**UNITED
        STATES**
 **SECURITIES
        AND EXCHANGE COMMISSION**
 **WASHINGTON,
        D.C. 20549**
 
 **FORM
        10-Q**
  (Mark
                  One)**x**
              **QUARTERLY
                  REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES****EXCHANGE
                  ACT OF 1934****For
                  the quarterly period ended September 30, 2008****o**
              **TRANSITION
                  REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
                  OF 1934****For
                  the transition period from _____________ to
                  _____________**
  **Commission
        File Number 000-51682**
  **Highbury
        Financial Inc.**
 (Exact
        name of registrant as specified in its charter)
  **Delaware**
              
              **20-3187008**(State
                  or other jurisdiction of
                incorporation
                  or organization)
              
              (I.R.S.
                  Employer
                Identification
                  No.)**999
                  Eighteenth Street, Ste. 3000**
                **Denver,
                  Colorado**
              
              **80202**(Address
                  of principal executive offices)
              
              (Zip
                  Code)
  **(303)
        357-4802**
 (Registrant's
        telephone number, including area code)
  Indicate
        by check mark whether the registrant: (1) has filed all reports required
        to be
        filed by Section 13 or 15(d) of the Exchange Act during the preceding 12
        months
        (or for such shorter period that the registrant was required to file such
        reports), and (2) has been subject to such filing requirements for the past
        90
        days. Yes x No o
 
 Indicate
        by check mark whether the registrant is a large accelerated filer, an
        accelerated filer, a non-accelerated filer or a smaller reporting company.
        See
        definitions of “large accelerated filer”, “accelerated filer”, and ”smaller
        reporting company” in Rule 12b-2 of the Exchange Act.
  Large
                  Accelerated Filer ̈
              
              Accelerated
                  Filer ̈Non-Accelerated
                  Filerx
                (Do
                  not check if a smaller reporting company)
              
              Smaller
                  Reporting Company ̈
 
 Indicate
        by check mark whether the registrant is a shell company (as defined in Rule
        12b-2 of the Exchange Act).   Yes o No x
  As
        of
        October 31, 2008, 9,126,628 shares of common stock, par value $0.0001 per
        share,
        were issued and outstanding.
  
  **Page****PART
                  I. FINANCIAL INFORMATION**Item
                  1 - Financial Statements
              
              3**Highbury
                  Financial Inc.**Condensed
                  Consolidated Balance Sheets
              
              3Condensed
                  Consolidated Statements of Income
              
              4Condensed
                  Consolidated Statements of Stockholders’ Equity
              
              5Condensed
                  Consolidated Statements of Cash Flows
              
              6Notes
                  to Unaudited Condensed Consolidated Financial Statements
              
              7Item
                  2 – Management’s Discussion and Analysis of Financial Condition and
                  Results of Operations
              
              13Item
                  3 - Quantitative and Qualitative Disclosures About Market
                  Risk
              
              31Item
                  4 - Controls and Procedures
              
              31**PART
                  II. OTHER INFORMATION**Item
                  1 - Legal Proceedings
              
              31Item
                  1A - Risk Factors
              
              32Item
                  6 - Exhibits
              
              32Signatures
              
              33
  2
  **ITEM
        1 - FINANCIAL STATEMENTS**
  **Highbury
        Financial Inc. and Subsidiary**
 
 **Condensed
        Consolidated Balance Sheets**
 **September 30,**
                
                **December 31,****2008**
                
                **2007***(unaudited)*
                
                *(audited)*ASSETS**Current
                    assets**Cash
                    and cash equivalents
                
                $
                9,251,097
                
                $
                7,276,545Investments
                
                
                1,543,215
                
                
                4,635,507Accounts
                    receivable
                
                
                3,283,596
                
                
                3,502,142Prepaid
                    expenses
                
                
                183,247
                
                
                270,086Prepaid
                    taxes
                
                
                81,027
                
                
                -**Total
                    current assets**
                
                
                14,342,182
                
                
                15,684,280**Other
                    Assets**Fixed
                    assets, net
                
                
                852,962
                
                
                991,260Identifiable
                    intangibles
                
                
                25,270,000
                
                
                25,270,000Goodwill
                
                
                7,046,412
                
                
                7,046,412Deferred
                    tax assets
                
                
                418,669
                
                
                952,209Other
                    long-term assets
                
                
                669,485
                
                
                169,464**Total
                    other assets**
                
                
                34,257,528
                
                
                34,429,345**Total
                    assets**
                
                $
                48,599,710
                
                $
                50,113,625LIABILITIES
                    AND STOCKHOLDERS’ EQUITY**Current
                    liabilities**Accounts
                    payable and accrued expenses
                
                $
                4,524,005
                
                $
                4,549,216Income
                    taxes payable
                
                
                30,839
                
                
                97,758**Total
                    current liabilities**
                
                
                4,554,844
                
                
                4,646,974Deferred
                    rent
                
                
                815,725
                
                
                844,980**Total
                    liabilities**
                
                
                5,370,569
                
                
                5,491,954Minority
                    interest
                
                
                840,000
                
                
                840,000Commitments
                    and contingencies**Stockholders’
                    equity:**Preferred
                    stock, $0.0001 par value, authorized1,000,000
                    shares; none issued
                
                
                -
                
                
                -Common
                    stock, $0.0001 par value, authorized50,000,000
                    shares; 9,126,628 and 9,527,000shares
                    issued and outstanding as of September 30, 2008and
                    December 31, 2007, respectively
                
                
                913
                
                
                953Additional
                    paid-in capital
                
                
                51,834,830
                
                
                55,393,484Accumulated
                    deficit
                
                
                (9,446,602
                )
                
                (11,612,766
                )**Total
                    stockholders’ equity**
                
                
                42,389,141
                
                
                43,781,671**Total
                    liabilities and stockholders’ equity**
                
                $
                48,599,710
                
                $
                50,113,625
  *See
        accompanying Notes to Unaudited Condensed Consolidated Financial
        Statements.*
  3
  **Highbury
        Financial Inc. and Subsidiary**
 
 **Condensed
        Consolidated Statements of Income**
 *(unaudited)*
  **Three Months Ended**
              
              **Nine Months Ended****September 30,**
              
              **September 30,****2008**
              
              **2007**
              
              **2008**
              
              **2007****Revenue**
              
              $
              9,595,927
              
              $
              10,157,568
              
              $
              28,555,443
              
              $
              31,829,001**Operating
                  expenses**Distribution
                  and sub-advisory costs
              
              
              (4,395,372
              )
              
              (4,735,347
              )
              
              (13,182,141
              )
              
              (14,992,086
              )Compensation
                  and related expenses
              
              
              (1,699,827
              )
              
              (1,777,417
              )
              
              (4,846,431
              )
              
              (5,091,841
              )Depreciation
                  and amortization
              
              
              (45,998
              )
              
              (46,345
              )
              
              (141,054
              )
              
              (126,568
              )Other
                  operating expenses
              
              
              (1,183,440
              )
              
              (1,320,117
              )
              
              (3,845,466
              )
              
              (3,891,330
              )**Total
                  operating expenses**
              
              
              (7,324,637
              )
              
              (7,879,226
              )
              
              (22,015,092
              )
              
              (24,101,825
              )**Operating
                  income**
              
              
              2,271,290
              
              
              2,278,342
              
              
              6,540,351
              
              
              7,727,176**Other
                  income**Interest
                  income
              
              
              19,643
              
              
              135,146
              
              
              90,934
              
              
              341,920Investment
                  income (loss)
              
              
              (346,085
              )
              
              (473
              )
              
              (497,946
              )
              
              50,221**Total
                  other income (loss)**
              
              
              (326,442
              )
              
              134,673
              
              
              (407,012
              )
              
              392,141**Income
                  before minority interest**
              
              
              1,944,848
              
              
              2,413,015
              
              
              6,133,339
              
              
              8,119,317Minority
                  interest in net income of subsidiary
              
              
              (891,104
              )
              
              (947,709
              )
              
              (2,649,042
              )
              
              (3,535,525
              )**Income
                  before provision for income taxes**
              
              
              1,053,744
              
              
              1,465,306
              
              
              3,484,297
              
              
              4,583,792Provision
                  for income taxes
              
              
              (412,740
              )
              
              (572,607
              )
              
              (1,318,133
              )
              
              (1,788,817
              )**Net
                  income**
              
              $
              641,004
              
              $
              892,699
              
              $
              2,166,164
              
              $
              2,794,975**Weighted
                  average shares outstanding, basic**
              
              
              9,126,628
              
              
              9,527,000
              
              
              9,170,068
              
              
              9,527,000**Net
                  income per share, basic**
              
              $
              0.07
              
              $
              0.09
              
              $
              0.24
              
              $
              0.29**Weighted
                  average shares outstanding, diluted**
              
              
              9,126,628
              
              
              9,683,634
              
              
              9,170,068
              
              
              11,420,944**Net
                  income per share, diluted**
              
              $
              0.07
              
              $
              0.09
              
              $
              0.24
              
              $
              0.24
 
 *See
        accompanying Notes to Unaudited Condensed Consolidated Financial
        Statements.*
  4
 
 **Highbury
        Financial Inc. and Subsidiary**
 
 **Condensed
        Consolidated Statements of Stockholders’ Equity**
 *(unaudited)*
 
 **Common Stock**
              
              **Additional**
                **Paid-In**
              
              **Retained**
                **Earnings**
                **(Accumulated****Shares**
              
              **Amount**
              
              **Capital**
              
              **Deficit)**
              
              **Total**Balance
                  at December 31, 2007
              
              
              9,527,000
              
              $
              953
              
              $
              55,393,484
              
              $
              (11,612,766
              )
              $
              43,781,671Redemption
                  of common stock
              
              
              (400,372
              )
              
              (40
              )
              
              (1,735,571
              )
              
              -
              
              
              (1,735,611
              )Repurchase
                  of warrants
              
              
              -
              
              
              -
              
              
              (1,823,083
              )
              
              -
              
              
              (1,823,083
              )Net
                  income for the period
              
              
              -
              
              
              -
              
              
              -
              
              
              2,166,164
              
              
              2,166,164Balance
                  at September 30, 2008
              
              
              9,126,628
              
              $
              913
              
              $
              51,834,830
              
              $
              (9,446,602
              )
              $
              42,389,141
  *See
        accompanying Notes to Unaudited Condensed Consolidated Financial
        Statements.*
  5
  **Highbury
        Financial Inc. and Subsidiary**
 
 **Condensed
        Consolidated Statements of Cash Flows**
 *(unaudited)*
 
 **Three Months Ended**
              
              **Nine Months Ended****September 30,**
              
              **September 30,****2008**
              
              **2007**
              
              **2008**
              
              **2007****CASH
                  FLOWS FROM OPERATING ACTIVITIES**Net
                  income
              
              $
              641,004
              
              $
              892,699
              
              $
              2,166,164
              
              $
              2,794,975Adjustments
                  to reconcile net income tonet
                  cash provided by operating activities:Depreciation
                  and amortization
              
              
              45,998
              
              
              46,345
              
              
              141,054
              
              
              126,568Deferred
                  taxes
              
              
              99,997
              
              
              134,706
              
              
              533,540
              
              
              613,974Unrealized
                  investment (gain) loss
              
              
              369,556
              
              
              (41,005
              )
              
              524,261
              
              
              (76,266
              )Minority
                  interest in net income of subsidiary
              
              
              891,104
              
              
              947,709
              
              
              2,649,042
              
              
              3,535,525Deferred
                  rent
              
              
              (10,017
              )
              
              88,470
              
              
              (29,255
              )
              
              244,994Changes
                  in operating assets and liabilities(Increase)
                  decrease in:Accounts
                  receivable
              
              
              166,407
              
              
              188,163
              
              
              218,546
              
              
              490,963Prepaid
                  taxes
              
              
              (81,027
              )
              
              -
              
              
              (81,027
              )
              
              -Prepaid
                  expenses
              
              
              (59,867
              )
              
              (121,687
              )
              
              86,839
              
              
              25,440Other
                  current assets
              
              
              -
              
              
              (1,108
              )
              
              -
              
              
              11,547Increase
                  (decrease) in:Accounts
                  payable and accrued expenses
              
              
              657,366
              
              
              (524,334
              )
              
              49,186
              
              
              846,909Income
                  taxes payable
              
              
              (62,061
              )
              
              265,301
              
              
              (66,919
              )
              
              413,703Net
                  cash provided by operating activities
              
              
              2,658,460
              
              
              1,875,259
              
              
              6,191,431
              
              
              9,028,332**CASH
                  FLOWS FROM INVESTING ACTIVITIES**Purchases
                  of investments
              
              
              -
              
              
              -
              
              
              (2,000,000
              )
              
              (4,480,946
              )Proceeds
                  from sales of investments
              
              
              603,960
              
              
              201,332
              
              
              4,568,031
              
              
              1,253,274Increase
                  in other long-term assets
              
              
              (501,369
              )
              
              -
              
              
              (500,021
              )
              
              -Purchase
                  of fixed assets
              
              
              -
              
              
              (10,232
              )
              
              (2,756
              )
              
              (114,722
              )Net
                  cash provided by (used in) investing activities
              
              
              102,591
              
              
              191,100
              
              
              2,065,254
              
              
              (3,342,394
              )**CASH
                  FLOWS FROM FINANCING ACTIVITIES**Distributions
                  paid to minority interest holders
              
              
              (914,637
              )
              
              (991,992
              )
              
              (2,723,439
              )
              
              (2,374,717
              )Redemption
                  of common stock
              
              
              -
              
              
              -
              
              
              (1,735,611
              )
              
              -Repurchase
                  of warrants
              
              
              -
              
              
              -
              
              
              (1,823,083
              )
              
              -Repurchase
                  of underwriters’ purchase option
              
              
              -
              
              
              (1,300,000
              )
              
              -
              
              
              (1,300,000
              )Net
                  cash used in financing activities
              
              
              (914,637
              )
              
              (2,291,992
              )
              
              (6,282,133
              )
              
              (3,674,717
              )**Net
                  increase (decrease) in cash and cash equivalents**
              
              
              1,846,414
              
              
              (225,633
              )
              
              1,974,552
              
              
              2,011,221**Cash
                  and cash equivalents - beginning of period**
              
              
              7,404,683
              
              
              8,485,559
              
              
              7,276,545
              
              
              6,248,705**Cash
                  and cash equivalents - end of period**
              
              $
              9,251,097
              
              $
              8,259,926
              
              $
              9,251,097
              
              $
              8,259,926**Supplemental
                  schedule of non-cash financing and investing
                  activities:**Leasehold
                  improvements paid by landlord
              
              $
              -
              
              $
              -
              
              $
              -
              
              $
              522,360**Supplemental
                  disclosure of cash flow information:**Cash
                  paid for income taxes
              
              $
              460,000
              
              $
              172,600
              
              $
              936,708
              
              $
              761,139
 
 *See
        accompanying Notes to Unaudited Condensed Consolidated Financial
        Statements.*
  6
  **Highbury
        Financial Inc. and Subsidiary**
 
 **Notes
        to Unaudited Condensed Consolidated Financial Statements**
 
 **1.**  **Basis
        of Presentation and Significant Accounting Policies**
 
 The
        accompanying unaudited condensed consolidated financial statements as of
        September 30, 2008 and for the three and nine months ended September 30,
        2008
        and 2007 of Highbury Financial, Inc. and Subsidiary (“Company” or “Highbury”)
        have been prepared in accordance with accounting principles generally accepted
        in the United States of America for interim financial information and with
        the
        instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly,
        they do
        not include all of the information and footnotes required by accounting
        principles generally accepted in the United States of America (“GAAP”) for
        complete financial statements. The December 31, 2007 condensed consolidated
        balance sheet data was derived from audited financial statements, but does
        not
        include all of the disclosures required by accounting principles generally
        accepted in the United States of America. In the opinion of management, all
        adjustments, consisting of normal, recurring adjustments, considered necessary
        for a fair statement of the results have been included. All material
        intercompany balances and transactions have been eliminated.  Certain
        reclassifications have been made to the prior period’s condensed consolidated
        financial statements to conform to the current period’s presentation. Operating
        results for interim periods are not necessarily indicative of the results
        that
        may be expected for the full year. The Company’s Annual Report on Form 10-K for
        the fiscal year ended December 31, 2007, as filed with the Securities and
        Exchange Commission on March 28, 2008 and amended on May 2, 2008, includes
        additional information about Highbury, its operations and its financial position
        and should be read in conjunction with this Quarterly Report on Form
        10-Q. **
 
 *Investments*
 
 The
        Company carries its investments in government securities, primarily 6-month
        Treasury bills, if any, and its investments in certain mutual funds managed
        by
        its majority owned subsidiary, Aston Asset Management LLC (“Aston”), invested as
        initial seed capital, at fair value based on quoted market prices. The Company
        reflected interest received and accrued on Treasury bills in interest income
        and
        changes in fair value of mutual funds, which were $(346,085) and $(497,946)
        for
        the three and nine months ended September 30, 2008, respectively, in Investment
        income (loss). For the three and nine months ended September 30, 2007, the
        Company similarly reflected interest received and accrued on Treasury bills
        in
        interest income and changes in fair value of mutual funds, which were $(473)
        and
        $50,221, respectively.
 
 Investments
        consist of the following:
  **September 30,**
              
              **December 31,****2008**
              
              **2007**U.S.
                  Treasury bills
              
              $
              -
              
              $
              3,064,071Aston
                  mutual funds
              
              
              1,543,215
              
              
              1,571,436$
              1,543,215
              
              $
              4,635,507
 
 *Recent
        Accounting Pronouncements*
 
 In
        March
        2008, the Financial Accounting Standards Board (“FASB”) issued Statement of
        Financial Accounting Standards No. 161 (“SFAS No. 161”), “ *Disclosures
        about Derivative Instruments and Hedging Activities—an amendment of FASB
        Statement No. 133* ”.
        SFAS
        No. 161 gives financial statement users better information about the reporting
        entity’s hedges by providing for qualitative disclosures about the objectives
        and strategies for using derivatives, quantitative data about the fair value
        of
        and gains and losses on derivative contracts, and details of credit-risk-related
        contingent features in their hedged positions. SFAS No. 161 is effective
        for
        financial statements issued for fiscal years and interim periods beginning
        after
        November 15, 2008, with early application encouraged, but not required. We
        do
        not anticipate the adoption of SFAS No. 161 will have a material effect on the
        Company’s financial statements.
  7
  **Highbury
        Financial Inc. and Subsidiary**
 
 **Notes
        to Unaudited Condensed Consolidated Financial Statements**
 
 In
        April
        2008, the FASB issued FASB Staff Position (“FSP”) No. FAS 142-3, “ *Determination
        of the Useful Life of Intangible Assets* ”
to
        improve the consistency between the useful life of a recognized intangible
        asset
        under SFAS No. 142, “ *Goodwill
        and Other Intangible Assets* ,”
and
        the period of expected cash flows used to measure the fair value of the asset
        under SFAS No. 141 (revised 2007), “ *Business
        Combinations* ,”
and
        other guidance under GAAP. We do not anticipate the adoption of this FSP
        will
        have a material effect on the Company’s financial statements. The FSP is
        effective for financial statements issued for fiscal years beginning after
        December 15, 2008, and interim periods within those years. Early adoption
        is
        prohibited.
 
 In
        May
        2008, the FASB issued SFAS No. 162, “ *The
        Hierarchy of Generally Accepted Accounting Principles* ”
(“SFAS
        No. 162”). SFAS No. 162 identifies the sources of accounting principles and
        provides entities with a framework for selecting the principles used in
        preparation of financial statements that are presented in conformity with
        GAAP.
        The Board believes the GAAP hierarchy should be directed to entities because
        it
        is the entity (not its auditors) that is responsible for selecting accounting
        principles for financial statements that are presented in conformity with
        GAAP.
        The adoption of FASB 162 is not expected to have a material impact on the
        Company’s financial position.
 
 Management
        does not believe that any other recently issued, but not yet effective,
        accounting standard if currently adopted would have a material effect on
        the
        accompanying condensed consolidated financial statements.
 
 **2.**  **Accounts
        Payable and Accrued Expenses**
 
 Accounts
        payable and accrued expenses consisted of the following:
 
 **September 30,**
              
              **December 31,****2008**
              
              **2007**Payable to
                  sub-advisors
              
              $
              1,094,145
              
              $
              1,173,769Payable
                  to brokers
              
              
              381,321
              
              
              455,987Payable
                  to minority interest
              
              
              873,400
              
              
              965,500Accrued
                  compensation payable
              
              
              1,042,802
              
              
              1,072,280Accrued
                  professional fees
              
              
              562,494
              
              
              473,507Other
                  payables
              
              
              569,843
              
              
              408,173$
              4,524,005
              
              $
              4,549,216
 
 **3.**  **Commitments
        and Contingencies**
 
 a.  On
        April
        20, 2006, Highbury and Aston, entered into an Asset Purchase Agreement (“Asset
        Purchase Agreement”) with ABN AMRO Asset Management Holdings, Inc., (“AAAMHI”
and together with certain of its current and former affiliates each individually
        referred to as a “Seller” and collectively as “Sellers”) to acquire
        substantially all of the Sellers’ business of providing investment advisory,
        administration, distribution and related services to the U.S. mutual funds
        (the
“Target Funds”) specified in the Asset Purchase Agreement.
  The
        Asset
        Purchase Agreement provides for a contingent adjustment payment payable in
        cash
        shortly after the second anniversary of the closing of the acquisition (November
        30, 2008). In the event the annualized investment advisory fee revenue generated
        under investment advisory contracts between Aston and the Target Funds or
        any new funds advised by Aston and sub-advised by the Sellers for the six
        months prior to the second anniversary of the date of the closing of the
        acquisition (“Target Revenue”):
  8
  **Highbury
        Financial Inc. and Subsidiary**
 
 **Notes
        to Unaudited Condensed Consolidated Financial Statements**
  ·
              exceeds
                  $41.8 million, Aston and Highbury will collectively pay to AAAMHI
                  the
                  difference between the Target Revenue and $41.8 million, up to
                  a total
                  aggregate payment of $3.8 million; or·
              is
                  less than $34.2 million, AAAMHI will pay to Aston and Highbury
                  the
                  difference between the $34.2 million and the Target Revenue, up
                  to a total
                  aggregate payment of $3.8 million.
 
 In
        the
        event that Highbury were to acquire other mutual fund investment managers
        and
        the trustees of those mutual funds were to retain sub-advisers affiliated
        with
        the Sellers, such revenues would be included in the calculation of Target
        Revenue. For the six-month period ended September 30, 2008 the annualized
        investment advisory fee revenue generated under investment advisory contracts
        between Aston and the Target Funds was $33.2 million. Highbury has not accrued
        any receivable or liability for this contingency. The contingent adjustment
        payment, if any, will be accounted for as an increase or decrease in
        goodwill ultimately settled in cash.
  b.  On
        August
        1, 2005, the Company’s officers and directors and their affiliates (the “Initial
        Stockholders”) purchased 1,725,000 shares of common stock (as adjusted for a
        subsequent stock dividend), which we refer to as the founding shares.
        Simultaneously with the Company’s initial public offering (the “Offering”), all
        of the Initial Stockholders purchased an aggregate of 166,667 units from
        the Company in a private placement (the “Private Placement”). The Initial
        Stockholders are entitled to registration rights with respect to the shares
        of
        common stock and warrants of the Company owned by them. The holders of the
        majority of the shares held by the Initial Stockholders are entitled to
        make up to two demands that the Company register these shares and any other
        warrants or shares of the Company owned by them (excluding the shares purchased
        in the Private Placement) at any time commencing on the date the founding
        shares
        are released from escrow. Following their release from escrow, the founding
        shares may also be eligible for resale pursuant to Rule 144 under the Securities
        Act of 1933, as amended. In addition, the Initial Stockholders have certain
        “piggy-back” registration rights with respect to such securities on registration
        statements filed subsequent to the date the founding shares are released
        from
        escrow. The holders of a majority of the units purchased in the Private
        Placement are entitled to make up to two demands that the Company register
        the
        shares, warrants and shares underlying the warrants comprising such units
        at any
        time. In addition, the Initial Stockholders have certain “piggy-back”
registration rights with respect to such securities on registration statements
        filed by the Company. The Company will bear the expenses incurred in connection
        with the filing of any of the foregoing registration statements. The shares
        purchased in the Private Placement may also be eligible for resale pursuant
        to
        Rule 144 under the Securities Act of 1933, as amended.
 
 The
        founding shares have been placed in escrow until the earliest of: (1) January
        31, 2009; (2) the Company’s liquidation; and (3) the consummation of a
        liquidation, merger or stock exchange, stock purchase or other similar
        transaction which results in all of the Company’s stockholders having the right
        to exchange their shares of common stock for cash, securities or other property.
        During the escrow period, the Initial Stockholders may not sell or transfer
        their founding shares except among the Initial Stockholders, to their spouses
        and children or trusts established for their benefit, by virtue of the laws
        of
        descent and distribution upon the death of any Initial Stockholder or pursuant
        to a qualified domestic relations order. The Initial Stockholders retain
        all
        other rights as stockholders, including, without limitation, the right to
        vote
        their shares and receive cash dividends, if declared.
 
 c.  Highbury
        and Aston are subject to claims, legal proceedings and other contingencies
        in
        the ordinary course of their business activities. Each of these matters is
        subject to various uncertainties, and it is possible that some of these matters
        may be resolved in a manner unfavorable to the Company or Aston. Highbury
        and
        Aston establish accruals for matters for which the outcome is probable and
        can
        be reasonably estimated. Management is not aware of any claims, legal
        proceedings or other contingencies that could result in a loss to Highbury
        or
        Aston. As such, no contingencies have been accrued.
  9
  **Highbury
        Financial Inc. and Subsidiary**
 
 **Notes
        to Unaudited Condensed Consolidated Financial Statements**
 
 **4.**  **Economic
        Dependency**
 
 Relationships
        with a limited number of clients account for a significant majority of
        Highbury’s revenue. Aston’s client, the Aston Funds, a Delaware business trust,
        which accounts for approximately 96% of our assets under management as of
        September 30, 2008, is comprised of 26 mutual funds that are currently managed
        by Aston. Because all these funds have the same trustees, it is possible
        that
        the contracts with them could be terminated simultaneously. Of these 26 funds,
        the Aston/Montag & Caldwell Growth Fund, the Aston/Optimum Mid Cap Fund and
        the Aston/TAMRO Small Cap Fund contributed approximately 33%, 18% and 13%
        of the
        revenues of Aston, respectively, in September 2008. Additionally, as of
        September 30, 2008, approximately 11% of our assets under management and
        11% of
        our revenues were generated by customers sourced through a firm which was
        previously affiliated with the Sellers but was subsequently sold to an
        unaffiliated third party. These various client concentrations leave Highbury
        vulnerable to any adverse change in the financial condition of any of its
        major
        clients. The loss of any of these relationships may have a material adverse
        impact on the Company’s revenue. The Aston/Montag & Caldwell Growth Fund and
        the Aston/Optimum Mid Cap Fund contributed approximately 34% and 17% of the
        revenues of Aston, respectively, in September 2007.
 
 **5.**  **Income
        Taxes**
 
 The
        provisions for income taxes for the three and nine month periods ended September
        30, 2008 and 2007 consist of the following:
 
 **Three Months Ended**
              
              **Nine Months Ended****September 30,**
              
              **September 30,****2008**
              
              **2007**
              
              **2008**
              
              **2007**CurrentFederal
              
              $
              251,739
              
              $
              370,185
              
              $
              609,770
              
              $
              963,976State
              
              
              60,460
              
              
              67,716
              
              
              174,823
              
              
              210,867DeferredFederal
              
              
              88,970
              
              
              108,540
              
              
              472,135
              
              
              494,710State
              
              
              11,571
              
              
              26,166
              
              
              61,405
              
              
              119,264$
              412,740
              
              $
              572,607
              
              $
              1,318,133
              
              $
              1,788,817
 
 The
        sources of the net deferred tax assets are as follows:
 
 **September 30,**
              
              **December 31,****2008**
              
              **2007**Expenses
                  deferred for income tax purposes
              
              $
              550,117
              
              $
              383,869(Amortization
                  of)/Impairment of intangibles
              
              
              (131,448
              )
              
              568,340Deferred
                  tax assets
              
              $
              418,669
              
              $
              952,209
  **6.**  **Earnings
        Per Share**
 
 The
        calculation of basic earnings per share is computed by dividing income available
        to common stockholders by the weighted average number of shares of the Company’s
        common stock outstanding during the period. Diluted earnings per share gives
        effect to all dilutive potential common shares outstanding during the period.
        The following is a reconciliation of the numerator and denominator used in
        the
        calculation of earnings per share available to common
        stockholders:
  10
  **Highbury
        Financial Inc. and Subsidiary**
 
 **Notes
        to Unaudited Condensed Consolidated Financial Statements**
  **Three Months Ended**
              
              **Nine Months Ended****September 30,**
              
              **September 30,****2008**
              
              **2007**
              
              **2008**
              
              **2007**Numerator:Net
                  income
              
              $
              641,004
              
              $
              892,699
              
              $
              2,166,164
              
              $
              2,794,975Denominator:Average
                  shares outstanding - basic
              
              
              9,126,628
              
              
              9,527,000
              
              
              9,170,068
              
              
              9,527,000Effect
                  of dilutive instruments:Warrants
              
              
              -
              
              
              156,634
              
              
              -
              
              
              1,893,944Average
                  shares outstanding - diluted
              
              
              9,126,628
              
              
              9,683,634
              
              
              9,170,068
              
              
              11,420,944
  The
        Company’s dilutive instruments outstanding include warrants which became
        exercisable on January 25, 2007. There are no effects of dilutive instruments
        included in the 2008 calculations because the warrants were out of the money
        based on the weighted average prices for the Company’s common stock during the
        periods. In the first quarter of 2008, the Company repurchased 1,836,292
        warrants for $1,823,083 and 400,372 shares for $1,735,611. As of September
        30,
        2008, the Company had 13,983,708 warrants outstanding.
 
 During
        the three and nine months ended September 30, 2007, the Company’s dilutive
        instruments outstanding included 15,820,000 warrants which became exercisable
        on
        January 25, 2007. The dilutive effect of the warrants is calculated using
        the
        treasury stock method and the average share price during the period.
 
 **7.**  **Related
        Person Transactions**
 
 Aston
        is
        the investment advisor to the Aston Funds, a Delaware business trust. Aston’s
        Chief Executive Officer is the Chairman of the Board of Trustees of the Aston
        Funds. Aston’s President is the President and Chief Executive Officer of the
        Aston Funds. Aston’s Chief Financial Officer and Chief Compliance Officer is the
        Senior Vice President, Secretary, Treasurer, Chief Financial Officer, Chief
        Operating Officer and Chief Compliance Officer of the Aston Funds. As a result
        of these relationships, the Aston Funds may be considered related parties
        as
        such are defined in SFAS No. 57, “ *Related
        Party Disclosures* ”
(“SFAS
        57”). In the three and nine months ended September 30, 2008, Aston earned
        advisory fees of $8,164,734 and $24,263,297, respectively, and administrative
        fees of $1,029,219 and $3,126,564, respectively, from the Aston Funds. These
        fees, in total, accounted for approximately 96% of Aston’s total revenue during
        both periods. In the three and nine months ended September 30, 2007, Aston
        earned advisory fees of $8,660,761 and $27,217,354, respectively, and
        administrative fees of $1,077,026 and $3,306,678, respectively, from the
        Aston
        Funds. These fees, in total, accounted for approximately 95% and 96% of Aston’s
        total revenue for each of the three and nine months ended September 30, 2007,
        respectively. As of September 30, 2008 and December 31, 2007, the Company’s
        balance sheets include accounts receivable of $2,791,629 and $3,093,885,
        respectively, associated with these fees, as Aston is generally paid in the
        first week of the month following the month in which fees were
        earned.
  11
  **Highbury
        Financial Inc. and Subsidiary**
 
 **Notes
        to Unaudited Condensed Consolidated Financial Statements**
  The
        Company presently occupies office space provided by Berkshire Capital. Berkshire
        Capital has agreed that it will make such office space, as well as certain
        office and secretarial services, available to the Company, as may be required
        by
        the Company from time to time. The Company had agreed to pay Berkshire Capital
        $7,500 per month for such facilities and services commencing on January 26,
        2006. The Company agreed to increase this payment to $10,000 per month effective
        November 1, 2007. The condensed consolidated statements of income for the
        three
        and nine months ended September 30, 2008 include $30,000 and $90,000 related
        to
        this agreement, respectively. The condensed consolidated statements of income
        for the three and nine months ended September 30, 2007 include $22,500 and
        $67,500 related to this agreement, respectively. The agreement is terminable
        by
        either party upon six months’ prior notice.
 
 **7.**  **Credit
        Facility**
 
 On
        October 1, 2008, the Company and City National Bank executed an amendment
        to the
        credit agreement, dated as of November 9, 2006, as amended by a First Amendment
        to Credit Agreement dated October 31, 2007 (the “Amended Credit Agreement”),
        which provides for an extension of the Amended Credit Agreement through
        September 30, 2009 and modifies certain provisions of the Amended Credit
        Agreement (the “Second Amendment to Credit Agreement”). The Second Amendment to
        Credit Agreement increases the rate at which borrowings will bear interest
        to,
        at the Company’s option, either the LIBOR interest rate plus two and three
        quarters percent (2.75%) per year or the fluctuating prime rate plus one
        half of
        one percent (0.50%) per year.
  12
   
  
 **ITEM
        2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
        OF
        OPERATIONS**
  *You
        should read this discussion and analysis of our financial condition and results
        of operations in conjunction with the condensed consolidated financial
        statements and the notes thereto included in this Quarterly Report on Form
        10-Q
        and the consolidated financial statements included in our Annual Report on
        Form
        10-K for the fiscal year ended December 31, 2007, as filed with the Securities
        and Exchange Commission on March 28, 2008 and amended on May 2, 2008.*
 
 *Unless
        otherwise provided in this Quarterly Report, references to the “Company,” the
“Registrant,” the “Issuer,” “we,” “us,” and “our” refer to Highbury Financial
        Inc. and its subsidiary. References to Highbury refer solely to Highbury
        Financial Inc. and references to Aston refer solely to Aston Asset Management
        LLC, a subsidiary of Highbury.*
 
 **Forward
        Looking Statements**
 
 *This
        Quarterly Report on Form 10-Q includes forward-looking statements within
        the
        meaning of the Private Securities Litigation Reform Act of 1995, as amended,
        Section 27A of the Securities Act of 1933, as amended, or the Securities
        Act,
        and Section 21E of the Securities Exchange Act of 1934, as amended, or the
        Exchange Act. We have based these forward-looking statements on our current
        expectations and projections about future events. These forward-looking
        statements are subject to known and unknown risks, uncertainties and assumptions
        about us that may cause our actual results to be materially different from
        historical results and results expressed or implied by such forward-looking
        statements. In some cases, you can identify forward-looking statements by
        terminology such as “may,” “should,” “could,” “would,” “expect,” “plan,”
“anticipate,” “believe,” “estimate,” “continue,” or the negative of such terms
        or other similar expressions. Factors that might cause or contribute to such
        a
        discrepancy include, but are not limited to, the following:*
 
 *·*
              our
                  performance is directly affected by changing conditions in global
                  financial markets generally and in the**equity
                  markets particularly, and a decline or a lack of sustained growth
                  in these
                  markets may result in decreased advisory fees and administrative
                  fees and
                  a corresponding decline (or lack of growth) in our operating results
                  and
                  in the cash flow distributable to us from our existing or future
                  affiliates;
 
 *·*
              we
                  cannot be certain that we will be successful in finding or investing
                  in
                  additional investment management firms on favorable terms, or that
                  existing and future affiliates will have favorable operating results;
 
 *·*
              we
                  may need to raise capital by making long-term or short-term borrowings
                  or
                  by selling shares of our common stock or other securities in order
                  to
                  finance investments in additional****investment
                  management firms or additional investments in our existing affiliate,
                  and
                  we cannot be sure that such capital will be available to us on
                  acceptable
                  terms, if at all; and
 
 *·*
              those
                  certain other factors discussed under the caption “Risk Factors” in our
                  Annual Report on Form 10-K for the year ended December 31, 2007,
                  as filed
                  with the Securities and Exchange Commission on March 28, 2008 and
                  amended
                  on May 2, 2008, and in any other filings we make with the Securities
                  and
                  Exchange Commission from time to time.
 
 *We
        will not undertake and we specifically disclaim any obligation to release
        publicly the result of any revisions which may be made to any forward-looking
        statements to reflect events or circumstances after the date of such statements
        or to reflect the occurrence of events, whether or not anticipated. In that
        respect, we wish to caution readers not to place undue reliance on any such
        forward-looking statements, which speak only as of the date
        made.*
  13





**Overview**




Highbury
      is an investment management holding company providing permanent capital
      solutions to mid-sized investment management firms. We pursue acquisition
      opportunities and seek to establish accretive partnerships with high quality
      investment management firms. Highbury’s strategy is to provide permanent equity
      capital to fund buyouts from corporate parents, buyouts of founding or departing
      partners, growth initiatives, or exit strategies for private equity funds.
      This
      strategy includes leaving material equity interests with management teams to
      align the interests of management and Highbury’s shareholders and, in general,
      does not include integrating our acquisitions, although Highbury may execute
      add-on acquisitions for its current or future affiliates. We seek to augment
      and
      diversify our sources of revenue by asset class, investment style, distribution
      channel, client type and management team. We intend to fund future acquisitions
      with our revolving credit facility, other external borrowings, retained
      earnings (if any), additional equity and other sources of capital, including
      seller financing and contingent payments.




As
      of
      September 30, 2008 the Company had approximately $4.5 billion of total assets
      under management, compared to approximately $4.8 billion as of June 30, 2008.
      As
      of September 30, 2008, Aston managed 26 no-load mutual funds, comprised of
      25
      equity funds and 1 fixed income fund, with approximately $4.3 billion of mutual
      fund assets under management. As of September 30, 2008, 12 of the mutual funds
      carried an overall Morningstar Rating TM of three
      stars or better, including six four-star funds and two five-star funds. Of
      the
      26 funds, 12 are relatively new and are not currently rated by Morningstar.
      The
      25 equity funds are classified across each of the nine Morningstar
      Rating TM style
      boxes, giving Aston wide coverage of the public equity investment spectrum
      and
      multiple sources of revenue. Aston intends to expand its assets under management
      with a combination of internal growth, new product development and accretive
      acquisitions.




*Business
      Combination* .
      On
      April 20, 2006, Highbury and Aston entered into an asset purchase agreement
      with
      ABN AMRO Asset Management Holdings, Inc., or AAAMHI, and certain of its
      affiliates, or the sellers. Pursuant to the asset purchase agreement, on
      November 30, 2006, we acquired substantially all of the sellers’ business of
      providing investment advisory, administration, distribution and related services
      to the target funds specified in the asset purchase agreement, or the acquired
      business. In connection with the consummation of the acquisition, Aston entered
      into agreements with each of the sellers that managed the target funds prior
      to
      the acquisition, pursuant to which each such seller now acts as a sub-adviser
      to
      the applicable target fund, each of which is now rebranded as an Aston Fund.
      Pursuant to the asset purchase agreement, the sellers have agreed not to
      terminate these agreements prior to November 30, 2011.




Pursuant
      to the asset purchase agreement, Highbury and Aston paid $38.6 million in cash
      to AAAMHI. The asset purchase agreement provides for a contingent adjustment
      payment in cash shortly after the second anniversary of the date of the closing
      of the acquisition (November 30, 2008), as follows: in the event the annualized
      investment advisory fee revenue generated under investment advisory contracts
      between Aston and the sellers applicable to the target funds for the six months
      prior to the second anniversary of the date of the closing of the acquisition,
      or the target revenue, (x) exceeds $41.8 million, we will pay to AAAMHI the
      difference between the target revenue and $41.8 million, up to a total aggregate
      payment of $3.8 million, or (y) is less than $34.2 million, AAAMHI will pay
      to
      us the difference between the $34.2 million and the target revenue, up to a
      total aggregate payment of $3.8 million. For the six-month period ended
      September 30, 2008 the annualized investment advisory fee revenue generated
      under investment advisory contracts between Aston and the target funds was
      $33.2
      million. Highbury has not accrued any receivable or liability for this
      contingency. The contingent adjustment payment, if any, will be accounted for
      as
      an increase or decrease in goodwill ultimately settled in
      cash.





The
      acquired business was founded in 1993 within Alleghany Corporation by employees
      of Aston to manage open-end investment funds for retail and institutional
      clients in the United States. Originally, the acquired business employed
      investment advisers affiliated with its parent to manage the assets of the
      funds, while it centralized the distribution, marketing, reporting and other
      operations of the fund family. As the business developed, the acquired business
      created new mutual funds managed by experienced independent investment advisers.
      Historically, the acquired business utilized seven different entities to manage
      the equity funds, of which five were current or former affiliates of the sellers
      and two were independent. Aston now employs 16 different sub-advisors of which
      five are current or former affiliates of the sellers and 11 are independent.
      Aston’s relationship with the sub-advisers currently or formerly affiliated with
      the sellers is supported by limited non-compete provisions and certain capacity
      guarantees in certain products to benefit Aston. This arrangement is intended
      to
      ensure that the investment philosophies and processes guiding the mutual funds
      in the future are consistent with their historical investment philosophies
      and
      processes.




14





Between
      the consummation of the acquisition and September 30, 2008, Aston opened 13
      new
      equity mutual funds including three funds in the first quarter of 2008. These
      funds are set forth in the table below.




**Fund**
            
            **Morningstar
                Category**Aston/Optimum
                Large Cap Opportunity
            
            Large
                GrowthAston/River
                Road Small-Mid Cap Fund
            
            Small
                ValueAston/Neptune
                International
            
            Foreign
                Large GrowthAston/Resolution
                Global Equity Fund
            
            World
                StockAston/ABN
                AMRO Global Real Estate
            
            Specialty-Real
                EstateAston/SGA
                International Small-Mid Cap
            
            Foreign
                Small/Mid GrowthAston/Barings
                International
            
            Foreign
                Large BlendAston/Montag
                & Caldwell Mid Cap Growth
            
            Mid-Cap
                GrowthAston/Cardinal
                Mid Cap Value
            
            Mid-Cap
                ValueAston/ClariVest
                Mid Cap Growth
            
            Mid-Cap
                GrowthAston/Smart
                Allocation ETF Fund
            
            Large
                BlendAston/MB
                Enhanced Equity Income Fund
            
            Large
                ValueAston/New
                Century Absolute Return ETF Fund
            
            Moderate
                Allocation




Between
      the consummation of the acquisition and September 30, 2008, Aston closed or
      merged six mutual funds as a result of poor investment performance, portfolio
      manager turnover or other reasons, including two fixed income mutual funds
      closed during the third quarter of 2008. Aston intends to manage its family
      of
      mutual funds in response to client demands, and may open new funds or close
      existing funds over time, as appropriate.




In
      addition, Aston may be able to develop new distribution channels
      including:




·
            arrangements
                with banks and insurance companies which, like ABN AMRO, elect to
                divest
                their mutual fund operations but enter into agreements with Aston
                to
                service their customers; and




·
            wholesalers
                focused on the traditional retail broker channel.




*Revenue
      Sharing Arrangement with Aston* .
      Highbury formed Aston on April 19, 2006 and became the sole member of Aston.
      In
      connection with Highbury and Aston entering into the asset purchase agreement,
      the limited liability company agreement of Aston was amended and eight employees
      of the acquired business and ABN AMRO were admitted as members of Aston
      (collectively referred to herein as the Aston management members). Highbury
      owns
      65% of the membership interests of Aston, and the Aston management members
      own
      35% of the membership interests of Aston.




Pursuant
      to the limited liability company agreement, 28% of the total revenues of Aston
      net of sub-administrative fees, which we refer to as the owners’
allocation, is allocated to the owners of Aston. The owners’ allocation is
      allocated among the members of Aston according to their relative ownership
      interests. Currently, 18.2% of total revenues net of sub-administrative fees
      is
      allocated to Highbury and 9.8% of total revenues net of sub-administrative
      fees
      is allocated to the Aston management members. The remaining revenues, which
      we refer to as the operating allocation, of Aston are used to pay operating
      expenses of Aston, including salaries and bonuses of all employees of Aston
      (including the Aston management members).




15





Highbury’s
      contractual share of revenues has priority over the distributions to the Aston
      management members in the event Aston’s actual operating expenses exceed the
      operating allocation. As a result, excess expenses first reduce the portion
      of
      the owners’ allocation allocated to the Aston management members until the Aston
      management members’ allocation is eliminated, then Highbury’s allocation is
      reduced. Any reduction in the distribution of revenues to be paid to Highbury
      is
      required to be paid to Highbury out of any future excess operating allocation
      and the portion of future owners’ allocation allocated to the Aston management
      members, with interest.




*Business
      Overview* .
      Aston
      generates revenue by charging mutual funds an advisory fee and an administrative
      fee based on a percentage of invested assets. A portion of the fees are paid
      to
      the sub-advisers, to a third-party sub-administrator and to third-party
      distribution partners. Each fund typically bears all expenses associated with
      its operation and the issuance and redemption of its securities. In particular,
      each fund pays investment advisory fees (to Aston), shareholder servicing fees
      and expenses, fund accounting fees and expenses, transfer agent fees, custodian
      fees and expenses, legal and auditing fees, expenses of preparing, printing
      and
      mailing prospectuses and shareholder reports, registration fees and expenses,
      proxy and annual meeting expenses and independent trustee fees and expenses.
      Aston has guaranteed many of the funds that their expenses will not exceed
      a
      specified percentage of their net assets. Aston absorbs all advisory fees and
      other mutual fund expenses in excess of these self-imposed limits in the form
      of
      expense reimbursements or fee waivers and collects as revenue the advisory
      fee
      less reimbursements and waivers. As of September 30, 2008, Aston was reimbursing
      21 mutual funds whose expenses exceed the applicable expense cap.




Relationships
      with a limited number of clients account for a significant majority of our
      revenue. We expect that Aston’s relationships with these clients will continue
      to account for a substantial portion of our total revenue in future periods.
      Aston’s client, the Aston Funds, a Delaware business trust, which accounts for
      approximately 96% of our assets under management, is comprised of 26 mutual
      funds that are currently managed by Aston. Because all these funds have the
      same
      trustees, it is possible that the contracts with them could be terminated
      simultaneously. Of these 26 funds, the Aston/Montag & Caldwell Growth Fund,
      the Aston/Optimum Mid Cap Fund and the Aston/TAMRO Small Cap Fund account for
      approximately 33%, 18% and 13%, respectively, of the revenues of Aston in
      September 2008. Additionally, as of September 30, 2008, approximately 11% of
      our
      assets under management and 11% of our revenues are generated by customers
      sourced through a firm which was previously affiliated with the sellers but
      was
      subsequently sold to an unaffiliated third party. These various client
      concentrations leave us vulnerable to any adverse change in the financial
      condition of any of our major clients. The loss of any of these relationships
      may have a material adverse impact on our revenues.




Our
      level
      of profitability will depend on a variety of factors, including:




·
            those
                affecting the global financial markets generally and the equity markets
                particularly, which could potentially result in considerable increases
                or
                decreases in our assets under management;




·
            our
                revenue, which is dependent on our ability to maintain or increase
                assets
                under management by maintaining existing investment advisory relationships
                and fee structures, retaining our current clients, marketing our
                services
                successfully to new clients and obtaining favorable investment results;




·
            our
                ability to maintain certain levels of operating profit margins;




·
            the
                availability and cost of the capital with which we finance our existing
                and new acquisitions;




·
            our
                success in making new acquisitions and the terms upon which such
                transactions are completed;




16


********





·
            the
                level of intangible assets and the associated amortization expense
                resulting from our acquisitions;




·
            the
                level of expenses incurred for holding company operations; and




·
            the
                level of taxation to which we are subject.




**Recent
      Market Developments**





In
      reaction to the global credit crisis, global equity markets declined
      significantly in September and October of 2008. For example, the S&P 500
      Index declined approximately 24% during the two month period ending October
      31,
      2008. Our assets under management have declined during this period. Continuing
      deterioration in market conditions and/or declines in our assets under
      management could materially impact our revenue, operating margin and net income
      in the fourth quarter of 2008 and into 2009.





**Key
      Operating Measures**




We
      use
      the following key measures to evaluate and assess our business:




·
            *Assets
                Under Management*.
                Aston generates revenues by charging each fund investment advisory
                and
                administrative fees (collected in monthly installments), each of
                which are
                equal to a percentage of the daily weighted average assets under
                management of the fund. Assets under management change on a daily
                basis as
                a result of client investments and withdrawals and changes in the
                market
                value of securities held in the mutual funds. We carefully review
                net
                asset flows into the mutual funds, trends in the equity markets and
                the
                investment performance of the mutual funds, both absolutely and relative
                to their peers, to monitor their effects on the overall level of
                assets
                under management.




·
            *Total
                Revenue*.
                Total revenue for Aston is equal to the sum of the advisory fees,
                administrative fees and money market service fees earned by the business
                in a given period. We operate Aston under a revenue sharing structure
                through which Highbury receives a fixed percentage (18.2%) of the
                total
                revenue, net of sub-administrative fees, earned by Aston. In addition,
                Highbury earns interest income on its cash balances which we recognize
                as
                non-operating income in the condensed consolidated financial
                statements.




·
            *Weighted
                Average Fee Basis*.
                The weighted average fee basis is equal to the total revenue earned
                in a
                specific period divided by the weighted average assets under management
                for that period. Because each fund has a different fee schedule,
                the
                weighted average fee basis provides us with a single indicator of
                the
                business’ ability to generate fees on its total assets under management
                across all products.




·
            *Total
                Operating Expenses*.
                The total operating expenses include the operating expenses of Aston
                as
                well as Highbury. At the Aston level, we monitor total operating
                expenses
                relative to Aston’s total revenue to ensure there is sufficient operating
                margin to cover expenses. We expect total operating expenses (including
                distribution and sub-advisory costs and excluding certain non-cash,
                non-recurring items) to equal approximately 72% of the total revenue
                of
                Aston, as provided in Aston’s limited liability company agreement. At the
                Highbury level, we incur operating expenses in connection with our
                pursuit
                of accretive acquisitions, including expenses for travel, entertainment,
                legal services and due diligence. We also incur legal and accounting
                expenses in connection with our SEC filing requirements and expenses
                of
                directors’ and officers’ insurance.




17





**Description
      of Certain Line Items**




Following
      is a description of the components of certain line items from our condensed
      consolidated financial statements:




·
            *Revenue*.
                Aston generates advisory fees based on a fixed percentage of the
                daily
                weighted average assets under management for each fund and receives
                these
                fees on a monthly basis. For many funds, Aston provides an expense
                cap
                which guarantees to investors that the total expenses of a fund will
                not
                exceed a fixed percentage of the total assets under management. For
                small
                funds, the fixed expenses for fund accounting, client reporting,
                printing
                and other expenses, when combined with the investment advisory fees
                and
                administrative fees, cause a fund’s total expenses to exceed the expense
                cap. In such cases, Aston reimburses the funds for the excess fixed
                expenses or waives a portion of the investment advisory fee, so as
                to keep
                the total expenses of the fund at or below the expense cap. Aston’s
                advisory fees include investment advisory fees from all of the funds,
                net
                of all fee waivers and expense reimbursements. Aston also generates
                advisory fees based on a fixed percentage of either monthly or quarterly
                assets under management for a variety of separately managed accounts.
                Additionally, Aston generates administration fees for providing
                administration services. Such services include marketing and customer
                relations, bookkeeping and internal accounting functions, and legal,
                regulatory and board of trustees support. Finally, Aston earns monthly
                fees from Fortis Investment Management USA, Inc. or Fortis, in return
                for
                providing administration services to six money market funds which
                are
                advised by Fortis.





·
            *Distribution
                and Sub-advisory Costs*.
                Aston has contracted on a non-exclusive basis with approximately
                400
                different institutions to sell its mutual funds, in exchange for
                a
                distribution fee, to retail and institutional investors. These
                distribution fees are generally equal to a fixed percentage of the
                assets
                invested by the retail or institutional investor. In addition, Aston
                employs third-party investment managers, or sub-advisers, to perform
                the
                security research and investment selection processes for each of
                its
                mutual funds. Under this arrangement, Aston pays the third-party
                investment manager a sub-advisory fee, generally equal to 50% of
                the
                advisory fees for the mutual fund, net of fee waivers, expense
                reimbursements, and applicable distribution fees paid under the
                distribution agreements discussed above. Total distribution and
                sub-advisory fees represent the largest component of expenses for
                Aston.
                Since these fees are generally based on total assets under management,
                they increase or decrease proportionately with total assets under
                management.




·
            *Compensation
                and Related Expenses*.
                As of September 30, 2008, Aston employed 37 full-time employees.
                The
                compensation and related expenses of Aston include the base salaries,
                incentive compensation, health insurance, retirement benefits and
                other
                costs related to the employees. These expenses increase and decrease
                with
                the addition or termination of employees. Highbury currently has
                no
                employees and provides no compensation to its officers or directors.





·
            *Other
                Operating Expenses*.
                The most significant components of other operating expenses include
                professional fees, insurance, occupancy, marketing and advertising,
                voice
                and data communication and travel and entertainment expenses.




**Critical
      Accounting Policies**




The
      Company’s discussion and analysis of its financial condition and results of
      operations for the purposes of this document are based upon its condensed
      consolidated financial statements, which have been prepared in accordance with
      accounting principles generally accepted in the United States of America, or
      GAAP, for interim financial information and with the instructions to Form 10-Q
      and Rule 10-01 of Regulation S-X. The preparation of these condensed
      consolidated financial statements requires management to make estimates and
      assumptions that affect the reported amounts of assets, liabilities, revenues,
      expenses and related disclosures. Actual results could differ from those
      estimates.




18





The
      Company’s significant accounting policies are presented in Note 1 to its
      unaudited condensed consolidated financial statements included elsewhere herein
      and in Note 1 to its audited financial statements included in its Annual Report
      on Form 10-K for the year ended December 31, 2007, as filed with the Securities
      and Exchange Commission on March 28, 2008 and amended on May 2, 2008. The
      following summaries should be read in conjunction with those condensed
      consolidated financial statements and the related notes. While all accounting
      policies affect the condensed consolidated financial statements, certain
      policies may be viewed as critical. Critical accounting policies are those
      that
      are both most important to the portrayal of the condensed consolidated financial
      statements and results of operations and that require management’s most
      subjective or complex judgments and estimates. We believe the policies that
      fall
      within this category are the policies related to principles of consolidation,
      investments, goodwill and intangible assets, revenue recognition and income
      taxes.




*Principles
      of Consolidation.* The
      condensed consolidated financial statements include the accounts of Highbury
      and
      Aston, in which Highbury has a controlling financial interest. Generally, an
      entity is considered to have a controlling financial interest when it owns
      a
      majority of the voting interest in an entity. Highbury is the manager member
      of
      Aston and owns 65% of Aston. Highbury has a contractual arrangement with Aston
      whereby a percentage of revenue is allocable to fund Aston’s operating expenses
      (referred to as the operating allocation), while the remaining portion of
      revenue (referred to as the owners’ allocation) is allocable to Highbury and the
      other members, with a priority to Highbury. The portion of the income of Aston
      allocated to owners other than Highbury is included in minority interest in
      the
      Consolidated Statements of Income. Minority interest on the Consolidated Balance
      Sheets includes capital and undistributed income owned by the management members
      of Aston. All material intercompany balances and transactions have been
      eliminated in consolidation.




*Investments.* In
      2007,
      the Company elected to adopt the provisions of Statement of Financial Accounting
      Standards (“SFAS”) No. 157 “ *Fair
      Value Measurements* ”
(“SFAS
      157”) and SFAS No. 159 “ *The
      Fair Value Option for Financial Assets and Financial
      Liabilities* ”
(“SFAS
      159”). The Company carries its investments in government securities, primarily
      6-month Treasury bills, if any, and its investments in certain mutual funds
      managed by Aston at fair value based on quoted market prices. The Company
      reflects interest paid and accrued on Treasury bills in Interest income and
      changes in fair value of mutual funds in Investment income (loss).




*Goodwill
      and Intangible Assets* .
      The
      purchase price and the capitalized transaction costs incurred in connection
      with
      the acquisition of the acquired business are allocated based on the fair value
      of the assets acquired, which is primarily the acquired mutual fund advisory
      contract. In determining the allocation of the purchase price to the acquired
      mutual fund advisory contract, we have analyzed the present value of the
      acquired business’ existing mutual fund advisory contract based on a number of
      factors including: the acquired business’ historical and potential future
      operating performance; the historical and potential future rates of new business
      from new and existing clients and attrition among existing clients; the
      stability and longevity of existing advisory and sub-advisory relationships;
      the
      acquired business’ recent, as well as long-term, investment performance; the
      characteristics of the acquired business’ products and investment styles; the
      stability and depth of the management team; and the acquired business’ history
      and perceived franchise or brand value.




We
      have
      determined that the acquired mutual fund advisory contract meets the indefinite
      life criteria outlined in Statement of Financial Accounting Standards No. 142,
      “ *Goodwill
      and Other Intangible Assets* ”
(“SFAS
      142”), because we expect both the contract and the cash flows generated by the
      contract to continue indefinitely due to the likelihood of continued renewal
      at
      little or no cost. Accordingly, we do not amortize this intangible asset, but
      instead review this asset at least annually for impairment. If the carrying
      amount of this intangible asset exceeds the fair value, an impairment loss
      is
      recorded in an amount equal to that excess. Additionally, each reporting period,
      we assess whether events or circumstances have occurred which indicate that
      the
      indefinite life criteria are no longer met. If the indefinite life criteria
      are
      no longer met, we will amortize the intangible asset over its remaining useful
      life.




19


The
      excess of purchase price for the acquisition of the acquired business over
      the
      fair value of net assets acquired, including the acquired mutual fund advisory
      contract, is reported as goodwill. Goodwill is not amortized, but is instead
      reviewed for impairment. Highbury assesses goodwill for impairment at least
      annually, or more frequently whenever events or circumstances occur indicating
      that the recorded goodwill may be impaired. If the carrying amount of goodwill
      exceeds the fair value, an impairment loss would be recorded in an amount equal
      to that excess.




In
      allocating the purchase price of the acquisition and testing our assets for
      impairment, we make estimates and assumptions to determine the value of our
      acquired client relationships. In these valuations, we make assumptions of
      the
      growth rates and useful lives of existing and prospective client accounts.
      Additionally, we make assumptions of, among other factors, projected future
      earnings and cash flow, valuation multiples, tax benefits and discount rates.
      The impacts of many of these assumptions are material to our financial condition
      and operating performance and, at times, are subjective. If we used different
      assumptions, the carrying values of our intangible assets and goodwill and
      the
      related amortization could be stated differently and our impairment conclusions
      could be modified.




*Revenue
      Recognition.* Highbury
      derives its operating revenues from Aston, its majority-owned subsidiary.
      Highbury also earns interest income on its cash balances. Aston earns investment
      advisory and administrative fees for services provided to the Aston Funds,
      six
      money market funds advised by Fortis and a limited number of separately managed
      accounts. These fees are primarily based on predetermined percentages of the
      market value of the assets under management and are billed in arrears of the
      period in which they are earned. These fees are recognized over the period
      in
      which services are performed unless facts and circumstances would indicate
      that
      collectibility of the fees is not reasonably assured. Fee waivers and expense
      reimbursements to certain of the Aston Funds in accordance with agreements
      are
      reported as an offset to investment advisory fees. Management has determined
      that no allowance for doubtful accounts is necessary due to all fees being
      collected within one month from the date of invoice.




*Income
      Taxes* .
      Deferred tax assets and liabilities are primarily the result of timing
      differences between the carrying value of assets and liabilities and the
      deductibility of operating expenses for financial reporting and income tax
      purposes. Deferred tax assets arise from financial statement impairment and
      tax
      amortization of the Company’s acquired intangible assets as well as certain
      expenses deferred for tax purposes and the unrealized gains and losses on mutual
      fund investments. We amortize acquired intangible assets over a 15-year period
      for tax purposes only, reducing their tax basis and generating deferred taxes
      each reporting period.




**Recently
      Issued Pronouncements**




In
      March
      2008, the Financial Accounting Standards Board (“FASB”) issued Statement of
      Financial Accounting Standards No. 161 (“SFAS No. 161”), “ *Disclosures
      about Derivative Instruments and Hedging Activities—an amendment of FASB
      Statement No. 133* ”.
      SFAS
      No. 161 gives financial statement users better information about the reporting
      entity’s hedges by providing for qualitative disclosures about the objectives
      and strategies for using derivatives, quantitative data about the fair value
      of
      and gains and losses on derivative contracts, and details of credit-risk-related
      contingent features in their hedged positions. SFAS No. 161 is effective for
      financial statements issued for fiscal years and interim periods beginning
      after
      November 15, 2008, with early application encouraged, but not required. We
      do
      not anticipate the adoption of SFAS No. 161 will have a material effect on
      the
      Company’s financial statements.





In
      April
      2008, the FASB issued Final FASB Staff Position (“FSP”) No. FAS 142-3,
“ *Determination
      of the Useful Life of Intangible Assets* ”
to
      improve the consistency between the useful life of a recognized intangible
      asset
      under SFAS No. 142, “ *Goodwill
      and Other Intangible Assets* ,”
and
      the period of expected cash flows used to measure the fair value of the asset
      under SFAS No. 141 (revised 2007), “ *Business
      Combinations* ,”
and
      other guidance under U.S. generally accepted accounting principles (“GAAP”). We
      do not anticipate the adoption of this FSP will have a material effect on the
      Company’s financial statements. The FSP is effective for financial statements
      issued for fiscal years beginning after December 15, 2008, and interim periods
      within those years. Early adoption is prohibited.




20







In
      May
      2008, the FASB issued SFAS No. 162, “ *The
      Hierarchy of Generally Accepted Accounting Principles* ”
(”SFAS
      No. 162”). SFAS No. 162 identifies the sources of accounting principles and
      provides entities with a framework for selecting the principles used in
      preparation of financial statements that are presented in conformity with GAAP.
      The Board believes the GAAP hierarchy should be directed to entities because
      it
      is the entity (not its auditors) that is responsible for selecting accounting
      principles for financial statements that are presented in conformity with GAAP.
      The adoption of FASB 162 is not expected to have a material impact on the
      Company’s financial position.




Management
      does not believe any other recently issued, but not yet effective, accounting
      standard if adopted in its current form would have a material effect on the
      accompanying condensed consolidated financial statements.





**Results
      of Operations**





*Three
      months ended September 30, 2008 compared to three months ended September 30,
      2007*





For
      the
      three months ended September 30, 2008, the Company earned net income of $641,004
      on total revenue of $9,595,927, as compared to net income of $892,699 and
      revenue $10,157,568 for the three months ended September 30, 2007. The following
      table summarizes the components of revenue, weighted average assets under
      management and the weighted average fee basis for the period.


For
                  the three months ended
                September
                  30, 2008Total Fees
              
              Weighted
                Average
                Assets
                Under
                Management
                ($M)
              
              Weighted
                Average Fee
                Basis
                (Annualized)Net
                  advisory fees
              
              $
              8,428,388
              
              $
              4,767
              (1)
              
              0.71
              %Net
                  administrative fees(2)
              
              
              506,678
              
              
              7,570
              (3)
              
              0.03
              %Money
                  market service fees
              
              
              138,320
              
              
              2,971
              
              
              0.02
              % (4)$
              9,073,386
              
              
              4,767
              (5)
              
              0.76
              %(5)




For
                  the three months ended
                September
                  30, 2007Total Fees
              
              Weighted
                Average
                Assets
                Under
                Management
                ($M)
              
              Weighted
                Average Fee
                Basis
                (Annualized)Net
                  advisory fees
              
              $
              8,935,606
              
              $
              5,095
              (1)
              
              0.70
              %Net
                  administrative fees(2)
              
              
              546,645
              
              
              8,099
              (3)
              
              0.03
              %Money
                  market service fees
              
              
              144,936
              
              
              3,137
              
              
              0.02
              %(4)$
              9,627,187
              
              
              5,095
              (5)
              
              0.76
              %(5)




21





(1)
            Includes
                long-term mutual fund and separate account assets under
                management.(2)
            Administrative
                fees are presented net of sub-administration fees paid to a third
                party to
                be consistent with the methodology used in calculating the revenue
                sharing
                arrangement with Aston. Gross administration fees were $1,029,219
                and
                $1,077,026 in the three months ended September 30, 2008 and 2007,
                respectively.(3)
            Aston
                provides administrative services to the Aston Funds, as well as six
                money
                market mutual funds managed by Fortis.(4)
            Aston
                receives a money market service fee from Fortis equal to $550,000
                per
                annum plus 0.0001% of the weighted average assets under management
                in the
                six money market mutual funds in excess of $3 billion. The fee is
                accrued
                and paid monthly.





(5)
            For
                an estimate of the overall weighted average fee basis, we use the
                total
                fees from all sources and the weighted average assets under management
                for
                which we provide investment advisory services (Note 1
                above).




As
      of
      September 30, 2008, the Company had approximately $4.5 billion of total assets
      under management, compared to approximately $4.8 billion as of June 30, 2008.
      As
      of September 30, 2008, mutual fund assets under management were approximately
      $4.3 billion, compared to approximately $4.7 billion as of June 30, 2008, a
      decrease of approximately 7%. This aggregate decline in mutual fund assets
      under
      management of $338 million resulted from a combination of (i) negative market
      appreciation and other adjustments, including distributions of income and gain,
      reinvestments of distributions, and other items, of approximately $488 million
      and (ii) net client inflows, which represent aggregate contributions from new
      and existing clients less withdrawals, of approximately $150 million. During
      the
      three months ended September 30, 2007, the Company experienced net client
      outflows of $246 million partially offset by positive market appreciation and
      other adjustments of $137 million. The Company believes that recent improvements
      in the relative investment performance of many of the Aston Funds have led
      to
      our net client inflows. During the three months ended September 30, 2008,
      separate account assets under management decreased from $167 million to $159
      million.




The
      Company generated total operating revenue during the three months ended
      September 30, 2008 of $9,595,927, as compared to $10,157,568 during the three
      months ended September 30, 2007. This 6% decrease in revenue was largely
      attributable to the overall decline in assets under management from 2007 to
      2008. Weighted average assets under management, as presented above, decreased
      from approximately $5.1 billion in the third quarter of 2007 to approximately
      $4.8 billion in the third quarter of 2008, a decline of approximately 6%. The
      Company’s overall weighted average fee basis remained flat at 0.76% for the
      three months ended September 30, 2008 as compared to the prior year period.
      Net
      advisory fees decreased from $8,935,606 in the third quarter of 2007 to
      $8,428,388 for the same period in 2008, primarily as a result of lower average
      mutual fund balances. For the same reason, gross administration fees decreased
      from $1,077,026 in the third quarter of 2007 to $1,029,219 in the third quarter
      of 2008. Net administration fees declined from $546,645 in the third quarter
      of
      2007 to $506,678 in the third quarter of 2008. Aston also earned money market
      service fees from Fortis of $138,320 in the three months ended September 30,
      2008, down from $144,936 in the three months ended September 30,
      2007.




Distribution
      and sub-advisory costs declined from $4,735,347 for the three months ended
      September 30, 2007 to $4,395,372 in the corresponding period in 2008. This
      7%
      decline is attributable to the decline in weighted average assets under
      management from 2007 to 2008, as these expenses are directly related to the
      value of assets under management.





Compensation
      and related expenses were $1,699,827 for the three months ended September 30,
      2008. Compensation and related expenses were $1,777,417 for the three months
      ended September 30, 2007. The Aston management team participates directly in
      the
      profitability of the business through their retention of any excess operating
      allocation which is paid as compensation. Because of the lower level of assets
      under management in the third quarter of 2008, as compared to the third quarter
      of 2007, there was a lower level of excess operating allocation available to
      pay
      as compensation to the Aston management team.




22





The
      Company incurred $45,998 of depreciation expense relating to Aston’s fixed
      assets in the third quarter of 2008, compared to $46,345 in the third quarter
      of
      2007.





Other
      operating expenses decreased from $1,320,117 for the three months ended
      September 30, 2007 to $1,183,440 for the three months ended September 30, 2008.
      These expenses include the operating expenses of Aston and Highbury for the
      periods and consist primarily of legal, accounting, insurance, occupancy and
      administrative fees. Aston’s direct operating expenses for the three months
      ended September 30, 2007 were $934,033, as compared to $928,234 during the
      three
      months ended September 30, 2008. Highbury’s direct operating expenses for the
      three months ended September 30, 2008 and 2007 were as follows:





Three
                Months Ended,September
                30,2008
            
            2007Professional
                fees
            
            $
            125,287
            
            $
            187,745Insurance
            
            
            44,355
            
            
            59,418Administrative
                fees
            
            
            30,000
            
            
            22,500Travel
                and entertainment
            
            
            20,475
            
            
            70,002Other
                expenses
            
            
            35,089
            
            
            46,419$
            255,206
            
            $
            386,084





Non-operating
      income consists primarily of earnings on cash and cash equivalent balances
      and
      short-term investments in U.S. Treasury bills and Aston mutual funds. For the
      three months ended September 30, 2008, Highbury earned interest income on its
      cash and cash equivalent balances of $19,643. The Company also had realized
      and
      unrealized losses of $346,085 related to investments in Aston mutual funds.
      For
      the three months ended September 30, 2007, Highbury earned $135,146 on its
      cash
      and cash equivalent balances and had unrealized losses of $473 related to
      investments in U.S. Treasury bills and Aston mutual funds.




For
      the
      three months ended September 30, 2008, the Company recorded income before
      minority interest and provisions for income taxes of $1,944,848. Minority
      interest expense and income taxes for the period were $891,104 and $412,740,
      respectively. For the three months ended September 30, 2007, the Company
      recorded income before minority interest and provisions for income taxes of
      $2,413,015. Minority interest expense and income taxes for the period were
      $947,709 and $572,607, respectively.




The
      following table outlines Highbury’s income tax expenses for the three months
      ended September 30, 2008 and September 30, 2007.





Three
                Months Ended
              September
                30,2008
            
            2007Current
            
            $
            312,199
            
            $
            437,901Deferred -
                intangible related
            
            
            233,263
            
            
            236,772Deferred
                - other
            
            
            (132,722
            )
            
            (102,066
            )Total
            
            $
            412,740
            
            $
            572,607





23


For
      further discussion of the Company’s income taxes, please refer to Note 5 of the
      condensed consolidated financial statements included elsewhere in this
      document.





Highbury
      earned net income of $641,004 in the three months ended September 30, 2008,
      as
      compared to $892,699 during the three months ended September 30, 2007.




*Nine
      months ended September 30, 2008 compared to nine months ended September 30,
      2007*




For
      the
      nine months ended September 30, 2008, the Company earned net income of
      $2,166,164 on total revenue of $28,555,443, as compared to net income of
      $2,794,975 and revenue of $31,829,001 for the nine months ended September 30,
      2007.





As
      of
      September 30, 2008, the Company had approximately $4.5 billion of total assets
      under management, compared to approximately $5.1 billion as of December 31,
      2007. As of September 30, 2008, mutual fund assets under management were
      approximately $4.3 billion, compared to approximately $5.0 billion as of
      December 31, 2007, a decrease of approximately 14%. This aggregate decline
      in
      mutual fund assets under management of $651 million resulted from a combination
      of (i) negative market appreciation and other adjustments, including
      distributions of income and gain, reinvestments of distributions, and other
      items, of approximately $790 million and (ii) net client inflows, which
      represent aggregate contributions from new and existing clients less
      withdrawals, of approximately $139 million. In April 2008, the Company
      experienced redemptions of approximately $200 million from customers sourced
      through a firm which was previously affiliated with the sellers but was
      subsequently sold to an unaffiliated third party. For the nine month period,
      the
      Company experienced net asset inflows of approximately $339 million from all
      other clients. During the nine months ended September 30, 2007, the Company
      experienced net client outflows of $976 million partially offset by positive
      market appreciation and other adjustments of $503 million. The Company believes
      that recent improvements in the relative investment performance of many of
      the
      Aston Funds have led to improvements in our net client flows. During the nine
      months ended September 30, 2008, separate account assets under management
      increased from $145 million to $159 million.




The
      Company generated total operating revenue during the nine months ended September
      30, 2008 of $28,555,443, as compared to $31,829,001 during the nine months
      ended
      September 30, 2007. This decrease in revenue of approximately 10% was largely
      attributable to the overall decline in assets under management from 2007 to
      2008. Net advisory fees decreased from $28,083,917 in the first nine months
      of
      2007 to $25,008,352 for the same period in 2008, primarily as a result of lower
      average mutual fund balances. For the same reason, gross administration fees
      decreased from $3,306,678 in the first nine months of 2007 to $3,126,564 for
      the
      same period in 2008. Net administration fees declined from $1,683,145 in the
      first nine months of 2007 to $1,533,951 for the same period in 2008. Aston
      also
      earned money market service fees from Fortis of $420,527 in the nine months
      ended September 30, 2008, down from $438,406 in the nine months ended September
      30, 2007.




Distribution
      and sub-advisory costs declined from $14,992,086 for the nine months ended
      September 30, 2007 to $13,182,141 in the corresponding period in 2008. This
      decline of approximately 12% is attributable to the decline in assets under
      management from 2007 to 2008, as these expenses are directly related to the
      value of assets under management.





Compensation
      and related expenses were $4,846,431 for the nine months ended September 30,
      2008. Compensation and related expenses were $5,091,841 for the nine months
      ended September 30, 2007. The Aston management team participates directly in
      the
      profitability of the business through their retention of any excess operating
      allocation which is paid as compensation. Because of the lower level of assets
      under management in the first nine months of 2008, as compared to the first
      nine
      months of 2007, there was a lower level of excess operating allocation available
      to distribute as compensation to the Aston management team.





The
      Company incurred $141,054 of depreciation expense relating to Aston’s fixed
      assets in the first nine months of 2008, compared to $126,568 in the first
      nine
      months of 2007.




24


Other
      operating expenses decreased from $3,891,330 for the nine months ended September
      30, 2007 to $3,845,466 for the nine months ended September 30, 2008. These
      expenses include the operating expenses of Aston and Highbury for each period
      and consist primarily of legal, accounting, insurance, occupancy and
      administrative fees. Aston’s direct operating expenses for the nine months ended
      September 30, 2007 were $2,644,607, as compared to $2,885,342 during the first
      nine months of 2008. Highbury’s direct operating expenses for the nine months
      ended September 30, 2008 and 2007 were as follows:




Nine
                Months Ended,September
                30,2008
            
            2007Professional
                fees
            
            $
            559,575
            
            $
            723,038Insurance
            
            
            155,970
            
            
            187,239Administrative
                fees
            
            
            90,000
            
            
            67,500Travel
                and entertainment
            
            
            64,719
            
            
            127,631Other
                expenses
            
            
            89,860
            
            
            141,315$
            960,124
            
            $
            1,246,723





Non-operating
      income consists primarily of earnings on cash and cash equivalent balances
      and
      short-term investments in U.S. Treasury bills and Aston mutual funds. For the
      nine months ended September 30, 2008, Highbury earned interest income on its
      cash and cash equivalent balances of $90,934. The Company also had realized
      and
      unrealized losses of $497,946 related to investments in Aston mutual funds.
      For
      the nine months ended September 30, 2007, Highbury earned $341,920 on its cash
      and cash equivalent balances and had realized and unrealized gains of $50,221
      related to investments in U.S. Treasury bills and Aston mutual
      funds.




For
      the
      nine months ended September 30, 2008, the Company recorded income before
      minority interest and provisions for income taxes of $6,133,339. Minority
      interest expense and income taxes for the period were $2,649,042 and $1,318,133,
      respectively. For the nine months ended September 30, 2007, the Company recorded
      income before minority interest and provisions for income taxes of $8,119,317.
      Minority interest expense and income taxes for the period were $3,535,525 and
      $1,788,817, respectively.




The
      following table outlines Highbury’s income tax expenses for the nine months
      ended September 30, 2008 and September 30, 2007.





Nine
                Months Ended
              September
                30,2008
            
            2007Current
            
            $
            784,593
            
            $
            1,174,843Deferred -
                intangible related
            
            
            699,788
            
            
            710,315Deferred
                - other
            
            
            (166,248
            )
            
            (96,341
            )Total
            
            $
            1,318,133
            
            $
            1,788,817





For
      further discussion of the Company’s income taxes, please refer to Note 5 of the
      condensed consolidated financial statements included elsewhere in this
      document.




25


Highbury
      earned net income of $2,166,164 in the nine months ended September 30, 2008,
      as
      compared to $2,794,975 during the nine months ended September 30, 2007.





***Supplemental
      Non-GAAP Performance Measure***





As
      supplemental information, we provide a non-GAAP performance measure that we
      refer to as Cash Net Income. This measure is provided in addition to, but not
      as
      a substitute for, GAAP Net Income. Cash Net Income means the sum of (a) net
      income determined in accordance with GAAP, plus (b) amortization of intangible
      assets, plus (c) deferred taxes related to intangible assets, plus (d) affiliate
      depreciation, plus (e) other non-cash expenses. We consider Cash Net Income
      an
      important measure of our financial performance, as we believe it represents
      operating performance before non-cash expenses relating to the acquisition
      of
      our interest in our affiliated investment management firm. Cash Net Income
      is
      not a measure of financial performance under GAAP and, as calculated by us,
      may
      not be consistent with computations of Cash Net Income by other companies.
      Cash
      Net Income is used by our management and board of directors as a performance
      benchmark.




Since
      our
      acquired assets do not generally depreciate or require replacement by us, and
      since they generate deferred tax expenses that are unlikely to reverse, we
      add
      back these non-cash expenses to Net Income to measure operating performance.
      We
      will add back amortization attributable to acquired client relationships because
      this expense does not correspond to the changes in value of these assets, which
      do not diminish predictably over time. The portion of deferred taxes generally
      attributable to intangible assets (including goodwill) that we do not amortize
      but which generates tax deductions is added back, because these benefits would
      be realized only in the event of a future sale of Aston or an impairment charge.
      We add back the portion of consolidated depreciation expense incurred by Aston
      because under Aston’s operating agreement we are not required to replenish these
      depreciating assets. We also add back expenses that we incur for financial
      reporting purposes for which there is no corresponding cash expense because
      such
      expenses cause our Net Income to be understated relative to our ability to
      generate cash flow to service debt, if any, finance accretive acquisitions,
      and
      repurchase securities, if appropriate.




Three
                Months Ended
              September
                30,
            
            Nine
                Months Ended
              September
                30,2008
            
            2007
            
            2008
            
            2007**Net
                Income**
            
            $
            641,004
            
            $
            892,699
            
            $
            2,166,164
            
            $
            2,794,975Intangible
                amortization
            
            
            —
            
            
            —
            
            
            —
            
            
            —Intangible-related
                deferred taxes
            
            
            233,263
            
            
            236,772
            
            
            699,788
            
            
            710,315Affiliate
                depreciation
            
            
            45,998
            
            
            46,345
            
            
            141,054
            
            
            126,568Other
                non-cash expenses
            
            
            —
            
            
            —
            
            
            —
            
            
            —**Cash
                Net Income**
            
            $
            920,265
            
            $
            1,175,816
            
            $
            3,007,006
            
            $
            3,631,858




**Liquidity
      and Capital Resources**




Highbury
      funds its business activities with a combination of operating income and the
      interest income earned on its cash and cash equivalent balances and expects
      to
      fund future acquisitions with retained net income or the issuance of debt or
      equity. As of September 30, 2008, Highbury had no borrowings outstanding. In
      the
      future, however, we will closely review our ratio of debt to Adjusted EBITDA
      (our “leverage ratio”) as an important gauge of our ability to service debt,
      make new investments and access capital. The leverage covenant of our credit
      facility provides for a maximum total leverage ratio (including debt from all
      sources) of 5.0 times Adjusted EBITDA, although borrowings under the credit
      agreement are limited to 2.0 times Adjusted EBITDA. We believe this level is
      prudent for our business, although substantially higher levels of senior and
      subordinated debt in relation to Adjusted EBITDA may also be prudent to fund
      future acquisitions. Adjusted EBITDA means the sum of (a) net income determined
      in accordance with GAAP, plus (b) amortization of intangible assets, plus (c)
      interest expense, plus (d) depreciation, plus (e) other non-cash expenses,
      plus
      (f) income tax expense. This definition of Adjusted EBITDA is consistent with
      the definition of EBITDA used in our credit facility. Adjusted EBITDA, as
      calculated by us, may not be consistent with computations of Adjusted EBITDA
      by
      other companies. For further information about our credit facility, please
      refer
      to the section entitled “Credit Facility.”




26





Current
      market conditions may make it more difficult for us to complete an acquisition
      through the use of debt financing because of the reduced availability of debt
      at
      appropriate terms. A decrease in our assets under management caused by negative
      market conditions could have an adverse effect on the distributions we receive
      from Aston and potential future affiliates and limit our ability to repay our
      borrowings, including any debt issued to finance an acquisition. In addition,
      our ability to make accretive acquisitions through the issuance of additional
      equity is dependent upon the relationship between the market value of our
      outstanding common stock and the pricing of any transaction. If the price of
      our
      common stock remains at or near its current level, it may be more difficult
      for
      us to issue additional equity to finance an acquisition. The inability to
      complete accretive acquisitions may negatively impact our growth, results of
      operations or financial condition.




Aston
      funds its business activities with cash flows from operations. However, Highbury
      may occasionally provide capital to Aston to help finance the development of
      new
      products or execute accretive acquisitions. Because Aston, like most investment
      management businesses, does not require a high level of capital expenditures,
      such as for purchases of inventory, property, plant or equipment, liquidity
      is
      less of a concern than for a company that sells physical assets.





As
      of
      September 30, 2008, the Company had $9,251,097 of cash and equivalents,
      $1,543,215 of investments and $3,283,596 of accounts receivable. The accounts
      receivable are primarily related to the investment advisory fees, administrative
      fees and money market service fees earned by Aston in September 2008. Aston
      receives its revenues generally within the first week of the month following
      the
      month in which they are earned. At September 30, 2008, the Company had accounts
      payable and accrued expenses of $4,524,005, primarily attributable to the
      revenue sharing payments owed to Aston’s distribution partners and the
      investment sub-advisers. These payments are generally paid shortly after the
      receipt of the revenue discussed above. In addition, this figure includes
      $873,400 of distributions payable to the Aston management members which were
      subsequently paid in October 2008. Because Aston is able to finance its
      day-to-day operations with operating cash flow, it does not need to retain
      a
      significant amount of cash on its balance sheet. Going forward, we expect Aston
      will distribute all of its excess cash and cash equivalents on a quarterly
      basis
      to its owners, so we do not expect large cash and cash equivalents balances
      to
      accrue within Aston. Highbury will retain its cash and cash equivalents, and
      we
      expect our cash and cash equivalents balances will increase over time, until
      the
      cash and cash equivalents is used to fund acquisitions, service debt, if any,
      or
      repurchase our securities, if appropriate.




Management
      believes our existing liquid assets, together with the expected continuing
      cash
      flow from operations, our borrowing capacity under the current credit facility
      and our ability to issue debt or equity securities will be sufficient to meet
      our present and reasonably foreseeable operating cash needs and future
      commitments.




*Cash
      Flow from Operating Activities* .
      Cash
      flow from operations generally represents net income plus non-cash charges
      for
      amortization, deferred taxes, depreciation and other items as well as the
      changes in our consolidated working capital. For the three months ended
      September 30, 2008, the Company received $2,658,460 of net cash flow from its
      operating activities. In addition to net income of $641,004, the Company’s cash
      flow was increased by $99,997 relating to deferred taxes related primarily
      to
      the amortization of goodwill and intangible assets for income tax purposes
      and
      by $891,104 relating to the Company’s minority interest in its affiliate. Cash
      flow was further increased by $657,366 relating to an increase in accounts
      payable and accrued expenses. For the three months ended September 30, 2007,
      the
      Company received $1,875,259 of net cash flow from its operating activities.
      In
      addition to net income of $892,699, the Company’s cash flow was increased by
      $134,706 relating to deferred taxes related primarily to the amortization of
      goodwill and intangible assets for income tax purposes and by $947,709 relating
      to the Company’s minority interest in its affiliate.  Cash flow was
      decreased by $524,334 relating to a decrease in accounts payable and accrued
      expenses.




27





For
      the
      nine months ended September 30, 2008, the Company received $6,191,431 of net
      cash flow from its operating activities. In addition to net income of
      $2,166,164, the Company’s cash flow was increased by $533,540 relating to
      deferred taxes related primarily to the amortization of goodwill and intangible
      assets for income tax purposes and by $2,649,042 relating to the Company’s
      minority interest in its affiliate. Cash flow was further increased by $49,186
      relating to an increase in accounts payable and accrued expenses. For the nine
      months ended September 30, 2007, the Company received $9,028,332 of net cash
      flow from its operating activities. In addition to net income of $2,794,975,
      the
      Company’s cash flow was increased by $613,974 relating to deferred taxes related
      primarily to the amortization of goodwill and intangible assets for income
      tax
      purposes, by $846,909 relating to an increase in accounts payable and accrued
      expenses and by $3,535,525 relating to the Company’s minority interest in its
      affiliate.




*Cash
      Flow from Investing Activities* .
      Changes
      in net cash flow from investing activities will result primarily from capital
      expenditures, investments in new affiliates, investments in U.S. Treasury
      securities with an original maturity in excess of 90 days or, from time to
      time,
      investments in new mutual funds created by Aston. In January 2008, Highbury
      invested $1,000,000 in the Aston/Smart Allocation ETF Fund, and in March 2008,
      Highbury invested $1,000,000 in the Aston/New Century Absolute Return ETF Fund.
      Highbury financed these investments through the sale of investments in U.S.
      treasury securities. In the second quarter of 2008, Highbury sold $400,000
      of
      investments in the Aston/New Century Absolute Return ETF Fund and $500,000
      of
      investments in the Aston/Smart Allocation ETF Fund. In the third quarter of
      2008, Highbury liquidated its investment in the Aston/New Century Absolute
      Return ETF Fund generating proceeds of $603,960. In March 2007, Highbury
      purchased U.S. treasury securities in the amount of $1,499,971 and invested
      $1,000,010 in the Aston/River Road Small-Mid Cap Fund. During the second quarter
      of 2007, Highbury liquidated this investment as new assets flowed into the
      fund
      generating total proceeds to Highbury of $1,051,942. In June 2007, Highbury
      invested $200,000 in the Aston/River Road Small-Mid Cap Fund Class I and
      $200,000 in the Aston/River Road Dynamic Equity Fund Class I. Each of these
      investments provided the initial seed capital for a new mutual fund share class
      within the two existing funds. In July 2007 Highbury liquidated its investment
      in the Aston/River Road Small-Mid Cap Fund Class I as new assets flowed into
      the
      fund generating total proceeds to Highbury of $201,332. In addition, Aston
      purchased $2,756 and $114,722 in fixed assets in the nine months ended September
      30, 2008 and September 30, 2007, respectively. Cash flow from investing
      activities provided $102,591 in the three months ended September 30, 2008,
      as
      compared to $191,100 in the three months ended September 30, 2007. Cash flow
      from investing activities provided $2,065,254 in the nine months ended September
      30, 2008, as compared to a use of $3,342,394 in the nine months ended September
      30, 2007.





*Cash
      Flow from Financing Activities* .
      Changes
      in net cash flow from financing activities will result primarily from the
      issuance of equity or debt or the repayment of any obligations which may arise
      thereunder, the repurchase of the Company’s outstanding securities or the
      payment of distributions to Aston’s minority interest holders. The Company
      distributed $914,637 and $2,723,439 to Aston’s minority interest holders during
      the three and nine months ended September 30, 2008, respectively. The Company
      distributed $991,992 and $2,374,717 to Aston’s minority interest holders during
      the three and nine months ended September 30, 2007, respectively. Additionally,
      during the first quarter of 2008, the Company repurchased 1,836,292 warrants
      for
      $1,823,083 and 400,372 shares for $1,735,611. In July 2007, Highbury entered
      into Unit Purchase Option Repurchase Agreements with the underwriters of our
      initial public offering pursuant to which we repurchased the option from the
      underwriters for aggregate cash payments of $1,300,000. The unit purchase option
      was cancelled upon its repurchase. Cash flow from financing activities used
      $914,637 in the three months ended September 30, 2008, as compared to a use
      of
      $2,291,992 in the three months ended September 30, 2007. Cash flow from
      financing activities used $6,282,133 in the nine months ended September 30,
      2008, as compared to a use of $3,674,717 in the nine months ended September
      30,
      2007.




***Credit
      Facility***




On
      October 1, 2008, we entered into a Second Amendment to our credit agreement
      with
      City National Bank. The credit agreement, as amended, expires on September
      30,
      2009 and provides for a revolving line of credit of up to $12.0 million. The
      credit agreement provides for a maximum total leverage ratio (including debt
      from all sources) of 5.0 times Adjusted EBITDA, although borrowings under the
      credit agreement are limited to 2.0 times Adjusted EBITDA, and incorporates
      a
      minimum fixed charge coverage ratio of 1.25x and a minimum net worth of $20
      million. The credit facility may be used for working capital, general corporate
      purposes and repurchases of our outstanding securities, if
      appropriate.




28





Borrowings
      under our credit facility will bear interest, at our option, at either the
      fluctuating prime rate plus one-half of one percent (0.50%) per year or the
      LIBOR interest rate plus two and three-quarters percent (2.75%) per year. In
      addition, we will be required to pay annually a fee of one quarter of one
      percent (0.25%) on the average daily balance of the unused portion of the credit
      facility. We will have to make interest payments monthly for any prime rate
      borrowings. For any LIBOR borrowings, interest payments will be made at the
      end
      of any LIBOR contract or quarterly, whichever is sooner. Any outstanding
      principal is due at maturity on September 30, 2009. For so long as certain
      events of default continue, upon notice by City National Bank, the interest
      rate
      on any outstanding loans will increase by three percent (3%). As of September
      30, 2008, we had no borrowings outstanding.




Our
      credit facility is secured by all of our assets. Our credit facility contains
      customary negative covenants which, among other things, limit indebtedness,
      asset sales, loans, investments, liens, mergers and acquisitions, sale and
      leaseback transactions and purchases of equity, other than repurchases of our
      outstanding securities. Our credit facility also contains affirmative covenants
      as to, among other things, financial statements, taxes, corporate existence
      and
      legal compliance. As of September 30, 2008, we were in compliance with all
      of
      the covenant requirements under this credit facility.




29





***Contractual
      Obligations***




There
      have been no material changes to the Company’s contractual obligations as
      disclosed in the Company’s Annual Report on Form 10-K for the year ended
      December 31, 2007, filed with the Securities and Exchange Commission on March
      28, 2008.




***Supplemental
      Non-GAAP Liquidity Measure***




As
      supplemental information, we provide information regarding Adjusted EBITDA,
      a
      non-GAAP liquidity measure. This measure is provided in addition to, but not
      as
      a substitute for, cash flow from operations. As a measure of liquidity, we
      believe that Adjusted EBITDA is useful as an indicator of our ability to service
      debt, make new investments and meet working capital requirements. We provide
      this non-GAAP measure because our management uses this information when
      analyzing the Company’s financial position.





The
      following table provides a reconciliation of net income to Adjusted
      EBITDA:




Three
                Months Ended
              September
                30,
            
            Nine
                Months Ended
              September
                30,2008
            
            2007
            
            2008
            
            2007**Net
                Income**
            
            $
            641,004
            
            $
            892,699
            
            $
            2,166,164
            
            $
            2,794,975Income
                tax expense
            
            
            412,740
            
            
            572,607
            
            
            1,318,133
            
            
            1,788,817Interest
                expense
            
            
            —
            
            
            —
            
            
            —
            
            
            —Intangible
                amortization
            
            
            —
            
            
            —
            
            
            —
            
            
            —Depreciation
                and other amortization
            
            
            45,998
            
            
            46,345
            
            
            141,054
            
            
            126,568Other
                non-cash expenses
            
            
            —
            
            
            —
            
            
            —
            
            
            —**Adjusted
                EBITDA**
            
            $
            1,099,742
            
            $
            1,511,651
            
            $
            3,625,351
            
            $
            4,710,360





**Off-Balance
      Sheet Arrangements**




Warrants
      issued in conjunction with our initial public offering are equity linked
      derivatives and accordingly represent off-balance sheet arrangements. The
      warrants meet the scope exception in paragraph 11(a) of FAS 133 and are
      accordingly not accounted for as derivatives for purposes of FAS 133, but
      instead are accounted for as equity.





**Agreements
      with Berkshire Capital**




Highbury
      occupies office space provided by Berkshire Capital Securities LLC, or Berkshire
      Capital, pursuant to an office services agreement. Messrs. Cameron, Foote and
      Forth, our executive officers, are affiliated with Berkshire Capital. The office
      services agreement provides for a monthly fixed fee of $10,000 for office and
      secretarial services including use and access to our office in Denver, Colorado
      and those other office facilities of Berkshire Capital as we may reasonably
      require. In addition, certain employees of Berkshire Capital will provide us
      with financial reporting support on a daily basis. The term of the agreement
      is
      indefinite. The agreement is terminable by either party upon six months’ prior
      notice. The condensed consolidated statements of income for the three and nine
      months ended September 30, 2008 include $30,000 and $90,000 related to this
      agreement, respectively. The condensed consolidated statements of income for
      the
      three and nine months ended September 30, 2007 include $22,500 and $67,500
      related to this agreement, respectively.




30





We
      have
      engaged Berkshire Capital to act as our non-exclusive financial advisor in
      connection with possible future acquisitions. In such capacity, Berkshire
      Capital will assist us in structuring, negotiating and completing acquisitions
      of targets identified by us and acknowledged by both us and Berkshire Capital
      as
      being subject to Berkshire Capital’s engagement. If we enter into an agreement
      to acquire such a target company during the term of Berkshire Capital’s
      engagement or within two years thereafter, and such acquisition is completed,
      then we will pay Berkshire Capital a success fee at closing equal to the greater
      of (a) the sum of 3.0% of the first $15 million of the aggregate consideration
      in such transaction and 1.0% of the aggregate consideration in such transaction
      in excess of $15 million, and (b) $600,000. Upon the execution of a definitive
      agreement with respect to an acquisition, we will pay Berkshire Capital $200,000
      which will be credited against the success fee. We will also reimburse Berkshire
      Capital for its reasonable expenses in performing its services under the
      engagement letter and will indemnify Berkshire Capital for liabilities it incurs
      in performing such services, unless such liabilities are attributable to
      Berkshire Capital’s gross negligence or willful misconduct. As of September 30,
      2008, we had made no payments pursuant to this engagement.




**Impact
      of Inflation**




Our
      revenue is directly linked to the total assets under management within the
      26
      mutual funds and the separate accounts managed by Aston. Our total assets under
      management increase or decrease on a daily basis as a result of fluctuations
      in
      the financial markets and net asset flows from investors. While long-term
      returns in the financial markets have historically exceeded the rate of
      inflation, this may not be the case going forward. Our operating expenses are
      likely to be directly affected by inflation. Furthermore, we earn interest
      income on our cash balances. Current interest rates available to us may or
      may
      not exceed the current rate of inflation. In some cases, the impact of inflation
      could erode our purchasing power.




**ITEM
      3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
      RISK.**





There
      have been no material changes to our Quantitative and Qualitative Disclosures
      About Market Risk in the nine months ended September 30, 2008.  Please
      refer to Item 7A in our Annual Report on Form 10-K for the fiscal year ended
      December 31, 2007, filed with the Securities and Exchange Commission on March
      28, 2008.




**ITEM
      4. CONTROLS AND PROCEDURES.**




We
      carried out an evaluation, under the supervision and with the participation
      of
      our management, including our chief executive officer and chief financial
      officer, of the effectiveness of our disclosure controls and procedures as
      of
      September 30, 2008. Based on that evaluation, our chief executive officer and
      chief financial officer concluded that our disclosure controls and procedures
      are effective as of the end of the period covered by this report to ensure
      that
      information required to be disclosed by us in reports that we file or submit
      under the Securities Exchange Act of 1934 is recorded, processed, summarized
      and
      reported within the time periods specified in Securities and Exchange
      Commission’s rules and forms.




During
      the most recently completed fiscal quarter, there has been no change in our
      internal control over financial reporting that has materially affected, or
      is
      reasonably likely to materially affect, our internal control over financial
      reporting.





**PART
      II.**


**OTHER
      INFORMATION**




**ITEM
      1. LEGAL PROCEEDINGS**





Neither
      Highbury nor Aston is currently subject to any material legal proceedings,
      nor,
      to our knowledge, is any material legal proceeding threatened against either
      of
      them. From time to time, we may be a party to certain legal proceedings
      incidental to the normal course of our business. While the outcome of these
      legal proceedings cannot be predicted with certainty, we do not expect that
      these proceedings will have a material effect upon our financial condition
      or
      results of operations.




31





**ITEM
      1A. RISK FACTORS**





There
      have been no material changes from the risk factors previously disclosed in
      Item
      1A “Risk Factors” of our Annual Report on Form 10-K filed with the Securities
      and Exchange Commission on March 28, 2008.




**ITEM
      6. EXHIBITS**





The
      exhibits are listed on the Exhibit Index and are included elsewhere in this
      Quarterly Report on Form 10-Q.




32





**SIGNATURES**





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




**HIGHBURY
                FINANCIAL INC.**Dated:
                November 6, 2008
            By: /s/
                Richard S.
                FooteRichard
                S. Foote
              President
                and Chief Executive Officer
              (Principal
                Executive Officer)Dated:
                November 6, 2008
            By:
                /s/ R. Bradley
                ForthR.
                Bradley Forth
              Executive
                Vice President, Chief Financial Officer and Secretary
              (Principal
                Financial and Accounting Officer)




33





**EXHIBIT
      INDEX**





**Exhibit**
              **Number**
            
            **Description
                of Document**10.1
                (1)
            
            Second
                Amendment to Credit Agreement, dated October 1, 2008, by and between
                Highbury and City National Bank31.1
            
            Section
                302 Certification by CEO.31.2
            
            Section
                302 Certification by CFO.32
            
            Section
                906 Certification by CEO and CFO.




(1)
            Incorporated
                by reference from our Current Report on Form 8-K filed with the SEC
                on
                October 6, 2008.




34