Hudson Acquisition

9 Months Ended

Sep. 30, 2011

Business Combination Disclosure [Text Block]

NOTE 3 - Hudson Acquisition

          On April 8, 2011, the Company completed its acquisition of Hudson Holding Corporation (“Hudson”). The transaction was valued at approximately $5.3 million, based upon the $2.06 per share closing price of the Company’s common stock on that date.

          The acquisition was accounted for under the acquisition method of accounting in accordance with ASC 805, “Business Combinations.” Accordingly, goodwill was measured as the excess of the acquisition-date fair value of the consideration transferred over the amount of acquisition-date identifiable assets acquired net of assumed liabilities. Goodwill of $0.4 million was recorded as an asset in the consolidated statement of financial condition, which has been allocated to our company’s Capital Markets segment. The allocation of the purchase price is preliminary and will be finalized upon completion of the analysis of the fair values of the net assets of Hudson. The final goodwill and intangible assets recorded on the consolidated statement of financial condition may differ from that reflected herein as a result of future measurement period adjustments. In management’s opinion, the goodwill represents the value expected from the synergies created through the operational enhancement benefits that will result from the integration of Hudson’s business and the reputation and expertise of Hudson in the equity trading business. Preliminarily, no intangible assets have been identified. Under ASC 805, merger-related transaction costs (such as advisory, legal, valuation and other professional fees) are not included as components of consideration transferred but are accounted for as expenses in the periods in which the costs are incurred. Transaction costs of approximately $0.3 million and $1.5 million were incurred during the three and nine months ended September 30, 2011, respectively, and are included in “other operating expenses” on the consolidated statement of operations.

          The following table summarizes the fair value of assets acquired and liabilities assumed at the date of the acquisition (in thousands):

Assets
Cash and cash equivalents:	$	4,927
Financial instruments owned, at fair value:		2,501
Private placement and other fees receivable		597
Receivable from brokers, dealers & clearing agencies		1,337
Property and equipment, net		152
Other assets		2,516
Total assets		12,030
Liabilities
Accrued compensation payable	$	1,231
Accounts payable and accrued expenses		4,701
Financial instruments sold, not yet purchased, at fair value		1,227
Total liabilities assumed		7,159
Net assets acquired	$	4,871

          Hudson’s results of operations have been included in the consolidated financial statements prospectively from the date of acquisition. Hudson’s businesses were integrated with the Company’s immediately after the merger; therefore, the revenues, expenses, and net income of the integrated businesses are not distinguishable within the Company’s results of operations. The following unaudited pro forma financial data assumes the acquisition had occurred at the beginning of each period presented. Pro forma results have been prepared by adjusting the Company’s historical results to include Hudson’s results of operations. The unaudited pro forma results presented do not necessarily reflect the results of operations that would have resulted had the acquisition been completed at the beginning of the applicable periods presented, nor do they indicate the results of operations in future periods. Additionally, the unaudited pro forma results do not include the impact of possible business model changes, nor do they consider any potential impacts of current market conditions or revenues, reduction of expenses, asset dispositions, or other factors. The impact of these items could alter the following pro forma results (in thousands of dollars):

	Three Months Ended September 30, 2011			Nine Months Ended September 30, 2011
	Unaudited			Unaudited
Total revenues	$	11,177			63,494
Net loss		(8,990	)		(20,437	)
Loss per share
Basic	$	(0.24	)		(0.55	)
Diluted	$	(0.24	)		(0.55	)