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Thomas Weisel Partners Group 10-Q 2009 UNITED
STATES SECURITIES AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
10-Q
or
Commission
File Number: 000-51730
Thomas
Weisel Partners Group, Inc.
(Exact
name of registrant as specified in its charter)
One
Montgomery Street
San Francisco,
California 94104
(415) 364-2500
(Address,
including zip code, and telephone number, including area code, of registrant’s
principal executive office)
Indicate
by check mark whether the registrant: (1) has filed all reports required to
be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934
during the preceding 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. þ Yes o No
Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, or a non-accelerated filer. See definition of “accelerated
filer and large accelerated filer” in Rule 12b-2 of the Exchange Act.
(Check one):
(Do not
check if a smaller reporting company)
Indicate
by check mark whether the registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act). o Yes þ No
APPLICABLE
ONLY TO CORPORATE ISSUERS:
As of
November 4, 2009 there were 31,780,379 shares of the registrant’s common stock
outstanding, including 6,260,618 exchangeable shares of TWP Acquisition Company
(Canada), Inc., a wholly-owned subsidiary of the registrant. Each exchangeable
share is exchangeable at any time into a share of common stock of the
registrant, entitles the holder to dividend and other rights substantially
economically equivalent to those of a share of common stock, and, through a
voting trust, entitles the holder to a vote on matters presented to common
shareholders.
PART
I — FINANCIAL INFORMATION
THOMAS
WEISEL PARTNERS GROUP, INC. AND SUBSIDIARIES
(In
thousands, except share and per share data)
(Unaudited)
See
accompanying notes to unaudited condensed consolidated financial
statements. - 1
-
THOMAS
WEISEL PARTNERS GROUP, INC. AND SUBSIDIARIES
(In
thousands, except per share data)
(Unaudited)
See
accompanying notes to unaudited condensed consolidated financial
statements. - 2
-
THOMAS
WEISEL PARTNERS GROUP, INC. AND SUBSIDIARIES
(In
thousands)
(Unaudited)
See
accompanying notes to unaudited condensed consolidated financial
statements. - 3
-
THOMAS
WEISEL PARTNERS GROUP, INC. AND SUBSIDIARIES
(Unaudited)
Organization
Thomas
Weisel Partners Group, Inc., a Delaware corporation, together with its
subsidiaries (collectively, the “Company”), is an investment banking firm
headquartered in San Francisco, California. The Company operates on an
integrated basis and is managed as a single operating segment providing
investment services that include investment banking, brokerage, equity research
and asset management.
The
Company conducts its investment banking, brokerage and equity research business
through the following subsidiaries:
TWP, TWPC
and TWPIL introduce on a fully disclosed basis proprietary and customer
securities transactions to other broker dealers (the “clearing brokers”) for
clearance and settlement.
The
Company primarily conducts its asset management business through Thomas Weisel
Capital Management LLC (“TWCM”), a registered investment adviser under the
Investment Advisers Act of 1940, as amended (the "Investment Advisors Act”).
TWCM is a general partner of a series of investment funds in venture capital and
fund of funds through the following subsidiaries (the “Asset Management
Subsidiaries”):
Basis
of Presentation
These
unaudited condensed consolidated financial statements have been prepared in
accordance with accounting principles generally accepted in the United States of
America (“GAAP”) for interim financial information and Regulation S-X,
Article 10 under the Exchange Act. Because the Company provides investment
services to its clients, it follows certain accounting guidance used by the
brokerage and investment industry.
The
preparation of the Company’s condensed consolidated financial statements in
conformity with GAAP requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities at the date of the
condensed consolidated financial statements and the reported amounts of revenues
and expenses during the reporting period. Actual amounts could differ from those
estimates, and such differences could be material to the condensed consolidated
financial statements.
The
condensed consolidated financial statements and the related notes are unaudited
and exclude some of the disclosures required in annual financial statements.
Management believes it has made all necessary adjustments (consisting of only
normal recurring items) so that the condensed consolidated financial statements
are presented fairly and that estimates made in preparing its condensed
consolidated financial statements are reasonable and prudent.
- 4
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These
condensed consolidated financial statements should be read in conjunction with
the Company’s audited consolidated financial statements included in its Annual
Report on Form 10-K for the year ended December 31, 2008.
Management
has evaluated subsequent events through November 6, 2009, which is the date that
the Company’s financial statements were issued. No material
subsequent events have occurred since September 30, 2009 that require
recognition or disclosure in these condensed consolidated financial
statements.
Determining Whether a Market Is Not
Active and a Transaction Is Not Distressed – In April 2009, the FASB
issued guidance which provides additional regulation on determining whether a
market for a financial asset is not active and a transaction is not distressed
for fair value measurements. The guidance was effective for interim and annual
periods ending after March 15, 2009 and shall be applied prospectively. The
Company adopted the guidance on March 31, 2009, and the adoption did not have a
material impact on its condensed consolidated statements of financial condition,
operations and cash flows.
Determining Fair Value When the
Volume and Level of Activity for the Asset or Liability Have Significantly
Decreased and Identifying Transactions That Are Not Orderly – In April
2009, the FASB issued additional guidance for estimating fair value when the
volume and level of activity for the asset or liability have significantly
decreased. This guidance also assists in identifying circumstances that indicate
a transaction is not orderly. This guidance was effective for interim and annual
reporting periods ending after June 15, 2009 and shall be applied prospectively.
The Company adopted the guidance on June 30, 2009, and the adoption did not have
a material impact on its condensed consolidated statements of financial
condition, operations and cash flows.
Interim Disclosures about Fair Value
of Financial Instruments – In April 2009, the FASB issued guidance
pertaining to disclosures of fair value of financial instruments that requires
disclosure of fair value of financial instruments for interim
reporting periods of publicly traded companies, as well as in annual financial statements.
The guidance was effective for interim reporting periods ending after June 15,
2009. The Company adopted the guidance on June 30, 2009, and the
adoption did not have a material impact on its condensed consolidated statement
of financial condition, operations and cash flows.
Subsequent Events – In May
2009, the FASB issued guidance which establishes general standards of accounting
for and disclosure of events that occur after the balance sheet date but before
the financial statements are issued or are available to be issued. In
particular, the guidance sets forth (i) the period after the balance sheet date
during which management of a reporting entity should evaluate events or
transactions that may occur for potential recognition or disclosure in the
financial statements, (ii) the circumstances under which an entity should
recognize events or transactions occurring after the balance sheet date in its
financial statements, and (iii) the disclosures that an entity should make about
events or transactions that occurred after the balance sheet date. The guidance
was effective for interim or annual financial periods ending after June 15,
2009. The Company adopted the guidance on June 30, 2009, and the adoption did
not have an impact on its condensed consolidated statements of financial
condition, operations and cash flows.
Accounting for Transfers of
Financial Assets – In June 2009, the FASB issued guidance to improve the
relevance, representational faithfulness and comparability of the information
that a reporting entity provides in its financial reports about a transfer of
financial assets, the effects of a transfer on its financial position, financial
performance and cash flows, and a transferor’s continuing involvement in
transferred financial assets. This guidance is effective for interim
and annual periods ending after November 15, 2009 and shall be applied
prospectively. The Company is currently evaluating the impact, if any, that the
adoption will have on its consolidated statements of financial condition,
operations and cash flows.
- 5
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Consolidation of Variable Interest
Entities – In June 2009, the FASB issued guidance with the objective to
amend certain requirements for accounting for the consolidation of variable
interest entities (“VIE”) to improve financial
reporting by enterprises involved with VIEs and to provide more relevant and
reliable information to users of financial statements. This
guidance is effective for annual reporting periods beginning after November 15,
2009, and for interim periods within that first annual reporting period. The
Company is currently evaluating the impact, if any, that the adoption will have
on its consolidated statements of financial condition, operations and cash
flows.
FASB Accounting Standards
Codification and the
Hierarchy of Generally Accepted Accounting Principles – In June 2009, the
FASB issued guidance with the objective to replace the original hierarchy of
accounting principles and to establish the FASB Accounting Standards
Codification as the source of authoritative accounting principles
recognized by the FASB. The new codification is to be applied by
nongovernmental entities in the
preparation of financial statements in conformity with GAAP. Rules and interpretive releases
of the Securities and Exchange Commission (“SEC”) under authority of federal securities
laws are also sources of authoritative GAAP for SEC registrants. The guidance
was effective
for financial statements issued for interim and annual periods ending after
September 15, 2009. The Company adopted the guidance on September 30,
2009, and the adoption did not have a material impact on its condensed
consolidated statements of financial condition, operations and cash
flows.
Measuring Liabilities at Fair
Value – In August 2009, the FASB issued guidance with the objective to
provide clarification in circumstances in which a quoted market price in an
active market for the identical liability is not available. The guidance is
applicable when trying to measure the fair value of a liability under fair value
accounting rules. The guidance is effective for the first reporting period,
including interim reporting periods, beginning after the standard was issued.
The Company adopted the guidance upon issuance, and the adoption did not have a
material impact on its condensed consolidated statements of financial condition,
operations and cash flows.
NOTE
3 — SECURITIES OWNED AND SECURITIES SOLD, BUT NOT YET PURCHASED
Securities
owned and securities sold, but not yet purchased were as follows (in thousands):
At September 30, 2009
and December 31, 2008, securities sold, but not yet purchased were
collateralized by securities owned that are held at the clearing
brokers.
At
September 30, 2009 and December 31, 2008, the Company did not hold
securities that cannot be publicly offered or sold unless registration has been
affected under the Securities Act, of 1933 as amended (the “Securities Act”),
except for warrants.
Warrants
are received from time to time as partial payment for investment banking
services. The
warrants provide the Company with the right to purchase common shares in both
public and private companies. All warrants were non-transferable as
of September 30, 2009, and certain of them have restricted periods during which
the warrant may not be exercised.
NOTE
4 — INVESTMENTS IN PARTNERSHIPS AND OTHER INVESTMENTS
Investments
in Partnerships
Investments
in partnerships consist of investments in private equity partnerships, including
the Company’s general partner interests in investment partnerships, at fair
value.
Through
March 31, 2007, the Company waived certain management fees with respect to
certain of these partnerships. These waived fees constitute deemed contributions
to the investment partnerships that serve to satisfy the Company’s general
partner commitment, as provided in the underlying investment partnerships’
partnership agreements. The Company may be allocated a special profits interest
in respect of previously waived management fees based on the subsequent
investment performance of the respective partnerships.
- 6
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The
investment partnerships in which the Company is a general partner may allocate
carried interest and make carried interest distributions to the general partner
if the partnerships’ investment performance reaches a threshold as defined in
the respective partnership agreements. The Company recognizes the
allocated carried interest if and when this threshold is met.
Some of
the Company’s investments in partnerships interests meet the definition of a
VIE. The Company does not consolidate these VIEs because it has determined
that the Company is not the primary beneficiary. For general partnership
interests that do not qualify as VIEs, the partnership agreements have
established simple majority kick-out rights for limited partner interests and
therefore the Company does not consolidate the partnerships.
As of
September 30, 2009, the Company held auction rate securities (“ARS”) with a par
value of $22.9 million and a fair value of $21.3 million. This balance includes
the July 2009 repurchase at par of $13.3 million of ARS that the Company
had previously sold from its account in January 2008 to three customers
without those customers’ prior written consent.
The ARS
are variable rate debt instruments, having long-term maturity dates
(approximately 25 to 33 years), but whose interest rates are reset through an
auction process, most commonly at intervals of 7, 28 and 35 days. The interest
earned on these investments is exempt from Federal income tax. All of the
Company’s ARS are backed by pools of student loans and were rated either Aaa,
Aa3, A1, A3, B2 or Baa3 at September 30, 2009 and either Aaa, Aa3 or A1 at
December 31, 2008. The Company continues to receive interest when due on its ARS
and expects to continue to receive interest when due in the
future. The weighted-average Federal tax exempt interest rate was
0.8% at September 30, 2009.
In 2008,
widespread auction failures resulted in a lack of liquidity for these previously
liquid securities. As a result, the principal balance of the Company’s ARS will
not be accessible until successful auctions occur, a buyer is found outside of
the auction process, the issuers and the underwriters establish a different form
of financing to replace these securities or final payments come due according to
the contractual maturities. As a result of the auction failures, the
Company has evaluated the credit risk and liquidity risk associated with the
securities and compared the yields on its ARS to similarly rated municipal
issues and has determined that its ARS had a fair value decline during the three
and nine months ended September 30, 2009 of $0.6 million and $0.8 million,
respectively.
In
October 2009, the State of New Mexico redeemed at par $3.0 million of ARS held
by the Company at September 30, 2009.
NOTE
5 — RELATED PARTY TRANSACTIONS
Receivables
from related parties consisted of the following (in thousands):
Related
Party Loans
Co-Investment Funds — In 2000
and 2001, the Company established an investment program for employees wherein
employees who qualified as accredited investors were able to contribute up to 4%
of their compensation to private equity funds (the “Co-Investment Funds”). The
Co-Investment Funds were established solely for employees of the Company and
invested side-by-side with the Company’s affiliates, Thomas Weisel Capital
Partners, L.P. (a private equity fund formerly managed by the Company) and
Thomas Weisel Venture Partners L.P. As part of this program, the Company made
loans to employees for capital contributions to the Co-Investment Funds in
amounts up to 400% of employees’ contributions. The Company discontinued the
investment program for employees in 2002.
The
Company holds as collateral the investment in the Co-Investment Funds and
establishes a reserve that reduces the carrying value of the receivable and
accrued interest to the fair value of the collateralized ownership interest of
the employees and former employees in the Co-Investment Funds. During the nine
months ended September 30, 2009, the Company increased the reserve related to
the Co-Investment Funds by $0.5 million. There was no change to the reserve
during the three months ended September 30, 2009 and in the three and nine
months ended September 30, 2008. During the three and nine months ended
September 30, 2009 the Co-Investment Funds distributed $0.2 million which was
credited towards repayment of loans to employees. The Co-Investment Funds did
not make any distributions that were credited towards repayment of the loans to
employees during the three and nine months ended September 30,
2008.
Employee Loans
— The Company from time to
time prior to its initial public offering made unsecured loans to its employees.
These loans were not part of a Company program, but were made as a matter of
course. The Company previously established a reserve for the face value of these
loans. In June 2007, two employees entered into agreements with the
Company that provide for repayment of the loans by December 31, 2008, if they
have not already been repaid, from funds generated through repurchase by the
Company of shares of the Company’s common stock held by the employees.
In September 2008, the two
employees and the Company amended the agreements described above to extend the
repayment date of the loans to February 2011. As of September 30,
2009, the two employees have collectively repaid $0.3 million of their
outstanding loan balances in cash or from proceeds they received through the
repurchase by the Company of shares of the Company’s common stock held by the
employees. As of September 30, 2009, the fair market value of the Company’s
common stock held by each of the employees was equal to or greater than the
carrying amount of their loans.
- 7
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Other
Transactions
Mr. Weisel,
the Company’s Chairman and Chief Executive Officer, and certain other employees
of the Company from time to time use an airplane owned by Ross Investments Inc.
(“Ross”), an entity wholly-owned by Mr. Weisel, for business travel. The
Company and Ross have adopted a time-sharing agreement in accordance with
Federal Aviation Regulation 91.501 to govern the Company’s use of the Ross
aircraft, pursuant to which the Company reimburses Ross for the travel expenses
in an amount generally comparable to the expenses the Company would have
incurred for business travel on commercial airlines for similar trips. For the
three months ended September 30, 2009 and 2008, the Company paid approximately
$27,000 and $15,000, respectively, to Ross on account of such expenses. For the
nine months ended September 30, 2009 and 2008, the Company paid approximately
$68,000 and $47,000, respectively, to Ross on account of such expenses. These
amounts are included in marketing and promotion expense within the condensed
consolidated statements of operations. As of September 30, 2009 and December 31,
2008, the Company did not have any amounts payable to Ross.
In
addition, the Company provides personal office services to Mr. Weisel.
Pursuant to an understanding between Mr. Weisel and the Company, Mr. Weisel
reimburses the Company for out-of-pocket expenses the Company incurs for such
services. Amounts incurred by the Company for these services for the three
months ended September 30, 2009 and 2008 were approximately $71,000 and $73,000,
respectively. Amounts incurred for the nine months ended September 30, 2009 and
2008 were approximately $210,000 and $264,000, respectively. The receivable from
Mr. Weisel at September 30, 2009 and December 31, 2008 was approximately $71,000
and $73,000, respectively. The amount outstanding at September 30, 2009 was paid
by Mr. Weisel in October 2009.
In 2009,
the Company agreed to provide personal office services, as needed, to Mr.
Conacher, its President and Chief Operating Officer. Mr. Conacher
reimburses the Company for the cost of such services and for out-of-pocket
expenses it incurs on his behalf. There were no expenses incurred by the
Company during the three months ended September 30, 2009. Amounts incurred by
the Company for the nine months ended September 30, 2009 were approximately
$40,000, which had been fully repaid as of September 30, 2009.
On July
27, 2009, the Company entered into a President Employment Agreement, a
Relocation Agreement and a Side Agreement with Mr. Conacher. The
Relocation Agreement sets forth terms and conditions applicable to Mr.
Conacher’s relocation from Canada to the Company’s headquarters in San
Francisco. Pursuant to the Relocation Agreement, on August 5, 2009, Mr.
Conacher sold 175,000 shares of the Company’s common stock at $4.00 per share.
Computershare Trust Company of Canada, the trustee for the trust that
distributes Company common stock associated with vesting restricted stock units
held by Canadian employees of the Company, acquired the shares. In conjunction
with the sale of shares by Mr. Conacher and pursuant to the Relocation
Agreement, the Company granted 175,000 options to Mr. Conacher. The
options have an exercise price of $4.00, will vest in February 2011 and be
exercisable until August 2014. At September 30, 2009, 132,575 shares remain in
the trust and have been recorded in treasury stock in the condensed consolidated
statement of financial condition.
NOTE
6 — GOODWILL AND OTHER INTANGIBLE ASSETS
On
January 2, 2008, the Company acquired Westwind Capital Corporation (“Westwind”),
a full-service, institutionally oriented, independent investment bank for a
purchase price of $156 million. The Company accounted for its acquisition of
Westwind utilizing the purchase method.
The
following sets forth the other intangible assets associated with the acquisition
of Westwind as of September 30, 2009 (in thousands):
- 8
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The
following sets forth the remaining amortization of the other intangible assets
based on accelerated and straight-line methods of amortization over the
respective useful lives as of September 30, 2009 (in thousands):
Amortization
expense related to other intangible assets was $2.7 million and $3.8 million for
the three months ended September 30, 2009 and 2008, respectively. Amortization
expense related to other intangible assets was $8.5 million and $11.6 million
for the nine months ended September 30, 2009 and 2008,
respectively.
In
connection with the allocation of the Westwind purchase price consideration, the
Company recorded goodwill of $98.2 million. Subsequent to the
acquisition, the Company experienced a significant decline in its market
capitalization which was affected by the uncertainty in the financial markets.
Based on the difficult conditions in the business climate and the Company’s
perception that the climate was unlikely to change in the near term, the Company
recorded a full impairment charge to the goodwill asset of $92.6 million during
the three months ended September 30, 2008. The difference between the
goodwill balance recorded on the acquisition date and the amount impaired during
the three months ended September 30, 2008 is due to a currency translation
adjustment of $5.6 million.
NOTE
7 — NOTES PAYABLE
As of
September 30, 2009 and December 31, 2008, the fair value for each of the notes
payable presented above approximates the carrying value as of September 30, 2009
and December 31, 2008, respectively.
The
weighted-average interest rate for notes payable was 4.27% and 5.17% at
September 30, 2009 and December 31, 2008, respectively.
The
principal balances for the notes payable are
due in February 2011.
Subordinated
Borrowings
In April
2008, TWP entered into a $25.0 million revolving note and cash subordination
agreement with its primary clearing broker and incurs an annual commitment fee
of 1.0%, or $0.3 million. The credit period in which TWP could draw on the note
ended on April 18, 2009. TWP renewed this agreement on April 30, 2009, and the
new credit period expires on April 30, 2010. In order to borrow under
this agreement, TWP is required to have equity and capital in excess of certain
thresholds. As of September 30, 2009, TWP did not meet the equity threshold
specified in the agreement. Subsequent to September 30, 2009, Thomas Weisel
Partners Group, Inc. contributed $5.0 million to TWP, which increased TWP’s
equity above the required equity threshold as of November 6, 2009. As
of September 30, 2009, TWP did not have any balances outstanding under this
facility.
TWPC has
a capital rental arrangement with a Canadian financial institution which is also
a member of the IIROC. Under this arrangement, the financial institution
provides subordinated loan capital to TWPC out of its capital up to CDN$8.0
million for bought deal underwriting commitments in return for a participation
in the underwriting. During the nine months ended September 30, 2009, TWPC was
provided capital for a bought deal underwriting commitment and as a result
incurred a fee of $0.1 million.
The
Senior Notes include financial covenants including restrictions on additional
indebtedness and other liabilities that could cause them to become callable and
requirements that the notes be repaid should the Company enter into a
transaction to liquidate or dispose of all or substantially all of its property,
business or assets. The Company was in compliance with all covenants at
September 30, 2009.
- 9
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NOTE
8 – FINANCIAL INSTRUMENTS
The
Company records financial assets and liabilities at fair value in the condensed
consolidated statements of financial condition with unrealized gains (losses)
reflected in the condensed consolidated statements of operations.
The
degree of judgment used in measuring the fair value of financial instruments
generally correlates to the level of pricing observability. Pricing
observability is impacted by a number of factors, including the type of
financial instrument, whether the financial instrument is new to the market and
not yet established and the characteristics specific to the
transaction. Financial instruments with readily available active
quoted prices for which fair value can be measured generally will have a higher
degree of pricing observability and a lesser degree of judgment used in
measuring fair value. Conversely, financial instruments rarely traded
or not quoted will generally have less, or no, pricing observability and a
higher degree of judgment used in measuring fair value.
The
Company’s financial assets and liabilities measured and reported at fair value
are classified and disclosed in one of the following
categories:
The
following is a summary of the fair value of the major categories of financial
instruments held by the Company (in thousands):
- 10
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The
following is a summary of the Company’s financial assets and liabilities as of
September 30, 2009 that are accounted for at fair value on a recurring basis by
level in accordance with the fair value hierarchy described above (in thousands):
The
following is a summary of changes in fair value of the Company’s financial
assets that have been classified as Level 3 for the three months ended September
30, 2009 (in
thousands):
The
following is a summary of changes in fair value of the Company’s financial
assets that have been classified as Level 3 for the nine months ended September
30, 2009 (in
thousands):
- 11
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During
the year ended December 31, 2008, ARS for which the auctions failed were moved
to Level 3, as the assets were subject to valuation using unobservable
inputs. These ARS, as well as the ARS purchased subsequent to
December 31, 2008, continue to be classified in Level 3 at September 30,
2009.
The total
net unrealized gains during the three and nine months ended September 30, 2009
of approximately $0.2 million and $2.3 million, respectively, relate to
financial assets held by the Company as of September 30, 2009.
Realized
and unrealized gains (losses) from investments in partnerships and other
investments are included in asset management revenues in the condensed
consolidated statements of operations. Realized and unrealized gains
(losses) from securities owned and securities sold, but not yet purchased,
except those related to warrants, are included in brokerage revenues in the
condensed consolidated statements of operations.
NOTE
9 — NET LOSS PER SHARE
Potential dilutive
shares consist of the incremental common stock issuable for outstanding
restricted stock units, options and a warrant (both vested and non-vested) using
the treasury stock method. Potential dilutive shares are excluded from the
computation of net loss per share if their effect is anti-dilutive. The
anti-dilutive options totaled 268,549 for both the three and nine months ended
September 30, 2009. The anti-dilutive options totaled 85,216 for both the three
and nine months ended September 30, 2008. The anti-dilutive warrant totaled
486,486 shares for both the three and nine months ended September 30, 2009, as
well as for the three and nine months ended September 30, 2008.
NOTE
10 — COMPREHENSIVE LOSS
The
following table is a reconciliation of net loss reported in the Company’s
condensed consolidated statements of operations to comprehensive loss (in thousands):
NOTE
11 — SHARE-BASED COMPENSATION
The Third
Amended and Restated Thomas Weisel Partners Group, Inc. Equity Incentive Plan
(the “Equity Incentive Plan”) provides for awards of non-qualified and incentive
stock options, restricted stock and restricted stock units and other share-based
awards to officers, directors, employees, consultants and advisors of the
Company. At the February 2009 Special Meeting of Shareholders, the shareholders
of the Company voted to approve an increase in the number of shares of the
Company’s common stock available for awards under the Equity Incentive Plan by
6,000,000 shares. At September 30, 2009 the total number of shares issuable
under the Equity Incentive Plan was 17,150,000 shares. Awards of
stock options and restricted stock units reduce the number of shares available
for future issuance. The number of shares available for future
issuance under the Equity Incentive Plan at September 30, 2009 was approximately
5,800,000 shares.
The
Equity Incentive Plan provides for the grant of non-qualified or incentive
options for the purchase of newly issued shares of the Company’s common stock at
a price determined by the Compensation Committee (the “Committee”) of the Board
at the date the option is granted. Generally, options vest and are exercisable
ratably over a three or four-year period from the date the option is granted
(although, in accordance with the terms of the Company’s Equity Incentive Plan,
options granted to non-employee directors as regular director’s compensation
have no minimum vesting period) and expire within ten years from the date of
grant. The exercise prices, as determined by the Committee, cannot be less than
the fair market value of the shares on the grant date. These options provide for
accelerated vesting upon a change in control, as determined by the
Committee. - 12
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The fair
value of each option award is estimated on the date of grant using a
Black-Scholes Merton option pricing model with the following weighted-average
assumptions noted in the table below:
The
following table is a summary of option activity:
As of
September 30, 2009, there were 264,444 options vested. The Company
assumes that there will be no forfeitures of the non-vested options outstanding
as of September 30, 2009 and therefore expects the total amount to vest over
their remaining vesting period.
As of
September 30, 2009, the total unrecognized compensation expense related to
non-vested options was approximately $0.3 million. This cost is expected to
be recognized over a weighted-average period of 1.2 years.
The
Company recorded $0.1 million in non-cash compensation expense with respect to
options during the nine months ended September 30, 2009.
Restricted
Stock Units
A summary
of non-vested restricted stock unit activity for the nine months ended September
30, 2009 is presented below:
The fair
value of the shares vested during the three and nine months ended September 30,
2009 was $1.1 million and $5.9 million, respectively. The fair value of the
shares vested during the three and nine months ended September 30, 2008 was $0.4
million and $7.9 million, respectively.
As of
September 30, 2009, there was $34.0 million of total unrecognized
compensation expense related to non-vested restricted stock unit awards. This
cost is expected to be recognized over a weighted-average period of
2.1 years.
During
the three and nine months ended September 30, 2009 the Company recorded
$5.2 million and $14.8 million, respectively, in non-cash compensation
expense with respect to grants of restricted stock units. During the three and
nine months ended September 30, 2008 the Company recorded $5.0 million and
$13.0 million, respectively, in non-cash compensation expense with respect to
grants of restricted stock units.
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The Company accounts
for income taxes by recognizing deferred tax assets and liabilities based upon
temporary differences between the financial reporting and tax basis of its
assets and liabilities. Valuation allowances are established when necessary to
reduce deferred tax assets when it is more likely than not that a portion or all
of the deferred tax assets will not be realized.
During
the year ended December 31, 2008, the Company determined that it was
more-likely-than-not that its U.S. deferred tax assets would not be
realized. The Company made this determination primarily based on the
significant losses it incurred in 2008 as a result of the severe economic
downturn and its effect on the capital markets. As of September 30, 2009,
the Company continued to carry a full valuation allowance on its U.S. and U.K.
deferred tax assets due to continued losses incurred during the nine months
ended September 30, 2009.
The
Company’s effective tax rate for the three and nine months ended September 30,
2009 was (2.4)% and (1.0)%, respectively. The Company’s effective tax rate for
the three and nine months ended September 30, 2008 was 8.6% and 15.8%,
respectively. The tax provision for the nine months ended September 30, 2009
relates to the Company’s operations in Canada. The change in the effective tax
rate is primarily due to the increase in the valuation allowance associated with
the U.S. net operating losses incurred during the three and nine months ended
September 30, 2009.
NOTE
13 — COMMITMENTS, GUARANTEES AND CONTINGENCIES
Commitments
Lease
Commitments
The
Company leases office space and computer equipment under non-cancelable
operating leases which extend to 2019 and which may be extended as prescribed
under renewal options in the lease agreements. The Company has entered into
several non-cancelable sub-lease agreements for certain facilities or floors of
facilities which are co-terminus with the Company’s lease for the respective
facilities or floors of facilities. Facility and computer equipment
lease expenses charged to operations for the three and nine months ended
September 30, 2009 was $3.3 million and $10.1 million, respectively, net of
sublease income of $0.9 million and $2.5 million, respectively. Facility and
computer equipment lease expenses charged to operations for the three and nine
months ended September 30, 2008 was $4.0 million and $12.2 million,
respectively, net of sublease income of $1.0 million and $2.8 million,
respectively.
During
the nine months ended September 30, 2009, the Company recorded a $2.3 million
lease loss charge related to office space that it vacated in
2009. The lease loss liability at September 30, 2009, which relates
to vacated office space, was $8.8 million. The lease loss liability
was estimated as the net present value of the difference between lease payments
and receipts under expected sublease agreements.
Fund
Capital Commitments
At
September 30, 2009, the Company’s Asset Management Subsidiaries had
commitments to invest in affiliated investment partnerships. These commitments
are generally called as investment opportunities are identified by the
underlying partnerships. The Company’s Asset Management Subsidiaries’
commitments at September 30, 2009 were as follows (in thousands):
In
addition to the commitments set forth in the table above, the Company has
committed $8.3 million to investments in unaffiliated funds. Through September
30, 2009, the Company has funded $4.9 million of these commitments and the
Company’s remaining unfunded commitment at September 30, 2009 was $3.4 million.
These commitments may be called in full at any time.
Guarantees
Broker-Dealer
Guarantees and Indemnification
The
Company’s customers’ transactions are introduced to the clearing brokers for
execution, clearance and settlement. Customers are required to complete their
transactions on settlement date, generally three business days after the trade
date. If customers do not fulfill their contractual obligations to the clearing
brokers, the Company may be required to reimburse the clearing brokers for
losses on these obligations. The Company has established procedures to reduce
this risk by monitoring trading within accounts and requiring deposits in excess
of regulatory requirements.
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In
February 2009, the Company recorded a loss of approximately $5.1 million due to
a customer who failed to pay for several equity
purchases that the Company executed at the customer’s request. Based
on the Company’s agreement with its primary clearing broker, the Company was
required to settle and pay for those transactions on the customer’s behalf.
The Company recorded the loss in bad debt expense which is included in other
expense in the condensed consolidated statements of operations. The
Company believes the loss was incurred as a result of fraudulent activity on the
part of the customer and is vigorously pursuing that customer for the losses
incurred upon liquidating those positions.
The
Company is a member of various securities exchanges. Under the standard
membership agreements, members are required to guarantee the performance of
other members and, accordingly, if another member becomes unable to satisfy its
obligations to the exchange, all other members would be required to meet the
shortfall. The Company’s liability under these arrangements is not quantifiable
and could exceed the cash and securities it has posted as collateral. However,
management believes that the potential for the Company to be required to make
payments under these arrangements is remote. The Company has not recorded any
loss contingency for this indemnification.
Guaranteed
Compensation
The
Company has entered into guaranteed compensation agreements, and obligations
under these agreements are being accrued ratably over the related service
period. Total unaccrued obligations at September 30, 2009 for services to be
provided subsequent to September 30, 2009 were $3.2 million.
Director
and Officer Indemnification
The
Company has entered into agreements that provide indemnification to its
directors, officers and other persons requested or authorized by the Board to
take actions on behalf of the Company for all losses, damages, costs and
expenses incurred by the indemnified person arising out of such person’s service
in such capacity, subject to the limitations imposed by Delaware law. The
Company has not recorded any loss contingency for this
indemnification.
Tax
Indemnification Agreement
In
connection with its initial public offering, the Company entered into a tax
indemnification agreement to indemnify the members of Thomas Weisel Partners
Group LLC against the full amount of certain increases in taxes that relate to
activities of Thomas Weisel Partners Group LLC and its affiliates prior to the
Company’s reorganization. The tax indemnification agreement included provisions
that permit the Company to control any tax proceeding or contest which might
result in it being required to make a payment under the tax indemnification
agreement. The Company has not recorded any loss contingency for this
indemnification.
Contingencies>
Loss
Contingencies
The
Company is involved in a number of judicial, regulatory and arbitration matters
arising in connection with its business. The outcome of matters the Company is
involved in cannot be determined at this time and the results cannot be
predicted with certainty. There can be no assurance that these matters will not
have a material adverse effect on the Company’s results of operations in any
future period, and a significant judgment could have a material adverse impact
on the Company’s condensed consolidated statements of financial condition,
operations and cash flows. The Company may in the future become involved in
additional litigation in the ordinary course of its business, including
litigation that could be material to the Company’s business.
The
Company reviews the need for any loss contingency reserves and establishes
reserves when, in the opinion of management, it is probable that a matter would
result in liability, and the amount of loss, if any, can be reasonably
estimated. Generally, in view of the inherent difficulty of predicting the
outcome of those matters, particularly in cases in which claimants seek
substantial or indeterminate damages, it is not possible to determine whether a
liability has been incurred or to reasonably estimate the ultimate or minimum
amount of that liability until the case is close to resolution, in which case no
reserve is established until that time.
Additionally,
the Company will record receivables for insurance recoveries for legal
settlements and expenses when such amounts are covered by insurance and recovery
of such losses or costs are considered probable of recovery. These amounts
will be recorded as other assets in the condensed consolidated statements of
financial condition and will reduce other expense to the extent such losses or
costs have been incurred, in the condensed consolidated statements of
operations.
The
following discussion describes significant developments with respect to the
Company’s litigation matters that have occurred subsequent to December 31,
2008.
Updated
Matters
Auction
Rate Securities – The Company has received inquiries from FINRA requesting
information concerning purchases through the Company of ARS by Private Client
Services customers. Based upon press reports, approximately forty
firms, including the Company, have received inquiries from the Enforcement
Department of FINRA regarding retail customer purchases through those firms of
ARS. The Company is cooperating with FINRA while it conducts its
investigation. The Company notes that a number of underwriters of ARS
entered into settlements with the SEC and other regulators in connection with
those underwriters’ sales and underwriting practices. The Company did
not, at any time, underwrite ARS or manage the associated
auctions. In connection with such auctions, the Company merely served
as agent for its customers when buying in auctions managed by those
underwriters. Accordingly, the Company distinguishes its conduct from
such underwriters and is prepared to assert these and other defenses should
FINRA seek to bring an action in the future. Nevertheless, there can
be no assurance that FINRA will not take regulatory action.
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As
previously disclosed, on July 23, 2009, the staff of the Enforcement Department
of FINRA (the “Staff”) advised the Company that the Staff has made a preliminary
determination to recommend disciplinary action in connection with the Company’s
transactions in ARS on behalf of its customers, including transactions for and
with the Company. The Staff’s recommendation involves potential violations of
FINRA and Municipal Securities Rulemaking Board rules and certain anti-fraud and
other provisions of the Federal securities laws in connection with the purchase
and sales of ARS and certain statements and disclosures made in connection with
those purchases and sales. A Staff preliminary determination is neither a formal
allegation nor is it evidence of wrongdoing.
The
Company has responded to the Staff’s preliminary determination and continues to
communicate with the Staff to provide its perspective on relevant events and
alleged conduct and to seek to resolve the matter, but there can be no assurance
that those efforts will be successful or that a disciplinary proceeding will not
be brought. The Company is prepared to contest vigorously any formal
disciplinary action that would result in a censure, fine, or other sanction that
could be material to its business, financial position or results of operations.
If FINRA were to institute disciplinary action, it is possible that such action
could result in a material adverse effect on the Company’s business, financial
position or results of operations. However, the Company is unable to determine
at this time the impact of the ultimate resolution of this matter.
In
addition to the FINRA investigation, the Company has been named in two FINRA
arbitrations filed by retail customers who purchased ARS. The first
claim was recently arbitrated and the Company prevailed on all
matters. The Company has filed its answer to the second customer’s
complaint, and the parties are now proceeding with discovery. The
Company believes it has meritorious defenses to the action and intends to
vigorously defend such action as it applies to the Company.
While the
Company’s review of the need and amount for any loss contingency reserve has led
the Company to conclude that, based upon currently available information, it has
adequately established a provision for loss contingencies related to ARS
matters, the Company is not able to predict with certainty the outcome of any
such matters, nor the amount if any, of an eventual settlement or
judgment.
In re Rigel Pharmaceuticals Inc.
Securities Litigation – The Company has been named as a co-defendant in a
purported class action litigation brought in connection with a February 2008
secondary offering of Rigel Pharmaceuticals where the Company acted as a
co-manager. The complaint was filed in the United States District
Court, Northern District of California, and alleges violations of Federal
securities laws against Rigel Pharmaceuticals, officers and underwriters,
including the Company, based on alleged misstatements and omissions in the
registration statement. The Company believes it has meritorious
defenses to these actions and intends to vigorously defend such actions as they
apply to the Company.
Stetson Oil & Gas, Ltd. v.
Thomas Weisel Partners Canada Inc. – Thomas Weisel Partners Canada Inc.
has been named as defendant in a Statement of Claim filed in the Ontario
Superior Court of Justice. The claim arises out of the July 2008
“bought deal” transaction in which Thomas Weisel Partners Canada Inc. was
allegedly engaged to act as underwriter (purchasing subscription receipts
amounting to approximately CDN$25 million) for Stetson Oil & Gas, Ltd., an
Alberta, Canada oil and gas exploration corporation. In May 2009,
Thomas Weisel Partners Canada, Inc. filed its Statement of Defense and
Counterclaim. The Company believes Thomas Weisel Partners Canada Inc. has
meritorious defenses to these actions and intends to vigorously defend such
actions as they apply to the Company and its affiliates.
Resolved
Matters
In re Initial Public Offering
Securities Litigation – The Company is a defendant in several purported
class actions brought against numerous underwriters in connection with certain
initial public offerings in 1999 and 2000. These cases have been consolidated in
the United States District Court for the Southern District of New York and
generally allege that underwriters accepted undisclosed compensation in
connection with the offerings, entered into arrangements designed to influence
the price at which the shares traded in the aftermarket and improperly allocated
shares in these offerings. The actions allege violations of Federal securities
laws and seek unspecified damages. Of the 310 issuers named in these cases, the
Company acted as a co-lead manager in one offering, a co-manager in 32
offerings, and as a syndicate member in 10 offerings. The Company has denied
liability in connection with these matters. On June 10, 2004, plaintiffs
entered into a definitive settlement agreement with respect to their claims
against the issuer defendants and the issuers’ present or former officers and
directors named in the lawsuits, however, approval of the proposed settlement
remained on hold pending the resolution of the class certification issue
described below. By a decision dated October 13, 2004, the Federal district
court granted plaintiffs’ motion for class certification, however, the
underwriter defendants petitioned the U.S. Court of Appeals for the Second
Circuit to review that certification decision. On December 5, 2006 the
Second Circuit vacated the district court’s class certification decision, and
the plaintiffs subsequently petitioned the Second Circuit for a rehearing. On
April 6, 2007, the Second Circuit denied the rehearing
request. In May 2007, the plaintiffs filed a motion for class
certification on a new basis and subsequently scheduled discovery. In
April 2009, the parties entered into a comprehensive settlement agreement that
was submitted to the Court which resulted in the resolution of this matter for a
payment of $10.6 million which had been previously accrued in the condensed
consolidated statements of financial condition. The payment was
funded by the Company’s insurance syndicate.
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In re Occam Networks
Litigation – The Company has been named as a defendant in a purported
class action lawsuit filed in November 2006 in connection with a secondary
offering of common stock by Occam Networks in November 2006 where the Company
acted as sole book manager. The amended complaint was filed in the United
States District Court, for the Central District of California, and alleges
violations of Federal securities laws against Occam Networks, various officers
and directors as well as the Occam Networks underwriters, including the Company,
based on alleged misstatements and omissions in the disclosure documents for the
offering. The matter has now been settled by the issuer with no
contribution from the underwriter defendants, including the
Company.
In re Openwave Systems Inc.
Securities Litigation – The Company has been named as a defendant in a
purported class action lawsuit filed in June 2007 in connection with a secondary
offering of common stock by Openwave Systems’ in December 2005 where the Company
acted as a co-manager. The complaint, filed in the United States
District Court for the Southern District of New York, alleges violations of
Federal securities laws against Openwave Systems, various officers and directors
as well as Openwave Systems’ underwriters, including the Company, based on
alleged misstatements and omissions in the disclosure documents for the
offering. The underwriters’ motion to dismiss was granted in October
2007, however, the plaintiffs may appeal the dismissal. The Company believes it
has meritorious defenses to the action and intends to vigorously defend such
action as it applies to the Company.
In re Netlist, Inc. Securities
Litigation – The Company has been named as a defendant in an amended
complaint for a purported class action lawsuit filed in November 2007 in
connection with the initial public offering of Netlist in November 2006 where
the Company acted as a lead manager. The amended complaint, filed in
the United States District Court for the Central District of California, alleges
violations of Federal securities laws against Netlist, various officers and
directors as well as Netlist’s underwriters, including the Company, based on
alleged misstatements and omissions in the disclosure documents for the
offering. The complaint essentially alleges that the registration
statement relating to Netlist’s initial public offering was materially false and
misleading. The Company denies liability in connection with this
matter and has filed a motion to dismiss that was granted without prejudice by
the court. Plaintiffs have now filed an amended complaint and the
Company has now filed another motion to dismiss. The Company believes it has
meritorious defenses to the action and intends to vigorously defend such action
as it applies to the Company.
In re Vonage Holdings Corp.
Securities Litigation – The Company is a defendant named in purported
class action lawsuits filed in June 2006 arising out of the May 2006
initial public offering of Vonage Holdings Corp. where the Company acted as a
co-manager. The complaints, filed in the United States District Court for the
District of New Jersey and in the Supreme Court of the State of New York, County
of Kings, allege misuse of Vonage’s directed share program and violations of
Federal securities laws against Vonage and certain of its directors and senior
officers as well as Vonage’s underwriters, including the Company, based on
alleged false and misleading statements in the registration statement and
prospectus. In January 2007, the plaintiffs’ complaints were transferred to
the U.S. District Court for the District of New Jersey and the defendants filed
motions to dismiss. In 2009, the court issued an order dismissing all
claims against the underwriters, with leave to re-file certain of those
claims. The Company believes it has meritorious defenses to these
actions and intends to vigorously defend such actions as they apply to the
Company.
New
Matters
In Re Bare Escentuals Inc.
Securities Litigation – The Company has been served in a purported class
action litigation brought in connection with the 2006 initial public offering
and 2007 secondary offering of Bare Escentuals where the Company acted as a
co-manager. The complaint was filed in the United States District
Court, Northern District of California, and alleges violations of Federal
securities laws against Bare Escentuals, officers, and underwriters, including
the Company, based on alleged misstatements and omissions in the registration
statement. The Company believes it has meritorious defenses to these actions and
intends to vigorously defend such actions as they apply to the
Company.
NOTE
14 — FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK, CREDIT RISK OR MARKET
RISK
The
majority of the Company’s transactions, and consequently the concentration of
its credit exposure, is with its clearing brokers. The clearing brokers are also
the primary source of short-term financing for both securities purchased and
securities sold, not yet purchased by the Company. The securities owned by the
Company may be pledged by the clearing brokers. The amount receivable from or
payable to the clearing brokers in the Company’s condensed consolidated
statements of financial condition represent amounts receivable or payable in
connection with the trading of proprietary positions and the clearance of
customer securities transactions. As of September 30, 2009 and December 31,
2008, the Company’s cash on deposit with the clearing brokers was not
collateralizing any liabilities to the clearing brokers.
In
addition to the clearing brokers, the Company is exposed to credit risk from
other brokers, dealers and other financial institutions with which it transacts
business. In the event counterparties do not fulfill their obligations, the
Company may be exposed to credit risk. The Company seeks to control credit risk
by following an established credit approval process and monitoring credit limits
with counterparties.
- 17
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The
Company’s trading activities include providing securities brokerage services to
institutional and retail clients. To facilitate these customer transactions, the
Company purchases proprietary securities positions (“long positions”) in equity
securities, convertible, other fixed income securities and equity index funds.
The Company also enters into transactions to sell securities not yet purchased
(“short positions”), which are recorded as liabilities in the condensed
consolidated statements of financial condition. The Company is exposed to market
risk on these long and short securities positions as a result of decreases in
market value of long positions and increases in market value of short positions.
Short positions create a liability to purchase the security in the market at
prevailing prices. Such transactions result in off-balance sheet market risk as
the Company’s ultimate obligation to satisfy the sale of securities sold not yet
purchased may exceed the amount recorded in the condensed consolidated
statements of financial condition. To mitigate the risk of losses, these
securities positions are marked to market daily and are monitored by management
to ensure compliance with limits established by the Company. The associated
interest rate risk of these securities is not deemed material to the
Company.
The
Company is also exposed to market risk through its investments in partnerships
and through certain loans to employees collateralized by such investments. In
addition, as part of the Company’s investment banking and asset management
activities, the Company from time to time takes long and short positions in
publicly traded equities and related options and other derivative instruments
and makes private equity investments, all of which expose the Company to market
risk. These activities are subject, as applicable, to risk guidelines and
procedures designed to manage and monitor market risk.
TWP is a
registered U.S. broker-dealer that is subject to the Uniform Net Capital Rule
(the “Net Capital Rule”) under the Exchange Act administered by the SEC and
FINRA, which requires the maintenance of minimum net capital. TWP has elected to
use the alternative method to compute net capital as permitted by the Net
Capital Rule, which requires that TWP maintain minimum net capital, as defined,
of $1.0 million. These rules also require TWP to notify and sometimes obtain
approval from the SEC and FINRA for significant withdrawals of capital or loans
to affiliates.
Under the
alternative method, a broker-dealer may not repay subordinated borrowings, pay
cash dividends or make any unsecured advances or loans to its parent or
employees if such payment would result in net capital of less than 5% of
aggregate debit balances or less than 120% of its minimum dollar amount
requirement.
TWPC is a registered investment dealer in Canada and is
subject to the capital requirements of the IIROC. In addition, TWPIL
is a registered U.K. broker-dealer and is subject to the capital requirements of
the Financial Securities Authority.
The table
below summarizes the minimum capital requirements for the Company’s
broker-dealer subsidiaries as of September 30, 2009 (in thousands):
The
following table represents net revenues by geographic area (in thousands):
No single
customer accounted for more than 10% of the Company’s net revenues during the
three and nine months ended September 30, 2009, or during the three or nine
months ended September 30, 2008.
Net
revenues from countries other than the United States consist primarily of net
revenues from Canada. Net revenues from Canada during both the three and nine
months ended September 30, 2009 accounted for 80% of net revenues from other
countries and during the three and nine months ended September 30, 2008
accounted for 67% and 78%, respectively, of net revenues from other
countries. - 18
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The
following table represents long lived assets by geographic area based on the
physical location of the assets (in thousands):
Item 2.
Management’s Discussion and Analysis of Financial Condition and Results of
Operations
The
following discussion should be read in conjunction with our unaudited condensed
consolidated financial statements and the related notes that appear elsewhere in
this Quarterly Report on Form 10-Q. This discussion contains forward-looking
statements reflecting our current expectations that involve risks and
uncertainties. Actual results and the timing of events may differ significantly
from those projected in forward-looking statements due to a number of factors,
including those set forth in Part I, Item 1A – “Risk Factors” of our Annual
Report on Form 10-K for the fiscal year ended December 31, 2008 and in Part
II, Item 1A – “Risk Factors” of this Quarterly Report on Form
10-Q. See “Where You Can Find More Information” in Part I,
Item 1 – “Business” of our Annual Report on Form 10-K for the fiscal year
ended December 31, 2008.
Forward-Looking
Statements
This
Quarterly Report on Form 10-Q in Item 2 – “Management’s Discussion and
Analysis of Financial Condition and Results of Operations” and in other sections
includes forward-looking statements within the meaning of Section 27A of the
Securities Act of 1933 as amended (the "Exchange Act”), and Section
21E of the Exchange Act, as amended. In some cases, you can identify
these statements by forward-looking words such as “may”, “might”, “will”,
“should”, “expect”, “plan”, “anticipate”, “believe”, “predict”, “potential”,
“intend” or “continue”, the negative of these terms and other comparable
terminology. These forward-looking statements, which are subject to risks,
uncertainties and assumptions about us, may include expectations as to our
future financial performance, which in some cases may be based on our growth
strategies and anticipated trends in our business. These statements are based on
our current expectations and projections about future events. There are
important factors that could cause our actual results, level of activity,
performance or achievements to differ materially from the results, level of
activity, performance or achievements expressed or implied by the
forward-looking statements. In particular, you should consider the numerous
risks outlined in Part I, Item 1A – “Risk Factors” in our Annual Report on
Form 10-K for the fiscal year ended December 31, 2008 and in Part II, Item
1A – “Risk Factors” of this Quarterly Report on Form 10-Q.
Although
we believe the expectations reflected in the forward-looking statements are
reasonable, we cannot guarantee future results, level of activity, performance
or achievements. Moreover, neither we nor any other person assumes
responsibility for the accuracy or completeness of any of these forward-looking
statements. You should not rely upon forward-looking statements as predictions
of future events. We are under no duty to update any of these forward-looking
statements after the date of this filing to conform our prior forward-looking
statements to actual results or revised expectations, except as required by
Federal securities law.
Forward-looking
statements include, but are not limited to, the following:
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