Overview

We are an integrated commodity risk management company providing risk management consulting and transaction execution services to commercial commodity intermediaries, end-users and producers. We assist primarily middle-market customers in optimizing their profit margins and mitigating commodity price risk. In addition to our risk management consulting services, we operate an independent clearing and execution platform for exchange-traded futures and options contracts. During the last twelve months, we have served more than 8,000 customers and transacted more than 73.7 million contracts in the exchange-traded and over-the-counter ("OTC") markets. We also assist our customers with the financing, transportation and merchandising of their physical commodity inventories.

We currently operate in three reportable segments consisting of Commodity and Risk Management Services ("C&RM"), Clearing and Execution Services ("CES") and Financial Services. We also report a Corporate and Other segment, which contains corporate investment income, and direct corporate expenses, development expenses, and income from equity investments not directly attributable to our operating segments. Agora-X, LLC ("Agora-X") is an 80% owned development-stage entity formed to create an electronic communications network for OTC commodity contracts.

Historically, our profitability has primarily been driven by the C&RM and CES segments of our business. In the three and nine months ended May 31, 2009, the C&RM segment experienced a significant decline in income before minority interest and income taxes primarily due to significant declines in exchange-traded and OTC contract trading activity by our customers. The CES segment experienced a significant loss before minority interest and income taxes, primarily due to a specific energy trading customer account deficit. For the three and nine months ended May 31, 2009, we recorded a provision for bad debts of $5.2 million and $111.5 million, respectively, comprised of increases to the allowance for doubtful accounts, net of expected recoveries, primarily resulting from the significant energy trading account deficit. Additionally, both segments have been impacted negatively by the decline in short-term interest rates to historically low levels, and declines in investable customer segregated and OTC deposits.

It is important that you read our consolidated financial statements in conjunction with the notes to our consolidated financial statements and the segment disclosure included below. The following table sets forth for each segment the income (loss) from continuing operations before minority interest and income tax expense for the three and nine months ended May 31, 2009 and 2008.

                                                  Three Months Ended            Nine Months Ended
                                                        May 31,                      May 31,
                                                  2009           2008           2009           2008
                                                                   (in thousands)
Commodity and Risk Management Services          $   2,287      $ 15,351      $   10,767      $ 54,278
Clearing and Execution Services                    (4,687 )       1,260         (97,057 )      15,072
Financial Services                                    160           656             280         1,183
Corporate and Other                                (9,762 )      (4,096 )       (17,890 )      (7,792 )

Income (loss) from continuing operations
before minority
interest and income tax expense (benefit)       $ (12,002 )    $ 13,171      $ (103,900 )    $ 62,741

Statement of Operations

Revenues

Our revenues are comprised of: (1) commissions and clearing fees, (2) risk management service, consulting and related brokerage fees, (3) interest income,
(4) other revenues and (5) sales of commodities.

Commissions and clearing fees. Commissions and clearing fees represent revenues generated from exchange-traded and foreign exchange ("Forex") transactions that we execute or clear in our C&RM and CES segments. Commissions and clearing fee revenue is a product of the number of transactions we process for our customers and the rate charged on those transactions. The rate that we charge our customers varies by type of customer, type of transaction and a customer's volume of trading activity.

Service, consulting and brokerage fees. Service, consulting and brokerage fees are revenues generated in the C&RM segment. Service revenues are monthly fees charged to Integrated Risk Management Program ("IRMP") customers for customized risk

management consulting services. Consulting fees are primarily fees we charge for providing various other risk management-related consulting services to customers, which are generally performed on either a monthly or project-by-project basis. Brokerage fees are generated from OTC derivative trades and Forex trades executed with our customers and with other counterparties. These brokerage fees vary on a per trade basis depending on the level of service provided and the type of transaction. When transacting OTC and Forex contracts with our customers, we will generally offset the customers' transaction simultaneously with one of our trading counterparties. On a limited basis, our OTC and Forex trade desks will accept a customer transaction and will offset that transaction with a similar, but not identical, position on an exchange. These unmatched transactions are intended to be short-term in nature and are conducted to facilitate the most effective transaction for our customer. We record revenue through the consolidated statement of operations on these trade-desk transactions based on differences in fair market value when valuing all open positions on a monthly basis.

Interest income. Interest income is primarily driven by the level of customer segregated and OTC assets deposited with us and the level of short-term interest rates. The level of customer assets deposited with us is directly related to transaction volume and commodity open contract interest of our customers. The majority of the interest we earn relates to client balances held with us on deposit to satisfy margin requirements, on which we may return a portion of the interest to our customers. We report interest revenues net of interest returned to customers. Additionally, we earn interest from our internally-generated cash balances invested in short-term marketable securities, and also from financing fees related to commodity inventory repurchase programs within our Financial Services segment.

Other revenue. Other revenue represents various ancillary revenue streams, including transportation-related income, profit-share arrangements and patronage income in our Financial Services segment, dividend income, income from equity investments (including our 25% interest in FGDI, LLC ("FGDI")) and non-recurring items. Historically, income from non-recurring items have included gains on the sale of exchange stock and exchange seats, dividends and litigation settlements, and can vary significantly from period to period.

Sales of commodities. During fiscal 2009, sales of commodities represent revenue generated from the sale of corn and wheat, Renewable Identification Numbers ("RINs") and Chicago Climate Exchange ("CCX") carbon financial instruments ("CFIs"). During fiscal 2008, sales of commodities represent revenue generated from the sale of CFIs. When evaluating commodity sales, management focuses on the margin (gross profit) from commodity sales (see "Non-GAAP Financial Measures"). The focus on gross profit from commodity sales removes the effect of commodity price driven changes on revenue and cost of goods sold, which may not have an effect on net income. The corn and wheat purchase and sale transactions were related to a specific inventory repurchase financing transaction within our Financial Services segment. The purchase and sale of RINs and CFIs are an ancillary activity and not part of our core operating model.

Costs and Expenses

Cost of commodities sold. During fiscal 2009 and 2008, cost of commodities represents the product of the volume of purchased corn and wheat bushels, RINs and CFIs, and their related costs, respectively.

Employee compensation and commissions. Employee compensation and commissions consists of risk management consultant commissions, salaries, short-term and long-term incentive compensation and share-based compensation, and is one of our primary operating expenses. We classify employees as either risk management consultants or salaried and support personnel, which includes our executive officers. The most significant component of our compensation expense is the employment of our risk management consultants, who are compensated with commissions based on the revenues their customers generate. Accordingly, our commission expense component is variable and is dependent on our commission revenue and service, consulting and brokerage fee revenue.

Pit brokerage and clearing fees. Pit brokerage and clearing fees relate directly to expenses for exchange-traded futures and options clearing and settlement services, including fees we pay to the exchanges and the floor pit brokers. These fees are variable and fluctuate based on transaction volume. Clearing fees are passed on to our customers and presented gross in the consolidated statements of operations under the Financial Accounting Standards Board ("FASB") Interpretation No. 39, Offsetting of Amounts Related to Certain Contracts (as Amended), as there is no right of offset.

Introducing broker commissions. Introducing broker commissions are commissions that we pay to non-employee third parties that have introduced customers to us. Introducing brokers are individuals or organizations that maintain relationships with customers and accept futures, options and foreign exchange orders from those customers. We directly provide all account, transaction and margining services to introducing brokers, including accepting money, securities and property from the customers. The commissions we pay an introducing broker vary based on a variety of factors, including the trading volume of the customers introduced to our company. This expense is variable and is directly related to the overall volume of trades by those customers.

Employee benefits and payroll taxes. Employee benefits and payroll taxes expense consist primarily of employee health insurance, two defined benefit pension plans, two defined contribution plans (401(k) and ESOP), and payroll taxes. Accordingly, these expenses normally fluctuate in relation to employee compensation and commissions and the number of employees. Effective September 1, 2008, all benefit accounts under our defined benefit pension plans were frozen and no additional benefits will be accrued for active participants under the plans, see Note 9 to the consolidated financial statements.

Interest expense. Interest expense consists of interest and related fees charged to us by our lenders on outstanding loans and letters of credit, commitment fees on certain lines of credit and the amortization of debt issuance costs. Our interest expense depends primarily on the amount of debt outstanding, cost of obtaining financial facilities and the interest rate environment, with all of our credit lines bearing interest at variable rates. A significant portion of our interest expense arises from the commodity inventory repurchase programs offered to customers within our Financial Services segment, and is economically offset with financing fees earned from the programs and presented as interest income.

Depreciation and amortization. Depreciation expense arises from the depreciation of equipment, furniture, software and leasehold improvements. Amortization arises from the amortization of intangible assets with determinable useful lives.

Provision for bad debts. The provision for bad debts consists of both losses on known defaults of customers and brokers, as well as a provision to the allowance for accounts that we believe may become uncollectible through our review of the daily account deficit reports, historical aging of our receivables and our monitoring of the financial strength of our customers, brokers and counterparties.

Impairment loss on goodwill. Impairment losses on goodwill and indefinite-lived intangibles are evaluated for impairment on an annual basis, or more frequently if impairment indicators arise, using a fair-value-based test that compares the fair value of the asset to its carrying value.

Other expenses. Other expenses consist primarily of office and equipment rent and expenses, communications and marketing information, travel, printing, insurance, legal and professional fees, dues and fees and other various expenses. The majority of these expenses are relatively fixed in nature and do not necessarily vary directly with changes in revenue.

Minority interest. On March 3, 2008, the Company executed an agreement with NASDAQ OMX Group, Inc. ("NASDAQ") in which NASDAQ contributed cash of approximately $5.0 million in exchange for preferred units in the Company's subsidiary, Agora-X. NASDAQ's initial interest associated with the preferred units was 13.3% ownership in Agora-X. During the second quarter of fiscal 2009, NASDAQ completed its $7.5 million equity investment, contributing an additional $2.5 million of cash consideration for a total ownership interest of 20%.

Income tax expense (benefit). Income tax expense consists of current and deferred tax expense relating to federal, state and local taxes. We file a consolidated federal income tax return and combined state and local income tax returns for all wholly-owned subsidiaries.

Loss from discontinued operations. The loss from discontinued operations is comprised of impairment losses from our previously majority-owned biodiesel development plant, operating losses from the discontinuance of its operations and costs incurred in disposition of the plant. We completed the disposition of the facility on October 8, 2008.

Non-GAAP Financial Measures

The body of U.S. generally accepted accounting principles is commonly referred to as "GAAP." A non-GAAP financial measure is generally defined by the SEC as one that purports to measure historical or future financial performance, financial position or cash flows, but excludes or includes amounts that would not be so adjusted under applicable GAAP guidance. In this report on Form 10-Q, we disclose revenues, net of cost of commodities sold, and earnings before interest, taxes, depreciation and amortization, impairment loss on goodwill and losses from discontinued operations, net of applicable taxes ("EBITDA"), both of which are non-GAAP financial measures. Revenues, net of cost of commodities sold, is not a substitute for the GAAP measure of total revenues. EBITDA is not a substitute for the GAAP measure of net income or operating cash flows.

Revenues, Net of Cost of Commodities Sold

Revenues, net of cost of commodities sold, consists of total revenues presented as determined in accordance with GAAP, less the cost of commodities sold. Revenues, net of cost of commodities sold, is a non-GAAP financial measure that is used in this report on Form 10-Q because our management considers it an important supplemental measure of our performance. Our management believes revenues, net of cost of commodities sold, is a more relevant measure of both our revenue growth and our economic interest in these commodities transactions because it removes the effect of commodity price driven changes in revenue and cost of commodities sold, which may not have a meaningful effect on net income. In managing our business, management has historically focused on revenues derived from sales of commodities, net of cost of commodities sold. This financial measure is meaningful in managing our business as profit is driven more by the margin on commodities sold rather than the price of the commodities and analyzing consolidated costs and expenses as a percentage of total revenue is not meaningful because total revenues related to commodity sales is a disproportionately large number compared to margin. Measuring expense as a percentage of revenues, net of cost of commodities sold, provides a clearer understanding of the trends in costs and expenses and expense management.

The following table reconciles revenues, net of cost of commodities sold, with our total revenues.

                                               Three Months Ended        Nine Months Ended
                                                     May 31,                  May 31,
                                               2009           2008       2009        2008
                                                             (in thousands)
 Revenues:
 Commissions and clearing fees               $  30,668      $ 47,714   $ 109,719   $ 132,709
 Service, consulting and brokerage fees          9,655        28,339      43,284      68,796
 Interest                                        3,519         5,296      21,797      37,535
 Other                                          (2,336 )       1,632       5,558       8,267
 Sales of commodities                           15,954           608      19,299       1,958

 Total revenues                                 57,460        83,589     199,657     249,265
 Less: Cost of commodities sold                 15,811           205      19,091       1,035

 Revenues, net of cost of commodities sold   $  41,649      $ 83,384   $ 180,566   $ 248,230

EBITDA

EBITDA consists of net income (loss) before interest expense, income tax (benefit) expense, depreciation and amortization, impairment loss on goodwill and loss on discontinued operations, net of applicable taxes. We have included EBITDA in this report on Form 10-Q because our management uses it as an important supplemental measure of our performance and believes that it is frequently used by securities analysts, investors and other interested persons in the evaluation of companies in our industry, some of which present EBITDA when reporting their results. We use EBITDA to evaluate our performance as compared to other companies in our industry that have different financing and capital structures and/or tax rates. Our management also believes that EBITDA is a useful tool for measuring our ability to meet our future debt service, capital expenditures and working capital requirements, and EBITDA is commonly used by us to measure our ability to service indebtedness. EBITDA is not a substitute for the GAAP measure of net income and is not necessarily a measure of our ability to fund our cash needs. In addition, it should be noted that companies calculate EBITDA differently and, therefore, EBITDA as presented for us may not be comparable to EBITDA reported by other companies. EBITDA has material limitations as a performance measure because it excludes interest expense, income tax (benefit) expense, depreciation and amortization, impairment loss on goodwill and losses on discontinued operations, net of tax.

The following table reconciles EBITDA with our net income (loss).

                                                      Three Months Ended         Nine Months Ended
                                                            May 31,                   May 31,
                                                      2009           2008       2009           2008
                                                                     (in thousands)
Net income (loss)                                   $  (8,076 )    $  8,007   $ (61,267 )    $ 33,208
Plus: interest expense                                    989         1,394       3,438         4,404
Plus: depreciation and amortization                       808           604       2,168         1,336
Plus (less): income tax (benefit) expense              (3,650 )       4,850     (42,133 )      23,500
Plus: impairment loss on goodwill                          -             -        1,888            -
Plus: loss on discontinued operations, net of tax          -            364         131         6,083

EBITDA                                              $  (9,929 )    $ 15,219   $ (95,775 )    $ 68,531

Results of Operations

Three Months Ended May 31, 2009 Compared to Three Months Ended May 31, 2008

Executive Summary

We recorded a net loss of $8.1 million in the three months ended May 31, 2009, compared to net income of $8.0 million recorded for the three months ended May 31, 2008, a decrease in profitability of $16.1 million. This decrease was primarily driven by the significant decline in exchange-traded and OTC customer trading activity across nearly all business lines and historically low short-term interest rates. Also, we recorded an additional $5.2 million in bad debt provision related to the disposition of a specific energy trading customer account deficit during the current quarter. See "Operations by Segment" and "Capital Resources and Liquidity" for additional discussion related to customer trading activity declines and the specific energy trading customer account deficit. We incurred a loss realized through our equity investment in FGDI of $2.8 million relating to the settlement by FGDI of a contractual dispute through litigation in June 2009. We did not have any direct involvement in the disputed commodity contracts, nor did we have any participation in settlement proceedings. We also incurred compensation expense totaling $1.9 million in the three months ended May 31, 2009 related to the employment termination of a former executive officer, including acceleration of the unvested long-term incentive plan award and remaining unvested stock options previously awarded.

Our underlying core commodity risk management consulting business is still performing despite low volatility throughout the commodity market environment and continued strain on our customers' availability of credit capacity to carry forward financial positions and inventories, which has had a significant impact on trading volumes. Additionally, exchange-traded volumes within the CES segment have been impacted by the disposition of the specific energy trading customer account and our risk-reducing initiatives implemented across the CES segment.

The following chart provides a comparison of revenues, costs and expenses, and net income (loss) for the periods:

                                          Three Months Ended                    Three Months Ended
                                             May 31, 2009                          May 31, 2008                       Variance
                                                          % of                                 % of
                                                        Revenue,                             Revenue,
                                                     Net of Cost of                       Net of Cost of
                                       In             Commodities              In          Commodities             In             %
                                    Thousands             Sold              Thousands          Sold            Thousands        Change
Sales of commodities               $    15,954                  N/M        $       608               N/M       $   15,346          N/M
Cost of commodities sold                15,811                  N/M                205               N/M           15,606          N/M

Gross profit on commodities
sold                                       143                  0.3 %              403               0.5 %           (260 )      (64.5 )%
Commissions and clearing fees           30,668                 73.6 %           47,714              57.2 %        (17,046 )      (35.7 )%
Service, consulting and
brokerage fees                           9,655                 23.2 %           28,339              34.0 %        (18,684 )      (65.9 )%
Interest                                 3,519                  8.5 %            5,296               6.4 %         (1,777 )      (33.6 )%
Other                                   (2,336 )               (5.6 )%           1,632               1.9 %         (3,968 )        N/M

Revenue, net of cost of commodities
sold (1)                                  41,649      100.0 %       83,384      100.0 %       (41,735 )     (50.1 )%

Costs and expenses
Employee compensation and broker
commissions                               12,662       30.4 %       18,098       21.7 %        (5,436 )     (30.0 )%
Pit brokerage and clearing fees           16,517       39.6 %       27,385       32.8 %       (10,868 )     (39.7 )%
Introducing broker commissions             4,612       11.1 %        8,818       10.6 %        (4,206 )     (47.7 )%
Employee benefits and payroll taxes        1,997        4.8 %        3,882        4.6 %        (1,885 )     (48.6 )%
Interest expense                             989        2.4 %        1,394        1.7 %          (405 )     (29.1 )%
Depreciation                                 808        1.9 %          604        0.7 %           204        33.8 %
Provision for bad debts                    5,260       12.6 %        1,721        2.1 %         3,539       205.6 %
Impairment loss on goodwill                   -          -              -          -               -           -
Other expenses                            10,806       26.0 %        8,311       10.0 %         2,495        30.0 %

Total costs and expenses (excluding
cost of commodities sold)                 53,651      128.8 %       70,213       84.2 %       (16,562 )     (23.6 )%

Income (loss) from continuing
operations before income tax
(benefit) expense and minority
interest                                 (12,002 )    (28.8 )%      13,171       15.8 %       (25,173 )    (191.1 )%
Minority interest                           (276 )     (0.6 )%         (50 )     (0.1 )%         (226 )    (100.0 )%

Income (loss) from continuing
operations before income tax
(benefit) expense                        (11,726 )    (28.2 )%      13,221       15.9 %       (24,947 )    (188.7 )%
Income tax (benefit) expense              (3,650 )     (8.8 )%       4,850        5.8 %        (8,500 )    (175.3 )%

Net income (loss) from continuing
operations                                (8,076 )    (19.4 )%       8,371       10.0 %       (16,447 )    (196.5 )%
Loss from discontinued operations,
net of tax                                    -          NA           (364 )     (0.4 )%          364      (100.0 )%

Net income (loss)                      $  (8,076 )    (19.4 )%    $  8,007        9.6 %     $ (16,083 )    (200.9 )%

(1) Revenues, net of cost of commodities sold, consist of total revenues presented with the sales of commodities net of cost of commodities sold. See "Selected and Other Data - Non-GAAP Financial Measures" for further discussion of revenues, net of cost of commodities sold.

N/M - Percentage is not meaningful.

Revenues and Cost of Commodities Sold

. . .