This discussion should be read in conjunction with our audited consolidated financial statements as of and for the year ended December 31, 2011, and the 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 stock market has improved in the six months ended June 30, 2012 and consequently so have our revenues. Our affiliate, Siebert, Brandford, Shank & Co., L.L.C. ("SBS") had income for the current six months period of approximately $1.4 million as a result of industry volumes increasing in the current period this year as compared to a loss of $2.8 million for the same period last year due to municipalities struggling with the fiscal crisis, concerns about defaults at the state and local level and the expiration of the Build America Bonds program in 2011. This increase in SBS's income resulted in income to the Company of $701,000 for the current six 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 operation 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 June 30, 2012 and 2011 and for the three and six months ended June 30, 2012 and 2011, respectively, which we use in evaluating our business.

                                         For the Three Months       For the Six Months
                                            ended June 30,            ended June 30,
Retail Customer Activity:                 2012          2011         2012        2011


Total retail trades:                        86,096      102,202      189,219     216,231
Average commission per retail trade:   $     30.16    $   20.72   $    31.03   $   21.25

                                                           As of June 30,

Retail customer balances:                                  2012       2011

Retail customer net worth (in billions):                 $    6.5   $    6.8
Retail customer money market fund value (in billions):   $    1.0   $    1.0
Retail customer margin debit balances (in millions):     $  221.6   $  232.0
Retail customer accounts with positions:                   42,934     45,994

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 debits 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 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 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 our discretion, in the open market and in private transactions. During the six months ended June 30, 2012, the Company purchased 4,302 shares at an average price of $1.67.

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

Results of Operations

We had net income of $447,000 and $1,072,000 for the three months and six months ended June 30, 2012, respectively.

Three Months Ended June 30, 2012 Compared to Three Months Ended June 30, 2011

Total revenues for the three months ended June 30, 2012 were $5.6 million, an increase of $1.1 million or 25.0% from the same period in 2011.

Commission and fee income for the three months ended June 30, 2012 was $3.9 million, an increase of $340,000 or 9.6% 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 by one customer, which accounted for approximately 26% of total commissions and fees, as well as an increase in our commission recapture operations offset by a decrease in institutional trading commissions.

Investment banking revenues for the three months ended June 30, 2012 were $1.2 million, an increase of $792,000 or 195.1% from the same period in 2011 due to our participation in larger new issues in the equity capital markets.

Trading profits were $531,000 for the three months ended June 30, 2012, an increase of $5,000 or 1.0% from the same period in 2011 due to an overall increase in trading volume primarily in the debt markets.

Interest and dividends for the three months ended June 30, 2012 were $17,000, a decrease of $10,000 or 37.0% from the same period in 2011 primarily due to lower yields.

Total expenses for each of the three months ended June 30, 2012 and 2011 were $6.0 million.

Employee compensation and benefit costs for the three months ended June 30, 2012 were $2.6 million, an increase $251,000 or 10.6% 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 June 30, 2012 were $667,000, a decrease of $23,000 or 3.3% from the same period in 2011 due to an overall decrease in retail trading offset by higher clearing costs for increased retail options trading volume, which costs more to clear. Additionally, the decrease in execution charges for institutional trading was offset by an increase in clearing charges for our commission recapture operations.

Professional fees for the three months ended June 30, 2012, were $820,000, a decrease of $580,000 or 41.4% 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.

Advertising and promotion expenses for the three months ended June 30, 2012 were $89,000, a decrease of $4,000 or 4.3% from the same period in 2011 due to a decrease in public relations costs.

Communications expense for the three months ended June 30, 2012, was $498,000, a decrease of $29,000 or 5.5% 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.

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 three months ended June 30, 2012 were $610,000, a decrease of $23,000 or 3.6% from the same period in 2011 due to a decrease in depreciation, training, subscriptions and data storage costs.

Income from Siebert's equity investment in SBS, an entity in which Siebert holds a 49% equity interest, for the three months ended June 30, 2012, was $847,000, compared to a loss of $301,000 from the same period in 2011 due to SBS participating in more senior managed or co-managed transactions. Loss from our equity investment in SBS Financial Products Company, LLC, an entity in which we hold a 33.33% equity interest ("SBSFPC") for the three months ended June 30, 2012, was $8,000 as compared to income of $10,000 for 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 three months ended June 30, 2012 and 2011 was $43,000 and $1,000, respectively, representing various minimum state income taxes. There is no provision for other income taxes for the three 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 three 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.

Six Months Ended June 30, 2012 Compared to Six Months Ended June 30, 2011

Total revenues for the six months ended June 30, 2012 were $12.2 million, an increase of $2.2 million or 21.8% from the same period in 2011.

Commission and fee income for the six months ended June 30, 2012 was $9.0 million, an increase of $1.6 million or 20.8% 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 by one customer, which accounted for approximately 26% of total commission and fees, as well as an increase in our institutional trading commissions and our commission recapture operations.

Investment banking revenues for the six months ended June 30, 2012 were $1.7 million, an increase of $129,000 or 8.2% from the same period in 2011 due to our participation in more new issues in the equity and debt capital markets.

Trading profits were $1.4 million for the six months ended June 30, 2012, an increase of $491,000 or 54.4% from the same period in 2011 due to an overall increase in customer trading volume in the debt markets.

Interest and dividends for the six months ended June 30, 2012 were $40,000, an increase of $4,000 or 1.1% from the same period in 2011 primarily due to higher cash balances.

Total expenses for the six months ended June 30, 2012 were $11.7 million, a decrease of $671,000 or 5.4% from the same period in 2011.

Employee compensation and benefit costs for the six months ended June 30, 2012 were $5.1 million, an increase of $278,000 or 5.7% from the same period in 2011 due to an increase in commissions paid based on

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.

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.