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 nine 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 our 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 100 employees, which follows a net headcount reduction in 2008 of approximately 200 employees. As of September 30, 2009, we had approximately 460 employees, a 40% reduction from the beginning of 2008.

In addition to the headcount reductions, as an additional 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 other executive officers effective January 1, 2009, and for the 2009-2010 director term, we reduced the base compensation for non-employee directors from $75,000 to $50,000. 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.

While we continue to rationalize our non-compensation expenses based on opportunities we are seeing in the marketplace, our focus has shifted to capitalizing on the growth prospects of our business and to increasing market share. With the economic recovery taking hold, and as companies with strong fundamentals continue to post top-line growth, we are starting to see strength in our investment banking business. We believe the near term investment banking opportunity in the technology and resource sectors to be significant and that our banking platform, with a focus on these growth sectors, will benefit.

Over this challenging period, as we have reduced headcount to align costs, we have been strategic in maintaining the same number of senior banking professionals, and therefore the capacity of our banking platform. If conditions continue to improve in the equity capital markets we should benefit from maintaining our coverage of the technology, mining, energy, healthcare and consumer growth sectors and our level of senior banking professionals.

While we believe that we maintain a solid capital position, we intend to file a universal shelf registration statement with the Securities and Exchange Commission ("SEC") to register up to $100 million in securities. The shelf filing provides us with the flexibility to raise capital or to take advantage of future growth opportunities. We do not have any immediate plans to raise capital.

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                           Nine Months Ended
                                  September 30,                                September 30,
                               2009           2008         % Change         2009           2008         % Change

Net revenues                 $  43,554     $   49,046          (11.2 )%   $ 134,939     $  157,984          (14.6 )%
Loss before taxes            $ (14,055 )   $ (119,479 )        (88.2 )%   $ (47,984 )   $ (162,817 )        (70.5 )%
Net loss                     $ (14,391 )   $ (109,179 )        (86.8 )%   $ (48,454 )   $ (137,111 )        (64.7 )%

Net loss per share:
Basic net loss per share     $   (0.44 )   $    (3.41 )                   $   (1.49 )   $    (4.22 )
Diluted net loss per share   $   (0.44 )   $    (3.41 )                   $   (1.49 )   $    (4.22 )

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                             Nine Months Ended
                             September 30,                                  September 30,
                           2009          2008          % Change          2009           2008         % Change
Revenues:
Investment banking      $   15,568     $  17,531           (11.2 )%    $  40,862      $  51,966          (21.4 )%
Brokerage                   24,256        33,652           (27.9 )        81,455        104,646          (22.2 )
Asset management             3,932        (2,329 )            nm (1)      13,102           (115 )           nm
Interest income                198         1,828           (89.2 )           743          6,701          (88.9 )

Total revenues              43,954        50,682           (13.3 )       136,162        163,198          (16.6 )
Interest expense              (400 )      (1,636 )         (75.6 )        (1,223 )       (5,214 )        (76.5 )

Net revenues            $   43,554     $  49,046           (11.2 )%    $ 134,939      $ 157,984          (14.6 )%

Percentage of net
revenues:
Investment banking            35.7 %        35.7 %                          30.3 %         32.9 %
Brokerage                     55.7          68.6                            60.4           66.2
Asset management               9.0          (4.7 )                           9.7           (0.1 )
Interest income                0.5           3.7                             0.5            4.3

Total revenues               100.9         103.3                           100.9          103.3
Interest expense              (0.9 )        (3.3 )                          (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                           Nine Months Ended
                             September 30,                                September 30,
                           2009          2008         % Change          2009          2008         % Change

Investment banking
revenue:
Capital raising         $   10,429     $   3,962          163.2 %    $   27,162     $  25,204            7.8 %
Strategic advisory           5,139        13,569          (62.1 )        13,700        26,762          (48.8 )

Total investment
banking revenue         $   15,568     $  17,531          (11.2 )%   $   40,862     $  51,966          (21.4 )%

Investment banking
transactions:
Capital raising                 17             8                             50            53
Strategic advisory               6             5                             16            15

Total investment
banking transactions            23            13                             66            68

Average revenue per
transaction             $      677     $   1,349                     $      619     $     764

Three Months Ended September 30, 2009 versus 2008 - Investment banking revenue decreased $2.0 million in the three months ended September 30, 2009 from 2008. Our average revenue per transaction decreased to $0.7 million during the three months ended September 30, 2009 from $1.3 million in 2008. During the three months ended September 30, 2009 and 2008 we closed 23 and 13 investment banking transactions, respectively. The increase in the number of transactions is primarily due to the increase in capital raising activity, particularly in Canada, as the Mining sector had significant activity. During the three months ended September 30, 2009 and 2008, 42.6% and 71.5%, respectively, of our investment banking revenue was earned from the five largest transactions during the respective periods.

Capital raising revenue accounted for 67% and 23% of our investment banking revenue in the three months ended September 30, 2009 and 2008, respectively. Capital raising revenue increased $6.5 million to $10.4 million in the three months ended September 30, 2009 from 2008. Our average revenue per capital raising transaction increased to $0.6 million during the three months ended September 30, 2009 from $0.5 million in 2008. Our results highlight the benefit of our diversified sector strategy. In particular, our expansion into the resource sectors diversified our platform and continues to be an important component of our revenues. The composition of investment banking revenues in the third quarter of 2009 by sector was led by Mining representing 44%, a sector that has performed well during the first nine months of 2009, followed by Healthcare representing 18%, and the remainder was from Energy, Technology and Consumer.

Strategic advisory revenue accounted for 33% and 77% of our investment banking revenue in the three months ended September 30, 2009 and 2008, respectively. Strategic advisory revenue decreased $8.4 million to $5.1 million in the three months ended September 30, 2009 from 2008. Our average revenue per strategic advisory transaction decreased to $0.9 million during the three months ended September 30, 2009 from $2.7 million in 2008. The decrease in our average revenue per transaction is due to three large transactions during the three months ended September 30, 2008, representing approximately $10.7 million of our strategic advisory revenues.

Nine Months Ended September 30, 2009 versus 2008 - Investment banking revenue decreased $11.1 million in the nine months ended September 30, 2009 from 2008. Our average revenue per transaction was $0.6 million and $0.8 million in the nine months ended September 30, 2009 and 2008, respectively. During the nine months ended September 30, 2009 and 2008 we closed 66 and 68 investment banking transactions, respectively. During the nine months ended September 30, 2009 and 2008, 27.9% and 27.8%, respectively, of our investment banking revenue was earned from the five largest transactions during the respective periods. During the nine months ended September 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 49% of our investment banking revenue in the nine months ended September 30, 2009 and 2008, respectively. Capital raising revenue increased $2.0 million to $27.2 million in the nine months ended September 30, 2009 from 2008. Our average revenue per capital raising transaction was $0.5 million in both the nine months ended September 30, 2009 and 2008. Our results highlight the benefits of our diversified sector strategy, and expansion into the resource sectors continues to be an important component of our revenues. While 2009 has only recently shown renewed strength in capital markets activity in the United States, the first nine months of 2009 benefited from the Energy and Mining sectors, primarily in Canada, which together represented 58% of investment banking revenues in the period.

Strategic advisory revenue accounted for 34% and 51% of our investment banking revenue in the nine months ended September 30, 2009 and 2008, respectively. Strategic advisory revenue decreased $13.1 million to $13.7 million in the nine months ended September 30, 2009 from 2008. Our average revenue per strategic advisory transaction decreased to $0.9 million during the nine months ended September 30, 2009 from $1.8 million in 2008. The decrease in our average revenue per transaction is due to three large transactions during the nine months ended September 30, 2008, representing approximately $10.7 million of our strategic advisory revenues.

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 25% and 39% for the three months ended September 30, 2009 and 2008, respectively, which represents approximately $6.1 million and $13.2 million, respectively, of brokerage revenue. The concentration in brokerage revenue among our ten largest brokerage clients was 26% and 25% for the nine months ended September 30, 2009 and 2008, respectively, which represents approximately $21.5 million and $26.0 million, respectively, of brokerage revenue.

Three and Nine Months Ended September 30, 2009 versus 2008 - Brokerage revenue decreased by $9.4 million and $23.2 million in the three and nine months ended September 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 lower institutional commissions coupled with lower revenues in electronic and block trading.

The combined average daily volume on the New York Stock Exchange and the Nasdaq was approximately 3.5 billion and 3.8 billion shares during the three and nine months ended September 30, 2009, respectively, a decrease of 5.6% and an increase of 2.2% from the three and nine months ended September 30, 2008, respectively. Our combined average daily customer trading volume decreased 13.3% and 6.7% for the three and nine months ended September 30, 2009 from 2008, respectively.

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                           Nine Months Ended
                              September 30,                               September 30,
                           2009           2008         % Change         2009          2008         % Change
Asset management
revenue:
Management fees         $    3,778      $   3,754            0.6 %   $   10,701     $  10,883           (1.7 )%
Investments in
partnerships realized
and unrealized gains
(losses)-net                   (65 )       (2,375 )        (97.3 )       (1,762 )      (4,133 )        (57.4 )
Other securities
realized and
unrealized gains
(losses)-net                   219         (3,708 )           nm          4,163        (6,865 )           nm

Total asset
management revenue      $    3,932      $  (2,329 )           nm     $   13,102     $    (115 )           nm

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

                                                         Three Months Ended
                                                           September 30,
                                                        2009            2008          % Change
Investments in partnerships realized and
unrealized gains (losses)-net:
TWCP                                                 $     (422 )     $    (245 )          72.3 %
TWGGP                                                        56             272           (79.5 )
TWHVP                                                      (447 )        (1,079 )         (58.6 )
TWVP                                                        (54 )          (785 )         (93.1 )
Other                                                       802            (538 )            nm

Total investments in partnerships realized and
unrealized gains (losses)-net                        $      (65 )     $  (2,375 )         (97.3 )%

The net realized and unrealized investment loss during the three months ended September 30, 2009 was attributable to our partnership interests in private portfolio companies caused primarily by downward valuations of those companies seeking capital in the current environment and stock price decreases associated with our interests in public companies held in these partnerships. The loss is partially offset by a net unrealized gain attributable 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.

We recorded net investment gains in other securities of $0.2 million in the three months ended September 30, 2009 compared to net investment losses of $3.7 million in 2008 primarily due to an increase in unrealized and realized gains on warrants and equity securities during the three months ended September 30, 2009, offset by unrealized losses on auction rate securities.

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

                                                        Nine Months Ended
                                                          September 30,
                                                       2009           2008          % Change
Investments in partnerships realized and
unrealized gains (losses)-net:
TWCP                                                 $  (1,714 )    $    (736 )         132.8 %
TWGGP                                                     (518 )          183              nm
TWHVP                                                   (2,029 )       (2,220 )          (8.6 )
TWVP                                                    (1,658 )       (1,062 )          56.1
Other                                                    4,157           (298 )            nm

Total investments in partnerships realized and
unrealized gains (losses)-net                        $  (1,762 )    $  (4,133 )         (57.4 )%

The net realized and unrealized investment loss during the nine months ended September 30, 2009 was 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. Stock price decreases associated with our interests in public companies held in these partnerships also contributed to the loss. This loss was partially offset by an unrealized gain attributable 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.

. . .