Annual report pursuant to section 13 and 15(d)

CONSOLIDATED STATEMENTS OF CASH FLOWS

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CONSOLIDATED STATEMENTS OF CASH FLOWS (USD $)
In Thousands
 12 Months Ended
Dec. 31, 2011
Dec. 31, 2010
Dec. 31, 2009
Cash flows from operating activities:      
Net income (loss). $ 3,893 $ (10,951) $ (18,673)
Adjustments to reconcile net income (loss) to net cash used in operating activities:      
Amortization of intangible assets 4,060 2,941 3,116
Depreciation and other amortization 1,572 1,037 1,027
Write-off of furniture, fixtures and leasehold improvements, net   24  
Adjustment to deferred rent (595) (450) (485)
Amortization of debt discount 39 289 721
Amortization of debt issue cost 642 282 521
Deferred income taxes (16,590) 693 946
Benefit attributable to reduction of goodwill 84 35  
Non-cash interest expense on forgivable loan 423 337  
Gain on forgiveness of accrued interest under forgivable loans (450) (525)  
Gain on forgiveness of principal under forgivable loan (1,429) (1,429)  
Non-cash compensation expense 4,014 5,439 7,534
(Increase) decrease in operating assets, net of effects of acquisitions:      
Securities owned 669 136 2,619
Receivables from clearing brokers (11,076) (4,667) 1,152
Receivables from other broker-dealers 851 (1,036) (329)
Other receivables, net (6,209) (2,888) (798)
Notes receivable from financial advisors, net (18,000) (71) (982)
Cash surrender value of life insurance 924    
Other assets 25 229 (166)
Increase (decrease) in operating liabilities, net of effects of acquisitions:      
Securities sold, but not yet purchased 58 1 (82)
Accrued compensation 653 964 638
Accrued interest 2,964 150 172
Commissions and fees payable 912 3,307 754
Deferred compensation liability (833)    
Accounts payable and accrued liabilities (2,823) 941 18
Net cash used in operating activities (36,222) (5,212) (2,297)
Cash flows from investing activities:      
Payment for Premier Trust acquisition, net of cash received   (162)  
Payment for Securities America acquisition, net of cash received (125,685)    
Purchases of fixed assets (1,439) (608) (399)
Decrease in restricted assets 50 150 351
Net cash used in investing activities (127,074) (620) (48)
Cash flows from financing activities:      
Issuance of common stock in private equity offering, net of offering expenses of $122   13,928  
Issuance of common stock other than private equity offerings 682 773 360
Repurchases of common stock (1,493) (64) (2,717)
Issuance of notes payable and warrants 175,700   10,000
Principal borrowings (payments) under revolving credit facility, net 5,600 (1,500) 450
Principal payments on notes payable (1,492) (6,080) (6,667)
Net cash provided by financing activities 178,997 7,057 1,426
Net increase (decrease) in cash and cash equivalents 15,701 1,225 (919)
Cash and cash equivalents, beginning of period 6,927 5,702 6,621
Cash and cash equivalents, end of period 22,628 6,927 5,702
Supplemental cash flow information:      
Interest paid 2,461 2,162 2,524
Taxes paid 372 87 60
Noncash investing and financing transactions:      
Warrants issued to lenders in connection with 2011 notes payable 9,428    
Acquisition of Premier Trust
      
Noncash investing and financing transactions:      
Assets acquired   2,565  
Liabilities assumed   (205)  
Net assets acquired   2,360  
Note issued in acquisition   (1,161)  
Cash paid in acquisition   1,199  
Cash acquired in acquisition   (1,037)  
Net cash paid in acquisition   162  
Acquisition of Securities America
      
Noncash investing and financing transactions:      
Assets acquired 232,059    
Liabilities assumed (74,948)    
Net assets acquired 157,111    
Fair value of contingent earnout (7,111)    
Cash paid in acquisition 150,000    
Cash acquired in acquisition (24,315)    
Net cash paid in acquisition $ 125,685