QUARTERLY
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF
1934.
|
TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF
1934.
|
Delaware
(State
or Other Jurisdiction of
Incorporation
or Organization)
|
|
11-2936371
(I.R.S.
Employer
Identification
No.)
|
600
California Street, 9th Floor
San
Francisco, CA
(Address
of Principal Executive Offices)
|
|
94108
(Zip
Code)
|
Large
accelerated filer ¨
|
Accelerated
filer x
|
Non-accelerated
filer ¨
|
|
Page
No.
|
|||
PART
I FINANCIAL INFORMATION
|
|
|||
ITEM
1. Financial Statements (unaudited)
|
|
|||
Condensed
Consolidated Statements of Operations For the Three Months and Nine
Months
Ended September 30, 2007 and 2006
|
2
|
|||
Condensed
Consolidated Statements of Financial Condition as of September 30,
2007
and December 31, 2006
|
3
|
|||
Condensed
Consolidated Statements of Cash Flows For the Nine Months Ended September
30, 2007 and 2006
|
||||
Notes
to Condensed Consolidated Financial Statements
|
5
|
|||
ITEM
2. Management's Discussion and Analysis of Financial Condition and
Results
of Operations
|
15
|
|||
ITEM
3. Quantitative and Qualitative Disclosures About Market
Risk
|
24
|
|||
ITEM
4. Controls and Procedures
|
24
|
|||
PART
II OTHER INFORMATION
|
|
|||
ITEM
1. Legal Proceedings
|
25
|
|||
ITEM
1A. Risk Factors
|
25
|
|||
ITEM
2. Unregistered Sales of Equity Securities
|
31
|
|||
ITEM
6. Exhibits
|
32
|
|||
Signatures
|
33
|
|||
Certifications
|
Three
Months Ended
|
Nine
Months Ended
|
||||||||||||
September
30, 2007
|
September
30, 2006
|
September
30, 2007
|
September
30, 2006
|
||||||||||
Revenue:
|
|
|
|
|
|||||||||
Commissions
|
$
|
7,923,963
|
$
|
6,700,416
|
$
|
22,807,243
|
$
|
23,344,124
|
|||||
Principal
transactions
|
2,478,297
|
(1,148,313
|
)
|
10,804,073
|
(1,480,963
|
)
|
|||||||
Investment
banking
|
5,616,491
|
1,839,288
|
15,480,518
|
11,750,176
|
|||||||||
Primary
research
|
1,165,428
|
─
|
2,116,490
|
─
|
|||||||||
Advisory
and other fees
|
476,015
|
35,099
|
1,147,363
|
238,321
|
|||||||||
Total
revenue
|
17,660,194
|
7,426,490
|
52,355,687
|
33,851,658
|
|||||||||
Operating
expenses:
|
|||||||||||||
Compensation
and benefits
|
12,096,131
|
8,534,218
|
35,673,505
|
29,987,310
|
|||||||||
Brokerage
and clearing fees
|
627,223
|
598,644
|
1,921,920
|
1,987,504
|
|||||||||
Cost
of primary research services
|
555,185
|
─
|
950,403
|
─
|
|||||||||
Professional
services
|
518,045
|
567,535
|
1,603,163
|
1,850,916
|
|||||||||
Occupancy
and equipment
|
499,459
|
406,047
|
1,395,048
|
1,195,202
|
|||||||||
Communications
and technology
|
921,853
|
800,061
|
2,618,799
|
2,123,963
|
|||||||||
Depreciation
and amortization
|
193,284
|
156,760
|
556,332
|
467,870
|
|||||||||
Amortization
of intangible assets
|
264,771
|
─
|
485,414
|
─
|
|||||||||
Travel
and entertainment
|
635,353
|
611,712
|
1,789,971
|
1,960,304
|
|||||||||
Other
|
1,277,519
|
1,042,738
|
2,993,878
|
1,578,024
|
|||||||||
Total
operating expenses
|
17,588,823
|
12,717,715
|
49,988,433
|
41,151,093
|
|||||||||
Operating
income (loss)
|
71,371
|
(5,291,225
|
)
|
2,367,254
|
(7,299,435
|
)
|
|||||||
Interest
income
|
132,965
|
117,945
|
362,919
|
367,711
|
|||||||||
Interest
expense
|
(15,876
|
)
|
134,895
|
(97,087
|
)
|
(408,002
|
)
|
||||||
Income
(loss) from continuing operations before taxes
|
188,460
|
(5,038,385
|
)
|
2,633,089
|
(7,339,726
|
)
|
|||||||
Income
tax expense
|
─
|
─
|
(55,000
|
)
|
─
|
||||||||
Income
(loss) from continuing operations
|
188,460
|
(5,038,385
|
)
|
2,578,089
|
(7,339,726
|
)
|
|||||||
Loss
from discontinued operations
|
─
|
(70,666
|
)
|
─
|
(178,868
|
)
|
|||||||
Net
income (loss)
|
$
|
188,460
|
$
|
(5,109,051
|
)
|
$
|
2,578,089
|
$
|
(7,518,594
|
)
|
|||
|
|||||||||||||
Basic
net income (loss) per share:
|
|||||||||||||
Income
(loss) from continuing operations
|
$
|
0.02
|
$
|
(0.50
|
)
|
$
|
0.23
|
$
|
(0.74
|
)
|
|||
Loss
from discontinued operations
|
$
|
─
|
$
|
(0.01
|
)
|
$
|
─
|
$
|
(0.02
|
)
|
|||
Net
income (loss)
|
$
|
0.02
|
$
|
(0.51
|
)
|
$
|
0.23
|
$
|
(0.76
|
)
|
|||
|
|||||||||||||
Diluted
net income (loss) per share:
|
|||||||||||||
Income
(loss) from continuing operations
|
$
|
0.01
|
$
|
(0.05
|
)
|
$
|
0.21
|
$
|
(0.74
|
)
|
|||
Loss
from discontinued operations
|
$
|
─
|
$
|
(0.01
|
)
|
$
|
─
|
$
|
(0.02
|
)
|
|||
Net
income (loss)
|
$
|
0.01
|
$
|
(0.51
|
)
|
$
|
0.21
|
$
|
(0.76
|
)
|
|||
|
|||||||||||||
Weighted
average common shares outstanding:
|
|||||||||||||
Basic
|
11,999,656
|
10,151,922
|
11,337,346
|
9,906,672
|
|||||||||
Diluted
|
13,139,384
|
10,151,922
|
12,499,544
|
9,906,672
|
September
30, 2007
|
December
31, 2006
|
||||||
ASSETS
|
|||||||
Cash
and cash equivalents
|
$
|
12,470,717
|
$
|
13,746,590
|
|||
Securities
owned:
|
|||||||
Marketable,
at fair value
|
14,661,068
|
7,492,914
|
|||||
Not
readily marketable, at estimated fair value
|
4,040,665
|
1,489,142
|
|||||
Restricted
cash
|
688,011
|
629,427
|
|||||
Due
from clearing broker
|
1,134,440
|
551,831
|
|||||
Accounts
receivable, net
|
2,421,026
|
2,715,271
|
|||||
Equipment
and fixtures, net
|
1,368,286
|
1,586,630
|
|||||
Intangible
assets
|
2,214,586
|
314,963
|
|||||
Goodwill
|
3,153,219
|
─
|
|||||
Prepaid
expenses and other assets
|
2,022,405
|
1,971,445
|
|||||
Total
assets
|
$
|
44,174,423
|
$
|
30,498,213
|
|||
LIABILITIES
AND STOCKHOLDERS' EQUITY
|
|||||||
Accounts
payable
|
$
|
1,871,033
|
$
|
1,121,623
|
|||
Commissions
and bonus payable
|
7,900,581
|
7,711,805
|
|||||
Accrued
expenses
|
3,469,821
|
2,285,670
|
|||||
Due
to clearing and other brokers
|
16,733
|
11,114
|
|||||
Securities
sold, not yet purchased
|
2,476,071
|
1,534,953
|
|||||
Capital
lease obligation
|
850,034
|
1,292,378
|
|||||
Convertible
notes payable, net
|
194,831
|
187,079
|
|||||
Notes
payable
|
66,187
|
138,571
|
|||||
Total
liabilities
|
16,845,291
|
14,283,193
|
|||||
Commitments
and contingencies
|
|||||||
Stockholders'
equity:
|
|||||||
Preferred
stock, Series A--$0.0001 par value; 2,000,000 shares authorized;
0 shares
issued and outstanding as of September 30, 2007 and December 31,
2006,
respectively; aggregate liquidation preference of $0
|
─
|
─
|
|||||
Preferred
stock, Series B--$0.0001 par value; 12,500,000 shares authorized;
1,250,000 shares issued and 0 shares outstanding as of September
30, 2007
and December 31, 2006; aggregate liquidation preference of
$0
|
─
|
─
|
|||||
Preferred
stock, Series C--$0.0001 par value; 14,200,000 shares authorized;
1,685,714 shares issued and 0 shares outstanding as of September
30, 2007
and December 31, 2006; aggregate liquidation preference of
$0
|
─
|
─
|
|||||
Common
stock, $0.0001 par value; 300,000,000 shares authorized; 12,249,520
and
10,602,720 shares issued and 12,223,082 and 10,602,720 shares outstanding
as of September 30, 2007 and December 31, 2006,
respectively
|
1,226
|
1,061
|
|||||
Additional
paid-in capital
|
123,278,319
|
114,616,848
|
|||||
Treasury
stock
|
(125,613
|
)
|
--
|
||||
Accumulated
deficit
|
(95,824,800
|
)
|
(98,402,889
|
)
|
|||
Total
stockholders' equity
|
27,329,132
|
16,215,020
|
|||||
Total
liabilities and stockholders' equity
|
$
|
44,174,423
|
$
|
30,498,213
|
Nine
Months Ended
September
30,
|
|||||||
2007
|
2006
|
||||||
Cash
flows from operating activities:
|
|
|
|||||
Net
income (loss)
|
$
|
2,578,089
|
$
|
(7,518,594
|
)
|
||
Adjustments
to reconcile net income (loss) to cash used in operating
activities:
|
|||||||
Depreciation
and amortization
|
556,332
|
474,637
|
|||||
Amortization
of intangible assets
|
485,414
|
34,214
|
|||||
Stock-based
compensation
|
2,146,436
|
3,179,305
|
|||||
Amortization
of discounts on convertible notes payable
|
7,749
|
326,383
|
|||||
Amortization
of debt issuance costs
|
─
|
26,783
|
|||||
Unrealized
(gain) loss on securities owned
|
(4,807,990
|
)
|
2,810,298
|
||||
Bad
debt write-off
|
368,272
|
─
|
|||||
Other
|
72,229
|
13,055
|
|||||
Changes
in operating assets and liabilities:
|
|||||||
Securities
owned
|
(3,970,569
|
)
|
(3,421,329
|
)
|
|||
Restricted
cash
|
(58,584
|
)
|
(575
|
)
|
|||
Due
from clearing broker
|
(582,609
|
)
|
386,205
|
||||
Accounts
receivable
|
938,143
|
1,345,785
|
|||||
Prepaid
expenses and other assets
|
99,178
|
(542,545
|
)
|
||||
Accounts
payable
|
172,239
|
279,879
|
|||||
Commissions
and bonus payable
|
1,053
|
(1,714,895
|
)
|
||||
Accrued
expenses
|
1,022,867
|
(122,981
|
)
|
||||
Due
to clearing and other brokers
|
5,619
|
(99,530
|
)
|
||||
Net
cash used in operating activities
|
(966,132
|
)
|
(4,543,905
|
)
|
|||
Cash
flows from investing activities:
|
|||||||
Cash
restricted for fund investment
|
─
|
(6,300,944
|
)
|
||||
Purchase
of equipment and fixtures
|
(291,687
|
)
|
(353,623
|
)
|
|||
MedPanel
acquisition costs
|
(24,585
|
)
|
─
|
||||
Catalyst
acquisition costs
|
─
|
(58,558
|
)
|
||||
Proceeds
from the sale of Catalyst
|
163,219
|
─
|
|||||
Net
cash used in investing activities
|
(153,053
|
)
|
(6,713,125
|
)
|
|||
Cash
flows from financing activities:
|
|||||||
Proceeds
from the exercise of stock options and warrants
|
172,996
|
301,799
|
|||||
Proceeds
from the issuance of common stock
|
185,041
|
603,070
|
|||||
Proceeds
from the issuance of note payable ($6,112,171) and stock warrant
($1,387,829)
|
─
|
7,500,000
|
|||||
Minority
interest in fund
|
─
|
2,188,050
|
|||||
Debt
service principal payments
|
(514,725
|
)
|
(345,271
|
)
|
|||
Net
cash provided by (used in) financing activities
|
(156,688
|
)
|
10,247,648
|
||||
Decrease
in cash and cash equivalents
|
(1,275,873
|
)
|
(1,009,382
|
)
|
|||
Cash
and cash equivalents at beginning of period
|
13,746,590
|
11,138,923
|
|||||
Cash
and cash equivalents at end of period
|
$
|
12,470,717
|
$
|
10,129,541
|
|||
|
|||||||
Supplementary
disclosure of cash flow information:
|
|||||||
Cash
paid during the period:
|
|||||||
Interest
|
$
|
73,023
|
$
|
55,624
|
|||
Income
taxes
|
$
|
38,400
|
$
|
18,800
|
|
Options
Outstanding
|
Weighted
Average
Exercise Price
|
|||||
Balance
as of December 31, 2006
|
3,570,370
|
$
|
6.19
|
||||
Granted
|
644,620
|
4.72
|
|||||
Exercised
|
(83,939
|
)
|
(2.06
|
)
|
|||
Canceled
|
(107,994
|
)
|
(6.89
|
)
|
|||
Balance
as of September 30, 2007
|
4,023,057
|
$
|
6.02
|
||||
Exercisable
as of September 30, 2007
|
3,029,242
|
$
|
6.13
|
Options
Outstanding
|
Vested
Options
|
|||||||||||||||||||||
Range
of Exercise Price
|
Number |
Weighted
Average
Remaining
Contractual
Life
(Years)
|
Weighted
Average
Exercise
Price
|
Aggregate
Intrinsic
Value
|
Number
|
Weighted
Average
Exercise
Price
|
Aggregate
Intrinsic
Value
|
|||||||||||||||
$
0.00 -- $ 3.50
|
1,993,849
|
5.28
|
$
|
2.99
|
$
|
2,142,790
|
1,993,849
|
$
|
2.99
|
$
|
2,142,790
|
|||||||||||
$
3.51 -- $ 7.00
|
1,107,181
|
8.29
|
$
|
4.62
|
─
|
351,061
|
4.17
|
─
|
||||||||||||||
$
7.01 -- $14.00
|
626,359
|
6.95
|
$
|
8.88
|
─
|
388,664
|
9.21
|
─
|
||||||||||||||
$14.01
-- $28.00
|
256,381
|
3.10
|
$
|
22.04
|
─
|
256,381
|
22.04
|
─
|
||||||||||||||
$28.01
-- $49.00
|
39,287
|
2.41
|
$
|
49.00
|
─
|
39,287
|
49.00
|
─
|
||||||||||||||
|
4,023,057
|
6.20
|
$
|
6.02
|
$
|
2,142,790
|
3,029,242
|
$
|
6.13
|
$
|
2,142,790
|
|
Non-Vested
Stock
Outstanding
|
Weighted
Average
Grant
Date
Fair
Value
|
Intrinsic
Value
at
September
30, 2007
|
|||||||
Balance
as of December 31, 2006
|
306,009
|
$
|
10.04
|
|||||||
Granted
|
92,462
|
4.66
|
||||||||
Vested
|
(231,933
|
)
|
(8.72
|
)
|
||||||
Canceled
|
(21,702
|
)
|
(9.49
|
)
|
|
|||||
Balance
as of September 30, 2007
|
144,836
|
$
|
8.78
|
$
|
588,034
|
|
Nine
months Ended
September
30,
|
||||||
|
2007
|
2006
|
|||||
Expected
volatility
|
63.81
|
%
|
82.71
|
%
|
|||
Expected
life (years)
|
4.20
|
4.50
|
|||||
Risk-free
interest rate
|
4.66
|
%
|
4.79
|
%
|
|||
Expected
dividend yield
|
0
|
%
|
0
|
%
|
|
As
of
April
17, 2007
|
|||
Cash
and cash equivalents
|
$
|
670,028
|
||
Accounts
receivable
|
1,023,325
|
|||
Equipment
and fixtures
|
86,088
|
|||
Prepaid
expenses and other assets
|
174,162
|
|||
Intangible
assets not subject to amortization:
|
||||
Registered
trademarks
|
710,000
|
|||
Intangible
assets subject to amortization:
|
||||
Customer
relationships (56 month weighted-average useful life)
|
990,000
|
|||
Customer
backlog (8 month weighted-average useful life)
|
420,000
|
|||
Technology
platform (30 month weighted-average useful life)
|
360,000
|
|||
Database
of registered panelists (24 weighted-average useful life)
|
220,000
|
|||
Goodwill
|
3,153,219
|
|||
Total
assets acquired
|
7,806,822
|
|||
|
||||
Accounts
payable
|
(577,171
|
)
|
||
Accrued
expenses
|
(463,300
|
)
|
||
Total
liabilities assumed
|
(1,040,471
|
)
|
||
Net
assets acquired
|
$
|
6,766,351
|
|
Three
Months Ended
|
Nine
Months Ended
|
|||||||||||
|
September
30,
2007
|
September
30,
2006
|
September
30,
2007
|
September
30,
2006
|
|||||||||
Total
revenue
|
$
|
17,660,194
|
$
|
8,671,790
|
$
|
54,484,089
|
$
|
37,864,977
|
|||||
Total
operating expenses
|
17,588,823
|
14,283,459
|
52,525,765
|
45,710,959
|
|||||||||
Operating
income (loss)
|
71,371
|
(5,611,669
|
)
|
1,958,324
|
(7,845,982
|
)
|
|||||||
Net
income (loss)
|
$
|
188,460
|
$
|
(5,434,415
|
)
|
$
|
2,171,308
|
$
|
(8,076,246
|
)
|
|||
|
|||||||||||||
Basic
net income (loss) per share
|
$
|
0.02
|
$
|
(0.47
|
)
|
$
|
0.18
|
$
|
(0.71
|
)
|
|||
Diluted
net income (loss) per share
|
$
|
0.01
|
$
|
(0.47
|
)
|
$
|
0.17
|
$
|
(0.71
|
)
|
|||
|
|||||||||||||
Weighted
average common shares outstanding:
|
|||||||||||||
Basic
|
11,999,656
|
11,652,042
|
11,919,810
|
11,406,792
|
|||||||||
Diluted
|
12,996,526
|
11,652,042
|
13,114,384
|
11,406,792
|
|
Three
Months
|
Nine
Months
|
|||||
Revenue
|
$
|
206,911
|
$
|
635,103
|
|||
Operating
expenses:
|
|||||||
Compensation
and benefits
|
182,615
|
555,677
|
|||||
Professional
services
|
8,525
|
33,429
|
|||||
Occupancy
and equipment
|
30,722
|
73,715
|
|||||
Communications
and technology
|
2,716
|
13,929
|
|||||
Depreciation
and amortization
|
15,156
|
40,981
|
|||||
Travel
and entertainment
|
11,875
|
44,938
|
|||||
Other
expenses
|
26,863
|
54,241
|
|||||
|
278,472
|
816,910
|
|||||
Operating
loss
|
(71,561
|
)
|
(181,807
|
)
|
|||
Interest
income, net
|
895
|
2,939
|
|||||
Net
loss
|
$
|
(70,666
|
)
|
$
|
(178,868
|
)
|
Assets:
|
|
|||
Cash
and cash equivalents
|
$
|
68,503
|
||
Accounts
receivable
|
11,155
|
|||
Furniture
and equipment
|
34,234
|
|||
Intangible
assets, net of accumulated amortization of $172,417
|
314,963
|
|||
Prepaid
expenses and other assets
|
24,024
|
|||
|
$
|
452,879
|
||
Liabilities:
|
||||
Accounts
payable
|
--
|
|||
Commissions
and bonus payable
|
8,368
|
|||
Accrued
liabilities
|
87,176
|
|||
Capital
leases
|
--
|
|||
|
$
|
95,544
|
Three
Months Ended
September
30,
|
Nine
Months Ended
September
30,
|
||||||||||||
2007
|
2006
|
2007
|
2006
|
||||||||||
Net
income (loss) available to stockholders - basic
|
$
|
188,460
|
$
|
(5,109,051
|
)
|
$
|
2,578,089
|
$
|
(7,518,594
|
)
|
|||
Interest
on dilutive securities
|
4,084
|
─
|
12,252
|
─
|
|||||||||
Net
income (loss) available to stockholders - diluted
|
$
|
192,544
|
$
|
(5,109,051
|
)
|
$
|
2,590,341
|
$
|
(7,518,594
|
)
|
|||
|
|||||||||||||
Weighted-average
number of common shares - basic
|
11,999,656
|
10,151,922
|
11,337,346
|
9,906,672
|
|||||||||
Exercise
or conversion of all potentially dilutive common shares
outstanding
|
1,139,728
|
─
|
1,162,198
|
─
|
|||||||||
Weighted-average
number of common shares - diluted
|
13,139,384
|
10,151,922
|
12,499,544
|
9,906,672
|
|||||||||
Basic
net income (loss) per common share:
|
|||||||||||||
Income
(loss) from continuing operations
|
$
|
0.02
|
$
|
(0.50
|
)
|
$
|
0.23
|
$
|
(0.74
|
)
|
|||
Loss
from discontinued operations
|
$
|
─
|
$
|
(0.01
|
)
|
$
|
─
|
$
|
(0.02
|
)
|
|||
Net
income (loss)
|
$
|
0.02
|
$
|
(0.51
|
)
|
$
|
0.23
|
$
|
(0.76
|
)
|
|||
Diluted
net loss per common share:
|
|||||||||||||
Income
(loss) from continuing operations
|
$
|
0.01
|
$
|
(0.50
|
)
|
(0.21
|
)
|
(0.74
|
)
|
||||
Loss
from discontinued operations
|
$
|
─
|
$
|
(0.01
|
)
|
$
|
─
|
$
|
(0.02
|
)
|
|||
Net
income (loss)
|
$
|
0.01
|
$
|
(0.51
|
)
|
$
|
0.21
|
$
|
(0.76
|
)
|
Three Months Ended
September 30,
|
Nine
Months Ended
September
30,
|
||||||||||||
|
2007
|
2006
|
2007
|
2006
|
|||||||||
Stock
options and warrants excluded due to the exercise price exceeding
the
average fair value of the Company's common stock during the
period
|
2,093,089
|
1,519,107
|
1,756,224
|
1,335,327
|
|||||||||
Weighted
average non-vested stock, stock options and stock warrants, calculated
using the treasury stock method, that were excluded due to the Company
reporting a net loss during the period
|
─
|
1,568,682
|
─
|
2,018,006
|
|||||||||
Weighted
average shares issuable upon conversion of the convertible notes
payable
|
─
|
902,736
|
─
|
721,812
|
|||||||||
Weighted
average shares contingently issuable
|
─
|
52,876
|
─
|
80,320
|
|||||||||
Total
common stock equivalents excluded from diluted net income (loss)
per
share
|
2,093,089
|
4,043,401
|
1,756,224
|
4,155,465
|
Three
Months Ended
September
30,
|
Nine
Months Ended
September
30,
|
||||||||||||
2007
|
2006
|
2007
|
2006
|
||||||||||
Investor
conferences
|
$
|
521,759
|
$
|
593,580
|
$
|
910,130
|
$
|
874,487
|
|||||
Recruiting
|
116,778
|
134,452
|
486,839
|
264,349
|
|||||||||
Bad
debt expenses
|
140,105
|
─
|
368,271
|
(445,016
|
)
|
||||||||
Public
and investor relations
|
208,058
|
73,165
|
368,769
|
247,166
|
|||||||||
Supplies
|
65,954
|
58,887
|
233,661
|
213,450
|
|||||||||
Insurance
|
73,659
|
66,997
|
220,663
|
197,867
|
|||||||||
Other
|
151,206
|
115,657
|
405,545
|
225,721
|
|||||||||
|
$
|
1,277,519
|
$
|
1,042,738
|
$
|
2,993,878
|
$
|
1,578,024
|
Three
Months Ended
|
Nine
Months Ended
|
||||||||||||
September
30,
2007
|
September
30,
2006
|
September
30,
2007
|
September
30,
2006
|
||||||||||
Revenue:
|
|||||||||||||
Commissions
|
$
|
7,923,963
|
$
|
6,700,416
|
$
|
22,807,243
|
$
|
23,344,124
|
|||||
Principal
transactions
|
2,478,297
|
(1,148,313
|
)
|
10,804,073
|
(1,480,963
|
)
|
|||||||
Investment
banking
|
5,616,491
|
1,839,288
|
15,480,518
|
11,750,176
|
|||||||||
Primary
research
|
1,165,428
|
─
|
2,116,490
|
─
|
|||||||||
Advisory
and other fees
|
476,015
|
35,099
|
1,147,363
|
238,321
|
|||||||||
Total
revenue
|
17,660,194
|
7,426,490
|
52,355,687
|
33,851,658
|
|||||||||
Operating
expenses:
|
|||||||||||||
Compensation
and benefits
|
12,096,131
|
8,534,218
|
35,673,505
|
29,987,310
|
|||||||||
Brokerage
and clearing fees
|
627,223
|
598,644
|
1,921,920
|
1,987,504
|
|||||||||
Cost
of primary research services
|
555,185
|
─
|
950,403
|
─
|
|||||||||
Professional
services
|
518,045
|
567,535
|
1,603,163
|
1,850,916
|
|||||||||
Occupancy
and equipment
|
499,459
|
406,047
|
1,395,048
|
1,195,202
|
|||||||||
Communications
and technology
|
921,853
|
800,061
|
2,618,799
|
2,123,963
|
|||||||||
Depreciation
and amortization
|
193,284
|
156,760
|
556,332
|
467,870
|
|||||||||
Amortization
of intangible assets
|
264,771
|
─
|
485,414
|
─
|
|||||||||
Travel
and entertainment
|
635,353
|
611,712
|
1,789,971
|
1,960,304
|
|||||||||
Other
|
1,277,519
|
1,042,738
|
2,993,878
|
1,578,024
|
|||||||||
Total
operating expenses
|
17,588,823
|
12,717,715
|
49,988,433
|
41,151,093
|
|||||||||
Operating
income (loss)
|
71,371
|
(5,291,225
|
)
|
2,367,254
|
(7,299,435
|
)
|
|||||||
Interest
income
|
132,965
|
117,945
|
362,919
|
367,711
|
|||||||||
Interest
expense
|
(15,876
|
)
|
134,895
|
(97,087
|
)
|
(408,002
|
)
|
||||||
Income
(loss) from continuing operations before taxes
|
188,460
|
(5,038,385
|
)
|
2,633,087
|
(7,339,726
|
)
|
|||||||
Income
tax expense
|
─
|
─
|
(55,000
|
)
|
─
|
||||||||
Income
(loss) from continuing operations
|
188,460
|
(5,038,385
|
)
|
2,578,089
|
(7,339,726
|
)
|
|||||||
Loss
from discontinued operations
|
─
|
(70,666
|
)
|
─
|
(178,868
|
)
|
|||||||
Net
income (loss)
|
$
|
188,460
|
$
|
(5,109,051
|
)
|
$
|
2,578,089
|
$
|
(7,518,594
|
)
|
Three
Months Ended
|
Nine
Months Ended
|
||||||||||||
September
30,
2007
|
September
30,
2006
|
September
30,
2007
|
September
30,
2006
|
||||||||||
Stock-based
compensation
|
$
|
694,574
|
$
|
1,197,256
|
$
|
2,146,436
|
$
|
3,179,305
|
|||||
Depreciation
and amortization
|
193,284
|
137,702
|
556,332
|
474,637
|
|||||||||
Amortization
of intangible assets
|
264,771
|
34,214
|
485,414
|
34,214
|
|||||||||
Write-off
of uncollectible accounts receivable
|
140,105
|
─
|
368,272
|
─
|
|||||||||
Amortization
of discounts on debt
|
2,583
|
175,543
|
7,749
|
326,383
|
|||||||||
Total
|
$
|
1,295,317
|
$
|
1,544,715
|
$
|
3,564,203
|
$
|
4,014,539
|
|
·
|
Capital
Raising
-
Capital raising includes private placements of equity and debt instruments
and underwritten public offerings.
|
|
·
|
Financial
Advisory
-
Financial advisory includes advisory assignments with respect to
mergers
and acquisitions, divestures, restructurings and
spin-offs.
|
Three
Months Ended
|
Nine
Months Ended
|
||||||||||||
September
30,
2007
|
September
30,
2006
|
September
30,
2007
|
September
30,
2006
|
||||||||||
Revenue:
|
|||||||||||||
Capital
raising
|
$
|
3,881,491
|
$
|
1,194,288
|
$
|
13,028,018
|
$
|
10,429,291
|
|||||
Financial
advisory
|
1,735,000
|
645,000
|
2,452,500
|
1,320,885
|
|||||||||
Total
investment banking revenue
|
$
|
5,616,491
|
$
|
1,839,288
|
$
|
15,480,518
|
$
|
11,750,176
|
|||||
|
|||||||||||||
Transaction
Volumes:
|
|||||||||||||
Public
offerings:
|
|||||||||||||
Capital
underwritten participations
|
$
|
8,505,000
|
$
|
─
|
$
|
113,744,000
|
$
|
104,151,000
|
|||||
Number
of transactions
|
1
|
─
|
7
|
10
|
|||||||||
Private
placements:
|
|||||||||||||
Capital
raised
|
$
|
101,210,000
|
$
|
19,385,000
|
$
|
187,795,000
|
$
|
107,385,000
|
|||||
Number
of transactions
|
8
|
4
|
15
|
8
|
|
·
|
Commissions
-
Commissions include revenue resulting from executing stock trades
for
exchange-listed securities, over-the-counter securities and other
transactions as agent.
|
|
·
|
Principal
Transactions
- Principal
transactions consist of a portion of dealer spreads attributed to
our
securities trading activities as principal in NASDAQ-listed and other
securities, and include transactions derived from our activities
as a
market-maker. Additionally, principal transactions include gains
and
losses resulting from market price fluctuations that occur while
holding
positions in our trading security
inventory.
|
Three
Months Ended
|
Nine
Months Ended
|
||||||||||||
September
30,
2007
|
September
30,
2006
|
September
30,
2007
|
September
30,
2006
|
||||||||||
Revenue:
|
|||||||||||||
Commissions
|
$
|
7,923,963
|
$
|
6,700,416
|
$
|
22,807,243
|
$
|
23,344,124
|
|||||
Principal
transactions:
|
|||||||||||||
Customer
principal transactions, proprietary trading and market
making
|
$
|
1,888,770
|
$
|
(1,135,723
|
)
|
$
|
9,243,523
|
$
|
(1,263,456
|
)
|
|||
Investment
portfolio
|
589,527
|
(12,590
|
)
|
1,560,550
|
(217,507
|
)
|
|||||||
Total
principal transactions revenue
|
$
|
2,478,297
|
$
|
(1,148,313
|
)
|
$
|
10,804,073
|
$
|
(1,480,963
|
)
|
|||
Transaction
Volumes:
|
|||||||||||||
Number
of shares traded
|
315,936,384
|
193,666,883
|
793,084,262
|
701,398,931
|
|||||||||
Number
of active clients
|
374
|
362
|
537
|
510
|
Three
Months Ended
|
Nine
Months Ended
|
||||||||||||
September
30,
2007
|
September
30,
2006
|
September
30,
2007
|
September
30,
2006
|
||||||||||
Incentive
compensation and discretionary bonuses
|
$
|
6,566,759
|
$
|
4,169,791
|
$
|
19,950,445
|
$
|
17,422,932
|
|||||
Salaries
and wages
|
3,928,087
|
2,402,530
|
10,527,878
|
6,737,427
|
|||||||||
Stock-based
compensation
|
694,574
|
1,197,256
|
2,146,436
|
3,179,305
|
|||||||||
Payroll
taxes, benefits and other
|
906,711
|
764,641
|
3,048,746
|
2,647,646
|
|||||||||
Total
compensation and benefits
|
$
|
12,096,131
|
$
|
8,534,218
|
$
|
35,673,505
|
$
|
29,987,310
|
|||||
Total
compensation and benefits expense as a percentage of
revenue
|
68
|
%
|
115
|
%
|
68
|
%
|
89
|
%
|
|||||
Cash
compensation and benefits expense as a percentage of
revenue
|
65
|
%
|
99
|
%
|
64
|
%
|
79
|
%
|
|
Three
Months Ended
September
30,
|
Nine
Months Ended
September
30,
|
|||||||||||
|
2007
|
2006
|
2007
|
2006
|
|||||||||
Investor
conferences
|
$
|
521,759
|
$
|
593,580
|
$
|
910,130
|
$
|
874,487
|
|||||
Recruiting
|
116,778
|
134,452
|
486,839
|
264,349
|
|||||||||
Bad
debt expenses
|
140,105
|
─
|
368,271
|
(445,016
|
)
|
||||||||
Public
and investor relations
|
208,058
|
73,165
|
368,769
|
247,166
|
|||||||||
Supplies
|
65,954
|
58,887
|
233,661
|
213,450
|
|||||||||
Insurance
|
73,659
|
66,997
|
220,663
|
197,867
|
|||||||||
Other
|
151,206
|
115,657
|
405,545
|
225,721
|
|||||||||
|
$
|
1,277,519
|
$
|
1,042,738
|
$
|
2,993,878
|
$
|
1,578,024
|
|
Notes
Payable
|
Operating
Leases
|
Capital
Leases
|
|||||||
Less
than one year
|
$
|
26,694
|
$
|
545,011
|
$
|
149,307
|
||||
One
year to three years
|
243,990
|
3,179,296
|
769,607
|
|||||||
Three
years to five years
|
─
|
985,839
|
─
|
|||||||
Total
commitments
|
$
|
270,684
|
$
|
4,710,146
|
$
|
918,914
|
·
|
establish,
maintain and increase our client
base;
|
·
|
manage
the quality of our services;
|
·
|
compete
effectively with existing and potential
competitors;
|
·
|
further
develop our business activities;
|
·
|
manage
expanding operations; and
|
·
|
attract
and retain qualified personnel.
|
·
|
the
level of institutional brokerage transactions and the level of commissions
we receive from those transactions;
|
·
|
the
valuations of our principal
investments;
|
·
|
the
number of capital markets transactions completed by our clients,
and the
level of fees we receive from those transactions;
and
|
·
|
variations
in expenditures for personnel, consulting and legal expenses, and
expenses
of establishing new business units, including marketing and technology
expenses.
|