UNITED STATES
SECURITIES AND EXCHANGE COMMISSION  Washington,
D.C. 20549 FORM 10-K


|           |   |  |                                                                                         
|---------- | - |  | ----------------------------------------------------------------------------------------
|          
|           |   |  |                                                                                         
|(Mark One) |   | 
|           | þ |  | ANNUAL REPORT PURSUANT TO SECTION
 13 OR 15(d)OF THE SECURITIES EXCHANGE ACT OF 1934    
|           |   |  |                                                                                         
|           |   |  | For the fiscal year ended December 31, 2009                                             
|           |   |  | or                                                                                      
|           |   |  |                                                                                         
|           | 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 001-33737

|                                                    
|----------------------------------------------------
|                                                    
|Rodman
& Renshaw Capital Group, Inc.                
|(Exact name of Company as specified in its
 charter)

|                                          |  |                    
|----------------------------------------- |  | -------------------
|Delaware                                  |  | 84-1374481         
|(State or other jurisdiction              |  | (I.R.S. Employer   
|of incorporation or organization)         |  | Identification No.)
|                                          |  |                    
|1251 Avenue of the Americas, New York, NY |  | 10020              
|(Address of principal executive offices)  |  | (Zip Code)         

|                                                             |                                          
|------------------------------------------------------------ | -----------------------------------------
|Registrants telephone number, including
 area code:        
|212-356-0500                                                
|                                                            
|Securities registered pursuant to Section
 12(b) of the Act:
|Title of each class                                          | Name of each exchange on which registered
|Common Stock, $.001 par value                                | NASDAQ                                   
|                                                             |                                          
|Securities registered pursuant to Section
 12(g) of the Act:
|None                                                        
|(Title of class)                                            
|                                                            

Indicate
by check mark if the registrant is a well-known seasoned issuer, as defined by
Rule 405 of the Securities Act.


Yes     o     No     x


Indicate
by check mark if the registrant is not required to file reports pursuant to
Section 13 or Section 15(d) of the Exchange Act.


Yes     o     No     x


Indicate
by check mark whether the registrant (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 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 has submitted electronically and posted on
its corporate Web site, if any, every Interactive Data File required to be
submitted and posted pursuant to rule 405 of Regulation S-T during the
preceding 12 months (or for such shorter period that the registrant was
required to submit and post such files). Yes    o     No     o

Indicate
by check mark if disclosure of delinquent filers pursuant to Item 405 of
Regulation S-K is not contained herein, and will not be contained, to the best
of registrants knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to
this Form 10-K.     x

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
the definitions of large accelerated filer, accelerated filer and smaller
reporting company in Rule 12b-2 of the Exchange Act. (Check one):

Large
Accelerated Filer     o     Accelerated
Filer     o     Non-accelerated
Filer     o     Smaller
Reporting Company
     x

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

Indicate
by check mark whether the registrant (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 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

The
aggregate market value of the voting stock held by non-affiliates of the
registrant as of June 30, 2009 was approximately $20,500,000.

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The
number of shares outstanding of the registrants common stock, $.001 par value,
as of March 16, 2010 was 35,349,445 shares.

DOCUMENTS INCORPORATED BY REFERENCE

The
information in response to Part III, Items 9, 10, 11, 12 and 13 of this Report
are incorporated herein by reference to the Registrants Definitive Proxy Statement,
to be filed on or before April 30, 2010, with respect to its 2010 Annual
Meeting of Stockholders.

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TABLE OF CONTENTS

|           |  |                                                                                                                    |  |     
|---------- |  | ------------------------------------------------------------------------------------------------------------------ |  | ----
|           |  |                                                                                                                    |  | Page
|           |  |                                                                                                                    |  |     
|           |  | PART I                                                                                                             |  |     
|Item 1.    |  | Business                                                                                                           |  | 2   
|Item 1A.   |  | Risk Factors                                                                                                       |  | 10  
|Item 1B.   |  | Unresolved
 Staff Comments                                                                                         |  | 19  
|Item 2.    |  | Properties                                                                                                         |  | 19  
|Item 3.    |  | Legal
 Proceedings                                                                                                 |  | 19  
|Item 4.    |  | Submission of
 Matters to a Vote of Security Holders                                                               |  | 20  
|           |  |                                                                                                                    |  |     
|           |  | PART II                                                                                                            |  |     
|Item 5.    |  | Market Price of
 Registrants Common Stock, Related Stockholder Matters and Issuer Purchases
 of Equity Securities |  | 20  
|Item 6.    |  | Selected
 Financial Data                                                                                           |  | 21  
|Item 7.    |  | Managements
 Discussion and Analysis of Financial Condition and Results of Operations                             |  | 23  
|Item 7A.   |  | Quantitative
 and Qualitative Disclosures About Market Risk                                                        |  | 31  
|Item 8.    |  | Financial
 Statements and Supplementary Data                                                                       |  | 32  
|Item 9.    |  | Changes in and
 Disagreements with Accountants on Accounting and Financial Disclosure                              |  | 32  
|Item 9A.   |  | Controls and
 Procedures                                                                                           |  | 32  
|Item 9B.   |  | Other
 Information                                                                                                 |  | 34  
|           |  |                                                                                                                    |  |     
|           |  | PART III                                                                                                           |  |     
|Item 10.   |  | Directors,
 Executive Officers and Corporate Governance                                                            |  | 34  
|Item 11.   |  | Executive
 Compensation                                                                                            |  | 34  
|Item 12.   |  | Security
 Ownership of Certain Beneficial Owners and Management and Related Stockholder
 Matters                   |  | 34  
|Item 13.   |  | Certain
 Relationships and Related Transactions, and Director Independence                                         |  | 34  
|Item 14.   |  | Principal
 Accounting Fees and Services                                                                            |  | 34  
|           |  |                                                                                                                    |  |     
|           |  | PART IV                                                                                                            |  |     
|Item 15.   |  | Exhibits and
 Financial Statement Schedules                                                                        |  | 34  
|           |  |                                                                                                                    |  |     
|Signatures |  |                                                                                                                    |  | 36  

FORWARD LOOKING STATEMENT INFORMATION

Certain
statements made in this Annual Report on Form 10-K are forward-looking
statements regarding the plans and objectives of management for future
operations. Such statements involve known and unknown risks, uncertainties and
other factors that may cause our actual results, performance or achievements to
be materially different from any future results, performance or achievements
expressed or implied by such forward-looking statements. The forward-looking
statements included herein are based on current expectations that involve
numerous risks and uncertainties. Our plans and objectives are based, in part,
on assumptions involving judgments with respect to, among other things, future
economic, competitive and market conditions and future business decisions, all
of which are difficult or impossible to predict accurately and many of which
are beyond our control. Although we believe that our assumptions underlying the
forward-looking statements are reasonable, any of the assumptions could prove
inaccurate and, therefore, there can be no assurance that the forward-looking
statements included in this Report will prove to be accurate. In light of the
significant uncertainties inherent in the forward-looking statements included
herein particularly in view of the current state of our operations, the
inclusion of such information should not be regarded as a statement by us or
any other person that our objectives and plans will be achieved. Factors that
could cause actual results to differ materially from those expressed or implied
by such forward-looking statements include, but are not limited to, the factors
set forth herein under the headings Business, Risk Factors and
Managements Discussion and Analysis of Financial Condition and Results of
Operations. We undertake no obligation to revise or update publicly any
forward-looking statements for any reason.

1

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PART I

Item 1. Business

(a) General Development of Business

Rodman
& Renshaw Capital Group, Inc. (RRCG) is a Delaware holding company which
was organized on December 20, 2006. RRCG, through its various subsidiaries, is
engaged in the investment banking business. RRCGs principal operating
subsidiary is Rodman & Renshaw, LLC (R&R), a Delaware limited
liability company organized on June 20, 2002. R&R is a broker dealer
registered with the Financial Industry Regulatory Authority, Inc. (FINRA).
RRCG and its subsidiaries, including R&R, are collectively referred to
herein as Company, we, our or us.

Overview

We
are a full-service investment bank dedicated to providing corporate finance,
strategic advisory and related services to public and private companies across
multiple sectors and regions. We also provide research and sales and trading
services primarily to institutional investors. We are the leader in the PIPE
(private investment in public equity) and RD (registered direct offering)
transaction markets. We have been ranked the #1 Placement Agent by deal volume
of PIPE and RD financing transactions completed every year since 2005. The
sectors that we currently serve include life science/healthcare, energy,
metals/mining, financial services and cleantech and the regions we currently
serve include the United States and China. Our primary product and service
offerings include financing transactions, including private placements and
public offerings. We also provide research and sales and trading services to
institutional investors.

In
October 2007, we consummated an underwritten public offering (the October 2007
financing) of our common stock, which generated net proceeds of $36.3 million.
Our stated plan was to use the net proceeds to:

| |  |  |       |                                                                                                                                                                     
| |  |  | ----- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  |  | (i)   | broaden our
 presence in the life science sector;                                                                                                                   
| |  |  |       |                                                                                                                                                                     
| |  |  | (ii)  | establish
 integrated investment banking platforms to service other sectors of the
 economy that, like biotechnology, have significant and recurring capital
 needs;
| |  |  |       |                                                                                                                                                                     
| |  |  | (iii) | expand our
 product base to include other financing alternatives, such as underwritten
 public offerings, and to increase our strategic advisory capability;        
| |  |  |       |                                                                                                                                                                     
| |  |  | (iv)  | develop a
 principal transaction investment platform that leverages off of our expand
 our sector expertise; and                                                    
| |  |  |       |                                                                                                                                                                     
| |  |  | (v)   | establish a
 physical presence in key markets in the United States and internationally.                                                                             

We
used proceeds from the October 2007 financing to consummate the following
transactions, each of which addressed one or more of our strategic objectives
outlined above:

| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | In March
 2008 we acquired Miller Mathis & Co, LLC (Miller Mathis), a leading
 independent mergers and acquisitions advisor to the global steel industry.
 The acquisition of Miller Mathis gave us an immediate presence in a growing
 sector of the global economy  metals/mining. In addition, Miller Mathis
 focus is on strategic advisory services, such as mergers and acquisitions,
 rather than corporate finance, which historically, has been our strength.
 Finally, the acquisition gave us the opportunity to apply our financing
 know-how to another large sector of the economy that has significant and
 recurring capital needs.                                                                             
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| |  | In June 2008
 we acquired COSCO Capital Management LLC (COSCO), a leading private
 investment bank focused on the energy sector. Like the acquisition of Miller
 Mathis, the acquisition of COSCO gave us an immediate presence in a
 significant and growing sector of the global economy with recurring capital
 needs. In addition, COSCOs focus has been on arranging private financing
 transactions; it did not have expertise in other types of financing
 transactions that we specialize in such as PIPEs (private investment in
 public equity), RDs (registered direct placements) and underwritten public
 offerings.                                                                                                
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| |  | In May 2008
 we formed our Global Capital Markets (GCM) Group to broaden and deepen our
 capabilities to structure, lead and place offerings in the public capital
 markets. Our GCM professionals work together with our investment bankers to
 develop the appropriate financing structure and vehicle for our clients. Our
 GCM capabilities include initial public offerings (IPOs);
 follow-on public offerings, dual listings, closed-end funds and special
 purpose acquisition corporations (SPACs). The GCM Group executes all
 registered offerings in which we participate as an underwriter. It targets
 institutional investors and high net worth individuals in the United States,
 Europe, Asia and the Middle East.

2

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| |   |                                                                                                                                                                                                                                                                                             
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | In May 2008
 we formed Aceras BioMedical LLC (Aceras BioMedical), a joint venture with
 an established team of biotech research and investment specialists, to make
 principal investments in promising products and early-stage companies in the
 biotechnology and life science sectors.

Business Environment

Market
conditions and valuations for companies in the life science sector and other
sectors in which we are active, as well as general market conditions, can
materially affect our financial performance. From mid-2007 through the first
quarter of 2009, declining valuations, extreme volatility and lack of liquidity
in certain sectors of the capital markets, notably the life science sector, as
well as a slowing of economic growth generally led to declines in financing
activity, smaller financing transactions, and a resulting decline in our
revenue. Beginning in the second quarter of 2009, market conditions improved as
evidenced by an increased number of financing transactions and an increase in
the size of the transactions.

Although
on September 15, 2009, Ben Bernanke, the Chairman of the Federal Reserve Bank,
announced that the recession in the United States had ended and the recovery
had begun, it is not possible to predict the breadth or depth of the recovery
or whether it is even sustainable. It is also difficult to forecast whether the
recent improvement in market conditions will continue and for how long. Despite
these concerns, we remain cautiously optimistic about our prospects. This optimism
is based on our performance and that of the financial markets over the last
nine months. In addition, we are not burdened with exposure to commercial paper
or real estate risk and hold no investments in structured products or vehicles
that have undergone client revaluations, such as collateralized debt
obligations and credit default swaps. On the other hand, the nature of our
revenue generation, including the size of transactions, the timing of
transaction closings and the sectors in which those transactions occur, make
future performance difficult to predict and potentially highly variable.
Revenues for many of the services we provide are earned only upon the
successful completion of a transaction. Accordingly, revenues and net income in
any period may not be indicative of full-year results or the results of any
other period and may vary significantly from year-to-year and
quarter-to-quarter depending on whether and when transactions are completed and
the number, size and type of transactions completed.

(b) Financial Information about Industry
Segments

Through
June 30, 2009, we operated in one business segment. Commencing July 1, 2009, we
began operating in two business segments, Capital Markets and Merchant Banking.
The Capital Markets reportable segment includes our investment banking, sales
and trading activities and research. The Capital Markets reportable segment is
managed as a single operating segment that provides the following principal
sources of revenue:

| |  |   |                                                                                                               
| |  | - | --------------------------------------------------------------------------------------------------------------
| |  |  | investment banking fees, which are derived from corporate
 finance activities and strategic advisory services;
| |  |   |                                                                                                               
| |  |  | realized and unrealized gains with respect to securities held
 for our own account;                           
| |  |   |                                                                                                               
| |  |  | commissions on sales and trading activities;                                                                  
| |  |   |                                                                                                               
| |  |  | conference fees; and                                                                                          
| |  |   |                                                                                                               
| |  |  | other miscellaneous sources of revenues, such as interest.                                                    

Although
we have multiple sources of revenue derived within Capital Markets, most of our
revenue is derived from our investment banking services and consists of private
placement, underwriting and strategic advisory fees earned upon the successful
completion of financing or other types of corporate transactions, such as
mergers, acquisitions and dispositions.

The
Merchant Banking segment is primarily comprised of operating activities related
to Aceras BioMedical.

(c) Narrative Description of Business

Our
business consists of: (a) investment banking, which includes corporate finance
and strategic advisory services; (b) sales and trading; (c) equity research;
and (d) principal transactions.

Investment Banking

Our
investment banking professionals focus on providing corporate finance and
strategic advisory services to public and private companies. As of December 31,
2009, our investment banking group consisted of 16 senior managing directors
and managing directors, who focus on originating, structuring and placing
transactions. A significant majority of our investment banking revenues is
earned from public companies with a market capitalization below $500 million.
We aim to provide these companies with capital origination services and
strategic advice throughout their various stages of development.

3

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Corporate
Finance

We
are corporate finance specialists and plan to continue to focus primarily on
financing transactions. Our in-depth knowledge of a particular sector enables
us to develop financing strategies, transaction structures and financing
instruments that simultaneously address issuers needs for capital and the
investment communitys need to balance risk and reward. We offer our clients a
broad range of financing alternatives including private placements, PIPEs, RDs
and underwritten public offerings.

| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Private Placements. These transactions
 involve sales of unregistered securities. In most cases the issuer is a
 private company, although public companies can undertake private placements
 as well. The securities sold may be common or preferred equity, debt,
 convertible debt, or derivatives, such as warrants. The debt could be secured
 or unsecured, senior, mezzanine or subordinated. Many of these transactions
 involve units, which include more than one class of securities.
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| |  | Private Investment in Public Equity, or
 PIPE. In these transactions, a publicly-traded reporting company sells
 unregistered securities of a class, and/or convertible or exchangeable for a
 class, that is already publicly traded. Generally, the issuer is obligated to
 register the securities within a specified period after the transaction
 closes.                                                                                                                                
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| |  | Registered Direct Offerings, or RD. These
 transactions are direct placements of securities that have been registered
 under a shelf registration statement and, therefore, are immediately
 tradable.                                                                                                                                                                                                                                                                                      
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| |  | Public Offerings. These transactions involve
 securities that have been registered and that are listed or traded on an
 exchange. The offering may constitute an initial public offering by a
 private company or a follow-on offering by an existing public company.                                                                                                                                                                                                                       

In
2009, we completed 102 financing transactions which raised in excess of $2.5
billion and generated in excess of $90.4 million of investment banking
revenues. In a majority of these transactions we were either the lead
investment bank or the only investment bank. In addition, we are a recognized
industry leader in PIPE and RD financing transactions. From January 1, 2003
through December 31, 2009, we executed an aggregate of 317 PIPE and RD
financing transactions which raised in excess of $5.1 billion.

Strategic
Advisory Services

We
also provide strategic advisory services on a broad range of transactions
including mergers, acquisitions and asset sales. We are involved at each stage
of these transactions, from initial structuring to final execution.

Sales and Trading

As
of December 31, 2009, our sales and trading unit included five sales people,
four sales traders and three traders. They focus on executing trades for
institutional investor clients in the United States and Europe. As of December
31, 2009, we were a market-maker for 320 stocks.

Equity
Research

As
of December 31, 2009, our research department included ten senior analysts:
four who cover the life science sector; one who covers the metals/mining
sector; one who covers the energy sector; three who cover the China sector and
one who covers community banks. These senior analysts are supported by eight
associate analysts. As of December 31, 2009, the research department covered
144 companies.

Merchant Banking

The
Merchant Banking segment is primarily comprised of operating activities related
to Aceras BioMedical. On May 12, 2008, we formed Aceras BioMedical, a joint
venture through which we, in partnership with Aceras Partners, LLC, make
principal investments in early-stage biotechnology and life sciences companies.
In conjunction with the establishment of the joint venture, we formed a new
wholly-owned subsidiary which holds a 50% stake in Aceras BioMedical and serves
as the holding vehicle for all of our principal-related businesses. At December
31, 2009, our outstanding investment commitment to Aceras BioMedical to fund
operations and the joint ventures principal investments in life science
companies was $15.4 million. We receive 50% of Aceras BioMedicals economic
interest in all investments made.

4

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Industry
Leading Conferences

Our
investment conferences are industry-leading events that bring together
companies, institutional investors, business development executives and experts
from our targeted sectors. The conferences are designed to facilitate
interactions of companies in our targeted sectors with potential investors and
strategic partners. The conferences also provide an opportunity to exchange
ideas and build relationships and provide an opportunity for the participating
companies and investors to build relationships.

At
our most recent conference held in Beijing, China in March 2010, we had
approximately 140 presenting companies and over 1,000 attendees. Prior to that
at our conference held in New York City in the fall of 2009, we had
approximately 550 presenting companies and over 3,500 attendees. Our
conferences emphasize small-cap and mid-cap companies and bring together
company executives, scientists, industry specialists, venture capitalists and
other institutional investors and feature company presentations, panel
discussions and one-on-one meetings between company managements and investors.

Our Business Strategy and Model

Our
business strategy is to provide corporate finance, strategic advisory and
related services to companies that have significant recurring capital needs due
to their growth and development strategies. Currently, we focus primarily on
four sectors:

| |   |                                                                                                                  
| | - | -----------------------------------------------------------------------------------------------------------------
| |  | life
 sciences, including biotechnology, medical device, pharmaceutical and
 healthcare services companies;      
| |   |                                                                                                                  
| |  | metals and
 mining, including steel (manufacturing and distribution) and natural resource
 exploration companies;
| |   |                                                                                                                  
| |  | energy,
 including oil and gas and alternative energy companies; and                                             
| |   |                                                                                                                  
| |  | China based
 companies that are, or desire to become, public in the United States.                               

Historically,
we have been one of the leaders in the PIPE and RD transaction markets,
particularly for biotechnology companies. More recently, we have expanded our
product offerings to include underwritten public offerings and have created the
GCM Group to focus on these types of financing transactions.

PIPE
and RD Financing Transactions

PIPE
and RD financing transactions provide public companies with effective and
viable alternatives to raising capital through public follow-on offerings. In a
PIPE, a public reporting company sells unregistered securities to investors in
a private placement transaction and obligates itself to file, and process to
effectiveness, a registration statement with the U.S. Securities and Exchange
Commission (the SEC) covering the resale of the securities by the investors
within a specified period after the financing closes. The investors cannot sell
the securities until the registration statement becomes effective, or an
exemption from registration is available for the resale of the securities. In a
RD, a public reporting company sells directly to investors securities that are
covered by what is commonly referred to as a shelf registration statement (a
registration statement that was previously declared effective by the SEC) in a
financing transaction commonly referred to as a shelf takedown. Since these
securities are issued pursuant to an effective registration statement, the
investors can immediately resell them after the completion of the transaction.
We believe that both PIPE and RD financing transactions offer the advantages of
greater speed, lower cost and more efficient execution over public follow-on
offerings.

PIPE
and RD financing transactions, as alternatives to public follow-on offerings,
have grown significantly in recent years. Sagient Research Systems, the leading
provider of research, data, and analytics covering PIPE and RD financing
transactions, and a widely quoted and used industry resource, publishes
PlacementTracker, which aggregates PIPE and RD financing transactions
together for the purposes of its league tables and other statistical data.

We
completed our first PIPE and RD financing transactions in 2002 and since then
have become a leader in this space. The table below sets forth the number of
PIPE and RD transactions completed by us and the dollars raised by us in those
transactions from 2003 to 2009 as well as the total industry-wide number of
transactions and dollars raised during these periods. The statistical data in
the table below is derived from data published by PlacementTracker.

5

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|       |  |                         |  |                               |  |                         |  |                               |       |  |  |  |  |       |  |  |  |    |         |  | 
|------ |  | ----------------------- |  | ----------------------------- |  | ----------------------- |  | ----------------------------- | ----- |  |  |  |  | ----- |  |  |  | -- | ------- |  | 
|       |  | Rodman & Renshaw        |  | Industry-Wide                 | 
|       |  |                         |  |                               | 
|Period |  | Number of 
Transactions |  | Dollars Raised 
(in millions) |  | Number of 
Transactions |  | Dollars Raised 
(in millions) |      
|       |  |                         |  |                               |  |                         |  |                               |      
|2003   |  |                         |  | 31                            |  |                         |  | >$                            | 400   |  |  |  |  | 1,456 |  |  |  | >$ | 19,100  |  | 
|2004   |  |                         |  | 38                            |  |                         |  | >$                            | 590   |  |  |  |  | 2,001 |  |  |  | >$ | 21,600  |  | 
|2005   |  |                         |  | 29                            |  |                         |  | >$                            | 460   |  |  |  |  | 2,171 |  |  |  | >$ | 28,000  |  | 
|2006   |  |                         |  | 45                            |  |                         |  | >$                            | 850   |  |  |  |  | 1,622 |  |  |  | >$ | 31,200  |  | 
|2007   |  |                         |  | 53                            |  |                         |  | >$                            | 930   |  |  |  |  | 1,623 |  |  |  | >$ | 86,600  |  | 
|2008   |  |                         |  | 44                            |  |                         |  | >$                            | 580   |  |  |  |  | 1,153 |  |  |  | >$ | 123,800 |  | 
|2009   |  |                         |  | 77                            |  |                         |  | >$                            | 1,233 |  |  |  |  | 1,019 |  |  |  | >$ | 38,400  |  | 

According
to PlacementTracker, in each of calendar years 2003, 2005, 2006, 2007, 2008 and
2009, we were the leading investment bank in terms of the aggregate number of
PIPE and RD financing transactions completed, and in calendar year 2004 we were
the number two investment bank in terms of the aggregate number of PIPE and RD
financing transactions completed.

We
believe there is a significant opportunity for continued growth in this space
given issuers continuing desire to identify and pursue faster and less costly
financing alternatives to traditional follow-on public offerings and
institutional investors continuing interest in participating in these
financing transactions.

Competitive Strengths

Sector Focus

We
believe that our focus on a limited number of large sectors with recurring
capital needs is a competitive advantage. This focus manifests itself in the
form of an integrated investment banking platform that includes specialists in
the areas of corporate finance, strategic advisory services, research and
trading and institutional sales. We believe this specialization produces a
combination of investment banking and technical expertise, allowing us to
better understand and service the strategic and financing needs of our clients
and deliver differentiated advice that our clients require and appreciate when
addressing complex financing issues and making important strategic decisions.

Experienced Professionals with Deep Knowledge and
Broad Skills

We
have created an entrepreneurial, performance-oriented corporate culture that
attracts professionals who share a reputation for sector expertise, strong
execution skills and a history of successful transactions. We are led by a team
of professionals with extensive track records of success in arranging and
executing various types of financing transactions.

Strong Client Relationships

We
emphasize developing and nurturing long-term relationships with both issuers
and investors, including hedge funds, venture capital funds and private equity
funds. This has expanded our distribution and placement capabilities, enabling
us to raise significant amounts of capital for our issuer clients. We strive to
build long-term relationships with our issuer clients by providing services
appropriate to each stage of a companys development. We provide our clients
with frequent and consistent interaction with our senior professionals, who are
actively involved in all stages of our client engagements. We believe that the
high levels of expertise and client trust we have developed have been
significant factors contributing to our growth and have enabled us to generate
significant repeat business. In 2009, 2008, 2007, 2006 and 2005, approximately
41%, 66%, 38%, 34% and 44%, respectively, of our investment banking
transactions were executed with repeat clients.

Unleveraged Balance Sheet

As
of December 31, 2009, we had total assets of $94.9 million and stockholders
equity of $75.4 million. Most importantly, we are debt-free. We believe that
our unleveraged financial position will allow us to successfully compete for
new client engagements, consummate acquisitions and expand our underwriting
business.

6

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Competition

All
aspects of our business are intensely competitive. Our competitors are other
investment banks, brokerage firms, merchant banks and financial advisory firms.
We consider our primary competitors to include the following firms:

|                                             |                                    
|-------------------------------------------- | -----------------------------------
|Canaccord
 Adams, Inc.                       | Leerink
 Swann & Co.               
|                                             |                                    
|Cowen Group,
 Inc                            | Merriman
 Curhan Ford Group, Inc.  
|                                             |                                    
|Jefferies
 Group, Inc.                       | Oppenheimer
 & Co. Inc.            
|                                             |                                    
|JMP Group,
 Inc                              | Piper
 Jaffray Companies.          
|                                             |                                    
|Ladenburg
 Thalmann Financial Services, Inc. | Roth Capital
 Partners, LLC        
|                                             |                                    
|Lazard Ltd.                                  | Thomas
 Weisel Partners Group, Inc.

In
addition, if we continue to expand into new sectors, we are likely to face
competition from other firms.

We
compete on a national, regional and local level as well as on product and
business-line bases. Some of our competitors have teams that specifically focus
on the same sectors, and some of them specialize in the same types of financing
transactions that we specialize in  namely, private placements, PIPEs, RDs, IPOs
and follow-on public offerings. We do not believe that our competitors have the
same level of expertise as we do with PIPE and RD financing transactions or in
our target sectors. Many of our competitors, however, have substantially
greater capital and resources than we do and offer a broader range of financial
products. We believe that the principal factors affecting competition in our
business include client relationships, reputation, quality and price of our
products and services, market focus and the experience of our professionals.

A
number of large commercial banks have established or acquired broker-dealers or
have merged with other financial institutions. Many of these firms have the
ability to offer a broader range of products and services than we offer,
including loans, deposit accounts, insurance and alternative investment
strategies. Many of these firms also have more extensive investment banking
services, which may enhance their competitive position. They also have the
ability to support investment banking and securities products with commercial
banking, insurance and other financial services revenue in an effort to gain
market share, which could result in pricing pressure in our business. This
trend toward consolidation and convergence has also significantly increased the
capital base and geographic reach of our competitors.

In
the investment banking industry, competition for the recruitment and retention
of qualified professionals is also intense. Our ability to continue to compete
effectively in our business will depend upon our continued ability to retain
and motivate our existing professionals and attract new professionals.

Government Regulation

Our
business, as well as the financial services industry generally, is subject to
extensive regulation in the United States and elsewhere. As a matter of public
policy, regulatory bodies in the United States and the rest of the world are
charged with safeguarding the integrity of the securities and other financial
markets and with protecting the interests of participants in those markets. In
the United States, the SEC is the federal agency responsible for the
administration of the federal securities laws. R&R, our wholly-owned
subsidiary, is registered as a broker-dealer with the SEC and FINRA and in 49
states. Accordingly, R&R is subject to regulation and oversight by the SEC
and FINRA, a self-regulatory organization, which is itself subject to oversight
by the SEC and which adopts and enforces rules governing the conduct, and
examines the activities, of its member firms. State securities regulators also
have regulatory or oversight authority over R&R. Our business may also be
subject to regulation by foreign governmental and regulatory bodies and
self-regulatory authorities in other countries.

Broker-dealers
are subject to regulations that cover all aspects of the securities business,
including sales methods, trade practices among broker-dealers, use and
safekeeping of customers funds and securities, capital structure,
record-keeping, the financing of customers purchases and the conduct and
qualifications of directors, officers and employees. In particular, as a
registered broker-dealer and member of various self-regulatory organizations,
R&R is subject to the SECs uniform net capital rule, Rule 15c3-1 of the
Securities Exchange Act of 1934, as amended (Exchange Act), which specifies
the minimum level of net capital a broker-dealer must maintain and also
requires that a significant part of its assets be kept in relatively liquid
form. The SEC and various self-regulatory organizations impose rules that
require notification when net capital falls below certain predefined criteria,
limit the ratio of

7

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subordinated
debt to equity in the regulatory capital composition of a broker-dealer and
constrain the ability of a broker-dealer to expand its business under certain
circumstances. Additionally, the SECs uniform net capital rule imposes certain
requirements that may have the effect of prohibiting a broker-dealer from
distributing or withdrawing capital and requiring prior notice to the SEC for
certain withdrawals of capital. The SEC has adopted rule amendments that
establish alternative net capital requirements for broker-dealers that are part
of a consolidated supervised entity. As a condition to its use of the
alternative method, a broker-dealers ultimate holding company and affiliates
(referred to collectively as a consolidated supervised entity) must consent
to group-wide supervision and examination by the SEC. If we elect to become
subject to the SECs group-wide supervision, we will be required to report to
the SEC computations of our capital adequacy.

The
research areas of investment banks have been and remain the subject of
increased regulatory scrutiny. In 2002 and 2003, acting in part pursuant to a
mandate contained in Sarbanes-Oxley Act of 2002 (SOX), the SEC, the New York
Stock Exchange (NYSE), NASDAQ and FINRA adopted rules imposing heightened
restrictions on the interaction between equity research analysts and investment
banking personnel at member securities firms. In addition, in 2003 and 2004, a
number of securities firms in the United States reached a settlement with
certain federal and state securities regulators and self-regulatory
organizations to resolve investigations into their equity research analysts
alleged conflicts of interest. Under this settlement, to which we were not a
party, the firms have been subject to certain restrictions and undertakings. In
addition, the settlement imposes restrictions on the interaction between
research and investment banking departments, and these securities firms are
required to fund the provision of independent research to their customers. In
connection with the research settlement, the firms also subscribed to a
voluntary initiative imposing restrictions on the allocation of shares in
public offerings to executives and directors of public companies. The SEC has
proposed amendments to Regulation M that would further affect the manner in which
securities are distributed and allocated in registered public offerings, and
FINRA has proposed similar rulemaking in this area. We cannot fully predict the
practical effect that such restrictions or measures will have on our business.
Furthermore, the SEC, the NYSE, NASDAQ and FINRA may, in the future, adopt
additional and more stringent rules with respect to offering procedures and the
management of conflicts of interest in the future.

The
effort to combat money laundering and terrorist financing is a priority in
government policy with respect to financial institutions. The USA PATRIOT Act
of 2001 contains anti-money laundering and financial transparency laws and
mandates the implementation of various regulations applicable to broker-dealers
and other financial services companies, including standards for verifying
client identification at account opening, and obligations to monitor client
transactions and report suspicious activities. Through these and other
provisions, the USA PATRIOT Act of 2001 seeks to promote the identification of
parties that may be involved in terrorism or money laundering. Anti-money
laundering laws outside the United States contain some similar provisions. The
obligation of financial institutions, including us, to identify their
customers, watch for and report suspicious transactions, respond to requests
for information by regulatory authorities and law enforcement agencies, and
share information with other financial institutions, has required the
implementation and maintenance of internal practices, procedures and controls
which have increased, and may continue to increase, our costs, and any failure
with respect to our programs in this area could subject us to serious
regulatory consequences, including substantial fines and, potentially, other
liabilities.

Certain
of our businesses are subject to compliance with laws and regulations of the
United States, state governments, foreign governments and their respective
agencies and/or various self-regulatory organizations or exchanges relating to
the privacy of client information, and any failure to comply with these
regulations could expose us to liability and/or reputational damage.

Additional
legislation, changes in rules promulgated by the SEC and self-regulatory
organizations or changes in the interpretation or enforcement of existing laws
and rules, either in the United States or elsewhere, may directly affect the
mode of our operation and profitability.

The
United States and foreign government agencies and self-regulatory
organizations, as well as state securities commissions in the United States,
are empowered to conduct administrative proceedings that can result in censure,
fine, the issuance of cease-and-desist orders or the suspension or expulsion of
a broker-dealer or its directors, officers or employees.

Since
March 2004, we have received inquiries, subpoenas and requests for production
of documents from the SEC, FINRA and the Attorney General of the State of New
York (AG) with respect to individual PIPE transactions in which we acted as
placement agent. We have responded to each such inquiry, subpoena and request,
and, to our best knowledge, our responses have been to the satisfaction of the
inquiring party. We have never been advised by the SEC, FINRA or the AG that we
are, or have been, a target in connection with any such inquiry or
investigation in connection with our PIPE business, and we have no reason to
believe that we are currently a target in connection with any such inquiry or
investigation. We believe that these inquiries and investigations are
consistent with the general regulatory scrutiny that PIPE transactions have
been the subject of during this period.

8

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During
2009, 2008, 2007 and 2006, we have received ongoing inquiries from FINRA
relating to our participation in resale registration offerings that register
securities placed in private placement financing transactions in which we acted
as placement agent. The inquiries have focused on whether the offerings
contemplated by such resale registration statements are subject to the filing
requirements set forth in Rule 5110 of FINRA Conduct Rules (Rule 5110) and
FINRA Notice to Members 88-101 and related Regulation M matters. A Rule 5110
filing seeks approval from FINRA as to the fairness of the compensation
received, or to be received, by a member in a financing transaction covered by
the rule. The rule generally covers a member that is participating in a
public offering, the definition of which is currently the subject of industry
discussion and debate. We have responded to each such inquiry, and to our best
knowledge, such responses have been to the satisfaction of the inquiring party.
We expect that FINRA may seek further information from us. We have never been
advised by FINRA that we are, or were, a target in connection with any inquiry
or investigation relating to Rule 5110.

Risk Management and Compliance

Risk
is an inherent part of our business. Global markets, by their nature, are prone
to uncertainty and expose participants to a variety of risks. The principal
risks we face are market, liquidity, legal, reputation and operational risks.
We consider risk management to be of paramount importance in our day-to-day
operations. Consequently, we devote significant resources, including
investments in personnel and technology, to the measurement, analysis and
management of risk. While risk cannot be eliminated, we seek to mitigate it through
a strong internal control environment, with multiple overlapping and
reinforcing elements. We developed policies and procedures to identify, measure
and monitor the risks involved in our sales and trading, principal transactions
and investment banking activities. We apply sound practical judgment before
transactions occur to ensure appropriate risk mitigation is in place. We
accomplish this objective by allocating the use of capital to each of our
business units, establishing trading limits and setting credit limits for
individual counterparties.

The
challenge is balancing risk versus return. Our objective is to achieve adequate
returns from each of our business units commensurate with the risks inherent in
those units. Nonetheless, the effectiveness of our approach to managing risks
can never be completely assured. For example, unexpected large or rapid
movements or disruptions in one or more markets or other unforeseen
developments could have an adverse effect on our results of operations and financial
condition. The consequences of these developments can include losses due to
adverse changes in the value of our portfolio of securities and warrants and
increases in our credit exposure to customers and trading counterparties and
general systemic risk.

Employees

As
of December 31, 2009, we had approximately 114 full-time employees, of which
all but nine are based in our principal offices in New York City. We are not a
party to any collective bargaining agreements and we have not had any work
stoppages. We consider our relations with our employees to be good.

Corporate Information

Our
principal executive office is located at 1251 Avenue of Americas, 20thFloor, New York, New York 10020, and our telephone number is (212) 356-0500. We
also have an office in Houston, Texas. Our corporate website address is
www.rodm.com. Information contained on our website is not incorporated by
reference into this Report and you should not consider information contained
on, or accessible through, our website as part of this Report.

(d) Financial Information About Geographic
Areas

In
2009 and 2008, RRCG derived certain revenues from business outside of the
United States; however, such revenues were not material. Financial information concerning
RRCGs operations is reported in Item 8, Financial Statements and Supplementary
Data.

(e) Available Information

Our
annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on
Form 8-K, and amendments are available on the SECs internet website at www.sec.gov.
The public may read and copy any materials we file with the SEC at the SECs
Public Reference Room at 100 Fifth Street, N.E., Washington, D.C. 20549. The
public may obtain information on the operation of the Public Reference Room by
calling the SEC at 1-800-SEC-0330. As noted above, the SEC also maintains an
Internet site that contains reports, proxy and information statements, and
other information regarding issuers such as us that file electronically with the
SEC.

9

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Item 1A. Risk Factors

The
following are certain risk factors that could affect our business, financial
position and results of operations. These risk factors should be considered in
connection with evaluating the forward-looking statements contained in this
Annual Report on Form 10-K because these factors could cause the actual results
and conditions to differ materially from those projected in the forward-looking
statements. Before you buy our common stock or other securities, you should
know that making such an investment involves risks, including the risks
described below. The risks that have been highlighted below are not necessarily
the only risks of our business. If any of the risks actually occur, our
business, financial condition or results of operations could be negatively
affected. In that case, the trading price of our common stock or other
securities could decline, and you may lose all or part of your investment.
Certain risk factors that could cause actual results to differ materially from
our forward-looking statements include the following:

Risks Related to Our Business

We have limited cash
and cash equivalents and rely on cash flow from operations to operate our
business.

At
December 31, 2009 we had cash and cash equivalents of approximately $15.5
million. Our capital requirements have been and will continue to be
significant. Historically, we have relied upon cash flow from operations to
fund our working capital needs. In light of current market and economic conditions
it is difficult, if not impossible, to predict the timing or likelihood of
generating revenues. In the event that we do not generate adequate cash flow
from operations to fund our working capital needs we will need to raise working
capital through a debt or equity financing, if available, or curtail
operations.

Limitations on our
access to capital could impair our ability to expand our businesses.

Liquidity,
or ready access to funds, is essential to financial services firms, including
ours. R&R, our broker-dealer subsidiary, is subject to the net capital
requirements of the SEC, FINRA and various self-regulatory organizations of
which it is a member. These requirements typically specify the minimum level of
net capital a broker-dealer must maintain and also mandate that a significant
part of its assets be kept in relatively liquid form. Any failure to comply
with these net capital requirements could impair our ability to expand our
business. Furthermore, there are laws that authorize regulatory bodies to block
or reduce R&Rs ability to distribute funds to us. As a result, regulatory
actions could impede our access to funds that we need to make payments on
obligations or dividend payments. In addition, because we hold equity interests
in our subsidiaries, our rights as an equity holder to the assets of these
subsidiaries may not materialize, if at all, until the claims of the creditors
of these subsidiaries are satisfied.

We derive a
significant portion of our revenues from the life science sector, primarily
from biotechnology companies. Adverse developments or a decline in investor
interest in this sector could harm our business.

In
2009 and 2008, 53% and 59%, respectively, of our revenues were derived from the
life science sector. Although this percentage may decrease over time, we
anticipate that the life science sector (primarily biotechnology companies)
will continue to account for a large portion of our revenues in the foreseeable
future. The life science sector is known for its volatility due to a number of
factors including the following:

| |   |                                                                                                        
| | - | -------------------------------------------------------------------------------------------------------
| |  | many
 companies in this sector rely on a single product or class of products;                          
| |   |                                                                                                        
| |  | the sector
 is highly regulated;                                                                       
| |   |                                                                                                        
| |  | a companys
 success and viability depends on the results of clinical trials, which are
 unpredictable;
| |   |                                                                                                        
| |  | technological
 developments;                                                                           
| |   |                                                                                                        
| |  | disposition
 of patent applications;                                                                   
| |   |                                                                                                        
| |  | international
 respect of patents;                                                                     
| |   |                                                                                                        
| |  | product
 recalls;                                                                                      
| |   |                                                                                                        
| |  | general
 economic conditions and political developments;                                               
| |   |                                                                                                        
| |  | global
 competition; and                                                                               
| |   |                                                                                                        
| |  | availability
 of insurance coverage.                                                                   

Despite
our expansion into other sectors, our revenue and net profits will continue to
be subject to the volatility of the life science sector, which could have a
detrimental impact on our results of operations.

10

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We derive a
significant portion of our revenues from China based companies which could be
adversely effected by changes in the political and economic policies of the
government of the Peoples Republic of China (PRC).

Our
China based revenue is principally derived from companies that are listed on,
or seek listing on, a US exchange. Under the current government leadership, the
government of the PRC has been pursuing economic reform policies that encourage
private economic activity, greater economic decentralization and globalization.
There is no assurance, however, that the government of the PRC will continue
    to pursue these policies, or that it will not significantly alter these policies
from time to time, with or without notice. Further, the China region and
markets may experience volatility, political turmoil, uncertainty or difficult
economic or market conditions that differ from those in the U.S. Any of these
    changes could negatively impact our current business and our expansion plans
    within the China region which could have a negative impact on our revenues
and results of operations.

Our growth may
depend on our ability to complete acquisitions and integrate operations of
acquired businesses and personnel.

We
deployed a significant portion of the net proceeds of the October 2007
financing to acquire businesses and to hire additional personnel. We cannot
assure you that any of the transactions that we have already completed or that
we may complete in the future will be successful and we may not realize the
anticipated benefits of these transactions. In fact, these transactions may
cause margin fluctuation or otherwise have a material adverse effect upon our
operating results.

Achieving
the benefits of acquisitions and new hiring depends on the timely, efficient
and successful execution of a number of post-transaction events, including, in
the case of acquisitions, integrating the acquired business, personnel, systems
and operations into our business platform, operations and reporting and
information systems. In the case of new hires and joint ventures, the
post-transaction challenges include integrating the new people into our corporate
culture and managing them properly. Our ability to integrate new businesses and
new hires may be adversely affected by many factors, including the size of the
business acquired, the number of and the personality of the people involved and
the allocation of our limited management resources among various integration
efforts. Integration and management issues may also require a disproportionate
amount of our managements time and attention and distract our management from
running our historical businesses.

In
connection with future acquisitions, we may decide to consolidate the
operations of any acquired business with our existing operations or make other
changes with respect to the acquired business, which could result in special
charges or other expenses. Our results of operations also may be adversely
affected by expenses we incur in making acquisitions and hiring new personnel.
For example, in the case of acquisitions, our results of operations will be
impacted by expenses, including legal and accounting fees, incurred in
connection with the transaction, amortization of acquisition-related intangible
assets with definite lives and by additional depreciation expense attributable
to acquired assets. Any of the businesses we acquire may also have liabilities
or adverse operating issues, including some that we fail to discover before the
acquisition, and our indemnity for such liabilities may be limited. Our ability
to make any future acquisitions may depend upon obtaining additional financing.
We may not be able to obtain additional financing on acceptable terms or at
all. To the extent that we seek to acquire other businesses in exchange for our
common stock, fluctuations in our stock price could have a material adverse
effect on our ability to complete acquisitions.

A principal
investing platform, in which we will invest our own capital, will expose us to
a significant risk of capital loss.

Principal
investing involves numerous risks, including illiquidity, loss of invested
capital and revaluation. In the past, we have used a portion of our own capital
in a variety of principal investment activities, including purchasing shell
companies to be used in connection with future financing transactions. From
time to time we also purchase securities offered in financing transactions for
which we are acting as placement agent. We also hold a portfolio of equity
securities, including stock and warrants that we received as part of our
compensation in connection with investment banking assignments. As of December
31, 2009 we had an outstanding investment commitment of $15.4 million to Aceras
BioMedical, which will use those funds to purchase promising compounds or
equity securities in early stage companies in the life science and/or
biotechnology sectors and its operating budget. Other principal investing
activities may involve purchasing securities in other high-risk financings of
early-stage, pre-public, or distressed companies. These securities are likely
to be restricted as to resale and may in any event, be highly illiquid. For
example, in the case of investments in marketable securities, principal
investments could be significant relative to the overall capitalization of the
company in which we invest. Resale of a significant amount of these securities
might adversely affect their market and/or sales price. Moreover, the companies
in which we invest may rely on new or developing technologies or novel business
models or concentrate on markets which have not yet developed and which may
never develop sufficiently to support successful operations. Even if we make an
appropriate investment decision based on the intrinsic value of an enterprise,
we cannot assure you that general market conditions will not cause the market
value of our investments to decline. For example, an increase in interest
rates, currency fluctuations, a general decline in the stock markets, or other
market conditions adverse to companies of the type in which we may invest could
result in a decline in the value of our investments or a total loss of our
investment. This could materially and adversely impact our financial results
and the price of our common stock.

11

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We
may also commit our own capital to facilitate client sales and trading
activities. The number and size of these transactions may adversely affect our
results of operations. To the extent that we have long positions in any of
those markets, a downturn in the value of those assets or in those markets
could result in losses. Conversely, to the extent that we have short positions
in any of those markets an upturn in those markets could expose us to
potentially large losses as we attempt to cover our short positions by
acquiring assets in a rising market. These long and short positions and the
movement of the market relative to these positions could further contribute to
the fluctuations in our revenues and earnings, which, in turn, could contribute
to volatility in the price of our common stock.

Our client base and
the number of products we offer are limited. Our rate of growth will be
impaired unless we expand our client base and increase our investment banking
revenues.

We
derive most of our revenues from investment banking engagements, including
placement agent and underwriting fees and strategic advisory fees, which also
have higher profit margins than our other categories of revenue. For the years
2009 and 2008, investment banking transactions accounted for 68% and 84%,
respectively, of our revenues excluding principal transactions. From January 1,
2003 through December 31, 2009, our corporate finance transactions ranged from
$1.0 million to $171.0 million.

Our
future growth still largely depends on our ability to generate significant
placement agent and underwriting fees. To do so, we must: (i) continue to build
up our expertise in the life sciences, metals/mining, energy and China sectors
and consider expansion into new sectors; (ii) increase the volume of corporate
finance transactions in which we act as sole or lead manager; and (iii) actively
solicit engagements for larger transactions. Significant factors affecting this
strategy include our relatively small size and competition from larger
investment banks. We cannot assure you that we will be able to compete
effectively for new investment banking engagements. If we are unable to
increase our investment banking revenue, our rate of growth will be adversely
affected, which may cause the price of our common stock to decline.

Our future success
depends on our ability to continue to expand our investment banking services
into sectors of the economy other than biotechnology.

For
the years 2009 and 2008, investment banking revenues from companies in sectors
other than biotechnology and life science were 47% and 41%, respectively, of our
total investment banking revenues. Since we did not have any particular
expertise in sectors other than biotechnology prior to the second quarter of
2008, we relied, in part, on our relationships with institutional investors and
private equity funds to introduce us to companies that need capital and on our
own ability to identify opportunities to which we can apply our corporate
finance know-how. We cannot assure you that we will be able to continue to
receive referrals from institutional investor sources or that our recent
expansion into the metals/mining and energy sectors will result in additional
investment banking revenues.

Our revenue and
profits are highly volatile, which may make it difficult for us to achieve
steady earnings growth on a quarterly basis and may cause the price of our
common stock to decline. In addition, the investment banking sector can be
highly volatile, which could adversely impact our revenues and profits.

We
have experienced, and expect to experience in the future, significant
variations from period-to-period in our revenues and results of operations.
These variations may be attributed in part to the fact that our investment
banking revenues, which represent the largest portion of our revenues, are
typically earned when the financing or merger or acquisition transaction is
consummated, the timing of which is uncertain and largely beyond our control.
If a transaction fails to close, we will earn little or no revenue despite the
fact that we may have devoted considerable resources to, and incurred
significant out-of-pocket expenses in connection with, the transaction. As a
result, our business depends a great deal on market conditions as well as the
decisions and actions of our clients and interested third parties. For example,
a client could delay or terminate financing transactions because of a failure
to agree upon final terms with the counterparty, failure to obtain necessary
regulatory consents or board or stockholder approvals, adverse market
conditions or because its business is experiencing unexpected operating or
financial problems. In addition, many companies seeking a financing
simultaneously explore a merger or sale option. Our investment banking revenues
would be adversely affected if companies for which we are acting as placement
agent or underwriter were sold and we were not also engaged as a strategic
advisor.

Market
conditions and valuations for companies in the life science, metals/mining and
energy sectors, as well as general market conditions, can materially affect our
financial performance. The nature of our revenue generation, including the size
of transactions, the timing of transaction closings and the sectors in which
those transactions occur, make our future performance difficult to predict and
potentially highly variable. Revenues for many of the services we provide are
earned only upon the successful completion of a transaction. Accordingly,
revenues and net income in any period may not be indicative of full-year
results or the results of any other period and may vary significantly from
year-to-year and quarter-to-quarter depending on whether and when transactions
are completed and the number, size and type of transactions completed. In
particular, recent volatility in the capital markets may lead to disruptions
that delay or eliminate revenue opportunities.

12

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Our results may be
adversely affected in future periods by the volatility of financial instruments
in our portfolio.

We
may engage in large block trades in a single security or maintain large
position concentrations in a single security or warrant, securities or warrants
of a single issuer, or securities or warrants of issuers engaged in a specific
industry. Any downward price movement in these securities or warrants could
result in a reduction of our revenues and profits in the future.

Our corporate
finance and strategic advisory engagements are singular in nature and do not
generally provide for subsequent engagements.

Our
investment banking engagements are usually transaction specific as opposed to
long-term engagements. As such, we must continually seek new engagements even
from companies that have engaged us in the past. For this reason, we believe it
is important to nurture strong relationships with our clients. Although we have
been successful in securing repeat engagements from clients in the past, we
cannot assure you that this trend will continue. As a result, high activity
levels in any period are not necessarily indicative of continued high levels of
activity in any subsequent period. If we are unable to generate a substantial
number of new engagements that generate fees from new or existing clients, our
business, results of operations and financial condition could be adversely
affected.

We depend on the
services of a limited number of key executives and the loss of their services
would have a material adverse effect on us.

We
depend on the efforts and reputations of Michael Vasinkevich, our Vice
Chairman, Edward Rubin, our Chief Executive Officer and President, and John J.
Borer III, Head of Investment Banking. Their reputations and relationships with
clients and potential clients are critical elements in expanding our business,
and we believe our historical and future performance is strongly correlated to
their involvement to date and their continued involvement in our operations.
The loss or reduction of the services of any of Messrs. Vasinkevich, Rubin
and/or Borer, due to death, disability, termination of employment or regulatory
restriction, could have a material adverse effect on our operations, including
our ability to attract new company clients and to raise capital from
institutional investors.

We
currently have employment agreements with each of Messrs. Vasinkevich, Rubin
and Borer, which expire on February 28, 2011. Each employment agreement then
renews automatically for an unlimited number of one-year periods until either
party gives a 90-day non-renewal notice. If the executives employment
terminates for any reason, he is subject to a covenant that prohibits him from
competing with us for a period of one year from the date of termination. We
cannot assure you that one or more of Messrs. Vasinkevich, Borer and Rubin will
not resign, join a competitor or form a competing company or that the
non-competition provisions in their employment agreements are enforceable.

The investment
banking industry is highly competitive. If we fail to address the challenges
posed by this competition, we could lose our leading position in these areas,
causing our operating results to suffer.

The
investment banking industry is intensely competitive, particularly in those
areas in which we specialize (i.e., biotechnology and life science,
metals/mining and energy, and PIPE and RD transactions), and we expect it to
remain so for the foreseeable future. We have experienced intense price
competition in our various businesses. Pricing and other competitive pressures
in investment banking, including the trends toward multiple book runners,
co-managers and multiple financial advisors handling transactions, could
adversely affect our revenues, even as the size and number of our investment
banking transactions may increase. Many of our competitors are larger, have
greater financial and other resources and longer operating histories than we
have, giving them a significant competitive advantage. We consider our
principal competitors to include Canaccord Adams, Inc., Cowen Group, Inc,
Jefferies Group, Inc., JMP Group, Inc, Ladenburg Thalmann Financial Services,
Inc., Lazard Ltd., Leerink Swann & Co., Merriman Curhan Ford Group, Inc.,
Oppenheimer & Co., Inc., Piper Jaffray Companies, Roth Capital Partners,
LLC, and Thomas Weisel Partners Group, Inc. If we expand our business into new
sectors and new business lines, we will face competition from other firms as
well. We compete on the basis of a number of factors, including the scope and
quality of services, price, market focus and industry knowledge, client
relationships and reputation. Larger firms provide a broader range of
investment banking services to their clients than we do. If we do not address
these competitive factors successfully, we may not be able to execute our
strategy or even maintain our existing market share. In either case, our operating
results would suffer as would the price of our common stock.

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We will likely face
competition from larger investment banking firms. In order to compete with
them, we may have to increase our operating expenses significantly and/or make
larger commitments of capital in our trading and underwriting business. This
increases the potential for capital loss, which could adversely impact our
operating results.

We
are a relatively small investment bank. Historically we have tried to avoid competing
with larger investment banks. However, we expect this to change as we pursue
investment banking opportunities with larger companies and engagements for
larger transactions. Larger investment banks not only offer a broader range of
products and services than we do, they also have significantly greater
financial and marketing resources than we do, greater name recognition, more
senior professionals to serve their clients needs, greater global reach and
may have more established relationships with clients than we have. Thus, they
are better able to respond to changes in the investment banking industry,
compete for skilled professionals, finance acquisitions, fund internal growth
and compete for market share.

In
addition, financial services firms have begun to make larger and more frequent
commitments of capital in many of their activities. In order to win business,
they are increasingly committing to purchase large blocks of stock from
publicly traded issuers or significant stockholders, instead of the more
traditional marketed underwriting process in which marketing is typically
completed before an investment bank commits to purchase securities for resale.
They are willing to provide debt financing out of internal funds, often giving
them a significant competitive advantage. Because we do not have the resources
to match these investment banking firms, we may be unable to compete as
effectively for larger clients and larger transactions. In that case, we may
not be able to execute that part of our strategy, which could have an adverse
impact on our operations and financial condition.

Our ability to
retain our senior professionals and recruit additional professionals is
critical to our strategy and our failure to do so may adversely affect our reputation,
business, results of operations and financial condition.

Our
ability to obtain and successfully execute the transactions that generate a
significant portion of our revenues depends upon the reputation, judgment,
business generation capabilities and project execution skills of our senior
professionals. The reputations of our senior professionals and their
relationships with our clients are a critical element in obtaining and
executing client engagements. Accordingly, retaining these particular employees
is critical to our future success and growth. In addition, we may add
investment bankers and other financial professionals. However, turnover in the
investment banking industry is high and we encounter intense competition for
qualified employees from other companies in the investment banking industry as
well as from businesses outside the investment banking industry, such as hedge
funds and private equity funds. We have experienced departures of investment
banking and other professionals in the past and losses of key employees may
occur in the future. As a result of such departures, we may not be able to
retain valuable relationships and some of our clients could choose to use the
services of a competitor instead of our services. We cannot assure you that our
efforts to recruit and retain the required personnel will be successful as the
market for qualified financial professionals is extremely competitive.
Similarly, we cannot assure you that our compensation arrangements and
non-competition and non-solicitation agreements with our key employees are
broad or effective enough to deter or prevent employees from resigning, joining
or forming competitors or soliciting our clients. Further, we cannot assure you
that we could successfully enforce our rights under those agreements. If we are
unable to retain our senior professionals and/or recruit additional
professionals, our reputation, business, results of operations and financial
condition will be adversely affected.

Our compensation
policy may adversely affect our ability to recruit, retain and motivate our
senior managing directors and other key employees, which in turn could
adversely affect our ability to compete effectively and to grow our business.

The
target for our total compensation and benefits expense is currently 55% to 60%
of total consolidated revenues. This target includes equity, equity-based
incentives, amortization of forgivable loans and other non-cash employee
benefits. Our reliance on equity and equity-based incentives for a significant
portion of the compensation package we pay to our senior executives may not be
effective, especially if the market price of our common stock declines. This
compensation policy could adversely impact the overall compensation our key employees,
including our senior executive officers and managing directors, may receive.
Our senior executives and managing directors may receive less compensation
under this formula than they otherwise would receive at other firms, which
would make it more difficult for us to retain our key employees, including our
senior executives and managing directors, and attract new key employees.

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If we are unable to
manage our growth successfully, we may not be able to sustain profitability.
Continued growth may place significant demands on our operational,
administrative and financial resources.

Our
rapid growth has caused, and if it continues, will continue to cause,
significant demands on our operational, administrative and financial
infrastructure and increase our expenses. If we do not effectively manage our
growth, the quality of our services could suffer, which would adversely affect
our operating results and our reputation. If we continue to grow, we will have
to hire, train and manage a larger work force and improve our financial and
management controls and our reporting systems and procedures. These systems
enhancements and improvements will require significant capital expenditures and
allocation of valuable management resources. If the improvements are not
implemented successfully, our ability to manage our growth will be impaired and
we may incur significant additional expenditures to address these issues,
further impairing our financial condition and profitability. We cannot assure
you that we will be able to manage growth effectively and any failure to do so
could adversely affect our ability to generate revenues and control expenses.

Our risk management
policies and procedures may leave us exposed to unidentified or unanticipated
risks.

Our
risk management strategies and techniques may not be fully effective in
mitigating our risk exposure in all market environments or against all types of
risk. We are exposed to the risk that third parties that owe us money,
securities or other assets will not perform their obligations. These parties
may default on their obligations to us due to bankruptcy, lack of liquidity,
operational failure, and breach of contract or other reasons. We are also
subject to the risk that our rights against third parties may not be
enforceable in all circumstances, and, as a result, default risks may arise
from events or circumstances that are difficult to detect, foresee or
reasonably guard against. In addition, concerns about, or a default by, one
institution could lead to significant liquidity problems, losses or defaults by
other institutions, which in turn could adversely affect us. If any of the
variety of processes and strategies we utilize to manage our exposure to
various types of risk are not effective, we may incur losses.

Our operations and
infrastructure and those of the service providers upon which we rely may
malfunction or fail.

We
outsource various aspects of our technology infrastructure, including data
centers, disaster recovery systems, and wide area networks, as well as most
trading applications. We depend on our technology providers to manage and
monitor those functions. A disruption of any of the outsourced services would
be out of our control and could negatively impact our business. We have
experienced disruptions on occasion, none of which has been material to our
operations or results. However, we cannot assure you that future disruptions
with these providers will not occur or that their impact would not be material.

We
also face the risk of operational failure or termination of relations with any
of the clearing agents, exchanges, clearing houses or other financial
intermediaries we use to facilitate our securities transactions. Any such
failure or termination could adversely affect our ability to effect
transactions and to manage our exposure to risk.

In
addition, our ability to conduct business may be adversely impacted by a
disruption in the infrastructure, including electrical, communications,
transportation and other services, that support our businesses and the area in
which we are located. This may affect, among other things, our financial,
accounting or other data processing systems. Nearly all of our employees work
in close proximity to each other. Although we have a formal disaster recovery
plan in place, if a disruption occurs and our employees are unable to
communicate with or travel to other locations, our ability to service and
interact with our clients may suffer, and we may not be able to implement
contingency plans that depend on communication or travel.

Our
operations also rely on the secure processing, storage and transmission of
confidential and other information in our computer systems and networks.
Although we take protective measures and endeavor to modify them as
circumstances warrant, our computer systems, software and networks may be
vulnerable to unauthorized access, computer viruses or other malicious code and
other events that could have an adverse impact on their integrity and/or
viability. If one or more of such events occur, this could jeopardize our or
our clients or counterparties confidential and other information processed
and stored in, and transmitted through, our computer systems and networks, or
otherwise cause interruptions or malfunctions in our, our clients, our
counterparties or third parties operations. We may be required to expend
significant additional resources to modify our protective measures, to
investigate and remediate vulnerabilities or other exposures or to make
required notifications, and we may be subject to litigation and financial
losses that are either not insured or not fully covered through any insurance
that we maintain.

We may be required
to make substantial payments under certain indemnification agreements.

In
connection with our conversion from a limited liability company to a
corporation, we entered into agreements that provide for us to indemnify our
former members against certain tax liabilities relating to periods before we
effected the Exchange. If we are required to make payments under these
indemnification agreements, our financial condition could be adversely
affected.

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Difficult market
conditions can adversely affect our business in many ways, which could materially
reduce our revenue or income.

Our
business, operating results and financial condition has been materially and
adversely affected by adverse conditions in the global financial markets and
adverse economic conditions throughout the world since the third quarter of
2007. 2008 was particularly difficult, marked by the failure or near failure of
a number of large and prestigious firms in the financial services industry.
Although market conditions improved in 2009 and the U.S. economy has begun to recover,
we cannot predict the timing, length or extent of any economic recovery. We
have no control over the political events and the global and local economic
developments that influence market conditions and dynamics.

Our
revenues are directly related to the volume and value of investment banking
transactions in which we are involved. During periods of unfavorable market or
economic conditions, such as those that existed throughout 2008 and the first
quarter of 2009, the volume and size of these transactions decreased, thereby
reducing the demand for our services and increasing price competition among
financial services companies seeking those engagements. In addition, weakness
in equity markets and diminished trading volume of securities adversely
impacted our sales and trading business. Finally, the general decline in the
value of securities adversely impacted our investment portfolio. The impact of
these factors was exacerbated by our fixed costs and our inability to scale
back other costs within a time frame sufficient to match any decreases in
revenue relating to market and economic conditions.

Significantly
expanded corporate governance and public disclosure requirements may result in
fewer public offerings and discourage companies from engaging in capital market
transactions, which may reduce the number of investment banking opportunities
available for us to pursue.

Highly-publicized
financial scandals in recent years have led to investor concerns over the
integrity of the U.S. financial markets, and have prompted the U.S. Congress,
the SEC, NYSE and NASDAQ to significantly expand corporate governance and
public disclosure requirements. To the extent that private companies, in order
to avoid becoming subject to these new requirements, decide to forego public
offerings or elect to be listed on foreign markets, our underwriting business
may be adversely affected. In addition, provisions of the SOX and the corporate
governance rules imposed by self-regulatory organizations and stock exchanges
have diverted the attention of many companies away from capital market
transactions, including securities offerings and acquisition and disposition
transactions. In particular, companies that either are or are planning to
become public companies are incurring significant expenses in complying with
the SEC reporting requirements relating to internal controls over financial
reporting, and companies that disclose material weaknesses in such controls
under the new standards may have greater difficulty accessing the capital
markets. These factors, in addition to adopted or proposed accounting and
disclosure changes, may have an adverse effect on our business.

Financial services
firms have been subject to increased scrutiny over the last several years, increasing
the risk of financial liability and reputational harm resulting from adverse
regulatory actions.

The
financial services industry has experienced increased scrutiny from a variety
of regulators, including the SEC, the NYSE, NASDAQ, FINRA and state attorney
generals. This regulatory and enforcement environment has created uncertainty
with respect to a number of transactions that had historically been entered
into by financial services firms and that were generally believed to be permissible
and appropriate. We may be adversely affected by changes in the interpretation
or enforcement of existing laws and rules by these governmental authorities and
self-regulatory organizations. Each of the regulatory bodies with jurisdiction
over us has regulatory powers dealing with many aspects of financial services,
including, but not limited to, the authority to fine us and to grant, cancel,
restrict or otherwise impose conditions on the right to carry on particular
businesses. For example, a failure to comply with the obligations imposed by
the Exchange Act on broker-dealers and the Investment Advisers Act on
investment advisers, including record-keeping, advertising and operating
requirements, disclosure obligations and prohibitions on fraudulent activities,
or by the Investment Company Act of 1940, could result in investigations,
sanctions and reputational damage. We also may be adversely affected as a
result of new or revised legislation or regulations imposed by the SEC, other
U.S. or foreign governmental regulatory authorities, FINRA or other
self-regulatory organizations that supervise the financial markets. Substantial
legal liability or significant regulatory action against us could have adverse
financial effects on us or harm our reputation, which could harm our business
prospects.

Financial
services firms are subject to numerous conflicts of interests or perceived
conflicts. The SEC and other federal and state regulators have increased their
scrutiny of potential conflicts of interest. We have adopted, and regularly
review and update, various policies, controls and procedures to address or
limit actual or perceived conflicts. However, appropriately addressing
conflicts of interest is complex and difficult and our reputation could be damaged
if we fail, or appear to fail, to appropriately address conflicts of interest.
Our policies and procedures to address or limit actual or perceived conflicts
may also result in increased costs and additional operational personnel.
Failure to adhere to these policies and procedures may result in regulatory
sanctions or litigation against us. For example, the research operations of
investment banks have been and remain the subject of heightened regulatory
scrutiny which has led to increased restrictions on the interaction between
equity research analysts and investment banking professionals at securities
firms. A number of securities firms in the United States reached a global
settlement in 2003 and 2004 with certain federal and state securities regulators
and self-regulatory organizations to resolve investigations into the alleged
conflicts of interest of research analysts, which resulted in rules that

16

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have imposed
additional costs and limitations on the conduct of our business.

PIPE transactions have
been subject to intense regulatory scrutiny over the last few years. To the
extent the investor interest is reduced as a result, our business will be
adversely affected.

A
significant factor in our growth to date has been our leading position as
placement agent in PIPE transactions. These transactions usually can be
accomplished in less time and at less cost than registered public offerings.
Various regulatory and governmental agencies, including the SEC, have been
reviewing PIPE transactions. Periodically, we receive requests for information
from the SEC and other regulatory and governmental agencies regarding PIPEs in
general or regarding specific transactions. In most cases, these communications
include a request for copies of transaction documents. We always comply with
these requests. If the SEC or any other regulatory agency promulgates
regulations that make it more difficult or expensive to consummate PIPE
transactions, investors and issuers may prefer other financing strategies, such
as registered public offerings. Since underwriting registered public offerings
has not historically been a significant source of revenue for us, any decline
in the number of PIPE transactions could have a material adverse impact on our
business, operations and financial condition, which may cause the price of our
common stock to decline.

Our exposure to
legal liability is significant, and damages and other costs that we may be
required to pay in connection with litigation and regulatory inquiries, and the
reputational harm that could result from legal action against us, could
adversely affect our businesses.

We
face significant legal risks in our businesses and, in recent years, the volume
of claims and amount of damages sought in litigation and regulatory proceedings
against financial institutions have been significant. These risks include
potential liability under securities or other laws for materially false or
misleading statements made in connection with securities offerings and other
transactions, employment claims, potential liability for fairness opinions
and other advice we provide to participants in strategic transactions and
disputes over the terms and conditions of complex trading arrangements.

As
an investment banking firm, we depend to a large extent on our reputation for
integrity and professionalism to attract and retain clients. Moreover, our role
as advisor to our clients on important underwriting or mergers and acquisitions
transactions involves complex analysis and the exercise of professional
judgment, including rendering fairness opinions in connection with mergers
and acquisitions and other transactions. Therefore, our activities may subject
us to the risk of significant legal liabilities to our clients and aggrieved
third parties, including our clients stockholders who could bring securities
class action suits against us. Our investment banking engagements typically
include broad indemnities from our clients and provisions to limit our exposure
to legal claims relating to our services. However, there can be no assurance
that these provisions will protect us or be enforceable in all cases. As a
result, we may incur significant legal and other expenses in defending against
litigation and may be required to pay substantial damages for settlements and
adverse judgments. Substantial legal liability or significant regulatory action
against us could harm our results of operations or harm our reputation, which
could adversely affect our business and prospects.

Employee misconduct,
which is difficult to detect and deter, could harm us by impairing our ability
to attract and retain clients and subjecting us to significant legal liability
and reputational harm.

Over
the past number of years, there have been a number of highly-publicized cases
involving fraud or other misconduct by employees in the financial services
industry, and there is a risk that our employees could engage in misconduct
that adversely affects our business. For example, we often deal with confidential
matters of great significance to our clients. If our employees were to
improperly use or disclose confidential information provided by our clients, we
could be subject to regulatory sanctions and suffer serious harm to our
reputation, financial position, current client relationships and ability to
attract future clients. The violation of these obligations and standards by any
of our employees would adversely affect us and our clients. It is not always
possible to deter employee misconduct, and the precautions we take to detect
and prevent this activity may not be effective in all cases. If our employees
engage in misconduct, our business could be adversely affected.

Risks Related to Our Common Stock

We cannot assure you
that an active trading market for our common stock will continue. Any decrease
in trading volume could make it more difficult for you to liquidate your
position in a timely fashion.

Since
October 16, 2007, our common stock has been listed on the NASDAQ Global Market,
trading under the symbol RODM. Since then, there have periods when our stock
was thinly traded. We cannot assure you that an established and liquid trading
market for our stock will continue. Accordingly, investors should consider the
potential lack of liquidity and the long-term nature of an investment in our
common stock prior to investing.

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The market price of
our common stock may be volatile.

Since
October 16, 2007, the day our stock commenced trading on the NASDAQ Global
Market, through March 15, 2010, the closing sales price of our common stock has
fluctuated from $6.35 to $0.19. This wide range could be attributable to a
number of factors including one or more of the following:

| |   |                                                                                                                                                                                     
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | actual or
 anticipated fluctuations in our financial condition or results of operations;                                                                                            
| |   |                                                                                                                                                                                     
| |  | the success
 or failure of our operating strategies and our perceived prospects and those
 of the financial services industry in general;                                           
| |   |                                                                                                                                                                                     
| |  | realization
 of any of the risks described in this section;                                                                                                                         
| |   |                                                                                                                                                                                     
| |  | failure to
 be covered by securities analysts or failure to meet the expectations of
 securities analysts;                                                                          
| |   |                                                                                                                                                                                     
| |  | a decline in
 the stock prices of peer companies; and                                                                                                                               
| |   |                                                                                                                                                                                     
| |  | a discount
 in the trading multiple of our common stock relative to that of common stock
 of certain of our peer companies due to perceived risks associated with our
 smaller size.

As
a result, shares of our common stock may trade at prices significantly below
the price you paid to acquire them. Furthermore, declines in the price of our
common stock may adversely affect our ability to conduct future offerings or to
recruit and retain key employees, including our managing directors and other
key professional employees.

If we are unable to
satisfy Nasdaqs maintenance requirements, including a bid price of not less
than $1.00, our common stock may be delisted from Nasdaq, which could impair
the liquidity and the value of our common stock.

While
the shares of our common stock currently satisfy Nasdaqs continued listing requirements,
there were periods during the past year when the price of a share of our common
stock fell below $1.00, the minimum required for continued listing on Nasdaq.
Other continued listing requirements include: (i) a minimum of $2,500,000 in
stockholders equity, or $35,000,000 in market capitalization, or $500,000 in
net income for either the last fiscal year, or two out of the last three fiscal
years; (ii) a minimum 500,000 shares in the public float valued at $1,000,000
or more; (iii) a minimum of two active market makers; and (iv) a minimum of 300
holders. If we are unable to satisfy Nasdaqs maintenance requirements, our
securities may be delisted from The Nasdaq Global Market. We cannot assure you
that we will be able to continue to satisfy any or all of these criteria. If we
fail to meet any on of these criteria, our stock could be delisted from Nasdaq,
in which case it would be quoted on the Over the Counter Bulletin Board. The
OTC Bulletin Board is not an exchange and is, thus, a less liquid market. Many
institutional investors are precluded from holding securities that are listed
on the Bulletin Board and, for that reasons, many analysts do not cover stocks
that are quoted on the Bulletin Board. As a result, the liquidity of our stock
would be impaired making it more difficult for stockholders to trade their
shares on a timely basis.

If securities
analysts do not publish research or reports about our industry or if they
downgrade us or our sector, the price of our common stock could decline.

The
trading market for our common stock may depend, in part, on research and
reports that industry or financial analysts publish about us or our industry.
Negative reports about us or the financial services industry could have an
adverse impact on the price of our stock. In addition, while the financial
services industry receives extensive coverage, our stock only receives limited
coverage, which may also adversely impact liquidity. In addition, given the
limited coverage of our stock, one negative report could have a
disproportionate impact on the price of our stock.

Provisions of our
organizational documents may discourage an acquisition of us, which could
adversely impact the price of our common stock.

Our
organizational documents contain provisions that may impede the removal of
directors and may discourage a third party from making a proposal to acquire
us. Our Board of Directors has the ability to take defensive measures that
could impede or thwart a takeover such as, under certain circumstances,
adopting a poison pill or causing us to issue preferred stock that has greater
voting rights than our common stock. If a change of control or change in
management that our stockholders might otherwise consider to be favorable is
prevented or delayed, the market price of our common stock could decline.

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We are controlled by
a limited number of stockholders whose interests may differ from those of our
other stockholders.

As
of March 15, 2010, our largest stockholder, Paul Revere, LLC (Revere), owns
approximately 36% of our outstanding common stock. Revere is owned one-third by
Edward Rubin, our Chief Executive Officer and President, and a trust for the
benefit of certain members of his family, and two-thirds by a trust, the beneficiaries
of which are the wife and children of Michael Vasinkevich, our Vice Chairman.
In addition, our other senior executive officers collectively own approximately
7% of our common stock. As a result, our public stockholders have limited
influence over the election of directors, management, company policies or major
corporate decisions that require the consent of stockholders owning a majority
of our issued and outstanding shares of common stock, such as mergers,
consolidations and the sale of all or substantially all of our assets. This
could adversely impact the market value of our common stock.

Item 1B. Unresolved Staff Comments

None.

Item 2. Properties

Our
corporate headquarters are located in New York City on the 20th floor at 1251
Avenue of the Americas, where we sublease 40,300 square feet under a lease that
expires in October 2013. In addition, we have an office in Houston, TX.

Item 3. Legal Proceedings

We
face significant legal risks in our businesses and, in recent years, the volume
of claims and amount of damages sought in litigation and regulatory proceedings
against investment banking firms have been increasing. These risks include
potential liability under Federal securities and other laws in connection with
securities offerings and other transactions, as well as advice and opinions we
may provide concerning strategic transactions. In addition, like most
investment banking firms, we could be the subject of claims made by current and
former employees arising out of their employment or termination of employment
with us. These claims often relate to dissatisfaction with an employees bonus
or separation payment, or involve allegations that the employee was the subject
of some form of discrimination, retaliation or other unlawful employment
practice.

The
following constitute our material pending legal proceedings as of the date of
this Report:

Rodman &
Renshaw, LLC, et al. v. Matthew N. Murray

In
October 2006, we, as claimant, filed a statement of claim with FINRA against
Matthew N. Murray (Murray), a former research analyst whom we terminated
on March 2, 2006 for engaging in unprofessional conduct (the FINRA Action).
The petition asserted claims for defamation, tortious interference with business
relations, breach of fiduciary duty, conversion, breach of contract, and prima
facie tort. We sought compensatory damages of at least $10.0 million, plus
punitive damages of at least $15.0 million, together with certain injunctive
relief. The claims related to wrongful activities allegedly undertaken by
Murray.

Contemporaneously
with the FINRA Action, we and our senior officers filed an action (the SDNY
Action) in the U.S. Federal District Court for the Southern District of New
York (Rodman & Renshaw, LLC, John Borer, Edward Rubin, Michael Vasinkevich,
and Wesley K. Clark v. Mathew N. Murray, U.S. District Court, Southern District
of New York, 06 CV 8210 (WHP)), alleging various claims for trademark dilution,
trademark infringement, cybersquatting, cyberpiracy, and false designation of
origin as a result of various websites allegedly created by or at the instance
of Murray using, among other things, the given names and surnames of certain of
our principals and high ranking employees. The SDNY Action, among other things,
sought permanent injunctive relief restraining Murray from continuing the acts
complained of, as well as compensatory and punitive damages, each in the amount
of at least $10.0 million. On October 6, 2006, we and the other plaintiffs
moved for a temporary restraining order and preliminary injunction seeking an
order enjoining Murray from continuing to maintain the offending websites and
directing that the sites be taken down and the domain names transferred to us
and to the other plaintiffs. Murray signed an order on October 10, 2006,
effectively agreeing to all of our demands, which document was so-ordered by
the Court on October 11, 2006. Murray filed an answer and counterclaims for
breach of contract, defamation, and declaratory relief, seeking at least $1.0
million each in compensatory damages and punitive damages in an amount to be
determined at trial. Murray also alleged that he was promised an option to
purchase two percent of Rodman for book value.

In
April 2007, the statement of claim in the FINRA Action was amended to include
the claims first set forth in the complaint in the SDNY Action and to include
the individual plaintiffs in the SDNY Action as additional claimants in the
FINRA Action.

Trial
hearings in the FINRA Action concluded in August 2009. On September 18, 2009
the FINRA Panel issued its rulings sustaining our claims for defamation,
tortious interference, breach of fiduciary duty, conversion, breach of contract
and prima facie tort and denying each of Murrays claims. A hearing on our
damages claims commenced during the fourth quarter of 2009 and is ongoing.

19

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Item 4. Submission of Matters to a Vote of Security Holders

None.

PART II

Item 5.Market Price of Registrants Common Stock, Related
Stockholder Matters and Issuer Purchases of Equity Securities

Our
common stock is listed on the NASDAQ Global Market and traded under the symbol
RODM. The following table sets forth for the periods indicated the high and
low sales prices per share for our common stock, as reported on NASDAQ. The
quotations reflect inter-dealer prices, without retail mark-up, mark-down or
commissions, and may not represent actual transactions.

|                |  |                     |      |     |   |      | 
|--------------- |  | ------------------- | ---- | --- | - | ---- | 
|                |  | Sales Closing Price |     
|                |  |                     |     
|                |  | High                |      | Low |  
|                |  |                     |      |     |  
|2009            |  |                     |      |     |   |      | 
|First
 Quarter  |  | $                   | 1.10 |     | $ | 0.19 | 
|Second
 Quarter |  |                     | 1.04 |     |   | 0.29 | 
|Third
 Quarter  |  |                     | 6.35 |     |   | 0.98 | 
|Fourth Quarter  |  |                     | 6.16 |     |   | 3.22 | 
|                |  |                     |      |     |   |      | 
|2008            |  |                     |      |     |   |      | 
|First
 Quarter  |  |                     | 3.25 |     |   | 1.57 | 
|Second
 Quarter |  |                     | 2.19 |     |   | 1.40 | 
|Third
 Quarter  |  |                     | 2.55 |     |   | 1.40 | 
|Fourth
 Quarter |  |                     | 1.66 |     |   | 0.86 | 

As
of March 10, 2010, we had approximately 265 stockholders of record.

We
have never declared or paid cash dividends on our common stock. We currently
intend to retain earnings to finance its ongoing operations and it does not
anticipate paying cash dividends in the foreseeable future. Future policy with
respect to payment of dividends on the common stock will be determined by our
Board of Directors based upon conditions then existing, including our earnings
and financial condition, capital requirements and other relevant factors.

Information
concerning our equity compensation plans required by Item 201(d) of Regulation
S-K appears in Note 12 to our Consolidated Financial Statements and will be in
Part III, Item 10 when filed.

Unregistered Sales of Equity Securities.

None.

20

---



STOCKHOLDER RETURN PERFORMANCE GRAPH

Set
forth below is a line graph comparing the yearly percentage change in the
cumulative total stockholder return on the Companys Common Stock, based on the
market price of the Companys Common Stock with the total return of the
Standard & Poors 500 and Standard & Poors 500 Financials Indices for
the two year period (the Company has only been a public company for two full
years) commencing January 1, 2008 and ending December 31, 2009. The calculation
of total cumulative return assumes a $100 investment in the Companys Common
Stock, the Standard & Poors 500 and the Standard & Poors 500
Financials Indices and the reinvestment of all dividends.

(LINE GRAPH)

|                                     |  |      |  |      |  |     
|------------------------------------ |  | ---- |  | ---- |  | ----
|                                     |  | 2007 |  | 2008 |  | 2009
|                                     |  |      |  |      |  |     
|Rodman & Renshaw Capital Group, Inc. |  | 100  |  | 26   |  | 125 
|S&P 500                              |  | 100  |  | 63   |  | 80  
|S&P 500 Financials                   |  | 100  |  | 45   |  | 52  

Item 6.
Selected Financial Data

SELECTED HISTORICAL CONSOLIDATED FINANCIAL
DATA

The
following table summarizes our selected historical consolidated financial data for
the periods and at the dates indicated. You should read this information in
conjunction with our audited consolidated financial statements and related
notes, Managements Discussion and Analysis of Financial Condition and Results
of Operations, and other financial information appearing elsewhere in this
Form 10-K. We derived our selected historical consolidated financial data as of
December 31, 2009, 2008, 2007, 2006 and 2005 and for the years ended December
31, 2009, 2008, 2007, 2006 and 2005, from our audited consolidated financial
statements. The results of operations for certain businesses that the Company
no longer owns are reported as discontinued operations.

21

---



|                                                             |  |                         |         |      |  |         |   |      |        |      |  |        |   |  |        |  
|------------------------------------------------------------ |  | ----------------------- | ------- | ---- |  | ------- | - | ---- | ------ | ---- |  | ------ | - |  | ------ | -
|Amounts in Thousands, Except Per Share Amounts               |  | Year Ended December 30, |        
|                                                             |  |                         |         |      |  |         |   |      |        |      | 
|                                                             |  | 2009                    |         | 2008 |  | 2007    |   | 2006 |        | 2005 | 
|                                                             |  |                         |         |      |  |         |   |      |        |      | 
|Revenues:                                                    |  |                         |         |      |  |         |   |      |        |      |  |        |   |  |        |  
|Investment banking                                           |  | $                       | 90,433  |      |  | 52,473  |   |      | 55,829 |      |  | 43,081 |   |  | 17,887 |  
|Merchant banking                                             |  |                         | 36,018  |      |  |        |   |      |       |      |  |       |   |  |       |  
|Commissions                                                  |  |                         | 4,423   |      |  | 6,492   |   |      | 6,914  |      |  | 5,161  |   |  | 2,429  |  
|Conference fees                                              |  |                         | 1,598   |      |  | 2,395   |   |      | 2,472  |      |  | 2,093  |   |  | 1,488  |  
|Principal transactions                                       |  |                         | (512    | )    |  | (13,048 | ) |      | 3,872  |      |  | 10,809 |   |  | 7,367  |  
|Interest and other income                                    |  |                         | 265     |      |  | 876     |   |      | 883    |      |  | 187    |   |  | 102    |  
|                                                             |  |                         |         |      |  |         |   |      |        |      |  |        |   |  |        |  
|Total revenues                                               |  |                         | 132,225 |      |  | 49,188  |   |      | 69,970 |      |  | 61,331 |   |  | 29,273 |  
|                                                             |  |                         |         |      |  |         |   |      |        |      |  |        |   |  |        |  
|                                                             |  |                         |         |      |  |         |   |      |        |      |  |        |   |  |        |  
|Operating expenses:                                          |  |                         |         |      |  |         |   |      |        |      |  |        |   |  |        |  
|Compensation and benefits                                    |  |                         | 62,437  |      |  | 34,639  |   |      | 41,333 |      |  | 25,889 |   |  | 15,345 |  
|Conference expense                                           |  |                         | 3,379   |      |  | 6,223   |   |      | 5,903  |      |  | 4,748  |   |  | 3,673  |  
|Professional and consulting                                  |  |                         | 7,450   |      |  | 6,276   |   |      | 4,731  |      |  | 6,181  |   |  | 1,492  |  
|Communication and market research                            |  |                         | 2,750   |      |  | 2,646   |   |      | 1,981  |      |  | 1,452  |   |  | 671    |  
|Business development                                         |  |                         | 2,228   |      |  | 2,926   |   |      | 3,006  |      |  | 1,880  |   |  | 765    |  
|Impairment of goodwill                                       |  |                         | 1,327   |      |  | 21,719  |   |      | 376    |      |  |       |   |  |       |  
|Other                                                        |  |                         | 10,574  |      |  | 9,714   |   |      | 4,566  |      |  | 4,121  |   |  | 2,423  |  
|                                                             |  |                         |         |      |  |         |   |      |        |      |  |        |   |  |        |  
|Total operating expenses                                     |  |                         | 90,145  |      |  | 84,143  |   |      | 61,896 |      |  | 44,271 |   |  | 24,369 |  
|                                                             |  |                         |         |      |  |         |   |      |        |      |  |        |   |  |        |  
|Operating income (loss)                                      |  |                         | 42,080  |      |  | (34,955 | ) |      | 8,074  |      |  | 17,060 |   |  | 4,904  |  
|Interest expense                                             |  |                         |        |      |  |        |   |      | 3,772  |      |  |       |   |  |       |  
|                                                             |  |                         |         |      |  |         |   |      |        |      |  |        |   |  |        |  
|Income (loss) before income taxes                            |  |                         | 42,080  |      |  | (34,955 | ) |      | 4,302  |      |  | 17,060 |   |  | 4,904  |  
|Income tax (expense) benefit                                 |  |                         | 3,913   |      |  | (2,482  | ) |      | 440    |      |  | (880   | ) |  | (395   | )
|                                                             |  |                         |         |      |  |         |   |      |        |      |  |        |   |  |        |  
|Net income (loss)                                            |  |                         | 45,993  |      |  | (37,437 | ) |      | 4,742  |      |  | 16,180 |   |  | 4,509  |  
|Less: Net income to non-controlling interest                 |  |                         | 18,695  |      |  |        |   |      |       |      |  |       |   |  |       |  
|                                                             |  |                         |         |      |  |         |   |      |        |      |  |        |   |  |        |  
|Net income (loss) from continuing operations                 |  |                         | 27,298  |      |  | (37,437 | ) |      | 4,742  |      |  | 16,180 |   |  | 4,509  |  
|Net income (loss) from discontinued operations               |  |                         |        |      |  |        |   |      | 17     |      |  | 338    |   |  |       |  
|                                                             |  |                         |         |      |  |         |   |      |        |      |  |        |   |  |        |  
|Net income (loss) to common stockholders                     |  | $                       | 27,298  |      |  | (37,437 | ) |      | 4,759  |      |  | 16,518 |   |  | 4,509  |  
|                                                             |  |                         |         |      |  |         |   |      |        |      |  |        |   |  |        |  
|Unrealized (loss) gain on investments, net of tax            |  |                         |        |      |  |        |   |      | (141   | )    |  | 1,002  |   |  |       |  
|Reclassification adjustment for realized gain on investments |  |                         |        |      |  | 141     |   |      | (1,002 | )    |  |       |   |  |       |  
|                                                             |  |                         |         |      |  |         |   |      |        |      |  |        |   |  |        |  
|Comprehensive income (loss)                                  |  | $                       | 27,298  |      |  | (37,296 | ) |      | 3,616  |      |  | 17,520 |   |  | 4,509  |  
|                                                             |  |                         |         |      |  |         |   |      |        |      |  |        |   |  |        |  
|                                                             |  |                         |         |      |  |         |   |      |        |      |  |        |   |  |        |  
|Basic income (loss) per common share:                        |  |                         |         |      |  |         |   |      |        |      |  |        |   |  |        |  
|From continuing operations                                   |  | $                       | 0.77    |      |  | (1.12   | ) |      | 0.21   |      |  | 0.89   |   |  | 0.25   |  
|From discontinued operations                                 |  |                         |        |      |  |        |   |      | 0.00   |      |  | 0.02   |   |  |       |  
|                                                             |  |                         |         |      |  |         |   |      |        |      |  |        |   |  |        |  
|Net income                                                   |  | $                       | 0.77    |      |  | (1.12   | ) |      | 0.21   |      |  | 0.91   |   |  | 0.25   |  
|                                                             |  |                         |         |      |  |         |   |      |        |      |  |        |   |  |        |  
|                                                             |  |                         |         |      |  |         |   |      |        |      |  |        |   |  |        |  
|Diluted income (loss) per common share:                      |  |                         |         |      |  |         |   |      |        |      |  |        |   |  |        |  
|From continuing operations                                   |  | $                       | 0.73    |      |  | (1.12   | ) |      | 0.20   |      |  | 0.88   |   |  | 0.25   |  
|From discontinued operations                                 |  |                         |        |      |  |        |   |      | 0.00   |      |  | 0.02   |   |  |       |  
|                                                             |  |                         |         |      |  |         |   |      |        |      |  |        |   |  |        |  
|Net income                                                   |  | $                       | 0.73    |      |  | (1.12   | ) |      | 0.20   |      |  | 0.90   |   |  | 0.25   |  
|                                                             |  |                         |         |      |  |         |   |      |        |      |  |        |   |  |        |  
|                                                             |  |                         |         |      |  |         |   |      |        |      |  |        |   |  |        |  
|Weighted average common shares outstanding:                  |  |                         |         |      |  |         |   |      |        |      |  |        |   |  |        |  
|Basic                                                        |  |                         | 35,588  |      |  | 33,375  |   |      | 23,039 |      |  | 18,160 |   |  | 18,160 |  
|                                                             |  |                         |         |      |  |         |   |      |        |      |  |        |   |  |        |  
|Diluted                                                      |  |                         | 37,399  |      |  | 33,375  |   |      | 24,024 |      |  | 18,485 |   |  | 18,160 |  
|                                                             |  |                         |         |      |  |         |   |      |        |      |  |        |   |  |        |  
|                                                             |  |                         |         |      |  |         |   |      |        |      |  |        |   |  |        |  
|Consolidated Balance Sheet Data:                             |  |                         |         |      |  |         |   |      |        |      |  |        |   |  |        |  
|Cash and cash equivalents                                    |  | $                       | 15,546  |      |  | 21,754  |   |      | 54,834 |      |  | 10,387 |   |  | 1,946  |  
|Financial instruments owned, at fair value                   |  | $                       | 56,156  |      |  | 13,872  |   |      | 9,011  |      |  | 14,156 |   |  | 2,460  |  
|Total assets                                                 |  | $                       | 94,886  |      |  | 47,682  |   |      | 71,872 |      |  | 38,106 |   |  | 9,682  |  
|Total liabilities                                            |  | $                       | 19,445  |      |  | 17,148  |   |      | 11,104 |      |  | 16,080 |   |  | 1,378  |  
|Common stockholders equity                                  |  | $                       | 63,382  |      |  | 30,535  |   |      | 60,768 |      |  | 22,026 |   |  | 8,304  |  
|                                                             |  |                         |         |      |  |         |   |      |        |      |  |        |   |  |        |  

22

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Item 7.
Managements Discussion
and Analysis of Financial Condition and Results of Operations

The
following discussion should be read in conjunction with our consolidated
financial statements and the related notes included elsewhere in this Report.

Overview

We
are a full-service investment bank dedicated to providing corporate finance,
strategic advisory and related services to public and private companies across
multiple sectors and regions. We also provide research and sales and trading
services to institutional investors. We are the leader in the PIPE (private
investment in public equity) and RD (registered direct offering) transaction
markets. We have been ranked the #1 Placement Agent by deal volume of PIPE and
RD financing transactions completed every year since 2005. The sectors that we
currently serve include life science/healthcare, energy, metals/mining,
financial services and cleantech and the regions we currently serve include the
United States and China. Our primary product and service offerings include
financing transactions, including private placements and public offerings. We
also provide research and sales and trading services to institutional
investors.

Business Environment

Market
conditions and valuations for companies in the life science sector and other
sectors in which we are active, as well as general market conditions, can
materially affect our financial performance. From mid-2007 through the first
quarter of 2009, declining valuations, extreme volatility and lack of liquidity
in certain sectors of the capital markets, notably the life science sector, as
well as a slowing of economic growth generally led to declines in financing
activity, smaller financing transactions, and a resulting decline in our
revenue. Beginning in the second quarter of 2009, market conditions have
improved as evidenced by an increased number of financing transactions and an
increase in the size of the transactions.

Although
on September 15, 2009, Ben Bernanke, the Chairman of the Federal Reserve Bank,
announced that the recession in the United States had ended and the recovery
had begun, it is not possible to predict the breadth or depth of the recovery
or whether it is even sustainable. It is also difficult to forecast whether the
recent improvement in market conditions will continue and for how long. Despite
these concerns, we remain cautiously optimistic about our prospects. This
optimism is based on our performance and that of the financial markets over the
last nine months. In addition, we are not burdened with exposure to commercial
paper or real estate risk and hold no investments in structured products or
vehicles that have undergone client revaluations, such as collateralized debt
obligations and credit default swaps. On the other hand, the nature of our
revenue generation, including the size of transactions, the timing of
transaction closings and the sectors in which those transactions occur, make
future performance difficult to predict and potentially highly variable.
Revenues for many of the services we provide are earned only upon the
successful completion of a transaction. Accordingly, revenues and net income in
any period may not be indicative of full-year results or the results of any
other period and may vary significantly from year-to-year and
quarter-to-quarter depending on whether and when transactions are completed and
the number, size and type of transactions completed.

Business Segments

Through
June 30, 2009, we operated in one business segment. Commencing July 1, 2009, we
began operating in two business segments, Capital Markets and Merchant Banking.
The Capital Markets reportable segment includes our investment banking, sales
and trading activities and research. The Capital Markets reportable segment is
managed as a single operating segment that provides the following principal
sources of revenue:

| |  |   |                                                                                                                
| |  | - | ---------------------------------------------------------------------------------------------------------------
| |  |  | investment
 banking fees, which are derived from corporate finance activities and
 strategic advisory services;
| |  |   |                                                                                                                
| |  |  | realized and
 unrealized gains with respect to securities held for our own account;                            
| |  |   |                                                                                                                
| |  |  | commissions
 on sales and trading activities;                                                                  
| |  |   |                                                                                                                
| |  |  | conference
 fees; and                                                                                          
| |  |   |                                                                                                                
| |  |  | other
 miscellaneous sources of revenues, such as interest.                                                    
| |  |   |                                                                                                                

Although
we have multiple sources of revenue derived within Capital Markets, most of our
revenue is derived from our investment banking services and consists of private
placement, underwriting and strategic advisory fees earned upon the successful
completion of financing or other types of corporate transactions, such as
mergers, acquisitions and dispositions.

The
Merchant Banking segment is primarily comprised of operating activities related
to Aceras BioMedical. On May 12, 2008, we formed Aceras BioMedical, a joint
venture through which we, in partnership with Aceras Partners, LLC, make
principal investments in early-stage biotechnology and life sciences companies.
In conjunction with the establishment of the joint venture, we formed a new
wholly-owned subsidiary which holds a 50% stake in Aceras BioMedical and serves
as the holding vehicle for all of our principal-related

23

---



businesses. At
December 31, 2009, our outstanding investment commitment to Aceras BioMedical
to fund operations and the joint ventures principal investments in life
science companies was $15.4 million. We receive 50% of Aceras BioMedicals
economic interest in all investments made.

Critical Accounting Policies

Our
Consolidated Financial Statements are prepared in conformity with GAAP, which
require management to make estimates and assumptions that affect the amounts
reported in the Consolidated Financial Statements and related notes. Actual
results can and will differ from estimates. These differences could be material
to the financial statements.

We
believe our application of accounting policies and the estimates required
therein are reasonable. These accounting policies and estimates are constantly
re-evaluated, and adjustments are made when facts and circumstances dictate a
change. Historically, actual results have not differed materially from those
determined using necessary estimates.

Our
management believes that our critical accounting policies (policies that are
both material to the financial condition and results of operations and require
managements most difficult subjective or complex judgments) are our valuation
of financial instruments, valuation of goodwill and other intangible assets,
income taxes and our use of estimates related to compensation and benefits
during the year.

Valuation of Financial Instruments

Fair
value generally is based on quoted market prices. If quoted market prices are
not available, fair value is determined based on other relevant factors,
including dealer price quotations, price activity for equivalent instruments
and valuation pricing models. Among the factors considered in determining the
fair value of financial instruments are discount margins, weighted average
spreads, discounted anticipated cash flows, the terms and liquidity of the
instrument, the financial condition, operating results and credit ratings of
the issuer or underlying company, the quoted market price of publicly traded
securities with similar duration and yield, as well as other measurements.
Certain financial instruments have bid and ask prices that can be observed in
the marketplace. For financial instruments whose inputs are based on bid-ask
prices, mid-market pricing is applied and adjusted to the point within the
bid-ask range that meets our best estimate of fair value. For offsetting
positions in the same financial instrument, the same price within the bid-ask
spread is used to measure both the long and short positions.

The
valuation process for financial instruments may include the use of valuation
models and other techniques. Adjustments to valuations derived from valuation
models may be made when, in our judgment, either the size of the position in
the financial instrument in a non-active market or other features of the financial
instrument such as its complexity, or the market in which the financial
instrument is traded require that an adjustment be made to the value derived
from the models. An adjustment may be made if a financial instrument is subject
to sales restrictions that would result in a price less than the quoted market
price. Adjustments from the price derived from a valuation model reflect
managements judgment that other participants in the market for the financial
instrument being measured at fair value would also consider in valuing that
same financial instrument and are adjusted for assumptions about risk
uncertainties and market conditions. Results from valuation models and
valuation techniques in one period may not be indicative of future period fair
value measurements.

Financial
instruments owned and financial instruments sold, not yet purchased are stated
at fair value, with related changes in unrealized appreciation or depreciation
reflected in principal transactions, net in the accompanying Consolidated
Statements of Operations. Equity interests in certain private equity securities
and limited partnership interests are reflected in the Consolidated Financial
Statements at fair value, which is often represented at initial cost until
significant transactions or developments indicate that a change in the carrying
value of the securities is appropriate. This represents our best estimate of
exit price. Generally, the carrying values of these securities will be
increased or decreased based on company performance in those instances where
market values are readily ascertainable by reference to substantial
transactions occurring in the marketplace or quoted market prices.

Fair
value is the price that would be received to sell an asset or paid to transfer
a liability in an orderly transaction between market participants at the
measurement date. In determining fair value, we use various methods including
market, income and cost approaches. Based on these approaches, we utilize
assumptions that market participants would use in pricing the asset or
liability, including assumptions about risk and or the risks inherent in the
inputs to the valuation technique. These inputs can be readily observable,
market corroborated, or generally unobservable firm inputs. We utilize
valuation techniques that maximize the use of observable inputs and minimize
the use of unobservable inputs. Based on the observability of the inputs used
in the valuation techniques, we are required to provide the following
information according to the fair value hierarchy. The fair value hierarchy
ranks the quality and reliability of the information used to determine fair
values. Financial instrument assets and liabilities carried at fair value have
been classified and disclosed in one of the following three categories:

24

---



Level
1 primarily consists of financial instruments whose value is based on quoted
market prices such as listed equities.

Level
2 includes those financial instruments that are valued using models or other
valuation methodologies calibrated to observable market inputs. These models
are primarily industry-standard models that consider various assumptions,
including discount margins, credit spreads, discounted anticipated cash flows,
the terms and liquidity of the instrument, the financial condition, operating
results and credit ratings of the issuer or underlying company, the quoted
market price of publicly traded securities with similar duration and yield,
time value, yield curve, default rates, as well as other measurements. In order
to be classified as Level 2, substantially all of these assumptions would need
to be observable in the marketplace or able to be derived from observable data
or supported by observable levels at which transactions are executed in the
marketplace.

Level
3 is comprised of financial instruments whose fair value is estimated based on
internally developed models or methodologies utilizing significant inputs that
are unobservable from objective sources. Included in this category are
warrants, private securities, convertible notes and loans receivable received
in conjunction with our investment banking and merchant banking activities and
limited partnership interests.

Compensation and Benefits

The
use of estimates is important in determining compensation and benefits expenses
for interim and year end periods. A substantial portion of our compensation and
benefits represents discretionary bonuses. In addition to the level of net
revenues, our overall compensation expense in any given year is influenced by
prevailing labor markets, revenue mix and our use of equity-based compensation
programs. We believe the most appropriate way to allocate estimated annual
discretionary bonuses among interim periods is in proportion to net revenues
earned or reasonably expected. Consequently, we generally accrue interim
compensation and benefits based on annual targeted compensation amounts and
interim revenues received.

Goodwill and Other Intangible Assets
Impairment

At
least annually, we are required to assess goodwill for impairment by comparing
the estimated fair value of the reporting unit with its net book value.
Periodically estimating the fair value of a reporting unit requires significant
judgment and often involves the use of significant estimates and assumptions.
These estimates and assumptions could have a significant effect on whether an
impairment charge is recorded and the magnitude of such a charge. We estimate
the fair value of the reporting unit based on valuation methodologies we believe
market participants would use, including the market value of our common stock
which we believe to be the most relevant indicator of value. A two-step test is
used to determine whether goodwill is impaired. The first step is to compare
our carrying value with our fair value. If our carrying value exceeds our fair
value, the second step is applied. The second step is to compare the carrying
amount of the goodwill with the implied fair value of the goodwill. Goodwill
impairment is recognized if carrying value exceeds implied fair value. The
determination of fair value includes considerations of projected cash flows,
relevant trading multiples of comparable exchange listed corporations, and the
trading price of our common shares.

We
review our finite-lived intangible assets for impairment whenever events or
changes in circumstances indicate that the carrying amount of any finite-lived
intangible asset may not be recoverable.

Income Taxes

Deferred
income taxes are recognized for the future tax consequences attributable to
differences between the financial statement carrying amounts of existing assets
and liabilities and their respective tax basis. Deferred tax assets and
liabilities are measured using enacted tax rates expected to apply to taxable
income in the years in which those temporary differences are expected to be
recovered or settled. The effect on deferred taxes of a change in tax rates is
recognized in income in the period that includes the enactment date.

At
least quarterly we evaluate the realizability of the aforementioned deferred
tax assets and liabilities and evaluate the need to record or reverse a
valuation allowance. The evaluation includes weighing all the available
positive and negative evidence in ascertaining whether it is more likely than
not that its net deferred tax assets will be realized. In the first quarter of
2009, we determined that it was not more likely than not that our net
deferred tax assets would be realized and accordingly we recorded a valuation
allowance fully offsetting our net deferred tax assets reducing them to zero.
$15.3 million of the the valuation allowance was released in the fourth quarter
of 2009 due to, among other factors, the continued trend of improved
profitability, and the historical profitability prior to the recent market
upheaval, as well as the Companys financial outlook for 2010 and beyond.

Management
on an ongoing basis, at least quarterly, evaluates our tax positions and
ascertains whether those tax positions that may be uncertain require
de-recognition or re-measurement. Management does not believe that the Company
has any material uncertain tax position requiring de-recognition or
measurement.

25

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Results of Operations

2009 compared to
2008

The
following table sets forth the results of operations for the years ended
December 31, 2009 and 2008 (in thousands of dollars):

|                                              |  |                   |         |                   |                   |  |      |   |                   |  |         |   |  |  |       |  
|--------------------------------------------- |  | ----------------- | ------- | ----------------- | ----------------- |  | ---- | - | ----------------- |  | ------- | - |  |  | ----- | -
|                                              |  | Year Ended        |        
|                                              |  |                   |        
|                                              |  | December 31, 2009 |         |                   | December 31, 2008 | 
|                                              |  |                   |         |                   |                   | 
|                                              |  |                   |         | % of net
 Revenue |                   |  |      |   | % of net
 Revenue | 
|                                              |  |                   |         |                   |                   |  |      |   |                   |  |         |  
|Revenues:                                     |  |                   |         |                   |                   |  |      |   |                   |  |         |   |  |  |       |  
|Investment banking                            |  | $                 | 90,433  |                   |                   |  |      |   |                   |  | 52,473  |   |  |  |       |  
|Merchant banking                              |  |                   | 36,018  |                   |                   |  |      |   |                   |  |        |   |  |  |       |  
|Commissions                                   |  |                   | 4,423   |                   |                   |  |      |   |                   |  | 6,492   |   |  |  |       |  
|Conference fees                               |  |                   | 1,598   |                   |                   |  |      |   |                   |  | 2,395   |   |  |  |       |  
|Principal transactions                        |  |                   | (512    | )                 |                   |  |      |   |                   |  | (13,048 | ) |  |  |       |  
|Interest and other income                     |  |                   | 265     |                   |                   |  |      |   |                   |  | 876     |   |  |  |       |  
|                                              |  |                   |         |                   |                   |  |      |   |                   |  |         |   |  |  |       |  
|Total revenues                                |  |                   | 132,225 |                   |                   |  |      |   |                   |  | 49,188  |   |  |  |       |  
|                                              |  |                   |         |                   |                   |  |      |   |                   |  |         |   |  |  |       |  
|                                              |  |                   |         |                   |                   |  |      |   |                   |  |         |   |  |  |       |  
|Operating
 expenses:                          |  |                   |         |                   |                   |  |      |   |                   |  |         |   |  |  |       |  
|Compensation and benefits                     |  |                   | 62,437  |                   |                   |  | 47.2 | % |                   |  | 34,639  |   |  |  | 70.4  | %
|Conference fees                               |  |                   | 3,379   |                   |                   |  | 2.6  | % |                   |  | 6,223   |   |  |  | 12.7  | %
|Professional and consulting                   |  |                   | 7,450   |                   |                   |  | 5.6  | % |                   |  | 6,276   |   |  |  | 12.8  | %
|Occupancy and equipment
 rentals              |  |                   | 3,125   |                   |                   |  | 2.4  | % |                   |  | 2,910   |   |  |  | 5.9   | %
|Advertising and marketing                     |  |                   | 1,582   |                   |                   |  | 1.2  | % |                   |  | 809     |   |  |  | 1.6   | %
|Communication and market
 research            |  |                   | 2,750   |                   |                   |  | 2.1  | % |                   |  | 2,646   |   |  |  | 5.4   | %
|Depreciation and
 amortization                |  |                   | 2,282   |                   |                   |  | 1.7  | % |                   |  | 2,384   |   |  |  | 4.8   | %
|Business development                          |  |                   | 2,228   |                   |                   |  | 1.7  | % |                   |  | 2,926   |   |  |  | 5.9   | %
|Office supplies                               |  |                   | 677     |                   |                   |  | 0.5  | % |                   |  | 569     |   |  |  | 1.2   | %
|Impairment of goodwill                        |  |                   | 1,327   |                   |                   |  | 1    | % |                   |  | 21,719  |   |  |  | 44.2  | %
|Other                                         |  |                   | 2,908   |                   |                   |  | 2.2  | % |                   |  | 3,042   |   |  |  | 6.2   | %
|                                              |  |                   |         |                   |                   |  |      |   |                   |  |         |   |  |  |       |  
|Total operating expenses                      |  |                   | 90,145  |                   |                   |  | 68.2 | % |                   |  | 84,143  |   |  |  | 171.1 | %
|                                              |  |                   |         |                   |                   |  |      |   |                   |  |         |   |  |  |       |  
|                                              |  |                   |         |                   |                   |  |      |   |                   |  |         |   |  |  |       |  
|Income (loss) before income
 taxes            |  |                   | 42,080  |                   |                   |  | 31.8 | % |                   |  | (34,955 | ) |  |  | -71.1 | %
|Income tax expense
 (benefit)                 |  |                   | (3,913  | )                 |                   |  |      |   |                   |  | 2,482   |   |  |  |       |  
|                                              |  |                   |         |                   |                   |  |      |   |                   |  |         |   |  |  |       |  
|Net income (loss)                             |  |                   | 45,993  |                   |                   |  |      |   |                   |  | (37,437 | ) |  |  |       |  
|                                              |  |                   |         |                   |                   |  |      |   |                   |  |         |   |  |  |       |  
|Less: Net income to
 non-controlling interest |  |                   | 18,695  |                   |                   |  |      |   |                   |  |        |   |  |  |       |  
|                                              |  |                   |         |                   |                   |  |      |   |                   |  |         |   |  |  |       |  
|Net income (loss) to common
 stockholders     |  | $                 | 27,298  |                   |                   |  |      |   |                   |  | (37,437 | ) |  |  |       |  
|                                              |  |                   |         |                   |                   |  |      |   |                   |  |         |   |  |  |       |  

Operating
income for the years ended December 31, 2009 and 2008 included the following
non-cash expenses (in thousands of dollars):

|                                                   |  |                   |        |  |                   |  |        | 
|-------------------------------------------------- |  | ----------------- | ------ |  | ----------------- |  | ------ | 
|                                                   |  | Year Ended        |       
|                                                   |  |                   |       
|                                                   |  | December 31, 2009 |        |  | December 31, 2008 | 
|                                                   |  |                   |        |  |                   | 
|                                                   |  |                   |        |  |                   | 
|Stock-based compensation                           |  | $                 | 5,799  |  |                   |  | 5,605  | 
|Amortization of forgivable
 loans                  |  |                   | 1,898  |  |                   |  | 777    | 
|Depreciation and
 amortization                     |  |                   | 2,282  |  |                   |  | 2,384  | 
|Impairment of goodwill and other intangible assets |  |                   | 1,327  |  |                   |  | 21,719 | 
|                                                   |  |                   |        |  |                   |  |        | 
|Total                                              |  | $                 | 11,306 |  |                   |  | 30,485 | 
|                                                   |  |                   |        |  |                   |  |        | 

Revenues

Merchant Banking Segment

Merchant
banking revenue, consisting of gains (or losses) on investments by Aceras
BioMedical and other principal investments activity, was $36.0 million.
Merchant banking revenue, net of non-controlling interest, was $17.3 million.
We recognize revenue on investments in its merchant banking segment based on
consolidated realized and unrealized gains (or losses) reported, including by
Aceras BioMedical. The value of Aceras BioMedicals assets was determined based
on an independent valuation prepared as of December 31, 2009, taking into
consideration the cost of the investment, market participant inputs,
non-binding offers made by third

26

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parties,
estimated cash flows based on entity specific criteria, purchase multiples paid
in other comparable third-party transactions, market conditions, liquidity,
operating results and other qualitative and quantitative factors. The values at
which our investments are carried on our books are adjusted to estimated fair
value at the end of each quarter and the instability in general economic
conditions, stock markets and regulatory conditions may result in significant
changes in the estimated fair value of these investments.

In
October 2009, we announced that BioMarin Pharmaceutical Inc. (NASDAQ: BMRN)
acquired Huxley Pharmaceuticals, Inc., an Aceras BioMedical privately held
portfolio company. Under the terms of the transaction, BioMarin made payments
of $16 million to Huxley stockholders in 2009. An additional $6.5 million based
on the final approval of the purchased compound from the European Commission
will be paid in 2010. Furthermore, Huxley stockholders, which include the
Company, may receive up to approximately $36 million in milestone payments if
certain U.S. sales and development milestones are met in the future.

Capital Market Segment

Within
our Capital Markets segment we derive revenues from two primary sources, 1)
investment banking and 2) sales and trading.

Total
revenue for 2009 was $96.2 million, representing an increase of 96% from $49.2
million in the comparable period of 2008. The increase was primarily due to a
$38.0 million increase in investment banking revenue.

Investment Banking
Revenue

Our
investment banking revenue is derived from private placement and underwriting
activities and strategic advisory services. The following table sets forth our
revenue from our investment banking activities for the years ended December 30,
2009 and 2008 (in thousands of dollars):

|                                    |  |                   |        |  |                   |  |        | 
|----------------------------------- |  | ----------------- | ------ |  | ----------------- |  | ------ | 
|                                    |  | Year Ended        |       
|                                    |  |                   |       
|                                    |  | December 31, 2009 |        |  | December 31, 2008 | 
|                                    |  |                   |        |  |                   | 
|Revenue:                            |  |                   |        |  |                   |  |        | 
|Private placement and
 underwriting |  | $                 | 83,468 |  |                   |  | 43,489 | 
|Financial advisory                  |  |                   | 6,965  |  |                   |  | 8,984  | 
|                                    |  |                   |        |  |                   |  |        | 
|Total investment banking
 revenue   |  | $                 | 90,433 |  |                   |  | 52,473 | 
|                                    |  |                   |        |  |                   |  |        | 

Investment
banking revenue was $90.4 million for 2009, which included $24.2 million
related to warrants received as compensation for activities as underwriter or
placement agent valued using Black-Scholes, as compared to revenue of $52.5
million in 2008, which included $13.7 million related to warrants and notes
received as compensation for activities as underwriter or placement agent at
fair value:

| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | § | Private placement and underwriting revenue
 for 2009 was $83.5 million, including $24.2 million of fair value related to
 warrants received, compared to $43.5 million in 2008, including $13.7 million
 warrants and a note received. The increase in private placement and
 underwriting revenue is a result of increased financing activity in our
 targeted verticals, especially in life sciences and China, as well as
 increased demand for capital market offerings, including private placements,
 registered directs and follow-on offerings
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| | § | Strategic advisory fees for 2009 were $7.0
 million, compared to $9.0 million in 2008.                                                                                                                                                                                                                                                                                                                                                                                                                                                                

Sales and Trading

Commission
revenues decreased by $2.1 million, or 32%, to $4.4 million for 2009, compared
with $6.5 million in 2008. The decrease is attributable to a lower volume of
transactions that occurred in 2009 as well as a decrease in sales and trading
employees throughout the year.

Principal
Transactions

Principal
transactions generated a loss for 2009 of $512,000, compared with a $13.0
million loss in 2008. The decrease in principal transaction losses was
attributed to unprecedented market instability, lack of liquidity and issuer
specific events in 2008.

27

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The
following discussion of expenses will be on the combined Capital Markets and
Merchant Banking expenses.

Expenses

Compensation

Compensation
expense increased $27.8 million, or 80%, while total net revenues (less net
income to non-controlling interest) increased 131% for 2009. The ratio of
compensation to net revenues (less net income to non-controlling interest) was
55% for 2009 as compared to 70% in 2008. The increase in compensation and
benefits is attributed to our variable compensation structure, whereby the
majority of compensation expense is based on revenue production. Additionally,
while we sizably reduced our employee headcount as of December 31, 2009 as
compared to December 31, 2008, during 2009 we made significant hires in connection
with expanding our China practice, which temporarily increases compensation
costs as production revenues build.

Non-Compensation
Expenses

Non-compensation
expense was $27.7 million for 2009, versus $49.5 million in 2008, or 24% of net
revenues (less net income to non-controlling interest) for 2009 versus 101% of
net revenues in 2008. The decrease in non-compensation expenses is mostly due
to a $20.4 million reduction in impairment charges related to goodwill and
other intangible assets. Additionally, increases in professional fees due to a
FINRA arbitration proceeding involving a former employee and advertising and
marketing fees due to an expanded technology based marketing program were
offset by lower business development expenses and conference expenses as a
result of the cost-reduction initiatives initiated in early 2009.

Income Taxes

Income
tax benefit was $3.9 million for the year ended December 31, 2009, compared to
an income tax expense of $2.5 million for 2008.

In
the first quarter of 2009, we determined that it was not more likely than not
that our net deferred tax assets would be realized and accordingly we recorded
a valuation allowance fully offsetting our net deferred tax assets, reducing
them to zero. The valuation allowance of $3.9 million was released in the
fourth quarter of 2009 due to, among other factors, the continued trend of
improved profitability, and the historical profitability prior to the recent
market upheaval, as well as the Companys financial outlook for 2010 and
beyond.

Liquidity and Capital Resources

We
have historically satisfied our capital and liquidity requirements through cash
generated internally from operations. In addition, in March 2007, we completed
a $20.0 million private placement to accredited investors and in October 2007
we completed a public offering which generated net proceeds of approximately
$36.3 million.

At
December 31, 2009, we had liquid assets, consisting of unrestricted cash,
restricted cash, Level I assets less Level I liabilities, and current
receivables of $31.0 million. As of December 31, 2008, we had liquid assets of
$27.7 million.

The
timing of bonus and retention compensation payments to our employees may
significantly affect our cash position and liquidity from period-to-period.
While our employees are generally paid salaries and draws on a semi-monthly
basis during the year, bonus payments, which make up a significant portion of
total compensation, will generally be paid quarterly, although in some cases
annually. An aggregate of $23.9 million of bonuses were paid for 2009 in July,
October and December.

As
a registered securities broker-dealer, we are subject to the net capital
requirements of the uniform net capital requirement set forth in Rule 15c3-1
promulgated by the SEC pursuant to the Securities and Exchange Act of 1934, as
amended (the Exchange Act). SEC regulations also provide that equity capital
may not be withdrawn or cash dividends paid if certain minimum net capital
requirements are not met. At December 31, 2009 and December 31, 2008, we had
excess net capital of $8.0 million and $8.1 million, respectively. Regulatory
net capital requirements may change based on investment and underwriting
activities.

Because
of the nature of settlement transactions in our investment banking and
brokerage business, we regularly monitor our liquidity position, including our
cash and net capital positions. In light of the uncertainty with respect to the
timing of a market recovery and its potential impact on the timing of our
receipt of anticipated funds from operating activities, we regularly explore
capital raising alternatives.

Unrestricted
cash and cash equivalents were $12.6 million at December 31, 2009, a decrease
of $5.8 million from $18.4 million at December 31, 2008.

28

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Operating
activities used $4.9 million of cash and cash equivalents during the twelve
months ended December 31, 2009. Our $54.2 million and $3.0 million increase in
financial instruments owned, at fair value and receivable from brokers, dealers
and clearing agencies, respectively, from December 31, 2008 contributed to
the use of our cash. Our accrued compensation balance decreased $5.2 million
during the twelve months ended December 31, 2009, primarily due to our making
2008 and 2009 earned aggregate cash bonus payments to our employees during
2009.

The
primary components of cash used by investing activities in 2009 were: (a) $2.5
million in connection with the purchase of property and equipment and leasehold
improvements; and (b) $2.0 million and $1.7 million in connection with the
acquisitions of Miller Mathis and COSCO, respectively; offset by $5.3 million
of net cash provided by Aceras BioMedical investing activities.

For
the year ended December 31, 2008, we had a net decrease in cash and cash
equivalents of $36.5 million. Operating activities used cash of $11.1 million;
investing activities used cash of $22.9 million; and financing activities used
cash of $2.5 million. The primary components of cash used by operating
activities were: (a) a net loss of $37.4 million; (b) an increase in other
assets of $2.4 million; and (c) a $3.4 million increase in restricted cash,
offset by: (i) impairment of goodwill and other intangible assets of $21.8
million; and (ii) share based compensation of $5.6 million. The primary
components of cash used by investing activities were: (a) $4.5 million in
connection with the acquisition of Miller Mathis; (b) $8.1 million in
connection with the acquisition of COSCO; and (c) the $5.0 million purchase of
GCM Group customer relationships. The primary components of cash used by
financing activities were $1.0 million for purchasing of treasury stock and a
$1.4 million distribution to our former members.

Contractual Obligations

Our
commitments and contingencies include: (i) real property leases; (ii) equipment
leases; and (iii) the Aceras BioMedical joint venture agreement. Our principal
offices are located at 1251 Avenue of the Americas, New York, New York where we
lease the entire 20th floor. The lease expires in October 2013.

The
following table sets forth information relating to our contractual obligations
as of December 31, 2009 (in thousands of dollars):

|                                           |  |                         |        |             |   |            |  |       |    |  |   |        | 
|------------------------------------------ |  | ----------------------- | ------ | ----------- | - | ---------- |  | ----- | -- |  | - | ------ | 
|                                           |  | Payments due by
 Period |       
|                                           |  |                         |       
|                                           |  | 2010-
 2011             |        | 2012-
 2013 |   | Thereafter |  | Total |   
|                                           |  |                         |        |             |   |            |  |       |   
|Operating lease obligations                |  | $                       | 6,377  |             | $ | 5,766      |  | $     | 56 |  | $ | 12,199 | 
|Aceras BioMedical joint
 venture agreement |  |                         | 15,400 | (1)         |   |           |  |       |   |  |   | 15,400 | 
|                                           |  |                         |        |             |   |            |  |       |    |  |   |        | 
|Total                                      |  | $                       | 21,777 |             | $ | 5,766      |  | $     | 56 |  | $ | 27,599 | 
|                                           |  |                         |        |             |   |            |  |       |    |  |   |        | 

|    |                                                                                                                                                    
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Pursuant to the Aceras
 BioMedical joint venture agreement, the timing of these expenditures may vary
 based upon investment timing considerations.

Off-Balance Sheet Arrangements

An
off-balance sheet arrangement is any contractual arrangement involving an
unconsolidated entity under which a company has (a) made guarantees, (b) a
retained or a contingent interest in transferred assets, (c) any obligation
under certain derivative instruments or (d) any obligation under a material
variable interest in an unconsolidated entity that provides financing,
liquidity, market risk, or credit risk support to the Company, or engages in
leasing, hedging, or research and development services for the benefit of the
Company.

The
Company does not have any off-balance sheet financing arrangements.

Risk Management

Risk
is an inherent part of our business and activities. The extent to which we
properly and effectively identify, assess, monitor and manage each of the
various types of risk involved in our activities is critical to our financial
soundness and profitability. We seek to identify, assess, monitor and manage
the following principal risks involved in our business activities: market,
credit, operational, legal and compliance, new business and reputational. Risk
management is a multi-faceted process that requires communication, judgment and
knowledge of financial products and markets. Management takes an active role in
the risk management process and requires specific administrative and business
functions to assist in the identification, assessment and control of various
risks. Our risk management policies, procedures and methodologies are fluid in
nature and are subject to ongoing review and modification.

29

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Market
Risk.The potential for changes in the value of
financial instruments is referred to as market risk. Our market risk generally
represents the risk of loss that may result from a change in the value of a
financial instrument as a result of fluctuations in equity prices, along with
the level of volatility. Equity price risks result from exposure to changes in
prices and volatilities of individual equities and warrants. We make dealer
markets in equity securities. We attempt to hedge our exposure to market risk
by managing our net long or short positions. Due to imperfections in
correlations, gains and losses can occur even for positions that are hedged.
Position limits in trading and inventory accounts are established and monitored
on an ongoing basis.

Operational
Risk. Operational risk generally refers to the risk of
loss resulting from our operations, including, but not limited to, improper or
unauthorized execution and processing of transactions, deficiencies in our
operating systems, business disruptions and inadequacies or breaches in our
internal control processes. Our businesses are highly dependent on our ability
to process, on a daily basis, transactions across markets. If any of our
financial, accounting or other data processing systems do not operate properly
or are disabled or if there are other shortcomings or failures in our internal
processes, people or systems, we could suffer impairment to our liquidity,
financial loss, a disruption of our businesses, liability to clients,
regulatory intervention or reputational damage. These systems may fail to
operate properly or become disabled as a result of events that are wholly or
partially beyond our control, including a disruption of electrical or
communications services or our inability to occupy one or more of our
buildings. The inability of our systems to accommodate an increasing volume of
transactions could also constrain our ability to expand our businesses.

We
also face the risk of operational failure or termination of any of the clearing
agents, exchanges, clearing houses or other financial intermediaries we use to
facilitate our securities transactions. Any such failure or termination could
adversely affect our ability to effect transactions and manage our exposure to
risk.

In
addition, despite the contingency plans we have in place, our ability to
conduct business may be adversely impacted by a disruption in the
infrastructure that supports our businesses and the communities in which they
are located. This may include a disruption involving electrical,
communications, transportation or other services used by us or third parties
with which we conduct business.

Our
operations rely on the secure processing, storage and transmission of
confidential and other information in our computer systems and networks.
Although we take protective measures and endeavor to modify them as
circumstances warrant, our computer systems, software and networks may be
vulnerable to unauthorized access, computer viruses or other malicious code,
and other events that could have a security impact. If one or more of such
events occur, this potentially could jeopardize our or our clients or counterparties
confidential and other information processed and stored in, and transmitted
through, our computer systems and networks, or otherwise cause interruptions or
malfunctions in our, our clients, our counterparties or third parties
operations. We may be required to expend significant additional resources to
modify our protective measures or to investigate and remediate vulnerabilities
or other exposures, and we may be subject to litigation and financial losses
that are either not insured against or not fully covered through any insurance
maintained by us.

Legal
and Compliance Risk. Legal and compliance risk
includes the risk of non-compliance with applicable legal and regulatory
requirements. We are subject to extensive regulations. We have various
procedures addressing issues such as regulatory capital requirements, sales and
trading practices, anti-money laundering and record keeping. We also maintain
an anonymous hotline for employees or others to report suspected inappropriate
actions by us or by our employees or agents.

New
Business Risk. New business risk refers to the risks
of entering into a new line of business or offering a new product. By entering
a new line of business or offering a new product, we may face risks that we are
unaccustomed to dealing with and may increase the magnitude of the risks we
currently face. We review proposals for new businesses and new products to
determine if we are prepared to handle the additional or increased risks
associated with entering into such activities.

Reputational
Risk.We recognize that maintaining our reputation
among clients, investors, regulators and the general public is an important
aspect of minimizing legal and operational risks. Maintaining our reputation
depends on a large number of factors, including the selection of our clients
and the conduct of our business activities. We seek to maintain our reputation
by screening potential clients and by conducting our business activities in
accordance with high ethical standards.

Recent Accounting Pronouncements

FASB
ASC 860-10. In June 2009, the FASB issued FASB
Statement No. 166,Accounting for Transfers
of Financial Assets  an amendment of FASB Statement No. 140 (SFAS
166), to improve the reporting for the transfer of financial assets resulting
from 1) practices that have developed since the issuance of FASB Statement No.
140,Accounting for Transfers and Servicing
of Financial Assets and Extinguishments of Liabilities, that are not
consistent with the original intent and key requirements of that Statement and
(2) concerns of financial statement users that many of the financial assets
(and related obligations) that have been derecognized should continue to be
reported in the financial statements of transferors. SFAS 166 must be applied
as of the beginning of each reporting entitys first annual reporting period
that begins after November 15, 2009, for interim periods within that first
annual reporting period and for interim and

30

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annual
reporting periods thereafter. Earlier application is prohibited. The Company
adopted SFAS 166 effective January 1, 2010. SFAS 166 did not impact our
Consolidated Financial Statements.

FASB
ASC 810.We will adopt further accounting changes
described in ASC 810, Consolidation Topic, as of January 1, 2010, which require
that the party who has the power to direct the activities of a variable
interest entity that most significantly impact the entitys economic
performance and who has an obligation to absorb losses of the entity or a right
to receive benefits from the entity that could potentially be significant to
the entity consolidate the variable interest entity. The changes to ASC 810,
effective as of January 1, 2010, eliminate the quantitative approach previously
applied to assessing the consolidation of a variable interest entity and
require ongoing reassessments for consolidation. Starting on January 1, 2010,
the Company deconsolidated our investment in Aceras BioMedical because Aceras
Partners most significantly impacts Aceras BioMedicals economic performance.
The impact of ASC 810 will be to record our investment in Aceras BioMedical
under the equity method prospectively as of January 1, 2010.

Item 7A. Quantitative and Qualitative Disclosures About Market
Risk

Market
risk represents the risk of loss that may result from the change in value of a
financial instrument due to fluctuations in its market price. Market risk is
inherent in all financial instruments. Market risk may be exacerbated in times of
trading illiquidity when market participants refrain from transacting in normal
quantities and/or at normal bid-offer spreads. Our exposure to market risk is
directly related to our role as a financial intermediary in customer trading
and to our market-making and investment activities.

We
trade in equity securities as an active participant in both listed and OTC
equity markets. We maintain securities in inventory to facilitate our
market-making activities and customer order flow. Although we do not engage in
proprietary trading, we may use a variety of risk management techniques and
hedging strategies in the ordinary course of our trading business, including
establishing position limits by product type and industry sector, closely
monitoring inventory turnover, maintaining long and short positions in related
securities, and using exchange-traded equity options and other derivative
instruments. We do not use derivatives for speculative purposes.

In
connection with our trading business, management also reviews reports
appropriate to the risk profile of specific trading activities. Typically,
market conditions are evaluated and transaction details and securities
positions are reviewed.

These
activities seek to ensure that trading strategies are within acceptable risk
tolerance parameters, particularly when we commit our own capital to facilitate
client trading. Our accounting department is actively involved in ensuring the
integrity and clarity of the daily profit and loss statements, to the extent
that we maintain trading positions for a period longer than one day. Activities
include price verification procedures, position reconciliation and review of
transaction booking. We believe that these procedures, which stress timely communications
between our traders and senior management, are important elements of the risk
management process.

At
December 31, 2009, $22.9 million, or 41% of $56.2 million of financial
instruments owned, at fair value, represented investments in warrants received
in conjunction with our investment banking activities. $22.3 million, or 40% of
financial instruments owned is related to our merchant banking activity. The
remaining 19% of the financial instruments owned represents a promissory note received
in conjunction with our investment banking activities, listed equity
securities, restricted securities and investments in affiliates at fair value.

The
primary quantifiable market risk associated with our financial instruments is
sensitivity to changes in interest rates. Interest rate risk represents the
potential loss from adverse changes in market interest rates. The risk
management strategies that we employ use various risk sensitivity metrics to
measure such risk and to examine behavior under significant adverse market
conditions. We use an interest rate sensitivity simulation to assess our
interest rate risk exposure. For purposes of presenting the possible earnings
effect of a hypothetical, adverse change in interest rates over the 12-month
period from our reporting date, we assume that all interest rate sensitive
financial instruments will be impacted by a hypothetical, immediate 100 basis
point increase in interest rates as of the beginning of the period. The
sensitivity is based upon the hypothetical assumption that all relevant types
of interest rates that affect our results would increase instantaneously,
simultaneously and to the same degree.

The
sensitivity analyses of the interest rate sensitive financial instruments are
hypothetical and should be used with caution. Changes in fair value based on a
1% or 2% variation in an estimate generally cannot be extrapolated because the
relationship of the change in the estimate to the change in fair value may not
be linear. Also, the effect of a variation in a particular estimate on the fair
value of financial instruments is calculated independent of changes in any
other estimate; in practice, changes in one factor may result in changes in
another factor, which might magnify or counteract the sensitivities. In
addition, the sensitivity analyses do not consider any action that the Company
may take to mitigate the impact of any adverse changes in the key estimates.

Based
on our analysis, as of December 31, 2009, the effect of a 100+/- basis point
change in interest rates on the value of our warrant portfolio and promissory
note and the resultant effect on our pre-tax income are considered immaterial.

31

---



The
value of Aceras BioMedicals assets in our merchant banking activity was
determined based on an independent valuation prepared as of December 31, 2009,
taking into consideration the cost of the investment, market participant
inputs, non-binding offers made by third parties, estimated cash flows based on
entity specific criteria, purchase multiples paid in other comparable
third-party transactions, market conditions, liquidity, operating results and
other qualitative and quantitative factors. The values at which our investments
are carried on our books are adjusted to estimated fair value at the end of
each quarter and the instability in general economic conditions, stock markets
and regulatory conditions may result in significant changes in the estimated
fair value of these investments. The primary quantifiable market risk
associated with our Aceras BioMedical assets is sensitivity to changes in
interest rates. Based on our analysis as of December 31, 2009 assuming a 100
basis point increase in interest rate, we estimated the reduction of pre-tax
income is considered immaterial.

Item 8. Financial Statements and Supplementary Data

The
information in response to this item is contained elsewhere in this Report
beginning on Page F-1.

Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure

Effective
on August 14, 2008, we dismissed Marcum & Kliegman LLP (Marcum &
Kleigman) from serving as our independent accountants and engaged KPMG LLP as
our new independent accountants. Our Audit Committee unanimously approved and
authorized the change, directed the process of review of candidate firms to
replace Marcum & Kleigman and made the final decision to engage KPMG LLP.
There were no disagreements, adverse opinions or disclaimer of opinion by
Marcum & Kleigman at the time of the change or during the fiscal year ended
December 31, 2008.

Item 9A. Controls and Procedures

(a)
Evaluation of Disclosure Controls and Procedures

Our
management, with the participation of our Chief Executive Officer and Chief
Financial Officer, has evaluated the effectiveness of our disclosure controls
and procedures (as defined in the Securities Exchange Act) Rules 13a-15(e) and
15-d-15(e)) as of the end of the period covered by this Report (the Evaluation
Date). Based upon that evaluation, the Chief Executive Officer and Chief
Financial Officer have concluded that as of the Evaluation Date, our disclosure
controls and procedures are effective to ensure that information required to be
disclosed by us in the reports that we file or submit under the Exchange Act
(i) is recorded, processed, summarized and reported, within the time periods
specified in the SECs rules and forms and (ii) is accumulated and communicated
to our management, including our Chief Executive Officer and Chief Financial
Officer, as appropriate to allow timely decisions regarding required
disclosure.

(b)
Managements Report on Internal Control over Financial Reporting

Our
management is responsible for establishing and maintaining adequate internal
control over our financial reporting as defined in Rule 13a-15(f) under the
Exchange Act. Internal control over financial reporting is a process to provide
reasonable assurance regarding the reliability of our financial reporting for
external purposes in accordance with accounting principles generally accepted
in the United States. Internal control over financial reporting includes
maintaining records that in reasonable detail accurately and fairly reflect our
transactions; providing reasonable assurance that transactions are recorded as
necessary for preparation of our financial statements; providing reasonable
assurance that receipts and expenditures of our assets are made in accordance
with management authorization; and providing reasonable assurance that
unauthorized acquisition, use or disposition of our assets that could have a
material effect on our financial statements would be prevented or detected on a
timely basis. Because of its inherent limitations, internal control over financial
reporting is not intended to provide absolute assurance that a misstatement of
our financial statements would be prevented or detected.

Management
conducted an evaluation of the effectiveness of our internal control over
financial reporting based on the framework in Internal Control  Integrated
Framework issued by the Committee of Sponsoring Organizations of the Treadway
Commission (COSO). Based on this evaluation, management concluded that our
internal control over financial reporting was effective as of December 31,
2009. KPMG LLP, who audited and reported on our consolidated financial
statements included in this Report, has issued an attestation report on our
internal control over financial reporting as of December 31, 2009 (which is
included in this Report).

32

---



Report of Independent Registered Public
Accounting Firm

The Board of
Directors and Stockholders 
Rodman & Renshaw Capital Group, Inc.:

We have
audited Rodman & Renshaw Capital Group, Incs (the Company) internal
control over financial reporting as of December 31, 2009, based on criteria
established in Internal Control 
Integrated Framework issued by the Committee of Sponsoring Organizations of the
Treadway Commission (COSO). The Companys management is responsible for
maintaining effective internal control over financial reporting and for its
assessment of the effectiveness of internal control over financial reporting,
included in the accompanying Report of Management on Internal Control over
Financial Reporting. Our responsibility is to express an opinion on the
Companys internal control over financial reporting based on our audit.

We conducted
our audit in accordance with the standards of the Public Company Accounting
Oversight Board (United States). Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether effective
internal control over financial reporting was maintained in all material
respects. Our audit included obtaining an understanding of internal control
over financial reporting, assessing the risk that a material weakness exists,
and testing and evaluating the design and operating effectiveness of internal
control based on the assessed risk. Our audit also included performing such
other procedures as we considered necessary in the circumstances. We believe
that our audit provides a reasonable basis for our opinion.

A companys
internal control over financial reporting is a process designed to provide
reasonable assurance regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in accordance with
generally accepted accounting principles. A companys internal control over
financial reporting includes those policies and procedures that (1) pertain to
the maintenance of records that, in reasonable detail, accurately and fairly
reflect the transactions and dispositions of the assets of the company; (2)
provide reasonable assurance that transactions are recorded as necessary to
permit preparation of financial statements in accordance with generally
accepted accounting principles, and that receipts and expenditures of the
company are being made only in accordance with authorizations of management and
directors of the company; and (3) provide reasonable assurance regarding prevention
or timely detection of unauthorized acquisition, use, or disposition of the
companys assets that could have a material effect on the financial statements.

Because of its
inherent limitations, internal control over financial reporting may not prevent
or detect misstatements. Also, projections of any evaluation of effectiveness
to future periods are subject to the risk that controls may become inadequate
because of changes in conditions, or that the degree of compliance with the
policies or procedures may deteriorate.

In our
opinion, the Company maintained, in all material respects, effective internal
control over financial reporting as of December 31, 2009, based on criteria
established in Internal Control  Integrated Framework issued by the Committee
of Sponsoring Organizations of the Treadway Commission.

We also have
audited, in accordance with the standards of the Public Company Accounting
Oversight Board (United States), the consolidated statements of financial
condition of the Company as of December 31, 2009 and 2008, and the related
consolidated statements of operations, changes in stockholders equity and
comprehensive income, and cash flows for the years then ended, and our report
dated March 16, 2010 expressed an unqualified opinion on those consolidated
financial statements.

|                   
|-------------------
|/s/KPMG LLP        
|                   
|New York,
 New York
|March 16,
 2010    

33

---



(c)
Changes in Internal Control over Financial Reporting

There
were no changes in our internal controls over financial reporting that occurred
during the period covered by this report that have materially affected, or are
reasonably likely to materially affect, our internal control over financial
reporting.

Item 9B. Other Information

None.

PART III

Item 10. Directors,
Executive Officers and Corporate Governance.

Information
with respect to this item will be contained in the Proxy Statement for our 2010
Annual Meeting of Stockholders, which is incorporated herein by reference.

Item 11. Executive Compensation.

Information
with respect to this item will be contained in the Proxy Statement for our 2010
Annual Meeting of Stockholders, which is incorporated herein by reference.

Item 12. Security Ownership of Certain Beneficial Owners and
Management and Related Stockholder Matters.

Information
with respect to this item will be contained in the Proxy Statement for our 2010
Annual Meeting of Stockholders, which is incorporated herein by reference.

Item 13. Certain Relationships and Related Transactions, and
Director Independence.

Information
with respect to this item will be contained in the Proxy Statement for our 2010
Annual Meeting of Stockholders, which is incorporated herein by reference.

Item 14. Principal Accountant Fees and Services.

Information
with respect to this item will be contained in the Proxy Statement for our 2010
Annual Meeting of Stockholders, which is incorporated herein by reference.

PART IV

Item 15. Exhibits and Financial Statement Schedules

(a) The
following documents are filed as part of this Report:

|                                                                                                                                         |   |                                                                                                            
|---------------------------------------------------------------------------------------------------------------------------------------- | - | -----------------------------------------------------------------------------------------------------------
|1.
 Financial Statements. The
 following financial statements and the report of RRCGs independent auditor
 thereon, are filed herewith.
|                                                                                                                                        
|                                                                                                                                         |  | Report of
 Independent Registered Public Accounting Firm                                                   
|                                                                                                                                         |   |                                                                                                            
|                                                                                                                                         |  | Consolidated
 Statements of Financial Condition as of December 31, 2009 and 2008                           
|                                                                                                                                         |   |                                                                                                            
|                                                                                                                                         |  | Consolidated
 Statements of Operations for the years ended December 31, 2009 and 2008                      
|                                                                                                                                         |   |                                                                                                            
|                                                                                                                                         |  | Consolidated
 Statements of Changes in Stockholders Equity for the years ended December
 31, 2009 and 2008
|                                                                                                                                         |   |                                                                                                            
|                                                                                                                                         |  | Consolidated
 Statements of Cash Flows for the years ended December 31, 2009 and 2008                      
|                                                                                                                                         |   |                                                                                                            
|                                                                                                                                         |  | Notes to
 Consolidated Financial Statements                                                                

2.
Financial Statement Schedules.

None

34

---



3.Exhibits Incorporated by Reference or Filed with this
Report.

|                |     |             |                                                                                                                                              
|--------------- | --- | ----------- | ---------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit
 Number |     | Description
|                |     |            
|3.1             | (a) |             | Certificate
 of Incorporation(1)                                                                                                             
|                |     |             |                                                                                                                                              
|3.1             | (b) |             | Amendment to
 Certificate of Incorporation(2)                                                                                                
|                |     |             |                                                                                                                                              
|3.2             |     |             | Bylaws(1)                                                                                                                                    
|                |     |             |                                                                                                                                              
|4.1             |     |             | Specimen
 stock certificate(2)                                                                                                               
|                |     |             |                                                                                                                                              
|4.2             |     |             | Form of
 Enthrust Common Stock Purchase Warrant(3)                                                                                           
|                |     |             |                                                                                                                                              
|4.3             |     |             | Registration
 Rights Agreement dated July 10, 2007(3)                                                                                        
|                |     |             |                                                                                                                                              
|10.1            | **  |             | 2007 Amended
 and Restated Stock and Incentive Plan(4)                                                                                       
|                |     |             |                                                                                                                                              
|10.2            | **  |             | Michael
 Vasinkevich Employment Agreement, as amended(3)(5)                                                                                  
|                |     |             |                                                                                                                                              
|10.3            | **  |             | John J.
 Borer III Employment Agreement, as amended(3)(5)                                                                                    
|                |     |             |                                                                                                                                              
|10.4            | **  |             | Edward Rubin
 Employment Agreement, as amended(3)(5)                                                                                         
|                |     |             |                                                                                                                                              
|10.5            | **  |             | Amended and
 Restated Wesley Clark Employment Agreement(3)                                                                                   
|                |     |             |                                                                                                                                              
|10.6            |     |             | Form of Tax
 Indemnification Agreement, dated as of July 10, 2007(3)                                                                         
|                |     |             |                                                                                                                                              
|10.7            |     |             | Form of
 Indemnification Agreement, dated as of July 10, 2007(3)                                                                             
|                |     |             |                                                                                                                                              
|10.8            | **  |             | Michael
 Lacovara Employment Agreement(2)                                                                                                    
|                |     |             |                                                                                                                                              
|10.9            | **  |             | Executive
 Bonus Plan(2)                                                                                                                     
|                |     |             |                                                                                                                                              
|10.10           | **  |             | David Horin
 Employment Agreement(6)                                                                                                         
|                |     |             |                                                                                                                                              
|10.11           |     |             | Asset
 Purchase Agreement, dated May 9, 2008, between COSCO Capital Management LLC
 and its related companies and Company(5)                 
|                |     |             |                                                                                                                                              
|10.12           | **  |             | Separation
 Agreement, dated February 9, 2009, between Michael Lacovara and the
 Company(7)                                                  
|                |     |             |                                                                                                                                              
|21.1            |     |             | Subsidiaries*                                                                                                                                
|                |     |             |                                                                                                                                              
|23.1            |     |             | Consent of
 KPMG LLP*                                                                                                                        
|                |     |             |                                                                                                                                              
|31.1            |     |             | Certification
 of the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley
 Act of 2002*                                    
|                |     |             |                                                                                                                                              
|31.2            |     |             | Certification
 of the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley
 Act of 2002*                                    
|                |     |             |                                                                                                                                              
|32.1            |     |             | Certification
 of the Chief Executive Officer and the Chief Financial Officer pursuant to Section
     906 of the Sarbanes-Oxley Act of 2002*

|    |                                                                                                                                                                  | 
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------- | 
|    |                                                                                                                                                                 
|*   | Filed
 herewith.                                                                                                                                                
|    |                                                                                                                                                                 
|**  | This exhibit
 is a management contract or compensatory plan or arrangement.                                                                                     
|    |                                                                                                                                                                 
|(1) | Filed as an
 exhibit to our Current Report on Form 8-K filed on January 22, 2007 and
 incorporated herein by reference.                                         
|    |                                                                                                                                                                 
|(2) | Filed as an
 exhibit to Amendment #1 to our Registration Statement on Form S-1 (SEC No. 333-144684)
 on September 20, 2007 and incorporated herein by reference.
|    |                                                                                                                                                                 
|(3) | Filed as an
 exhibit to our Current Report on Form 8-K dated July 11, 2007 and
 incorporated herein by reference.                                               
|    |                                                                                                                                                                 
|(4) | Filed as an
 exhibit to our Annual Report on Form 10-K for the year ended December 31,
 2008 and incorporated herein by reference.                              
|    |                                                                                                                                                                 
|(5) | Filed as an
 exhibit to our Quarterly Report on Form 10-Q dated September 30, 2009 and
 incorporated herein by reference.                                       
|    |                                                                                                                                                                 
|(6) | Filed as an
 exhibit to our Current Report on Form 8-K dated March 18, 2008 and
 incorporated herein by reference.                                              
|    |                                                                                                                                                                 
|(7) | Filed as an
 exhibit to our Current Report on Form 8-K dated February 9, 2009 and
 incorporated herein by reference.                                            

35

---



SIGNATURES

Pursuant
to the requirements of Section 13 or 15(d) of the Securities Exchange Act of
1934, Rodman & Renshaw Capital Group, Inc. has duly caused this report to
be signed on its behalf by the undersigned, thereunto duly authorized.

| |                                       |                                      
| | ------------------------------------- | -------------------------------------
| | RODMAN
 & RENSHAW CAPITAL GROUP, INC.
| |                                       |                                      
| | By:                                   | /s/ EDWARD
 RUBIN                    
| |                                       |                                      
| |                                       | Edward Rubin Chief Executive Officer
| |                                       | (Principal Executive Officer)        

Date: March
16, 2010

Pursuant
to the requirements of the Securities Exchange Act of 1934, this report has
been signed below by the following persons on behalf of Rodman & Renshaw
Capital Group, Inc. and in the capacities indicated on this 16 th
day of March, 2010.

|                        |  |                                                                                
|----------------------- |  | -------------------------------------------------------------------------------
|/s/ EDWARD RUBIN        |  | Chief Executive Officer, President and
 Director
 (Principal Executive Officer)
|                        | 
|Edward Rubin            | 
|                        |  |                                                                                
|                        |  |                                                                                
|/s/ DAVID HORIN         |  | Chief Financial Officer
 (Principal Financial and Accounting Officer)          
|                        | 
|David Horin             | 
|                        |  |                                                                                
|                        |  |                                                                                
|/s/ WESLEY K. CLARK     |  | Chairman and Director                                                          
|                        |  |                                                                                
|Wesley K. Clark         |  |                                                                                
|                        |  |                                                                                
|                        |  |                                                                                
|/s/ MICHAEL VASINKEVICH |  | Vice Chairman and Director                                                     
|                        |  |                                                                                
|Michael Vasinkevich     |  |                                                                                
|                        |  |                                                                                
|                        |  |                                                                                
|/s/ JOHN J. BORER III   |  | Senior Managing Director, Head of
 Investment Banking and Director             
|                        | 
|John J. Borer III       | 
|                        |  |                                                                                
|                        |  |                                                                                
|/s/ WINSTON CHURCHILL   |  | Director                                                                       
|                        |  |                                                                                
|Winston Churchill       |  |                                                                                
|                        |  |                                                                                
|                        |  |                                                                                
|/s/ RICHARD M. COHEN    |  | Director                                                                       
|                        |  |                                                                                
|Richard M. Cohen        |  |                                                                                
|                        |  |                                                                                
|                        |  |                                                                                
|/s/ PETER F. DRAKE      |  | Director                                                                       
|                        |  |                                                                                
|Peter F. Drake          |  |                                                                                
|                        |  |                                                                                
|                        |  |                                                                                
|/s/ SAM DRYDEN          |  | Director                                                                       
|                        |  |                                                                                
|Sam Dryden              |  |                                                                                
|                        |  |                                                                                
|                        |  |                                                                                
|/s/ MARK L. FRIEDMAN    |  | Director                                                                       
|                        |  |                                                                                
|Mark L. Friedman        |  |                                                                                
|                        |  |                                                                                
|                        |  |                                                                                
|/s/ MARVIN I. HAAS      |  | Director                                                                       
|                        |  |                                                                                
|Marvin I. Haas          |  |                                                                                

36

---



RODMAN & RENSHAW CAPITAL GROUP, INC.

INDEX TO AUDITED CONSOLIDATED FINANCIAL
STATEMENTS

|                                                                                                                |  |     
|--------------------------------------------------------------------------------------------------------------- |  | ----
|                                                                                                                |  | Page
|                                                                                                                |  |     
|Report of
 Independent Registered Public Accounting Firm                                                        |  | F-2 
|Consolidated
 Statements of Financial Condition as of December 31, 2009 and 2008                                |  | F-3 
|Consolidated
 Statements of Operations and Comprehensive Income for the years ended
 December 31, 2009 and 2008 |  | F-4 
|Consolidated
 Statements of Changes in Stockholders Equity for the years ended December
 31, 2009 and 2008     |  | F-5 
|Consolidated
 Statements of Cash Flows for the years ended December 31, 2009 and 2008                           |  | F-6 
|Notes to Consolidated
 Financial Statements                                                                     |  | F-7 

F-1

---



Report
of Independent Registered Public Accounting Firm

The Board of
Directors and Stockholders 
Rodman & Renshaw Capital Group, Inc:

We have
audited the accompanying consolidated statements of financial condition of
Rodman & Renshaw Capital Group, Inc. and subsidiaries (the Company) as of
December 31, 2009 and 2008, and the related consolidated statements of
operations, changes in stockholders equity and comprehensive income, and cash
flows for the years then ended. These consolidated financial statements are the
responsibility of the Companys management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audits.

We conducted
our audits in accordance with the standards of the Public Company Accounting Oversight
Board (United States). Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.

In our
opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Rodman &
Renshaw Capital Group, Inc. and subsidiaries as of December 31, 2009 and 2008,
and the results of their operations and their cash flows for the years then
ended, in conformity with U.S. generally accepted accounting principles.

We also have
audited, in accordance with the standards of the Public Company Accounting
Oversight Board (United States), the Companys internal control over financial
reporting as of December 31, 2009, based on criteria established in Internal
Control  Integrated Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission (COSO), and our report dated March 16,
2010 expressed an unqualified opinion on the effectiveness of the Companys
internal control over financial reporting.

/s/KPMG LLP

New York, New
York 
March 16, 2010

F-2

---



RODMAN
& RENSHAW CAPITAL GROUP, INC. AND SUBSIDIARIES 
Consolidated Statements of Financial Condition as of December 31, 2009 and 2008

Dollars in Thousands, Except Per Share Amounts

|                                                                                                                                                               |  |                   |         |                   |  |  |         |  
|-------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ----------------- | ------- | ----------------- |  |  | ------- | -
|                                                                                                                                                               |  | December 31, 2009 |         | December 31, 2008 | 
|                                                                                                                                                               |  |                   |         |                   |  | 
|                                                                                                                                                               |  |                   |         |                   |  |  |         |  
|Assets                                                                                                                                                         |  |                   |         |                   |  |  |         |  
|Cash and cash equivalents                                                                                                                                      |  |                   |         |                   |  |  |         |  
|Unrestricted                                                                                                                                                   |  | $                 | 12,603  |                   |  |  | 18,383  |  
|Restricted                                                                                                                                                     |  |                   | 2,943   |                   |  |  | 3,371   |  
|                                                                                                                                                               |  |                   |         |                   |  |  |         |  
|Total cash and cash equivalents                                                                                                                                |  |                   | 15,546  |                   |  |  | 21,754  |  
|Financial instruments owned, at fair value                                                                                                                     |  |                   | 56,156  |                   |  |  | 13,872  |  
|Private placement and other fees receivable                                                                                                                    |  |                   | 4,798   |                   |  |  | 1,975   |  
|Receivable from brokers, dealers &
 clearing agencies                                                                                                          |  |                   | 5,735   |                   |  |  | 2,714   |  
|Prepaid expenses                                                                                                                                               |  |                   | 781     |                   |  |  | 439     |  
|Property and equipment, net                                                                                                                                    |  |                   | 2,773   |                   |  |  | 1,390   |  
|Other assets                                                                                                                                                   |  |                   | 7,136   |                   |  |  | 2,632   |  
|Goodwill and other intangible assets, net                                                                                                                      |  |                   | 1,961   |                   |  |  | 2,906   |  
|                                                                                                                                                               |  |                   |         |                   |  |  |         |  
|Total Assets                                                                                                                                                   |  | $                 | 94,886  |                   |  |  | 47,682  |  
|                                                                                                                                                               |  |                   |         |                   |  |  |         |  
|                                                                                                                                                               |  |                   |         |                   |  |  |         |  
|Liabilities and Stockholders Equity                                                                                                                           |  |                   |         |                   |  |  |         |  
|Accrued compensation payable                                                                                                                                   |  | $                 | 10,098  |                   |  |  | 4,882   |  
|Accounts payable and accrued expenses                                                                                                                          |  |                   | 6,217   |                   |  |  | 5,954   |  
|Acquisitions related payables                                                                                                                                  |  |                   | 2,826   |                   |  |  | 4,950   |  
|Financial instruments sold, not yet
 purchased, at fair value                                                                                                  |  |                   | 304     |                   |  |  | 1,361   |  
|                                                                                                                                                               |  |                   |         |                   |  |  |         |  
|Total Liabilities                                                                                                                                              |  |                   | 19,445  |                   |  |  | 17,147  |  
|                                                                                                                                                               |  |                   |         |                   |  |  |         |  
|                                                                                                                                                               |  |                   |         |                   |  |  |         |  
|Commitments and contingencies (See Note 9)                                                                                                                     |  |                   |         |                   |  |  |         |  
|                                                                                                                                                               |  |                   |         |                   |  |  |         |  
|Stockholders Equity                                                                                                                                           |  |                   |         |                   |  |  |         |  
|Common stock, $0.001, par value;
 100,000,000 shares authorized; 35,918,222 and 35,044,670 issued as of
 December 31, 2009 and December 31, 2008, respectively |  |                   | 36      |                   |  |  | 35      |  
|Preferred stock, $0.001 par value;
 1,000,000 authorized; none issued                                                                                          |  |                   |        |                   |  |  |        |  
|Additional paid-in capital                                                                                                                                     |  |                   | 75,989  |                   |  |  | 70,441  |  
|Treasury stock, 534,500 shares                                                                                                                                 |  |                   | (1,034  | )                 |  |  | (1,034  | )
|Accumulated deficit                                                                                                                                            |  |                   | (11,609 | )                 |  |  | (38,907 | )
|                                                                                                                                                               |  |                   |         |                   |  |  |         |  
|Total Common Stockholders Equity                                                                                                                              |  |                   | 63,382  |                   |  |  | 30,535  |  
|                                                                                                                                                               |  |                   |         |                   |  |  |         |  
|Non-Controlling Interest                                                                                                                                       |  |                   | 12,059  |                   |  |  |        |  
|                                                                                                                                                               |  |                   |         |                   |  |  |         |  
|Total Stockholders Equity                                                                                                                                     |  |                   | 75,441  |                   |  |  | 30,535  |  
|                                                                                                                                                               |  |                   |         |                   |  |  |         |  
|Total Liabilities and Stockholders Equity                                                                                                                     |  | $                 | 94,886  |                   |  |  | 47,682  |  
|                                                                                                                                                               |  |                   |         |                   |  |  |         |  

The accompanying notes are an integral part
of these consolidated financial statements.

F-3

---



RODMAN
& RENSHAW CAPITAL GROUP, INC. AND SUBSIDIARIES 
Consolidated Statements of Operations for the Years Ended December 30, 2009 and
2008 
Amounts in Thousands, Except Per Share Amounts

|                                             |  |                         |         |      |  |  |         |  
|-------------------------------------------- |  | ----------------------- | ------- | ---- |  |  | ------- | -
|                                             |  | Year Ended December 31, |        
|                                             |  |                         |        
|                                             |  | 2009                    |         | 2008 | 
|                                             |  |                         |         |      | 
|                                             |  |                         |         |      |  |  |         |  
|Revenues:                                    |  |                         |         |      |  |  |         |  
|Investment banking                           |  | $                       | 90,433  |      |  |  | 52,473  |  
|Merchant banking                             |  |                         | 36,018  |      |  |  |        |  
|Commissions                                  |  |                         | 4,423   |      |  |  | 6,492   |  
|Conference fees                              |  |                         | 1,598   |      |  |  | 2,395   |  
|Principal transactions                       |  |                         | (512    | )    |  |  | (13,048 | )
|Interest and other income                    |  |                         | 265     |      |  |  | 876     |  
|                                             |  |                         |         |      |  |  |         |  
|Total revenues                               |  |                         | 132,225 |      |  |  | 49,188  |  
|                                             |  |                         |         |      |  |  |         |  
|                                             |  |                         |         |      |  |  |         |  
|Operating
 expenses:                         |  |                         |         |      |  |  |         |  
|Compensation and benefits                    |  |                         | 62,437  |      |  |  | 34,639  |  
|Conference expense                           |  |                         | 3,379   |      |  |  | 6,223   |  
|Professional and consulting                  |  |                         | 7,450   |      |  |  | 6,276   |  
|Occupancy and equipment rentals              |  |                         | 3,125   |      |  |  | 2,910   |  
|Advertising and marketing                    |  |                         | 1,582   |      |  |  | 809     |  
|Communication and market research            |  |                         | 2,750   |      |  |  | 2,646   |  
|Depreciation and amortization                |  |                         | 2,282   |      |  |  | 2,384   |  
|Business development                         |  |                         | 2,228   |      |  |  | 2,926   |  
|Office supplies                              |  |                         | 677     |      |  |  | 569     |  
|Impairment of goodwill                       |  |                         | 1,327   |      |  |  | 21,719  |  
|Other                                        |  |                         | 2,908   |      |  |  | 3,042   |  
|                                             |  |                         |         |      |  |  |         |  
|Total operating expenses                     |  |                         | 90,145  |      |  |  | 84,143  |  
|                                             |  |                         |         |      |  |  |         |  
|                                             |  |                         |         |      |  |  |         |  
|Operating income (loss)                      |  |                         | 42,080  |      |  |  | (34,955 | )
|Income tax (expense) benefit                 |  |                         | 3,913   |      |  |  | (2,482  | )
|                                             |  |                         |         |      |  |  |         |  
|Net income (loss)                            |  |                         | 45,993  |      |  |  | (37,437 | )
|Less: Net income to non-controlling interest |  |                         | 18,695  |      |  |  |        |  
|                                             |  |                         |         |      |  |  |         |  
|Net income (loss) to
 common stockholders    |  | $                       | 27,298  |      |  |  | (37,437 | )
|                                             |  |                         |         |      |  |  |         |  
|                                             |  |                         |         |      |  |  |         |  
|Net
 income (loss) per common share:         |  |                         |         |      |  |  |         |  
|Net income (loss) to
 common stockholders    |  |                         |         |      |  |  |         |  
|Basic                                        |  | $                       | 0.77    |      |  |  | (1.12   | )
|                                             |  |                         |         |      |  |  |         |  
|Diluted                                      |  | $                       | 0.73    |      |  |  | (1.12   | )
|                                             |  |                         |         |      |  |  |         |  
|                                             |  |                         |         |      |  |  |         |  
|Weighted
 average common shares outstanding: |  |                         |         |      |  |  |         |  
|Basic                                        |  |                         | 35,588  |      |  |  | 33,375  |  
|                                             |  |                         |         |      |  |  |         |  
|Diluted                                      |  |                         | 37,399  |      |  |  | 33,375  |  
|                                             |  |                         |         |      |  |  |         |  

The accompanying notes are an integral part
of these consolidated financial statements.

F-4

---



RODMAN
& RENSHAW CAPITAL GROUP, INC. AND SUBSIDIARIES 
Consolidated Statements of Changes in Stockholders Equity and Comprehensive
Income for the Years 
Ended December 31, 2009 and 2008 
Dollars in Thousands

|                                                                          |  |                         |         |      |  |  |         |  
|------------------------------------------------------------------------- |  | ----------------------- | ------- | ---- |  |  | ------- | -
|                                                                          |  | Year Ended December 31, |        
|                                                                          |  |                         |        
|                                                                          |  | 2009                    |         | 2008 | 
|                                                                          |  |                         |         |      | 
|                                                                          |  |                         |         |      |  |  |         |  
|Common
 stock:                                                            |  |                         |         |      |  |  |         |  
|Balance, beginning of the period                                          |  | $                       | 35      |      |  |  | 34      |  
|Issuance of common stock                                                  |  |                         | 1       |      |  |  | 3       |  
|Conversion of common stock to RSUs                                        |  |                         |        |      |  |  | (2      | )
|                                                                          |  |                         |         |      |  |  |         |  
|Balance, end of period                                                    |  | $                       | 36      |      |  |  | 35      |  
|                                                                          |  |                         |         |      |  |  |         |  
|                                                                          |  |                         |         |      |  |  |         |  
|Additional
 paid-in-capital:                                              |  |                         |         |      |  |  |         |  
|Balance, beginning of the period                                          |  | $                       | 70,441  |      |  |  | 62,345  |  
|Stock based compensation                                                  |  |                         | 5,799   |      |  |  | 5,605   |  
|Conversion of common stock to RSUs                                        |  |                         |        |      |  |  | 2       |  
|Other                                                                     |  |                         | (219    | )    |  |  | 2,491   |  
|Forfeitures                                                               |  |                         | (31     | )    |  |  |        |  
|Issuance of restricted stock                                              |  |                         |        |      |  |  | (2      | )
|Issuance of common stock                                                  |  |                         | (1      | )    |  |  |        |  
|                                                                          |  |                         |         |      |  |  |         |  
|Balance, end of period                                                    |  | $                       | 75,989  |      |  |  | 70,441  |  
|                                                                          |  |                         |         |      |  |  |         |  
|                                                                          |  |                         |         |      |  |  |         |  
|Accumulated
 Deficit:                                                     |  |                         |         |      |  |  |         |  
|Balance, beginning of the period                                          |  | $                       | (38,907 | )    |  |  | (1,470  | )
|Net (loss) income                                                         |  |                         | 27,298  |      |  |  | (37,437 | )
|                                                                          |  |                         |         |      |  |  |         |  
|Balance, end of period                                                    |  | $                       | (11,609 | )    |  |  | (38,907 | )
|                                                                          |  |                         |         |      |  |  |         |  
|                                                                          |  |                         |         |      |  |  |         |  
|Treasury
 stock, at cost:                                                 |  |                         |         |      |  |  |         |  
|Balance, beginning of the period                                          |  | $                       | (1,034  | )    |  |  |        |  
|Purchases                                                                 |  |                         |        |      |  |  | (1,034  | )
|                                                                          |  |                         |         |      |  |  |         |  
|Balance, end of period                                                    |  | $                       | (1,034  | )    |  |  | (1,034  | )
|                                                                          |  |                         |         |      |  |  |         |  
|                                                                          |  |                         |         |      |  |  |         |  
|Accumulated
 other comprehensive (loss) income:                           |  |                         |         |      |  |  |         |  
|Balance, beginning of the period                                          |  | $                       |        |      |  |  | (141    | )
|Reclassification adjustment for unrealized gains (losses) on
 investments |  |                         |        |      |  |  | 141     |  
|                                                                          |  |                         |         |      |  |  |         |  
|Balance, end of period                                                    |  | $                       |        |      |  |  |        |  
|                                                                          |  |                         |         |      |  |  |         |  
|                                                                          |  |                         |         |      |  |  |         |  
|Non-controlling
 interest:                                                |  |                         |         |      |  |  |         |  
|Balance, beginning of the period                                          |  | $                       |        |      |  |  |        |  
|Net income to non-controlling interest                                    |  |                         | 18,695  |      |  |  |        |  
|Distribution to non-controlling interest                                  |  |                         | (6,636  | )    |  |  |        |  
|                                                                          |  |                         |         |      |  |  |         |  
|Balance, end of period                                                    |  | $                       | 12,059  |      |  |  |        |  
|                                                                          |  |                         |         |      |  |  |         |  
|                                                                          |  |                         |         |      |  |  |         |  
|Total
 stockholders equity                                               |  | $                       | 75,441  |      |  |  | 30,535  |  
|                                                                          |  |                         |         |      |  |  |         |  
|                                                                          |  |                         |         |      |  |  |         |  
|Comprehensive
 Income:                                                    |  |                         |         |      |  |  |         |  
|Net (loss) income                                                         |  | $                       | 27,298  |      |  |  | (37,437 | )
|Other comprehensive income (loss)                                         |  |                         |        |      |  |  | 141     |  
|                                                                          |  |                         |         |      |  |  |         |  
|Total comprehensive (loss) income                                         |  | $                       | 27,298  |      |  |  | (37,296 | )
|                                                                          |  |                         |         |      |  |  |         |  

The accompanying notes are an integral part
of these consolidated financial statements.

F-5

---



RODMAN & RENSHAW CAPITAL GROUP, INC. AND
SUBSIDIARIES Consolidated
Statements of Cash Flows for the Years Ended December 31, 2009 and 2008 
Dollars in Thousands

|                                                                                             |  |                         |         |      |  |         |  
|-------------------------------------------------------------------------------------------- |  | ----------------------- | ------- | ---- |  | ------- | -
|                                                                                             |  | Year Ended December 31, |        
|                                                                                             |  |                         |        
|                                                                                             |  | 2009                    |         | 2008 | 
|                                                                                             |  |                         |         |      | 
|Cash flows from operating activities:                                                        |  |                         |         |      |  |         |  
|Net income (loss)                                                                            |  | $                       | 45,993  |      |  | (37,437 | )
|Adjustments to reconcile net income to net cash (used in) provided by
 operating activities: |  |                         |         |      |  |         |  
|Depreciation and amortization                                                                |  |                         | 2,282   |      |  | 2,384   |  
|Restricted cash                                                                              |  |                         | 428     |      |  | (3,371  | )
|Stock based compensation                                                                     |  |                         | 5,799   |      |  | 5,604   |  
|Realized gain on available for sale investments                                              |  |                         |        |      |  | 141     |  
|Impairment of goodwill and other intangible assets                                           |  |                         | 1,327   |      |  | 21,719  |  
|Deferred taxes, net                                                                          |  |                         | (4,342  | )    |  | 2,258   |  
|Changes in operating assets and liabilities:                                                 |  |                         |         |      |  |         |  
|Financial instruments owned, at fair value                                                   |  |                         | (54,184 | )    |  | (711    | )
|Private placement and other fees receivable                                                  |  |                         | (2,823  | )    |  | (1,007  | )
|Receivable from brokers, dealers & clearing agencies                                         |  |                         | (3,021  | )    |  | (825    | )
|Prepaid expenses                                                                             |  |                         | (342    | )    |  | 249     |  
|Other assets                                                                                 |  |                         | (162    | )    |  | (2,387  | )
|Financial instruments sold not yet purchased, at fair value                                  |  |                         | (1,057  | )    |  | 1,213   |  
|Accrued compensation payable                                                                 |  |                         | 5,216   |      |  | (1,258  | )
|Accounts payable and accrued expenses                                                        |  |                         | 8       |      |  | 2,440   |  
|Income taxes payable                                                                         |  |                         |        |      |  | (48     | )
|Conferences deposits                                                                         |  |                         |        |      |  | (15     | )
|                                                                                             |  |                         |         |      |  |         |  
|Net cash used in operating activities                                                        |  |                         | (4,878  | )    |  | (11,051 | )
|                                                                                             |  |                         |         |      |  |         |  
|                                                                                             |  |                         |         |      |  |         |  
|Cash flows from investing activities:                                                        |  |                         |         |      |  |         |  
|Purchases of property and equipment                                                          |  |                         | (2,506  | )    |  | (1,183  | )
|Acquisitions                                                                                 |  |                         | (3,665  | )    |  | (12,585 | )
|Aceras proceeds                                                                              |  |                         | 13,272  |      |  |        |  
|Distributions to non-controlling interests                                                   |  |                         | (6,636  | )    |  |        |  
|Purchase of intangible assets                                                                |  |                         |        |      |  | (5,008  | )
|Investments                                                                                  |  |                         | (1,367  | )    |  | (4,150  | )
|Distributions from affiliate                                                                 |  |                         |        |      |  |        |  
|                                                                                             |  |                         |         |      |  |         |  
|Net cash used in investing activities                                                        |  |                         | (902    | )    |  | (22,926 | )
|                                                                                             |  |                         |         |      |  |         |  
|                                                                                             |  |                         |         |      |  |         |  
|Cash flows from financing activities:                                                        |  |                         |         |      |  |         |  
|Purchase of treasury stock                                                                   |  |                         |        |      |  | (1,034  | )
|Distributions to members                                                                     |  |                         |        |      |  | (1,440  | )
|                                                                                             |  |                         |         |      |  |         |  
|Net cash (used in) provided by financing activities                                          |  |                         |        |      |  | (2,474  | )
|                                                                                             |  |                         |         |      |  |         |  
|Net decrease in cash and cash equivalents                                                    |  |                         | (5,780  | )    |  | (36,451 | )
|Cash and cash equivalents  beginning of period                                              |  |                         | 18,383  |      |  | 54,834  |  
|                                                                                             |  |                         |         |      |  |         |  
|Cash and cash equivalents  end of period                                                    |  | $                       | 12,603  |      |  | 18,383  |  
|                                                                                             |  |                         |         |      |  |         |  
|                                                                                             |  |                         |         |      |  |         |  
|Supplemental disclosures of cash flow information:                                           |  |                         |         |      |  |         |  
|Income taxes paid                                                                            |  | $                       |        |      |  | 244     |  
|Non-cash investing and financing activities:                                                 |  |                         |         |      |  |         |  
|Accrued liabilities related to the acquisitions of Miller Mathis and
 COSCO                  |  |                         |        |      |  | 5,153   |  
|Additional paid-in-capital related to acquisition of COSCO                                   |  |                         |        |      |  | 2,491   |  
|Issuance of restricted stock to employees                                                    |  |                         |        |      |  | 2       |  

The
accompanying notes are an integral part of these consolidated financial
statements.

F-6

---



RODMAN & RENSHAW CAPITAL GROUP, INC. AND
SUBSIDIARIES 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 -Organization, Nature of Operations
and Basis of Presentation

General

Rodman
& Renshaw Capital Group, Inc. (RRCG) is a Delaware holding company which,
through its various subsidiaries, is engaged in the investment banking
business. The Companys principal operating subsidiary is Rodman & Renshaw,
LLC (R&R), a Delaware limited liability company formed on June 20, 2002.
R&R is registered with the Financial Industry Regulatory Authority, Inc.
(FINRA). RRCG and its subsidiaries, including R&R, are collectively
referred to herein as the Company.

On
July 10, 2007 Rodman & Renshaw Holding, LLC (Holding), consummated a
reverse acquisition through an exchange transaction with its subsidiary,
Enthrust Financial Services, Inc. (Enthrust), which was a non-operating
public shell company. For accounting purposes, Holding is treated as the
continuing reporting entity and the acquisition has been treated as a
recapitalization of Enthrust with Holding as the acquirer. On August 31, 2007,
Enthrust changed its name to Rodman & Renshaw Capital Group, Inc. The
historical financial statements of the Company prior to July 10, 2007 are those
of Holding.

Aceras BioMedical LLC

On
May 12, 2008, the Company formed Aceras BioMedical LLC (Aceras BioMedical), a
joint venture through which the Company, in partnership with Aceras Partners,
LLC (Aceras Partners), will make principal investments in early-stage
biotechnology and life sciences companies. In conjunction with the
establishment of the joint venture, the Company formed a new wholly-owned
subsidiary, Rodman Principal Investments, LLC (RPI), which holds a 50% stake
in Aceras BioMedical and serves as the holding vehicle for all of the Companys
principal-related businesses. RPI has made an initial investment commitment to
Aceras BioMedical of up to $30.0 million over five years to fund operations and
the joint ventures principal investments in life science companies. At
December 31, 2009, RPIs remaining commitment to Aceras BioMedical to fund
operations and the joint ventures principal investments in life science
companies was $15.4 million. RPI receives 50% of Aceras BioMedicals economic
interest in all investments made by Aceras.

The
Company determined that Aceras Partners meets the definition of a variable
interest entity (VIE) as of December 31,2009 because the total equity
investment at risk is not sufficient to permit Aceras to finance its activities
without additional subordinated financial support provided by Rodman. The
Company is the primary beneficiary of Aceras BioMedical because the Company
absorbs all of the entitys expected losses and therefore is required to
consolidate Aceras BioMedical.

As
of May 1, 2009, the Company effected a modification to the agreements defining
the ongoing obligations between Aceras BioMedical and the Company. Pursuant to
the modification agreement, the annual fixed operating budget was reduced from
$2.5 million to $1.0 million and the expected targeted investment amount in
each prospective investee was reduced from $2.0 million to $0.5 million.
Potential investments in excess of $0.5 million require consent of the Company.

In
October 2009, the Company announced that BioMarin Pharmaceutical Inc. (NASDAQ:
BMRN) acquired Huxley Pharmaceuticals, Inc., an Aceras privately held portfolio
company. Under the terms of the transaction, BioMarin made payments of $16
million to Huxley shareholders in 2009. An additional $6.5 million based on the
final approval of the purchased compound from the European Commission will be
paid in 2010. Furthermore, Huxley stockholders, which include the Company, may
receive up to approximately $36 million in milestone payments if certain U.S.
sales and development milestones are met in the future.

Rodman & Renshaw, LLC

R&R,
which is a wholly-owned subsidiary of the Company, is a full-service investment
banking firm specializing in investment banking services to corporations and
businesses and the trading and sale of primarily equity securities. R&R
assists emerging growth companies through capital raising, strategic advice,
research, and the development of institutional support. R&R is an
introducing broker and clears all transactions through a clearing organization
on a fully disclosed basis. Accordingly, R&R is exempt from rule 15c3-3 of
the Exchange Act.

F-7

---



RODMAN & RENSHAW CAPITAL GROUP, INC. AND
SUBSIDIARIES 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

R&R Biotech Partners, LLC

R&R
Biotech Partners, LLC (R&R Biotech) is a wholly-owned subsidiary of the
Company for the purpose of making investments primarily in biotechnology and
other emerging companies. In addition to making investments in operating
companies, R&R Biotech has made several investments in public company
corporate shells for use by prospective investment banking clients that desire
to go public by effecting a reverse merger.

Non-Controlling Interests

The
Company presents its non-controlling (minority) interests as equity (as opposed
to as a liability or mezzanine equity), and presents its income allocated to
both non-controlling interests and common stockholders. The portion of the
consolidated interests in Aceras Biomedical, which are held directly by current
and former employees of Aceras, are represented as non-controlling interests.

NOTE 2 -Summary of Significant Accounting
Policies

Principles of Consolidation

The
Companys policy is to consolidate all entities in which it owns more than 50%
of the outstanding voting stock and has control. In addition, the Company
consolidates entities which lack characteristics of an operating entity or
business for which it is the primary beneficiary. The primary beneficiary is
the party that absorbs a majority of the entitys expected losses, receives a
majority of its expected residual returns, or both, as a result of holding
variable interests, directly or implied. In situations where the Company has
significant influence but not control of an entity that does not qualify as a
variable interest entity, the Company applies the equity method of accounting.
In those cases where its investment is less than 20% and significant influence
does not exist, the investments are carried at fair value. Significant
influence generally is deemed to exist when the Company owns 20% to 50% of the
voting equity of a corporation, or when it holds at least 3% of a limited
partnership interest. If the Company doesnt consolidate an entity or applies
the equity method of accounting, it accounts for the investment at fair value.

All
material intercompany accounts and transactions are eliminated in
consolidation.

Financial Instruments at Fair Value

Fair
value generally is based on quoted market prices. If quoted market prices are
not available, fair value is determined based on other relevant factors,
including dealer price quotations, price activity for equivalent instruments
and valuation pricing models. Among the factors considered in determining the
fair value of financial instruments are discount margins, weighted average
spreads, discounted anticipated cash flows, the terms and liquidity of the
instrument, the financial condition, operating results and credit ratings of
the issuer or underlying company, the quoted market price of publicly traded
securities with similar duration and yield, as well as other measurements.
Certain financial instruments have bid and ask prices that can be observed in
the marketplace. For financial instruments whose inputs are based on bid-ask
prices, mid-market pricing is applied and adjusted to the point within the
bid-ask range that meets the Companys best estimate of fair value. For
offsetting positions in the same financial instrument, the same price within the
bid-ask spread is used to measure both the long and short positions.

The
valuation process for financial instruments may include the use of valuation
models and other techniques. Adjustments to valuations derived from valuation
models may be made when, in managements judgment, either the size of the
position in the financial instrument in a non-active market or other features
of the financial instrument such as its complexity, or the market in which the
financial instrument is traded require that an adjustment be made to the value
derived from the models. An adjustment may be made if a financial instrument is
subject to sales restrictions that would result in a price less than the quoted
market price. Adjustments from the price derived from a valuation model reflect
managements judgment that other participants in the market for the financial
instrument being measured at fair value would also consider in valuing that
same financial instrument and are adjusted for assumptions about risk uncertainties
and market conditions. Results from valuation models and valuation techniques
in one period may not be indicative of future period fair value measurements.

F-8

---



RODMAN & RENSHAW CAPITAL GROUP, INC. AND
SUBSIDIARIES 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Financial
instruments owned and financial instruments sold, not yet purchased are stated
at fair value, with related changes in unrealized appreciation or depreciation
reflected in principal transactions, net in the accompanying Consolidated
Statements of Operations. Equity interests in certain private equity securities
and limited partnership interests are reflected in the Consolidated Financial
Statements at fair value, which is often represented at initial cost until significant
transactions or developments indicate that a change in the carrying value of
the securities is appropriate. This represents the Companys best estimate of
exit price. Generally, the carrying values of these securities will be
increased or decreased based on company performance in those instances where
market values are readily ascertainable by reference to substantial
transactions occurring in the marketplace or quoted market prices.

Fair
value is the price that would be received to sell an asset or paid to transfer
a liability in an orderly transaction between market participants at the
measurement date. In determining fair value, the Company uses various methods
including market, income and cost approaches. Based on these approaches, the
Company utilizes assumptions that market participants would use in pricing the
asset or liability, including assumptions about risk and or the risks inherent
in the inputs to the valuation technique. These inputs can be readily
observable, market corroborated, or generally unobservable firm inputs. The
Company utilizes valuation techniques that maximize the use of observable
inputs and minimize the use of unobservable inputs. Based on the observability
of the inputs used in the valuation techniques the Company is required to
provide the following information according to the fair value hierarchy. The
fair value hierarchy ranks the quality and reliability of the information used
to determine fair values. Financial instrument assets and liabilities carried at
fair value have been classified and disclosed in one of the following three
categories:

Level
1 primarily consists of financial instruments whose value is based on quoted
market prices such as listed equities.

Level
2 includes those financial instruments that are valued using models or other
valuation methodologies calibrated to observable market inputs. These models
are primarily industry-standard models that consider various assumptions,
including discount margins, credit spreads, discounted anticipated cash flows,
the terms and liquidity of the instrument, the financial condition, operating
results and credit ratings of the issuer or underlying company, the quoted
market price of publicly traded securities with similar duration and yield,
time value, yield curve, default rates, as well as other measurements. In order
to be classified as Level 2, substantially all of these assumptions would need
to be observable in the marketplace or able to be derived from observable data
or supported by observable levels at which transactions are executed in the
marketplace.

Level
3 is comprised of financial instruments whose fair value is estimated based on
internally developed models or methodologies utilizing significant inputs that
are unobservable from objective sources. Included in this category are
warrants, private securities, convertible notes and loans receivable received
in conjunction with the Companys investment banking and merchant banking activities
and limited partnership interests.

Value of Underwriter and Placement Agent
Warrants

As
a part of the Companys compensation for its activities as underwriter or
placement agent, it may receive warrants exercisable to purchase securities
similar to those that are offered and sold in the financing transaction. The
Company values such warrants using the Black-Scholes Option Pricing Model
(Black-Scholes). The model requires management to use five inputs: price,
risk-free interest rate, exercise price, time remaining on the warrant and
price volatility. When the Company initially receives a new warrant in
connection with, or prior to an initial public offering, its calculated
volatility factor is based on the volatility of an index of comparable
companies, since there is no price history for new publicly traded or private
companies. As each warrant approaches its expiration date, its volatility
factor is derived primarily from the historical prices of its underlying common
stock. Management cannot assure that it ultimately will be able to liquidate
any of the Companys warrants in a way that will realize the value attributed
to the warrants in the financial statements through the application of
Black-Scholes.

The
fair value of warrants is recorded in financial instruments owned, at fair
value on the Companys Consolidated Statement of Financial Condition. When a
new warrant is received, its fair value is included in investment banking
revenue on the date on which it is earned. Subsequently, any change in fair
value is recorded as principal transactions. When a warrant is exercised, the
fair value is adjusted to reflect the value of the securities purchased, net of
the exercise price, and the adjustment amount is recorded as income or loss for
the relevant period. If a warrant expires unexercised, the fair value is
adjusted to zero and the decrease is recorded as a loss in the relevant period.

F-9

---



RODMAN & RENSHAW CAPITAL GROUP, INC. AND
SUBSIDIARIES 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Value of Merchant Banking Assets

The
value of Aceras assets was determined based on an independent valuation
prepared as of December 31, 2009, taking into consideration the cost of the
investment, market participant inputs, a binding offer made by BioMarin,
estimated cash flows based on entity specific criteria, purchase multiples paid
in other comparable third-party transactions, market conditions, liquidity,
operating results and other qualitative and quantitative factors. The values
at which the Companys investments are carried on our books are adjusted
to estimated fair value at the end of each quarter and the instability in general
economic conditions, stock markets and regulatory conditions may result in significant
changes in the estimated fair value of these investments.

Cash and Cash Equivalents

The
Company generally invests its excess cash in money market funds. Restricted cash
is due to short sales which were collateralized based on the requirements of
the prime broker and an escrow accounts per the Companys office lease
agreement and the Huxley Purchase Agreement.

Revenue Recognition

Investment Banking.Underwriting and
placement agent revenues and fees from mergers and acquisitions and other
financial advisory assignments are recognized in the Consolidated Statements of
Operations when the services related to the underlying transaction are
completed under the terms of the engagement. Expenses associated with such
transactions are deferred until the related revenue is recognized or the
engagement is otherwise concluded. Underwriting and placement agent revenues
are presented net of related expenses.

When
the Company receives warrants as a component of its compensation for investment
banking services, revenue is recognized based on the fair value of those
instruments. Revenue from the receipt of warrants is recognized on the date the
warrants are received based on the estimated fair value of the securities
received as estimated using Black-Scholes, which takes into account the
exercise price, remaining life of the warrant, the current price and expected
volatility of the underlying stock, expected dividends on the stock and the
risk-free interest rate for the remaining term of the warrant. The following
provides details of the Companys investment banking revenue for the years
ended December 31, 2009 and 2008 (in thousands of dollars):

|                                           |  |                         |        |      |  |        | 
|------------------------------------------ |  | ----------------------- | ------ | ---- |  | ------ | 
|                                           |  | Year Ended December 31, |       
|                                           |  |                         |       
|                                           |  | 2009                    |        | 2008 | 
|                                           |  |                         |        |      | 
|                                           |  |                         |        |      |  |        | 
|Private placement  cash
 fees             |  | $                       | 48,150 |      |  | 28,586 | 
|Private placement  warrant
 and note fees |  |                         | 24,184 |      |  | 13,684 | 
|Advisory  cash fees                       |  |                         | 6,965  |      |  | 8,984  | 
|Underwriting  cash fees                   |  |                         | 11,134 |      |  | 1,219  | 
|                                           |  |                         |        |      |  |        | 
|Total investment banking revenue           |  | $                       | 90,433 |      |  | 52,473 | 
|                                           |  |                         |        |      |  |        | 

Principal Transactions.Financial
instruments owned and financial instruments sold, but not yet purchased (all of
which are recorded on a trade-date basis) are carried at fair value with gains
and losses reflected in principal transactions on a trade date basis.

Commissions.The Companys sales and trading business generates
revenue from equity securities trading commissions paid by customers.
Commissions are recognized on a trade date basis.

Conference
Fees. The Company receives conference deposits from
presenters, which are recorded as a liability and then recognized as revenue
when the conference is conducted. The Company also makes advance payments for
conference facilities, entertainment and related costs, which are recorded as
prepaid expenses and then recognized as expenses when the conference is
conducted.

Property and Equipment

Property
and equipment are depreciated using the straight-line method over the estimated
useful lives of the related assets (generally three to ten years). Leasehold
improvements are amortized using the straight-line method over the term of
related leases or the estimated useful lives of the assets, whichever is
shorter.

F-10

---



RODMAN & RENSHAW CAPITAL GROUP, INC. AND
SUBSIDIARIES 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Goodwill and Other Intangible Assets

Goodwill
is not amortized; instead, it is reviewed for impairment at least annually and
written down when impaired. Goodwill is impaired when the carrying amount of
the reporting unit exceeds the implied fair value of the reporting unit.

Intangible
assets consist of customer relationships and a trade name. Customer
relationships and a trade name acquired in business combinations under the
purchase method of accounting are recorded at their fair values net of
accumulated amortization since the acquisition date. Customer relationships
acquired in the normal course of the Companys operations are recorded at cost
net of accumulated amortization. Intangible assets are amortized over their
useful lives using a method of amortization that reflects the pattern in which
the economic benefits of the intangible assets are consumed or otherwise used.
Amortization is calculated using the straight line method over the estimated
useful lives at the following annual rates:

|                        |  |     | 
|----------------------- |  | --- | 
|                        |  | %   | 
|                        |  |     | 
|Customer
 relationships |  | 33% | 
|Trade name              |  | 10% | 

The
Company reviews its finite-lived intangible assets for impairment whenever
events or changes in circumstances indicate that the carrying amount of
finite-lived intangible asset may not be recoverable. Recoverability of a
finite-lived intangible asset is measured by a comparison of its carrying
amount to the undiscounted future cash flows expected to be generated by the
asset. If the asset is considered to be impaired, the impairment to be
recognized is measured by the amount by which the carrying amount of the asset
exceeds the fair value of the asset, which is determined based on discounted
cash flows.

Earnings Per Share

Basic
EPS is computed by dividing net income applicable to common stock by the
weighted-average number of common shares outstanding, which includes restricted
stock and restricted stock units (RSUs) for which service has been provided.
Diluted EPS includes the components of basic EPS and also includes the dilutive
effects of restricted stock and RSUs for which service has not yet been
provided and employee stock options.

Income Taxes

Prior
to the Exchange, Holding was a limited liability company (LLC) filing
Federal, NewYork State, and New York City Unincorporated Business Tax (UBT)
returns. As an LLC, Holding was not subject to Federal or State income taxes
other than New York City UBT. Rather, the members of Holding, Revere and
R&R Capital, were taxed on Holdings federal and state taxable income.
Accordingly, there was no provision or liability for Federal or State income
taxes recorded in Holdings consolidated financial statements prior to the
Exchange, except for the New York City UBT. For the short year that began on
July 11, 2007 and ended December 31, 2007, and for subsequent tax years, the
Company was subject to Federal, foreign, state, and local corporate income
taxes. The Company files Federal, foreign, state, and local corporate tax
returns.

Deferred
income taxes are recognized for the future tax consequences attributable to
differences between the financial statement carrying amounts of existing assets
and liabilities and their respective tax basis. Deferred tax assets and
liabilities are measured using enacted tax rates expected to apply to taxable
income in the years in which those temporary differences are expected to be
recovered or settled. The effect on deferred taxes of a change in tax rates is
recognized in income in the period that includes the enactment date.

Management
does not believe that the Company has any material uncertain tax position
requiring recognition or measurement.

The
Companys policy is to classify penalties and interest associated with
uncertain tax positions, if required, as a component of its income tax
provision.

F-11

---



RODMAN & RENSHAW CAPITAL GROUP, INC. AND
SUBSIDIARIES 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Legal Reserves

The
Company recognizes a liability for a contingency when it is probable that a
liability has been incurred and when the amount of loss can be reasonably
estimated. When a range of probable loss can be estimated, the Company accrues
the most likely amount of such loss, and if such amount is not determinable,
then the Company accrues the minimum of the range of probable loss.

Reserves
related to legal proceedings are established and maintained. The determination
of these reserve amounts requires significant judgment on the part of
management. The Companys management considers many factors including, but not
limited to: the amount of the claim; the basis and validity of the claim;
previous results in similar cases; and legal precedents and case law. Each
legal proceeding is reviewed with counsel in each accounting period and the
reserve is adjusted as deemed appropriate by management. As of December 31,
2009, there were no legal reserves accrued in the Consolidated Statements of
Financial Condition.

Use of Estimates

The
preparation of financial statements is in conformity with GAAP, which requires
management to make estimates and assumptions that affect the reported amounts
of assets and liabilities and disclosure of contingent assets and liabilities
at the date of the financial statements and the reported amounts of revenues
and expenses during the reporting period. Actual results could differ from
these estimates.

Concentrations of Credit Risk

R&R
is engaged in trading and provides a broad range of securities brokerage and
investment services to institutional clients as well as private placement
services to business entities. Counterparties to the R&Rs business
activities include broker-dealers and clearing organizations, banks and other
financial institutions.

R&R
uses a clearing broker to process transactions and maintain client accounts on
a fee basis. R&R permits the clearing firm to extend credit to a client
secured by cash and securities in the clients account. R&Rs exposure to
credit risk associated with the non-performance by its clients and
counterparties in fulfilling their contractual obligations can be directly
impacted by volatile or illiquid trading markets, which may impair the ability
of clients and counterparties to satisfy their obligations to R&R. R&R
has agreed to indemnify its clearing broker for losses incurred while extending
credit to R&Rs clients. R&Rs policy is to review, as necessary, the
credit standing of its clients and counterparties. Amounts due from clients
that are considered uncollectible are charged back to R&R by the clearing
brokers when such amounts become determinable.

Financial
instruments sold but not yet purchased commit R&R to deliver specified
securities at predetermined prices. The transactions may result in market risk
since, to satisfy the obligation, R&R must acquire the financial
instruments at market prices, which may exceed the values reflected on the Consolidated
Statements of Financial Condition.

Forgivable Loans

During
the year ended December 31, 2008, the Company issued $3.3 million of forgivable
loans as a retention vehicle to certain new employees. The Company issued an
additional $2.1 million in forgivable loans in 2009. These loans are subject to
a substantive service requirement by the employees and are amortized over a
three year service period on a straight-line basis. As of December 31, 2009,
the net balance of the loans was $2.7 million, which is included in other
assets on the Consolidated Statements of Financial Condition. The Company
recorded $1.9 million and $0.8 million of compensation expense related to the
amortization of these loans during the years ended December 31, 2009 and 2008,
respectively.

Stock-Based Compensation

The
Company measures its compensation cost for all stock-based awards at fair value
on the date of grant, taking into account any post vesting selling
restrictions, and recognizes the compensation expense over the requisite
service period. Expenses associated with such grants are generally recognized
on a straight-line basis over the requisite service period, net of estimated
forfeitures.

Stock
based compensation for performance-based stock awards is recognized on a
straight-line basis over the requisite service period, net of estimated
forfeitures, if it is probable that the performance condition will be achieved.

F-12

---



RODMAN & RENSHAW CAPITAL GROUP, INC. AND
SUBSIDIARIES 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Deferred
stock based compensation costs with respect to shares of restricted stock and
restricted stock units and stock options granted are presented as part of
additional paid in capital in the consolidated statements of stockholders
equity.

Reclassifications

Certain
non-material reclassifications have been made to previously reported balances
to conform to the current presentation.

NOTE 3 -Recent Accounting Pronouncements

FASB
ASC 105-10.In June 2009, the FASB issued SFAS No.
168,The FASB Accounting Standards
Codification and the Hierarchy of Generally Accepted Accounting Principles,
(SFAS 168). SFAS 168 replaces SFAS 162 and establishes the FASB Accounting
Standards Codification (ASC or Codification) as the source of authoritative
accounting principles recognized by the FASB to be applied by non-governmental
entities in the preparation of financial statements in conformity with GAAP.
Rules and interpretive releases of the Securities and Exchange Commission (the
SEC) under authority of federal securities laws are also sources of
authoritative GAAP for SEC registrants. The Codification became the exclusive
authoritative reference on September 30, 2009.

FASB
ASC 810-10. In December 2007, the Financial Accounting
Standards Board (FASB) issued FASB 160, Non-controlling
Interests in Consolidated Financial Statements - an amendment of ARB No. 51
(SFAS 160). SFAS 160 requires an entity to clearly identify and present
ownership interests in subsidiaries held by parties other than the entity in
the Consolidated Financial Statements within the equity section but separate
from the entitys equity. It also requires the amount of consolidated net
income attributable to the parent and to the non-controlling interest be
clearly identified and presented on the face of the consolidated statement of
income; changes in ownership interest be accounted for similarly, as equity
transactions; and when a subsidiary is deconsolidated, any retained
non-controlling equity investment in the former subsidiary and the gain or loss
on the deconsolidation of the subsidiary be measured at fair value. This
statement is effective for financial statements issued for fiscal years
beginning after December 15, 2008. Accordingly, the Company adopted SFAS No.
160 effective January 1, 2009. The non-controlling interests related to the
investment in Aceras are presented in accordance with ASC 810-10.

FASB
ASC 815-10. In March 2008, the FASB issued SFAS 161,Disclosures about Derivative Instruments and Hedging
Activities (SFAS 161). SFAS 161 amends and expands the disclosure
requirements of SFAS 133,Accounting for
Derivative Instruments and Hedging Activities, and requires
qualitative disclosures about objectives and strategies for using derivatives,
quantitative disclosures about fair values and amounts of gains and losses on
derivative contracts and disclosures about credit-risk-related contingent
features in derivative agreements. SFAS 161 is effective for the fiscal years
and interim periods beginning after November 15, 2008. The Company adopted SFAS
No. 161 effective January 1, 2009. SFAS 161 did not impact the Companys
Consolidated Financial Statements.

FASB
ASC 320-10. In April 2009, the FASB released FASB
Staff Position (FSP) FAS 115-2, FAS 124-2, and EITF 99-20-2, Recognition
and Presentation of Other-Than-Temporary Impairments (FSP FAS
115-2). FSP FAS 115-2 was issued
contemporaneously with FSP FAS 157- 4, Determining Fair Value When the
Volume and Level of Activity for the Asset or Liability has Significantly Decreased
and Identifying Transactions that are Not Orderly (FSP FAS 157-4) and FSP
FAS 107-1 and APB 28-1,Interim
Disclosures About Fair Value of Financial Instruments (FSP FAS 107-1).
FSP FAS 115-2 provides new guidance on the recognition and presentation of an
other-than-temporary impairment of debt securities, such as auction rate investment
instruments. FSP FAS 157-4 indicates that if an entity determines that either the
volume and/or level of activity for an asset or liability has significantly decreased
(from normal conditions for that asset or liability) or price quotations or observable
inputs are not associated with orderly transactions, increased analysis and management
judgment will be required to estimate fair value. FSP FAS 115-2 and FSP FAS 157-4 are
effective for interim and annual periods ending after June 15, 2009, with early
adoption permitted. FSP FAS 157-4 must be applied prospectively. The Company
elected to adopt FSP FAS 115-2 and FSP FAS 157-4 in the first quarter of 2009. The
adoption of FSP FAS 115-2 and FSP FAS 157-4 had no material impact on the Companys
Consolidated Financial Statements.

F-13

---



RODMAN & RENSHAW CAPITAL GROUP, INC. AND
SUBSIDIARIES 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

FASB
ASC 260-10. In June 2008, the FASB issued FASB Staff
Position (FSP) EITF 03-6-1, Determining
Whether Instruments Granted in Share-Based Payment Transactions Are
Participating Securities (FSP EITF 03-6-1). FSP EITF 03-6-1
addresses whether instruments granted in share-based payment transactions are
participating securities prior to vesting, and therefore need to be included in
the earnings allocation in computing earnings per share under the two-class
method as described in SFAS No. 128, Earnings per Share. Under the guidance of
FSP EITF 03-6-1, unvested share-based payment awards that contain
non-forfeitable rights to dividends or dividend equivalents (whether paid or
unpaid) are participating securities and shall be included in the computation
of earnings-per-share pursuant to the two-class method. FSP EITF 03-6-1 is
effective for financial statements issued for fiscal years beginning after
December 15, 2008. The adoption ofFSP EITF
03-6-1 did not have an effect on the Companys calculation of
earnings per share and related disclosures, as its share-based payment awards
include forfeitable rights to dividends or dividend equivalents declared, and
as such these awards do not meet the definition of participating securities in
their current form.

FASB
ASC 855-10. In May 2009, the FASB issued FASB
Statement No. 165,Subsequent Events
(SFAS 165), which establishes general standards of and accounting for and
disclosure of events that occur after the balance sheet date but before
financial statements are issued or are available to be issued. This SFAS was
effective for interim and annual periods ending after June 15, 2009. The
adoption of SFAS 165 had no impact on the Companys financial condition, results
of operations or cash flows.

NOTE 4 -Financial Instruments, at Fair
Value

The
following is a summary of the fair value of financial instruments owned and
financial instruments sold, not yet purchased, as of December 31, 2009 and 2008
(in thousands of dollars):

|                                  |  |                               |        |                                                   |  |                               |  |                                                   |        |  |  |       | 
|--------------------------------- |  | ----------------------------- | ------ | ------------------------------------------------- |  | ----------------------------- |  | ------------------------------------------------- | ------ |  |  | ----- | 
|                                  |  | December 31, 2009             |        | December 31, 2008                                 | 
|                                  |  |                               |        |                                                   | 
|                                  |  | Financial
 Instruments
 Owned |        | Financial
 Instruments
 Sold,
 Not Yet
 Purchased |  | Financial
 Instruments
 Owned |  | Financial
 Instruments
 Sold,
 Not Yet
 Purchased |       
|                                  |  |                               |        |                                                   |  |                               |  |                                                   |       
|Publicly
 traded securities       |  | $                             | 5,120  |                                                   |  | 304                           |  |                                                   | 1,258  |  |  | 1,361 | 
|Merchant
 banking investment      |  |                               | 22,251 |                                                   |  |                              |  |                                                   |       |  |  |      | 
|Warrants                          |  |                               | 22,945 |                                                   |  |                              |  |                                                   | 7,484  |  |  |      | 
|Investment
 in private securities |  |                               | 1,373  |                                                   |  |                              |  |                                                   | 627    |  |  |      | 
|Investments
 in shell companies   |  |                               | 1,654  |                                                   |  |                              |  |                                                   | 1,824  |  |  |      | 
|Loans and
 loan commitments       |  |                               | 1,920  |                                                   |  |                              |  |                                                   | 1,917  |  |  |      | 
|Other
 investments                |  |                               | 893    |                                                   |  |                              |  |                                                   | 762    |  |  |      | 
|                                  |  |                               |        |                                                   |  |                               |  |                                                   |        |  |  |       | 
|                                  |  | $                             | 56,156 |                                                   |  | 304                           |  |                                                   | 13,872 |  |  | 1,361 | 
|                                  |  |                               |        |                                                   |  |                               |  |                                                   |        |  |  |       | 

F-14

---



RODMAN & RENSHAW CAPITAL GROUP, INC. AND
SUBSIDIARIES 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The
following is a summary of the Companys financial assets and liabilities that
are accounted for at fair value as of December 31, 2009 by level within the
fair value hierarchy (in thousands of dollars):

|                                                    |  |         |       |         |  |         |  |       |        |  |  |        | 
|--------------------------------------------------- |  | ------- | ----- | ------- |  | ------- |  | ----- | ------ |  |  | ------ | 
|                                                    |  | Level 1 |       | Level 2 |  | Level 3 |  | Total |       
|                                                    |  |         |       |         |  |         |  |       |       
|Assets:                                             |  |         |       |         |  |         |  |       |        |  |  |        | 
|Financial instruments owned:                        |  |         |       |         |  |         |  |       |        |  |  |        | 
|Securities                                          |  | $       | 5,180 |         |  |        |  |       | 1,313  |  |  | 6,493  | 
|Merchant banking investment                         |  |         |      |         |  |        |  |       | 22,251 |  |  | 22,251 | 
|Warrants                                            |  |         |      |         |  |        |  |       | 22,945 |  |  | 22,945 | 
|Investments in shell companies                      |  |         |      |         |  |        |  |       | 1,654  |  |  | 1,654  | 
|Loans and loan commitments                          |  |         |      |         |  |        |  |       | 1,920  |  |  | 1,920  | 
|Other investments                                   |  |         |      |         |  |        |  |       | 893    |  |  | 893    | 
|                                                    |  |         |       |         |  |         |  |       |        |  |  |        | 
|Total financial instruments owned                   |  | $       | 5,180 |         |  |        |  |       | 50,976 |  |  | 56,156 | 
|                                                    |  |         |       |         |  |         |  |       |        |  |  |        | 
|                                                    |  |         |       |         |  |         |  |       |        |  |  |        | 
|Liabilities:                                        |  |         |       |         |  |         |  |       |        |  |  |        | 
|Financial instruments sold, not yet purchased       |  | $       | 304   |         |  |        |  |       |       |  |  | 304    | 
|                                                    |  |         |       |         |  |         |  |       |        |  |  |        | 
|Total financial instruments sold, not yet purchased |  | $       | 304   |         |  |        |  |       |       |  |  | 304    | 
|                                                    |  |         |       |         |  |         |  |       |        |  |  |        | 

The
following is a summary of the Companys financial assets and liabilities that
are accounted for at fair value as of December 31, 2008 by level within the
fair value hierarchy (in thousands of dollars):

|                                                    |  |         |       |         |  |         |  |       |        |  |  |        | 
|--------------------------------------------------- |  | ------- | ----- | ------- |  | ------- |  | ----- | ------ |  |  | ------ | 
|                                                    |  | Level 1 |       | Level 2 |  | Level 3 |  | Total |       
|                                                    |  |         |       |         |  |         |  |       |       
|Assets:                                             |  |         |       |         |  |         |  |       |        |  |  |        | 
|Financial instruments owned:                        |  |         |       |         |  |         |  |       |        |  |  |        | 
|Securities                                          |  | $       | 1,258 |         |  |        |  |       | 627    |  |  | 1,885  | 
|Warrants                                            |  |         |      |         |  | 1,862   |  |       | 5,622  |  |  | 7,484  | 
|Investments in shell companies                      |  |         |      |         |  |        |  |       | 1,824  |  |  | 1,824  | 
|Loans and loan commitments                          |  |         |      |         |  |        |  |       | 1,917  |  |  | 1,917  | 
|Other investments                                   |  |         |      |         |  |        |  |       | 762    |  |  | 762    | 
|                                                    |  |         |       |         |  |         |  |       |        |  |  |        | 
|Total financial instruments owned                   |  | $       | 1,258 |         |  | 1,862   |  |       | 10,752 |  |  | 13,872 | 
|                                                    |  |         |       |         |  |         |  |       |        |  |  |        | 
|                                                    |  |         |       |         |  |         |  |       |        |  |  |        | 
|Liabilities:                                        |  |         |       |         |  |         |  |       |        |  |  |        | 
|Financial instruments sold, not yet purchased       |  | $       | 1,361 |         |  |        |  |       |       |  |  | 1,361  | 
|                                                    |  |         |       |         |  |         |  |       |        |  |  |        | 
|Total financial instruments sold, not yet purchased |  | $       | 1,361 |         |  |        |  |       |       |  |  | 1,361  | 
|                                                    |  |         |       |         |  |         |  |       |        |  |  |        | 

F-15

---



RODMAN & RENSHAW CAPITAL GROUP, INC. AND
SUBSIDIARIES 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The
following is a summary of changes in fair value of the Companys financial
assets and liabilities that have been classified as Level 3 for the year ended
December 31, 2009 (in thousands of dollars):

|                                                                                           |  |          |        |                              |  |        |   |  |         |  
|------------------------------------------------------------------------------------------ |  | -------- | ------ | ---------------------------- |  | ------ | - |  | ------- | -
|                                                                                           |  | Warrants |        | Other Financial
 Instruments |  | Total  |  
|                                                                                           |  |          |        |                              |  |        |  
|Balance, December 31, 2008                                                                 |  | $        | 5,622  |                              |  | 5,130  |   |  | 10,752  |  
|Purchases / issuances                                                                      |  |          | 25,266 |                              |  | 1,363  |   |  | 26,629  |  
|Sales / settlements                                                                        |  |          | (5,610 | )                            |  | (6,636 | ) |  | (12,246 | )
|Realized and unrealized gain (loss) (1)                                                    |  |          | (2,333 | )                            |  | 28,174 |   |  | 25,841  |  
|                                                                                           |  |          |        |                              |  |        |   |  |         |  
|Balance, December 31, 2009                                                                 |  | $        | 22,945 |                              |  | 28,031 |   |  | 50,976  |  
|                                                                                           |  |          |        |                              |  |        |   |  |         |  
|                                                                                           |  |          |        |                              |  |        |   |  |         |  
|Change in unrealized gains/losses relating
 to instruments still held at December 31, 2009 |  | $        | (3,353 | )                            |  | 21,538 |   |  | 18,185  |  
|                                                                                           |  |          |        |                              |  |        |   |  |         |  

| |     |                                                                                 
| | --- | --------------------------------------------------------------------------------
| | (1) | Reported in
 principal transactions in the Consolidated Statement of Operations.

There
were no material transfers in or out of financial assets classified as Level 3
for the year ended December 31, 2009.

The
following is a summary of changes in fair value of the Companys financial
assets and liabilities that have been classified as Level 3 for the year ended
December 31, 2008 (in thousands of dollars):

|                                                                                           |  |          |         |                              |  |        |   |  |         |  
|------------------------------------------------------------------------------------------ |  | -------- | ------- | ---------------------------- |  | ------ | - |  | ------- | -
|                                                                                           |  | Warrants |         | Other Financial
 Instruments |  | Total  |  
|                                                                                           |  |          |         |                              |  |        |  
|Balance, December 31, 2007                                                                 |  | $        | 2,083   |                              |  | 5,807  |   |  | 7,890   |  
|Purchases / issuances                                                                      |  |          | 10,493  |                              |  | 7,521  |   |  | 18,014  |  
|Change in accounting estimate (1)                                                          |  |          | 9,008   |                              |  |       |   |  | 9,008   |  
|Realized and unrealized gain (loss) (1)                                                    |  |          | (15,962 | )                            |  | (8,198 | ) |  | (24,160 | )
|                                                                                           |  |          |         |                              |  |        |   |  |         |  
|Balance, December 31, 2008                                                                 |  | $        | 5,622   |                              |  | 5,130  |   |  | 10,752  |  
|                                                                                           |  |          |         |                              |  |        |   |  |         |  
|                                                                                           |  |          |         |                              |  |        |   |  |         |  
|Change in unrealized gains/losses relating to instruments still held
 at December 31, 2008 |  | $        | (15,962 | )                            |  | (3,595 | ) |  | (19,557 | )
|                                                                                           |  |          |         |                              |  |        |   |  |         |  

| |     |                                                                                 
| | --- | --------------------------------------------------------------------------------
| | (1) | Reported in principal
 transactions in the Consolidated Statement of Operations.

There
were no material transfers in or out of financial assets classified as Level 3
for the year ended December 31, 2008.

NOTE 5 -Goodwill and Other Intangible
Assets

Miller Mathis & Co., LLC Acquisition

On
March 24, 2008, the Company acquired Miller Mathis & Co., LLC (Miller
Mathis), an independent mergers and acquisition advisor to the global steel
industry. The total fixed consideration for the acquisition was $7.3 million,
with $4.4 million paid in cash at closing, and the balance ($2.9 million)
payable on the first anniversary of the closing date. The Company had to pay up
to $0.4 million of the deferred consideration in cash, and at its election, had
the right to pay up to $2.5 million of the deferred consideration in cash or
common stock. Up to an additional $2.1 million of purchase price was payable in
cash or common stock, or a combination thereof, on the second anniversary of
the closing date, upon the achievement of significant growth targets.

As
of March 1, 2009, the Company effected a modification to the agreements
defining the ongoing obligations between Miller Mathis and the Company.
Pursuant to the modification agreement, the $2.9 million deferred payment that
was due to Miller Mathis on the first anniversary of the closing date was
reduced to $1.0 million, which amount was paid on April 1, 2009. The remaining
$1.9 million, which is recorded as an accrued liability of the Company, will be
paid to Miller Mathis contingent upon future revenues generated by the metals
and mining group, of which $1.0 million was paid through December 31, 2009.

F-16

---



RODMAN & RENSHAW CAPITAL GROUP, INC. AND
SUBSIDIARIES 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

COSCO Capital Management, LLC Acquisition

On
June 2, 2008, the Company consummated the acquisition of all the operating
assets of COSCO Capital Management LLC, COSCO Capital Texas LP and Private
Energy Securities, Inc. (collectively, COSCO), related companies that provide
investment banking services to the oil and gas sectors, principally in the
United States and Canada.

Under
the terms of the acquisition agreement, the fixed purchase price was $10.1
million, $8.1 million of which was paid at closing by the delivery of $6.1
million in cash and 1,121,138 shares of restricted common stock of the Company
valued at $2.0 million. The $2.0 million balance of the fixed purchase price
was payable over the two year period following the closing. Additionally, the
Company was required to pay (a) up to a maximum of $4.0 million over the 21
month period following the closing in respect of certain revenue earned, but
not yet received, under contracts acquired (of which $3.8 million was paid in
cash and restricted stock through December 31, 2009), and (b) certain other
incremental payments based upon the acquired business achieving performance
targets during the two year period following the closing. In addition, the
acquisition of COSCO contained a 21 month contingency for additional contingent
consideration to the selling shareholders, based on future revenues. This
additional consideration was payable annually in a mix of cash and equity.

As
of May 1, 2009, the Company effected a modification to the agreements defining
the ongoing obligations between COSCO and the Company. Pursuant to the
modification agreement, the $2.0 million deferred payment that was due to COSCO
in equal installments in June 2009 and 2010, respectively, will be paid to
COSCO contingent upon future revenues generated by the COSCO group. Of this
$2.0 million, the Company paid $0.1 million in contingent earn-out payments
through December 31, 2009, and will pay the remaining balance of the earn-out
payments as future revenues are generated.

Goodwill and Intangible Assets

In
light of market conditions, the Company performed an impairment test during the
first quarter of 2008 which resulted in the recognition of a goodwill
impairment charge of $1.1 million, of which $ 0.3 million and $0.8 million are
related to its TechBio, LLC and Techvest, LLC subsidiaries, respectively.

Goodwill
was tested for impairment again as of December 31, 2008. The fair value of the
reporting unit was determined using the weighted average of discounted cash
flow, price to tangible book value multiple and market capitalization. The
significant estimates used in the fair value methodologies include estimates of
future cash flows, future growth rates and the weighted average cost of capital
of the reporting unit. The impairment test resulted in the recognition of an
impairment charge of $16.8 million related to Miller Mathis and COSCO, which
was the total balance of goodwill related to these acquisitions.

Goodwill
was tested for impairment as of March 31, 2009 and as of June 30, 2009, after
monitoring the relationship of the Companys market capitalization to both its
book value and tangible book value and observing a decline in the Companys
market capitalization related to both financial services industry-wide factors
and to Company specific factors. The impairment tests resulted in the
recognition of an impairment charge of $1.3 million related to a COSCO
contingent earn-out paid in cash.

Goodwill
was tested annually for impairment as of September 30, 2009. Based on this
analysis goodwill was not considered to be impaired.

The
following table represents a summary of the changes to goodwill and other
intangible assets from December 31, 2008 through December 31, 2009 (in
thousands of dollars):

|                           |  |          |        |                         |  |           |   |       |     |   |  |        |  
|-------------------------- |  | -------- | ------ | ----------------------- |  | --------- | - | ----- | --- | - |  | ------ | -
|                           |  | Goodwill |        | Customer
 Relationships |  | Trademark |   | Total |    
|                           |  |          |        |                         |  |           |   |       |    
|Balance, December 31, 2008 |  | $        |       |                         |  | 2,686     |   |       | 220 |   |  | 2,906  |  
|Additions                  |  |          | 1,540  |                         |  |          |   |       |    |   |  | 1,540  |  
|Impairment                 |  |          | (1,327 | )                       |  |          |   |       |    |   |  | (1,327 | )
|Amortization               |  |          |       |                         |  | (1,136    | ) |       | (22 | ) |  | (1,158 | )
|                           |  |          |        |                         |  |           |   |       |     |   |  |        |  
|Balance, December 31, 2009 |  | $        | 213    |                         |  | 1,550     |   |       | 198 |   |  | 1,961  |  
|                           |  |          |        |                         |  |           |   |       |     |   |  |        |  

F-17

---



RODMAN & RENSHAW CAPITAL GROUP, INC. AND
SUBSIDIARIES 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

NOTE 6 -Property and Equipment, Net

Property
and equipment, net is comprised of the following as of December 31, 2009 and
2008 (in thousands of dollars):

|                                                 |  |                    |       |                    |  |       | 
|------------------------------------------------ |  | ------------------ | ----- | ------------------ |  | ----- | 
|                                                 |  | December
 31, 2009 |       | December
 31, 2008 | 
|                                                 |  |                    |       |                    | 
|Computer and office
 equipment                   |  | $                  | 2,203 |                    |  | 1,625 | 
|Furniture and fixtures                           |  |                    | 1,460 |                    |  | 1,011 | 
|Leasehold improvements                           |  |                    | 2,420 |                    |  | 1,008 | 
|                                                 |  |                    |       |                    |  |       | 
|                                                 |  |                    | 6,083 |                    |  | 3,644 | 
|Less: accumulated
 depreciation and amortization |  |                    | 3,310 |                    |  | 2,254 | 
|                                                 |  |                    |       |                    |  |       | 
|Property and Equipment, Net                      |  | $                  | 2,773 |                    |  | 1,390 | 
|                                                 |  |                    |       |                    |  |       | 

Depreciation
expense for the years ended December 31, 2009 and 2008 was $1.1 million and
$707,000, respectively.

NOTE 7 -Related Party Transactions

One
of the Companys directors, who joined its board of directors on October 16,
2007, has also served as the chairman of the board of Cyalume Technologies,
Inc. (Cyalume) since May 31, 2006. During 2008 the Company recorded revenue in
the amount of $2.3 million in connection with services rendered to Cyalume. As
of December 31, 2009, a promissory note in the amount of $1.8 million was
outstanding.

NOTE 8 -Warrants

On
March 1, 2007, the Company, in a private placement transaction, issued the
debentures and the warrants to the investors in exchange for $20,000,000 in
cash. The debentures had a maturity date of December 31, 2009 and bore interest
at 6% per annum, payable at the earlier of the maturity date or at the time of conversion
or redemption of the debentures. The debentures, including any accrued
interest, were convertible into shares of Holdings common stock, at any time,
at the election of the holders, at a conversion price of $7.00 per share,
subject to certain adjustments. The warrants were exercisable at any time on or
before March 1, 2010, at the election of the holder, and entitled the holders
to purchase up to 714,286 shares of Holdings common stock at an exercise price
of $7.70 per share, subject to certain adjustments.

As
part of the Exchange, the holders of the debentures and the warrants exchanged
those securities (and accrued interest on the debentures) for an aggregate of
5,970,099 shares of Common Stock and warrants to purchase 1,355,600 shares of
Common Stock at an exercise price of $7.00 per share, subject to certain
adjustments. As a result of such adjustments, at September 30, 2009, the
warrants covered the right to purchase 1,494,886 shares at an exercise price of
$6.35. Subsequent to September 30, 2009, the Company extended to the warrant
holders the ability to exercise the warrants on a cashless basis prior to
their expiration on March 1, 2010. On March 2, 2010 all 1,494,886 warrants
expired unexercised.

In
connection with the sale of the Debentures and the Warrants, the Company agreed
to enter into a Registration Rights Agreement with the holders of the
Debentures, which would require it or its successor to file a resale
registration statement with the SEC within 90 days after certain trigger
events. The Exchange was a trigger event and, in connection therewith, the
Company entered into a Registration Rights Agreement with the former holders of
the Debentures. In furtherance of the Companys obligations under the Registration
Rights Agreement, the holders shares were included in the Registration
Statement that was declared effective by the SEC on October 16, 2007. The
Company has no on-going obligations under the Registration Rights Agreement.

F-18

---



RODMAN & RENSHAW CAPITAL GROUP, INC. AND
SUBSIDIARIES 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

NOTE 9 -Commitments and Contingencies

Lease Commitments

The
Company leases its headquarters and other office locations under non-cancelable
lease agreements which expire between 2008 and 2014.

On
February 14, 2008, the Company entered into a new lease agreement for
approximately 40,300 square feet of office space on the 20th floor at 1251
Avenue of the Americas, New York, NY for a term which commenced in May 2008 and
ends in October 2013. The monthly rental fee is $252,000, with five months free
rent after the payment of the first monthly lease payment on the commencement
date. The monthly rent expense is $233,000.

The
Companys future minimum lease payments for all operating leases are as follows
as of December 31, 2009 (in thousands of dollars):

|     |  |                  |       | 
|---- |  | ---------------- | ----- | 
|     |  | Office
 
 Leases |      
|     |  |                  |      
|2010 |  | $                | 3,198 | 
|2011 |  |                  | 3,179 | 
|2012 |  |                  | 3,181 | 
|2013 |  |                  | 2,585 | 
|2014 |  |                  | 56    | 

Occupancy
and rental expense amounted to $3.1 million and $2.9 million in 2009 and 2008,
respectively.

Letter
of Credit

In
connection with the lease for the 20th floor at 1251 Avenue of the Americas,
New York, NY the Company issued a letter of credit in favor of the landlord in
the sum of $755,625, as a security deposit. The letter of credit expires in
March 2011 but is subject to automatic extension.

Equity Commitment

The
Company, through RPI, has made an investment commitment to Aceras Partners to
fund operations and the joint ventures principal investments in life science
companies. As of December 31, 2008, $28.6 million of this commitment remained
unfunded.

At December
31, 2009, $15.4 million of this commitment remained unfunded.

NOTE 10 -Net Capital Requirements

R&R
is subject to various regulatory requirements, including the SECs Uniform Net
Capital Rule (SEC Rule 15c3-1). These regulations place limitations on certain
transactions, such as repaying subordinated borrowings, paying cash dividends,
and making loans to a parent, affiliates or employees. Broker-dealers are
prohibited from such transactions which would result in a reduction of its
total net capital to less than 120% of its required minimum net capital. Moreover,
broker-dealers are required to notify the SEC before entering into any such
transactions, which if executed, would result in a reduction of 30% or more of
its excess net capital (net capital less the minimum requirement). The SEC has
the ability to prohibit or restrict such transactions if the result is
detrimental to the financial integrity of the broker-dealer.

At
December 31, 2009, the R&R had net capital of $8.6 million, which was $8.0
million in excess of its required net capital of $599,000.

F-19

---



RODMAN & RENSHAW CAPITAL GROUP, INC. AND
SUBSIDIARIES 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

NOTE 11 -Income Taxes

For
the years ended December 31, 2009 and 2008, the current and deferred amount of
income tax expense (benefit) in the statement of operations are comprised of
the following (in thousands of dollars):

|                                      |  |                         |        |      |  |       | 
|------------------------------------- |  | ----------------------- | ------ | ---- |  | ----- | 
|                                      |  | Year Ended December 31, |       
|                                      |  |                         |       
|                                      |  | 2009                    |        | 2008 | 
|                                      |  |                         |        |      | 
|Current:                              |  |                         |        |      |  |       | 
|Federal                               |  | $                       | 297    |      |  |      | 
|States & City                         |  |                         | 132    |      |  | 224   | 
|                                      |  |                         |        |      |  |       | 
|Total current tax expense (benefit)   |  |                         | 429    |      |  | 224   | 
|                                      |  |                         |        |      |  |       | 
|                                      |  |                         |        |      |  |       | 
|Deferred:                             |  |                         |        |      |  |       | 
|Federal                               |  |                         | (3,399 | )    |  | 1,486 | 
|States & City                         |  |                         | (943   | )    |  | 772   | 
|                                      |  |                         |        |      |  |       | 
|Total
 deferred tax expense (benefit) |  |                         | (4,342 | )    |  | 2,258 | 
|                                      |  |                         |        |      |  |       | 
|                                      |  |                         |        |      |  |       | 
|Total
 income tax expense (benefit)   |  | $                       | (3,913 | )    |  | 2,482 | 
|                                      |  |                         |        |      |  |       | 

A
reconciliation of total income taxes and the amount computed by applying the
applicable federal income tax rate to earnings before income taxes follows (in
thousands of dollars):

|                                                      |  |                         |         |      |  |         |  
|----------------------------------------------------- |  | ----------------------- | ------- | ---- |  | ------- | -
|                                                      |  | Year Ended December 31, |        
|                                                      |  |                         |        
|                                                      |  | 2009                    |         | 2008 | 
|                                                      |  |                         |         |      | 
|Computed
 expected tax at 34% statutory rate        |  | $                       | 14,307  |      |  | (11,884 | )
|Increase
 in taxes resulting from:                    |  |                         |         |      |  |         |  
|Non-deductible expenses and non-taxable income, net   |  |                         | 84      |      |  | 64      |  
|State and local income taxes, net of federal benefit  |  |                         | 1,458   |      |  | (2,124  | )
|Income taxes attributable to non-controlling interest |  |                         | (6,361  | )    |  |        |  
|Share-based compensation                              |  |                         | 1,184   |      |  |        |  
|Other items                                           |  |                         | 754     |      |  | 887     |  
|Change in valuation allowance                         |  |                         | (15,339 | )    |  | 15,539  |  
|                                                      |  |                         |         |      |  |         |  
|Total                                                 |  | $                       | (3,913  | )    |  | 2,482   |  
|                                                      |  |                         |         |      |  |         |  

F-20

---



RODMAN & RENSHAW CAPITAL GROUP, INC. AND
SUBSIDIARIES 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The
tax effects of temporary differences that give rise to the deferred tax assets
and deferred tax liabilities are presented below (in thousands of dollars):

|                                         |  |                    |        |                    |  |         |  
|---------------------------------------- |  | ------------------ | ------ | ------------------ |  | ------- | -
|                                         |  | December 31,
 2009 |        | December 31,
 2008 | 
|                                         |  |                    |        |                    | 
|Deferred tax assets:                     |  |                    |        |                    |  |         |  
|Stock based compensation                 |  | $                  | 3,462  |                    |  | 3,444   |  
|Intangible assets                        |  |                    | 8,881  |                    |  | 8,809   |  
|Depreciation                             |  |                    | 393    |                    |  | 217     |  
|Unrealized gain on investments           |  |                    | 199    |                    |  | 114     |  
|Accrued expenses                         |  |                    | 961    |                    |  | 805     |  
|Allocation for bad debt                  |  |                    | 141    |                    |  |        |  
|Net operating loss carryforwards         |  |                    |       |                    |  | 3,621   |  
|Foreign net operating loss carryforwards |  |                    | 200    |                    |  |        |  
|Other carryovers                         |  |                    | 133    |                    |  | 7       |  
|                                         |  |                    |        |                    |  |         |  
|                                         |  |                    | 14,370 |                    |  | 17,017  |  
|Valuation allowance                      |  |                    | (200   | )                  |  | (15,539 | )
|                                         |  |                    |        |                    |  |         |  
|                                         |  |                    | 14,170 |                    |  | 1,478   |  
|                                         |  |                    |        |                    |  |         |  
|Deferred tax liabilities:                |  |                    |        |                    |  |         |  
|Warrant income                           |  |                    | (5,457 | )                  |  | (1,478  | )
|Gain on sale of investments              |  |                    | (4,371 | )                  |  |        |  
|                                         |  |                    |        |                    |  |         |  
|                                         |  |                    | (9,828 | )                  |  | (1,478  | )
|                                         |  |                    |        |                    |  |         |  
|Net deferred tax asset                   |  | $                  | 4,342  |                    |  |        |  
|                                         |  |                    |        |                    |  |         |  

In
determining the possible future realization of deferred tax assets, the future
taxable income from the following sources is taken into account: (a) the
reversal of taxable temporary differences, (b) future operations exclusive of
reversing temporary differences and (c) tax planning strategies that, if
necessary, would be implemented to accelerate taxable income into years in
which net operating losses might otherwise expire.

The
Company recorded a valuation allowance of $15.5 million against the deferred
tax asset as of December 31, 2008, after considering all available evidence and
potential tax-planning strategies related to the amount of the tax asset that
is more likely than not to be realized. In the fourth quarter of 2009, the
Company, based on its evaluation of all available evidence and potential
tax-planning strategies available, determined that it was more likely than
not that substantially all of its deferred tax assets would be realized and accordingly
reversed $15.3 million of its valuation allowance existing at December 31,
2008.

As
of December 31, 2009, the Company has Canadian net operating loss
carry-forwards of $0.7 million, with $0.3 million expiring in 2028 and $0.4
million expiring in 2029.

The
Companys continuing practice is to recognize estimated interest and/or
penalties related to income tax matters as a component of income tax expense.
As of December 31, 2009, the Company had no accruals for interest of penalties
or reserves for uncertain tax positions.

The
Company files income tax returns in the U.S. federal jurisdiction, various
states, local and foreign jurisdictions. The Company is not currently under
examination by the United States Internal Revenue Service or any other state,
local, or foreign taxing jurisdictions.

The
Companys income tax returns filed for tax years 2007 and 2008 are subject to
examination by the U.S. federal, state, and foreign taxing jurisdictions. In
addition, the Company does not anticipate any change in the amount of
unrecognized tax benefits within the next twelve months.

F-21

---



RODMAN & RENSHAW CAPITAL GROUP, INC. AND
SUBSIDIARIES 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

NOTE 12 Stock Based Compensation

Stock-Based Compensation

We
have an Incentive Compensation Plan (Incentive Plan) which allows awards in
the form of incentive stock options (within the meaning of Section 422 of the
Internal Revenue Code), nonqualified stock options, stock appreciation rights,
restricted stock, unrestricted stock, performance awards, restricted stock
units, dividend equivalents or other share-based awards. The plan imposes a
limit on the number of shares of our common stock that may be subject to awards.

The
Incentive Plan allows for grants of restricted stock awards, whereby employees
are granted restricted shares of common stock subject to forfeiture. The
Incentive Plan also allows for grants of restricted stock units. Restricted
stock units give a participant the right to receive fully vested shares at the
end of a specified deferral period. One advantage of restricted stock units, as
compared to restricted stock, is that the period during which the award is
deferred as to settlement can be extended past the date the award becomes
non-forfeitable, allowing a participant to hold an interest tied to common
stock on a tax deferred basis. Prior to settlement, restricted stock units
carry no voting rights associated with the stock ownership.

We
have historically and generally expect to issue new shares of common stock when
satisfying our issuance obligations pursuant to share based awards, as opposed
to reissuing shares from our treasury stock.

The
Company recorded $5.8 million and $5.6 million of stock-based compensation for
the years ended December 31, 2009 and 2008, respectively. The unamortized
deferred stock-based compensation balance as of December 31, 2009 amounts to
$2.5 million and will be fully amortized through 2012.

A
summary of options (with retroactive effect given for the Exchange) outstanding
as of December 31, 2009 is as follows (shares in thousands):

|                                  |  |                     |       |                                    |   |                                            |  |                                                 |      |                             |  |            |  |   |              | 
|--------------------------------- |  | ------------------- | ----- | ---------------------------------- | - | ------------------------------------------ |  | ----------------------------------------------- | ---- | --------------------------- |  | ---------- |  | - | ------------ | 
|Stock
 Options                   
|                                  |  | Number
 of
 Options |       | Weighted
 Average
 Exercise
 Price |   | Weighted
 Average
 Grant
 Date
 Fair Value |  | Weighted
 Average
 Remaining
 Contractual
 Life |      | Aggregate
 Intrinsic
 Value | 
|                                  |  |                     |       |                                    |   |                                            |  |                                                 |      |                             | 
|Outstanding at December 31,
 2007 |  |                     | 6,088 |                                    | $ | 3.91                                       |  | $                                               | 1.04 |                             |  |            |  |   |              | 
|Exercised                         |  |                     | (150  | )                                  |   | 0.22                                       |  |                                                 |     |                             |  |            |  |   |              | 
|Canceled                          |  |                     | (861  | )                                  |   | 3.78                                       |  |                                                 |     |                             |  |            |  |   |              | 
|                                  |  |                     |       |                                    |   |                                            |  |                                                 |      |                             |  |            |  |   |              | 
|Outstanding at December 31,
 2008 |  |                     | 5,077 |                                    | $ | 4.04                                       |  | $                                               | 1.09 |                             |  |            |  |   |              | 
|Canceled                          |  |                     | (970  | )                                  |   | 3.91                                       |  |                                                 | 1.62 |                             |  |            |  |   |              | 
|                                  |  |                     |       |                                    |   |                                            |  |                                                 |      |                             |  |            |  |   |              | 
|Outstanding at December 31,
 2009 |  |                     | 4,107 |                                    | $ | 4.07                                       |  | $                                               | 0.96 |                             |  | 2.5
 years |  | $ | 0.7
 million | 
|                                  |  |                     |       |                                    |   |                                            |  |                                                 |      |                             |  |            |  |   |              | 
|Exercisable at December 31,
 2009 |  |                     | 3,980 |                                    | $ | 4.06                                       |  | $                                               | 0.95 |                             |  | 2.4
 years |  | $ | 0.7
 million | 
|                                  |  |                     |       |                                    |   |                                            |  |                                                 |      |                             |  |            |  |   |              | 

There
are no option grants in 2009 and 2008.

The
total intrinsic value of stock options exercised during 2008 was $95,892. No
cash was received from the exercise of stock options by employees during 2009
and 2008.

Total
compensation cost associated with stock options was $1.4 million and $2.2
million in 2009 and 2008, respectively.

F-22

---



RODMAN & RENSHAW CAPITAL GROUP, INC. AND
SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The
following tables detail the activity of restricted stock (shares in thousands):

|                             |  |                   |        |                                           |   |      | 
|---------------------------- |  | ----------------- | ------ | ----------------------------------------- | - | ---- | 
|Restricted
 Stock           
|                             |  | Number
 of Shares |        | Weighted
 Average
 Grant Date
 Fair Value |  
|                             |  |                   |        |                                           |  
|Balance at December 31, 2007 |  |                   | 750    |                                           | $ | 5.00 | 
|Granted                      |  |                   | 1,470  |                                           |   | 2.27 | 
|RSU conversion               |  |                   | (1,327 | )                                         |   | 3.80 | 
|Forfeited                    |  |                   | (329   | )                                         |   | 2.28 | 
|Vested                       |  |                   | (132   | )                                         |   | 2.28 | 
|                             |  |                   |        |                                           |   |      | 
|Balance at December 31, 2008 |  |                   | 432    |                                           | $ | 2.31 | 
|Forfeited                    |  |                   | (95    | )                                         |   | 2.28 | 
|Vested                       |  |                   | (144   | )                                         |   | 2.31 | 
|                             |  |                   |        |                                           |   |      | 
|Balance at December 31, 2009 |  |                   | 193    |                                           | $ | 2.33 | 
|                             |  |                   |        |                                           |   |      | 

Total
compensation cost associated with restricted stock was $235,000 and $2.2
million in 2009 and 2008, respectively.

The
following tables detail the activity of restricted stock units (shares in
thousands):

|                                  |  |                           |        |                                         |  |                           |   |                              |      |  |   |      | 
|--------------------------------- |  | ------------------------- | ------ | --------------------------------------- |  | ------------------------- | - | ---------------------------- | ---- |  | - | ---- | 
|Restricted Stock Units            |  |                           |        |                                         |  |                           |   |                              |      |  |   |      | 
|                                  |  | Shares                    |        | Weighted Average Grant Date
 Fair Value | 
|                                  |  |                           |        |                                         | 
|                                  |  | Future
 Service
 Required |        | No Future
 Service
 Required (1)        |  | Future
 Service
 Required |   | No Future
 Service
 Required |     
|                                  |  |                           |        |                                         |  |                           |   |                              |     
|Balance at December 31, 2007      |  |                           |       |                                         |  |                          |   | $                            |     |  | $ |     | 
|Granted                           |  |                           | 5,918  |                                         |  |                          |   |                              | 0.83 |  |   |     | 
|Restricted stock conversion       |  |                           | 1,327  |                                         |  |                          |   |                              | 0.62 |  |   |     | 
|                                  |  |                           |        |                                         |  |                           |   |                              |      |  |   |      | 
|Balance at December 31, 2008      |  |                           | 7,245  |                                         |  |                          |   | $                            | 0.79 |  | $ |     | 
|Granted                           |  |                           | 2,132  |                                         |  |                          |   |                              | 0.81 |  |   |     | 
|Forfeited                         |  |                           | (3,321 | )                                       |  |                          |   |                              | 0.73 |  |   |     | 
|Vested                            |  |                           | (3,389 | )                                       |  | 3,389                     |   |                              | 1.93 |  |   | 1.93 | 
|Distribution of underlying shares |  |                           |       |                                         |  | (883                      | ) |                              |     |  |   | 4.52 | 
|                                  |  |                           |        |                                         |  |                           |   |                              |      |  |   |      | 
|Balance at December 31, 2009      |  |                           | 2,667  |                                         |  | 2,506                     |   | $                            | 1.00 |  | $ | 1.02 | 
|                                  |  |                           |        |                                         |  |                           |   |                              |      |  |   |      | 

|    |                                                                                                          
|--- | ---------------------------------------------------------------------------------------------------------
|   
|    |                                                                                                          
|(1) | Represents
 fully vested restricted stock units which are still subject to
 transferability restrictions.

Total
compensation cost associated with RSUs was $4.2 million and $1.2 million in
2009 and 2008, respectively.

As
of December 31, 2009, there was $2.4 million of total unrecognized compensation
cost related to non vested restricted shares and RSUs awards, which is expected
to be recognized over a remaining weighted-average vesting period of
approximately 2.2 years.

F-23

---



RODMAN & RENSHAW CAPITAL GROUP, INC. AND
SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

NOTE 13 Weighted Average Shares
Outstanding

The
table below reconciles weighted average number of common shares outstanding,
basic and diluted, for the years ended December 31, 2009 and 2008 (weighted
average shares in thousands):

|                                                                                                                                                                                                                                                              |  |                         |        |      |  |        | 
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ----------------------- | ------ | ---- |  | ------ | 
|                                                                                                                                                                                                                                                              |  | Year Ended December 31, |       
|                                                                                                                                                                                                                                                              |  |                         |       
|                                                                                                                                                                                                                                                              |  | 2009                    |        | 2008 | 
|                                                                                                                                                                                                                                                              |  |                         |        |      | 
|Common shares outstanding, basic                                                                                                                                                                                                                              |  |                         | 35,588 |      |  | 33,375 | 
|Common shares upon exercise of options (1)                                                                                                                                                                                                                    |  |                         | 39     |      |  |       | 
|Common shares upon exercise of warrants (1)                                                                                                                                                                                                                   |  |                         |       |      |  |       | 
|Common shares upon vesting of non-vested restricted stock and RSUs                                                                                                                                                                                            |  |                         | 1,772  |      |  |       | 
|                                                                                                                                                                                                                                                              |  |                         |        |      |  |        | 
|Common shares outstanding, diluted                                                                                                                                                                                                                            |  |                         | 37,399 |      |  | 33,375 | 
|                                                                                                                                                                                                                                                              |  |                         |        |      |  |        | 
|                                                                                                                                                                                                                                                             
|(1) Calculated under the
 treasury stock method. The treasury stock method assumes the issuance of only
 a net incremental number of shares as proceeds from issuance are assumed to
 be used to repurchase shares at the average stock price for the period.

Due
to the fact the Company had a net loss for the year ended December 31, 2008,
the outstanding shares for calculation of basic EPS and diluted EPS for that
period are the same.

NOTE 14  Segment Reporting

Through
June 30, 2009, the Company operated in one business segment. Commencing July 1,
2009, the Company began operating in two business segments, Capital Markets and
Merchant Banking. The Capital Markets reportable segment includes our investment
banking, sales and trading activities and research. The Capital Markets
reportable segment is managed as a single operating segment that provides the
following principal sources of revenue:

|  |                                                                                                                
|- | ---------------------------------------------------------------------------------------------------------------
| | investment
 banking fees, which are derived from corporate finance activities and
 strategic advisory services;
|  |                                                                                                                
| | realized and
 unrealized gains with respect to securities held for the Companys own
 account;                 
|  |                                                                                                                
| | commissions
 on sales and trading activities;                                                                  
|  |                                                                                                                
| | conference
 fees; and                                                                                          
|  |                                                                                                                
| | other
 miscellaneous sources of revenues, such as interest.                                                    
|  |                                                                                                                

Although
the Company has multiple sources of revenue derived within Capital Markets,
most of our revenue is derived from investment banking services and consists of
private placement, underwriting and strategic advisory fees earned upon the
successful completion of financing or other types of corporate transactions,
such as mergers, acquisitions and dispositions.

The
Merchant Banking segment is primarily comprised of operating activities related
to Aceras BioMedical. On May 12, 2008, the Company formed Aceras BioMedical, a
joint venture through which it, in partnership with Aceras Partners, LLC, make
principal investments in early-stage biotechnology and life sciences companies.
In conjunction with the establishment of the joint venture, the Company formed
a new wholly-owned subsidiary, RPI, which holds a 50% stake in Aceras
BioMedical and serves as the holding vehicle for all of its principal-related
businesses. At December 31, 2009, RPIs outstanding investment commitment to
Aceras BioMedical over five years to fund operations and the joint ventures
principal investments in life science companies was $15.4 million. RPI receives
50% of Aceras BioMedicals economic interest in all investments made.

F-24

---



RODMAN & RENSHAW CAPITAL GROUP, INC. AND
SUBSIDIARIES 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

|                    |  |                |      |                 |       |      |  |                         |      |  |  |       | 
|------------------- |  | -------------- | ---- | --------------- | ----- | ---- |  | ----------------------- | ---- |  |  | ----- | 
|                    |  |                |      |                 |       |      |  | Non-ControllingInterest |      |  |  |      
|Dollars in Millions |  | CapitalMarkets |      | MerchantBanking |       |      |  |                         |     
|                    |  |                |      |                 | Total |     
|                    |  |                |      |                 |       |      |  |                         |     
|2009                |  |                |      |                 |       |      |  |                         |      |  |  |       | 
|Net revenues        |  | $              | 96.2 |                 |       | 17.3 |  |                         | 18.7 |  |  | 132.2 | 
|Expenses            |  | $              | 80.1 |                 |       | 10.0 |  |                         |     |  |  | 90.1  | 
|Segment assets      |  | $              | 72.7 |                 |       | 10.1 |  |                         | 12.1 |  |  | 94.9  | 
|                    |  |                |      |                 |       |      |  |                         |      |  |  |       | 
|2008                |  |                |      |                 |       |      |  |                         |      |  |  |       | 
|Net revenues        |  | $              | 49.2 |                 |       |     |  |                         |     |  |  | 49.2  | 
|Expenses            |  | $              | 83.1 |                 |       | 1.0  |  |                         |     |  |  | 84.1  | 
|Segment assets      |  | $              | 47.7 |                 |       |     |  |                         |     |  |  | 47.7  | 

NOTE 15 Selected Quarterly Financial Data
(Unaudited)

The
following is a summary of unaudited quarterly statements of operations for the
years ended December 31, 2009 and 2008 (amounts in thousands, except per share
amounts):

|                                                |  |       |         |        |  |        |  |        |        |   |  |         |  
|----------------------------------------------- |  | ----- | ------- | ------ |  | ------ |  | ------ | ------ | - |  | ------- | -
|                                                |  | First |         | Second |  | Third  |  | Fourth |       
|                                                |  |       |         |        |  |        |  |        |       
|2009                                            |  |       |         |        |  |        |  |        |        |   |  |         |  
|Revenues                                        |  | $     | 5,839   |        |  | 33,395 |  |        | 65,550 |   |  | 27,440  |  
|Operating
 income (loss)                        |  | $     | (12,297 | )      |  | 15,951 |  |        | 30,582 |   |  | 7,844   |  
|Net income
 (loss)                              |  | $     | (12,283 | )      |  | 15,928 |  |        | 15,540 |   |  | 8,113   |  
|                                                |  |       |         |        |  |        |  |        |        |   |  |         |  
|Earnings
 (loss) per share:                     |  |       |         |        |  |        |  |        |        |   |  |         |  
|Basic                                           |  | $     | (0.35   | )      |  | 0.45   |  |        | 0.44   |   |  | 0.22    |  
|                                                |  |       |         |        |  |        |  |        |        |   |  |         |  
|Diluted                                         |  | $     | (0.35   | )      |  | 0.42   |  |        | 0.40   |   |  | 0.21    |  
|                                                |  |       |         |        |  |        |  |        |        |   |  |         |  
|                                                |  |       |         |        |  |        |  |        |        |   |  |         |  
|Weighted
 average number of shares outstanding: |  |       |         |        |  |        |  |        |        |   |  |         |  
|Basic                                           |  |       | 34,795  |        |  | 35,669 |  |        | 35,645 |   |  | 36,227  |  
|                                                |  |       |         |        |  |        |  |        |        |   |  |         |  
|Diluted                                         |  |       | 34,795  |        |  | 37,883 |  |        | 38,522 |   |  | 39,218  |  
|                                                |  |       |         |        |  |        |  |        |        |   |  |         |  
|                                                |  |       |         |        |  |        |  |        |        |   |  |         |  
|2008                                            |  |       |         |        |  |        |  |        |        |   |  |         |  
|Revenues                                        |  | $     | 15,181  |        |  | 29,532 |  |        | 8,563  |   |  | (4,087  | )
|Operating
 income (loss)                        |  | $     | 2,084   |        |  | 10,166 |  |        | (4,265 | ) |  | (42,939 | )
|Net income
 (loss)                              |  | $     | 1,097   |        |  | 6,004  |  |        | (2,850 | ) |  | (41,688 | )
|                                                |  |       |         |        |  |        |  |        |        |   |  |         |  
|Earnings
 (loss) per share:                     |  |       |         |        |  |        |  |        |        |   |  |         |  
|Basic                                           |  | $     | 0.03    |        |  | 0.18   |  |        | (0.08  | ) |  | (1.23   | )
|                                                |  |       |         |        |  |        |  |        |        |   |  |         |  
|Diluted                                         |  | $     | 0.03    |        |  | 0.18   |  |        | (0.08  | ) |  | (1.23   | )
|                                                |  |       |         |        |  |        |  |        |        |   |  |         |  
|                                                |  |       |         |        |  |        |  |        |        |   |  |         |  
|Weighted
 average number of shares outstanding: |  |       |         |        |  |        |  |        |        |   |  |         |  
|Basic                                           |  |       | 32,927  |        |  | 32,989 |  |        | 33,733 |   |  | 33,824  |  
|                                                |  |       |         |        |  |        |  |        |        |   |  |         |  
|Diluted                                         |  |       | 33,244  |        |  | 34,109 |  |        | 33,733 |   |  | 33,824  |  
|                                                |  |       |         |        |  |        |  |        |        |   |  |         |  

F-25

---