition in the brokerage industry remains intense.

The following table sets forth certain metrics as of March 31, 2012 and 2011 and for the three months ended March 31, 2012 and 2011, respectively, which we use in evaluating our business.

                                         For the Three Months
                                           ended March 31,
Retail Customer Activity:                  2012         2011


Total retail trades:                        103,123     114,029
Average commission per retail trade:   $      31.75   $   21.72




                                                           As of March 31,
Retail customer balances:                                  2012       2011
Retail customer net worth (in billions):                 $    6.8   $    7.0
Retail customer money market fund value (in billions):   $    1.0   $    1.0
Retail customer margin debit balances (in millions):     $  237.0   $  237.6
Retail customer accounts with positions:                   44,003     48,639

Description:

• Total retail trades represent retail trades that generate commissions.

• Average commission per retail trade represents the average commission generated for all types of retail customer trades.

• Retail customer net worth represents the total value of securities and cash in the retail customer accounts before deducting margin debits.

• Retail customer money market fund value represents all retail customers accounts invested in money market funds.

• Retail customer margin debit balances represent credit extended to our customers to finance their purchases against current positions.

• Retail customer accounts with positions represent retail customers with cash and/or securities in their accounts.

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 financial market activity, profitability is likely to be adversely affected because certain expenses remain relatively fixed, including salaries and related costs, portions of communications costs and occupancy expenses. Accordingly, earnings or loss for any period should not be considered representative of any other period.

Recent Developments

On January 22, 2008, our Board of Directors authorized a buy back of up to 300,000 shares of common stock. Shares will be purchased from time to time, in our discretion, in the open market and in private transactions. The Company purchased 3,850 shares at an average price of $1.65 in the first quarter of 2012.

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 contingent 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 receive 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. Our management believes that its estimates are reasonable.

Results of Operations

We had net income of $625,000 and a net loss of $2.0 million for the three months ended March 31, 2012 and 2011, respectively.

Total revenues for the three months ended March 31, 2012 were $6.6 million, an increase of $1.1 million or 19.1% from the same period in 2011.

Commission and fee income for the three months ended March 31, 2012 was $5.2 million, an increase of $1.2 million or 30.8% from the same period in 2011 primarily due to an increase in average commissions charged per trade as a result of an increase in retail options trading as well as an increase in fees from margin debits due to higher average margin debit balances. Additionally, there was an increase in our institutional trading commissions and our commission recapture operations.

Investment banking revenues for the three months ended March 31, 2012 were $509,000, a decrease of $663,000 or 56.6% from the same period in 2011 primarily due to our participation in fewer new issues in the equity and debt markets.

Trading profits were $863,000 for the three months ended March 31, 2012, an increase of $486,000 or 128.9% from the same period in 2011 primarily due to an overall increase in customer trading volume in the debt markets.

Interest and dividends for the three months ended March 31, 2012 were $23,000, an increase of $14,000 or 155.6% from the same period in 2011 primarily due to improved yields on money market balances.

Total expenses for the three months ended March 31, 2012 were $5.8 million, a decrease of $650,000 or 10.1% from the same period in 2011.

Employee compensation and benefit costs for the three months ended March 31, 2012 were $2.5 million, an increase of $27,000 or 1.1% from the same period in 2011 due to an increase in commissions paid based on production in the capital markets and retail operations offset by a decrease in compensation due to a reduction in headcount for registered representatives.

Clearing and floor brokerage costs for the three months ended March 31, 2012 were $967,000, an increase of $43,000 or 4.7% from the same period in 2011 despite an overall decrease in retail trading volume. The increase in costs reflected a higher volume of retail options trading which costs more to clear as well as an increase in execution charges for institutional equity and debt customers.

Professional fees were $790,000 for the three months ended March 31, 2012, a decrease of $623,000, or 44.1% from the same period in 2011 primarily due to a decrease in legal fees relating to a dispute with a former employee.

Advertising and promotion expenses for the three months ended March 31, 2012 were $138,000, an increase of $38,000 or 38.0% from the same period in 2011 due to an increase in print advertising, brochures and direct mailing to our retail customer base.

Communications expense for the three months ended March 31, 2012 was $488,000, a decrease of $69,000 or 12.4% 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 three months ended March 31, 2012 were $251,000, a decrease of $20,000 or 7.4% from the same period in 2011 due to the closing of our branches in Surfside and Naples in Florida during the fourth quarter of 2011.

Other general and administrative expenses were $639,000, a decrease of $46,000 or 6.7% from the same period in 2011 due to a decrease in depreciation, printing and travel and entertainment offset by increases in registration and placement fees.

Loss from Siebert's equity investment in Siebert, Brandford, Shank & Co., L.L.C., an entity in which Siebert holds a 49% equity interest ("SBS"), for the three months ended March 31, 2012 was $146,000, compared to a loss of $1.1 million from the same period in 2011. SBS serves as an underwriter for municipal bond offerings. This loss was due to SBS participating in fewer managed and co-managed transactions. Loss 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 March 31, 2012 was $8,000 as compared to a loss of $21,000 from the same period in 2011. These 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 income tax provision for the three months ended March 31, 2012 and 2011 was $12,000 and $11,000, respectively, representing various minimum state income taxes. There is no provision for other income taxes for the three months ended March 31, 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 three months ended March 31, 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.

Our assets are highly liquid, consisting generally of cash, money market funds and commercial paper. Our total assets at March 31, 2012 were $35 million. As of that date, $22 million, or 64%, of our 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 March 31, 2012, Siebert's regulatory net capital was $18.5 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. Shares will be purchased from time to time, in our discretion, in the open market and in private transactions. The Company purchased 3,850 shares at an average price of $1.65 in the first quarter of 2012.

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 March 31, 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, 2013 at which time SBS is obligated to repay to Siebert any amounts borrowed by SBS thereunder.