Amendment No. 1 to Form 8-K

INSTITUTIONAL FINANCIAL MARKETS, INC.

Date: August 2, 2011

/s/ JOSEPH W. POOLER, JR.

Joseph W. Pooler, Jr.

Chief Financial Officer

0001193125-11-206035.txt : 20110802 0001193125-11-206035.hdr.sgml : 20110802 20110802133128 ACCESSION NUMBER: 0001193125-11-206035 CONFORMED SUBMISSION TYPE: 8-K/A PUBLIC DOCUMENT COUNT: 6 CONFORMED PERIOD OF REPORT: 20110531 ITEM INFORMATION: Financial Statements and Exhibits FILED AS OF DATE: 20110802 DATE AS OF CHANGE: 20110802 FILER: COMPANY DATA: COMPANY CONFORMED NAME: INSTITUTIONAL FINANCIAL MARKETS, INC. CENTRAL INDEX KEY: 0001270436 STANDARD INDUSTRIAL CLASSIFICATION: SECURITY BROKERS, DEALERS & FLOTATION COMPANIES [6211] IRS NUMBER: 161685692 STATE OF INCORPORATION: MD FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K/A SEC ACT: 1934 Act SEC FILE NUMBER: 001-32026 FILM NUMBER: 111002946 BUSINESS ADDRESS: STREET 1: CIRA CENTRE, 2929 ARCH STREET STREET 2: 17TH FLOOR CITY: PHILADELPHIA STATE: PA ZIP: 19104-2870 BUSINESS PHONE: 215-701-9555 MAIL ADDRESS: STREET 1: CIRA CENTRE, 2929 ARCH STREET STREET 2: 17TH FLOOR CITY: PHILADELPHIA STATE: PA ZIP: 19104-2870 FORMER COMPANY: FORMER CONFORMED NAME: COHEN & Co INC. DATE OF NAME CHANGE: 20091216 FORMER COMPANY: FORMER CONFORMED NAME: ALESCO FINANCIAL INC DATE OF NAME CHANGE: 20061006 FORMER COMPANY: FORMER CONFORMED NAME: SUNSET FINANCIAL RESOURCES INC DATE OF NAME CHANGE: 20031117 8-K/A 1 d8ka.htm AMENDMENT NO. 1 TO FORM 8-K Amendment No. 1 to Form 8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K/A

Amendment No. 1

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the

Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): May 31, 2011

INSTITUTIONAL FINANCIAL MARKETS, INC.

(Exact name of registrant as specified in its charter)

Maryland

1-32026

16-1685692

(State or other jurisdiction

of incorporation)

(Commission

File Number)

(IRS Employer

Identification Number)

Cira Centre

2929 Arch Street, 17th Floor

Philadelphia, Pennsylvania

19104

(Address of principal executive offices)

(Zip Code)

Registrant’s telephone number, including area code: (215) 701-9555

(Former name or former address, if changed since last report.)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

¨	Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

¨	Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

¨	Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

¨	Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

EXPLANATORY NOTE:

This Amendment No. 1 amends Item 9.01 of the Registrant’s Current Report on Form 8-K filed with the Securities and Exchange Commission on June 6, 2011 by providing the financial statement information of PrinceRidge Partners LLC and the pro forma financial information required by Item 9.01 of Form 8-K with respect to the acquisition of a majority interest in PrinceRidge Partners LLC and its subsidiary PrinceRidge Holdings LP by IFMI, LLC, a majority owned subsidiary of the Registrant (the “Acquisition”).

Item 9.01

Financial Statements and Exhibits.

(a)

Financial statements of businesses acquired.

The audited consolidated statements of financial condition of PrinceRidge Partners LLC and Subsidiaries as of December 31, 2010 and the related consolidated statements of operations, changes in total capital and cash flows, and the notes related thereto, are attached hereto as Exhibit 99.1.

The audited consolidated statements of financial condition of PrinceRidge Partners LLC and Subsidiaries as of December 31, 2009 and the related consolidated statements of operations, changes in total capital and cash flows, and the notes related thereto, are attached hereto as Exhibit 99.2.

The unaudited consolidated statements of financial condition of PrinceRidge Partners LLC and Subsidiaries as of March 31, 2011 and the related consolidated statements of operations, changes in total capital and cash flows, and the notes related thereto, are attached hereto as Exhibit 99.3.

(b)

Pro forma financial information.

The unaudited pro forma condensed combined balance sheet of the Registrant as of March 31, 2011 and the unaudited pro forma condensed combined statement of operations of the Registrant for the three months ended March 31, 2011 and for the year ended December 31, 2010, and the notes related thereto, giving effect to the Acquisition are attached hereto as Exhibit 99.4.

(d)

Exhibits.


Exhibit No.		Exhibit Description

23.1*		Consent of KPMG LLP, Independent Auditing Firm, regarding the financial statements of PrinceRidge Partners LLC.

99.1*		Audited consolidated statements of financial condition of PrinceRidge Partners LLC and Subsidiaries as of December 31, 2010, and the related consolidated statements of operations, changes in total capital and cash flows, and the notes related thereto.

99.2*		Audited consolidated statements of financial condition of PrinceRidge Partners LLC and Subsidiaries as of December 31, 2009, and the related consolidated statements of operations, changes in total capital and cash flows, and the notes related thereto.

99.3*		Unaudited consolidated statements of financial condition of PrinceRidge Partners LLC and Subsidiaries as of March 31, 2011 and the related consolidated statements of operations, changes in total capital and cash flows, and the notes related thereto.

99.4*		Unaudited pro forma condensed combined balance sheet of the Registrant as of March 31, 2011 and the unaudited pro forma condensed combined statement of operations of the Registrant for the three months ended March 31, 2011 and for the year ended December 31, 2010, and the notes related thereto.

*	Filed electronically herewith.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized.

EXHIBIT INDEX


Exhibit No.		Exhibit Description

23.1*		Consent of KPMG LLP, Independent Auditing Firm, regarding the financial statements of PrinceRidge Partners LLC.

99.1*		Audited consolidated statements of financial condition of PrinceRidge Partners LLC and Subsidiaries as of December 31, 2010, and the related consolidated statements of operations, changes in total capital and cash flows, and the notes related thereto.

99.2*		Audited consolidated statements of financial condition of PrinceRidge Partners LLC and Subsidiaries as of December 31, 2009 and the related consolidated statements of operations, changes in total capital and cash flows, and the notes related thereto.

99.3*		Unaudited consolidated statements of financial condition of PrinceRidge Partners LLC and Subsidiaries as of March 31, 2011 and the related consolidated statements of operations, changes in total capital and cash flows, and the notes related thereto.

99.4*		Unaudited pro forma condensed combined balance sheet of the Registrant as of March 31, 2011 and the unaudited pro forma condensed combined statement of operations of the Registrant for the three months ended March 31, 2011 and for the year ended December 31, 2010, and the notes related thereto.

*	Filed electronically herewith.

EX-23.1 2 dex231.htm CONSENT OF KPMG LLP Consent of KPMG LLP

EXHIBIT 23.1

CONSENT OF INDEPENDENT AUDITORS

The Board of Directors

Institutional Financial Markets, Inc.

We consent to the incorporation by reference in the registration statements on Forms S-3 (File No.333-145417, effective October 2, 2007; File No. 333-166385, effective May 24, 2010; and File No. 333-172194, effective April 28, 2011) and on Forms S-8 (File No. 333-140318, effective January 30, 2007; File No.333-143503, effective June 5, 2007; File No. 333-153211, effective August 27, 2008; File No. 333-166387, effective April 29, 2010; File No. 333-166386, effective on April 29, 2010; and File No. 333-174281, effective on May 17, 2011) of Institutional Financial Markets, Inc. of our reports dated June 30, 2011, with respect to the consolidated statements of financial condition of PrinceRidge Partners LLC as of December 31, 2010 and 2009, and the related consolidated statements of operations, changes in total capital and cash flows for each of the years then ended, which reports appear in the Form 8-K/A of Institutional Financial Markets, Inc. dated August 2, 2011.

/s/ KPMG LLP

August 1, 2011

EX-99.1 3 dex991.htm AUDITED CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION OF PRINCERIDGE PARTNERS Audited consolidated statements of financial condition of PrinceRidge Partners

EXHIBIT 99.1

PRINCERIDGE PARTNERS LLC

Consolidated Financial Statements

December 31, 2010

(With Independent Auditors’ Report Thereon)

Independent Auditors’ Report

Management Board

PrinceRidge Partners LLC:

We have audited the accompanying consolidated statement of financial condition of PrinceRidge Partners LLC and subsidiaries (the Company) as of December 31, 2010, and the related consolidated statements of operations, changes in total capital, and cash flows for the year then ended. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audit.

We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of PrinceRidge Partners LLC and subsidiaries as of December 31, 2010 and the results of their operations and their cash flows for the year then ended, in conformity with U.S. generally accepted accounting principles.

/s/ KPMG LLP

June 30, 2011

PRINCERIDGE PARTNERS LLC

Consolidated Statement of Financial Condition

December 31, 2010


Assets
Cash and cash equivalents	$	4,510,115
Financial instruments owned, at fair value		20,001,092
Receivable from clearing broker		7,916,723
Furniture, equipment and leasehold improvements at cost, less accumulated depreciation and amortization of $1,126,376		979,043
Receivables from others (net of allowances $27,117)		660,015
Prepaid expenses		630,957
Advances to employees		521,270
Due from Members		1,000
Other assets		455,922

Total assets	$	35,676,137


Liabilities and Capital

Financial instruments sold, not yet purchased, at fair value	$	13,729,152
Accrued incentive compensation		2,853,762
Accrued other expenses and other liabilities		1,434,967


Total liabilities		18,017,881

Members’ capital		(228,162	)

Noncontrolling interest		17,886,418


Total capital		17,658,256


Total liabilities and capital	$	35,676,137

See accompanying notes to consolidated financial statements.

PRINCERIDGE PARTNERS LLC

Consolidated Statement of Operations

Year ended December 31, 2010


Revenues:
Principal transactions, net	$	20,123,602
Investment banking fees		4,357,352
Net interest income		261,414


Total revenues		24,742,368


Expenses:
Compensation and benefits		19,368,624
Communications and technology		3,111,558
Professional fees		2,408,869
Occupancy and equipment		1,842,737
Business development		655,706
Brokerage, clearing and exchange fees		536,788
Regulatory fees		454,173
Other		918,416


Total expenses		29,296,871


Net loss		(4,554,503	)

Less: Net loss attributable to noncontrolling interest		4,478,503


Net loss attributable to controlling interest	$	(76,000	)

See accompanying notes to consolidated financial statements.

PRINCERIDGE PARTNERS LLC

Consolidated Statement of Changes in Total Capital

Year ended December 31, 2010


	Members’ capital			Noncontrolling interest			Total capital
Balance at December 31, 2009	$	(160,662	)		21,622,321		$	21,461,659

Capital contributions		8,500			742,600			751,100

Net loss		(76,000	)		(4,478,503	)		(4,554,503	)


Balance at December 31, 2010	$	(228,162	)		17,886,418		$	17,658,256

See accompanying notes to consolidated financial statements.

PRINCERIDGE PARTNERS LLC

Consolidated Statement of Cash Flows

Year ended December 31, 2010


Cash flows from operating activities:
Net loss	$	(4,554,503	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation		818,096
(Increase) decrease in operating assets:
Financial instruments owned, at fair value		(14,653,645	)
Receivable from clearing broker		(3,827,807	)
Receivables from others		268,745
Prepaid expenses		(130,956	)
Advances to employees		108,187
Due from Members		(735	)
Other assets		(7,312	)
Increase (decrease) in operating liabilities:
Financial instruments sold, not yet purchased, at fair value		12,418,527
Accrued incentive compensation		810,695
Accrued expenses and other liabilities		76,380


Net cash used in operating activities		(8,674,328	)


Cash flows from investing activities:
Purchase of office equipment and leasehold improvements		(531,773	)


Net cash used in investing activities		(531,773	)


Cash flows from financing activities:

Capital contributions from Members		8,500
Noncontrolling interest		742,600


Net cash provided by financing activities		751,100


Net decrease in cash and cash equivalents		(8,455,001	)

Cash and cash equivalents, December 31, 2009		12,965,116


Cash and cash equivalents, December 31, 2010	$	4,510,115


Supplemental disclosure of cash flow information:
Cash paid for interest	$	979,053
Cash paid for taxes		—

See accompanying notes to consolidated financial statements.

PRINCERIDGE PARTNERS LLC

Notes to Consolidated Financial Statements

December 31, 2010

(1)

Organization

PrinceRidge Partners LLC (the Company) was organized as a limited liability company under the laws of the state of Delaware on January 28, 2008 and is the General Partner of PrinceRidge Holdings LP, a financial services company. Pursuant to the Company’s LLC agreement, certain Members have been appointed as Managing Members of the Company for which the authority for day-to-day management decision making resides. The Company also has limited partner interests (non-managing members) which have certain limited rights as specified in the Company’s LLC agreement. PrinceRidge Holdings LP is comprised of two wholly owned operating subsidiaries; The PrinceRidge Group LLC, a U.S. registered broker dealer, and PrinceRidge Capital LLC, a dealer in non-securities related products. The Company was formed on January 28, 2008 under the Delaware Limited Liability Company Act and the Company and its operating subsidiaries subsequently changed their names on June 29, 2009 from VinsonForbes Holdings LLC, VinsonForbes Group LP, VinsonForbes & Co. LLC and VinsonForbes Capital LLC to PrinceRidge Partners LLC, PrinceRidge Holdings LP, The PrinceRidge Group LLC, and PrinceRidge Capital LLC, respectively. On June 18, 2009, The PrinceRidge Group LLC became a member of the Financial Industry Regulation Authority (FINRA) and other various exchanges and received approval to operate as a broker-dealer registered with Securities and Exchange Commission (SEC). Additionally, the PrinceRidge Group LLC is a member of the Securities Investor Protection Corporation (SIPC).

The Company, through its operating subsidiaries, commenced operations on April 1, 2009 and operates an institutional brokerage and investment banking business. The Company’s customers are predominately institutional investors including brokers and dealers, commercial banks, asset managers and other financial institutions. The PrinceRidge Group LLC has a clearing agreement with Pershing LLC whereby all securities transactions are cleared on a fully disclosed basis. The PrinceRidge Group LLC is exempt from Rule 15c3-3 of the Securities and Exchange Commission under paragraph k(2)(ii) of that rule.

(2)

Summary of Significant Accounting Policies

(a)

Basis of Presentation

The Company’s consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America, which require management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Although these, and other, estimates and assumptions are based on the best available information, actual results could be materially different from these estimates.

The consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. All material intercompany transactions and balances have been eliminated in consolidation.

(b)

Cash and Cash Equivalents

The Company defines cash equivalents as short-term interest-earning deposits with original maturities of three months or less that are not held for sale in the ordinary course of business.


		6		(Continued)

PRINCERIDGE PARTNERS LLC

Notes to Consolidated Financial Statements

December 31, 2010

The Company maintains deposits in federally insured financial institutions in excess of federally insured (FDIC) limits and in institutions in which deposits are not insured. However, management believes that the Company is not exposed to significant credit risk due to the financial position of the depository institution in which those deposits are held.

(c)

Revenue Recognition

Principal Transactions

The Company earns revenue from (i) transactions executed as agent or riskless principal and (ii) related net trading gains and losses from market making and dealing activities to facilitate customer orders. These activities and associated revenue are recorded on a trade date basis. Financial instruments owned and financial instruments sold, not yet purchased, are recorded on a trade-date basis at fair value with realized and unrealized gains and losses reflected in principal transactions, net in the accompanying statement of operations.

Investment Banking Fees

The Company earns fees for providing strategic advisory services in mergers and acquisitions and other transactions which are predominately comprised of fees based on the successful completion of a transaction, and from capital markets transactions which are comprised of underwriting securities’ offerings and arranging private placements, including both debt and equity offerings.

Advisory fees, net of deal related expenses, are recorded when earned, the fees are determinable and collection is reasonably assured. Nonrefundable upfront fees are deferred and recognized as revenue ratably over the expected period in which the related services are rendered. Upon successful completion of a transaction or termination of an engagement, the recognition of revenue would be accelerated.

Capital markets revenue arise from securities offerings and private placements in which the Company acted as a placement agent or underwriter. Private placement revenue is recorded when the underlying transaction is completed under the terms of the relevant agreement, typically on the closing date of the transaction. Underwriting revenue, which includes management fees, selling concessions and underwriting fees, net of related syndicate expenses, is recorded on a trade-date basis.

(d)

Fair Value of Financial Instruments

The Company accounts for financial instruments that are being measured and reported on a fair value basis in accordance with Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) 820, Fair Value Measurements and Disclosures. ASC 820 defines fair value, establishes a framework for measuring fair value and requires enhanced disclosures about fair value measurements. ASC 820 defines fair value as “the price that would be received to sell an asset or paid to transfer a liability in an ordinary transaction between current market participants at the measurement date”.


		7		(Continued)

PRINCERIDGE PARTNERS LLC

Notes to Consolidated Financial Statements

December 31, 2010

FASB ASC 820 outlines a fair value hierarchy. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets and liabilities (which are considered level 1 measurements) and the lowest priority to unobservable inputs (which are considered level 3 measurements). The three levels of the fair value hierarchy under FASB ASC 820 are as follows:

Level 1 – Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities;

Level 2 – Quoted prices for similar instruments in active markets, quoted prices in markets that are not active or financial instruments for which all significant inputs are observable, whether directly or indirectly;

Level 3 – Valuation is generated from model-based techniques that use significant assumptions not observable in the market. These unobservable assumptions would reflect the Company’s own estimates of assumptions that market participants would use in pricing the asset or liability. Such valuation techniques include the use of option pricing models, discounted cash flow models and similar techniques.

Fair value is generally based on quoted market prices. If quoted market prices are not available, fair value is determined based on other relevant factors, including dealer price quotations, price activity for equivalent instruments and valuation pricing methods. Among the factors considered by the Company in determining the fair value of financial instruments for which there is no current quoted market prices are credit spreads, the terms and liquidity of the instrument, the financial condition, operating results and credit ratings of the issuer or underlying company, the quoted market price of publicly traded securities with similar duration and yield, assessing the underlying investments, market-based information, such as comparable company transactions, performance multiples and changes in market outlook as well as other measurements. Financial instruments owned and financial instruments sold, not yet purchased are stated at fair value, with related changes in unrealized appreciation or depreciation reflected in principal transactions, net in the accompanying statement of operations. See note 3 of the notes to the consolidated financial statements for additional discussion of ASC 820.

(e)

Receivables and Payables from Clearing Broker

Receivables from clearing broker include deposits and free credit balances with the Company’s clearing broker, proceeds from securities sold, including financial instruments sold not yet purchased, and payables to clearing broker include margin loans. Proceeds related to financial instruments sold, not yet purchased may be restricted until the securities are purchased.

(f)

Receivables from Others

Receivables from others include receivables related to advisory and capital markets fees earned in the Company’s broker-dealer business and receivables related to revenue earned in the Company’s loan trading business.


		8		(Continued)

PRINCERIDGE PARTNERS LLC

Notes to Consolidated Financial Statements

December 31, 2010

(g)

Furniture, Equipment and Leasehold Improvements

Furniture and equipment is stated at cost less accumulated depreciation. Depreciation is provided on a straight-line basis over the estimated useful life of the asset, generally two to five years. Leasehold improvements are stated at cost less accumulated amortization and are amortized on a straight-line basis over the lesser of the economic useful life of the improvement or the initial term of the respective lease.

(h)

Foreign Currency Translation

Assets and liabilities denominated in non-U.S. currencies are translated into U.S. dollar equivalents using year-end spot foreign exchange rates. Gains and losses resulting from translation to U.S. dollar equivalents are included in the statement of operations as part of principal transactions, net.

(i)

Member Accounts

Net income or loss from operations is allocated to the capital accounts of the Members on a pro-rata basis in proportion to such Members’ profit units as of the last day of the applicable accounting period for which such net income or loss was determined. In connection with the withdrawal of a Member from the Company, the Company may repurchase such Member’s units in accordance with the terms of the Company’s LLC agreement.

(j)

Interest Income and Interest Expense

The Company recognizes contractual interest on financial instruments owned at fair value and financial instruments sold, not yet purchased on an accrual basis as a component of interest income or interest expense.

(k)

Advances to Employees

Advances to employees include upfront compensation payments made to employees which are deferred and amortized on a straight-line basis over the relevant service period for which they are earned.

(l)

Income Taxes

The Company and PrinceRidge Holdings LP are treated as partnerships for federal income tax purposes. The Company’s operating subsidiaries, The PrinceRidge Group LLC and PrinceRidge Capital LLC, are single member limited liability companies and are treated as disregarded entities pursuant to Treasury Regulation Section 301.7701-3 for federal income tax purposes. Generally, disregarded entities are not subject to entity-level federal or state income taxation and, as such, the Company is not required to provide for income taxes under FASB ASC 740, Income Taxes. The operating subsidiaries’ taxable income becomes taxable to the respective members of the Company as a result of the Company’s treatment as a nontaxable flow-through entity for federal income tax purposes. However, certain aspects of the Company’s businesses are subject to local taxes such as the New York City unincorporated business tax (UBT).


		9		(Continued)

PRINCERIDGE PARTNERS LLC

Notes to Consolidated Financial Statements

December 31, 2010

(m)

Recent Accounting Developments

In January 2010, the FASB issued ASU No. 2010-06, which updates the guidance in ASC 820, Fair Value Measurements and Disclosures. The ASU requires new disclosures including significant transfers in and out of Level 1 and Level 2 fair value measurements and a reconciliation of Level 3 fair value measurements including purchases, sales, issuances and settlements on a gross basis. The ASU also amends ASC Subtopic 820-10 to clarify certain existing disclosures regarding the level of disaggregation at which fair value measurements are provided for each class of assets and liabilities (instead of major category) and disclosures about inputs and valuation techniques used to measure fair value for both recurring and non-recurring fair value measurements that fall in either Level 2 or Level 3. The majority of the provisions of this update, including those applicable to the Company, were effective for annual periods beginning after December 15, 2009, with the remainder being effective for annual reporting periods beginning after December 15, 2010. The adoption of the guidance effective in 2010 did not have a material impact on the Company’s disclosures nor does the Company expect the adoption of the remaining guidance in 2011 to impact its disclosures.

(3)

Financial Instruments

The following table sets forth by level within the fair value hierarchy the Company’s “financial instruments owned, at fair value,” and “financial instruments sold, but not yet purchased, at fair value” as of December 31, 2010. Assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement.


	Level 1		Level 2		Level 3		Total
Assets:
Cash equivalents	$	—		—		—		—
Financial instruments owned, at fair value:
Corporate debt		—		16,064,066		—		16,064,066
Equities		2,106		43,335		—		45,441
Government securities		1,976,064		—		—		1,976,064
Municipal securities		—		918,532		—		918,532
Mortgage-backed securities		—		996,989		—		996,989


Total financial instruments owned		1,978,170		18,022,922		—		20,001,092


Total assets at fair value	$	1,978,170		18,022,922		—		20,001,092


Liabilities:
Financial instruments sold, but not yet purchased at fair value:
Corporate debt	$	—		12,042,782		—		12,042,782
Government securities		1,686,370		—		—		1,686,370

Total liabilities at fair value	$	1,686,370		12,042,782		—		13,729,152

There have not been any significant transfers between level 1 and level 2 of the fair value hierarchy during the year ended December 31, 2010.


		10		(Continued)

PRINCERIDGE PARTNERS LLC

Notes to Consolidated Financial Statements

December 31, 2010

(4)

Receivable from Clearing Broker

Securities transactions are recorded on a trade date basis. The receivable and payable amounts related to unsettled securities transactions are recorded on a net basis in the receivable from clearing broker in the accompanying statement of financial condition. Receivable from clearing broker consists of the following:


Clearing deposit	$	250,000
Free credit balances, net		7,516,723
Trade date receivable		150,000


Total receivables from clearing broker	$	7,916,723

(5)

Receivables from Others

Receivables from others are comprised of:


Investment banking fee receivable (net of allowances $27,117)	$	150,501
Other receivables		259,131
Purchased interest and interest income receivable		250,383


Total receivables from others	$	660,015

(6)

Office Equipment and Leasehold Improvements

Furniture, equipment and leasehold improvements consist of the following as of December 31:


Furniture and fixtures	$	204,776
Equipment		985,859
Leasehold improvements		759,327
Software		155,457

Total		2,105,419

Less: accumulated depreciation and amortization		1,126,376


Total office equipment and leasehold improvements, net	$	979,043


		11		(Continued)

PRINCERIDGE PARTNERS LLC

Notes to Consolidated Financial Statements

December 31, 2010

(7)

Commitments and Contingencies

(a)

Leases

The Company leases office space in New York City, Los Angeles and Chicago under operating lease agreements that expire at various times through 2012. The following table presents the Parent’s required future minimum rental payments for the office space under noncancelable operating leases as of December 31, 2010:


Year ending:
2011	$	206,258
2012		23,470


Total minimum payments required		229,728

Less sublease rentals under noncancelable subleases		—


Net minimum payment required	$	229,728

(b)

Commitments

In connection with underwriting activities, the Company’s broker-dealer subsidiary may enter into firm commitments for the purchase of securities in return for a fee. These commitments may require the broker-dealer to purchase securities at a specified price. Securities underwriting exposes the Company to market and credit risk primarily in the event that, for any reason, securities purchased by the Company cannot be distributed at anticipated price levels. At December 31, 2010, the Company had no open underwriting commitments.

(c)

Contingencies

The Company, together with various other brokers and dealers, corporations, and individuals, has been named as a defendant in various legal actions and other litigation arising in connection with the conduct of its business activities that allege violations of federal and state securities laws and claim substantial damages.

In accordance with ASC 450-20 (Loss Contingencies), the Company will accrue a liability when it is probable that a liability has been incurred and the amount of the loss can be reasonably estimated. In many lawsuits and arbitrations, it is not possible to determine whether a liability has been incurred or to estimate the ultimate or minimum amount of that liability until the case is close to resolution, in which case no accrual is made until that time. In view of the inherent difficulty of predicting the outcome of such matters, particularly in cases in which claimants seek substantial or indeterminate damages, the Company cannot predict what the eventual loss or range of loss related to such matters will be. Subject to the foregoing, the Company continues to assess these cases and believes, based on information available to it, that the resolution of these matters will not have a material adverse effect on the financial condition of the Company.


		12		(Continued)

PRINCERIDGE PARTNERS LLC

Notes to Consolidated Financial Statements

December 31, 2010

(8)

Financial Instruments with Off-Balance Sheet Risk, Credit Risk or Market Risk

The Company’s broker-dealer clears securities transactions on behalf of customers through its clearing broker. Substantially all of the Company’s transactions are executed with and on behalf of institutional investors, including other brokers and dealers, commercial banks, asset managers, and other financial institutions. In connection with these activities, unsettled customer trades may expose the Company to off-balance sheet credit risk in the event its customers are unable to fulfill their contractual obligations.

The majority of the Company’s transactions, and consequently the concentration of its credit exposure, is with its clearing broker. The clearing broker is also a significant source of short-term financing for the Company, which is collateralized by cash and securities owned by the Company and held by the clearing broker.

In connection with its proprietary activities, the Company has sold securities that it does not own and will, therefore, be obligated to purchase such securities at a future date. The Company has recorded this obligation in the financial statements at fair value for the related securities and will record a trading loss if the market value of the securities increases subsequent to the date of the financial statements.

(9)

Income Taxes

The Company is subject to UBT and has provided for income taxes based on a statutory rate of 4.00%. For the period ended December 31, 2010, the Company recorded a deferred tax asset of $323,766 related to its net operating loss, which can be carried forward for UBT tax purposes. At December 31, 2010, management has provided for a full valuation allowance for the deferred tax asset.

(10)

Regulatory Requirements

The Company’s subsidiary, The PrinceRidge Group LLC, is a registered broker-dealer and, accordingly, is subject to Rule 15c3-1 under the Securities Exchange Act of 1934 (Net Capital Rule) which requires the maintenance of minimum net capital as defined. The PrinceRidge Group LLC has elected to use the alternative method, permitted by the Net Capital Rule, which requires that it maintain minimum net capital, as defined, equal to the greater of $250,000 or 2% of aggregate debit items arising from customer transactions. At December 31, 2010, the Company had net capital of $8,419,776 which was $8,169,776 in excess of its required net capital of $250,000.

(11)

Subsequent Events

The Company has evaluated subsequent events for the period from December 31, 2010 through June 30, 2011, the date which the accompanying financial statements were issued.

In January of 2011, the Company began effecting reverse repurchase and repurchase agreements as principal. The Company clears and settles these transactions with NewEdge USA, LLC.

On January 28, 2011 the Parent entered into a sublease agreement for approximately 21,435 square feet of office space in New York City. The lease commenced on February 18, 2011 and expires on July 31, 2015. Total required future minimum rental payments associated with this new lease agreement is $3,310,517.


		13		(Continued)

PRINCERIDGE PARTNERS LLC

Notes to Consolidated Financial Statements

December 31, 2010

On June 1, 2011 the Company completed a transaction with Institutional Financial Markets, Inc. (IFMI) pursuant to which IFMI contributed net assets for a majority interest in the Company. The fair value of the contributed assets was approximately $45 million and was comprised of cash, trading securities, employees and other assets and liabilities.

On June 3, 2011 a Series A member provided written notice to the Company of their intent to withdrawal from the partnership. At the time of the notice the member’s capital consisted of less than 6% of the Company’s total capital.


		14

EX-99.2 4 dex992.htm AUDITED CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION OF PRINCERIDGE PARTNERS Audited consolidated statements of financial condition of PrinceRidge Partners

EXHIBIT 99.2

PRINCERIDGE PARTNERS LLC

Consolidated Financial Statements

December 31, 2009

(With Independent Auditors’ Report Thereon)

Independent Auditors’ Report

Management Board

PrinceRidge Partners LLC:

We have audited the accompanying consolidated statement of financial condition of PrinceRidge Partners LLC and subsidiaries (the Company) as of December 31, 2009, and the related consolidated statements of operations, changes in total capital, and cash flows for the year then ended. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audit.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of PrinceRidge Partners LLC and subsidiaries as of December 31, 2009 and the results of their operations and their cash flows for the year then ended, in conformity with U.S. generally accepted accounting principles.

/s/ KPMG LLP

June 30, 2011

PRINCERIDGE PARTNERS LLC

Consolidated Statement of Financial Condition

December 31, 2009


Assets
Cash and cash equivalents	$	12,965,116
Financial instruments owned, at fair value		5,347,446
Receivable from clearing broker		4,088,916
Furniture, equipment and leasehold improvements at cost, less accumulated depreciation and amortization of $375,424		1,265,365
Receivables from others		934,366
Due from Members		265
Prepaid expenses		500,000
Advances to employees		629,457
Other assets		443,007

Total assets	$	26,173,938


Liabilities and Capital

Financial instruments sold, not yet purchased, at fair value	$	1,310,625
Accrued incentive compensation		2,043,066
Accrued other expenses and other liabilities		1,358,588


Total liabilities		4,712,279

Members’ capital		(160,662	)

Noncontrolling interest		21,622,321


Total capital		21,461,659


Total liabilities and capital	$	26,173,938

See accompanying notes to consolidated financial statements.

PRINCERIDGE PARTNERS LLC

Consolidated Statement of Operations

Year ended December 31, 2009


Revenues:
Principal transactions, net	$	8,316,014
Investment banking fees		441,801
Net interest income		119,335


Total revenues		8,877,150


Expenses:
Compensation and benefits		6,944,572
Professional fees		1,534,459
Communications and technology		1,264,143
Occupancy and equipment		1,131,483
Regulatory fees		253,798
Business development		178,615
Brokerage, clearing and exchange fees		36,879
Other		103,597


Total expenses		11,447,546


Net loss		(2,570,396	)

Less: Net loss attributable to noncontrolling interest		2,452,044


Net loss attributable to controlling interest	$	(118,352	)

See accompanying notes to consolidated financial statements.

PRINCERIDGE PARTNERS LLC

Consolidated Statement of Changes in Total Capital

Year ended December 31, 2009


	Members’ capital			Noncontrolling interest			Total capital
Balance at December 31, 2008	$	(42,575	)		4,714,365		$	4,671,790

Capital contributions		265			19,360,000			19,360,265

Net loss		(118,352	)		(2,452,044	)		(2,570,396	)


Balance at December 31, 2009	$	(160,662	)		21,622,321		$	21,461,659

See accompanying notes to consolidated financial statements.

PRINCERIDGE PARTNERS LLC

Consolidated Statement of Cash Flows

Year ended December 31, 2009


Cash flows from operating activities:
Net loss	$	(2,570,396	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation		355,377
(Increase) decrease in operating assets:
Financial instruments owned, at fair value		(5,347,446	)
Receivable from clearing broker		(4,088,916	)
Receivables from others		(934,366	)
Due from Members		(265	)
Prepaid expenses		(467,399	)
Advances to employees		(629,457	)
Other assets		(176,806	)
Increase (decrease) in operating liabilities:
Financial instruments sold, not yet purchased, at fair value		1,310,625
Accrued incentive compensation		2,043,066
Accrued expenses and other liabilities		1,157,769


Net cash used in operating activities		(9,348,214	)


Cash flows from investing activities:
Purchase of office equipment and leasehold improvements		(1,456,079	)


Net cash used in investing activities		(1,456,079	)


Cash flows from financing activities:

Capital contributions from Members		265
Noncontrolling interest		19,360,000


Net cash provided by financing activities		19,360,265


Net increase in cash and cash equivalents		8,555,972

Cash and cash equivalents, December 31, 2008		4,409,144


Cash and cash equivalents, December 31, 2009	$	12,965,116


Supplemental disclosure of cash flow information:
Cash paid for interest	$	25,842
Cash paid for taxes		—

See accompanying notes to consolidated financial statements.

PRINCERIDGE PARTNERS LLC

Notes to Consolidated Financial Statements

December 31, 2009

(1)

Organization

PrinceRidge Partners LLC (the Company) was organized as a limited liability company under the laws of the state of Delaware on January 28, 2008 and is the General Partner of PrinceRidge Holdings LP, a financial services company. Pursuant to the Company’s LLC agreement, certain Members have been appointed as Managing Members of the Company for which the authority for day-to-day management decision making resides. The Company also has limited partner interests (non-managing members) which have certain limited rights as specified in the Company’s LLC agreement. PrinceRidge Holdings LP is comprised of two wholly owned operating subsidiaries; The PrinceRidge Group LLC, a U.S. registered broker dealer, and PrinceRidge Capital LLC, a dealer in non-securities related products. The Company was formed on January 28, 2008 under the Delaware Limited Liability Company Act and the Company and its operating subsidiaries subsequently changed their names on June 29, 2009 from VinsonForbes Holdings LLC, VinsonForbes Group LP, VinsonForbes & Co. LLC and VinsonForbes Capital LLC to PrinceRidge Partners LLC, PrinceRidge Holdings LP, The PrinceRidge Group LLC, and PrinceRidge Capital LLC, respectively. On June 18, 2009, The PrinceRidge Group LLC became a member of the Financial Industry Regulation Authority (FINRA) and other various exchanges and received approval to operate as a broker-dealer registered with Securities and Exchange Commission (SEC). Additionally, the The PrinceRidge Group LLC is a member of the Securities Investor Protection Corporation (SIPC).

(2)

Summary of Significant Accounting Policies

(a)

Basis of Presentation

The consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. All material intercompany transactions and balances have been eliminated in consolidation.

(b)

Cash and Cash Equivalents

The Company defines cash equivalents as short-term interest-earning deposits with original maturities of three months or less that are not held for sale in the ordinary course of business.


		6		(Continued)

PRINCERIDGE PARTNERS LLC

Notes to Consolidated Financial Statements

December 31, 2009

(c)

Revenue Recognition

Principal Transactions

Investment Banking Fees

(d)

Fair Value of Financial Instruments


		7		(Continued)

PRINCERIDGE PARTNERS LLC

Notes to Consolidated Financial Statements

December 31, 2009

Level 1 – Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities;

(e)

Receivables and Payables from Clearing Broker

(f)

Receivables from Others


		8		(Continued)

PRINCERIDGE PARTNERS LLC

Notes to Consolidated Financial Statements

December 31, 2009

(g)

Furniture, Equipment and Leasehold Improvements

(h)

Foreign Currency Translation

(i)

Member Accounts

(j)

Interest Income and Interest Expense

(k)

Advances to Employees

Advances to employees include upfront compensation payments made to employees which are deferred and amortized on a straight-line basis over the relevant service period for which they are earned.

(l)

Income Taxes


		9		(Continued)

PRINCERIDGE PARTNERS LLC

Notes to Consolidated Financial Statements

December 31, 2009

(m)

Recent Accounting Developments

In June 2009, the FASB issued Statement of Financial Accounting Standards 168, The FASB Accounting Standards Codification (“Codification”) and the “Hierarchy of Generally Accepted Accounting Principles,” a replacement of SFAS 162, now codified in the Generally Acceptable Accounting Principles Topic 105 of the FASB ASC. The Codification became the source of authoritative United States generally accepted accounting principles (“GAAP”) recognized by the FASB to be applied to nongovernment entities. 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 Codification supersedes all then-existing non-SEC accounting and reporting standards. All other nongrandfathered non-SEC accounting literature included in the Codification became nonauthoritative. This statement became effective for financial statements issued for interim and annual periods ending after September 15, 2009. The adoption of the Codification statement did not impact the Company’s financial statements.

(3)

Financial Instruments

The following table sets forth by level within the fair value hierarchy the Company’s “financial instruments owned, at fair value,” and “financial instruments sold, but not yet purchased, at fair value” as of December 31, 2009. Assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement.


	Level 1		Level 2		Level 3		Total
Assets:
Cash equivalents	$	4,999,500		—		—		4,999,500
Financial instruments owned, at fair value:
Corporate and other debt		—		2,822,470		—		2,822,470
Mortgage-backed securities		—		2,524,976		—		2,524,976


Total financial instruments owned		—		5,347,446		—		5,347,446


Total assets at fair value	$	4,999,500		5,347,446		—		10,346,946

Liabilities:
Financial instruments sold, but not yet purchased at fair value:
Corporate debt	$	—		1,310,625		—		1,310,625
Government securities		—		—		—		—


Total liabilities at fair value	$	—		1,310,625		—		1,310,625

There have not been any significant transfers between level 1 and level 2 of the fair value hierarchy during the year ended December 31, 2009.


		10		(Continued)

PRINCERIDGE PARTNERS LLC

Notes to Consolidated Financial Statements

December 31, 2009

(4)

Receivable from Clearing Broker


Clearing deposit	$	250,000
Free credit balances, net		3,836,740
Trade date receivable		2,176

Total receivables from clearing broker	$	4,088,916

(5)

Receivables from Others

Receivables from others are comprised of:


Investment banking fee receivable (net of allowances $27,117)	$	457,359
Other receivables		355,606
Purchased interest and interest receivable		121,401


Total receivables from others	$	934,366

(6)

Office Equipment and Leasehold Improvements

Furniture, equipment and leasehold improvements consist of the following as of December 31:


Furniture and fixtures	$	168,903
Equipment		674,526
Leasehold improvements		726,447
Software		70,913


Total		1,640,789

Less: accumulated depreciation and amortization		375,424


Total Furniture, equipment and leasehold improvements, net	$	1,265,365


		11		(Continued)

PRINCERIDGE PARTNERS LLC

Notes to Consolidated Financial Statements

December 31, 2009

(7)

Commitments and Contingencies

(a)

Leases

The Company leases office space in Los Angeles and New York City under operating lease agreements that expire in 2010 and 2011 respectively. The following table presents the Parent’s required future minimum rental payments for the office space under non-cancelable operating leases as of December 31, 2009:


Year ending:
2010	$	875,188

Total minimum payments required		875,188
Less sublease rentals under noncancelable subleases		(62,356	)

Net minimum payment required	$	812,832

(b)

Commitments

In connection with underwriting activities, the Company’s broker-dealer subsidiary may enter into firm commitments for the purchase of securities in return for a fee. These commitments may require the broker-dealer to purchase securities at a specified price. Securities underwriting exposes the Company to market and credit risk primarily in the event that, for any reason, securities purchased by the Company cannot be distributed at anticipated price levels. At December 31, 2009, the Company had no open underwriting commitments.

(c)

Contingencies

(8)

Financial Instruments with Off-Balance Sheet Risk, Credit Risk or Market Risk


		12		(Continued)

PRINCERIDGE PARTNERS LLC

Notes to Consolidated Financial Statements

December 31, 2009

(9)

Income Taxes

The Company is subject to UBT and has provided for income taxes based on a statutory rate of 4.00%. For the period ended December 31, 2009, the Company recorded a deferred tax asset of $141,584 related to its net operating loss, which can be carried forward for UBT tax purposes. At December 31, 2009, management has provided for a full valuation allowance for the deferred tax asset.

(10)

Regulatory Requirements


		13		(Continued)

PRINCERIDGE PARTNERS LLC

Notes to Consolidated Financial Statements

December 31, 2009

requires that it maintain minimum net capital, as defined, equal to the greater of $250,000 or 2% of aggregate debit items arising from customer transactions. At December 31, 2009, the Company had net capital of $10,977,774 which was $10,727,774 in excess of its required net capital of $250,000.

(11)

Subsequent Events

The Company has evaluated subsequent events for the period from December 31, 2009 through June 30, 2011, the date which the accompanying financial statements were issued.

On February 3, 2010 the Company entered into a sublease agreement for approximately 2,000 square feet of office space in Chicago, IL. The lease commenced on February 11, 2010 and expired on January 31, 2011. On March 24, 2010 the Company entered into a sublease agreement for approximately 2,900 square feet of office space in Los Angeles, CA. The lease commenced on March 31, 2010 and expires on February 13, 2012. On January 28, 2011 the Parent entered into a sublease agreement for approximately 21,435 square feet of office space in New York City. The lease commenced on February 18, 2011 and expires on July 31, 2015. Total required future minimum rental payments associated with these new lease agreements is $3,638,036.

In January of 2011, the Company began effecting reverse repurchase and repurchase agreements as principal. The Company clears and settles these transactions with NewEdge USA, LLC.


		14

EX-99.3 5 dex993.htm UNAUDITED CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION OF PRINCERIDGE PARTNERS Unaudited consolidated statements of financial condition of PrinceRidge Partners

EXHIBIT 99.3

PRINCERIDGE PARTNERS LLC

Consolidated Financial Statements

March 31, 2011

(Unaudited Report)

PRINCERIDGE PARTNERS LLC

Consolidated Statement of Financial Condition

For three months ended March 31, 2011

(Unaudited)


Assets
Cash and cash equivalents	$	3,240,811
Financial instruments owned, at fair value		42,651,335
Receivable from clearing brokers		397,146
Securities purchased under agreements to resell		42,764,411
Furniture, equipment and leasehold improvements at cost, less accumulated depreciation and amortization of $607,651		2,694,923
Receivables from others (net of allowances $27,117)		1,086,878
Due from landlord		588,991
Prepaid expenses		772,926
Advances to employees		348,809
Due from Members		4,249
Other assets		955,331


Total assets	$	95,505,810


Liabilities and Capital

Financial instruments sold, not yet purchased, at fair value	$	22,283,701
Payable to clearing broker		6,205,109
Securities sold under agreements to repurchase		42,409,765
Landlord incentive		363,976
Accrued incentive compensation		2,725,424
Accrued other expenses and other liabilities		3,457,813


Total liabilities		77,445,788

Members’ capital		(230,468	)
Noncontrolling interest		18,290,490

Total capital		18,060,022


Total liabilities and capital	$	95,505,810

See accompanying notes to consolidated financial statements.

PRINCERIDGE PARTNERS LLC

Consolidated Statement of Operations

For three months ended March 31, 2011

(Unaudited)


Revenues:
Principal transactions, net	$	7,057,149
Investment banking fees		2,318,565
Net interest income		(8,021	)

Total revenues		9,367,693

Expenses:
Compensation and benefits		6,544,946
Communications and technology		841,588
Professional fees		654,430
Occupancy and equipment		573,946
Business development		133,775
Brokerage, clearing and exchange fees		337,988
Regulatory fees		96,372
Other		113,883

Total expenses		9,296,928

Net Income	$	70,765
Less: Net income attributable to noncontrolling interest		(76,320	)

Net Loss attributable to controlling interest		(5,555	)

See accompanying notes to consolidated financial statements.

PRINCERIDGE PARTNERS LLC

Consolidated Statement of Changes in Total Capital

For three months ended March 31, 2011

(Unaudited)


	Members’ capital			Noncontrolling interest		Total capital
Balance at December 31, 2010	$	(228,162	)		17,886,418	$	17,658,256

Capital contributions		3,249			327,752		331,001

Net income (loss)		(5,555	)		76,320		70,765


Balance at March 31, 2011	$	(230,468	)		18,290,490	$	18,060,022

See accompanying notes to consolidated financial statements.

PRINCERIDGE PARTNERS LLC

Consolidated Statement of Cash Flows

For three months ended March 31, 2011

(Unaudited)


Cash flows from operating activities:
Net loss	$	70,765
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation		207,508
(Increase) decrease in operating assets:
Financial instruments owned, at fair value		(22,650,244	)
Receivable from clearing brokers		7,519,577
Securities purchased under agreements to resell		(42,764,411	)
Prepaid expenses		(141,969	)
Receivables from others		(426,864	)
Due from landlord		(588,991	)
Advances to employees		172,461
Due from Members		(3,249	)
Other assets		(499,406	)
Increase (decrease) in operating liabilities:
Financial instruments sold, not yet purchased, at fair value		8,554,549
Securities sold under agreements to repurchase		42,409,765
Payable to clearing broker		6,205,109
Landlord incentive		363,976
Accrued incentive compensation		(128,338	)
Accrued expenses and other liabilities		2,022,846


Net cash provided by operating activities		323,084


Cash flows from investing activities:
Purchase of office equipment and leasehold improvements		(1,923,389	)


Net cash used in investing activities		(1,923,389	)


Cash flows from financing activities:

Capital contributions from Members		3,249
Noncontrolling interest		327,752


Net cash provided by financing activities		331,001


Net decrease in cash and cash equivalents		(1,269,304	)

Cash and cash equivalents, December 31, 2010		4,510,115


Cash and cash equivalents, March 31, 2011	$	3,240,811


Supplemental disclosure of cash flow information:
Cash paid for interest	$	344,914
Cash paid for taxes		—

See accompanying notes to consolidated financial statements.

PRINCERIDGE PARTNERS LLC

Notes to Consolidated Financial Statements

March 31, 2011

(Unaudited)

(1)

Organization

PrinceRidge Partners LLC (the Company) was organized as a limited liability company under the laws of the state of Delaware on January 28, 2008 and is the General Partner of PrinceRidge Holdings LP, a financial services company. Pursuant to the Company’s LLC agreement, certain Members have been appointed as Managing Members of the Company for which the authority for day-to-day management decision making resides. The Company also has limited member interests (non-managing members) which have certain limited rights as specified in the Company’s LLC agreement. PrinceRidge Holdings LP is comprised of two wholly owned operating subsidiaries; The PrinceRidge Group LLC, a U.S. registered broker dealer, and PrinceRidge Capital LLC, a dealer in non-securities related products. The Company was formed on January 28, 2008 under the Delaware Limited Liability Company Act and the Company and its operating subsidiaries subsequently changed their names on June 29, 2009 from VinsonForbes Holdings LLC, VinsonForbes Group LP, VinsonForbes & Co. LLC and VinsonForbes Capital LLC to PrinceRidge Partners LLC, PrinceRidge Holdings LP, The PrinceRidge Group LLC, and PrinceRidge Capital LLC, respectively. On June 18, 2009, The PrinceRidge Group LLC became a member of the Financial Industry Regulation Authority (FINRA) and other various exchanges and received approval to operate as a broker-dealer registered with Securities and Exchange Commission (SEC). Additionally, The PrinceRidge Group LLC is a member of the Securities Investor Protection Corporation (SIPC).

The Company, through its operating subsidiaries, commenced operations on April 1, 2009 and operates an institutional brokerage and investment banking business. The Company’s customers are predominately institutional investors including brokers and dealers, commercial banks, asset managers and other financial institutions. The PrinceRidge Group LLC has clearing agreements with Pershing LLC and NewEdge USA, LLC. The PrinceRidge Group LLC clears all security transactions on a fully disclosed basis through Pershing LLC and clears all reverse repurchase agreements and repurchase agreements through NewEdge USA, LLC. The PrinceRidge Group LLC is exempt from Rule 15c3-3 of the Securities and Exchange Commission under paragraph k(2)(ii) of that rule.

(2)

Summary of Significant Accounting Policies

(a)

Basis of Presentation

The consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. All material intercompany transactions and balances have been eliminated in consolidation.

PRINCERIDGE PARTNERS LLC

Notes to Consolidated Financial Statements

March 31, 2011

(Unaudited)

(b)

Cash and Cash Equivalents

The Company defines cash equivalents as short-term interest-earning deposits with original maturities of three months or less that are not held for sale in the ordinary course of business.

(c)

Revenue Recognition

Principal Transactions

Investment Banking Fees

(d)

Fair Value of Financial Instruments

PRINCERIDGE PARTNERS LLC

Notes to Consolidated Financial Statements

March 31, 2011

(Unaudited)

Level 1 – Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities;

(e)

Securities Purchased and Sold Under Agreements to Resell and Repurchase

Securities purchased under agreements to resell (“reverse repurchase agreements”) and securities sold under agreements to repurchase (“repurchase agreements”) are accounted for as collateralized financing transactions and are carried at contract value plus accrued interest. It is the policy of the Company to obtain possession of the collateral with market values equal to or in excess of the principal amount loaned under reverse repurchase agreements. Collateral is valued daily, and the Company may require counterparties to deposit additional collateral when appropriate. Reverse repurchase agreements and repurchase agreements are reported net by counterparty when permitted under applicable accounting standards.

PRINCERIDGE PARTNERS LLC

Notes to Consolidated Financial Statements

March 31, 2011

(Unaudited)

As of March 31, 2011, the Company has the right to sell or repledge all of the securities it has received under reverse repurchase agreements. These repledged securities have been used in the normal course of business.

As of March 31, 2011, the Company has received securities with market values of $46,753,738 under resale agreements and pledged securities with market values of $46,095,373 under repurchase agreements, prior to netting. The Company’s counterparties to its repurchase agreements have the right by contract to sell or repledge the Company’s pledged securities.

As part of the company’s matched-booked trading activities the Company can enter into futures transactions to manage its interest rate risk. As of March 31, 2011, the Company had no futures transactions outstanding.

(f)

Receivables and Payables from Clearing Broker

(g)

Receivables from Others

Receivables from others include receivables related to advisory and capital markets fees earned in the Company’s broker-dealer business, receivables related to capital contributions in noncontrolling interest, payroll tax receivables and purchased interest and income receivables related to trading activity.

(h)

Furniture, Equipment and Leasehold Improvements

Furniture and equipment is stated as cost less accumulated depreciation. Depreciation is provided on a straight-line basis over the estimated life of the asset, generally two to five years. Leasehold improvements are stated at cost less accumulated amortization and are amortized on a straight-line basis over the lesser of the economic useful of the improvement or the initial term of the respective lease.

(i)

Foreign Currency Translation

PRINCERIDGE PARTNERS LLC

Notes to Consolidated Financial Statements

March 31, 2011

(Unaudited)

(j)

Member Accounts

(k)

Interest Income and Interest Expense

(l)

Advances to Employees

Advances to employees include upfront compensation payments made to employees which are deferred and amortized on a straight-line basis over the relevant service period for which they are earned.

(m)

Income Taxes

(n)

Recent Accounting Developments

PRINCERIDGE PARTNERS LLC

Notes to Consolidated Financial Statements

March 31, 2011

(Unaudited)

(3)

Financial Instruments

The following table sets forth by level within the fair value hierarchy the Company’s “financial instruments owned, at fair value,” and “financial instruments sold, but not yet purchased, at fair value” as of March 31, 2011. Assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement.


	Level 1		Level 2		Level 3		Total
Assets:
Cash equivalents	$	—	$	—	$	—	$	—
Financial instruments owned, at fair value:
Corporate debt		—		37,110,359		—		37,110,359
Equities		—		—		—		—
Government securities		1,281,380		—		—		1,281,380
Municipal securities		—		2,249,157		—		2,249,157
Mortgage-backed securities		—		2,010,439		—		2,010,439


Total financial instruments owned		1,281,380		41,369,955		—		42,651,335


Total assets at fair value	$	1,281,380	$	41,369,955	$	—	$	42,651,335


Liabilities:
Financial instruments sold, but not yet purchased at fair value:
Corporate debt	$	—	$	14,309,515	$	—	$	14,309,515
Government securities		7,974,186		—		—		7,974,186


Total liabilities at fair value	$	7,974,186	$	14,309,515	$	—	$	22,283,701

There have not been any significant transfers between level 1 and level 2 of the fair value hierarchy during the quarter ended March 31, 2011.

PRINCERIDGE PARTNERS LLC

Notes to Consolidated Financial Statements

March 31, 2011

(Unaudited)

(4)

Receivable from Clearing Broker


Clearing deposit	$	397,146

Total receivables from clearing broker	$	397,146

(5)

Receivables from Others

Receivables from others are comprised of:


Investment banking fee receivable (net of allowances $27,117)	$	114,178
Due from noncontrolling interest		327,850
Other receivables		189,625
Purchased interest and interest income receivable		455,225

Total receivables from others	$	1,086,878

(6)

Office Equipment and Leasehold Improvements

Furniture, equipment and leasehold improvements consist of the following as of March 31:


Furniture and fixtures	$	360,432
Equipment		987,473
Leasehold improvements		1,799,212
Software		155,457

Total		3,302,574

Less: Accumulated depreciation and amortization		607,651

Total office equipment and leasehold improvements, net	$	2,694,923

PRINCERIDGE PARTNERS LLC

Notes to Consolidated Financial Statements

March 31, 2011

(Unaudited)

(7)

Commitments and Contingencies

(a)

Leases

The Company leases office space in New York City, Los Angeles and Chicago under operating lease agreements that expire at various times through 2015. The following table presents the Parent’s required future minimum rental payments for the office space under noncancelable operating leases that expire in 2015:


Year Ending:
2011	$	397,355
2012		880,870
2013		857,400
2014		857,400
2015		500,150

Total minimum payments required		3,493,175
Less: Sublease rentals under noncancellable subleases		—

Net minimum payments required	$	3,493,175

(b)

Commitments

In connection with underwriting activities, the Company’s broker-dealer subsidiary may enter into firm commitments for the purchase of securities in return for a fee. These commitments may require the broker-dealer to purchase securities at a specified price. Securities underwriting exposes the Company to market and credit risk primarily in the event that, for any reason, securities purchased by the Company cannot be distributed at anticipated price levels. At March 31, 2011, the Company had no open underwriting commitments.

(c)

Contingencies

PRINCERIDGE PARTNERS LLC

Notes to Consolidated Financial Statements

March 31, 2011

(Unaudited)

(8)

Financial Instruments with Off-Balance Sheet Risk, Credit Risk or Market Risk

(9)

Income Taxes

The Company and its subsidiaries are subject to UBT and have provided for income taxes based on a statutory rate of 4.00%. For the period ended March 31, 2011, the Company recorded a deferred tax asset of $320,936 related to its net operating loss, which can be carried forward for UBT tax purposes. At March 31, 2011, management has provided for a full valuation allowance for the deferred tax asset.

(10)

Regulatory Requirements

The Company’s subsidiary, The PrinceRidge Group LLC, is a registered broker-dealer and, accordingly, is subject to Rule 15c3-1 under the Securities Exchange Act of 1934 (Net Capital Rule) which requires the maintenance of minimum net capital as defined. The PrinceRidge Group LLC has elected to use the alternative method, permitted by the Net Capital Rule, which requires that it maintain minimum net capital, as defined, equal to the greater of $250,000 or 2% of aggregate debit items arising from customer transactions. At March 31, 2011, the Company had net capital of $5,193,765 which was $4,943,765 in excess of its required net capital of $250,000.

(11)

Subsequent Events

The Company has evaluated subsequent events for the period from March 31, 2011 through July 22, 2011, the date which the accompanying financial statements were issued.

PRINCERIDGE PARTNERS LLC

Notes to Consolidated Financial Statements

March 31, 2011

(Unaudited)

On June 1, 2011 the Company completed a transaction with Institutional Financial Markets, Inc. (IFMI) pursuant to which IFMI contributed the equity interests in a subsidiary comprising a substantial part of its capital markets segment in exchange for a majority interest in the Company. The fair value of the equity interests was approximately $45 million and was comprised of cash, trading securities, employees and other assets and liabilities.

EX-99.4 6 dex994.htm UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET OF THE REGISTRANT Unaudited pro forma condensed combined balance sheet of the Registrant

EXHIBIT 99.4

UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION

In this report on Form 8-K, unless otherwise noted or as the context requires: “the Company,”, “Institutional Financial Markets”, “we”, “us”, “IFMI”, and “our” refers to Institutional Financial Markets, Inc. and it subsidiaries (formerly known as Cohen & Company Inc.). “IFMI LLC,” refers to IFMI LLC (formerly known as Cohen Brothers, LLC), the main operating subsidiary of the Company. “PrinceRidge” refers to PrinceRidge Partners, LLC, and its consolidated entities, including PrinceRidge Holdings LP. “Business Combination” refers to the June 1, 2011 closing of the contribution transaction between IFMI and PrinceRidge.

On April 19, 2011, the Company entered into a contribution agreement, referred to herein, as amended, as the “Contribution Agreement,” with PrinceRidge. On June 1, 2011, the Company completed the Business Combination, pursuant to which the Company contributed the equity interests of its wholly owned subsidiary, Cohen and Company Capital Markets, LLC (“CCCM”) along with cash and other amounts payable to PrinceRidge in exchange for a 69.9% equity interest in PrinceRidge. The owners of PrinceRidge prior to the Business Combination are referred to herein as the PrinceRidge Principals. The PrinceRidge Principals retained a 30.1% interest in PrinceRidge subsequent to the Business Combination and contribution.

The following unaudited pro forma condensed combined statements give effect to the Business Combination as if it had been completed as of March 31, 2011 for balance sheet purposes, and at the beginning of the periods presented for statements of operations purposes. We have adjusted the historical consolidated financial statements of both IFMI and PrinceRidge to give effect to pro forma events that are (1) directly attributable to the Business Combination, (2) factually supportable, and (3) with respect to the statement of operations, expected to have a continuing impact on the combined results. The manner in which this pro forma financial information is calculated may differ from similarly titled measures reported by other companies.

The unaudited pro forma condensed combined financial statements are presented for illustrative purposes only and are not necessarily indicative of the operating results or financial position that would have occurred if the Business Combination had been completed during the period or as of the dates for which the pro forma data is presented, nor is it necessarily indicative of future operating results or the future financial position of the combined company. These statements do not give effect to (1) IFMI or PrinceRidge’s results of operations or other transactions or developments since March 31, 2011, (2) the impact of possible enhancements, expense efficiencies or synergies expected to result from the Business Combination, or (3) the effects of events or developments that may occur subsequent to the Business Combination. The foregoing matters could cause both the combined company’s pro forma historical financial position and results of operations, and the combined company’s actual future financial position and results of operations, to differ materially from those presented in the accompanying unaudited pro forma condensed combined financial statements.

The unaudited pro forma condensed combined balance sheet and statement of operations and accompanying notes should be read in conjunction with the historical consolidated financial statements of IFMI and PrinceRidge. PrinceRidge’s audited financial statements for 2010 and 2011 are filed as an exhibit to the Form 8-K of which this exhibit is a part. IFMI’s historical audited financial statements and interim unaudited quarterly financial statements are included on Form 10-K and Forms 10-Q filed with the Securities and Exchange Commission and are available via IFMI’s website at www.ifmi.com.

Institutional Financial Markets, Inc.

Unaudited Pro Forma Condensed Combined Balance Sheet

As of March 31, 2011

(In thousands, except share amounts)


	IFMI			PrinceRidge			Adjustments			Pro Forma
Cash and cash equivalents	$	49,548		$	3,241					$	52,789
Restricted cash		1,880									1,880
Receivables from:
Brokers, dealers, and clearing agencies					397						397
Related parties		771			353						1,124
Other receivables		5,632			1,676						7,308
Investments - trading		316,394			42,651						359,045
Other investments, at fair value		44,766									44,766
Receivables under resale agreements		—			42,764						42,764
Goodwill		10,184						806	(A)		10,990
Other assets		12,613			4,424			166	(B)		17,203

Total assets	$	441,788		$	95,506		$	972		$	538,266


Payables to:
Brokers, dealers, and clearing agencies	$	113,885		$	6,205					$	120,090
Related parties		60									60
Accounts payable and other liabilities		13,842			3,823						17,665
Accrued compensation		9,072			2,725						11,797
Trading securities sold, not yet purchased		54,351			22,284						76,635
Securities sold under agreement to repurchase		105,490			42,410						147,900
Deferred income taxes		8,639									8,639
Debt		43,258									43,258

Total liabilities		348,597			77,447			—			426,044


Redeemable non controlling interest								19,031	(C)		19,031

Preferred stock		5									5
Common stock		11									11
Additional paid in capital		62,762									62,762
Retained earnings		6,212									6,212
Accumulated comprehensive loss		(448	)								(448	)
Treasury stock		(328	)								(328	)
Members’ equity		—			(231	)		231	(D)		—

Total controlling interest		68,214			(231	)		231			68,214
Non controlling interest		24,977			18,290			(18,290	) (D)		24,977

Total stockholders’ equity		93,191			18,059			(18,059	)		93,191

Total liabilities and equity and redeemable non controlling interest	$	441,788		$	95,506		$	972		$	538,266


IFMI Shares outstanding		12,160,249						848,742	(E)		13,008,991

Institutional Financial Markets, Inc.

Unaudited Pro Forma Condensed Combined Statement of Operations

For the Three Months Ended March 31, 2011

(In thousands, except share and per share amounts)


	IFMI			PrinceRidge			Adjustments			Pro Forma
Revenues

Net trading	$	27,274		$	7,049						34,323
Asset management		5,970									5,970
New issue and advisory		109			2,319						2,428
Principal transactions and other income		(1,039	)								(1,039	)

Total revenues		32,314			9,368			—			41,682


Operating expenses
Compensation and benefits		21,988			6,545			497	(E)		29,030
Business development, occupancy, equipment		1,439			499						1,938
Subscriptions, clearing, and execution		2,815			1,180						3,995
Professional services and other operating		4,015			866						4,881
Depreciation and amortization		470			208						678
Impairment of intangible asset											—

Total operating expenses		30,727			9,298			497			40,522


Operating income / (loss)		1,587			70			(497	)		1,160


Non operating income / (expense)

Interest expense		(1,482	)								(1,482	)
Gain on sale of management contracts		—									—
Income / (loss) from equity method affiliates		95									95

Income / (loss) before income taxes		200			70			(497	)		(227	)
Income taxes		(213	)								(213	)

Net income (loss)		413			70			(497	)		(14	)
Less: Net (loss) income attributable to the noncontrolling interest		38			76			(335	) (F)		(221	)

Net income (loss) attributable to controlling interest	$	375		$	(6	)	$	(162	)	$	207


Earnings (loss) per share - basic: (H)
Weighted average shares outstanding-Basic		10,819,995									10,819,995

Basic earnings (loss) per share	$	0.03								$	0.02


Earnings (loss) per share-diluted: (H)
Weighted average shares outstanding-Diluted		16,125,155						223,687	(E)		16,348,842

Diluted earnings (loss) per share	$	0.03								$	0.02

Institutional Financial Markets, Inc.

Unaudited Pro Forma Condensed Combined Statement of Operations

For the Year Ended December 31, 2010

(In thousands, except share and per share amounts)


	IFMI			PrinceRidge			Adjustments			Pro Forma
Revenues

Net trading	$	70,809		$	20,385						91,194
Asset management		25,281									25,281
New issue and advisory		3,778			4,357						8,135
Principal transactions and other income		25,684									25,684

Total revenues		125,552			24,742			—			150,294


Operating expenses
Compensation and benefits		77,446			19,369			1,986	(E)		98,801
Business development, occupancy, equipment		5,470			1,681						7,151
Subscriptions, clearing, and execution		8,733			3,649						12,382
Professional services and other operating		17,198			3,780						20,978
Depreciation and amortization		2,356			818						3,174
Impairment of intangible asset		5,607			—						5,607

Total operating expenses		116,810			29,297			(1,986	)		148,093


Operating income / (loss)		8,742			(4,555	)		(1,986	)		2,201


Non operating income / (expense)

Interest expense		(7,686	)								(7,686	)
Gain on repurchase of debt		2,555									2,555
Gain on sale of management contracts		971									971
Income / (loss) from equity method affiliates		5,884									5,884

Income / (loss) before income taxes		10,466			(4,555	)		(1,986	)		3,925
Income taxes		(749	)								(749	)

Net income (loss)		11,215			(4,555	)		(1,986	)		4,674
Less: Net (loss) income attributable to the noncontrolling interest		3,620			(4,479	)		1,592	(G)		733

Net income (loss) attributable to controlling interest	$	7,595		$	(76	)	$	(3,578	)	$	3,941


Earnings (loss) per share - basic: (H)
Weighted average shares outstanding-Basic		10,404,017									10,404,017

Basic earnings (loss) per share	$	0.73								$	0.38


Earnings (loss) per share-diluted: (H)
Weighted average shares outstanding-Diluted		15,687,573						378,578	(E)		16,066,151

Diluted earnings (loss) per share	$	0.73								$	0.37

Note 1 – Basis of Presentation

The unaudited pro forma condensed combined statements give effect to the Business Combination as a transaction to be accounted for as a purchase business combination under FASB Accounting Standards Codification (“ASC”) 805 “Business Combinations” and as if the acquisition of PrinceRidge had been completed as of March 31, 2011 for balance sheet purposes and at the beginning of the periods presented for statements of operations purposes. IFMI is the acquirer for accounting purposes. IFMI will record the acquisition of PrinceRidge’s assets and liabilities as of the effective date of the Business Combination.

The purchase price of PrinceRidge has been allocated to the assets acquired and liabilities assumed based upon management’s preliminary estimates of their respective fair values as of the assumed date of acquisition as described above. The purchase price allocation reflected in the unaudited pro forma condensed combined financial statements is preliminary, and the final allocation will be based upon the fair values of the actual assets and liabilities of PrinceRidge as of the effective date of the combination. Accordingly, the actual purchase price adjustments may differ materially from those presented in these statements.

Certain reclassifications have been made to the PrinceRidge historical balances in the unaudited pro forma condensed combined financial statements in order to conform to IFMI’s presentation. IFMI has completed a preliminary review of PrinceRidge’s accounting policies but the review is ongoing. As such, additional reclassifications or pro forma adjustments may be identified.

Note 2 – Assets and Liabilities Acquired

The following represents the identifiable assets and liabilities acquired and the values assigned as of March 31, 2011:

Values Assigned to Identifiable Net Assets Acquired


	PrinceRidge Recorded Value			Purchase Accounting Adjustments		Purchase Accounting Value
Cash and cash equivalents	$	3,241				$	3,241
Receivables from brokers, dealers, and clearing agencies		397					397
Receivables from related parties		353					353
Other receivables		1,676					1,676
Investments - trading		42,651					42,651
Receivables under resale agreements		42,764					42,764
Other assets		4,424			166		4,590
Payables to brokers, dealers, and clearing agencies		(6,205	)				(6,205	)
Accounts payable and other liabilities		(6,548	)				(6,548	)
Trading securities sold, not yet purchased		(22,284	)				(22,284	)
Securities sold under agreement to repurchase		(42,410	)				(42,410	)

Fair Value of Net Assets							18,225

Note 3 – Pro Forma Adjustments

(A)	Goodwill is calculated as:

Calculation of Goodwill


Purchase price	$	19,031
Fair value of net assets acquired		(18,225	)

Goodwill	$	806

The purchase price equals the fair value of the non-controlling interest retained by the PrinceRidge Principals. The fair value is calculated in (C) below.

(B)

$166 represents the estimated value of broker-dealer license. The $166 value of PrinceRidge’s broker-dealer license is an initial estimate. This value will be finalized in the future. Any adjustment to this value in the final purchase accounting will result in an offsetting adjustment to the amount assigned to goodwill.

(C)	Represents the fair value of the non-controlling interest retained by the PrinceRidge Principals.

Calculation of Fair Value of Non Controlling Interest


Fair value of net assets of PrinceRidge - Historical	18,225
Contribution from IFMI	45,000

Pro Forma fair value of PrinceRidge equity	63,225
Non controlling interest percentage	30.1	%

Fair value of non controlling interest	19,031

This interest represents the membership interests of PrinceRidge that are not owned by IFMI, LLC. The members of PrinceRidge have the right to withdraw from PrinceRidge and require PrinceRidge to redeem the interests for cash over an agreed upon payment period. The Company has concluded it will treat these interests as temporary equity under Accounting Series Release 268 (“ASR 268”). These interests will be shown outside of the permanent equity of IFMI in its consolidated balance sheet as redeemable non controlling interests.

(D)	Adjustment to eliminate the historical equity accounts of PrinceRidge.

(E)	To record expense and dilutive share effect of equity compensation granted to PrinceRidge Principals contemporaneous with the business combination.

(F)	Adjustment to non controlling interest for the three months ended March 31, 2011 is calculated as follows:

Calculation of Adjustment to Non Controlling Interest


Prince Ridge historical net income	70
Pro forma equity compensation recognized by PrinceRidge	(199	)
Historical net loss of CCCM	(456	)

Pro Forma net loss of PrinceRidge			(585	)
PrinceRidge non controlling interest percentage			30.1	%

Pro Forma loss attributable to non controlling interest of PrinceRidge						(176	)


IFMI LLC historical net income	115
Pro forma equity compensation recognized by IFMI	(298	)
Historical net loss of CCCM	456

Pro forma income of IFMI LLC before PrinceRidge						273
Pro Forma net loss of PrinceRidge			(585	)
Pro Forma loss attributable to non controlling interest of PrinceRidge			176

IFMI LLC’s share of PrinceRidge pro forma net income						(409	)

Pro Forma income of IFMI LLC						(136	)
IFMI non controlling interest percentage						32.76	%

IFMI pro forma non controlling interest						(45	)


Consolidated pro forma non controlling interest						(221	)
Less: Historical combined non controlling interest						114

Adjustment required					$	(335	)

(G)	Adjustment to non controlling interest for the year ended December 31, 2010 is calculated as follows:

Calculation of Adjustment to Non Controlling Interest


Prince Ridge historical net income	(4,555	)
Pro forma equity compensation recognized by PrinceRidge	(796	)
Historical net income of CCCM	1,959

Pro Forma net loss of PrinceRidge			(3,392	)
PrinceRidge non controlling interest percentage			30.1	%

Pro Forma loss attributable to non controlling interest of PrinceRidge						(1,021	)


IFMI LLC historical net income	10,707
Pro froma equity compensation recognized by IFMI	(1,190	)
Historical net income of CCCM	(1,959	)

Pro forma income of IFMI LLC before PrinceRidge						7,558
Pro Forma net loss of PrinceRidge			(3,392	)
Pro Forma loss attributable to non controlling interest of PrinceRidge			1,021

IFMI LLC’s share of PrinceRidge pro forma net income						(2,371	)

Pro Forma Income of IFMI LLC						5,187
IFMI non controlling interest percentage						33.81	%

IFMI pro forma non controlling interest						1,754


Consolidated pro forma non controlling interest						733
Less: Historical combined non controlling interest						(859	)

Adjustment required					$	1,592

(H)	The following table shows the calculation of the earnings per share amounts:


	Historical Year Ended December 31, 2010		Proforma Year Ended December 31, 2010		Historical Three Months Ended March 31, 2011		Proforma Three Months Ended March 31, 2011
Basic
Net income attributable to controlling interest		7,595		3,941		375		207

Weighted average shares outstanding		10,404		10,404		10,820		10,820

Earnings per share	$	0.73	$	0.38	$	0.03	$	0.02


Diluted
Net income attributable to controlling interest		7,595		3,941		375		207
Income attributable to units of IFMI, LLC that are exchangeable into IFMI shares		3,620		1,754		38		(45	)
Adjustment to income tax expense for exchange at units to shares		260		260		145		145


Net income on a fully converted basis		11,475		5,955		558		307


Weighted shares outstanding		15,688		16,066		16,125		16,349

Earnings per share	$	0.73	$	0.37	$	0.03	$	0.02