The following discussion should be read in conjunction with our unaudited condensed consolidated financial statements and the related notes that appear elsewhere in this Quarterly Report on Form 10-Q. This discussion contains forward-looking statements reflecting our current expectations that involve risks and uncertainties. Actual results and the timing of events may differ significantly from those projected in forward-looking statements due to a number of factors, including those set forth in Part I, Item 1A - "Risk Factors" of our Annual Report on Form 10-K for the fiscal year ended December 31, 2008, and in

This Quarterly Report on Form 10-Q in Item 2 - "Management's Discussion and Analysis of Financial Condition and Results of Operations" and in other sections includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 as amended ("the Exchange Act"), and Section 21E of the Exchange Act, as amended. In some cases, you can identify these statements by forward-looking words such as "may", "might", "will", "should", "expect", "plan", "anticipate", "believe", "predict", "potential", "intend" or "continue", the negative of these terms and other comparable terminology. These forward-looking statements, which are subject to risks, uncertainties and assumptions about us, may include expectations as to our future financial performance, which in some cases may be based on our growth strategies and anticipated trends in our business. These statements are based on our current expectations and projections about future events. There are important factors that could cause our actual results, level of activity, performance or achievements to differ materially from the results, level of activity, performance or achievements expressed or implied by the forward-looking statements. In particular, you should consider the numerous risks outlined in Part I, Item 1A - "Risk Factors" in our Annual Report on Form 10-K for the fiscal year ended December 31, 2008 and in Part II, Item 1A - "Risk Factors" of this Quarterly Report on Form 10-Q.

Although we believe the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, level of activity, performance or achievements. Moreover, neither we nor any other person assumes responsibility for the accuracy or completeness of any of these forward-looking statements. You should not rely upon forward-looking statements as predictions of future events. We are under no duty to update any of these forward-looking statements after the date of this filing to conform our prior forward-looking statements to actual results or revised expectations, except as required by Federal securities law.

Forward-looking statements include, but are not limited to, the following:

· Our statements in Part I, Item 2 - "Management's Discussion and Analysis of Financial Condition and Results of Operations" that -

o we expect to expand our trading in Canadian securities as our energy and mining analysts begin to make a greater impact on our U.S. and European accounts, and we will be hiring U.S. based energy bankers and analysts to capitalize on our capabilities in these sectors;

o we expect the electronic trading and commission sharing programs to increase our market share of the expanding volume of shares traded by institutional clients through alternative trading platforms;

o we currently plan to continue to selectively hire senior professionals, particularly in revenue generating areas, in the belief that it will lead to a higher level of revenue productivity;

o we may carry out repurchases of our common stock from time to time in the future and our Board of Directors may authorize additional repurchases in the future, in each case for the purpose of settling obligations to deliver common stock to employees who have received Restricted Stock Units under our Equity Incentive Plan; and

o we believe that our current level of equity capital, current cash balances, funds anticipated to be provided by operating activities and funds available to be drawn under temporary loan agreements, will be adequate to meet our liquidity and regulatory capital requirements for the next 12 months.

We are an investment bank focused principally on growth companies and growth investors. Our business is managed as a single operating segment, and we generate revenues by providing financial services that include investment banking, brokerage, equity research and asset management. We take a comprehensive approach in providing these services to growth companies.

We are exposed to volatility and trends in the general securities market and the economy. In the latter half of 2007, uncertainty and turmoil in the global financial markets began to impact our capital markets activity. In 2008 and through the first six months of 2009, we experienced a dramatic slowdown in the capital markets that led to a significant decline in the number of our investment banking transactions. As transactions declined, it was important for us to align out costs with expected revenues to maintain our capital.

During 2008, we took significant steps to reduce our cost structure and reshape our operations in an effort to preserve capital, retain key personnel and position the Company to take advantage of the dislocation in the marketplace when capital market activity returned. The most significant of these measures has been the reduction in our headcount. During 2009, we reduced our headcount by approximately 110 employees, which follows a net headcount reduction in 2008 of approximately 200 employees. As of July 31, 2009, we had approximately 455 employees, a 40% reduction from the beginning of 2008.

In addition to the headcount reductions, as a cost saving measure, we reduced base salaries for employees with titles of Vice President and above by 10%, including our Chief Executive Officer, President and our other executive officers, and we reduced the base compensation for non-employee directors from $75,000 to $50,000, effective January 1, 2009. Although we believe our professionals to be our most important asset, and their compensation and benefits have been our most significant expenditure, we undertook these reductions in an effort to align this expenditure to revenues.

In an effort to position ourselves to take advantage of the dislocation in the marketplace when the capital markets activity returns, we continue to recruit high quality talent who possess deep relationships. Since the beginning of 2008, we have hired 11 senior investment banking and 21 senior brokerage professionals, many of which came from bulge bracket firms. Over this challenging period we have maintained the same number of banking calling officers through which we expect to engage clients and generate revenues as conditions improve.

Our results of operations depend on a number of market factors, including market conditions and valuations for growth companies and growth investors, as well as general securities market conditions. Trends in the securities markets are also affected by general economic trends, including fluctuations in interest rates, flows of funds into and out of the markets and other conditions. In addition to these market factors, our revenues from period to period are substantially affected by the timing of investment banking transactions in which we are involved. Fees for many of the services we provide are earned only upon the completion of a transaction. Accordingly, our results of operations in any individual year or quarter may be affected significantly by whether and when significant transactions are completed.

Notwithstanding this exposure to volatility and trends, in order to provide value to our clients, we have made a long-term commitment to maintaining a substantial, full-service integrated business platform. As a result of this commitment, if business conditions result in decreases to our revenues, we may not experience corresponding decreases in the expense of operating our business.

The following table provides a summary of our results of operations (dollar amounts in thousands):

                                 Three Months Ended June 30,                           Six Months Ended June 30,
                                  2009                 2008           % Change           2009               2008         % Change
Net revenues                 $       48,286       $       60,014          (19.5 )%   $      91,385       $  108,938          (16.1 )%
Loss before taxes                   (10,916 )            (16,886 )        (35.4 )          (33,929 )        (43,338 )        (21.7 )
Net loss                            (10,210 )            (10,127 )          0.8            (34,063 )        (27,932 )         22.0

Net loss per share:
Basic net loss per share     $        (0.31 )     $        (0.31 )                   $       (1.05 )     $    (0.85 )
Diluted net loss per share   $        (0.31 )     $        (0.31 )                   $       (1.05 )     $    (0.85 )

Revenues

The following table sets forth our revenues, both in dollar amounts and as a
percentage of net revenues (dollar amounts in thousands):
                           Three Months Ended                              Six Months Ended
                                June 30,                                       June 30,
                           2009          2008          % Change          2009           2008         % Change
Revenues:
Investment banking      $   14,268     $  22,939           (37.8 )%    $  25,294      $  34,435          (26.5 )%
Brokerage                   27,743        34,860           (20.4 )        57,199         70,994          (19.4 )
Asset management             6,445         1,865              nm (1)       9,170          2,214             nm
Interest income                170         1,848           (90.8 )           545          4,873          (88.8 )

Total revenues              48,626        61,512           (20.9 )        92,208        112,516          (18.0 )
Interest expense              (340 )      (1,498 )         (77.3 )          (823 )       (3,578 )        (77.0 )

Net revenues            $   48,286     $  60,014           (19.5 )%    $  91,385      $ 108,938          (16.1 )%

Percentage of net
revenues:
Investment banking            29.5 %        38.2 %                          27.7 %         31.6 %
Brokerage                     57.5          58.1                            62.6           65.2
Asset management              13.3           3.1                            10.0            2.0
Interest income                0.4           3.1                             0.6            4.5

Total revenues               100.7         102.5                           100.9          103.3
Interest expense              (0.7 )        (2.5 )                          (0.9 )         (3.3 )

Net revenues                 100.0 %       100.0 %                         100.0 %        100.0 %

(1) Not meaningful.

Investment Banking Revenue

Our investment banking revenue includes (i) management fees, underwriting fees, selling concessions and agency placement fees earned through our participation in public offerings and private placements of equity and debt securities, including convertible debt, (ii) fees earned as a strategic advisor in mergers and acquisitions and similar transactions and (iii) the value of warrants received as partial payment for investment banking services. Investment banking revenues are typically recognized at the completion of each transaction. Underwriting revenues are presented net of related expenses. Unreimbursed expenses associated with private placement and advisory transactions are recorded as non-compensation expenses.

The following table sets forth our investment banking revenues and the number of investment banking transactions (dollar amounts in thousands):

                           Three Months Ended                           Six Months Ended
                                June 30,                                    June 30,
                           2009          2008         % Change         2009          2008         % Change
Investment banking
revenue:
Capital raising         $    8,132     $  13,854          (41.3 )%   $  16,733     $  21,242          (21.2 )%
Strategic advisory           6,136         9,085          (32.5 )        8,561        13,193          (35.1 )

Total investment
banking revenue         $   14,268     $  22,939          (37.8 )%   $  25,294     $  34,435          (26.5 )%

Investment banking
transactions:
Capital raising                 21            26                            32            45
Strategic advisory               7             6                            11            10

Total investment
banking transactions            28            32                            43            55

Average revenue per
transaction             $      510     $     717                     $     588     $     626

Three Months Ended June 30, 2009 versus 2008 - Investment banking revenue decreased $8.7 million in the three months ended June 30, 2009 from 2008. Our average revenue per transaction decreased to $0.5 million during the three months ended June 30, 2009 from $0.7 million in 2008. During the three months ended June 30, 2009 and 2008 we closed 28 and 32 investment banking transactions, respectively. The change in our number of transactions is primarily due to the decline in capital raising activity. During the three months ended June 30, 2009 and 2008, 42.3% and 30.6%, respectively, of our investment banking revenue was earned from the five largest transactions during the respective periods.

Capital raising revenue accounted for 57% and 60% of our investment banking revenue in the three months ended June 30, 2009 and 2008, respectively. Capital raising revenue decreased $5.7 million to $8.1 million in the three months ended June 30, 2009 from 2008. Our average revenue per capital raising transaction decreased to $0.3 million during the three months ended June 30, 2009 from $0.5 million in 2008. Our results highlight the benefit of our diversified sector strategy as in the first quarter of 2009, the majority of our capital raising revenue was a result of transactions in our mining sector while in the second quarter of 2009, the majority of our capital raising revenue was a result of transactions in our technology sector.

Strategic advisory revenue accounted for 43% and 40% of our investment banking revenue in the three months ended June 30, 2009 and 2008, respectively. Strategic advisory revenue decreased $2.9 million to $6.1 million in the three months ended June 30, 2009 from 2008. Our average revenue per strategic advisory transaction decreased to $0.9 million during the three months ended June 30, 2009 from $1.5 million in 2008.

Six Months Ended June 30, 2009 versus 2008 - Investment banking revenue decreased $9.1 million in the six months ended June 30, 2009 from 2008. Our average revenue per transaction was $0.6 million during both the six months ended June 30, 2009 and 2008. During the six months ended June 30, 2009 and 2008 we closed 43 and 55 investment banking transactions, respectively. The change in our number of transactions is primarily due to the decline in capital raising activity. During the six months ended June 30, 2009 and 2008, 41.8% and 23.2%, respectively, of our investment banking revenue was earned from the five largest transactions during the respective periods. During the six months ended June 30, 2009 our investment banking revenue included $5.4 million of revenue generated from a single capital raising transaction.

Capital raising revenue accounted for 66% and 62% of our investment banking revenue in the six months ended June 30, 2009 and 2008, respectively. Capital raising revenue decreased $4.5 million to $16.7 million in the six months ended June 30, 2009 from 2008. Our average revenue per capital raising transaction was $0.5 million during both the six months ended June 30, 2009 and 2008. Our results highlight the benefits of our diversified sector strategy as in the first quarter of 2009 the majority of our capital raising revenue was a result of transactions in our mining sector while in the second quarter of 2009 majority of our capital raising revenue was a result of transactions in our technology sector.

Strategic advisory revenue accounted for 34% and 38% of our investment banking revenue in the six months ended June 30, 2009 and 2008, respectively. Strategic advisory revenue decreased $4.6 million to $8.6 million in the six months ended June 30, 2009 from 2008. Our average revenue per strategic advisory transaction decreased to $0.8 million during the six months ended June 30, 2009 from $1.3 million in 2008.

Brokerage Revenue

Our brokerage revenue includes (i) commissions paid by customers for brokerage transactions in equity securities, (ii) spreads paid by customers on convertible debt securities, (iii) trading gains (losses) which result from market making activities from our commitment of capital to facilitate customer transactions and from proprietary trading activities relating to our convertible debt and special situations trading groups, (iv) advisory fees paid to us by high-net-worth individuals and institutional clients of our private client services group, which are generally based on the value of the assets we manage and (v) fees paid to us for equity research.

The concentration in brokerage revenue among our ten largest brokerage clients was 28% and 52% for the three months ended June 30, 2009 and 2008, respectively, which represents approximately $7.7 million and $18.1 million of brokerage revenue, respectively. The concentration in brokerage revenue among our ten largest brokerage clients was 28% and 35% for the six months ended June 30, 2009 and 2008, respectively, which represents approximately $16.0 million and $24.8 million of brokerage revenue, respectively.

Three and Six Months Ended June 30, 2009 versus 2008 - Brokerage revenue decreased by $7.1 million and $13.8 million in the three and six months ended June 30, 2009 from 2008, respectively. The decrease in brokerage revenues was primarily attributable to lower revenue from our institutional business in the United States due to a reduction in our average daily volume of shares traded for our customers.

The combined average daily volume on the New York Stock Exchange and the Nasdaq was approximately 3.8 billion shares during both the three and six months ended June 30, 2009, an increase of 14.6% and 2.7% from the three and six months ended June 30, 2008, respectively. Our combined average daily customer trading volume decreased 14.8% and 6.5%, respectively, for the three and six months ended June 30, 2009 from 2008.

We have taken steps over the past year, including broadening our geographic coverage and developing our product offerings within electronic trading, to attract and retain trading volume from customers who are shifting away from utilizing full-service brokerage services and increasing their use of alternative trading systems.

Asset Management Revenue

Our asset management revenue includes (i) fees from investment partnerships we manage, (ii) realized and unrealized gains (losses) on investments in private equity partnerships which are primarily allocations of the appreciation and depreciation in fair value of the underlying partnership investments, (iii) fees we earn from the management of equity distributions received by our clients,
(iv) other asset management-related realized and unrealized gains (losses) on investments not associated with private equity partnerships and (v) realized and unrealized gains (losses) on warrants received as partial payment for investment banking services. Our investments in partnerships include the following private investment funds: Thomas Weisel Capital Partners ("TWCP"), Thomas Weisel Global Growth Partners ("TWGGP") Thomas Weisel Healthcare Venture Partners ("TWHVP") and Thomas Weisel Venture Partners ("TWVP").

The following table sets forth our asset management revenues (dollar amounts in thousands):

                           Three Months Ended                            Six Months Ended
                                June 30,                                     June 30,
                           2009           2008         % Change         2009          2008         % Change
Asset management
revenue:
Management fees         $    3,333      $   3,469           (3.9 )%   $   6,923     $   7,129           (2.9 )%
Investments in
partnerships realized
and unrealized gains
(losses)-net                   151            331          (54.3 )       (1,698 )      (1,758 )         (3.4 )
Other securities
realized and
unrealized gains
(losses)-net                 2,961         (1,935 )           nm          3,945        (3,157 )           nm

Total asset
management revenue      $    6,445      $   1,865             nm      $   9,170     $   2,214             nm

Three Months Ended June 30, 2009 versus 2008 - Investments in partnerships realized and unrealized gains (losses) were as follows (dollar amounts in thousands):

                                                   Three Months Ended
                                                        June 30,
                                                   2009           2008        % Change
 Investments in partnerships realized and
 unrealized gains (losses):
 TWCP                                            $    (387 )    $   (396 )         (2.2 )
 TWGGP                                                (211 )         (76 )           nm
 TWHVP                                                (961 )       1,487             nm
 TWVP                                                 (251 )      (1,002 )        (74.9 %)
 Other                                               1,961           318             nm

 Total investments in partnerships realized
 and unrealized gains (losses)                   $     151      $    331          (54.3 )%

Net realized and unrealized investment gains during the three months ended June 30, 2009 were due to our interest in a partnership which has invested in a privately held company that experienced significant growth in its operating results since our interest was acquired at the beginning of 2008. This gain was offset by realized and unrealized losses attributable to our partnership interests in private portfolio companies caused by both downward valuations of those companies seeking capital in the current environment and declining operating results.

We recorded net investment gains in other securities of $3.0 million in the three months ended June 30, 2009 compared to net investment losses of $1.9 million in 2008 primarily due to an increase in unrealized and realized gains on warrants during the three months ended June 30, 2009.

Six Months Ended June 30, 2009 versus 2008 - Investments in partnerships realized and unrealized gains (losses) were as follows (dollar amounts in thousands):

                                                        Six Months Ended June 30,
                                                         2009                2008           % Change
Investments in partnerships realized and
unrealized gains (losses):
TWCP                                                 $     (1,292 )      $       (460 )            nm
TWGGP                                                        (573 )               (89 )            nm
TWHVP                                                      (1,584 )            (1,141 )          38.8 %
TWVP                                                       (1,604 )              (279 )            nm
Other                                                       3,355                 211              nm

Total investments in partnerships realized and
unrealized gains (losses)                            $     (1,698 )      $     (1,758 )          (3.4 )%

Net realized and unrealized investment gains during the six months ended June 30, 2009 were due to our interest in a partnership which has invested in a privately held company that experienced significant growth in its operating results since our interest was acquired at the beginning of 2008. This gain was offset by realized and unrealized losses attributable to our partnership interests in private portfolio companies caused by both downward valuations of those companies seeking capital in the current environment and declining operating results.

We recorded net investment gains in other securities of $3.9 million in the six months ended June 30, 2009 compared to net investment losses of $3.2 million in 2008 primarily due to an increase in unrealized and realized gains on warrants during the six months ended June 30, 2009.

Net Revenues by Geographic Segment

The following table sets forth our net revenues by geographic segment (in
thousands):

                          Three Months Ended June 30,          Six Months Ended June 30,
                           2009                 2008             2009              2008
  United States       $       36,376       $       51,129      $     65,939       $  92,664
  Other countries             11,910                8,885            25,446          16,274

  Total net revenue   $       48,286       $       60,014      $     91,385       $ 108,938

No single customer accounted for more than 10% of net revenues during the three and six months ended June 30, 2009. During the three months ended June 30, 2008, brokerage revenue received from a single customer accounted for 10.6% of net revenues. No single customer accounted for 10% or more of net revenues during the six months ended June 30, 2008.

Net revenues from countries other than the United States consist primarily of net revenues from Canada. Net revenues from Canada during the three and six months ended June 30, 2009 accounted for 79% and 80%, respectively, of net revenues from other countries and during the three and six months ended June 30, 2008 accounted for 100% and 83%, respectively, of net revenues from other countries.

Expenses Excluding Interest

The following table sets forth information relating to our expenses excluding
interest, both in dollar amounts and as a percentage of net revenues (dollar
amounts in thousands):

                           Three Months Ended                           Six Months Ended
                                June 30,                                    June 30,
                           2009          2008         % Change         2009          2008         % Change
Expenses excluding
interest:
Compensation and
benefits expense        $   30,061     $  41,788          (28.1 )%   $  60,739     $  82,177          (26.1 )%
Non-compensation
expense                     29,141        35,112          (17.0 )       64,575        70,099           (7.9 )

Total expenses
excluding interest      $   59,202     $  76,900          (23.0 )%   $ 125,314     $ 152,276          (17.7 )%

Percentage of net
revenues:
. . .