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Acquisitions | 12 Months Ended
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Dec. 31, 2019
Acquisitions Abstract |
Acquisitions | 3. Acquisitions Weeden Prime Weeden Prime is a Delaware limited liability company originally organized as a corporation under the laws of the State of Florida in 2007. Weeden Prime is a registered broker-dealer with the SEC and Commodity Futures Trading Commission ("CFTC"), and is a member of the Financial Industry Regulatory Authority, Inc. ("FINRA"), National Futures Association ("NFA"), and Securities Investor Protection Corporation ("SIPC"). Weeden Prime’s operations consist primarily of trade execution and risk management services for customers and is an introducing broker for the transactions of institutional customers. Overview of Acquisition Prior to being acquired by the Company, Weeden Prime was comprised of two members, Weeden Investors L.P. (“WILP”), a Delaware limited partnership, and Weeden Securities Corporation (“WSC”), a Delaware corporation, and was managed by a Board of Managers. Weeden Prime has maintained all of its registrations and licenses with the SEC, CFTC, FINRA, NFA, and SIPC as well as its agreements with some of its clearing broker dealers that were in place before its acquisition by the Company. Effective December 1, 2019, the Company purchased 100% of the member interests of Weeden Prime from WILP and WSC pursuant to an Equity Interests Purchase Agreement and Weeden Prime became a wholly-owned subsidiary of the Company. The purchase price was approximately $7.1 million paid in cash, for which the Company borrowed $3 million in a promissory note payable to Gloria E. Gebbia. The operating results for the 31-day period ending December 31, 2019 were included in the Company’s statement of income for the year ended December 31, 2019. Weeden Prime will provide a new customer base of institutional clients and several strategic clearing relationships for the Company. In addition, there are cross-selling opportunities for the institutional and retail clients, including partnering with institutional clients to generate new product offerings for the retail clients. Weeden Prime will bring economies of scale in terms of operational and administrative functions as well as a skilled management team within the institutional space to the Company. Accounting for Acquisition The merger will be accounted for under the acquisition method of accounting for business combinations pursuant to ASC 805 - Business Combinations. ASC 805, requires, among other things, that the assets acquired and liabilities assumed be recognized at their fair values as of the proposed acquisition date. ASC 820 - Fair Value Measurements, which establishes a framework for measuring fair values, defines fair value as ‘‘the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.’’ Allocation of Purchase Price The Company was required to allocate the Weeden Prime purchase price to tangible and identifiable intangible assets acquired and liabilities assumed based on their fair values as of November 30, 2019. The excess of the purchase price over those fair values is recorded as goodwill. As of December 31, 2019, the Company completed its allocation of the Weeden Prime purchase price. In determining the fair value of assets acquired and liabilities assumed, the Company primarily used discounted cash flow analyses and market approaches. Inputs to the discounted cash flow analyses and other aspects of the allocation of purchase price require judgment. The more significant inputs used in the discounted cash flow analyses and other areas of judgment include assumptions such as future revenue growth or attrition rates, projected margins, discount rates used to present value future cash flows, the amount of synergies expected from the acquisition, and the economic useful life of assets. In accordance with ASC 805, the Company was required to finalize the fair value of net assets of the business combination on the acquisition date. The excess of the fair value purchase price on the date of acquisition was recorded as goodwill. Adjustments were made for tax considerations. The following table summarizes the Company’s allocation of the purchase price as of the date of acquisition:
Purchase Price Allocation |  | Estimated Fair Value |
Cash and cash equivalents |  | $ | 301,000 |
Cash segregated under federal regulations |  |  | 152,000 |
Receivables from clearing broker dealers |  |  | 4,616,000 |
Furniture, equipment and leasehold improvements, net |  |  | 41,000 |
Software, net |  |  | 51,000 |
Intangible assets, net |  |  | 1,057,000 |
Lease right-of-use assets |  |  | 214,000 |
Other assets |  |  | 271,000 |
Total Assets acquired |  |  | 6,703,000 |
Accounts payable and accrued liabilities |  |  | 1,353,000 |
Lease liabilities |  |  | 214,000 |
Total Liabilities acquired |  |  | 1,567,000 |
Net Assets acquired |  |  | 5,136,000 |
Goodwill |  |  | 1,989,000 |
Purchase price |  | $ | 7,125,000 |
The transaction resulted in $1,989,000 of goodwill which consisted of Weeden Prime providing a new customer base of institutional clients, several strategic clearing relationships, as well as substantial cross-selling opportunities for the institutional and retail clients. The addition of Weeden Prime will bring economies of scale in terms of operational and administrative functions as well as a skilled management team within the institutional space to Siebert. All of the goodwill is expected to be deductible for tax purposes. Financial Results from Weeden Prime The following table summarizes the revenue and net income from continuing operations of Weeden Prime included in the Company’s statement of income for the year ending December 31, 2019 since the date of acquisition (for the 31-day period ending December 31, 2019):
Weeden Prime |  |  |
Revenue |  | $ | 968,000 |
Net income from continuing operations |  | $ | 203,000 |
Pro Forma Statements The following pro forma summary presents consolidated statements of income of the Company as if the acquisition of Weeden Prime had occurred on January 1, 2018, inclusive of pro forma adjustments (unaudited):
|  | Year Ended December 31, |
|  | 2019 |  |  | 2018 |
Revenue |  | $ | 39,746,000 |  |  | $ | 42,987,000 |
Net income |  | $ | 2,485,000 |  |  | $ | 11,102,000 |
These pro forma results include adjustments made for the consolidation of both entities. These pro forma results align Weeden Prime’s presentation to the Company’s accounting policy in relation to reporting interest revenue net of interest expense and to recalculate Weeden Prime’s depreciation and amortization using the Company’s assumptions for estimated useful lives. These adjustments also take into consideration the amortization of the intangible assets acquired in the transaction as well as the tax effect of pro forma adjustments using an estimated combined statutory rate of 28.0%. Additionally, these pro forma results reflect the method of payment of the purchase price of approximately $7.1 million via cash and the promissory note, the acquisition of intangible assets and goodwill, as well as the elimination of Weeden Prime’s equity upon consummation of the acquisition. The Company notes that pro forma data may not be indicative of the results that would have been obtained had these events occurred at the beginning of the periods presented, nor is it intended to be a projection of future results.

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- Definition The entire disclosure for a business combination (or series of individually immaterial business combinations) completed during the period, including background, timing, and recognized assets and liabilities. The disclosure may include leverage buyout transactions (as applicable). + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -URI http://asc.fasb.org/topic&trid=2303972 + Details
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