SIEBERT FINANCIAL CORP (SIEB)

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion provides a narrative of our financial performance and condition that should be read in conjunction with the accompanying financial statements and related notes included under Part I, Item 1 of this Report. In addition to our historical consolidated financial information, the following discussion contains forward-looking statements that reflect our plans, estimates, and beliefs. Our actual results could differ materially from those discussed in the forward-looking statements. Factors that could cause or contribute to these differences include those discussed below and elsewhere in our 2025 Form 10-K, particularly in Part I, Item 1A – Risk Factors.

Overview

We are primarily a financial services company and provide a wide variety of financial services to our clients. We operate in business lines such as retail brokerage, investment advisory, insurance, and technology development through our wholly-owned subsidiaries. We also operate a media, sports and entertainment business, although financial services remains our primary business.

Results in the businesses in which we operate are highly correlated to general economic conditions and, more specifically, for our financial services businesses, to the direction of the U.S. equity and fixed-income markets. Market volatility, overall market conditions, interest rates, economic, political, and regulatory trends, industry competition, and, with respect to our media, sports and entertainment business, consumer demand for music and entertainment content, are among the factors which could affect us and which are unpredictable and beyond our control. These factors affect the financial decisions made by market participants who include investors and competitors, impacting their level of participation in the financial markets.

In addition, in periods of reduced financial market activity, or lower revenue generation from our developing business lines, profitability is likely to be adversely affected because certain expenses remain relatively fixed, including salaries and related costs, as well as portions of communications costs and occupancy expenses. Accordingly, earnings for any period should not be considered representative of earnings to be expected for any other period.

Financial Overview

In the second quarter of 2026, loss per share was $0.01, compared to loss per share of $0.12 in the second quarter of 2025. In the second quarter of 2026, our revenues were $31.2 million and operating loss was $0.5 million, compared to revenues of $14.9 million and operating loss of $5.8 million in the second quarter of 2025.

Financial highlights for the three months ended June 30, 2026:

During the three months ended June 30, 2026, revenues increased primarily due to higher activity in our stock borrow / stock loan business, increased investment banking fees, and higher commission revenue. These increases were partially offset by continued investments in the expansion of our business and supporting infrastructure, which contributed to higher personnel expenses, commission and payout expenses, technology costs, advertising and promotion expenses, and costs associated with music production, artist development, marketing, distribution, and related operations, as well as a settlement charge associated with the resolution of an arbitration matter. The year-over-year comparison was also significantly impacted by investment-related losses recognized in the second quarter of 2025. During that period, we recognized approximately $6.8 million of realized and unrealized losses on an equity security investment acquired through a private placement in a company that subsequently completed an initial public offering. Refer to “Investment in Equity Security” below for additional detail.

tZERO Clearing Agreement

During the second quarter of 2026, we entered into clearing agreements with tZERO Digital Asset Securities, LLC and tZERO Securities, LLC (collectively, "tZERO"), privately held financial companies that provide regulated infrastructure for the issuance, management, and trading of digital securities and tokenized assets. Under these agreements, tZERO will provide custody services for digital assets and traditional securities held by certain customers introduced by us and accepted by tZERO on a fully disclosed basis. We believe this relationship expands our available custodial arrangements and enhances our ability to offer digital asset-related services to customers.

Arbitration Settlement

Subsequent to June 30, 2026, we settled an arbitration matter and expect to make a payment of approximately $1.48 million during the third quarter of 2026. We accrued the full amount of the settlement as of June 30, 2026, and the related liability is included in “Accounts payable and accrued liabilities” on the statements of financial condition. The settlement charge of $1.48 million was recognized in line item “Settlement expense” on the statements of operations during the three and six months ended June 30, 2026.

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Investment in Equity Security

In the first quarter of 2025, we acquired the Investment in Equity Security in connection with a private placement from a private U.S company that subsequently completed an IPO. Following the IPO, these shares were subject to resale restrictions until they were registered with the SEC.

There was significant volatility in the price of the shares, and in the three months ended March 31, 2025, we recorded an unrealized gain of approximately $9.2 million as the per share price closed at $85.31 on March 31, 2025. In June 2025, after the lifting of contractual sale restrictions, we sold the majority of our Investment in Equity Security for an average price of $19.00 per share and recognized a total gain of $2.4 million for the six months ended June 30, 2025. However, we recognized a total realized and unrealized loss of $6.8 million for the three months ended June 30, 2025, which drove our operating loss for the prior-year quarter.

FusionIQ

In the second quarter of 2025, we invested $2.0 million in FusionIQ, a cloud-native digital wealth management platform serving financial advisors and financial institutions. As of June 30, 2026, we held an ownership interest of approximately 4% in FusionIQ. In addition, in December 2025, FusionIQ issued to us a $350,000 convertible promissory note bearing interest at 12% per annum.

We believe our investment in FusionIQ supports our strategy of expanding our digital wealth management capabilities and enhancing the client experience across our platform. In July 2026, we made an additional $1.0 million investment in FusionIQ, increasing our aggregate investment to $3.0 million and our ownership interest to approximately 5%. Refer to Note 22 – Subsequent Events for further information.

Green Pier Clearing Agreement

RISE executed a fully disclosed clearing agreement with Green Pier, an indirect wholly-owned subsidiary of FMR, effective February 27, 2026. We believe the relationship will provide access to advanced clearing infrastructure and technology solutions that enhance operational capabilities, scalability, and system reliability, supporting the development and execution of RISE’s broker-dealer activities. Refer to Note 1 - Organization and Basis of Presentation for further information.

Arqitech Investment

In the first quarter of 2026, we made a strategic investment in Arqitech. Arqitech is an institutional-grade, non-custodial digital asset infrastructure platform that provides on-chain settlement, cross-chain execution, and decentralized financial technology solutions for regulated financial institution to support its broader technology and digital asset initiatives. As part of the investment, we received repayment of $2.0 million of debt in July 2026. We believe this investment provides exposure to institutional-grade digital asset infrastructure and anticipates it will support future growth and strategic opportunities.

Media Partnership

On March 4, 2026, we entered into an agreement with a multimedia news platform operator for $1 million for a media partnership designed to support marketing and promotional initiatives related to our products and services. The partnership is intended to expand our market reach, increase brand awareness, and provide additional exposure to existing and prospective customers through multimedia content and promotional channels.

Segments

We manage our business through the following reportable segments:

Segment results are evaluated based on operating income, which reflect the manner in which management assesses performance and allocates resources.

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Financial Services

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Overview

We
are primarily a financial services company and provide a wide variety of financial services to our clients. We operate in business lines
such as retail brokerage, investment advisory, insurance, and technology development through our wholly-owned and majority-owned subsidiaries.
We also operate a smaller Media, Entertainment, and Sports segment that provides talent management and related services. This segment
represents a limited portion of our overall operations, and its results may vary based on the timing of projects and broader industry
conditions.

Results
in the businesses in which we operate are highly correlated to general economic conditions and, more specifically, to the direction of
the U.S. equity and fixed-income markets. Market volatility, overall market conditions, interest rates, economic, political, and regulatory
trends, and industry competition are among the factors which could affect us, and which are unpredictable and beyond our control. These
factors affect the financial decisions made by market participants who include investors and competitors, impacting their level of participation
in the financial markets. In addition, 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, as well as portions of communications costs and
occupancy expenses. Accordingly, earnings for any period should not be considered representative of earnings to be expected for any other
period.

Financial
Overview

In
2025, earnings per share were $0.13, compared to earnings per share of $0.33 in 2024. In 2025, our net revenues were $94.2 million and
net income was $5.1 million, compared to net revenues of $83.9 million and net income of $13.3 million in 2024.

Financial
highlights as of December 31, 2025:

Investment
in Equity Security

In
the first quarter of 2025, Siebert participated in a private placement and acquired restricted shares of a privately held U.S. company
(the “Investment in Equity Security”). In June 2025, after the lifting of contractual sale restrictions, Siebert sold the
majority of its Investment in Equity Security for an average price of $19.00 per share, with the remaining position sold by August
2025. Siebert recognized a total realized gain related to this transaction of $2.4 million for the year ended December 31, 2025.

Developments in 2025

Acquisition
of BMLG Assets

To
expand upon our 2024 acquisition of GM, in the second quarter of 2025, we acquired certain assets from BMLG related to music masters,
including associated copyrights and artwork. This acquisition gives Siebert ownership of recorded masters from artists such as Daughtry,
Badflower, Sammy Hagar, Olive Vox, and Ryan Perdz, among others. The total cost of the acquisition was $441,000, which includes
cash consideration of $337,000 and direct transaction costs of $104,000.

20

NIL
Revenue

In
the third quarter of 2025, we began earning a new revenue stream relating to Name, Image and Likeness (“NIL”) negotiation
services on behalf of student-athletes with university athletic departments or NIL collectives totaling $594,000 in the year ended December
31, 2025.

RISE
Transaction

Siebert
purchased the remaining 32% ownership interest in RISE on October 28, 2025, for $3.7 million. After the transaction, RISE became a wholly-owned
subsidiary of Siebert, which allows Siebert to fully benefit from any future operations and economic benefit of this subsidiary. Refer
to Note 5 – RISE for further information.

Agreement
with NFS

Effective
September 29, 2025, MSCO amended its clearing agreement with NFS, extending the term of the arrangement through October 1, 2030. As part
of the amendment, Siebert received a one-time $4.8 million business development credit. Refer to Note 15 – Deferred Contract Incentive
and Note 20 – Commitments, Contingencies and Other for additional detail.

Segments

We
manage our business through the following reportable segments:

Segment
results are evaluated based on operating income, which reflect the manner in which management assesses performance and allocates resources.

Financial
Services

21

Financial
services operating income decreased year over year primarily due to:

Management
continues to focus on:

Media,
Sports and Entertainment

22

Media,
Sports and Entertainment operating income decreased year over year primarily due to:

Management
continues to focus on:

Management
notes that this segment did not contribute positively to operating results during the years ended December 31, 2025 and 2024, which is
consistent with expectations for early-stage record labels. Management believes these expenditures are essential to building the label’s
catalogue and brand, and anticipates that future revenues from recorded music sales, streaming, and licensing will drive profitability
over time. While there is no assurance regarding the timing or magnitude of future earnings, we expect this segment to have positive
impact on operating results as our catalogue develops and athlete pipeline expands.

Trends
and Key Factors Affecting our Operations

Market
Risk

Market
risk is our risk of loss resulting from the impact of changes in market prices on our trading inventory and investment positions. We
have exposure to market risk primarily through our broker-dealer trading operations. Through our broker-dealer subsidiary, we trade debt
obligations and equity securities and maintain trading inventories to ensure availability of securities to facilitate client transactions.
Inventory levels may fluctuate daily as a result of client demand. Our primary market risks relate to interest rates and equity prices.
Equity risk results from changes in prices of equity securities, affecting the value of the equity securities and other instruments that
derive their value from a particular stock.

We
may enter into underwriting commitments and, as a result, we may be subject to market risk on any unsold securities issued in the offerings
to which we are committed. Risk exposure is controlled by limiting our participation, the transaction size, or through the syndication
process.

Interest
Rates

We
are exposed to market risk from changes in interest rates. Such changes in interest rates primarily impact revenue from interest, marketing,
and distribution fees. We primarily earn

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