MERRIMAN CURHAN FORD GROUP, INC.

CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION

(unaudited)

 

ASSETS		June 30,				December 31,
		2010				2009
Cash and cash equivalents		$	3,907,094			$	5,656,750
Securities owned:
Marketable, at fair value			3,409,272				4,728,940
Not readily marketable, at estimated fair value			1,175,017				272,463
Other			62,682				67,448
Restricted cash			1,072,086				1,072,086
Due from clearing broker			124,936				2,546,581
Accounts receivable, net			1,331,063				470,992
Prepaid expenses and other assets			1,343,752				801,946
Equipment and fixtures, net			318,257				506,535
Total assets		$	12,744,159			$	16,123,741
LIABILITIES AND STOCKHOLDERS’ EQUITY
Liabilities:
Accounts payable		$	256,880			$	346,220
Commissions and bonus payable			2,610,068				4,133,924
Accrued expenses			2,683,783				2,755,831
Due to clearing and other brokers			5,376				7,185
Securities sold, not yet purchased			132,491				161,461
Deferred revenue			40,000				304,334
Capital lease obligation			261,213				397,958
Total liabilities			5,989,811				8,106,913
Stockholders’ equity:
Convertible preferred stock, Series A–$0.0001 par value; 2,000,000 shares
authorized; 2,000,000 shares issued and 0 shares outstanding as of
June 30, 2010 and December 31, 2009; aggregate liquidation
preference of $0			-				-
Convertible preferred stock, Series B–$0.0001 par value; 12,500,000 shares
authorized; 8,750,000 shares issued and 0 shares outstanding as of
June 30, 2010 and December 31, 2009; aggregate liquidation
preference of $0			-				-
Convertible preferred stock, Series C–$0.0001 par value; 14,200,000 shares
authorized; 11,800,000 shares issued and 0 shares outstanding as of
June 30, 2010 and December 31, 2009; aggregate liquidation
preference of $0			-				-
Convertible preferred stock, Series D–$0.0001 par value; 24,000,000
shares authorized, 23,720,916 and 23,720,916 shares issued
and 22,697,662 and 23,720,916 shares outstanding as of
June 30, 2010 and December 31, 2009, respectively;
aggregate liquidation preference of $9,759,995 prior to conversion,
and pari passu with common stock on conversion			2,269				2,372
Common stock, $0.0001 par value; 300,000,000 shares authorized;
14,256,119 and 12,988,073 shares issued and 14,054,542 and
12,786,496 shares outstanding as of June 30, 2010 and
December 31, 2009, respectively			1,423				1,299
Additional paid-in capital			133,883,340				133,054,192
Treasury stock			(225,613	)			(225,613	)
Accumulated deficit			(126,907,071	)			(124,815,422	)
Total stockholders’ equity			6,754,348				8,016,828
Total liabilities and stockholders’ equity		$	12,744,159			$	16,123,741

 

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MERRIMAN CURHAN FORD GROUP, INC.

GAAP to Non-GAAP Reconciliations

(unaudited)

		Three Months Ended
		June 30, 2010				June 30, 2009
Operating loss - U.S. GAAP as reported		$	(2,493,565	)		$	(1,451,452	)
Deprecation and amortization			100,363				115,749
Stock option expense			607,148				170,163
Legal and litigation settlement expense			264,403				310,575
Adjusted operating loss - non-GAAP		$	(1,521,651	)		$	(854,965	)
		Six Months Ended
		June 30, 2010				June 30, 2009
Operating loss - U.S. GAAP as reported		$	(2,160,826	)		$	(4,615,865	)
Deprecation and amortization			202,854				262,991
Stock option expense			834,780				259,779
Legal and litigation settlement expense			445,466				630,576
Adjusted operating loss - non-GAAP		$	(677,726	)		$	(3,462,519	)

 

Our non-GAAP financial measures include adjustments based on the following items:

 

Deprecation and amortization of equipment and fixtures: We have excluded the effect of deprecation and amortization of equipment and fixtures from our non-GAAP operating loss. Deprecation and amortization is a non-cash expense. Investors should note that our assets under equipment and fixtures were essential for generating revenues during the periods presented and will contribute to future period revenues as well.

 

Stock-based compensation expense: We have excluded the effect of stock-based compensation from our non-GAAP operating loss. Although stock-based compensation is a key incentive offered to our employees and consultants, we evaluate our business performance excluding stock-based compensation expense. Stock-based compensation expense will recur in future periods.

 

Legal and litigation settlement expense: We have excluded the effect of certain legal and litigation settlement expense from our non-GAAP operating loss. This expense is related to a number of lawsuits filed against Merriman Curhan Ford Group, Inc.’s wholly owned subsidiary, Merriman Curhan Ford & Co., including at least one which also names the parent company as the defendant, in connection with the actions of Willliam Del Biaggio III, a former customer of Merriman Curhan Ford & Co. and David Scott Cacchione, a former retail broker of Merriman Curhan Ford & Co. We believe expenses related to the above stated matters to be a non-core operating expense. We expect to have some of these expenses recur in future periods until all lawsuits are resolved.

 

These non-GAAP financial measures are not consistent with GAAP because they do not fully reflect expenses. The above-mentioned non-GAAP measures are generated by adjusting the related GAAP measures solely to reverse the effect of the above mentioned non-cash and/or non-core operating expenses. The Company uses these financial measures to provide additional insight into current operating and business trends not readily apparent from the GAAP results.

 

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Management believes users of Merriman Curhan Ford Group, Inc.’s financial statements will benefit from greater transparency in referring to these non-GAAP financial measures when assessing the Company's operating results, as well as when forecasting and analyzing future periods. However, management recognizes that:

 

-	these non-GAAP financial measures are limited in their usefulness and should be considered only as a supplement to the Company's GAAP  financial measures;

-	these non-GAAP financial measures should be read in conjunction with our consolidated financial statements prepared in accordance with GAAP;

-	these non-GAAP financial measures should not be considered in isolation from, or as a substitute for, the Company's GAAP financial measures;

-	these non-GAAP financial measures should not be considered to be superior to the Company's GAAP financial measures;

-	these non-GAAP financial measures were not prepared in accordance with GAAP and investors should not assume that the non-GAAP financial measures presented in this earnings release were prepared under a comprehensive set of rules or principles; and

-	management intends to continue to track and present these non-GAAP financial measures for future periods.

 

Further, these non-GAAP financial measures may be unique to Merriman Curhan Ford Group, Inc., as they may be different from non-GAAP financial measures used by other companies. As such, this presentation of non-GAAP financial measures may not enhance the comparability of the Company's results to the results of other companies.

 

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