x
|
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
|
|
11-2936371
|
(State
or Other Jurisdiction of
Incorporation
or Organization)
|
|
(I.R.S.
Employer
Identification
No.)
|
600
California Street, 9th Floor
San
Francisco, CA
|
|
94108
|
(Address
of Principal Executive Offices)
|
|
(Zip
Code)
|
Large
accelerated filer ¨
|
|
Accelerated
filer x
|
Non-accelerated
filer ¨
|
|
Smaller
reporting company ¨
|
|
Page
No.
|
|
PART
I FINANCIAL INFORMATION
|
|
|
ITEM
1. Financial Statements (unaudited)
|
|
|
Consolidated
Statements of Operations For the Three Months and Six Months Ended
June
30, 2008 and 2007
|
3
|
|
Consolidated
Statements of Financial Condition as of June 30, 2008 and December
31,
2007
|
4
|
|
Consolidated
Statements of Cash Flows For the Six Months Ended June 30, 2008
and
2007
|
||
Notes
to Consolidated Financial Statements
|
6
|
|
ITEM
2. Management's Discussion and Analysis of Financial Condition
and Results
of Operations
|
18
|
|
ITEM
3. Quantitative and Qualitative Disclosures About Market
Risk
|
27
|
|
ITEM
4. Controls and Procedures
|
28
|
|
PART
II OTHER INFORMATION
|
|
|
ITEM
1. Legal Proceedings
|
29
|
|
ITEM
1A. Risk Factors
|
31
|
|
ITEM
4. Submission of Matters to a Vote of Security Holders
|
32
|
|
ITEM
6. Exhibits
|
33
|
|
Signatures
|
34
|
|
Certifications
|
|
|
Three
Months Ended
|
Six
Months Ended
|
|||||||||||
|
June
30,
2008
|
June
30,
2007
|
June
30,
2008
|
June
30,
2007
|
|||||||||
Revenue:
|
|
|
|
|
|||||||||
Commissions
|
$
|
7,892,372
|
$
|
7,717,573
|
$
|
16,361,082
|
$
|
14,883,280
|
|||||
Principal
transactions
|
1,418,829
|
5,712,652
|
103,753
|
8,325,776
|
|||||||||
Investment
banking
|
4,446,995
|
5,631,556
|
7,823,406
|
9,864,027
|
|||||||||
Primary
research
|
1,498,144
|
951,062
|
3,039,938
|
951,062
|
|||||||||
Advisory
and other fees
|
543,134
|
359,506
|
239,600
|
671,348
|
|||||||||
Total
revenue
|
15,799,474
|
20,372,349
|
27,567,779
|
34,695,493
|
|||||||||
Operating
expenses:
|
|||||||||||||
Compensation
and benefits
|
12,102,568
|
12,767,087
|
25,273,210
|
23,577,374
|
|||||||||
Brokerage
and clearing fees
|
709,183
|
662,056
|
1,484,484
|
1,294,697
|
|||||||||
Cost
of primary research services
|
609,129
|
395,218
|
1,194,293
|
395,218
|
|||||||||
Professional
services
|
2,475,016
|
703,640
|
3,302,501
|
1,085,118
|
|||||||||
Occupancy
and equipment
|
689,428
|
453,061
|
1,226,610
|
895,589
|
|||||||||
Communications
and technology
|
1,010,869
|
884,010
|
1,950,847
|
1,696,946
|
|||||||||
Depreciation
and amortization
|
162,946
|
182,027
|
306,170
|
363,048
|
|||||||||
Amortization
of intangible assets
|
116,536
|
220,643
|
233,071
|
220,643
|
|||||||||
Travel
and entertainment
|
1,012,210
|
685,416
|
1,971,804
|
1,154,618
|
|||||||||
Other
|
1,278,377
|
1,124,415
|
2,117,247
|
1,716,359
|
|||||||||
Impairment
of goodwill and intangible assets
|
2,601,516
|
─
|
2,601,516
|
─
|
|||||||||
Total
operating expenses
|
22,767,778
|
18,077,573
|
41,661,753
|
32,399,610
|
|||||||||
Operating
(loss) income
|
(6,968,304
|
)
|
2,294,776
|
(14,093,974
|
)
|
2,295,883
|
|||||||
Interest
income
|
34,016
|
107,461
|
130,420
|
229,954
|
|||||||||
Interest
expense
|
(18,301
|
)
|
(26,864
|
)
|
(39,008
|
)
|
(81,208
|
)
|
|||||
(Loss)/income
before taxes
|
(6,952,589
|
)
|
2,375,373
|
(14,002,562
|
)
|
2,444,629
|
|||||||
Income
tax (expense) benefit
|
1,838,744
|
(55,000
|
)
|
1,838,744
|
(55,000
|
)
|
|||||||
Net
(loss) income
|
$
|
(5,113,845
|
)
|
$
|
2,320,373
|
$
|
(12,163,818
|
)
|
$
|
2,389,629
|
|||
|
|||||||||||||
Basic
net (loss) income per
share:
|
|||||||||||||
Net
(loss) income
|
$
|
(0.41
|
)
|
$
|
0.20
|
$
|
(0.98
|
)
|
$
|
0.22
|
|||
|
|||||||||||||
Diluted
net (loss) income per share:
|
|||||||||||||
Net
(loss) income
|
$
|
(0.41
|
)
|
$
|
0.18
|
$
|
(0.98
|
)
|
$
|
0.20
|
|||
|
|||||||||||||
Weighted
average common shares outstanding:
|
|||||||||||||
Basic
|
12,562,120
|
11,657,775
|
12,425,851
|
11,000,702
|
|||||||||
Diluted
|
12,562,120
|
12,856,306
|
12,425,851
|
12,208,965
|
|
June
30,
2008 |
|
December
31,
2007
|
||||
ASSETS
|
|
|
|||||
Cash
and cash equivalents
|
$
|
10,420,371
|
$
|
31,962,201
|
|||
Securities
owned:
|
|||||||
Marketable,
at fair value
|
15,791,255
|
14,115,022
|
|||||
Not
readily marketable, at estimated fair value
|
2,047,169
|
2,250,668
|
|||||
Other
|
1,711,270
|
2,254,120
|
|||||
Restricted
cash
|
1,130,563
|
689,157
|
|||||
Due
from clearing broker
|
1,234,423
|
1,251,446
|
|||||
Accounts
receivable, net
|
3,166,425
|
4,008,729
|
|||||
Prepaid
expenses and other assets
|
2,021,182
|
1,716,814
|
|||||
Equipment
and fixtures, net
|
1,937,724
|
1,245,692
|
|||||
Intangible
assets
|
1,323,963
|
1,949,815
|
|||||
Goodwill
|
1,129,281
|
3,129,667
|
|||||
Total
assets
|
$
|
41,913,626
|
$
|
64,573,331
|
|||
LIABILITIES
AND STOCKHOLDERS' EQUITY
|
|||||||
Accounts
payable
|
$
|
1,873,241
|
$
|
957,969
|
|||
Commissions
and bonus payable
|
6,646,912
|
17,517,032
|
|||||
Accrued
expenses
|
5,630,368
|
6,351,598
|
|||||
Due
to clearing and other brokers
|
15,731
|
6,865
|
|||||
Securities
sold, not yet purchased
|
1,512,896
|
3,804,558
|
|||||
Capital
lease obligation
|
1,411,989
|
890,272
|
|||||
Convertible
notes payable, net
|
─
|
197,416
|
|||||
Notes
payable
|
─
|
41,573
|
|||||
Total
liabilities
|
17,091,137
|
29,767,283
|
|||||
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
June 30, 2008 and December 31, 2007, 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 June 30, 2008 and
December
31, 2007; 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 June 30, 2008 and
December
31, 2007; aggregate liquidation preference of $0
|
─
|
─
|
|||||
Common
stock, $0.0001 par value; 300,000,000 shares authorized; 12,772,563
and
12,310,886 shares issued and 12,746,125 and 12,284,448 shares
outstanding
as of June 30, 2008 and December 31, 2007, respectively
|
1,278
|
1,232
|
|||||
Additional
paid-in capital
|
126,190,496
|
124,010,283
|
|||||
Treasury
stock
|
(125,613
|
)
|
(125,613
|
)
|
|||
Accumulated
deficit
|
(101,243,672
|
)
|
(89,079,854
|
)
|
|||
Total
stockholders' equity
|
24,822,489
|
34,806,048
|
|||||
Total
liabilities and stockholders' equity
|
$
|
41,913,626
|
$
|
64,573,331
|
|
Six
Months Ended
June
30,
|
||||||
|
2008
|
2007
|
|||||
Cash
flows from operating activities:
|
|
|
|||||
Net
(loss) income
|
$
|
(12,163,818
|
)
|
$
|
2,389,629
|
||
Adjustments
to reconcile net (loss) income to cash provided by (used in)
operating
activities:
|
|||||||
Depreciation
and amortization
|
306,171
|
363,048
|
|||||
Amortization
of intangible assets
|
233,070
|
220,643
|
|||||
Stock-based
compensation
|
1,316,606
|
1,451,862
|
|||||
Amortization
of discounts on convertible notes payable
|
2,584
|
5,166
|
|||||
Impairment
of goodwill
|
2,208,735
|
─
|
|||||
Impairment
of intangible assets
|
392,781
|
─
|
|||||
Common
stock received for services
|
(1,545,788
|
)
|
─
|
||||
Unrealized
loss (gain) on securities owned
|
381,431
|
(5,680,368
|
)
|
||||
Provision
for bad debt
|
280,543
|
228,167
|
|||||
Other
|
─
|
31,304
|
|||||
Changes
in operating assets and liabilities:
|
|||||||
Securities
owned
|
(2,057,190
|
)
|
1,896,662
|
||||
Restricted
cash
|
(441,406
|
)
|
(2,541
|
)
|
|||
Due
from clearing broker
|
17,023
|
(574,610
|
)
|
||||
Accounts
receivable
|
546,762
|
628,898
|
|||||
Prepaid
expenses and other assets
|
(304,366
|
)
|
667,994
|
||||
Accounts
payable
|
915,272
|
570,326
|
|||||
Commissions
and bonus payable
|
(10,870,120
|
)
|
(1,368,234
|
)
|
|||
Accrued
expenses
|
(721,230
|
)
|
1,671,655
|
||||
Due
to clearing and other brokers
|
8,866
|
10,744
|
|||||
Net
cash (used in) provided by operating activities
|
(21,494,074
|
)
|
2,510,345
|
||||
Cash
flows from investing activities:
|
|||||||
Purchase
of equipment and fixtures
|
(192,428
|
)
|
(118,021
|
)
|
|||
Investment
in MedPanel
|
─
|
(24,585
|
)
|
||||
Investment
in Catalyst
|
─
|
163,219
|
|||||
Net
cash (used in) provided by investing activities
|
(192,428
|
)
|
20,613
|
||||
Cash
flows from financing activities:
|
|||||||
Proceeds
from the exercise of stock options and warrants
|
470,304
|
102,937
|
|||||
Proceeds
from the issuance of common stock
|
─
|
102,555
|
|||||
Debt
service principal payments
|
(325,632
|
)
|
(352,511
|
)
|
|||
Net
cash provided by (used in) financing activities
|
144,672
|
(147,019
|
)
|
||||
(Decrease)
increase in cash and cash equivalents
|
(21,541,830
|
)
|
2,383,939
|
||||
Cash
and cash equivalents at beginning of period
|
31,962,201
|
13,746,590
|
|||||
Cash
and cash equivalents at end of period
|
$
|
10,420,371
|
$
|
16,130,529
|
|||
|
|||||||
Supplementary
disclosure of cash flow information:
|
|||||||
Cash
paid during the period:
|
|||||||
Interest
|
$
|
37,924
|
$
|
51,039
|
|||
Income
taxes
|
$
|
566,858
|
$
|
─
|
|||
Supplementary
non-cash information:
|
|||||||
Conversion
of note payable into common stock
|
$
|
200,000
|
|||||
Property
acquired through capitalized leases
|
$
|
805,776
|
182,665
|
|
Assets
at Fair Value at June 30, 2008
|
||||||||||||
|
Level
1
|
Level
2
|
Level
3
|
Total
|
|||||||||
Corporate
equities
|
$
|
11,372,856
|
$
|
25,000
|
$
|
712,811
|
$
|
12,110,667
|
|||||
Stock
warrants
|
—
|
—
|
5,441,043
|
5,441,043
|
|||||||||
Underwriters’
purchase option
|
—
|
—
|
283,714
|
283,714
|
|||||||||
Preferred
stock
|
3,000
|
—
|
—
|
3,000
|
|||||||||
$
|
11,375,856
|
$
|
25,000
|
$
|
6,437,568
|
$
|
17,838,424
|
|
Assets
at Fair Value at December 31, 2007
|
||||||||||||
|
Level
1
|
Level 2
|
Level
3
|
Total
|
|||||||||
Corporate
equities
|
$
|
13,696,019
|
$
|
—
|
$
|
489,453
|
$
|
14,185,472
|
|||||
Stock
warrants
|
—
|
—
|
1,756,580
|
1,756,580
|
|||||||||
Underwriters’
purchase option
|
—
|
—
|
194,957
|
194,957
|
|||||||||
Convertible
notes
|
228,456
|
—
|
—
|
228,456
|
|||||||||
Preferred
stock
|
225
|
—
|
—
|
225
|
|||||||||
$
|
13,924,700
|
$
|
—
|
$
|
2,440,990
|
$
|
16,365,690
|
|
Corporate
Equities
|
Stock
Warrants
|
Underwriters’
Purchase Option
|
Total
|
|||||||||
Balance
at December 31, 2007
|
$
|
489,453
|
$
|
1,756,580
|
$
|
194,957
|
$
|
2,440,990
|
|||||
Purchases,
issuances and settlements
|
551,809
|
1,110,586
|
—
|
1,662,395
|
|||||||||
Net
transfers in / (out)
|
(339,453
|
)
|
—
|
—
|
(339,453
|
)
|
|||||||
Gains
/ (losses)
|
|||||||||||||
Realized
|
—
|
—
|
—
|
—
|
|||||||||
Unrealized
|
11,002
|
2,573,877
|
88,757
|
2,673,636
|
|||||||||
Balance
at June 30, 2008
|
$
|
712,811
|
$
|
5,441,043
|
$
|
283,714
|
$
|
6,437,568
|
Options
Outstanding
|
Weighted
Average
Exercise Price
|
||||||
Balance
as of December 31, 2007
|
4,066,259
|
$
|
6.00
|
||||
Granted
|
608,385
|
3.75
|
|||||
Exercised
|
(64,628
|
)
|
(2.36
|
)
|
|||
Canceled
|
(300,119
|
)
|
(6.87
|
)
|
|||
Balance
as of June 30, 2008
|
4,309,897
|
$
|
5.68
|
||||
Exercisable
as of June 30, 2008
|
3,069,672
|
$
|
6.
17
|
|
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
|
2,007,309
|
4.86
|
$
|
2.98
|
$
|
─
|
1,909,777
|
$
|
3.02
|
$
|
─
|
|||||||||||
$
3.51 - $ 7.00
|
1,592,700
|
8.11
|
$
|
4.45
|
─
|
506,212
|
4.43
|
─
|
||||||||||||||
$
7.01 - $14.00
|
414,220
|
6.06
|
$
|
9.24
|
─
|
358,015
|
9.37
|
─
|
||||||||||||||
$14.01
- $28.00
|
256,381
|
2.35
|
$
|
22.04
|
─
|
256,381
|
22.04
|
─
|
||||||||||||||
$28.01
- $49.00
|
39,287
|
1.66
|
$
|
49.00
|
─
|
39,287
|
49.00
|
─
|
||||||||||||||
|
4,309,897
|
6.00
|
$
|
5.68
|
$
|
─
|
3,069,672
|
$
|
6.17
|
$
|
─
|
|
Non-Vested
Stock
Outstanding
|
Weighted
Average
Grant
Date
Fair
Value
|
Intrinsic
Value
at
June
30, 2007
|
|||||||
Balance
as of December 31, 2007
|
180,620
|
$
|
7.51
|
|||||||
Granted
|
30,346
|
1.92
|
||||||||
Vested
|
(85,307
|
)
|
(6.86
|
)
|
||||||
Canceled
|
(670
|
)
|
(10.97
|
)
|
||||||
Balance
as of June 30, 2008
|
124,989
|
$
|
7.41
|
$
|
158,736
|
|
Six
months Ended
June
30,
|
||||||
|
2008
|
2007
|
|||||
Expected
volatility
|
70.42
|
%
|
65.83
|
%
|
|||
Expected
life (years)
|
6.43
|
4.17
|
|||||
Risk-free
interest rate
|
3.11
|
%
|
4.75
|
%
|
|||
Expected
dividend yield
|
0
|
%
|
0
|
%
|
|
Three
Months Ended June 30,
|
Six
Months Ended June 30,
|
|||||||||||
|
2008
|
2007
|
2008
|
2007
|
|||||||||
Net
(loss) income available to stockholders - basic
|
$
|
(5,113,845
|
)
|
$
|
2,320,373
|
$
|
(12,163,818
|
)
|
$
|
2,389,629
|
|||
Interest
on dilutive securities
|
500
|
4,084
|
4,584
|
8,168
|
|||||||||
Net
(loss) income available to stockholders - diluted
|
$
|
(5,113,345
|
)
|
$
|
2,324,457
|
$
|
(12,159,234
|
)
|
$
|
2,397,797
|
|||
Weighted-average
number of common shares - basic
|
12,562,120
|
11,657,775
|
12,425,851
|
11,000,702
|
|||||||||
Weighted-average
number of common shares - diluted
|
12,562,120
|
12,856,306
|
12,425,851
|
12,208,965
|
|||||||||
Basic
net income (loss) per common share:
|
$
|
(0.41
|
)
|
$
|
0.20
|
$
|
(0.98
|
)
|
$
|
0.22
|
|||
Diluted
net loss per common share:
|
$
|
(0.41
|
)
|
$
|
0.18
|
$
|
(0.98
|
)
|
$
|
0.20
|
|
Three Months Ended June 30,
|
Six
Months Ended June 30,
|
|||||||||||
|
2008
|
2007
|
2008
|
2007
|
|||||||||
Stock
options and warrants excluded due to the exercise price exceeding
the
average fair value of the Company's common stock during the
period
|
4,198,770
|
1,682,257
|
2,226,464
|
1,637,949
|
|||||||||
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
|
348,754
|
─
|
740,477
|
─
|
|||||||||
Weighted
average shares issuable for the period prior to the conversion
of the
convertible notes payable
|
45,526
|
─
|
94,192
|
─
|
|||||||||
Total
common stock equivalents excluded from diluted net (loss) income
per
share
|
4,593,050
|
1,682,257
|
3,061,133
|
1,637,949
|
|
·
|
|
Revenue
and expenses directly associated with each segment are included
in
determining income.
|
|
·
|
|
Each
segment’s operating expenses include compensation and benefits expenses
and other operating expenses that are incurred directly in
support of the
segments. These other operating expenses, include brokerage
and clearing
fees, cost of primary research services, professional services,
occupancy
and equipment, communications and technology, depreciation
and
amortization, amortization of intangible assets, travel and
business
development and other operating expenses.
|
|
·
|
|
Corporate
operating expenses include compensation and benefits for corporate
support
employees as well as operating expenses that are not incurred
directly in
support of our three segments.
|
Three Months Ended
June 30,
|
Six Months Ended
June 30,
|
|||||||||||||
2008
|
2007
|
2008
|
2007
|
|||||||||||
Broker-Dealer
|
Revenue
|
$
|
14,175,678
|
$
|
19,156,231
|
$
|
24,913,877
|
$
|
33,304,549
|
|||||
Operating
expenses
|
13,127,656
|
16,027,623
|
27,074,716
|
29,797,608
|
||||||||||
Operating
(loss) income
|
$
|
(1,084,022
|
)
|
$
|
3,128,608
|
$
|
(2,160,838
|
)
|
$
|
3,506,941
|
||||
Segment
assets
|
$
|
34,334,205
|
$
|
33,634,010
|
$
|
34,334,205
|
$
|
33,634,011
|
||||||
Primary
Research
|
Revenue
|
1,498,144
|
973,062
|
$
|
3,039,938
|
$
|
973,062
|
|||||||
Operating
expenses
|
4,587,493
|
1,445,117
|
6,497,873
|
1,445,117
|
||||||||||
Operating
(loss) income (1)
|
$
|
(3,089,349
|
)
|
$
|
(472,055
|
)
|
$
|
(3,457,935
|
)
|
$
|
(472,055
|
)
|
||
Segment
assets
|
$
|
3,987,090
|
$
|
7,806,048
|
$
|
3,987,090
|
$
|
7,806,048
|
||||||
Asset
Management
|
Revenue
|
125,652
|
243,056
|
$
|
(386,036
|
)
|
$
|
417,882
|
||||||
Operating
expenses
|
590,472
|
218,986
|
1,017,562
|
448,690
|
||||||||||
Operating
(loss) income
|
$
|
(464,820
|
)
|
$
|
24,070
|
$
|
(1,403,598
|
)
|
$
|
(30,808
|
)
|
|||
Segment
assets
|
$
|
2,436,001
|
$
|
2,345,761
|
$
|
2,436,001
|
$
|
2,325,249
|
||||||
Corporate
Support
|
Operating
loss
|
(4,462,157
|
)
|
(385,845
|
)
|
(7,071,602
|
)
|
(708,195
|
)
|
|||||
Assets
|
1,156,330
|
874,154
|
1,156,330
|
874,154
|
||||||||||
Consolidated
Entity
|
Revenue
|
15,799,474
|
20,372,349
|
27,567,779
|
34,695,493
|
|||||||||
Operating
expenses
|
22,767,
778
|
18,077,573
|
41,661,753
|
32,399,610
|
||||||||||
Operating
(loss) income
|
$
|
(6,968,304
|
)
|
$
|
2,294,776
|
$
|
(14,093,973
|
)
|
$
|
2,295,883
|
||||
Total
assets
|
$
|
41,913,626
|
$
|
44,659,973
|
$
|
41,913,626
|
$
|
44,659,974
|
(1)
|
Note:
The operating loss includes $2.6 million of non-cash based
impairment of
goodwill and an intangible asset associated with the acquisition
which is
a non-cash expense.
|
|
Three
Months Ended
|
Six
Months Ended
|
|||||||||||
|
June
30,
2008
|
June
30,
2007
|
June
30,
2008
|
June
30,
2007
|
|||||||||
Revenue:
|
|
|
|
|
|||||||||
Commissions
|
$
|
7,892,372
|
$
|
7,717,573
|
$
|
16,361,082
|
$
|
14,883,280
|
|||||
Principal
transactions
|
1,418,829
|
5,712,652
|
103,753
|
8,325,776
|
|||||||||
Investment
banking
|
4,446,995
|
5,631,556
|
7,823,406
|
9,864,027
|
|||||||||
Primary
research
|
1,498,144
|
951,062
|
3,039,938
|
951,062
|
|||||||||
Advisory
and other fees
|
543,134
|
359,506
|
239,600
|
671,348
|
|||||||||
Total
revenue
|
15,799,474
|
20,372,349
|
27,567,779
|
34,695,493
|
|||||||||
Operating
expenses:
|
|||||||||||||
Compensation
and benefits
|
12,102,568
|
12,767,087
|
25,273,210
|
23,577,374
|
|||||||||
Brokerage
and clearing fees
|
709,183
|
662,056
|
1,484,484
|
1,294,697
|
|||||||||
Cost
of primary research services
|
609,129
|
395,218
|
1,194,293
|
395,218
|
|||||||||
Professional
services
|
2,475,016
|
703,640
|
3,302,501
|
1,085,118
|
|||||||||
Occupancy
and equipment
|
689,428
|
453,061
|
1,226,610
|
895,589
|
|||||||||
Communications
and technology
|
1,010,869
|
884,010
|
1,950,847
|
1,696,946
|
|||||||||
Depreciation
and amortization
|
162,946
|
182,027
|
306,170
|
363,048
|
|||||||||
Amortization
of intangible assets
|
116,536
|
220,643
|
233,071
|
220,643
|
|||||||||
Travel
and entertainment
|
1,012,210
|
685,416
|
1,971,804
|
1,154,618
|
|||||||||
Other
|
1,278,377
|
1,124,415
|
2,117,247
|
1,716,359
|
|||||||||
Impairment
of goodwill
|
2,601,516
|
—
|
2,601,516
|
—
|
|||||||||
Total
operating expenses
|
22,767,778
|
18,077,573
|
41,661,753
|
32,399,610
|
|||||||||
Operating
(loss) income
|
(6,968,304
|
)
|
2,294,776
|
(14,093,974
|
)
|
2,295,883
|
|||||||
Interest
income
|
34,016
|
107,461
|
130,420
|
229,954
|
|||||||||
Interest
expense
|
(18,301
|
)
|
(26,864
|
)
|
(39,008
|
)
|
(81,208
|
)
|
|||||
(Loss)
income before taxes
|
(6,952,589
|
)
|
2,375,373
|
(14,002,562
|
)
|
2,444,629
|
|||||||
Income
tax expense
|
1,838,744
|
(55,000
|
)
|
1,838,744
|
(55,000
|
)
|
|||||||
Net
(loss) income
|
$
|
(5,113,845
|
)
|
$
|
2,320,373
|
$
|
(12,163,818
|
)
|
$
|
2,389,629
|
|
Three
Months Ended
|
Six
Months Ended
|
|||||||||||
|
June
30,
2008
|
June
30,
2007
|
June
30,
2008
|
June
30,
2007
|
|||||||||
Stock-based
compensation
|
$
|
653,281
|
714,159
|
$
|
1,316,606
|
$
|
1,451,862
|
||||||
Depreciation
and amortization
|
162,946
|
182,028
|
306,171
|
363,048
|
|||||||||
Amortization
of intangible assets
|
116,535
|
220,643
|
233,070
|
220,643
|
|||||||||
Provision
for uncollectible accounts receivable
|
113,758
|
217,922
|
280,543
|
228,167
|
|||||||||
Impairment
of goodwill and intangible assets
|
2,601,516
|
—
|
2,601,516
|
—
|
|||||||||
Amortization
of discounts on debt
|
—
|
2,583
|
2,584
|
5,166
|
|||||||||
Total
|
$
|
3,648,036
|
1,337,335
|
$
|
4,740,490
|
$
|
2,268,886
|
|
·
|
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
|
Six
Months Ended
|
|||||||||||
|
June
30,
2008
|
June
30,
2007
|
June
30,
2008
|
June
30,
2007
|
|||||||||
Revenue:
|
|
|
|
|
|||||||||
Capital
raising
|
$
|
4,252,495
|
$
|
5,126,556
|
$
|
7,482,685
|
$
|
9,146,527
|
|||||
Financial
advisory and other
|
194,500
|
505,000
|
340,721
|
717,500
|
|||||||||
Total
investment banking revenue
|
$
|
4,446,995
|
$
|
5,631,556
|
$
|
7,823,406
|
$
|
9,864,027
|
|||||
|
|||||||||||||
Transaction
Volumes:
|
|||||||||||||
Public
offerings:
|
|||||||||||||
Capital
underwritten participations
|
$
|
8,153,000
|
$
|
72,750,000
|
$
|
8,153,000
|
$
|
105,250,000
|
|||||
Number
of transactions
|
2
|
4
|
2
|
7
|
|||||||||
Private
placements:
|
|||||||||||||
Capital
raised
|
$
|
43,276,000
|
$
|
22,985,000
|
$
|
75,700,000
|
$
|
86,585,000
|
|||||
Number
of transactions
|
6
|
3
|
10
|
6
|
|
·
|
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
|
|
Six
Months Ended
|
|
|||||||||
|
|
June
30,
2008
|
|
June
30,
2007
|
|
June
30,
2008
|
|
June
30,
2007
|
|||||
Revenue:
|
|
|
|
|
|||||||||
Commissions
|
$
|
7,892,372
|
$
|
7,717,573
|
$
|
16,361,082
|
$
|
14,883,280
|
|||||
Principal
transactions:
|
|||||||||||||
Customer
principal transactions, proprietary trading and market
making
|
$
|
112,637
|
$
|
4,669,144
|
$
|
(3,672,105
|
)
|
$
|
7,354,753
|
||||
Investment
portfolio
|
1,306,192
|
1,043,508
|
3,775,858
|
971,023
|
|||||||||
Total
principal transactions revenue
|
$
|
1,418,829
|
$
|
5,712,652
|
$
|
103,753
|
$
|
8,325,776
|
|||||
Transaction
Volumes:
|
|||||||||||||
Number
of shares traded
|
329,419,357
|
247,476,532
|
561,535,539
|
477,147,878
|
|||||||||
Number
of active clients
|
343
|
408
|
444
|
488
|
|
Three
Months Ended
|
|
Six
Months Ended
|
|
|||||||||
|
|
June
30,
2008
|
|
June
30,
2007
|
|
June
30,
2008
|
|
June
30,
2007
|
|||||
Incentive
compensation and discretionary bonuses
|
$
|
6,139,517
|
$
|
7,708,451
|
$
|
12,355,067
|
$
|
13,383,686
|
|||||
Salaries
and wages
|
4,242,553
|
3,559,646
|
8,552,376
|
6,599,791
|
|||||||||
Stock-based
compensation
|
653,821
|
714,159
|
1,316,606
|
1,451,862
|
|||||||||
Payroll
taxes, benefits and other
|
1,066,677
|
784,831
|
3,049,161
|
2,142,035
|
|||||||||
Total
compensation and benefits
|
$
|
12,102,568
|
$
|
12,767,087
|
$
|
25,273,210
|
$
|
23,577,374
|
|||||
Total
compensation and benefits as a percentage of revenue
|
77
|
%
|
63
|
%
|
92
|
%
|
68
|
%
|
|||||
Cash
compensation and benefits as a percentage of revenue
|
72
|
%
|
59
|
%
|
87
|
%
|
64
|
%
|
|
Operating
Leases
|
Capital
Leases
|
|||||
2008
|
$
|
1,377,663
|
$
|
280,338
|
|||
2009
|
2,624,011
|
407,369
|
|||||
2010
|
2,019,930
|
268,853
|
|||||
2011
|
1,923,516
|
146,647
|
|||||
2012
|
1,174,323
|
—
|
|||||
Thereafter
|
572,000
|
—
|
|||||
Total
commitments
|
$
|
9,691,443
|
$
|
1,103,207
|
Don Arata, et al. v. Merriman Curhan Ford & Co.