U.S. SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                   FORM 10-KSB

(Mark One)

[X]     ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE  SECURITIES  
                              EXCHANGE ACT OF 1934

                   For the fiscal year ended DECEMBER 31, 1998

[ ]     TRANSITION  REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
                              EXCHANGE ACT OF 1934

        For the transition period from                to
                                      ----------------   -----------------------

        Commission file number    0-5703
                              --------------------------------------------------

                             SIEBERT FINANCIAL CORP.
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                 (Name of small business issuer in its charter)

                  NEW YORK                              11-1796714
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     (State or other jurisdiction of                 (I.R.S. Employer
     incorporation or organization)                  Identification No.)

   885 THIRD AVENUE, NEW YORK, NEW YORK                    10022
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  (Address of principal executive offices)               (Zip Code)

Issuer's telephone number, including area code    (212) 644 - 2400
                                              ----------------------------------

Securities registered under Section 12(b) of the Exchange Act:

    Title of each class              Name of each exchange on which registered

           NONE                                     NONE
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Securities registered under Section 12(g) of the Exchange Act:

                     COMMON STOCK, PAR VALUE $.01 PER SHARE
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                                (Title of class)

         Check whether the issuer (1) filed all reports  required to be filed by
Section 13 or 15(d) of the  Exchange  Act during the past 12 months (or for such
shorter period that the  registrant was required to file such reports),  and (2)
has been subject to such filing requirements for the past 90 days. Yes [X]No [ ]

         Check if there is no  disclosure  of  delinquent  filers in response to
Item 405 of  Regulation  S-K contained in this form,  and no disclosure  will be
contained,  to the  best of  registrant's  knowledge,  in  definitive  proxy  or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB. [ ]

         State issuer's revenues for its most recent fiscal year. $25,661,000
                                                                  --------------
As of March 17,  1999,  the  aggregate  market value of the voting stock held by
non-affiliates  of the registrant  was  approximately  $57,077,005  based on the
closing price of the Common Stock on the Nasdaq SmallCap Market on that date.

As of March 17, 1999, there were 22,194,553 shares of Common Stock outstanding.

                   DOCUMENTS INCORPORATED BY REFERENCE: NONE.

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         UNLESS OTHERWISE INDICATED,  ALL INFORMATION IN THIS FORM 10-K HAS BEEN
ADJUSTED  TO REFLECT A 4-FOR-1  STOCK SPLIT  EFFECTED  APRIL 7, 1998 (THE "STOCK
SPLIT"). UNLESS THE CONTEXT OTHERWISE REQUIRES, THE "COMPANY" OR "SIEBERT" SHALL
MEAN SIEBERT FINANCIAL CORP. AND ITS WHOLLY-OWNED SUBSIDIARIES.

         THE COMPANY'S  QUARTERLY AND ANNUAL OPERATING RESULTS ARE AFFECTED BY A
WIDE  VARIETY OF FACTORS  THAT COULD  MATERIALLY  AND  ADVERSELY  AFFECT  ACTUAL
RESULTS,   INCLUDING:   CHANGES  IN  GENERAL  ECONOMIC  AND  MARKET  CONDITIONS,
FLUCTUATIONS  IN VOLUME AND PRICES OF  SECURITIES,  CHANGES  AND  PROSPECTS  FOR
CHANGES IN  INTEREST  RATES AND  DEMAND FOR  BROKERAGE  AND  INVESTMENT  BANKING
SERVICES,  INCREASES IN  COMPETITION  WITHIN AND WITHOUT THE DISCOUNT  BROKERAGE
BUSINESS  THROUGH  BROADER  SERVICES  OFFERINGS OR OTHERWISE,  COMPETITION  FROM
ELECTRONIC  DISCOUNT  BROKERAGE FIRMS OFFERING GREATER  DISCOUNTS ON COMMISSIONS
THAN THE COMPANY, PREVALENCE OF A FLAT FEE ENVIRONMENT, DECLINE IN PARTICIPATION
IN EQUITY OR MUNICIPAL  FINANCE  UNDERWRITINGS,  DECREASED  TICKET VOLUME IN THE
DISCOUNT  BROKERAGE  DIVISION,  LIMITED  TRADING  OPPORTUNITIES,   INCREASES  IN
EXPENSES,  CHANGES IN NET  CAPITAL OR OTHER  REGULATORY  REQUIREMENTS  AND RISKS
RELATED TO THE YEAR 2000.

         AS A RESULT OF THESE AND OTHER  FACTORS,  THE  COMPANY  MAY  EXPERIENCE
MATERIAL  FLUCTUATIONS  IN FUTURE  OPERATING  RESULTS ON A  QUARTERLY  OR ANNUAL
BASIS,  WHICH COULD  MATERIALLY  AND ADVERSELY  AFFECT ITS  BUSINESS,  FINANCIAL
CONDITION,  OPERATING RESULTS, AND STOCK PRICE.  FURTHERMORE,  THIS DOCUMENT AND
OTHER DOCUMENTS FILED BY THE COMPANY WITH THE SECURITIES AND EXCHANGE COMMISSION
(THE "SEC")  CONTAIN  CERTAIN  FORWARD  LOOKING  STATEMENTS  WITH RESPECT TO THE
BUSINESS OF THE COMPANY,  INCLUDING  PROSPECTIVE FINANCING  ARRANGEMENTS.  THESE
FORWARD-LOOKING  STATEMENTS  ARE  SUBJECT  TO CERTAIN  RISKS AND  UNCERTAINTIES,
INCLUDING  THOSE  MENTIONED  ABOVE,  WHICH MAY CAUSE  ACTUAL  RESULTS  TO DIFFER
SIGNIFICANTLY FROM THESE FORWARD-LOOKING  STATEMENTS.  THE COMPANY UNDERTAKES NO
OBLIGATION   TO  PUBLICLY   RELEASE  THE  RESULTS  OF  ANY  REVISIONS  TO  THESE
FORWARD-LOOKING  STATEMENTS WHICH MAY BE MADE TO REFLECT EVENTS OR CIRCUMSTANCES
AFTER THE DATE WHEN SUCH  STATEMENTS  WERE MADE OR TO REFLECT THE  OCCURRENCE OF
UNANTICIPATED  EVENTS.  AN INVESTMENT  IN THE COMPANY  INVOLVES  VARIOUS  RISKS,
INCLUDING  THOSE  MENTIONED ABOVE AND THOSE WHICH ARE DETAILED FROM TIME TO TIME
IN THE COMPANY'S SEC FILINGS.

                                     PART I

ITEM 1.  DESCRIPTION OF BUSINESS

GENERAL

         Siebert  Financial  Corp.  (the  "Company") is a holding  company which
conducts all of its business  activities  in the retail  discount  brokerage and
investment banking business through its wholly-owned subsidiary,  Muriel Siebert
& Co., Inc., a Delaware corporation ("Siebert"). Muriel Siebert, the first woman
member of the New York  Stock  Exchange,  is the Chair  and  President  and owns
approximately 92% of the outstanding common stock, par value $.01 per share (the
"Common Stock"), of the Company.

         The Company has acquired  accounts from other discount  brokerage firms
and,  from  time to time,  the  Company  has  considered  acquisitions  of other
discount  brokerage  firms or their  

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accounts. Although the Company intends to pursue these opportunities,  there can
be no assurance  that the Company will be able to  successfully  consummate  any
such  acquisitions  in the future.  

         The Company was ranked third among discount brokerage firms in the July
1998 issue of Smart  Money  Magazine  in part based upon "a huge  advance in its
responsiveness  and solid gains in on-line trading,  mutual funds and breadth of
products." In addition,  unlike many discount brokerage firms, the firm offers a
wide variety of  underwriting  and  investment  banking  services Such services,
offered through its Capital Markets division,  include acting as senior manager,
co-manager or otherwise participating in the underwriting or sales syndicates of
municipal,  corporate debt and equity, government agency and mortgage/asset back
securities issues.

         Siebert  Financial  Corp.  became a reporting  company through a merger
with J.  Michaels,  Inc.  ("JMI"),  a company  with which it was not  previously
associated,  effective on November 8, 1996  Following  the merger,  JMI's fiscal
year was changed to  December  31 and its name was changed to Siebert  Financial
Corp.

BUSINESS OVERVIEW

         Siebert provides  services to its customers through two main divisions.
Through its Retail  division,  Siebert provides  discount  brokerage and related
services  to more than  70,000  retail  investor  accounts.  Through its Capital
Markets division, Siebert offers institutional clients equity execution services
on an agency basis, as well as equity, fixed income and municipal  underwriting,
and investment  banking  services.  In addition,  the Capital  Markets  division
participates in the secondary markets for Municipal and U.S. Treasury securities
and also trades listed  closed-end  bond funds and certain other  securities for
its own account.  This proprietary  trading business is strictly segregated from
that of the agency business executed on behalf of institutional clients.

         The  Company  believes  that  it is the  largest  Woman-Owned  Business
Enterprise  ("WBE") in the  capital  markets  business  in the  country  through
Siebert and the largest Minority and Women's Business Enterprise ("MWBE") in the
tax-exempt  underwriting  business in the  country  through  its  investment  in
Siebert Brandford Shank & Co., LLC.

THE RETAIL DIVISION

         DISCOUNT  BROKERAGE AND RELATED  SERVICES.  The Securities and Exchange
Commission  (the  "SEC")   eliminated   fixed  commission  rates  on  securities
transactions  on May 1, 1975,  a date that would  later come to be known as "May
Day",  spawning the discount brokerage  industry;  that very day, on the opening
bell, Siebert executed its first discounted  commission trade. The firm has been
in  business  and a member of The New York Stock  Exchange,  Inc.  (the  "NYSE")
longer than any other discount broker.

         Siebert's focus in its discount  brokerage  business is to serve retail
clients who seek a wide selection of quality investment  services at commissions
that are substantially lower than those of

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full-commission  firms and competitive  with those of national  discounters.  In
fact,  many of Siebert's new customer  accounts  come from such  full-commission
firms.

         Siebert clears all securities  transactions on a fully-disclosed  basis
through National Financial Services Corp. ("NFSC"), a wholly owned subsidiary of
Fidelity   Investments.   NFSC,   with  over  $11.9  billion  in  assets,   adds
state-of-the-art  technology as well as back-office experience to the operations
of Siebert supplementing Siebert's in-house systems.

         Siebert  serves  investors  who make  their own  investment  decisions.
Siebert seeks to assist its customers in their investment  decisions by offering
a number of value  added  services,  including  quick and easy access to account
information.  The firm provides its customers with information via toll-free 800
service direct to its  representatives,  Monday through Friday between 7:30 a.m.
and  7:30  p.m.  Eastern  Time.   Through  its   SierbertNet,   Siebert  OnLine,
MobileBroker and Siebert  MarketPhone  services,  24-hour access is available to
customers.

         INDEPENDENT  RETAIL EXECUTION  SERVICES.  Siebert is independent of the
Over-the-Counter  ("OTC") and Third Market market makers and consequently offers
what it believes to be the best possible trade executions for customers. Siebert
does not make  markets in  securities,  nor does it  position  against  customer
orders.  Most of the firm's listed orders are routed to the primary exchange for
execution;  however,  all such customer  orders are afforded the opportunity for
price  improvement.  Through a service called NYSE Prime1,  Siebert also has the
ability to  document  to  customers  all price  improvements  received on orders
executed  on the NYSE when orders are filled at better  than the  National  Best
Bid/Offer.

         The firm's OTC orders are  executed  through a network of  unaffiliated
NASDAQ  market  makers  with  no  single  market  maker  executing  all  trades.
Additionally,   the  firm  offers  customers   execution  services  through  the
SelectNet2  and  Instinet3  systems for an  additional  fee.  These systems give
customers  access to  extended  trading  hours.  Siebert  believes  that its OTC
executions  afford its customers the best possible  opportunity  for  consistent
price improvement.  Siebert does not have any affiliation with market makers and
therefore does not execute OTC trades through affiliated market makers.

         Siebert executes trades of fixed income securities  through its Capital
Markets  division.  Representatives  of this division  assist clients in buying,
selling or shopping for competitive yields of fixed income securities, including
municipal bonds, corporate bonds, U.S. Treasuries,  mortgage-backed  securities,
Government   Sponsored   Enterprises,   Unit   Investment   Trusts  ("UITs")  or
Certificates of Deposit ("CDs").  See "Description of  Business-Capital  Markets
Division."


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(1)      NYSE Prime is a service mark of the New York Stock Exchange, Inc.
(2)      SelectNet is a trademark of NASDAQ Stock Market, Inc.
(3)      Instinet is a trademark of Reuters Group PLC.

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<PAGE>

         RETAIL  CUSTOMER  SERVICE.  Siebert  provides retail  customers,  at no
additional  charge,  with  personal  service via  toll-free  access to dedicated
customer support  personnel for all of its products and services.  The Company's
customer  service  personnel  also  respond  to  customer   inquiries  made  via
SiebertNet,  also at no  additional  cost.  The customer  service  department is
located  in its home  office in New York City.  The  department  is staffed  and
supervised by securities  professionals qualified to address all of the clients'
needs.  Each  representative  is equipped  with  powerful  workstations  running
multiple  software  programs  simultaneously  for  quick  response  to  customer
inquiries.  The  workstations  display  real-time  quotes,  market  information,
up-to-date  equity and margin  balances,  positions  and  account  history.  The
Company   recently   upgraded  the  software   used  by  its  discount   trading
representatives  to a Windows NT platform  from an existing  terminal  emulation
program. The Company believes that this should result in additional efficiencies
with respect to order entry and execution.

         PRODUCTS AND SERVICES.  Siebert  offers  retail  customers a variety of
products and services  designed to assist them with their  investment  needs and
allow  them the  convenience  of  maintaining  a single  brokerage  account  for
simplicity and security.  The firm backs up its order  execution  service with a
guarantee  that states,  "If you are  dissatisfied  with a trade for any reason,
that trade is commission free," which excludes losses due to fluctuations in the
market value of securities and applies only to commissions.

         Siebert's  products and services  include the Siebert Asset  Management
account featuring no-fee, no minimum check writing with payee detail; a dividend
reinvestment  program  that  allows  for  the  automatic  reinvestment  of  cash
dividends as well as capital gains  distribution;  retirement  accounts that are
free of fees if the account  maintains assets of at least $10,000;  $100 million
in account  protection per account  consisting of $500,000 in standard insurance
and $99.5 million in additional  protection at no charge;  and free  safekeeping
services.

         ELECTRONIC   SERVICES.   Siebert  provides  customers  with  electronic
delivery of services  through a variety of means,  as discussed  below.  Siebert
believes,  however, that electronic delivery services,  while cost efficient, do
not offer a customer the ultimate in flexibility. Siebert believes a combination
of electronic  services and personalized  telephonic  service maintains customer
loyalty and best  serves the needs of most  customers.  To that end,  all of the
services of the firm are supported by trained licensed securities professionals.

         SIEBERTNET - Internet access with features including the efficiency and
manageability  of placing  low  commission  stock and option  orders,  obtaining
research and real time  quotes,  confirmation  of pending and  executed  orders,
access to late breaking news and valuable financial reports,  as well as current
account information  including balances and positions.  SiebertNet features have
been  upgraded to include news  provided by CBS  MarketWatch  and research  from
Zacks  Investment  Research.  Additionally,  the  Company  has  signed a license
agreement  with Geo  Interactive  Media Group  Ltd.,  whose  Emblaze  technology
enables the delivery of true streaming,  real-time  multimedia over  SiebertNet,
including  audio,  video,  animation  and  interactive  content at existing "low
bandwidth" modem speeds and without  plug-ins or server  software.  In addition,
the

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Company has retained Gomez  Advisors,  Inc., a source of strategic  research for
brokerages,  mutual funds,  banks,  and other  commercial firms that utilize the
Internet to enhance  their  customer  relationships,  to advise the Company with
respect to SiebertNet.

         SIEBERT MARKETPHONE(R) - allows customers to trade at their convenience
through  touch-tone phones and to check balances and executions and receive free
real-time quotes (including  closed end mutual funds).  The service also permits
automatic  transfer to a live broker or the use of the fax-on-demand  feature to
select an investment  report to be delivered to a fax machine through the firm's
Research by Fax7 service.

         SELECTNET  and INSTINET - gives  customers  access to extended  trading
hours.

         PERFORMANCEFAX - allows customers to receive a comprehensive profit and
loss analysis of their  portfolios  faxed each morning  before the market opens.
Alternatively,  the  customer can select from weekly and monthly  schedules  for
receipt of PerformanceFax reports.

         SIEBERT  FUNDEXCHANGE(R) - the  FundExchange(R)  Mutual  Fund   service
provides  customers with access to approximately  7,000 mutual funds,  including
7,000 no-load funds, approximately 1,000 of which have no transaction fees.

         ON-LINE  STATEMENT  IMAGING  SYSTEM - electronic  imaging  of  customer
statements are displayed directly on the screen of Siebert  representatives  for
fast accurate detail of customer accounts.

         VISA(R)4 DEBIT CARD - allows customers to make purchases with a Siebert
VISA debit card.

         SIEBERT RESEARCH BY FAX - customers are able to call toll free from any
touch tone  telephone  and select from a list of research  reports  that will be
faxed 24 hours a day. Upon request,  such reports will be mailed to customers or
made available for customer pick-up at any branch.

         VIP PREMIERE  STATEMENT - these statements  offer a more  sophisticated
view  of the  brokerage  account  information  including  an  account  valuation
section,  an asset  allocation  pie chart,  an enhanced  activity  section and a
detailed income summary section.

         MOBILEBROKER - In  January  1999,   the   Company,   unveiled  its  new
interactive  palm-top service that allows Siebert clients to make equity trades,
receive  confirmations,  get real-time  quotes and alerts,  access account data,
send and receive  e-mail and more B all without a phone or computer.5  Using the
newest  wireless  two-way  interactive  beeper  technology,  this  beeper-sized,
4.9-ounce  battery-operated  device can be programmed to provide instant account
updates and quotes. The Company, through its clearing agent, expects to roll out
its voice recognition technology in the 


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(4)      VISA is a registered trademark of VISA International, Inc.
(5)      Services provided  pursuant to an agreement with the Company's clearing
         agent.

                                        6

<PAGE>

second quarter of 1999, which will allow its customers to use "natural language"
to obtain stock quotes, make trades and check balances.

         NEW  ACCOUNTS  DEPARTMENT.  Siebert  maintains a separate  New Accounts
department  to  familiarize  each  customer  with  Siebert's  array of services,
policies  and  procedures.  The  department  assists in the  development  of new
business received through the firm's print and broadcast  advertising as well as
its referral programs.

         The New Accounts department assesses the credit worthiness of customers
and monitors control procedures for each new customer.  These procedures include
the use of a combination of nationally  recognized fraud prevention services and
internal  controls  developed and maintained by Siebert.  Management  feels that
these  procedures   minimize   Siebert's   exposure  to  customers'   fraudulent
activities. The New Accounts department staff also assists customers in document
management and compliance with regulatory requirements.

         RETIREMENT   ACCOUNTS.   Siebert   offers   customers   a  variety   of
self-directed   retirement   accounts   for  which  it  acts  as  agent  on  all
transactions.  Custodial services are provided through an affiliate of NFSC, the
firm's clearing agent, which also serves as trustee for such accounts.  IRA, SEP
IRA,  ROTH IRA,  401(k) and KEOGH  accounts  can be  invested in a wide array of
mutual funds,  stocks,  bonds and other investments all through one consolidated
account.  Cash  balances in these  accounts  are swept daily to the money market
fund chosen by the customer.  Retirement accounts in excess of $10,000 in assets
are free of  maintenance  fees.  Retirement  accounts  also enjoy free  dividend
reinvestment  in more than 12,000  publicly  traded  securities and mutual funds
allowing  customers to  automatically  reinvest cash dividends and capital gains
distributions for additional shares of the same security.

         CUSTOMER FINANCING.  Customers' securities transactions are effected on
either a cash or margin  basis.  Generally,  a customer  buying  securities in a
cash-only  brokerage account is required to make payment by the settlement date,
generally  three  business  days  after  the  trade is  executed.  However,  for
purchases of certain types of securities,  such as options, a customer must have
a cash or a money  market fund balance in his or her account  sufficient  to pay
for the trade prior to its  execution.  When selling  securities,  a customer is
required to deliver the securities,  and is entitled to receive the proceeds, on
the  settlement  date.  In an account  authorized  for margin  trading,  Siebert
arranges  for the  clearing  agent to lend its  customer a portion of the market
value of  certain  securities  up to the limit  imposed by the  Federal  Reserve
Board,  which for most  equity  securities  is  initially  50%.  Such  loans are
collateralized  by the  securities  in the  customer's  account.  Short sales of
securities  represent  sales of borrowed  securities and create an obligation to
purchase the securities at a later date.  Customers may sell securities short in
a margin account  subject to minimum equity and applicable  margin  requirements
and the availability of such securities to be borrowed.

         In permitting a customer to engage in transactions, Siebert assumes the
risk of its  customer's  failure to meet his or her  obligations in the event of
adverse  changes in the market value of the

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securities positions in his or her account.  Both Siebert and its clearing agent
reserve the right to set margin  requirements  higher than those  established by
the Federal Reserve Board.

         CURRENT  DEVELOPMENTS.  In June  1998,  Siebert  signed a new  one-year
agreement  with NFSC which  provides,  among other  things,  for reduced  ticket
charges and execution fees. The agreement granted  retroactive effect to the new
charges  and  execution  fees  resulting  in a refund to Siebert of  $1,000,000.
Siebert has reduced  clearing  costs and execution fees for the remainder of the
contract term based on the volume of trades and customer account  balances.  The
new agreement also provides increasing volume discounts as the monthly number of
trades increases.

         Siebert's  commission per customer trade is trending down as the number
of trades  executed  electronically  increases.6 For the year ended December 31,
1998,  electronic  trades accounted for an average of 25% of all Siebert trades.
This trend has continued  during 1999,  with electronic  trading  accounting for
approximately 45% of all trades during the current fiscal year. Siebert's online
trading system was in the early stage of implementation in 1997.

         OFFICES.  Siebert currently  maintains seven retail discount  brokerage
offices.  See "Properties."  Customers can visit the Company's offices to obtain
market information,  place orders, open accounts, deliver and receive checks and
securities, and obtain related customer services in person.  Nevertheless,  most
of Siebert's activities are conducted by telephone and mail.

         The New York office  remains open Monday  through Friday from 7:30 a.m.
to 7:30 p.m.,  Eastern Time,  while branch  offices remain open from 9 a.m. to 5
p.m., Eastern Time, to service customers in person and by telephone.

         RISK  MANAGEMENT.  The  principal  credit  risk to which the Company is
exposed on a regular basis is to customers  who fail to pay for their  purchases
or who fail to maintain the minimum  required  collateral  for amounts  borrowed
against securities positions.

         Siebert  has  established  policies  with  respect to maximum  purchase
commitments for new customers or customers with inadequate collateral to support
a requested purchase. Managers have some flexibility in the allowance of certain
transactions.  When transactions occur outside normal guidelines,  such accounts
are  monitored  closely until their  payment  obligation  is  completed;  if the
customer does not meet the commitment, steps are taken to close out the purchase
and minimize any losses.

         Siebert has a risk unit  specifically  responsible  for  monitoring all
customer  positions for the  maintenance of required  collateral.  The unit also
monitors  accounts  that may be  concentrated  unduly in one or more  securities
whereby a significant decline in the value of a particular concentrated 


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(6)      Electronic trading includes:  SiebertNet,  MarketPhone,  Siebert Online
         and MobileBroker.

                                       8

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security could reduce the value of the account's  collateral below the account's
loan obligation.  Siebert has not had significant credit losses in the last five
years.

         CERTAIN  RISKS RELATED TO ELECTRONIC  COMMERCE.  The Company  presently
receives and  processes up to 45% of its trade orders  electronically  (includes
SiebertNet,  MarketPhone,  Siebert  OnLine  and  MobileBroker).  This  method of
trading  is  heavily  dependent  on  the  integrity  of the  electronic  systems
supporting it. While the Company has never experienced a significant  failure of
its trading  systems,  heavy stress placed on the Company's  systems during peak
trading times could cause the Company's  systems to operate at unacceptably  low
speeds  or fail  altogether.  Any  significant  degradation  or  failure  of the
Company's systems or any other systems in the trading process (e.g.,  online and
Internet  service  providers,  record  keeping  and  data  processing  functions
performed by third parties and third-party  software such as Internet browsers),
even for a short time,  could cause customers to suffer delays in trading.  Such
delays  could  cause  substantial  losses for  customers  and could  subject the
Company to claims from customers for losses, including litigation claiming fraud
or negligence.  There can be no assurance that the Company's  network  structure
will operate  appropriately  in the event of a subsystem,  component or software
failure  or that,  in the  event of an  earthquake,  fire or any  other  natural
disaster,  power or  telecommunications  failure,  act of God or act of war, the
Company will be able to prevent an extended systems failure. Any systems failure
that causes  interruptions  in the  Company's  operations  could have a material
adverse  effect on the  Company's  business,  financial  condition and operating
results.

         Adoption of online  commerce,  particularly by those  individuals  that
have  historically  relied upon  traditional  means of commerce,  will require a
broad acceptance by such individuals of new and substantially  different methods
of conducting  business.  Moreover,  the Company's  brokerage  services over the
Internet  involve a  relatively  new  approach to  securities  trading and, as a
result,  increased  marketing  and sales  efforts  may be  necessary  to educate
prospective customers regarding the uses and benefits of the Company's brokerage
services and products.  Moreover,  the security and privacy concerns of existing
and potential  users of the Company's  services may inhibit the growth of online
commerce generally, and online brokerage trading in particular, which could have
a material  adverse effect on the Company's  business,  financial  condition and
operating results.

         The Company  relies on  encryption  and  authentication  technology  to
provide the security and authentication  necessary to effect secure transmission
of confidential information. There can be no assurance that advances in computer
capabilities,  new  discoveries in the field of  cryptography or other events or
developments will not result in a compromise or breach of the algorithms used by
the Company to protect customer  transaction data. If any such compromise of the
Company's security were to occur, it could have a material adverse effect on the
Company's business, financial condition and operating results.

         OTHER  INFORMATION  SYSTEMS.   Siebert's  operations  rely  heavily  on
information  processing and  communications  systems.  The system for processing
securities transactions is highly automated. Registered representatives equipped
with online computer terminals can access customer account  information,  obtain
securities prices and related information and enter and confirm orders online.

                                       9

<PAGE>

         To support its  customer  service  delivery  systems,  as well as other
applications such as clearing functions, account administration,  record keeping
and direct  customer  access to  investment  information,  Siebert  maintains  a
computer network in New York.  Through its clearing agent,  Siebert's  computers
are also linked to the major registered United States securities exchanges,  the
National  Securities  Clearing  Corporation  and The  Depository  Trust Company.
Failure of the information processing or communication systems for a significant
period of time could limit the ability to process a large volume of transactions
accurately  and  rapidly.  This could cause  Siebert to be unable to satisfy its
obligations  to  customers  and other  securities  firms,  and  could  result in
regulatory violations.  External events, such as an earthquake or power failure,
loss of external information feeds, such as security price information,  as well
as  internal   malfunctions,   such  as  those  that  could  occur   during  the
implementation of system modifications, could render part or all of such systems
inoperative.

         To enhance the reliability of the system and integrity of data, Siebert
maintains  carefully  monitored  backup and recovery  functions.  These  include
logging of all critical files intra-day, duplication and storage of all critical
data outside of its central  computer  site each  evening,  and  maintenance  of
facilities for backup and communications located offsite.

CAPITAL MARKETS DIVISION

         In  1991,  Siebert  formalized  its  commitment  to  its  institutional
customer base by creating the Capital  Markets  division  (the "Capital  Markets
Division").  This  group has served as a  co-manager,  selling  group  member or
underwriter  on a  full  spectrum  of new  issue  offerings  by  municipalities,
corporations and Federal agencies.

         The two principal areas of the Capital Markets  Division are investment
banking and institutional equity execution services.

         INVESTMENT  BANKING.  Siebert  offers  investment  banking  services to
corporate and  municipal  clients  through its Capital  Markets  Division  which
participates   in  public   offerings  of  equity  and  debt   securities   with
institutional and individual investors.

         Siebert has  participated  as an underwriter for taxable and tax-exempt
debt,  raising  capital for many types of issuers  including  states,  counties,
cities, transportation authorities,  sewer and water authorities and housing and
education agencies. Since it began underwriting in 1989, the firm has co-managed
over $100 billion in municipal debt.  Siebert has participated as an underwriter
in several  of the  largest  common  stock  offerings  that have come to market,
including  Conrail,  Allstate,  PacTel  Corporation,  Estee  Lauder  and  Lucent
Technologies.  To date,  the  firm has  participated  as an  underwriter  and or
selling group member in over 210 offerings,  including  corporate debt issuances
totaling over $137 billion.

         During 1996, Siebert formed the Siebert,  Brandford,  Shank division of
the  investment  banking group to add to the former  activities of Siebert's tax
exempt bond underwriting  department.

                                       10

<PAGE>

This  division  is  primarily   comprised  of  a  group  of  investment  banking
professionals  who were previously  employed by the 13th largest tax exempt bond
underwriting  firm in the country.  The  operations  of the Siebert,  Brandford,
Shank  division  were moved on July 1, 1998 to a newly formed  entity,  Siebert,
Brandford, Shank & Co., L.L.C. or "SBS". Two individuals, Mr. Napoleon Brandford
and Ms.  Suzanne F. Shank,  own 51% of the equity and are entitled to 51% of the
net profits,  after Siebert's  recovery of start-up  expenses,  while Siebert is
entitled to the balance. The group has made Siebert a more significant factor in
the  tax  exempt  underwriting  area,  and  is  expected  to  enhance  Siebert's
government and institutional  relationships,  as well as the breadth of products
that can be made available to retail clients.

         In addition to occupying a portion of Siebert's existing offices in New
York, SBS operates out of offices in San Francisco,  Seattle,  Houston, Chicago,
Detroit, Los Angeles and Dallas.

         To date, the Siebert, Brandford, Shank division and SBS have co-managed
offerings  of  approximately   $44  billion  and  senior  managed  offerings  of
approximately $1.7 billion. Clients include the States of California,  Texas and
Washington and the Cities of Chicago, Detroit and St. Louis.

         The success of the Company's  municipal bond  underwriting  business is
dependent on the services of two of its principals,  Napoleon  Brandford III and
Suzanne Shank, the loss of whose services would adversely affect the Company.

         Certain  risks  are  involved  in  the   underwriting   of  securities.
Underwriting  syndicates  agree to purchase  securities  at a discount  from the
initial  public  offering  price.  If the  securities  must  be sold  below  the
syndicate  cost, an underwriter  is exposed to losses on the securities  that it
has committed to purchase.  In the last several years,  investment banking firms
have  increasingly  underwritten  corporate and municipal  offerings  with fewer
syndicate participants or, in some cases, without an underwriting  syndicate. In
such  cases,  the  underwriter  assumes  a larger  part or all of the risk of an
underwriting  transaction.  Under Federal  securities laws, other laws and court
decisions,  an  underwriter is exposed to  substantial  potential  liability for
material  misstatements  or omissions of fact in the prospectus used to describe
the securities  being offered.  While  municipal  securities are exempt from the
registration   requirements   of  the   Securities  Act  of  1933,  as  amended,
underwriters  of municipal  securities  nevertheless  are exposed to substantial
potential  liability in connection with material  misstatements  or omissions of
fact in the offering  documents  prepared in connection  with  offerings of such
securities.

         The  Company's  Capital  Markets  division   underwriting  and  trading
activities involve the purchase,  sale or short sale of securities as principal.
These  activities  involve  the risks of changes  in the  market  prices of such
securities  and of decreases in the liquidity of the securities  markets,  which
could  limit  the  Company's  ability  to  resell  securities  purchased  or  to
repurchase  securities sold short.  In addition,  these  activities  subject the
Company's capital to significant risks that counter parties will fail to perform
their  obligations.  From time to time, the Company  establishes short positions
during the course of its trading  activities.  It is a  characteristic  of short

                                       11

<PAGE>

positions  that any loss  sustained  on closing out the  position may exceed the
liability related thereto as shown on the Company's financial statements.

         INSTITUTIONAL   EQUITY   EXECUTION   SERVICES.   The  firm   emphasizes
personalized  service,  professional  order handling and client  satisfaction to
approximately 400 institutional accounts. It utilizes up to 15 independent floor
brokers that use an extensive  network  linked via direct "ring down"  circuits.
Each broker is strategically located on a major exchange which allows Siebert to
execute orders in all market environments.  Utilizing its clearing  arrangement,
Siebert has the ability to provide  foreign  execution and clearing  services to
institutional customers.  Although the firm has a propriety trading function, it
does not execute  customer  orders  against  such  propriety  positions  because
Siebert believes its client's interest in a transaction  should always be placed
above any other interest.  The firm's institutional client list includes some of
the largest pension funds, investment managers and banks across the country.

         The Institutional  Equity Execution  Services  department  utilizes the
Siebert  Real-Time List Execution  ("SRLX") system.  The SRLX system is designed
exclusively  for  institutional  customers who employ the use of basket  trading
strategies  in their  portfolio  management.  This  system  enables  the Capital
Markets  Division  to  simultaneously  manage an array of baskets  for  multiple
clients while providing  real-time  analysis.  The SRLX system can be integrated
into an  existing  local  area  network.  It is  built  with the  latest  32 bit
technology to take  advantage of today's  Pentium7-based  PCs running  Microsoft
Windows958 or Windows NT6. Data integrity is assured  through a private  digital
T1 line with built-in network redundancy.

         The SRLX  system is built for  institutional  customers  with  features
designed to add significant value to their trading  capabilities.  This system's
features  include:   design  and  development  by  in-house   professionals  for
reliability and speed;  sophisticated  graphical interface allowing  exceptional
control and monitoring;  real-time order entry, reporting and messaging from the
inter-market  trading  network;  real-time  basket  analysis  including  average
pricing and liquidity;  multiple basket management from a single window; account
allocation and automated report  uploading;  customized  client reports;  active
intervention  for large blocks or inactive  stocks;  and built-in  fail-safe and
recovery system.

CERTAIN RISKS RELATING TO MARKET CONDITIONS

         The  securities  business  is, by its  nature,  subject to  significant
risks,  particularly  in  volatile or illiquid  markets,  including  the risk of
trading  losses,   losses  resulting  from  the  ownership  or  underwriting  of
securities, counter party failure to meet commitments,  customer fraud, employee
fraud,  issuer fraud,  errors and  misconduct,  failures in connection  with the
processing of securities transactions and litigation.


----------
(7)      Pentium is a trademark of the Intel Corporation.
(8)      Microsoft  Window95  and  Windows  NT are  trademarks of the  Microsoft
         Corporation.

                                       12

<PAGE>

         The  Company's  principal  business  activity,   retail   broker-dealer
operations,  as well as its investment  banking,  institutional  sales and other
services,  are highly competitive and subject to various risks, volatile trading
markets  and  fluctuations  in the  volume of market  activity.  The  securities
business is directly affected by many factors,  including economic and political
conditions,  broad trends in business and finance,  legislation  and  regulation
affecting the national and  international  business and  financial  communities,
currency  values,  inflation,  market  conditions,  the availability and cost of
short-term or long-term  funding and capital,  the credit  capacity or perceived
creditworthiness of the securities industry in the marketplace and the level and
volatility of interest  rates.  These and other factors can  contribute to lower
price levels for securities and illiquid markets.

         Lower price levels of securities  may result in (i) reduced  volumes of
securities,  options and futures  transactions,  with a consequent  reduction in
commission  revenues,  and (ii)  losses  from  declines  in the market  value of
securities held in trading, investment and underwriting positions. In periods of
low volume,  levels of  profitability  are further  adversely  affected  because
certain expenses remain relatively fixed. Sudden sharp declines in market values
of  securities  and the failure of issuers and counter  parties to perform their
obligations  can result in illiquid  markets  which,  in turn, may result in the
Company having difficulty selling  securities.  Such negative market conditions,
if prolonged,  may also lower the Company's revenues from investment banking and
other activities.

         As a  result  of  the  varied  risks  associated  with  the  securities
business,  which are beyond the Company's control,  the Company's commission and
other  revenues could be adversely  affected.  A reduction in revenues or a loss
resulting from the underwriting or ownership of securities could have a material
adverse effect on the Company's  results of operations and financial  condition.
In addition,  as a result of such risks,  the  Company's  revenues and operating
results may be subject to significant  fluctuations  from quarter to quarter and
from year to year.  See  "Management's  Discussion  and  Analysis  of  Financial
Condition and Results of Operations-Business Environment."

ADVERTISING, MARKETING AND PROMOTION

         Siebert develops and maintains its retail customer base through printed
advertising in financial  publications,  broadcast commercials over national and
local cable TV channels as well as promotional efforts and public appearances by
Ms. Siebert.  Additionally,  a significant portion of the firm's new business is
developed  directly from  referrals by satisfied  customers.  Many of the firm's
competitors expend  substantial funds in advertising and direct  solicitation of
prospects and customers to increase their share of the market.

         The Capital  Markets  Division  maintains a practice of  announcing  in
advance  that it will  contribute  a portion of the net  commission  revenues it
derives  from  sales of  certain  negotiated  new issue  equity,  municipal  and
government bonds to charitable organizations. Siebert is certified as a WBE with
numerous states, agencies and authorities.  Siebert is the only WBE which offers
both retail and institutional product distribution capabilities.  It is also the
largest  WBE with  significant  

                                       13

<PAGE>

minority  participation.  Although  it has been a member  of the New York  Stock
Exchange  since 1967,  new business  opportunities  have become  available to it
based upon its  status as a WBE.  Minority  and  Women-owned  business  programs
generally  operate under the authority of state and local  governments  or their
related  agencies.  Changes in laws or  policies  of such  governments  or their
agencies  with  respect to such  programs  may  adversely  affect the  Company's
participation  in  municipal  bond  and  equity  underwritings  as  well  as the
Company's execution of institutional  equity  transactions.  Management believes
that, irrespective of the legal requirements, as long as there is a "sensitivity
to diversity  and  competitive  equality,"  opportunities  will be available for
qualified minority and women-owned businesses,  especially in those locales that
have    a    significant    minority    population.    See    "Description    of
Business-Regulation."

COMPETITION

         Siebert encounters  significant  competition from  full-commission  and
discount  brokerage firms, as well as from financial  institutions,  mutual fund
sponsors  and other  organizations  many of which are  significantly  larger and
better capitalized than Siebert. The general financial success of the securities
industry  over the past several  years has  strengthened  existing  competitors.
Siebert  believes  that  such  success  will  continue  to  attract   additional
competitors such as banks,  insurance  companies,  providers of online financial
and information  services and others as they expand their product lines. Many of
these competitors are larger, more diversified,  have greater capital resources,
and offer a wider range of services and financial  products  than Siebert.  Some
such firms are offering  their  services over the facilities of the Internet and
have  devoted  more  resources  to and have more  elaborate  web sites  than the
Company's. Siebert competes with a wide variety of vendors of financial services
for the same customers.  Siebert believes that its main  competitive  advantages
are quality of  execution  and  service,  responsiveness,  price of services and
products offered and the breadth of its product line.

         There are currently over 100 principal  competitors with Siebert in the
discount brokerage business.  Siebert charges  commissions  generally lower than
other  discount  brokers  but more  than some  others.  In  investment  banking,
Siebert's principal  competitors for business include both national and regional
firms, some of whom have resources substantially greater than Siebert's. Siebert
believes that it is one of the largest independent  discount brokerage firms, as
most firms that were  previously  independent  have been  purchased by or merged
into larger financial institutions.

REGULATION

         The  securities  industry in the United  States is subject to extensive
regulation  under both  Federal  and state laws.  The SEC is the Federal  agency
charged  with   administration  of  the  Federal  securities  laws.  Siebert  is
registered  as  a  broker-dealer  with  the  SEC,  the  NYSE  and  the  National
Association  of  Securities   Dealers  ("NASD").   Much  of  the  regulation  of
broker-dealers has been delegated to self-regulatory organizations,  principally
the NASD and national  securities  exchanges such as the NYSE which is Siebert's
primary  regulator with respect to financial and operational  compliance.  These
self-regulatory  organizations  adopt  rules  (subject  to  approval by the SEC)

                                       14

<PAGE>

governing  the industry and conduct  periodic  examinations  of  broker-dealers.
Securities firms are also subject to regulation by state securities  authorities
in  the  states  in  which  they  do  business.   Siebert  is  registered  as  a
broker-dealer in 48 states, the District of Columbia and Puerto Rico.

         The principal  purpose of regulations and discipline of  broker-dealers
is  the  protection  of  customers  and  the  securities  markets,  rather  than
protection of creditors and stockholders of  broker-dealers.  The regulations to
which  broker-dealers are subject cover all aspects of the securities  business,
including  training  of  personnel,   sales  methods,  trading  practices  among
broker-dealers, uses and safekeeping of customers' funds and securities, capital
structure of securities firms, record keeping,  fee arrangements,  disclosure to
clients,  and the  conduct of  directors,  officers  and  employees.  Additional
legislation,  changes  in rules  promulgated  by the SEC and by  self-regulatory
organizations or changes in the  interpretation  or enforcement of existing laws
and rules may  directly  affect the method of  operation  and  profitability  of
broker-dealers and investment advisers. The SEC,  self-regulatory  organizations
and  state   securities  and  other   authorities  may  conduct   administrative
proceedings  which can  result in  censure,  fine,  cease and  desist  orders or
suspension  or  expulsion  of a  broker-dealer  or an  investment  adviser,  its
officers or its employees.  Neither the Company nor Siebert has been the subject
of any such administrative proceedings.

         As a registered broker-dealer and NASD member organization,  Siebert is
required  by  Federal  law to  belong  to  the  Securities  Investor  Protection
Corporation  ("SIPC")  which  provides,  in the  event of the  liquidation  of a
broker-dealer,  protection for securities held in customer  accounts held by the
firm of up to $500,000  per  customer,  subject to a  limitation  of $100,000 on
claims for cash balances.  The SIPC is funded through  assessments on registered
broker-dealers.  In addition, Siebert, through its clearing agent, has purchased
from private insurers  additional  account protection of up to $99.5 million per
customer,  as defined,  for customer securities  positions only. Stocks,  bonds,
mutual funds and money market funds are considered  securities and are protected
on a  share  basis  for  the  purposes  of SIPC  protection  and the  additional
protection.  Neither SIPC  protection nor the additional  protection  applies to
fluctuations in the market value of securities.

         Siebert is also authorized by the Municipal Securities Rulemaking Board
to effect  transactions  in municipal  securities on behalf of its customers and
has obtained certain additional  registrations with the SEC and state regulatory
agencies necessary to permit it to engage in certain other activities incidental
to its brokerage business.

         Margin  lending  arranged by Siebert is subject to the margin  rules of
the Board of Governors of the Federal  Reserve  System and the NYSE.  Under such
rules, broker-dealers are limited in the amount they may lend in connection with
certain  purchases and short sales of securities and are also required to impose
certain  maintenance  requirements  on the amount of securities and cash held in
margin accounts. In addition, those rules and rules of the Chicago Board Options
Exchange  govern the amount of margin  customers  must  provide and  maintain in
writing uncovered options.

         In 1996, voters in the State of California approved  Proposition 209, a
proposed  statewide  constitutional  amendment by  initiative,  and the Governor
issued an executive order requiring state 

                                       15

<PAGE>

officials  to  immediately  implement  the  initiative.   Proposition  209  bans
preferential  treatment  for  women  and  minorities  in state  programs.  Under
Proposition  209,  state  agencies  have  been  ordered  to end  all  quotas  or
set-asides. A number of lawsuits were filed challenging the constitutionality of
the proposition  under the Fourteenth  Amendment and the equal protection clause
and  a  court  in  San  Francisco   has  issued  an   injunction   blocking  the
implementation of the proposition. The Court of Appeals for the Ninth Circuit is
currently  considering the appeal of the injunction  blocking  Proposition 209's
implementation.  It is unclear at this point  whether  the  proposition  will be
implemented  or what the impact of the  proposition  will be on the new business
opportunities that may have become available to Siebert in California based upon
its  status as a WBE.  Ms.  Siebert  believes  that,  irrespective  of the legal
requirements,  as long as there is a "sensitivity  to diversity and  competitive
equality,"  opportunities will be available for WBEs and MWBEs. See "Description
of Business-Advertising, Marketing and Promotion."

         In addition,  securities trading conducted on the Internet recently has
been the  subject  of  increased  Federal  and state  regulatory  interest.  See
"Description of Business-Risks Related to the Internet."

NET CAPITAL REQUIREMENTS

         As a registered broker-dealer,  Siebert is subject to the SEC's Uniform
Net Capital Rule (Rule  15c3-1) (the "Net  Capital  Rule"),  which has also been
adopted through incorporation by reference in NYSE Rule 325. Siebert is a member
firm of the NYSE and the  NASD.  The Net  Capital  Rule  specifies  minimum  net
capital  requirements  for all  registered  broker-dealers  and is  designed  to
measure  financial  integrity  and  liquidity.  Failure to maintain the required
regulatory net capital may subject a firm to suspension or expulsion by the NYSE
and the NASD,  certain punitive  actions by the SEC and other regulatory  bodies
and, ultimately, may require a firm's liquidation.

         Regulatory   net  capital  is  defined  as  net  worth   (assets  minus
liabilities),  plus qualifying subordinated borrowings,  less certain deductions
that result from excluding assets that are not readily convertible into cash and
from  conservatively  valuing  certain other assets.  These  deductions  include
charges  that  discount  the value of firm  security  positions  to reflect  the
possibility of adverse changes in market value prior to disposition.

         The Net Capital Rule requires  notice of equity capital  withdrawals to
be provided to the SEC prior to and subsequent to withdrawals  exceeding certain
sizes. The Net Capital Rule also allows the SEC, under limited circumstances, to
restrict a broker-dealer  from withdrawing  equity capital for up to 20 business
days.

         The firm  falls  within  the  provisions  of Rule  240.15c3-1(a)(1)(ii)
promulgated  by the SEC.  Siebert  has  elected to use the  alternative  method,
permitted by the rule, which requires that Siebert maintain minimum net capital,
as defined,  equal to the greater of  $250,000 or 2 percent of  aggregate  debit
balances arising from customer  transactions,  as defined. (The net capital rule
of the NYSE also  provides  that  equity  capital may not be  withdrawn  or cash
dividends  paid if  resulting  net  capital

                                       16

<PAGE>

would be less than 5 percent of  aggregate  debits.)  At  December  31, 1998 and
1997,  Siebert had net capital of $11.1 million and $9.1 million,  respectively,
and net capital requirements of $250,000 under Regulation  240.15c3-1(a)(1)(ii).
Siebert is not subject to SEC Rule 15c3-3 and claims  exemption from the reserve
requirement  under Section  15c3-3(k)(2)(ii).  The firm maintains net capital in
excess of the SEC Rule 17a-11 requirement.

EMPLOYEES

         As of March 10, 1999, the Company had approximately 100 employees,  all
of whom were full time and four of whom  were  corporate  officers.  None of the
employees  are  represented  by a  union,  and the  Company  believes  that  its
relations with its employees are good.

ITEM 2.  PROPERTIES

         Siebert  operates  its business out of the  following  fourteen  leased
offices:

<TABLE>
<CAPTION>
                                                                  Expiration
                                           Approximate Office       Date of 
Location                                  Area in Square Feet    Current Lease        Renewal Terms
--------                                  -------------------    -------------        -------------
<S>                                            <C>                  <C>                  <C>
Corporate Headquarters, Retail and
Investment Banking Office
-------------------------
885 Third Ave.                                 7,828 SF             4/30/03               None
New York, NY  10022


Retail Offices
--------------
9693 Wilshire Boulevard                        1,000 SF            12/31/00               None
Beverly Hills, CA  90212


4400 North Federal Highway                     1,038 SF             2/28/02               None
Boca Raton, FL  33431


55 Madison Avenue                                140 SF         Month to month            None
Morristown, NJ  07960


400 Fifth Avenue - South                       1,008 SF             4/22/99               None
Naples, FL  33940


240A South County Road                           770 SF            10/14/00           2 year option
Palm Beach, FL  33480


9569 Harding Avenue                            1,150 SF         Month to month            None
</TABLE>

                                       17

<PAGE>
<TABLE>
<CAPTION>

                                                                  Expiration
                                           Approximate Office       Date of 
Location                                  Area in Square Feet    Current Lease        Renewal Terms
--------                                  -------------------    -------------        -------------
<S>                                            <C>                  <C>                  <C>
Surfside, FL  33154                                                  month


Investment Banking Offices
--------------------------
30 N. LaSalle Street                           1,613 SF             8/31/99               None
Chicago, IL  60602


1845 Woodall Rodgers Freeway                     224 SF         Month to month            None
Dallas, TX  75201


400 Renaissance Center                         1,500 SF         Month to month            None
Detroit, MI  48243


400 Louisiana                                  1,513 SF             6/29/99               None
Houston, TX 77002


523 West 6th Street                            1,138 SF         Month to month            None
Los Angeles, CA  90014


220 Sansome Street                             3,250 SF             2/28/00               None
San Francisco, CA  94104


601 Union Street                                 325 SF         Month to month            None
Seattle, WA  98101
</TABLE>

         The Company  believes that its properties are in good condition and are
suitable and adequate for the Company's business operations.

ITEM 3.  LEGAL PROCEEDINGS

         The Company is involved in various routine  lawsuits of a nature deemed
by the Company  customary  and  incidental  to its  business.  In the opinion of
management,  the ultimate  disposition  of such actions will not have a material
adverse effect on its financial position or results of operations.

                                       18

<PAGE>

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

         The Company held its regular  annual  meeting on December 16, 1998.  At
that  meeting,  the  following  matters  were voted upon and  received the votes
indicated:

(1)      Election of Directors

                                                   For        Withheld
                                                   ---        --------

              Muriel F. Siebert                 20,262,712       800

              Nicholas P. Dermigny              20,262,712       800

              Patricia L. Francy                20,262,712       800

              Jane H. Macon                     20,262,712       800

              Monte E. Wetzler*                 20,262,712       800


----------
* Subsequently resigned as a Director of the Company.

(2)      Ratification and approval of the Company's Restricted Stock Award Plan:


                                                       Abstentions and
                      For            Against           Broker Non-Votes
                      ---            -------           ----------------
                   20,258,484         3,828                 1,200


(3)      Ratification  and approval of selection of Richard A. Eisner & Company,
         LLP as independent auditors for 1998:


                                                       Abstentions and
                     For             Against           Broker Non-Votes
                     ---             -------           ----------------
                   20,262,312           800                   400


                                       19

<PAGE>

                                     PART II

ITEM 5.  MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

         The Common Stock trades on the Nasdaq  SmallCap Market under the symbol
"SIEB" on November 12,  1996.  The high and low sales prices of the Common Stock
reported by the Nasdaq SmallCap Market during the following periods were:

                                                                 High       Low
                                                                 ----       ---

    First Quarter - 1997 ...................................     $3.09     $2.31

    Second Quarter - 1997...................................     $2.38     $2.31

    Third Quarter - 1997....................................     $2.75     $1.31

    Fourth Quarter - 1997...................................     $2.25     $1.88

    First Quarter - 1998....................................    $12.06     $2.42

    Second Quarter - 1998...................................    $19.00     $7.38

    Third Quarter - 1998....................................    $13.50     $5.75

    Fourth Quarter - 1998...................................    $19.00     $5.75


         The closing price of the Common Stock on the Nasdaq  SmallCap Market on
March 17, 1999 was $24.875 per share.

         As of March 17, 1999, there were approximately 194 holders of record of
the Common Stock.

         The  Company  currently  meets the  criteria  for listing of its Common
Stock on the Nasdaq  National  Market  System.  Notwithstanding  its meeting the
applicable  criteria,  there can be no assurance that the Company will, in fact,
either apply for listing or be listed on the Nasdaq National Market System.

DIVIDEND POLICY

To date,  the  Company  has  established  a practice  of paying  quarterly  cash
dividends to its  shareholders.  On December 22, 1997,  March 16, 1998, June 23,
1998, September 25, 1998, and

                                       20

<PAGE>

December 30, 1998 dividends of $.0225,  $.0225,  $.03,  $.03, and $.04 per share
were declared for all  stockholders of record as of December 30, 1997, March 20,
1998 July 9, 1998,  October 9, 1998,  and  January 18,  1999  respectively.  Ms.
Siebert, as the majority shareholder of the Company, waived her right to receive
the cash  dividends  described  above and has  indicated to the Company that she
intends to waive her right to receive  future cash  dividends  declared  through
1999, if any.

         Subject  to  statutory,   regulatory   and   contractual   constraints,
prevailing  financial  conditions and future earnings,  the Company may pay cash
dividends on its Common Stock. In considering whether to pay such dividends, the
Company's  Board of  Directors  will  review the  earnings of the  Company,  its
capital  requirements,  its  economic  forecasts  and such other  factors as are
deemed  relevant.  Some portion of the  Company's  earnings  will be retained to
provide capital for the operation and expansion of its business. There can be no
assurance that the Company will declare or pay any dividends in the future.

OFFERINGS OF SHARES

         In January  1997,  the Company  offered to "odd lot"  shareholders  the
opportunity  to round up to the closest 100 shares any holdings of an odd amount
at a price of $2.344 per share.  The offer expired March 21, 1997.  6,852 shares
of Common Stock were issued pursuant to the offer.

         On January 5, 1999,  the Company  completed a rights  offering in which
existing  shareholders  received one right to purchase one share of Common Stock
at $7.50  for each  share  owned of record  as of July 29,  1998.  Approximately
961,000 shares of Common Stock were issued pursuant to the offering,  generating
net proceeds to the Company of  approximately  $7,000,000,  after the payment of
offering expenses of approximately $270,000.

ITEM 6.  MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.

         This  discussion  should  be read in  conjunction  with  the  Company's
audited  Consolidated  Financial  Statements  and the  Notes  thereto  contained
elsewhere in this Annual Report.

BUSINESS ENVIRONMENT

         Market  conditions  during  the first six  months of 1998  reflected  a
continuation of the 1996 bull market  characterized  by record volume and record
high market  levels.  During the second half of 1998, the markets were extremely
volatile, with large daily swings in the market averages. Meanwhile, competition
has continued to intensify both among all classes of brokerage  firms and within
the discount brokerage business, as well as from new firms not previously in the
discount  brokerage  business.  Electronic trading continues to grow as a retail
discount  market  segment  with 

                                       21

<PAGE>

some firms offering very low flat rate trading execution fees that are difficult
for any  conventional  discount  firm to meet.  Many of the  flat  fee  brokers,
however,  impose  charges for services  such as mailing,  transfers and handling
exchanges which the Company does not impose and also direct their  executions to
captive  market  makers.  Continued  competition  from  ultra  low cost flat fee
brokers and broader  service  offerings from other discount  brokers could limit
the Company's  growth or even lead to a decline in the  Company's  customer base
which would adversely affect its results of operations. Industry-wide changes in
trading  practices are expected to cause  continuing  pressure on fees earned by
discount brokers for the sale of order flow.

         The  Company,  like other  securities  firms,  is directly  affected by
general economic and market conditions including  fluctuations in trading 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 the  Company's  results  of  operations.  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.  Accordingly,  earnings for any
period  should not be considered  representative  of earnings to be expected for
any other period.

CURRENT DEVELOPMENTS

         In June 1998, Siebert signed a new one-year agreement with its clearing
broker, NFSC which provides,  among other things, for reduced ticket charges and
execution fees. The new arrangement  also provided for retroactive  effect being
given to the new  rates  and  resulted  in a refund to  Siebert  of  $1,000,000.
Siebert  recognized  $750,000  of that  amount as pre-tax  income in the quarter
ended June 31, 1998 and $250,000 in the quarter ended  September 30, 1998,  when
all contingencies relating to the payments lapsed.

         In July 1998,  Siebert,  Brandford,  Shank & Co., L.L.C.  ("SBS") began
operating  as a separate  broker/dealer  and,  accordingly,  the  Company  began
reporting its  investment in, and the operations of, SBS using the equity method
of accounting.  Prior to July 1998, the operations of what is now SBS were fully
consolidated with those of Siebert.

         Siebert's  commission per customer trade is trending down as the number
of trades  executed  electronically  increases.9 For the year ended December 31,
1998,  electronic  trades accounted for an average of 25% of all Siebert trades.
This trend has continued  during 1999,  with electronic  trading  accounting for
approximately 45% of all trades during the current fiscal year. Siebert's online
trading system was in the early stage of implementation in 1997.


----------
(9)      Electronic trading includes:  SiebertNet,  MarketPhone,  Siebert OnLine
         and MobileBroker.

                                       22

<PAGE>

         In December  1998,  the  Company  signed a letter of intent to purchase
100% of the outstanding  common stock of a discount  brokerage firm, Andrew Peck
Associates, Inc. The parties currently are negotiating the terms of the proposed
acquisition.

         In December  1998,  Siebert  acquired the retail  customer  accounts of
Donald K. Cowles and of Cowles, Sabol & Co., Inc. of Encino, California.

         On January 5, 1999 the  Company  completed  a rights  offering in which
existing  shareholders  received one right to purchase one share of Common Stock
at $7.50  for each  share  owned of record  as of July 29,  1998.  Approximately
961,000  shares of Common  Stock were issued  pursuant  to the rights  offering,
generating net proceeds to the Company of  approximately  $7,000,000,  after the
payment of offering expenses of approximately  $270,000.  The Company intends to
use the proceeds to build up and promote the Company's  Internet trading service
and for general corporate purposes.

         In January 1999, the Company,  through its clearing agent, unveiled its
new  interactive  palm-top  service that allows  Siebert  clients to make equity
trades, receive  confirmations,  get real-time quotes and alerts, access account
data, send and receive e-mail and more B all without a phone or computer.  Using
the newest wireless two-way  interactive beeper  technology,  this beeper-sized,
4.9-ounce  battery-operated  device can be programmed to provide instant account
updates and quotes.

RESULTS OF OPERATIONS

YEAR ENDED DECEMBER 31, 1998 COMPARED TO YEAR ENDED DECEMBER 31, 1997

         REVENUES.  Total  revenues for 1998 were $25.7  million,  a decrease of
$207,000,  or 0.8%, over 1997.  Commission and fee income increased $385,000, or
2%, over the prior year to $19.3 million due to higher trading volume  partially
offset by lower commissions earned per trade resulting from the increased use of
lower priced electronic trading,  reductions on other related services caused by
increased  competition  from ultra low cost flat fee brokers and a reduction  of
order flow fees. The portion of trades executed on the Company's  SiebertNet web
site continues to increase at a rapid pace,  representing  approximately  33% of
trades executed since the beginning of 1999.

         Investment banking revenues decreased $1.2 million,  or 26.6%, from the
prior year to $3.3 million as the Company began reporting its investment in, and
the operations of, SBS using the equity method of accounting in July 1998. Prior
to that time,  the  operations of what is now SBS were fully  consolidated  with
those of Siebert.  SBS  generates  a majority of its  revenues in the tax exempt
underwriting area.

         Income from equity investee increased $1.2 million as the Company began
for its investment in SBS using the equity method starting in July 1998.

                                       23

<PAGE>

         Trading profits  declined  $509,000,  or 28.4%,  from the prior year to
$1.3 million  primarily due to reduced  income  opportunities  in the trading of
listed bond funds, the firm's principal trading activity.

         Income from interest and dividends  decreased  $71,000,  or 10.1%, from
the prior year to $634,000  primarily due to trading  strategies which generated
lower dividend income, coupled with generally lower interest rates.

         Expenses.  Total  expenses for 1998 were $18.2  million,  a decrease of
$2.9 million, or 14.1%, from the prior year.

         Employee  compensation and benefit costs decreased  $268,000,  or 3.3%,
from the prior year to $7.9 million  primarily  due to the treatment of SBS as a
separate entity, with a commensurate  decrease in the number of employees on the
Company's payroll.

         Clearing and floor  brokerage fees  decreased  $1.7 million,  or 37.4%,
from the prior year to $2.9  million  primarily  due to the  retroactive  effect
given to the Company's new clearing  agreement  with its clearing  broker which,
among other things,  reduced ticket charges,  execution fees and a resulted in a
refund to the Company of $1.0 million.

         Advertising and promotion  expense decreased  $956,000,  or 34.7%, from
the  prior  year  to  $1.8  million  due to a  decreased  level  of  promotional
advertising.

         Communications  expense  increased  $218,000,  or 15.1%, over the prior
year, to $1.7 million primarily due increased quote and news services.

         Occupancy  costs  decreased  $49,000,  or 7.5%,  from the prior year to
$601,000 principally due to the treatment of SBS as a separate entity, partially
offset by a lease extension option  cancellation  fee of  approximately  $33,000
paid during 1998.

         Interest expense  decreased  $91,000,  or 21.8%, from the prior year to
$327,000,  primarily due to the decreased use of short  positions in proprietary
trading activities coupled with generally lower interest rates.

         GENERAL  AND  ADMINISTRATIVE.   General  and  administrative   expenses
decreased $94,000, or 3.1%, from the prior year to $2.9 million primarily due to
the treatment of SBS as a separate entity.

         TAXES.  Provision for income taxes  increased  $1.1 million,  or 52.8%,
from the prior year to $3.1 million  primarily  due to an increase in net income
before  income tax to $7.5 million in 1998 from $4.7 million in 1997,  partially
offset by a refund of local taxes.

                                       24

<PAGE>

YEAR ENDED DECEMBER 31, 1997 COMPARED TO YEAR ENDED DECEMBER 31, 1996

         REVENUES.  Total revenues for 1997 were $25.9  million,  an increase of
$1.7 million, or 7.1%, from the prior year.

         Commission  and fee income  decreased $1.2 million,  or 6.1%,  from the
prior year to $18.9 million due to lower commissions  earned per trade resulting
from the increase of lower priced electronic trading,  price reductions on other
related  services caused by increased  competition  from ultra low cost flat fee
brokers and a reduction of order flow fees.

         Investment  banking revenues  increased $2.0 million,  or 77%, from the
prior year to $4.5 million primarily due to the inclusion of a whole year of tax
exempt  underwriting   revenues  from  the  predecessor  to  SBS  in  1997.  The
predecessor to SBS operated for only three months of the year in 1996.

         Trading  profits  increased  $926,000,  or 107%, from the prior year to
$1,795,000  primarily  due to  increased  activity in secondary  municipal  bond
trading by SBS and improved  trading  opportunities in the principal listed bond
funds trading activity.

         Interest and dividends  increased $48,000, or 7.4%, from the prior year
to $705,000 primarily due to trading strategies which generated greater dividend
income.

         EXPENSES.  Total  expenses for 1997 were $21.2  million,  a decrease of
$806,000, or 3.7%, from the prior year.

         Employee  compensation  and benefit costs  decreased  $1.5 million,  or
15.5%,  from the prior  year to $8.2  million  primarily  due to a  compensation
reduction for Muriel Siebert,  offset by a full year's worth of compensation for
SBS'  principals,   municipal  investment  banking  staff  and  commission-based
municipal trading personnel.

         Clearing and brokerage fees increased $90,000,  or 2.0%, from the prior
year to $4.7 million. Such costs increased due to higher trading volume.

         Advertising and promotion  expense decreased  $514,000,  or 15.7%, from
the prior year to $2.8 million due to decreased  branch and services  promotion.
Such  expenses for 1996 included  several  one-time  expenses  related to branch
expansion and on-line trading services.

         Communications  expense increased $87,000, or 6.4%, from the prior year
to $1.4 million as the Company's  client base and trading  volume  increased and
more  services  were offered  on-line,  as well as increased  activities  of the
investment  banking staff.  These  increases were partially  offset by telephone
contract price reductions.

                                       25

<PAGE>

         Occupancy costs increased  $245,000,  or 60.5%,  from the prior year to
$650,000  principally  due to a full year's worth of rent in 1997 for new retail
and investment banking branch offices opened during 1996.

         Interest expense increased  $128,000,  or 44.1%, from the prior year to
$418,000  primarily due to greater use of margin  borrowings and short positions
in proprietary trading activities.

         GENERAL  AND  ADMINISTRATIVE.   General  and  administrative   expenses
increased $704,000,  or 30.7%, from the prior year to $3.0 million primarily due
to travel and  entertainment  expenses  related to the new municipal  investment
banking  staff and a range of  miscellaneous  costs  associated  with  increased
volume.

         TAXES.  Current and pro forma provision for income taxes increased $1.1
million,  or 116%,  from the prior year, due to an increase in net income before
taxes to $4.7  million  in 1997 from pro forma net income  before  taxes of $2.2
million in 1996.

LIQUIDITY AND CAPITAL RESOURCES

         The Company's assets are highly liquid,  consisting  generally of cash,
money market funds and securities freely saleable in the open market.  Siebert's
total assets at December 31, 1998 were $20.2 million, of which $2.0 million took
the form of a secured demand note issued by Muriel Siebert  bearing  interest at
an annual rate of 4.0%. As of December 31, 1998, $13.5 million, or 67%, of total
assets were  regarded by the  Company as highly  liquid.  See "Market For Common
Equity and Related Stockholder Matters C Offerings of Shares."

         Siebert is subject to the net capital requirements of the SEC, the NYSE
and other regulatory authorities. At December 31, 1998, Siebert's regulatory net
capital  was $11.1  million,  $10.9  million  in excess of its  minimum  capital
requirement of $250,000.

YEAR 2000

         Many  existing  computer  programs  use only two  digits to  identify a
specific year and therefore may not accurately  recognize the upcoming change in
the century. If not corrected,  many computer  applications could fail or create
erroneous  results by or at the Year 2000.  Due to the  Company's  dependence on
computer  technology  in its  operations,  and the  dependence  of the financial
services  industry  on computer  technology,  the nature and impact of Year 2000
processing  failures on the Company's business,  financial position,  results of
operations or cash flows could be material.  The Company is currently  modifying
its  computer  systems  in order to  enable  its  systems  to  process  data and
transactions   incorporating   Year  2000  dates  without   material  errors  or
interruptions.  Because systems critical to the Company's functioning other than
its computer  systems also may be affected by the century change,  the Company's
Year 2000 compliance efforts also encompass  facilities and equipment which rely
on date-dependent technology, such as, building equipment that contains embedded
technology.

                                       26

<PAGE>

         Siebert  utilizes  both  systems  housed  primarily on its own computer
network  and  systems  housed on the  computers  of third  parties,  such as its
clearing broker and payroll vendor,  to conduct its normal business  activities.
Some of the systems on its network  are  proprietary  but many are off the shelf
programs  acquired  from  vendors.  Siebert  has  inventoried  those  systems it
believes are critical to its  operations  and has received  assurances  from the
developers,  vendors and third  parties that those systems are, or will be prior
to  December  31,  1999,  Year  2000  compliant.  Although  nothing  has come to
Siebert's  attention  which would cause it to believe that the assurances it has
received are not  accurate,  the failure of one or more  critical  systems to be
Year 2000 compliant  could have a material  adverse effect on the results of its
operations.  Siebert intends to test all critical systems during 1999. The costs
incurred to date and in the future relating to this issue are not expected to be
material in the aggregate.

IMPACT OF INFLATION

         General inflation in the economy increases  operating  expenses of most
businesses.  The Company has provided  compensation  increases generally in line
with the inflation rate and incurred higher prices for goods and services. While
the Company is subject to inflation as described above, management believes that
inflation  currently does not have a material effect on the Company's  operating
results,  but there can be no assurance  that this will continue to be so in the
future.   See  "Description  of   Business-Certain   Risks  Relating  to  Market
Conditions."

NEW ACCOUNTING PRINCIPLES

         During 1997, and 1998, the Financial  Accounting Standards Board issued
the following account standards: Statement of Financial Accounting Standards No.
130,  "Reporting  Comprehensive  Income" (SFAS No. 130),  Statement of Financial
Accounting  Standards No. 131,  "Disclosures about Segments of an Enterprise and
Related Information" (SFAS No. 131), Statement of Financial Accounting Standards
No. 132 "Employers  Disclosures about Pension and other Post retirement  Benefit
Plans" (SFAS No. 132) and  Statement of Financial  Accounting  Standards No. 133
"Accounting for Derivative Instruments and Hedging Activities.  The Company does
not expect any material  effect from adoption of SFAS Nos. 131, 132 and 133. The
Company will report  comprehensive  income as a component of equity.  During the
year ended  December 31, 1998,  the Company did not have any items that would be
reportable as a component of comprehensive income other than its net income.

ITEM 7.  FINANCIAL STATEMENTS.

         See financial  statements and  supplementary  data required pursuant to
this Item beginning on page F-1 of this Report on Form 10-KSB.

                                       27

<PAGE>

ITEM 8.  CHANGES  IN  AND  DISAGREEMENTS  WITH  ACCOUNTANTS  ON  ACCOUNTING  AND
         FINANCIAL DISCLOSURE.

         None.

                                       28
<PAGE>

                                    PART III

ITEM 9.  DIRECTORS,   EXECUTIVE   OFFICERS,   PROMOTERS  AND  CONTROL   PERSONS;
         COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT.

The executive officers and directors of the Company are:

Name                          Age     Position
----                          ---     --------
Muriel F.  Siebert            66      Chair of the Board and President


Nicholas P.  Dermigny         41      Executive Vice President and Chief
                                      Operating Officer; Director

Mitchell M.  Cohen            43      Executive Vice President, Chief Financial
                                      Officer and Assistant Secretary

Daniel Iesu                   39      Secretary

Patricia L. Francy            53      Director

Jane H. Macon                 52      Director

         Certain   information   regarding  each  executive  officer's  business
experience is set forth below.

         MURIEL F. SIEBERT has been Chair,  President  and a director of Siebert
since 1967 and the Company since November 8, 1996. The first woman member of the
New  York  Stock   Exchange  on  December  28,  1967,   Ms.  Siebert  served  as
Superintendent  of Banks of the State of New York  from  1977 to 1982.  She is a
director of the New York State Business  Council,  and the Boy Scouts of Greater
New York, and President of the New York Woman's Agenda.

         NICHOLAS  P.  DERMIGNY  has been  Executive  Vice  President  and Chief
Operating  Officer of Siebert  since  joining  the firm in 1989 and the  Company
since  November  8,  1996.  Prior to 1993,  he was  responsible  for the  retail
division. Mr. Dermigny became an officer and director of the Company on November
8, 1996.

         MITCHELL M. COHEN has been Executive Vice  President,  Chief  Financial
Officer and Assistant Secretary of Siebert since November 9, 1998. From December
1996  to  October  1998,  Mr.  Cohen  served  as  Chief  Financial   Officer  of
Everything's  Jake.  From May 1994 to November  1996,  Mr. Cohen served as Chief
Financial Officer of three firms including two broker-dealers. From January 1993
to May 1994, Mr. Cohen was an audit manager for Goldstein,  Golub, Kessler & Co.
P.C, a

                                       29

<PAGE>

public accounting firm. Prior to these positions,  Mr. Cohen was Chief Financial
Officer of Ehrlich Bober Financial  Corp., an investment  banking firm listed on
the American Stock Exchange.

         DANIEL IESU has been  Secretary of Siebert  since  October 1996 and the
Company since November 8, 1996. He has been Controller of Siebert since 1989.

         PATRICIA L. FRANCY is Treasurer and Controller of Columbia  University.
She previously  served as the  University's  Director of Finance and Director of
Budget  Operations and has been associated  with the University  since 1969. Ms.
Francy became a director of the Company on March 11, 1997.

         JANE H. MACON is a partner  with the law firm of  Fulbright  & Jaworski
L.L.P.,  San Antonio,  Texas.  Ms. Macon has been associated with the firm since
1983. Ms. Macon became a director of the Company on November 8, 1996.

         The Board of Directors has standing Audit and  Compensation  Committees
consisting of Ms. Francy and Ms. Macon with Ms. Siebert  serving as a non-voting
member.

         Directors are elected by the shareholders at each annual meeting or, in
the case of a vacancy, appointed by the directors then in office, to serve until
the next annual  meeting or until their  successors  are elected and  qualified.
Pursuant to the Company's bylaws,  its officers are chosen annually by the Board
of Directors and hold office until their  respective  successors  are chosen and
qualified.

COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT OF 1934

         To the Company's knowledge, the Company's directors, executive officers
and beneficial owners of more than ten percent of the Company's Common Stock are
in  compliance  with the  reporting  requirements  of  Section  16(a)  under the
Securities  Exchange Act of 1934, as amended (the "Exchange Act").  During 1998,
each of Nicholas  Dermigny and Daniel Iesu  inadvertently  did not timely report
one transaction on Form 4, which transactions were subsequently reported.

ITEM 10. EXECUTIVE COMPENSATION.

EXECUTIVE COMPENSATION

         The  following  table sets forth  information  concerning  all cash and
non-cash  compensation  awarded  to,  earned by or paid to the  Company's  Chief
Executive  Officer and each of the Company's most highly  compensated  executive
officers  for  services  rendered  to the  Company  during the fiscal year ended
December  31,  1998  whose  total  annual  compensation  for such year  exceeded
$100,000 (the "Named Executive Officers").

                                       30

<PAGE>

<TABLE>
<CAPTION>
                                             SUMMARY COMPENSATION TABLE

                                                                                           Long-term
                                                         Annual Compensation              Compensation
                                                -------------------------------------------------------
                                                                                           Securities
                                                                                           Underlying
                                                                            Other Annual     Stock
Name and Principal Position          Year        Salary          Bonus      Compensation    Options
=======================================================================================================
<S>                                  <C>         <C>            <C>                           <C>   
Muriel F.  Siebert                   1998        150,000             --             --            --
Chair and President                  1997        150,000             --             --            --
                                     1996        150,000      2,975,000             --            --

Nicholas P.  Dermigny                1998        185,000        175,000             --        40,000
Executive Vice President and         1997        125,000        187,500             --       200,000
 Chief Operating Officer             1996        125,000        205,000             --            --

Daniel Iesu                          1998         70,000         65,000             --         8,000
Secretary                            1997         50,000         65,000             --        60,000
                                     1996         50,000         53,250             --            --
</TABLE>


STOCK OPTION PLAN

         The  Company's  1997 Stock  Option Plan (the "Stock  Option  Plan") was
adopted by the Board of Directors in March 1997 and approved by the shareholders
on  December 1, 1997.  The Stock  Option  Plan  permits  the  issuance of either
options  intended  to qualify  as  incentive  stock  options  ("Incentive  Stock
Options")  under  Section 422 of the Internal  Revenue Code of 1986,  as amended
(the  "Code"),  or  options  not  intended  to so qualify  ("Nonstatutory  Stock
Options").  The  aggregate  fair  market  value  of  Common  Stock  for  which a
participant  is granted  Incentive  Stock Options that first become  exercisable
during any given  calendar year will be limited to $100,000.  To the extent such
limitation  is  exceeded,  an option  will be  treated as a  Nonstatutory  Stock
Option.

         The Stock Option Plan  provides for the grant of options to purchase up
to  2,100,000  shares  of  Common  Stock to  employees  of the  Company  and its
subsidiaries.  The Stock Option Plan is administered by a committee of the Board
of  Directors   consisting  of  Patricia  L.  Francy  and  Jane  H.  Macon  (the
"Committee") that selects persons to receive awards under the Stock Option Plan,
determines the amount of each award and the terms and conditions  governing such
award,  interprets  the Stock  Option  Plan and any awards  granted  thereunder,
establishes  rules and  regulations for the  administration  of the Stock Option
Plan and takes any other action necessary or desirable for the administration of
the Stock  Option  Plan.  The Stock  Option  Plan may be amended by the Board of
Directors as it deems  advisable;  provided,  however,  that no  amendment  will
become  effective  unless  approved  by the  affirmative  vote of the  Company's
shareholders  if such approval is necessary  for the  continued  validity of the
Stock  Option  Plan or if the failure to obtain such  approval  would  adversely
affect the  compliance  of the Stock  Option Plan under any  applicable  rule or
regulation. No amendment may, without the consent of a participant,  impair such
participant's  rights under any option previously granted under the Stock Option
Plan.

                                       31

<PAGE>

         The price for which shares of Common  Stock may be  purchased  upon the
exercise of an option  will be the fair market  value of such shares on the date
of the grant of such option;  provided,  however, that an Incentive Stock Option
granted  to an  employee  who owns stock  possessing  more than 10% of the total
combined  voting  power of all  classes  of stock of the  Company  shall  have a
purchase price for the underlying  shares equal to 110% of the fair market value
of the Common  Stock on the date of grant.  An option may be granted  for a term
not to exceed ten years from the date such option is granted. An Incentive Stock
Option  awarded to an employee  who owns stock  possessing  more than 10% of the
total  combined  voting power of all classes of stock of the Company may not, in
any event, be exercisable  after the expiration of five years from the date such
Incentive Stock Option is granted. All options will be exercisable in accordance
with the terms and conditions set forth in the option agreements  evidencing the
grant of such options.  Except under limited circumstances involving termination
of employment  due to retirement or death or disability,  a participant  may not
exercise  any option  granted  under the Stock Option Plan within the first year
after the date of the grant of such option.

         Full payment of the purchase price for shares of Common Stock purchased
upon the  exercise,  in whole or in part,  of an option  granted under the Stock
Option  Plan must be made at the time of such  exercise.  The Stock  Option Plan
provides  that the  purchase  price  may be paid in cash or in  shares of Common
Stock valued at their fair market value on the date of purchase.  Alternatively,
an option may be exercised in whole or in part by delivering a properly executed
exercise notice,  together with irrevocable  instructions to a broker to deliver
promptly to the Company the amount of sale or loan proceeds necessary to pay the
purchase price and applicable  withholding  taxes,  and any other documents that
the Committee deems necessary.

         During a participant's lifetime, options granted under the Stock Option
Plan will be  exercisable  only by such  participant.  Furthermore,  any options
granted under the Stock Option Plan may not be  transferred,  other than by will
or by the laws of descent and  distribution.  Notwithstanding  the foregoing,  a
participant  may transfer a  Nonstatutory  Stock Option  granted under the Stock
Option Plan to his or her spouse,  children and/or  grandchildren,  or to one or
more trusts for the benefit of such family members, if the agreement  evidencing
such option so provides and the participant  does not receive any  consideration
for the transfer.

         The following table sets forth certain summary  information  concerning
individual  grants of stock options made during the year ended December 31, 1998
to each of the Company's  executive  officers named in the Summary  Compensation
Table.

                                       32

<PAGE>


<TABLE>
<CAPTION>
                                        OPTION GRANTS IN LAST FISCAL YEAR


                                                                                               Potential
                                                                                            Realizable Value
                                                                                               At Assumed
                              Number of     % of Total                                      Annual Rates of
                               Shares        Options        Exercise                          Stock Price
                             Underlying     Granted to       or Base                        Appreciation for
                              Options       Employees       Price Per      Expiration          Option Term
Name                          Granted        in 1998         Share            Date          5%          10%
---------------------------  ----------    -----------     ----------      ----------   -------      --------
<S>                            <C>                           <C>            <C>            <C>         <C>
Muriel F.  Siebert                 --           --               --             --           --            --
Nicholas P.  Dermigny          40,000        31.7%           $2.6875        1/9/08      $67,606      $171,327
Daniel Iesu                     8,000         6.3%           $2.6875        1/9/08      $13,521      $ 34,264
Mitchell M.  Cohen             10,000         7.9%           $6.625        11/9/08      $41,664      $105,585
</TABLE>


------------
(1)      These amounts  represent  assumed rates of appreciation in the price of
         the  Company's  Common  Stock  during  the  terms  of  the  options  in
         accordance  with  rates  specified  in  applicable  federal  securities
         regulations.  Actual  gains,  if any, on stock  option  exercises  will
         depend on the future price of the Common Stock and overall stock market
         conditions.  There is no representation  that the rates of appreciation
         reflected in this table will be achieved.


         The  following  table sets  forth at  December  31,  1998 the number of
options  and the  value of  unexercised  options  held by each of the  executive
officers named in the Summary Compensation Table:


<TABLE>
<CAPTION>
                     AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND
                                FISCAL YEAR END OPTION VALUES


                             Number of Unexercised Options at     Value of Unexercised In-the-Money
                                         Year End                  Options at Fiscal Year End (1)
                             --------------------------------     ---------------------------------
Name                         Exercisable    Unexercisable         Exercisable        Unexercisable
-----------------            -----------    -------------         -----------        -------------
<S>                             <C>            <C>                 <C>                <C>       
Muriel F.  Siebert                --              --                  --                   --
Nicholas P.  Dermigny           40,000         200,000             $282,500           $1,397,500
Daniel Iesu                     12,000          56,000             $ 84,750             $392,500
Mitchell M.  Cohen                --            10,000                --                 $27,500
</TABLE>


----------
(1)      The dollar values have been  calculated by  determining  the difference
         between the closing  price of the Common  Stock at December  31,  1998,
         $9.375, and the exercise prices of the options.

                                       33

<PAGE>

RESTRICTED STOCK AWARD PLAN

         The 1998 Restricted Stock Award Plan (the "Plan"),  provides for awards
of not more than 60,000 shares of Common Stock, subject to adjustments for stock
splits,  stock dividends and other changes in the Company's  capitalization,  to
key employees,  to be issued either  immediately  after the award or at a future
date. As of December 31, 1998,  38,000 shares of Common Stock under the Plan had
been  awarded  and were  outstanding.  As  provided  in the Plan and  subject to
restrictions,  shares  awarded may not be disposed  of by the  recipients  for a
period of one year from the date of the award.  Cash dividends on shares awarded
are held by the Company for the benefit of the  recipients,  subject to the same
restrictions  as the award.  Such dividends  (without  interest) are paid to the
recipients upon lapse of the restrictions.

         The  following  table sets  forth at  December  31,  1998 the number of
shares awarded under the Plan to each of the Company's  executive officers named
in the Summary Compensation Table.


<TABLE>
<CAPTION>
                               LONG-TERM INCENTIVE PLANS B AWARDS
                                       IN LAST FISCAL YEAR


                               Number of Shares, Units or    Performance or Other Period Until
     Name                             Other Rights                 Maturation or Payout
----------------------------   --------------------------    ----------------------------------
<S>                                      <C>                             <C>   
     Muriel F.  Siebert                  --                                --

     Nicholas P.  Dermigny               400                             1 year

     Daniel Iesu                         400                             1 year
</TABLE>

                                       34

<PAGE>

ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.

         The  following  table  sets forth  certain  information  regarding  the
beneficial  ownership of the Common Stock of the Company as of December 31, 1998
by: (i) each person known to the Company to beneficially own more than 5% of the
outstanding shares of Common Stock; (ii) each of the Company's directors;  (iii)
each named executive  officer;  and (iv) all directors and executive officers of
the Company as a group.  Unless  otherwise  indicated  below,  the persons named
below have sole voting and investment power with respect to the number of shares
set forth  opposite  their  names,  subject  to  community  property  laws where
applicable.


<TABLE>
<CAPTION>
                                                           Amount and Nature of          
                                                          Beneficial Ownership of    Percentage of
Name and Address of Beneficial Owner (1)                       Common Stock          Common Stock(2)
----------------------------------------                  -----------------------    ---------------

<S>                                                            <C>                       <C>  
Muriel F.  Siebert (3).................................        20,122,000                95.8%

Nicholas P.  Dermigny (4)..............................            48,800                 *

Daniel Iesu (5)........................................            12,400                 *

Patricia L.  Francy (6)................................            40,000                 *

Jane H.  Macon (6).....................................            40,000                 *

Mitchell M.  Cohen.....................................            10,000                 *

All directors and executive officers as a                                                 *
group (5 persons) (7)..................................        20,263,200                95.8%
</TABLE>


----------
*  Less than 1.0%

(1)      Except as otherwise noted, the address of the named  stockholder is c/o
         Siebert Financial Corp., 885 Third Avenue, New York, New York 10022.

(2)      Percentages  computed in accordance with Rule 13d-3  promulgated  under
         the Exchange Act.

(3)      Includes  222,000 shares of Common Stock owned by the Muriel F. Siebert
         Foundation,  Inc.  as to  which  shares  Ms.  Siebert  has  voting  and
         investment power.

(4)      Includes 48,000 shares of Common Stock which Mr. Dermigny has the right
         to acquire pursuant to a stock option grant.

(5)      Includes  12,000 shares of Common Stock which Mr. Iesu has the right to
         acquire pursuant to a stock option grant.

(6)      Consists of 40,000  shares of Common  Stock which the  director has the
         right to acquire pursuant to a stock option grant.

(7)      Includes  options to purchase an aggregate of 140,000  shares of Common
         Stock.

                                       35

<PAGE>

ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

         As a  registered  broker-dealer,  the Company is subject to the Uniform
Net Capital Rule (Rule 15c3-1)  promulgated by the SEC. "Net capital" is defined
as  net  worth  (assets  minus   liabilities),   plus  qualifying   subordinated
borrowings, less certain deductions. Ms. Siebert has executed subordinated notes
in favor of the  Company  in the  principal  amount  of $3  million  which  bear
interest at rates ranging from 4% to 8%.

         In 1998,  the Company loaned an aggregate of $4 million to SBS pursuant
to Temporary  Subordinated  Loan Agreements  entered into under the rules of the
NASD.  These loans were  subsequently  repaid.  Siebert  holds 49% of the equity
interests of SBS.

         The foregoing  relationship and transactions  have been approved by the
Board or a committee of the Board or by the shareholders and, to the extent that
such  arrangements are available from  non-affiliated  parties,  are on terms no
less favorable to the Company than those available from non-affiliated parties.

ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K.

(a)      1.       Financial Statements.

         The Financial  Statements and Financial  Statement Schedules are listed
         in the accompanying index to financial statements beginning on page F-1
         of this report.

         2.       Financial Statement Schedules.

         None.

         3.       Exhibits

         The exhibits  required by Item 601 of the Regulations S-K filed as part
         of, or  incorporated  by  reference  in,  this report are listed in the
         accompanying Exhibit Index.

(b)      1.       Reports on Form 8-K

         None.

                                       36

<PAGE>

<TABLE>
<CAPTION>
                   INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

                                                                                  Page
                                                                                  ----
SIEBERT FINANCIAL CORP.

<S>                                                                                  <C>
Report of Independent Auditors                                                     F-1

Consolidated Statements of Financial Condition at December 31, 1998
         and 1997 and Pro Forma Consolidated Statement of Financial
         Condition at December 31, 1998                                            F-2

Consolidated Statements of Income for the years ended December 31, 1998
         and 1997                                                                  F-3

Consolidated Statements of Changes in Stockholders' Equity for the years
         ended December 31, 1998 and 1997                                          F-4

Consolidated Statements of Cash Flows for the
         years ended December 31, 1998 and 1997                                    F-5

Notes to Consolidated Financial Statements                                         F-6

SIEBERT, BRANDFORD, SHANK & CO., LLC

Report of Independent Auditors                                                    F-16

Statement of Financial Condition at December 31, 1998                             F-17

Statement of Operations for the year ended December 31, 1998                      F-18

Statement of Changes in Members' Capital for the year ended December 31, 1998     F-19

Statements of Cash Flows for the year ended December 31, 1998                     F-20

Notes to Financial Statements                                                     F-21
</TABLE>

<PAGE>

REPORT OF INDEPENDENT AUDITORS

Board of Directors
Siebert Financial Corp.
New York, New York


We have audited the accompanying  consolidated statements of financial condition
of Siebert  Financial  Corp. and its wholly owned  subsidiary as of December 31,
1998 and December 31, 1997, and the related  consolidated  statements of income,
changes in stockholders' equity and cash flows for each of the years then ended.
These financial  statements are the responsibility of the Company's  management.
Our responsibility is to express an opinion on these financial  statements based
on our audits.

We  conducted  our  audits  in  accordance  with  generally   accepted  auditing
standards.  Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement.  An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements.  An audit also includes
assessing the  accounting  principles  used and  significant  estimates  made by
management,  as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion,  the financial  statements  referred to above present fairly, in
all material respects,  the consolidated financial position of Siebert Financial
Corp.  and its wholly owned  subsidiary as of December 31, 1998 and December 31,
1997, and the consolidated  results of their operations and their cash flows for
each of the years then ended, in conformity with generally  accepted  accounting
principles.


Richard A. Eisner & Company, LLP

New York, New York
February 11, 1999

                                       F-1

<PAGE>

SIEBERT FINANCIAL CORP. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
<TABLE>
<CAPTION>

                                                               PRO FORMA
                                                              DECEMBER 31,        DECEMBER 31,
                                                                  1998      -------------------------
ASSETS                                                          (NOTE A)        1998          1997
                                                              -----------   -----------   -----------

<S>                                                           <C>           <C>           <C>        
Cash and cash equivalents                                     $13,707,000   $ 6,499,000   $ 4,394,000
Cash equivalents - restricted                                   1,300,000     1,300,000     1,300,000
Receivable from clearing broker                                 2,572,000     2,572,000     2,135,000
Securities owned, at market value                               4,490,000     4,490,000     6,565,000
Secured demand notes receivable from stockholder                2,000,000     2,000,000     2,000,000
Furniture, equipment and leasehold improvements, net              657,000       657,000       476,000
Investment in affiliate                                         1,572,000     1,572,000       392,000
Deferred financing costs                                                        270,000
Prepaid expenses and other assets                                 850,000       850,000       620,000
                                                              -----------   -----------   -----------

                                                              $27,148,000   $20,210,000   $17,882,000
                                                              ===========   ===========   ===========

LIABILITIES AND STOCKHOLDERS' EQUITY

Liabilities:
Securities sold, not yet purchased, at market value           $   567,000   $   567,000   $ 2,038,000
Accounts payable and accrued liabilities                        2,688,000     2,688,000     3,172,000
                                                              -----------   -----------   -----------

                                                                3,255,000     3,255,000     5,210,000
                                                              -----------   -----------   -----------

Commitments and contingent liabilities

Subordinated borrowings payable to stockholder                  3,000,000     3,000,000     3,000,000
                                                              -----------   -----------   -----------

Stockholders' equity:
Common stock, $.01 par value; 49,000,000 shares authorized,
   21,965,960 (pro forma) and 21,004,960 shares outstanding
   at December 31, 1998 and 20,950,440 shares outstanding
   at December 31, 1997                                           219,000       209,000       209,000
Additional paid-in capital                                     13,642,000     6,714,000     6,585,000
Retained earnings                                               7,032,000     7,032,000     2,878,000
                                                              -----------   -----------   -----------

                                                               20,893,000    13,955,000     9,672,000
                                                              -----------   -----------   -----------

                                                              $27,148,000   $20,210,000   $17,882,000
                                                              ===========   ===========   ===========
</TABLE>



                 See notes to consolidated financial statements.

                                      F-2

<PAGE>

CONSOLIDATED STATEMENTS OF INCOME

                                                   YEAR ENDED DECEMBER 31,
                                                 -------------------------
                                                     1998          1997
                                                 -----------   -----------
Revenues:
   Commissions and fees                          $19,265,000   $18,880,000
   Investment banking                              3,296,000     4,488,000
   Trading profits                                 1,286,000     1,795,000
   Income from equity investee                     1,180,000
   Interest and dividends                            634,000       705,000
                                                 -----------   -----------

                                                  25,661,000    25,868,000

Expenses:
   Employee compensation and benefits              7,940,000     8,208,000
   Clearing fees, including floor brokerage        2,927,000     4,675,000
   Advertising and promotion                       1,796,000     2,752,000
   Communications                                  1,665,000     1,447,000
   Occupancy                                         601,000       650,000
   Interest                                          327,000       418,000
   Other general and administrative                2,949,000     3,043,000
                                                 -----------   -----------

                                                  18,205,000    21,193,000

Income before provision for income taxes           7,456,000     4,675,000

Provision for income taxes - current               3,143,000     2,057,000
                                                 -----------   -----------

NET INCOME                                       $ 4,313,000   $ 2,618,000
                                                 ===========   ===========

NET INCOME PER SHARE OF COMMON STOCK - BASIC     $       .21   $       .12
NET INCOME PER SHARE OF COMMON STOCK - DILUTED   $       .20   $       .12

WEIGHTED AVERAGE SHARES OUTSTANDING - BASIC       20,998,406    20,949,484
WEIGHTED AVERAGE SHARES OUTSTANDING - DILUTED     21,641,860    20,949,484



                 See notes to consolidated financial statements.

                                      F-3

<PAGE>

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY

<TABLE>
<CAPTION>
                                                 COMMON STOCK
                                         ---------------------------
                                            NUMBER                      ADDITIONAL
                                              OF          $.01 PAR        PAID-IN        RETAINED
                                            SHARES          VALUE         CAPITAL        EARNINGS          TOTAL
                                         ------------   ------------   ------------    ------------    ------------
<S>                                        <C>          <C>            <C>             <C>             <C>         
BALANCE - JANUARY 1, 1997                  20,943,588   $    209,000   $  6,614,000    $    278,000    $  7,101,000

Net income                                         --             --             --       2,618,000       2,618,000

Issuance of shares in connection with
   offering, net of expenses                    6,852             --        (29,000)             --         (29,000)

Dividend on common stock ($.02 per
   share)                                          --             --             --         (18,000)        (18,000)
                                         ------------   ------------   ------------    ------------    ------------

BALANCE - DECEMBER 31, 1997                20,950,440        209,000      6,585,000       2,878,000       9,672,000

Net income                                         --             --             --       4,313,000       4,313,000

Issuance of shares in connection with
   Restricted Stock Award Plan, net of
   7,200 shares forfeited                      38,000             --             --              --              --

Non-cash compensation in connection
   with Restricted Stock Award Plan                --             --         91,000              --          91,000

Issuance of shares in connection with
   exercise of employee stock options          16,520             --         38,000              --          38,000

Dividends on common stock ($.12 per
   share)                                          --             --             --        (159,000)       (159,000)
                                         ------------   ------------   ------------    ------------    ------------

BALANCE - DECEMBER 31, 1998                21,004,960        209,000      6,714,000       7,032,000      13,955,000

Issuance of shares in connection with
   rights offering, net of expenses           961,000         10,000      6,928,000              --       6,938,000
                                         ------------   ------------   ------------    ------------    ------------

BALANCE - DECEMBER 31, 1998
   (PRO FORMA)                             21,965,960   $    219,000   $ 13,642,000    $  7,032,000    $ 20,893,000
                                         ============   ============   ============    ============    ============
</TABLE>


                 See notes to consolidated financial statements.

                                      F-4

<PAGE>

CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
                                                                                           YEAR ENDED DECEMBER 31,
                                                                                         --------------------------
                                                                                             1998           1997
                                                                                         -----------    -----------
CASH FLOWS FROM OPERATING ACTIVITIES:
<S>                                                                                      <C>            <C>        
   Net income                                                                            $ 4,313,000    $ 2,618,000
   Adjustments  to  reconcile  net  income  to net cash  provided
      by operating activities:
      Depreciation and amortization                                                          177,000        157,000
      Income from equity investee                                                         (1,180,000)
      Non-cash compensation                                                                   91,000
      Changes in operating assets and liabilities:
        Net decrease in securities owned, at market value                                  2,075,000      3,552,000
        Net change in receivable from clearing broker                                       (437,000)      (993,000)
        Increase in prepaid expenses and other assets                                       (500,000)      (187,000)
        Net increase (decrease) in securities sold, not yet purchased, at market value    (1,471,000)       590,000
        Increase (decrease) in accounts payable and accrued liabilities                     (563,000)       348,000
                                                                                         -----------    -----------

           Net cash provided by operating activities                                       2,505,000      6,085,000
                                                                                         -----------    -----------

CASH FLOWS FROM INVESTING ACTIVITIES:
   Investment in cash equivalents-restricted                                                             (1,300,000)
   Purchase of furniture, equipment and leasehold improvements                              (358,000)      (182,000)
   Investment in affiliate                                                                                 (392,000)
   Loans to affiliate                                                                     (4,000,000)
   Repayment of loans - affiliate                                                          4,000,000
                                                                                         -----------    -----------
           Net cash used in investing activities                                            (358,000)    (1,874,000)
                                                                                         -----------    -----------

CASH FLOWS FROM FINANCING ACTIVITIES:
   Issuance of shares, net of expenses                                                                      (29,000)
   Proceeds from exercise of options                                                          38,000
   Dividend on common stock                                                                  (80,000)       (18,000)
                                                                                         -----------    -----------

           Net cash used in financing activities                                             (42,000)       (47,000)
                                                                                         -----------    -----------

           Net increase in cash and cash equivalents                                       2,105,000      4,164,000

Cash and cash equivalents - beginning of year                                              4,394,000        230,000
                                                                                         -----------    -----------

Cash and cash equivalents - end of year                                                  $ 6,499,000    $ 4,394,000
                                                                                         ===========    ===========


SUPPLEMENTAL CASH FLOW DISCLOSURES:
   Cash paid for:
      Interest                                                                           $   382,000    $   405,000
      Income taxes                                                                       $ 3,522,000    $ 1,796,000

NONCASH INVESTING AND FINANCING ACTIVITIES:
   Dividends declared                                                                    $    79,000
</TABLE>

                 See notes to consolidated financial statements.

                                      F-5

<PAGE>

SIEBERT FINANCIAL CORP. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE A - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

[1]      ORGANIZATION AND BASIS OF PRESENTATION:

         Siebert  Financial  Corp.  ("Financial"),   through  its  wholly  owned
         subsidiary,  Muriel  Siebert & Co.,  Inc.  ("Siebert"),  engages in the
         business  of  providing  discount  brokerage  services  for  customers,
         investment  banking  services  for  institutional  clients  and trading
         securities for its own account. All significant  intercompany  accounts
         have been eliminated.  Financial and Siebert  collectively are referred
         to herein as the "Company".

         The municipal  bond  investment  banking  business was conducted by the
         Siebert Brandford Shank division until July 1, 1998. Since that date it
         is being conducted by Siebert  Brandford  Shank & Co., LLC ("SBS"),  an
         investee,  which is accounted  for by the equity  method of  accounting
         (see Note B).

         The  pro  forma  statements  of  financial  condition  and  changes  in
         stockholders'  equity at  December  31,  1998  give  effect to a rights
         offering  which the Company  completed  on January 15,  1999,  in which
         shareholders  received one right to purchase one share of the Company's
         common  stock at $7.50 for each  share that they owned as of the record
         date, July 29, 1998. 961,000 shares were exercised raising  $6,938,000,
         net of expenses of $270,000; the balance expired unexercised.

[2]      SECURITY TRANSACTIONS:

         Security transactions,  commissions, revenues and expenses are recorded
         on a trade date basis.

         Siebert clears all its security  transactions  through an  unaffiliated
         clearing firm on a fully disclosed basis. Accordingly, Siebert does not
         hold  funds  or  securities  for  or owe  funds  or  securities  to its
         customers.  Those functions are performed by the clearing firm which is
         highly capitalized.

[3]      INCOME TAXES:

         The Company accounts for income taxes utilizing the asset and liability
         approach   requiring  the   recognition  of  deferred  tax  assets  and
         liabilities  for the  expected  future tax  consequences  of  temporary
         differences  between the basis of assets and  liabilities for financial
         reporting  purposes and tax purposes.  Financial  files a  consolidated
         federal income tax return which includes Siebert.

[4]      FURNITURE, EQUIPMENT AND LEASEHOLD IMPROVEMENTS:

         Property and equipment is stated at cost and depreciation is calculated
         using the straight-line method over the lives of the assets,  generally
         five years. Leasehold improvements are amortized over the period of the
         lease.

                                      F-6

<PAGE>

NOTE A - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

[5]      CASH EQUIVALENTS:

         For purposes of reporting cash flows,  cash  equivalents  include money
         market funds.

[6]      ADVERTISING COSTS:

         Advertising costs are charged to expense as incurred.

[7]      USE OF ESTIMATES:

         The  preparation of financial  statements in conformity  with generally
         accepted  accounting  principles  requires management to make estimates
         and  assumptions  that  affect  the  reported  amounts  of  assets  and
         liabilities and disclosure of contingent  assets and liabilities at the
         date of the financial  statements and the reported  amounts of revenues
         and expenses during the reporting  period.  Actual results could differ
         from those estimates.

[8]      EARNINGS PER SHARE:

         Earnings per basic share are  calculated  by dividing net income by the
         weighted  average  outstanding  shares during the period.  Earnings per
         diluted share are calculated by dividing net income by the basic shares
         and all dilutive  securities,  which  consist of options.  The treasury
         stock  method is used to reflect  the  dilutive  effect of  outstanding
         options, which, for 1998, amounts to 643,454 additional shares added to
         the basic weighted average outstanding shares of 20,998,406. There were
         no dilutive securities in 1997.

[9]      INVESTMENT BANKING:

         Investment  banking  revenues  include gains and fees, net of syndicate
         expenses.  Investment  banking management fees are recorded on offering
         date, sales concessions on settlement date and underwriting fees at the
         time  the  underwriting  is  completed  and the  income  is  reasonably
         determinable.

[10]     CASH EQUIVALENTS - RESTRICTED:

         Cash  equivalents  -  restricted  represents  cash  invested in a money
         market account which is pledged as collateral for a secured demand note
         in the amount of $1,200,000 executed in favor of SBS.

[11]     ACCOUNTING FOR STOCK OPTIONS:

         The Company  accounts for stock options in accordance  with  Accounting
         Principles  Board Opinion No. 25 ("APB Opinion  25"),  "Accounting  for
         Stock Issued to  Employees"  using  intrinsic  values with  appropriate
         disclosures  in  conformity  with  the  fair  values  based  method  of
         Statement of Financial Accounting Standards No. 123 (See Note G).

                                      F-7

<PAGE>

NOTE B - INVESTMENT IN AFFILIATE

In March 1997,  Siebert and two  individuals  (the  "Principals")  formed SBS to
succeed to the tax exempt  underwriting  business of the Siebert Brandford Shank
division of Siebert when regulatory requirements permitted.  The agreements with
the Principals provide that profits will be shared 51% to the Principals and 49%
to Siebert. Losses incurred in the amount of approximately $631,000 through June
30,  1998  were  recouped  by  Siebert  prior to any  profit  allocation  to the
Principals.  Siebert  invested  $392,000 as its share of the members' capital of
SBS.  Through  June 30,  1998,  Siebert  operated  the  division's  business  in
accordance with the terms of the agreements with the Principals.  Effective July
1, 1998, SBS met the regulatory requirements and commenced operations.

In 1998,  the  Company  loaned an  aggregate  of  $4,000,000  to SBS,  which was
subsequently repaid, pursuant to Temporary Subordination Agreements.

Summarized financial data of SBS as of December 31, 1998 and for the period July
1, 1998 (commencement of operations) through December 31, 1998 is as follows:

<TABLE>
<CAPTION>
<S>                                                                            <C>        
         Total assets                                                          $ 6,234,000
         Total liabilities including subordinated liability of $1,200,000        3,685,000
         Total members' capital                                                  2,549,000
         Total revenues                                                          4,817,000
         Net income                                                              1,750,000
</TABLE>

During   1998,   Siebert   charged  SBS   $150,000  for  rent  and  general  and
administrative  services,  which  Siebert  believes  approximates  the  cost  of
furnishing such services.



NOTE C - SUBORDINATED BORROWINGS AND SECURED DEMAND NOTE RECEIVABLE

The  subordinated  borrowings  at December 31, 1998 are payable to the principal
stockholder and consist of the following:

<TABLE>
<CAPTION>
                                                                               DECEMBER 31,
                                                                     -------------------------------
                                                                          1998              1997
                                                                     --------------   --------------
<S>                                                                  <C>              <C>           
          Secured demand note collateral agreement, 4%, due
             December 31, 2000                                       $    2,000,000   $    2,000,000
          Subordinated note, 8%, due January 31, 2000                       500,000          500,000
          Subordinated note, 8%, due October 31, 2000                       500,000          500,000
                                                                     --------------   --------------

                                                                     $    3,000,000   $    3,000,000
                                                                     ==============   ==============
</TABLE>

The long-term  borrowings are automatically  renewed for a period of one year if
notice of demand for payment is not given thirteen months prior to maturity.

                                      F-8

<PAGE>

NOTE C - SUBORDINATED BORROWINGS AND SECURED DEMAND NOTE RECEIVABLE  (CONTINUED)

The  subordinated  borrowings  are  available in computing net capital under the
Securities  and Exchange  Commission's  (the "SEC") Uniform Net Capital Rule. To
the extent that such borrowings are required for Siebert's continued  compliance
with minimum net capital requirements, they may not be repaid.

Interest paid on subordinated  borrowings was approximately  $160,000 in each of
the years ended December 31, 1998 and 1997.

The secured  demand note  receivable of $2,000,000 at December 31, 1998 and 1997
is collateralized by marketable  securities with a market value of approximately
$2,227,000 and $2,446,000, respectively.


NOTE D - FURNITURE, EQUIPMENT AND LEASEHOLD IMPROVEMENTS, NET

Furniture, equipment and leasehold improvements consist of the following:

<TABLE>
<CAPTION>
                                                                        DECEMBER 31,
                                                               ----------------------------
                                                                    1998            1997
                                                               ------------    ------------
<S>                                                            <C>             <C>         
         Equipment                                             $    882,000    $    639,000
         Leasehold improvements                                     132,000         129,000
         Furniture and fixtures                                      84,000          84,000
                                                               ------------    ------------

                                                                  1,098,000         852,000

         Less accumulated depreciation and amortization             441,000         376,000
                                                               ------------    ------------

                                                               $    657,000    $    476,000
                                                               ============    ============
</TABLE>

Depreciation and amortization  expense for the years ended December 31, 1998 and
1997 amounted to $177,000 and $157,000, respectively.

                                      F-9

<PAGE>

NOTE E - INCOME TAXES

Income tax expense consists of the following:

<TABLE>
<CAPTION>
                                                                       YEAR ENDED
                                                                      DECEMBER 31,
                                                              -----------------------------
                                                                   1998           1997
                                                              --------------  -------------
<S>                                                           <C>             <C>          
        Federal income tax                                    $    2,233,000  $   1,360,000
        State and local income tax                                   910,000        697,000
                                                              --------------  -------------

        Income tax expense                                    $    3,143,000  $   2,057,000
                                                              ==============  =============
</TABLE>

A  reconciliation  between the income tax expense and income  taxes  computed by
applying  the  statutory  Federal  income tax rate to income  before taxes is as
follows:

<TABLE>
<CAPTION>
                                                                        YEAR ENDED
                                                                        DECEMBER 31,
                                                             ------------------------------
                                                                  1998            1997
                                                             ---------------  -------------
<S>                                                          <C>              <C>          
Expected income tax provision at statutory Federal tax rate  $    2,535,000   $   1,590,000
State and local taxes, net of Federal tax effect                    718,000         467,000
Effect of refund of prior years' local taxes, net of 
   Federal and state tax effect                                    (110,000)  
                                                             ---------------  -------------
Income tax expense                                           $    3,143,000   $   2,057,000
                                                             ==============   =============
</TABLE>


There are no significant  temporary  differences which give rise to deferred tax
assets or liabilities at December 31, 1998 and 1997.


NOTE F - STOCKHOLDERS' EQUITY

Siebert is subject to the SEC's  Uniform Net Capital Rule (Rule  15c3-1),  which
requires the maintenance of minimum net capital.  Siebert has elected to use the
alternative method,  permitted by the rule, which requires that Siebert maintain
minimum net capital,  as defined,  equal to the greater of $250,000 or 2 percent
of aggregate debit balances arising from customer  transactions,  as defined. At
December 31, 1998 and 1997, Siebert had net capital of approximately $11,124,000
and  $9,052,000,  respectively,  as compared  with net capital  requirements  of
$250,000.  Siebert claims exemption from the reserve  requirement  under Section
15c3-3(k)(2)(ii).

                                      F-10

<PAGE>

NOTE F - STOCKHOLDERS' EQUITY  (CONTINUED)

In an  offering  completed  on  March  21,  1997,  the  Company  offered  to its
shareholders  with "odd lots" the  opportunity to "round up" their shares to the
next nearest 100 shares.  6,852 shares were issued with  proceeds to the Company
of approximately $16,000. Costs related to the offering approximated $45,000.

The principal  shareholder  waived her right to receive her portion of dividends
declared in 1997 and 1998.

On April 7,  1998 the  Company  split its stock 4 for 1. All share and per share
data  contained  herein have been  retroactively  adjusted to reflect this stock
split.

On  January  15,  1999,  the  Company  completed  a  rights  offering  in  which
shareholders  received one right to purchase one share of the  Company's  common
stock at $7.50 for each share that they owned;  961,000  rights  were  exercised
raising approximately $7.2 million.

The 1998 Restricted Stock Award Plan (the "Award Plan"),  provides for awards of
not  more  than  60,000  shares  of  the  Company's  common  stock,  subject  to
adjustments for stock splits, stock dividends and other changes in the Company's
capitalization,  to key  employees,  to be issued either  immediately  after the
award or at a future  date.  As  provided  in the  Award  Plan  and  subject  to
restrictions,  shares  awarded may not be disposed  of by the  recipients  for a
period of one year from the date of the award.  Cash dividends on shares awarded
are held by the  Company  for the  benefit of the  recipients  and are paid upon
lapse of the restrictions.

400 shares of the  Company's  common stock were awarded to each of 110 employees
of the  Company,  as of January 5, 1998.  Additional  awards of 400 shares  were
granted to each of three individuals,  as of February 20, 1998. The market value
at the date of the awards was $2.25 and $5.75, respectively. Subsequently, 7,200
shares were forfeited.  The Company recorded a non-cash  compensation  charge of
$91,000 in 1998 relating to the shares awarded under the Award Plan.


NOTE G - OPTIONS

In 1997,  the  shareholders  of the Company  approved the 1997 Stock Option Plan
(the  "Plan").  The Plan  authorizes  the grant of options to  purchase up to an
aggregate of 2,100,000 shares,  subject to adjustment in certain  circumstances.
Both  non-qualified  options and options intended to qualify as "Incentive Stock
Options"  under Section 422 of the Internal  Revenue  Code,  as amended,  may be
granted  under the Plan.  A Stock  Option  Committee  of the Board of  Directors
administers  the Plan. The committee has the authority to determine when options
are  granted,  the term during  which an option may be  exercised  (provided  no
option has a term  exceeding  10 years),  the  exercise  price and the  exercise
period.  The  exercise  price shall  generally  be not less than the fair market
value on the date of  grant.  No option  may be  granted  under  the Plan  after
December 2007.

                                      F-11

<PAGE>

NOTE G - OPTIONS  (CONTINUED)

In March 1997, the Company granted to non-employee directors options to purchase
120,000 shares of the Company's  common stock at an exercise price of $2.313 per
share.  The  options  expire  five  years  from the date of grant.  In May 1997,
pursuant to the Plan, the Company granted options to certain of its employees to
purchase  799,000  shares of its common stock at an exercise price of $2.313 per
share. In November 1997, pursuant to the Plan, the Company granted options to an
employee to purchase 40,000 shares of the Company's  common stock at an exercise
price of $2.219 per share.  In  February  1998 and  November  1998,  the Company
granted  options to  purchase  76,000 and 10,000  shares,  respectively,  of the
Company's  common  stock at  exercise  prices of $2.688  and  $6.625  per share,
respectively.  All such  employee  options  vest 20% per year for five years and
expire ten years from the date of grant.

A summary of the Company's stock option transactions for the year ended December
31, 1998 and 1997 is presented below:

                                           1998                   1997
                                   --------------------   ------------------- 
                                              WEIGHTED               WEIGHTED
                                              AVERAGE                AVERAGE
                                              EXERCISE               EXERCISE
                                    SHARES     PRICE      SHARES      PRICE
                                   -------    --------    -------    --------
Outstanding - beginning of year    925,200    $   2.31                    
Granted                             86,000    $   3.15    959,000    $   2.31
Forfeited                         (123,880)   $   2.31    (33,800)   $   2.31
Exercised                          (16,520)   $   2.31                       
                                   -------                -------

Outstanding - end of year          870,800    $   2.39    925,200    $   2.31
                                   =======                =======

Exercisable at end of year         254,560    $   2.31    120,000    $   2.31

Weighted average fair value of
options granted                          $1.44               $1.18


The following table  summarizes  information  related to options  outstanding at
December 31, 1997:

<TABLE>
<CAPTION>
                                                OPTIONS OUTSTANDING                           OPTIONS EXERCISABLE
                              =======================================================    ==============================
                                                 WEIGHTED AVERAGE         WEIGHTED                         WEIGHTED
               RANGE             NUMBER             REMAINING              AVERAGE          NUMBER          AVERAGE
          EXERCISE PRICES     OUTSTANDING        CONTRACTUAL LIFE      EXERCISE PRICE    EXERCISABLE    EXERCISE PRICE
          ---------------     -----------        ----------------      --------------    -----------    --------------
<S>           <C>                 <C>               <C>                    <C>              <C>              <C>  
              $2.31               885,200           8.68 Years             $2.31            120,000          $2.31
              $2.22                40,000           9.85 Years             $2.22                 --
                              -----------                                                ----------

           $2.22 - $2.31          925,200           8.73 Years             $2.31            120,000          $2.31
                              ===========                                                ==========
</TABLE>

                                      F-12

<PAGE>

NOTE G - OPTIONS  (CONTINUED)

The following table  summarizes  information  related to options  outstanding at
December 31, 1998:

<TABLE>
<CAPTION>
                                                OPTIONS OUTSTANDING                             OPTIONS EXERCISABLE
                               ======================================================    =================================
                                                 WEIGHTED AVERAGE         WEIGHTED                             WEIGHTED
               RANGE              NUMBER            REMAINING             AVERAGE            NUMBER            AVERAGE
          EXERCISE PRICES      OUTSTANDING       CONTRACTUAL LIFE      EXERCISE PRICE     EXERCISABLE       EXERCISE PRICE
          ---------------      -----------       ----------------      --------------     -----------       --------------
<S>            <C>                <C>                 <C>                  <C>                <C>                <C>  
               $2.31              792,800             7.59 Years           $2.31              254,560            $2.31
               $2.69               68,000             8.88 Years           $2.69                   --               --
               $6.63                                  9.92 Years           $6.63                                    --
                                   10,000                                                          --
                               ----------                                                 -----------
           $2.31 - $6.63          870,800             7.72 Years           $2.39              254,560            $2.31
                               ==========                                                 ===========            =====
</TABLE>

The fair value of each option  grant is estimated on the date of grant using the
Black-Scholes   option-pricing   model  with  the  following   weighted  average
assumptions:  dividend  yields  ranging  from 0% to  3.3%,  expected  volatility
ranging from 25% to 39%,  risk-free  interest rates ranging from 4.77% to 6.43%,
and expected lives ranging from 5 to 10 years.

The Company applies APB Opinion 25 and related Interpretations in accounting for
its options. Accordingly, no compensation cost has been recognized for its stock
option  grants.  The pro forma effect of applying SFAS No. 123 on net income for
the years ended December 31, 1998 and 1997 is not necessarily  representative of
the effects on reported net income for future years due to, among other  things,
(1) the vesting  period of stock  options  and (2) the fair value of  additional
stock options in future years.  Had  compensation  costs for the Company's stock
option  grants  been  determined  based on the fair value at the grant dates for
awards,  the  Company's  net income and earnings per share would have reduced to
the pro forma amounts indicated below.

<TABLE>
<CAPTION>
                                                                           YEAR ENDED
                                                                           DECEMBER 31,
                                                                  ---------------------------
                                                                     1998            1997
                                                                  -----------     -----------
<S>                                                               <C>             <C>        
         Net Income                           As reported         $4,313,000      $ 2,618,000
                                              Pro forma           $4,098,000      $ 2,397,000

         Net Income Per Share - Basic         As reported            $ .21           $ .12
                                              Pro forma              $ .20           $ .11

         Net Income Per Share - Diluted       As reported            $ .20           $ .12
                                              Pro forma              $ .19           $ .11
</TABLE>

At December 31, 1998,  2,079,000  shares of the Company's common stock have been
reserved  for future  issuance  under the Plan,  the Award Plan and for  options
granted to directors.

                                      F-13

<PAGE>

NOTE H - CLEARING AGREEMENT

In 1998,  Siebert signed a new one-year agreement with its clearing broker which
provides,  among other things,  for reduced ticket  charges and execution  fees.
Such arrangement  provides for retroactive  effect at the new rates and resulted
in a refund of $1,000,000.


NOTE I - FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK AND
         CONCENTRATIONS OF CREDIT RISK

In the normal course of business,  Siebert enters into  transactions  in various
financial  instruments  with  off-balance  sheet risk.  This risk  includes both
market and credit risk, which may be in excess of the amounts  recognized in the
statement of financial condition.

Retail customer  transactions  are cleared through National  Financial  Services
Corp.  ("NFSC") on a fully  disclosed  basis.  In the event that  customers  are
unable to fulfill their contractual obligations, NFSC may charge Siebert for any
loss  incurred  in  connection  with  the  purchase  or  sale of  securities  at
prevailing market prices to satisfy  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 in the
event  customers  and other  counterparties  are unable to  fulfill  contractual
obligations.  Securities  transactions  entered  into as of  December  31,  1998
settled with no adverse effect on Siebert's financial condition.


NOTE J - COMMITMENTS AND CONTINGENT LIABILITIES

The Company  rents office space under  long-term  operating  leases  expiring in
various periods through 2003.  These leases call for base rent plus  escalations
for taxes and operating expenses.

Future minimum rental payments for base rent under these operating leases are as
follows:

                 YEAR ENDING
                 DECEMBER 31,                  AMOUNT
                 ------------              --------------

                    1999                   $      445,000
                    2000                          372,000
                    2001                          327,000
                    2002                          313,000
                    2003                          103,000
                                           --------------
                                           $    1,560,000
                                           ==============


                                      F-14

<PAGE>

NOTE J - COMMITMENTS AND CONTINGENT LIABILITIES  (CONTINUED)

Rent  expense,   including   escalations  for  operating   costs,   amounted  to
approximately  $527,000 and  $424,000 for the years ended  December 31, 1998 and
1997, respectively.  Rent is being charged to expense over the entire lease term
on a straight-line basis.

Siebert is party to certain claims, suits and complaints arising in the ordinary
course of business.  In the opinion of  management,  all such claims,  suits and
complaints  are  without  merit,  or  involve  amounts  which  would  not have a
significant effect on the financial position of the Company.

Siebert sponsors a defined contribution  retirement plan under Section 401(k) of
the Internal Revenue Code that covers  substantially all employees.  Participant
contributions to the plan are voluntary and are subject to certain  limitations.
Siebert may also make discretionary  contributions to the plan. No contributions
were made by Siebert in 1998 and 1997.

Siebert  executed  a  demand  note  payable  in favor  of SBS in the  amount  of
$1,200,000  collaterized by approximately  $1,300,000 of cash equivalents  which
are reported as "cash equivalents - restricted". This obligation is not included
in the Company's statement of financial condition.


NOTE K - ACQUISITION

In December  1998, the Company signed a letter of intent to purchase 100% of the
outstanding common stock of a discount brokerage firm, Andrew Peck & Associates,
Inc. for $3.5 million in cash and 563,951 shares of the Company's common stock.


NOTE L - FAIR VALUE OF FINANCIAL INSTRUMENTS

The carrying  amounts  reflected  in the  consolidated  statements  of financial
condition for cash, cash  equivalents,  receivable  from broker,  secured demand
notes  receivable,  accounts  payable and accrued  liabilities and  subordinated
borrowings  approximate  fair  value due to the short term  maturities  of those
instruments. Securities owned and securities sold, not yet purchased are carried
at market value,  in accordance  with industry  practice for  broker-dealers  in
securities.


                                      F-15
<PAGE>

INDEPENDENT AUDITORS' REPORT

To the Members
Siebert, Brandford, Shank & Co., L.L.C.
New York, New York


We have  audited the  statement of  financial  condition of Siebert,  Brandford,
Shank & Co.,  L.L.C.  as of December 31,  1998,  and the related  statements  of
operations,  changes in members' capital and cash flows for the year then ended.
These financial  statements are the responsibility of the Company's  management.
Our responsibility is to express an opinion on these financial  statements based
on our audit.

We conducted our audit in accordance with generally accepted auditing standards.
Those standards  require that we plan and perform the audit to obtain reasonable
assurance   about  whether  the  financial   statements  are  free  of  material
misstatement.  An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements.  An audit also includes
assessing the  accounting  principles  used and  significant  estimates  made by
management,  as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.

In our opinion, the financial statements enumerated above present fairly, in all
material respects,  the financial position of Siebert,  Brandford,  Shank & Co.,
L.L.C.  as of December 31, 1998,  and the results of its operations and its cash
flows for the year then ended in conformity with generally  accepted  accounting
principles.




Richard A. Eisner & Company, LLP

New York, New York
February 11, 1999

                                      F-16

<PAGE>



SIEBERT, BRANDFORD, SHANK & CO., L.L.C.

SEE NOTES TO FINANCIAL STATEMENTS
STATEMENT OF FINANCIAL CONDITION
DECEMBER 31, 1998

ASSETS
   Cash and cash equivalents                                  $   3,257,835
   Accounts receivable                                              611,477
   Securities owned, at market value                                904,234
   Receivable from affiliate                                         91,268
   Secured demand notes                                           1,200,000
   Furniture, equipment and leasehold improvements, net              79,253
   Other assets                                                      90,208
                                                              -------------

                                                              $   6,234,275
                                                              =============

LIABILITIES AND MEMBERS' CAPITAL
   Liabilities:
      Payable to broker-dealers                               $     794,426
      Accounts payable and accrued expenses                       1,690,189
                                                              -------------

                                                                  2,484,615

      Subordinated debt                                           1,200,000

   Members' capital                                               2,549,660
                                                              -------------

                                                              $   6,234,275
                                                              =============

SEE NOTES TO FINANCIAL STATEMENTS                                              

                                      F-17

<PAGE>

STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1998 (COMMENCED OPERATIONS JULY 1, 1998)

REVENUES:
   Investment banking                                $   4,550,435
   Trading profits                                         109,861
   Interest and other                                      156,464
                                                     -------------

                                                         4,816,760
                                                     -------------
EXPENSES:
   Employee compensation and benefits                    2,037,548
   Clearing fees                                            22,475
   Communications                                           89,403
   Occupancy                                               119,304
   Professional fees                                        79,117
   Interest                                                105,937
   General and administrative                              613,316
                                                     -------------

                                                         3,067,100
                                                     -------------

NET INCOME                                           $   1,749,660
                                                     =============

SEE NOTES TO FINANCIAL STATEMENTS                                              

                                      F-18

<PAGE>

STATEMENT OF CHANGES IN MEMBERS' CAPITAL
YEAR ENDED DECEMBER 31, 1998

BALANCE - JANUARY 1, 1998                                       $  800,000


Net income                                                       1,749,660
                                                                ----------


BALANCE - DECEMBER 31, 1998                                     $2,549,660
                                                                ==========

SEE NOTES TO FINANCIAL STATEMENTS                                              

                                      F-19

<PAGE>

STATEMENT OF CASH FLOWS
YEAR ENDED DECEMBER 31, 1998

CASH FLOWS FORM OPERATING ACTIVITIES:
   Net income                                              $   1,749,660
   Adjustments to reconcile net income to net cash 
      provided by operating activities:
      Depreciation and amortization                               47,518
      Changes in:
        Securities owned, at market value                       (904,234)
        Accounts receivable                                     (611,477)
        Receivable from affiliate                                 39,418
        Other assets                                             (73,427)
        Accounts payable and accrued expenses                  1,690,189
        Payable to broker-dealers                                794,426
                                                           -------------

           Net cash provided by operating activities           2,732,073
                                                           -------------

CASH FLOWS FROM INVESTING ACTIVITIES:
   Purchase of property and equipment                            (13,534)
                                                           -------------

CASH FLOWS FROM FINANCING ACTIVITIES:
   Borrowings from affiliate                                   4,000,000
   Repayments to affiliate                                    (4,000,000)

                                                                       0
                                                           -------------

NET INCREASE IN CASH AND CASH EQUIVALENTS                      2,718,539
Cash and cash equivalents - beginning of year                    539,296
                                                           -------------
CASH AND CASH EQUIVALENTS - END OF YEAR                    $   3,257,835
                                                           =============

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
   Taxes paid                                              $      82,076
   Interest paid                                           $     105,937


SEE NOTES TO FINANCIAL STATEMENTS                                              

                                      F-20

<PAGE>

SIEBERT, BRANDFORD, SHANK & CO., L.L.C.

NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998


NOTE A - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

[1]      ORGANIZATION AND BASIS OF PRESENTATION:

         In October  1996,  Napolean  Brandford  III,  Suzanne  Shank and Muriel
         Siebert & Co., Inc.  ("Siebert")  began a tax exempt  underwriting  and
         related  trading  business,  which  qualifies as a Minority and Women's
         Business Enterprise in certain states.

         The business was operated as the Siebert,  Brandford, Shank Division of
         Siebert   ("the   Division")   until  July  1,  1998  when   regulatory
         requirements  were met and  Siebert,  Brandford,  Shank & Co.,  L.L.C.,
         ("SBS" or "the  Company"),  which was formed on March 10,  1997,  began
         operations.  Mr.  Branford  and Ms. Shank  collectively  own 51% of the
         members'  interests in SBS and Siebert owns the remaining 49%. Prior to
         July  1,  1998  the  Division  operated  under a  business  arrangement
         providing  that profits  would be shared 51% to Mr.  Brandford  and Ms.
         Shank and 49% to Siebert.  Siebert recouped losses of $631,000 incurred
         through  June 30,  1998 prior to any profit  allocation.  The  original
         capital of $800,000 was invested by the members in  proportion to their
         respective profit sharing interests.

[2]      FURNITURE, EQUIPMENT AND LEASEHOLD IMPROVEMENTS, NET:

         Furniture  and  equipment  is  stated  at  cost  and   depreciation  is
         calculated using the straight-line method over the lives of the assets,
         generally  five years.  Leasehold  improvements  are amortized over the
         period of the lease.

[3]      CASH EQUIVALENTS:

         For purposes of reporting cash flows,  cash  equivalents  include money
         market funds.

[4]      USE OF ESTIMATES:

         The  preparation of financial  statements in conformity  with generally
         accepted  accounting  principles  requires management to make estimates
         and  assumptions  that  affect  the  reported  amounts  of  assets  and
         liabilities and disclosure of contingent  assets and liabilities at the
         date of the financial  statements and the reported  amounts of revenues
         and expenses during the reporting  period.  Actual results could differ
         from those estimates.

[5]      INCOME TAXES:

         The  Company is not  subject  to federal  income  taxes.  Instead,  the
         members  are  required  to include in their  income tax  returns  their
         respective share of the Company's income. The Company is subject to tax
         in certain states and local jurisdictions.


 NOTE B - SUBORDINATED BORROWINGS AND SECURED DEMAND NOTE RECEIVABLE

The subordinated borrowing at December 31, 1998 represents a Secured Demand Note
Collateral  Agreement,  10%  interest  due August 31,  2000.  Such  borrowing is
payable to Siebert.

 Subordinated  borrowings  are  available  in  computing  net capital  under the
Securities  and Exchange  Commission's  (the "SEC") Uniform Net Capital Rule. To
the  extent  that  such  borrowing  is  required  for  the  Company's  continued
compliance with minimum net capital requirements, it may not be repaid.

                                      F-21

<PAGE>

NOTE B - SUBORDINATED BORROWINGS AND SECURED DEMAND NOTE RECEIVABLE  (CONTINUED)

The secured  demand note  receivable  of $1,200,000  is  collateralized  by cash
equivalents of Siebert of approximately $1,300,000 at December 31, 1998.


NOTE C - FURNITURE, EQUIPMENT AND LEASEHOLD IMPROVEMENTS, NET

 Furniture, equipment and leasehold improvements consist of the following:

       Equipment                                                $   116,952
       Furniture and fixtures                                        17,138
       Leasehold improvements                                        11,706
                                                                -----------

                                                                    145,796
       Less accumulated depreciation and amortization                66,543

                                                                $    79,253
                                                                ===========

NOTE D - NET CAPITAL

 The Company is subject to the  Securities and Exchange  Commission  Uniform Net
Capital Rule 15c3-1,  which requires the  maintenance of minimum net capital and
requires  that the  ratio of  aggregate  indebtedness  to net  capital,  both as
defined,  shall not exceed 15 to 1. At December  31,  1998,  the Company had net
capital of $3,231,000 which was $3,065,000 in excess of its required net capital
and its ratio of aggregate indebtedness to net capital was .77 to 1. The Company
claims exemption from the reserve requirements under Section 15c-3-3(k)(2)(ii).


NOTE E - COMMITMENTS

The Company rents office space under long-term operating leases expiring through
2000.  These leases call for base rent plus  escalations for taxes and operating
expenses.  Future minimum rental  payments under these  operating  leases are as
follows:

          YEAR                                      AMOUNT
          ----                                    ----------
          1999                                    $   76,000
          2000                                        11,000
                                                  ----------

                                                  $   87,000
                                                  ==========

 Rent expense for 1998 amounted to $105,000.


NOTE F - OTHER

During  1998,  the Company was charged  $171,000 by Siebert for rent and general
and administrative services.

                                      F-22

<PAGE>
                                   SIGNATURES

         Pursuant to the  requirements  of Section 13 or 15(d) 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
                                                      Chair and President


                                              Date:  March 29, 1999

         Pursuant to the  requirements  of the Securities  Exchange Act of 1934,
this  report has been  signed  below by the  following  persons on behalf of the
registrant and in the capacities and on the dates indicated.

         Name                             Title                  Date
         ----                             -----                  ----

/s/ MURIEL F. SIEBERT                                            March 29, 1999
-------------------------
    Muriel F.  Siebert           Chair, President and Director
                                 (principal executive officer)


/s/ NICHOLAS P. DERMIGNY                                         March 29,1999
-------------------------
    Nicholas P.  Dermigny        Executive Vice President,
                                 Chief Operating Officer and
                                 Director

/s/ MITCHELL M. COHEN                                            March 29, 1999
-------------------------
    Mitchell M.  Cohen           Chief Financial Officer 
                                 and Assistant Secretary   
                                 (principal financial and
                                 accounting officer)


/s/ PATRICIA L. FRANCY                                           March 25, 1999
-------------------------
    Patricia L.  Francy          Director


/s/ JANE H. MACON                                                March 25, 1999
-------------------------
    Jane H. Macon                Director

<PAGE>

                                  EXHIBIT INDEX


Exhibit
Number      Description of Exhibit
------      ----------------------

2.1         Plan and Agreement of Merger between J. Michaels,  Inc.  ("JMI") and
            Muriel Siebert Capital Markets Group,  Inc.  ("MSCMG"),  dated as of
            April 24, 1996 ("Merger  Agreement")  (incorporated  by reference to
            Siebert  Financial  Corp.'s  Form  10-K for the  fiscal  year  ended
            December 31, 1996)

2.2         Amendment  No. 1 to  Merger  Agreement,  dated  as of June 28,  1996
            (incorporated  by reference to Siebert  Financial  Corp.'s Form 10-K
            for the fiscal year ended December 31, 1996)

2.3         Amendment No. 2 to Merger Agreement,  dated as of September 30, 1996
            (incorporated  by reference to Siebert  Financial  Corp.'s Form 10-K
            for the fiscal year ended December 31, 1996)

2.4         Amendment  No. 3 to Merger  Agreement,  dated as of November 7, 1996
            (incorporated  by reference to Siebert  Financial  Corp.'s Form 10-K
            for the fiscal year ended December 31, 1996)

3.1         Certificate of  Incorporation of Siebert  Financial Corp.,  formerly
            known as J.  Michaels,  Inc.  originally  filed on April 9, 1934, as
            amended and restated to date  (incorporated  by reference to Siebert
            Financial  Corp.'s Form 10-K for the fiscal year ended  December 31,
            1997)

3.2         By-laws of Siebert  Financial  Corp.  (incorporated  by reference to
            Siebert Financial Corp.'s  Registration  Statement on Form S-1 (File
            No. 333-49843) filed with the Securities and Exchange  Commission on
            April 10, 1998)

10.1        Siebert   Financial   Corp.   1998   Restricted   Stock  Award  Plan
            (incorporated  by reference to Siebert  Financial  Corp.'s Form 10-K
            for the fiscal year ended December 31, 1997)

10.2        10(a) Siebert  Financial Corp. 1997 Stock Option Plan  (incorporated
            by reference to Siebert  Financial  Corp.'s Form 10-K for the fiscal
            year ended December 31, 1996)

10.4        LLC Operating Agreement, among Siebert, Brandford, Shank & Co., LLC,
            Muriel  Siebert & Co., Inc.,  Napoleon  Brandford III and Suzanne F.
            Shank,  dated as of March 10, 1997  (incorporated  by  reference  to
            Siebert  Financial  Corp.'s  Form  10-K for the  fiscal  year  ended
            December 31, 1996)

10.5        Services Agreement, between Siebert, Brandford, Shank & Co., LLC and
            Muriel Siebert & Co., Inc., dated as of March 10, 1997 (incorporated
            by reference to Siebert  Financial  Corp.'s Form 10-K for the fiscal
            year ended December 31, 1996)

10.6        Siebert   Financial   Corp.   1998   Restricted   Stock  Award  Plan
            (incorporated  by reference to Siebert  Financial  Corp.'s Form 10-K
            for the fiscal year ended December 31, 1997)

10.7        Stock Option  Agreement,  dated March 11, 1997,  between the Company
            and  Patricia  L.  Francy  (incorporated  by  reference  to  Siebert
            Financial  Corp.'s  Registration  Statement  on Form S-8  (File  No.
            333-72939)  filed with the  Securities  and Exchange  Commission  on
            February 25, 1999)


<PAGE>

10.8        Stock Option  Agreement,  dated March 11, 1997,  between the Company
            and Jane H. Macon  (incorporated  by reference to Siebert  Financial
            Corp.'s  Registration  Statement  on Form S-8 (File  No.  333-72939)
            filed with the  Securities  and Exchange  Commission on February 25,
            1999)

10.9        Stock Option  Agreement,  dated March 11, 1997,  between the Company
            and Monte E. Wetzler (incorporated by reference to Siebert Financial
            Corp.'s  Registration  Statement  on Form S-8 (File  No.  333-72939)
            filed with the  Securities  and Exchange  Commission on February 25,
            1999)

21          Subsidiaries of the registrant (incorporated by reference to Siebert
            Financial  Corp.'s  Registration  Statement  on Form S-1  (File  No.
            333-49843)  filed with the  Securities  and Exchange  Commission  on
            April 10, 1998)

23          Consent of Independent Auditors

27          Financial Data Schedule