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, 1997

[ ]     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.
--------------------------------------------------------------------------------
                 (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
----------------------------       --------------------------------------------

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

                     COMMON STOCK, PAR VALUE $.01 PER SHARE
--------------------------------------------------------------------------------
                                (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-B 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. [X]

         State issuer's revenues for its most recent fiscal year. $25,867,283
                                                                 ---------------

         As of March 27, 1998,  the  aggregate  market value of the voting stock
held by non-affiliates  of the registrant was approximately  $6,204,000 based on
the  closing  price of the Common  Stock on the Nasdaq  SmallCap  Market on that
date.

         As of March 27,  1998,  there  were  5,248,410  shares of Common  Stock
outstanding.

                      DOCUMENTS INCORPORATED BY REFERENCE:

         Siebert  Financial  Corp.'s  definitive  proxy  statement  for its 1998
annual  meeting  of  shareholders  to be filed  by the  registrant  pursuant  to
Regulation 14A is  incorporated by reference into items 9, 10, 11 and 12 of Part
III of this Form 10-KSB by reference.
<PAGE>

                                     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 96% of the outstanding common stock, par value $.01 per share (the
"Common Stock"), of the Company.

         The Company is the successor by merger to J. Michaels,  Inc. ("JMI"), a
company not previously  associated  with Siebert  Financial Corp. On November 8,
1996, JMI and Muriel Siebert Capital Markets Group, Inc., a Delaware corporation
owned by Ms. Siebert ("MSCMG"),  merged and concurrently  transferred all of the
assets  previously owned by JMI to a liquidating  trust. The Company has had no,
nor  does it  expect  to have  any,  involvement  with  the  liquidating  trust.
Following the merger, the Company's fiscal year was changed to December 31.

         Siebert was  incorporated  on June 13, 1969 under the laws of the State
of  Delaware.  The  principal  executive  offices of the Company and Siebert are
located at 885 Third Avenue, 17th Floor, New York, New York 10022.

BUSINESS OVERVIEW

         Siebert provides  services to its customers through two main divisions.
Through its Retail  division,  Siebert provides  discount  brokerage and related
services to its 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,  this  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  segregated  from that of the agency  business
executed on behalf of institutional clients.

         The firm is unique among discount  brokerage firms in that, through its
Capital Markets division,  it offers a wide array of underwriting and investment
banking services. Such services 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   backed
securities issues.

         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 Siebert  Brandford
Shank division.

                                      -2-
<PAGE>

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 full-commission firms and competitive
with the national discounters.

         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  $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  research by fax and 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 SiebertNet,  Siebert
Online  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 Prime(1), 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.  This
allows Siebert to fill its customer orders by choosing the market maker it deems
best in each particular stock quickly and efficiently in all market  conditions.
Additionally,   the  firm  offers  customers   execution  services  through  the
SelectNet(2)  and Instinet(3)  systems.  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.

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

                                      -3-
<PAGE>

         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 or Certificates of
Deposit. See "Description of Business-Capital Markets Division."

         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 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.

         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  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 the 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 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.

                                      -4-
<PAGE>

         SIEBERT  ONLINE - the firm's popular PC software runs on Windows 3.1(4)
and  Windows95(5)  through  a  secure  private  connection.   It  features  easy
installation and intuitive  operations but its design lends itself to the active
trader as well.  With the click of a mouse,  investors  can check their  account
status, get real-time quotes and place orders 24 hours a day.

         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 Fax(R) 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  6,000 mutual funds,  including
1,800 no-load funds, about 800 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)(6)  DEBIT CARD - allows  customers the convenience of 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 pickup 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.

         Siebert is currently developing and will offer during the next year new
products and services including the following:

         o   Major  upgrades and  improvements  to each of its major  electronic
             services - SiebertNet,  Siebert  Online,  and  MartketPhone.  These
             upgrades are intended to vastly  improve the efficiency and content
             of these services.

----------
(4)   Windows 3.1 is a trademark of the Microsoft Corporation.
(5)   Windows95 is a trademark of the Microsoft Corporation.
(6)   VISA is a registered trademark of VISA International, Inc.

                                      -5-
<PAGE>

         o   Brand new  wireless  trading  and  market  data  service - this new
             product  will allow  clients to place  trades,  receive  quotes and
             access other market information by utilizing the latest in wireless
             technology.

         o   News and trade execution alert service - customers are able to keep
             abreast of the market whether at home or traveling using the firm's
             alert service via PC, beeper or fax.

         NEW  ACCOUNTS  DEPARTMENT.  Siebert  maintains a separate  New Accounts
department to  familiarize  each customer  with  Siebert's  variety 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,
credit  bureaus 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, SEPP
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

                                       -6-
<PAGE>

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  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.

         Pursuant  to  its  clearing  agreement,  Siebert  participates  in  its
clearing  agent's income from financing  Siebert  customers'  transactions.  See
"Management's Discussion and Analysis or Plan of Operation."

         OFFICES.  Siebert currently  maintains seven retail discount  brokerage
offices.  See  "Properties."  Customers  can visit the 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  allowing  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 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.

         INFORMATION   SYSTEMS.   Siebert's   operations  rely  heavily  on  its
information  processing  and  communications   systems.   Siebert's  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.

         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

                                      -7-
<PAGE>

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 Siebert's information processing or
communication  systems for a significant  period of time could limit its ability
to process its 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 a separate  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  Capital  Markets  Division  has been
involved in issues from New York to California. In addition, the Capital Markets
Division's  distribution  system is  extensive.

         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 either
senior  managed or co-managed  over $99 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  corporate  offerings,
including 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 underwriting department.  This division is primarily comprised of a group
of investment  banking  professionals  who were previously  employed by the 13th
largest tax exempt  underwriting  firm in the  country.  The  operations  of the
Siebert,  Brandford,  Shank  division  will  shortly be moved to a newly  formed

                                      -8-
<PAGE>

entity, Siebert,  Brandford,  Shank & Co., L.L.C. 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. The division 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.

         Pending  transfer  to  Siebert,  Brandford,  Shank & Co.,  L.L.C.,  the
municipal  bond business has been  operated as a division of Siebert,  utilizing
the financial arrangement previously described.

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

         To  date,  the  Siebert,   Brandford,  Shank  division  has  co-managed
offerings  of  approximately   $20  billion  and  senior  managed  offerings  of
approximately $700 million. Clients include the States of California,  Texas and
Washington and the Cities of New York, Chicago, Detroit and St. Louis.

         The principal  sources of revenue of the Capital  Markets  Division are
underwriting profits and management fees derived from underwriting.

         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.

         INSTITUTIONAL   EQUITY   EXECUTION   SERVICES.   The  firm   emphasizes
personalized  service,  professional  order handling and client  satisfaction to
approximately 600 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 proprietary trading function,
it does not execute customer orders against such proprietary  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
firm trades an average of 540,000 shares

                                      -9-
<PAGE>

daily for institutional investors and for its own account.

         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  Pentium(7)-based  PCs running Microsoft
Windows95(8)  or Windows  NT(9).  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.

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  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. 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

----------
(7)   Pentium is a trademark of the Intel Corporation.
(8)   Microsoft Windows95 is a trademark of the Microsoft Corporation.
(9)   WindowsNT is a trademark of the Microsoft Corporation.

                                      -10-
<PAGE>

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.  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.

         Among Siebert's principal retail competitors are Charles Schwab,  Quick
and Reilly,  Fidelity Investments,  Waterhouse Securities,  Jack White & Co. and
Kennedy  Cabot.  Siebert  charges  commissions  generally  lower than some other
discount  brokers  including  Charles  Schwab,   Quick  &  Reilly  and  Fidelity
Investments. 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.

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)
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  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

                                      -11-
<PAGE>

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 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  issued  an  injunction
blocking the  implementation  of the  proposition.  The Court of Appeals for the
Ninth Circuit considered the appeal of the injunction blocking Proposition 209's
implementation.  Such Court  expressly  upheld  Proposition 209 and the Governor
responded  to the  decision by signing an executive  order  abolishing  minority
preferences  in the awarding of state  contracts.  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
qualified WBEs and MWBEs.  See "Description of Business  Advertising,  Marketing
and Promotion."

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.

                                      -12-
<PAGE>

         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  would  be less  than 5  percent  of
aggregate  debits.)  At December  31, 1997 and 1996,  Siebert had net capital of
$9.1 million and $7.8 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 27, 1998, the Company had approximately 120 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.

                                      -13-
<PAGE>

ITEM 2. DESCRIPTION OF PROPERTY.

        Siebert  operates  its  business out of the  following  fourteen  leased
offices:
<TABLE>
<CAPTION>

                                                                   Expiration
                                              Approximate            Date Of
                                            Office Area in           Current            Renewal
               Location                       Square Feet             Lease              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                                  1,000 SF             12/31/00             None
9693 Wilshire Boulevard
Beverly Hills, CA  90212

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

66 South Street                                 1,341 SF             8/31/98              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             9/30/98              None
Surfside, FL  33154


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             None
Dallas, TX  75201                                                     month

400 Renaissance Center                          1,500 SF             Month to             None
Detroit, MI  48243                                                    month
</TABLE>

                                              -14-
<PAGE>
<TABLE>
<CAPTION>

                                                                 Expiration
                                            Approximate            Date Of
                                          Office Area in           Current            Renewal
               Location                     Square Feet             Lease              Terms
               --------                     -----------             -----              -----

<S>                                          <C>                  <C>                <C>
523 West 6th Street                           1,138 SF             5/16/98              None
Los Angeles, CA  90014

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

601 Union Street                                325 SF             4/30/98          1 year option
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.

         Siebert is involved in various  routine  lawsuits of a nature  which is
deemed  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.

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

         At the Company's  Annual  Meeting of  Shareholders  held on December 1,
1997, the  shareholders  voted on the following five proposals:  (1) election of
five members of the Board of Directors to serve until the next Annual Meeting of
Shareholders;  (2)  ratification and approval of a Stock Option Plan approved by
the Board of  Directors;  (3) approval of the  granting of stock  options to the
non-employee  members of the  Company's  Board of  Directors;  (4)  approval  of
certain proposed amendments to the Company's  Certificate of Incorporation;  and
(5)  ratification  and approval of the  appointment by the Board of Directors of
Richard A. Eisner & Company,  LLP as the Company's  independent auditors for the
fiscal year ended December 31, 1997. All such proposals were approved,  with the
following votes cast:

(1)       Election of Board of Directors

          The  five  members  of the  Board of  Directors,  Muriel  F.  Siebert,
          Nicholas P. Dermigny,  Patricia L. Francy,  Jane H. Macon and Monte E.
          Wetzler,  were  elected  to serve  until the 1998  Annual  Meeting  of
          Shareholders  and in each case until their  respective  successors are
          elected and  qualified.  Each nominee for director  received a minimum
          vote of  5,209,720  shares for, a maximum of 70 shares  against and no
          shares abstaining.

                                      -15-
<PAGE>
<TABLE>
<CAPTION>

                                                      For                Against             Abstain
                                                      ---                -------             -------

<S>                                                <C>                    <C>                <C>
(2)     Ratification of Stock Option Plan          5,111,379              6,577              24,060

(3)     Grant of Stock Options                     5,111,413             30,600                   3

(4)     Amendments to the Certificate of
         Incorporation                             5,204,038              5,727                  25

(5)     Appointment of the Company's
         independent auditors                      5,208,566              1,221                   3
</TABLE>


                                               -16-
<PAGE>


                                     PART II

ITEM 5.  MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.

         The Common Stock commenced  trading 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
                                                         -------      ------

      Period from November 12, 1996 to December 31, 1996 $12.000      $9.000
      First Quarter - 1997  ............................ $12.375      $9.250
      Second Quarter - 1997  ........................... $ 9.500      $9.250
      Third Quarter - 1997  ............................ $ 9.250      $5.250
      Fourth Quarter - 1997  ........................... $ 9.000      $7.500
      Period from January 1, 1998 to March 27, 1998  ... $48.250      $9.688

         The closing  price of the Common  Stock on March 27, 1998 on the Nasdaq
SmallCap Market was $31.75 per share.

         As of March 27, 1998,  there were  approximately  200 holders of record
and approximately 800 beneficial holders of Common Stock.

DIVIDEND POLICY

         On December  22, 1997 and March 16,  1998,  dividends of $.09 per share
were declared for all  stockholders  of record as of December 30, 1997 and March
20, 1998, respectively. Ms. Siebert, as the majority shareholder of the Company,
waived her right to receive the two cash  dividends  declared by the Company and
may from time to time waive her right to receive future cash dividends declared,
if any.

         Subject to statutory and regulatory  constraints,  prevailing financial
conditions and future earnings, the Company may pay cash dividends in the future
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.

LIMITED OFFERING 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 $9.375 per share.  The offer expired March 21, 1997.  1,713 shares
were issued pursuant to the offer.

                                      -17-
<PAGE>

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.

         Statements  in this  "Management's  Discussion  and Analysis or Plan of
Operation" and elsewhere in this document as well as oral statements that may be
made by the Company or by officers, directors or employees of the Company acting
on the  Company's  behalf that are not  statements of historical or current fact
constitute  "forward  looking  statements"  within the  meaning  of the  Private
Securities  Litigation  Reform  Act of  1995.  Such  forward-looking  statements
involve risks and  uncertainties  and known and unknown factors that could cause
the actual results of the Company to be materially different from the historical
results or from any future results  expressed or implied by such forward looking
statements,  including,  without  limitation:  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   and  changes  in  net  capital  or  other   regulatory
requirements.

BUSINESS ENVIRONMENT

         Market conditions during 1997 reflected a continuation of the 1996 bull
market characterized by record volume and record high market levels. At the same
time, 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 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 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 also 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 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  relative  profitability.  In periods of reduced market  activity,
profitability  is likely to be  adversely  affected  because  certain  expenses,
including  salaries  and related  costs,  portions of  communications  costs and
occupancy  expenses,  remain  relatively  fixed.  Accordingly,  earnings for any
period should not be considered representative of any other period.

                                      -18-
<PAGE>


         Siebert's  clearing  broker has represented  that its computer  systems
will be year 2000 operable and fully tested by December 31, 1998.  The Company's
own systems are presently being modified or replaced.  The Company  believes its
cost for meeting this problem will not be material.

CURRENT DEVELOPMENTS

         During the fourth  quarter of 1997,  the Company,  through its Siebert,
Brandford,  Shank  division,  acted as either senior manager or co-manager for a
total of $3.8 billion of municipal bond offerings.  In addition, the Company was
appointed as senior  manager for several large  offerings  including the Oakland
State Building Authority ($158 million) and the City of North Forest Independent
School District ($47 million).

RESULTS OF OPERATIONS

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

         Total revenues for 1997 were $25.9 million, an increase of $1.7 million
or 7.1% over  1996.  Investment  banking  revenues,  trading  and  interest  and
dividend revenues increased as compared to the prior year,  however,  commission
and fee income decreased.

         Commission  and fee  income  decreased  $1.2  million  or 6.1% 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.

         Trading profits increased $926,000 or 107% to $1,795,000  primarily due
to  increased  activity in  secondary  municipal  bond  trading by the  Siebert,
Brandford,  Shank division and improved  trading  opportunities in the principal
listed bond funds trading activity.

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

         Investment  banking  revenues  increased  $2.0  million  or 77% to $4.5
million primarily due to a whole year of tax exempt underwriting activity by the
Siebert,  Brandford,  Shank  division in 1997.  This division  operated for only
three months of the year in 1996.

         Total expenses for 1997 were $21.2  million,  a decrease of $806,000 or
3.7% over 1996.  Both employee  compensation  and benefits and  advertising  and
promotion decreased. All other categories of costs increased.

         Employee  compensation  and benefit costs decreased $1.5 million or 16%
to $8.2 million primarily due to Muriel Siebert's compensation reduction, offset
by a full  year's  worth  of  compensation  for the  Siebert,  Brandford,  Shank
division's  principals,  municipal investment banking staff and commission based
municipal trading personnel.

         Clearing and brokerage fees increased  $90,000 or 2.0% to $4.7 million.
Such costs increased due to a higher volume of tickets.

                                      -19-
<PAGE>

         Advertising and promotion expense  decreased  $514,000 or 15.7% to $2.8
million due to decreased branch and service promotion; 1996 included several one
time expenses related to branch expansion and on-line trading.

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

         Occupancy costs increased  $245,000 or 61% to $649,000  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% to $418,000 primarily due to
greater use of margin  borrowings  and short  positions in  proprietary  trading
activity.

         Other general and administrative  expenses increased $704,000 or 30% 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.

         Current and pro forma provision for income taxes increased $1.1 million
or 116% to $2.1 million while net income for 1997 was $2.6 million,  an increase
of $1.4 million or 116% over 1996, both  proportional  to a similar  increase in
pre-tax income.

YEAR ENDED DECEMBER 31, 1996 COMPARED TO YEAR ENDED DECEMBER 31, 1995

         Total revenues for 1996 were $24.2 million, an increase of $3.1 million
or 15% over 1995.  Commission  and fee income and  investment  banking  revenues
increased and trading and interest and dividend revenues declined.

         Commission  and fee  income  increased  $4.5  million  or 29% to  $20.1
million due to the continued bull market and increased  spending for advertising
and promotion to attract additional clients.  In addition,  under a new clearing
agreement  which was  phased in  during  the  second  quarter  of 1995,  Siebert
received additional  commission income on client margin and free credit balances
and  investments  in certain  mutual and money  market  funds and the amounts of
related customer balances and investments increased substantially.

         Trading  profits  declined  $1.7  million or 67% to  $869,000  due to a
continuing lack of liquidity and substantially  reduced volatility in markets in
which  the firm  trades,  thus  limiting  trading  and  arbitrage  opportunities
compared to the prior year.

         Interest  and  dividends  decreased  $733,000 or 53% to $656,000 due to
decreases in long trading  positions and in trading  strategies  which generated
greater dividend income in 1995 over the corresponding period in 1996.

         Investment  banking  revenues  increased  $1.1  million  or 81% to $2.5
million  due  to  increased   participation   in  both  equity  and  tax  exempt
underwritings  over  the  prior  year  period.   This  resulted  from  providing
additional  resources to the  development  of both types of business

                                      -20-
<PAGE>

and, from October 1, 1996, the addition of over 20 municipal  investment banking
professionals  to form the Siebert,  Brandford,  Shank  division  engaged in tax
exempt underwriting.

         Total costs and  expenses for 1996 were $22.0  million,  an increase of
$2.2 million or 11% over 1995. All categories of costs increased except interest
expense and other general and administrative expenses.

         Employee  compensation  and benefit costs increased $1.2 million or 14%
to $9.8  million  due to  provisions  for bonus  payments  and to  increases  in
staffing  to cover  the  trading  and  service  needs of the  retail  commission
business,  and, in the fourth  quarter,  the tax exempt  underwriting  business.
Management,  staff and incentive bonuses increased  $350,000  reflecting volume,
improved performance and firm profitability. The balance of the increase relates
primarily to an increase in average head count of 73 for 1995 to 95 for 1996, an
increase of 32%.  The staff  increase is  primarily  related to the  increase in
retail  commission  business  and, in the fourth  quarter,  the  addition of the
municipal investment banking professionals.

         Clearing and brokerage fees increased $336,000 or 7.9% to $4.6 million.
Such costs increased substantially less than commission volume due to the effect
of a new clearing cost structure that became  effective in the second quarter of
1995.

         Advertising  and promotion  expense  increased  $780,000 or 31% to $3.3
million due to increased branch and service promotion (for example,  the opening
of the Naples  office in early 1996 and the Surfside  and Palm Beach  offices in
late 1996 and the  introduction  of new products  such as "Siebert  OnLine") and
increased advertising and promotion to differentiate Siebert from other firms in
an increasingly competitive environment.

         Communications expense increased $240,000 or 22% to $1.4 million as the
client  base and  volume  increased  and more  services  were  offered  directly
on-line.

         Occupancy costs increased $77,000 or 24% to $403,000 principally due to
opening a new branch in Naples, Florida in December 1995, pre-opening and rental
costs of three new retail  branches in late 1996, and the new location costs for
the Siebert, Brandford, Shank division for the fourth quarter of 1996.

         Interest expense declined $278,000 or 49% to $291,000  primarily due to
the  decreased  use of  equity  trading  strategies  that  involve  large  short
positions.  Dividend  charges  against  short  positions are included as part of
interest expense.

         Other general and  administrative  expenses decreased $122,000 or 5% to
$2.3 million due principally to reduced legal and consulting fees in the current
year.  Included in general and  administrative  costs for 1996 are approximately
$210,000 in legal,  accounting  and printing  costs related to the JMI merger in
November 1996.

         Siebert's  current and pro forma  provision for income taxes  increased
$405,000  or 74% to  $953,000  while  pro  forma  net  income  for 1996 was $1.2
million,  an  increase  of $516,000  or 74% over 1995,  both  proportional  to a
similar increase in pre-tax income.

                                      -21-
<PAGE>

YEAR ENDED DECEMBER 31, 1995 COMPARED TO YEAR ENDED DECEMBER 31, 1994

         Total revenues for 1995 were $21.0 million, an increase of $3.7 million
or 21% over 1994.  Commission and fee income and interest and dividend  revenues
increased and trading and investment banking revenues declined.

         Commission  and fee  income  increased  $3.5  million  or 29% to  $15.6
million due to the continued bull market and increased  spending for advertising
to attract additional clients.

         Trading profits declined  $607,000 or 19% to $2.6 million due to a lack
of liquidity and substantially  reduced  volatility in the firm's markets during
the  second  half  of  the  year  thus   limiting  the  trading  and   arbitrage
opportunities present in the first half of the year and in the prior period.

         Interest and dividends  increased  $927,000 or 200% to $1.4 million due
to increases in long trading positions and in trading strategies which generated
greater dividend income.

         Investment  banking revenues decreased $139,000 or 9.1% to $1.4 million
due to reduced  underwriting  volume generally in municipal  markets and a shift
from negotiated  underwriting  transactions to  competitively  bid  transactions
which are relatively less profitable for participants.

         Total costs and  expenses for 1995 were $19.8  million,  an increase of
$3.0 million or 18% over 1994. All categories of costs increased except interest
expense.

         Employee  compensation  and benefit costs increased $2.5 million or 40%
to $8.6 million due to an increase in  Subchapter-S  compensation to Ms. Siebert
of $1.76 million,  an increase in contractual  incentive  bonus  compensation of
$355,000 and an increase in the bonus  provision for other staff and  executives
of $365,000.

         Clearing and brokerage fees increased $282,000 or 7.1% to $4.2 million.
Such costs increased substantially less than commission volume due to the effect
of a new clearing cost structure that became  effective in the second quarter of
1995.

         Advertising and promotion  expense  increased  $186,000 or 8.1% to $2.5
million primarily in increased  advertising to differentiate  Siebert from other
firms in an increasingly competitive environment.

         Communications expense increased $117,000 or 12% to $1.1 million due to
increased  market volume,  increased use of "800" number service  resulting from
national  television  advertising  and increased  use of Siebert's  market phone
service for orders as well as customer inquiries.  Also as a result of increased
volume, the cost of quote services increased $58,000 or 14%.

         Occupancy  costs  increased  $3,000 or 0.9% to $326,000  primarily from
cost escalation provisions in existing leases.

                                      -22-

<PAGE>

         Interest expense declined $34,000 or 5.7% to $568,000  primarily due to
the  decreased  use of  equity  trading  strategies  that  involve  large  short
positions.  Dividend  charges  against  short  positions are included as part of
interest expense.

         Pro forma  provision  for income  taxes  increased  $303,000 or 124% to
$548,000 and pro forma net income for 1995 was $697,000, an increase of $385,000
or 123% over 1994, both proportional to a similar increase in pre-tax income.

LIQUIDITY AND CAPITAL RESOURCES

         The Company's assets are highly liquid,  consisting  generally of cash,
money market funds and securities  freely salable in the open market.  Siebert's
total assets at December 31, 1997 were $17.9 million, of which $2.0 million took
the form of a secured  demand  note.  $13.1  million or 73% of total assets were
highly liquid.

         Siebert is subject to the net capital requirements of the SEC, the NYSE
and other regulatory authorities. At December 31, 1997, Siebert's regulatory net
capital  was $9.1  million,  $8.8  million  in  excess  of its  minimum  capital
requirement of $250,000.

ITEM 7.  FINANCIAL STATEMENTS.

         See index immediately following the signature page.

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

         None.

                                      -23-

<PAGE>

                                    PART III

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

        (a)       Identification of Directors

                  The  information  required  by this  item is  incorporated  by
                  reference from the Company's  definitive proxy statement to be
                  filed by the Company pursuant to Regulation 14A.

        (b)       Identification of Executive Officers

                  The executive officers of the Company are:
<TABLE>
<CAPTION>

                  NAME                          AGE        POSITION
                  ----                          ---        --------

<S>               <C>                           <C>        <C>
                  Muriel F. Siebert             65         Chair and President



                  Nicholas P. Dermigny          40         Executive Vice President and
                                                           Chief Operating Officer

                  Richard M. Feldman            36         Executive Vice President,
                                                           Chief Financial Officer and
                                                           Assistant Secretary

                  Daniel Iesu                   38         Secretary
</TABLE>

         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,  the National Women's Business
Council, the International Women's Forum and the Boy Scouts of Greater New York.

         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 a director of the Company on November 8, 1996.

         RICHARD M. FELDMAN has been Executive Vice  President,  Chief Financial
Officer and  Assistant  Secretary of Siebert and the Company  since  October 20,
1997.  From August 1992 to October 1997, Mr.  Feldman served as Chief  Financial
Officer of various broker  dealers,  including  Waterhouse  Securities,  Inc., a
national discount  brokerage firm headquartered in New

                                      -24-
<PAGE>

York City. Prior to these positions, Mr. Feldman worked ten years for Deloitte &
Touche, a large international accounting firm. Mr. Feldman is a Certified Public
Accountant.

         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.

ITEM 10. EXECUTIVE COMPENSATION.

         The information required by this item is incorporated by reference from
the Company's  definitive proxy statement to be filed by the Company pursuant to
Regulation 14A.

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

         The information required by this item is incorporated by reference from
the Company's  definitive proxy statement to be filed by the Company pursuant to
Regulation 14A.

ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

         The information required by this item is incorporated by reference from
the Company's  definitive proxy statement to be filed by the Company pursuant to
Regulation 14A.

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

        (a)   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)   Reports on Form 8-K

              None.

                                      -25-


<PAGE>


                                   SIGNATURES

         In  accordance  with  Section  13 or 15(d)  of the  Exchange  Act,  the
registrant  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 30, 1998


         In accordance  with the Exchange Act, this report has been signed below
by the following  persons on behalf of the  registrant and in the capacities and
on the dates indicated.
<TABLE>
<CAPTION>

          NAME                                         TITLE                                DATE
          ----                                         -----                                ----

<S>                                         <C>                                         <C>
/s/ MURIEL F. SIEBERT                       Chair, President and Director               March 30, 1998
------------------------                    (principal executive officer)
    Muriel F. Siebert

/s/ NICHOLAS P. DERMIGNY                    Executive Vice President,                   March 30, 1998
------------------------                    Chief Operating Officer and
    Nicholas P. Dermigny                    Director

/s/ RICHARD M. FELDMAN                      Executive Vice President,                   March 30, 1998
------------------------                    Chief Financial Officer
    Richard M. Feldman                      and Assistant Secretary
                                            (principal financial and
                                            accounting officer)

/s/ PATRICIA L. FRANCY                      Director                                    March 30, 1998
------------------------
    Patricia L. Francy

/s/ JANE H. MACON                           Director                                    March 30, 1998
------------------------
    Jane H. Macon

/s/ MONTE E. WETZLER                        Director                                    March 30, 1998
------------------------
    Monte E. Wetzler
</TABLE>

                                                      -26-

<PAGE>


                     SIEBERT FINANCIAL CORP. AND SUBSIDIARY

                   INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

                                                                            PAGE
                                                                            ----
Report of Independent Auditors                                              F-1

Consolidated Statements of Financial Condition at
  December 31, 1997 and 1996                                                F-2

Consolidated Statements of Income for each of the
  years in the three-year period ended December 31, 1997                    F-3

Consolidated Statements of Changes in Stockholders' Equity
  for each of the years in the three-year  period ended
  December 31, 1997                                                         F-4

Consolidated Statements of Cash Flows for each of the
  years in the three-year period ended December 31, 1997                    F-5

Notes to Consolidated Financial Statements                                  F-6


                                      -27-

<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,
1997 and December 31, 1996, and the related  consolidated  statements of income,
changes  in  stockholders'  equity  and cash  flows for each of the years in the
three-year  period ended December 31, 1997.  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, 1997 and December 31,
1996, and the consolidated  results of their operations and their cash flows for
each  of the  years  in the  three-year  period  ended  December  31,  1997,  in
conformity with generally accepted accounting principles.


Richard A. Eisner & Company, LLP

New York, New York
February 13, 1998


                                      F-1

<PAGE>


SIEBERT FINANCIAL CORP. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION

<TABLE>
<CAPTION>
                                                                           DECEMBER 31,
                                                                    -------------------------
ASSETS                                                                  1997          1996
                                                                    -----------   -----------

<S>                                                                 <C>           <C>
Cash and cash equivalents                                           $ 4,394,142   $   231,029
Cash equivalents - restricted                                         1,300,000            --
Receivable from clearing broker                                       2,134,839     1,141,439
Securities owned, at market value                                     6,564,668    10,116,248
Secured demand note receivable from affiliate                         2,000,000     2,000,000
Furniture, equipment and leasehold improvements, net                    475,553       450,254
Investment in affiliate                                                 392,000            --
Prepaid expenses and other assets                                       620,387       433,738
                                                                    -----------   -----------
                                                                    $17,881,589   $14,372,708
                                                                    ===========   ===========
LIABILITIES AND STOCKHOLDERS' EQUITY

Liabilities:
Securities sold, not yet purchased, at market value                 $ 2,037,547   $ 1,447,143
Accounts payable and accrued liabilities                              3,171,485     2,824,000
                                                                    -----------   -----------
                                                                      5,209,032     4,271,143
                                                                    -----------   -----------
Commitments and contingent liabilities

Subordinated borrowings payable to affiliate                          3,000,000     3,000,000
                                                                    -----------   -----------
Stockholders' equity:
Common stock, $.01 par value; 49,000,000 shares authorized,
  5,237,610 shares outstanding at December 31, 1997 and 5,235,897
  shares outstanding at December 31, 1996                                52,376        52,359
Additional paid-in capital                                            6,742,091     6,771,049
Retained earnings                                                     2,878,090       278,157
                                                                    -----------   -----------
                                                                      9,672,557     7,101,565
                                                                    -----------   -----------

                                                                    $17,881,589   $14,372,708
                                                                    ===========   ===========
</TABLE>


                    See notes to consolidated financial statements.


                                         F-2

<PAGE>

SIEBERT FINANCIAL CORP. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
                                                        YEAR ENDED DECEMBER 31,
                                              ---------------------------------------
                                                  1997          1996          1995
                                              -----------   -----------   -----------
Revenues:
<S>                                           <C>           <C>           <C>
   Commissions and fees                       $18,879,674   $20,105,127   $15,645,334
   Investment banking                           4,487,594     2,532,795     1,396,967
   Trading profits                              1,795,104       868,823     2,608,078
   Interest and dividends                         704,911       656,434     1,389,612
                                              -----------   -----------   -----------

                                               25,867,283    24,163,179    21,039,991
                                              -----------   -----------   -----------

Expenses:
   Employee compensation and benefits           8,208,006     9,753,847     8,586,116
   Clearing fees, including floor brokerage     4,675,368     4,585,398     4,249,050
   Advertising and promotion                    2,751,755     3,265,692     2,485,426
   Communications                               1,446,817     1,359,325     1,119,189
   Occupancy                                      648,763       403,534       326,089
   Interest                                       418,405       290,465       568,326
   Other general and administrative             3,043,068     2,339,483     2,461,122
                                              -----------   -----------   -----------

                                               21,192,182    21,997,744    19,795,318
                                              -----------   -----------   -----------

Income before income taxes                      4,675,101     2,165,435            --

Provision for income taxes - current            2,057,000       201,000            --
                                              -----------   -----------   -----------

NET INCOME - HISTORICAL                       $ 2,618,101     1,964,435     1,244,673
                                              ===========

Pro forma provision for income taxes                            752,000       548,000
                                                            -----------   -----------

NET INCOME - PRO FORMA                                        1,212,435   $   696,673
                                                                          ===========

SUPPLEMENTARY PRO FORMA ADJUSTMENT:
  Effect of officer's salary reduction
    as though 1997 salary had been in
    effect in 1996                                            2,975,000
  Related income taxes                                       (1,309,000)
                                                            -----------

SUPPLEMENTARY PRO FORMA NET INCOME                          $ 2,878,435
                                                            ===========

Net income per share of common stock -
  basic and diluted:
  Historical                                  $       .50
  Pro forma                                                 $       .23   $       .13
  Supplementary pro forma                                   $       .55

WEIGHTED AVERAGE SHARES DEEMED OUTSTANDING      5,237,371     5,235,897     5,235,897
</TABLE>


                 See notes to consolidated financial statements.


                                      F-3

<PAGE>


SIEBERT FINANCIAL CORP. AND SUBSIDIARY

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, 1995                    5,105,000   $    51,050   $        --    $ 3,841,407    $ 3,892,457

Net income                                          --            --            --      1,244,673      1,244,673
                                             ---------   -----------   -----------    -----------    -----------

BALANCE - DECEMBER 31, 1995                  5,105,000        51,050            --      5,086,080      5,137,130
Net income as subchapter - S corporation
  January 1, 1996 - November 8, 1996                --            --            --      1,686,278      1,686,278

Transfer upon change in tax status                  --            --     6,772,358     (6,772,358)            --

Issuance of shares in connection with
  reorganization                               130,897         1,309        (1,309)            --             --

Net income as C corporation
  November 9, 1996 - December 31, 1996
                                                    --            --            --        278,157        278,157
                                             ---------   -----------   -----------    -----------    -----------

BALANCE - DECEMBER 31, 1996                  5,235,897        52,359     6,771,049        278,157      7,101,565

Net income                                          --            --            --      2,618,101      2,618,101

Issuance of shares in connection with
  offering, net of expenses                      1,713            17       (28,958)            --        (28,941)

Dividend on common stock                            --            --            --        (18,168)       (18,168)
                                             ---------   -----------   -----------    -----------    -----------

BALANCE - DECEMBER 31, 1997                  5,237,610   $    52,376   $ 6,742,091    $ 2,878,090    $ 9,672,557
                                             =========   ===========   ===========    ===========    ===========


                                  See notes to consolidated financial statements.
</TABLE>


                                                      F-4
<PAGE>


SIEBERT FINANCIAL CORP. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
                                                                                          YEAR ENDED DECEMBER 31,
                                                                          -----------------------------------------
                                                                               1997          1996           1995
                                                                          -----------    -----------    -----------
CASH FLOWS FROM OPERATING ACTIVITIES:
<S>                                                                       <C>            <C>            <C>
  Net income                                                              $ 2,618,101    $ 1,964,435    $ 1,244,673
  Adjustments to reconcile net income to net cash provided by (used in)
    operating activities:
      Depreciation and amortization                                           157,010        108,460         67,360
      Changes in operating assets and liabilities:
        Net decrease (increase) in securities owned, at market value        3,551,580      3,630,683     (8,006,577)
        Net change in receivable from clearing broker                        (993,400)    (6,377,785)     8,151,165
        (Increase) in prepaid expenses and other assets                      (186,649)      (292,409)        (2,097)
        Net increase (decrease) in securities sold, not yet purchased,
          at market value                                                     590,404        868,653       (994,994)
        Increase (decrease) in accounts payable and accrued
          liabilities                                                         347,485       (515,229)     1,432,940
                                                                          -----------    -----------    -----------

          Net cash provided by (used in) operating activities               6,084,531       (613,192)     1,892,470
                                                                          -----------    -----------    -----------

CASH FLOWS FROM INVESTING ACTIVITIES:
  Investment in cash equivalents-restricted                                (1,300,000)            --             --
  Purchase of furniture, equipment and leasehold improvements                (182,309)      (319,850)       (95,771)
  Investment in affiliate                                                    (392,000)            --             --
                                                                          -----------    -----------    -----------

          Net cash (used in) investing activities                          (1,874,309)      (319,850)       (95,771)
                                                                          -----------    -----------    -----------

CASH FLOWS FROM FINANCING ACTIVITIES:
  Subordinated borrowings from affiliate                                           --      1,000,000             --
  Repayment of subordinated borrowings from affiliate                              --             --     (2,000,000)
  Issuance of shares, net of expenses                                         (28,941)            --             --
  Dividend on common stock                                                    (18,168)            --             --
                                                                          -----------    -----------    -----------

          Net cash (used in) provided by financing activities                 (47,109)     1,000,000     (2,000,000)
                                                                          -----------    -----------    -----------

          Net increase (decrease) in cash and cash equivalents              4,163,113         66,958       (203,301)

Cash and cash equivalents - beginning of year                                 231,029        164,071        367,372
                                                                          -----------    -----------    -----------

Cash and cash equivalents - end of year                                   $ 4,394,142    $   231,029    $   164,071
                                                                          ===========    ===========    ===========

SUPPLEMENTAL CASH FLOW DISCLOSURES:
  Cash paid for:
    Interest                                                              $   405,000    $   290,465    $   568,326
    Income taxes                                                            1,796,000        234,850        126,342

SUPPLEMENTAL INFORMATION ON NONCASH FINANCING ACTIVITIES:
   During 1995, an affiliate issued a secured demand note to the Company and the
     Company issued a subordinated note to a shareholder, both in the amount of
      $2,000,000.


                                   See notes to consolidated financial statements.
</TABLE>


                                                       F-5
<PAGE>


SIEBERT FINANCIAL CORP. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995


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.

       In accordance with a Plan and Agreement of Merger (the "Agreement") which
       closed on November 8, 1996 (the  "Merger"),  J.  Michaels,  Inc.  ("JMI")
       issued  5,105,000  shares (post  one-for-seven  reverse  split) to Muriel
       Siebert in exchange for all the issued and  outstanding  shares of Muriel
       Siebert Capital Markets Group,  Inc.,  sole  shareholder of Siebert.  The
       Agreement provided that JMI liquidate all its assets other than shares of
       Siebert,  and distribute the proceeds to the pre-merger  stockholders  of
       JMI who, by virtue of the Merger, collectively retained a 2 1/2% interest
       in the surviving  company which has been renamed Siebert  Financial Corp.
       The Merger has been accounted for as a reorganization  of Siebert whereby
       Financial  issued  130,897  shares of its common stock to the  pre-merger
       stockholders of JMI.  Accordingly,  the financial statements for 1996 and
       1995 are the historical basis financial statements of Siebert.

       The financial  statements  reflect the results of  operations,  financial
       condition  and cash flows of Siebert  and,  from the date of the  Merger,
       Financial.  All significant  intercompany  accounts have been eliminated.
       Financial  and  Siebert  collectively  are  referred  to  herein  as  the
       "Company".

[2]    SECURITY TRANSACTIONS:

       Prior to 1996, security transactions,  commissions, revenues and expenses
       were  recorded  on a  settlement  date  basis,  generally  the  third day
       following the  transaction  for  securities and the next day for options.
       Revenues and related  expenses on a trade date basis were not  materially
       different. Effective January 1, 1996, 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:

       Prior to November 8, 1996,  the Company  was  considered  a  subchapter-S
       corporation for tax purposes. Such status was terminated by virtue of the
       Merger.  The historical  financial  statements do not include a provision
       for  income  taxes  for the  period  prior  to the  termination  of the S
       election. A pro forma provision for income taxes has been reflected which
       represents  taxes which would have been provided had the Company operated
       as a C corporation for the entire year.


                                      F-6
<PAGE>


SIEBERT FINANCIAL CORP. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995

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

[3]    INCOME TAXES  (CONTINUED):

       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. The Company files a consolidated Federal income tax return.

[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.

[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:

       In 1997, the Company adopted SFAS #128,  "Earnings Per Share".  SFAS #128
       requires  the  reporting  of earnings  per basic share and  earnings  per
       diluted  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  including options.  Adoption of
       SFAS #128 had no effect on prior periods.


                                      F-7
<PAGE>


SIEBERT FINANCIAL CORP. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995

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

[9]    PRO FORMA AND SUPPLEMENTARY PRO FORMA DATA:

       Pro forma net income  and pro forma  earnings  per share  give  effect to
       income taxes which would have been provided had the Company operated as a
       C corporation for all of 1996 and 1995.

       Supplementary  pro forma net income and  supplementary pro forma earnings
       per share give effect to the  adjustment of Ms.  Siebert's  salary to the
       amount set forth in her current  salary  arrangement  and the related tax
       effect.

[10]   INVESTMENT BANKING:

       Investment  banking  revenues  include  gains and fees,  net of syndicate
       expenses,  arising  primarily  from municipal bond offerings in which the
       Siebert,  Brandford,  Shank  ("SBS")  division  of  Siebert  acts  as  an
       underwriter or agent.  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.

[11]   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 Siebert,  Brandford,  Shank &
       Co., L.L.C., an affiliated registered broker dealer.


NOTE B - INVESTMENT IN AFFILIATE

In March 1997,  Siebert and two individuals (the  "Principals")  formed Siebert,
Brandford,  Shank  & Co.,  L.L.C.  to  succeed  to the tax  exempt  underwriting
business of the SBS division of Siebert when regulatory  requirements  have been
met. 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  $601,000  through  March 10,  1997 are to be  recouped by Siebert
prior to any profit  allocation to the Principals.  Siebert invested $392,000 as
its share of the members'  capital of Siebert,  Brandford,  Shank & Co.,  L.L.C.
Siebert  operated the SBS division  business  during 1997 in accordance with the
terms of the agreements with the Principals.


                                      F-8
<PAGE>


SIEBERT FINANCIAL CORP. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995

NOTE C - SUBORDINATED BORROWINGS AND SECURED DEMAND NOTE RECEIVABLE

The subordinated borrowings at December 31, 1997 are payable to an affiliate and
consist of the following:

<TABLE>
<CAPTION>
                                                                                             DECEMBER 31,
                                                                                   -------------------------------
                                                                                         1997             1996
                                                                                   --------------   --------------
<S>                                                                                <C>              <C>
            Secured demand note collateral agreement, 4%, due
               December 31, 1999                                                   $    2,000,000   $    2,000,000
            Subordinated note, 8%, due January 31, 1999                                   500,000          500,000
            Subordinated note, 8%, due October 31, 1999                                   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.

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,  $123,000
and $160,000 for the years ended December 31, 1997, 1996 and 1995, respectively.

The secured  demand note  receivable of $2,000,000 at December 31, 1997 and 1996
is collateralized by marketable  securities with a market value of approximately
$2,446,000 and $2,363,000, respectively.


                                      F-9
<PAGE>


SIEBERT FINANCIAL CORP. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995

NOTE D - FURNITURE, EQUIPMENT AND LEASEHOLD IMPROVEMENTS, NET

Furniture, equipment and leasehold improvements consist of the following:

<TABLE>
<CAPTION>
                                                                                   DECEMBER 31,
                                                                          ----------------------------
                                                                               1997            1996
                                                                          ------------    ------------
<S>                                                                       <C>             <C>
           Equipment                                                      $    638,534    $    569,471
           Leasehold improvements                                              128,655          70,576
           Furniture and fixtures                                               84,468          61,539
                                                                          ------------    ------------

                                                                               851,657         701,586

           Less accumulated depreciation and amortization                      376,104         251,332
                                                                          ------------    ------------

                                                                          $    475,553    $    450,254
                                                                          ============    ============
</TABLE>

Depreciation  and  amortization  expense for the years ended  December 31, 1997,
1996  and  1995  amounted  to  approximately  $157,000,  $108,000  and  $67,000,
respectively.


NOTE E - INCOME TAXES

Income tax expense (pro forma for periods prior to November 8, 1996) consists of
the following:

<TABLE>
<CAPTION>
                                                                                YEAR ENDED DECEMBER 31,
                                                                     ---------------------------------------------
                                                                           1997           1996            1995
                                                                     --------------  -------------  --------------
<S>                                                                  <C>             <C>            <C>
          Federal income tax                                         $    1,360,000  $     624,000  $      359,000
          State and local income tax                                        697,000        329,000         189,000
                                                                     --------------  -------------  --------------

          Income tax expense                                         $    2,057,000  $     953,000  $      548,000
                                                                     ==============  =============  ==============
</TABLE>


                                                         F-10
<PAGE>


SIEBERT FINANCIAL CORP. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995

NOTE E - INCOME TAXES  (CONTINUED)

A reconciliation  between the income tax expense (pro forma for periods prior to
November 8, 1996) 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,
                                                                         ---------------------------------------------
                                                                               1997           1996           1995
                                                                         --------------  -------------  --------------
<S>                                                                      <C>             <C>            <C>
Expected income tax provision at statutory Federal tax rate              $    1,590,000  $     736,000  $      423,000
State and local taxes, net of Federal tax effect                                467,000        217,000         125,000
                                                                         --------------  -------------  --------------

Income tax expense                                                       $    2,057,000  $     953,000  $      548,000
                                                                         ==============  =============  ==============
</TABLE>

There are no significant  temporary  differences which give rise to deferred tax
assets or liabilities at December 31, 1997 and 1996.


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. (The
net  capital  rule of the New York Stock  Exchange  also  provides  that  equity
capital may not be withdrawn  or cash  dividends  paid if resulting  net capital
would be less than 5 percent of  aggregate  debits.)  At  December  31, 1997 and
1996,  Siebert  had net  capital of  approximately  $9,052,000  and  $7,754,000,
respectively,  as compared with net capital  requirements  of $250,000.  Siebert
claims exemption from the reserve requirement under Section 15c3-3(k)(2)(ii).

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.  1,713 shares were issued with  proceeds to the Company
of approximately $16,000. Costs related to the offering approximated $45,000.

On  December  22, 1997 the  Company  declared a  quarterly  dividend of $.09 per
share. The principal  shareholder waived her right to receive her portion of the
dividend.

On  February  13, 1998 the  Company  announced  that in order to comply with the
rules of The Nasdaq  Stock  Market,  Inc.  relating to listings on the  SmallCap
Market, it will split its stock 4 for 1 in April 1998.


                                      F-11
<PAGE>

SIEBERT FINANCIAL CORP. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995

NOTE G - 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,  1997
settled with no adverse effect on Siebert's financial condition.


NOTE H - 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 plus operating expenses under these
operating leases are as follows:

                   YEAR ENDING
                   DECEMBER 31,                                       AMOUNT
                   ------------                                    ------------
                      1998                                         $    362,000
                      1999                                              356,000
                      2000                                              343,000
                      2001                                              325,000
                      2002                                              307,000
                      Thereafter                                        103,000
                                                                   ------------
                                                                   $  1,796,000
                                                                   ============

Rent  expense,   including   escalations  for  operating   costs,   amounted  to
approximately  $424,000,  $360,000 and $289,000 for the years ended December 31,
1997,  1996 and 1995,  respectively.  Payments are being charged to expense over
the entire lease term on a straight-line basis.


                                      F-12
<PAGE>


SIEBERT FINANCIAL CORP. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995

NOTE H - COMMITMENTS AND CONTINGENT LIABILITIES  (CONTINUED)

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 1997, 1996 and 1995.

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 I - 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 525,000  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 which 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.

On March 11, 1997,  the Company  granted to  non-employee  directors  options to
purchase  30,000  shares of the Company's  Common Stock at an exercise  price of
$9.25 per share. The directors' options are exercisable six months from the date
of grant and expire five years from the date of grant. On May 16, 1997, pursuant
to the Plan, the Company granted options to certain of its employees to purchase
199,750  shares of the Company's  Common Stock at an exercise price of $9.25 per
share. On November 6, 1997, pursuant to the Plan, the Company granted options to
an  employee to  purchase  10,000  shares of the  Company's  Common  Stock at an
exercise price of $8.875 per share.  All such employee options vest 20% per year
for five years and expire ten years from the date of grant. No employee  options
are currently exercisable.


                                      F-13
<PAGE>

SIEBERT FINANCIAL CORP. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995


NOTE I - OPTIONS  (CONTINUED)

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

                                                          1997
                                                 ---------------------
                                                              WEIGHTED
                                                              AVERAGE
                                                              EXERCISE
                                                  SHARES       PRICE
                                                 --------    ---------

Outstanding - beginning of year
Granted                                           239,750    $    9.23
Forfeited                                          (8,450)   $    9.25
                                                  -------

Outstanding - end of year                         231,300    $    9.23
                                                  =======

Exercisable at end of year                         30,000    $    9.25

Weighted average fair value of options granted               $    4.70

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>
        $        9.25         221,300               8.68 Years            $9.25           30,000          $9.25
        $        8.88          10,000               9.85 Years            $8.88                -              -
                             --------                                                     ------

        $8.88 - $9.25         231,300               8.73 Years            $9.23           30,000          $9.25
                             ========                                                     ======
</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  yield  of zero  (0%)  percent,  expected  volatility  of
twenty-five (25%) percent, risk-free interest rates ranging from 6.21% to 6.43%,
and expected lives ranging from 5 to 10 years.


                                                      F-14
<PAGE>
SIEBERT FINANCIAL CORP. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995

NOTE I - OPTIONS  (CONTINUED)

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 effect of applying SFAS No. 123 on 1997 pro forma net income
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.

                                                                 1997
                                                            ------------
          Net Income                     As reported        $  2,618,101
                                         Pro forma          $  2,439,101

          Net Income Per Share           As reported        $        .50
                                         Pro forma          $        .47


NOTE J - RECENT ACCOUNTING PRONOUNCEMENTS

In June 1997,  the Financial  Accounting  Standards  Board issued  Statements of
Financial Accounting Standards No. 130, "Reporting Comprehensive Income" and No.
131,  "Disclosure  about  Segments of an  Enterprise  and  Related  Information"
effective  for fiscal years  beginning  after  December  15,  1997.  The Company
believes that the above pronouncements will not have a significant effect on its
financial position or results of operations.

                                      F-15
<PAGE>

                     SIEBERT FINANCIAL CORP. AND SUBSIDIARY

                                  EXHIBIT INDEX



            EXHIBIT NO.                 DESCRIPTION OF DOCUMENT
          --------------    ---------------------------------------------------
                3.1         Certificate of Incorporation of Siebert Financial
                            Corp., formerly known as J. Michaels, Inc.,
                            originally filed on April 9, 1934, as amended to
                            date

                10.1        Siebert Financial Corp. 1998 Restricted Stock Award
                            Plan

                21.1        Subsidiaries of the registrant

                23.1        Consent of Independent Auditors

                27.1        Financial Data Schedule (EDGAR filing only)