**SECURITIES
      AND EXCHANGE COMMISSION**


**WASHINGTON,
      D.C. 20549**









**FORM
      10-Q**




**x**
            **QUARTERLY
                REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
                ACT OF
                1934.**




For
      the
      quarterly period ended September 30, 2008




** ̈**
            **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: 1-15831









**MERRIMAN
      CURHAN FORD GROUP, INC.**


**(Exact
      Name of Registrant as Specified in its Charter)**




**Delaware**
            
            **11-2936371****(State
                or Other Jurisdiction of**
              **Incorporation
                or Organization)**
            
            **(I.R.S.
                Employer**
              **Identification
                No.)**




**600
                California Street, 9th Floor**
              **San
                Francisco, CA**
            
            **94108****(Address
                of Principal Executive Offices)**
            
            **(Zip
                Code)**




**(415)
      248-5600**


**(Registrant’s
      Telephone Number, Including Area Code)**




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




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
      definition of “large accelerated filer,” “accelerated filer” and “smaller
      reporting company” in Rule 12b-2 of the Exchange Act.




Large
                accelerated filer   ̈
            
            Accelerated
                filer  xNon-accelerated
                filer    ̈
            
            Smaller
                reporting company   ̈




Indicate
      by check mark whether the registrant is a shell company (as defined in
      Rule 12b-2 of the Act).    Yes  ̈ No x




The
      number of shares of Registrant’s common stock outstanding as of October 31, 2008
      was 12,891,862.












**Merriman
      Curhan Ford Group, Inc.**


**Index**





**Page No.**PART
                I FINANCIAL INFORMATIONITEM
                1. Financial Statements (unaudited)Consolidated
                Statements of Operations For the Three Months and Nine Months Ended
                September 30, 2008 and 2007
            
            3Consolidated
                Statements of Financial Condition as of September 30, 2008 and December
                31, 2007
            
            4Consolidated
                Statements of Cash Flows For the Nine Months Ended September 30,
                2008 and
                2007
            
            5Notes
                to Consolidated Financial Statements
            
            6ITEM
                2. Management's Discussion and Analysis of Financial Condition and
                Results
                of Operations
            
            18ITEM
                3. Quantitative and Qualitative Disclosures About Market
                Risk
            
            27ITEM
                4. Controls and Procedures
            
            28PART
                II OTHER INFORMATIONITEM
                1. Legal Proceedings
            
            29ITEM
                1A. Risk Factors
            
            31ITEM
                6. Exhibits
            
            32Signatures
            
            33Certifications


2


**PART
      I.  FINANCIAL INFORMATION**




**Item
      1.   Financial Statements (unaudited)**




**MERRIMAN
      CURHAN FORD GROUP, INC.**


**CONSOLIDATED
      STATEMENTS OF OPERATIONS**


**(unaudited)**




**Three
                Months Ended**
            
            **Nine
                Months Ended****September 30,**
              **2008**
            
            **September 30,**
              **2007**
            
            **September 30,**
              **2008**
            
            **September 30,**
              **2007**Revenue:Commissions
            
            $
            7,992,614
            
            $
            7,923,963
            
            $
            24,353,696
            
            $
            22,807,243Principal
                transactions
            
            
            (5,384,303
            )
            
            2,478,297
            
            
            (5,280,550
            )
            
            10,804,073Investment
                banking
            
            
            1,600,260
            
            
            5,616,491
            
            
            9,423,666
            
            
            15,480,518Primary
                research
            
            
            1,431,154
            
            
            1,165,428
            
            
            4,471,092
            
            
            2,116,490Advisory
                and other fees
            
            
            341,810
            
            
            476,015
            
            
            581,410
            
            
            1,147,363Total
                revenue
            
            
            5,981,535
            
            
            17,660,194
            
            
            33,549,314
            
            
            52,355,687Operating
                expenses:Compensation
                and benefits
            
            
            8,743,732
            
            
            12,096,131
            
            
            34,016,942
            
            
            35,673,505Brokerage
                and clearing fees
            
            
            558,344
            
            
            627,223
            
            
            2,042,828
            
            
            1,921,920Cost
                of primary research services
            
            
            548,943
            
            
            555,185
            
            
            1,743,236
            
            
            950,403Professional
                services
            
            
            3,987,874
            
            
            518,045
            
            
            7,290,374
            
            
            1,603,163Occupancy
                and equipment
            
            
            650,678
            
            
            499,459
            
            
            1,877,288
            
            
            1,395,048Communications
                and technology
            
            
            702,654
            
            
            921,853
            
            
            2,653,501
            
            
            2,618,799Depreciation
                and amortization
            
            
            308,220
            
            
            193,284
            
            
            614,390
            
            
            556,332Amortization
                of intangible assets
            
            
            116,536
            
            
            264,771
            
            
            349,607
            
            
            485,414Travel
                and entertainment
            
            
            674,161
            
            
            635,353
            
            
            2,645,964
            
            
            1,789,971Other
            
            
            1,388,335
            
            
            1,277,519
            
            
            3,505,583
            
            
            2,993,878Impairment
                of goodwill and intangible assets
            
            
            ─
            
            
            ─
            
            
            2,601,516
            
            
            ─Total
                operating expenses
            
            
            17,679,477
            
            
            17,588,823
            
            
            59,341,229
            
            
            49,988,433Operating
                (loss) income
            
            
            (11,697,942
            )
            
            71,371
            
            
            (25,791,915
            )
            
            2,367,254Interest
                income
            
            
            195,283
            
            
            132,965
            
            
            325,703
            
            
            362,919Interest
                expense
            
            
            (22,665
            )
            
            (15,876
            )
            
            (61,673
            )
            
            (97,087
            )(Loss)/income
                before taxes
            
            
            (11,525,324
            )
            
            188,460
            
            
            (25,527,885
            )
            
            2,633,089Income
                tax (expense) benefit
            
            
            (198,014
            )
            
            ─
            
            
            1,640,730
            
            
            (55,000
            )Net
                (loss) income
            
            $
            (11,723,338
            )
            $
            188,460
            
            $
            (23,887,155
            )
            $
            2,578,089Basic
                net (loss) income per share:Net
                (loss) income
            
            $
            (0.93
            )
            $
            0.02
            
            $
            (1.91
            )
            $
            0.23Diluted
                net (loss) income per share:Net
                (loss) income
            
            $
            (0.93
            )
            $
            0.01
            
            $
            (1.91
            )
            $
            0.21Weighted
                average common shares outstanding:Basic
            
            
            12,672,598
            
            
            11,999,656
            
            
            12,498,687
            
            
            11,337,346Diluted
            
            
            12,672,598
            
            
            13,139,384
            
            
            12,498,687
            
            
            12,499,544




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


3




**MERRIMAN
      CURHAN FORD GROUP, INC.**


**CONSOLIDATED
      STATEMENTS OF FINANCIAL CONDITION**


**(unaudited)**


**September 30,**
                **2008**
              
              **December 31,**
                **2007**ASSETSCash
                  and cash equivalents
              
              $
              7,914,755
              
              $
              31,962,201Securities
                  owned:Marketable,
                  at fair value
              
              
              7,725,069
              
              
              14,115,022Not
                  readily marketable, at estimated fair value
              
              
              1,156,724
              
              
              2,250,668Other
              
              
              1,336,628
              
              
              2,254,120Restricted
                  cash
              
              
              1,131,032
              
              
              689,157Due
                  from clearing broker
              
              
              1,256,548
              
              
              1,251,446Accounts
                  receivable, net
              
              
              1,855,856
              
              
              4,008,729Prepaid
                  expenses and other assets
              
              
              1,500,150
              
              
              1,716,814Equipment
                  and fixtures, net
              
              
              1,639,475
              
              
              1,245,692Intangible
                  assets
              
              
              1,207,427
              
              
              1,949,815Goodwill
              
              
              1,129,281
              
              
              3,129,667Total
                  assets
              
              $
              27,852,945
              
              $
              64,573,331LIABILITIES
                  AND STOCKHOLDERS' EQUITYAccounts
                  payable
              
              $
              746,619
              
              $
              957,969Commissions
                  and bonus payable
              
              
              6,141,989
              
              
              17,517,032Accrued
                  expenses
              
              
              6,086,363
              
              
              6,351,598Due
                  to clearing and other brokers
              
              
              13,233
              
              
              6,865Securities
                  sold, not yet purchased
              
              
              1,204
              
              
              3,804,558Capital
                  lease obligation
              
              
              1,218,036
              
              
              890,272Convertible
                  notes payable, net
              
              
              ─
              
              
              197,416Notes
                  payable
              
              
              ─
              
              
              41,573Total
                  liabilities
              
              
              14,207,444
              
              
              29,767,283Commitments
                  and contingenciesStockholders'
                  equity:Preferred
                  stock, Series A—$0.0001 par value; 2,000,000 shares authorized; 0 shares
                  issued and outstanding as of September 30, 2008 and December 31,
                  2007,
                  respectively; aggregate liquidation preference of $0
              
              
              ─
              
              
              ─Preferred
                  stock, Series B—$0.0001 par value; 12,500,000 shares authorized; 1,250,000
                  shares issued and 0 shares outstanding as of September 30, 2008
                  and
                  December 31, 2007; aggregate liquidation preference of $0
              
              
              ─
              
              
              ─Preferred
                  stock, Series C—$0.0001 par value; 14,200,000 shares authorized; 1,685,714
                  shares issued and 0 shares outstanding as of September 30, 2008
                  and
                  December 31, 2007; aggregate liquidation preference of $0
              
              
              ─
              
              
              ─Common
                  stock, $0.0001 par value; 300,000,000 shares authorized; 12,794,563
                  and
                  12,310,886 shares issued and 12,768,125 and 12,284,448 shares outstanding
                  as of September 30, 2008 and December 31, 2007,
                  respectively
              
              
              1,281
              
              
              1,232Additional
                  paid-in capital
              
              
              126,736,842
              
              
              124,010,283Treasury
                  stock
              
              
              (125,613
              )
              
              (125,613
              )Accumulated
                  deficit
              
              
              (112,967,009
              )
              
              (89,079,854
              )Total
                  stockholders' equity
              
              
              13,645,501
              
              
              34,806,048Total
                  liabilities and stockholders' equity
              
              $
              27,852,945
              
              $
              64,573,331




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


4




**MERRIMAN
      CURHAN FORD GROUP, INC.**


**CONSOLIDATED
      STATEMENTS OF CASH FLOWS**


**(unaudited)**





**Nine
                Months Ended**
              **September
                30,****2008**
            
            **2007**Cash
                flows from operating activities:Net
                (loss) income
            
            $
            (23,887,155
            )
            $
            2,578,089Adjustments
                to reconcile net (loss) income to cash provided by (used in) operating
                activities:Depreciation
                and amortization
            
            
            614,390
            
            
            556,332Amortization
                of intangible assets
            
            
            349,607
            
            
            485,414Stock-based
                compensation
            
            
            1,897,033
            
            
            2,146,436Amortization
                of discounts on convertible notes payable
            
            
            2,584
            
            
            7,749Impairment
                of goodwill
            
            
            2,208,735
            
            
            ─Impairment
                of intangible assets
            
            
            392,781
            
            
            ─Common
                stock received for services
            
            
            (1,713,361
            )
            
            ─Unrealized
                loss (gain) on securities owned
            
            
            8,105,058
            
            
            (4,807,990
            )Provision
                for bad debt
            
            
            156,300
            
            
            368,272Other
            
            
            ─
            
            
            72,229Changes
                in operating assets and liabilities:Securities
                owned
            
            
            (1,793662
            )
            
            (3,970,569
            )Restricted
                cash
            
            
            (441,875
            )
            
            (58,584
            )Due
                from clearing broker
            
            
            (5,102
            )
            
            (582,609
            )Accounts
                receivable
            
            
            1,981,574
            
            
            938,143Prepaid
                expenses and other assets
            
            
            216,664
            
            
            99,178Accounts
                payable
            
            
            (211,350
            )
            
            172,239Commissions
                and bonus payable
            
            
            (11,375,042
            )
            
            1,053Accrued
                expenses
            
            
            (265,235
            )
            
            1,022,867Due
                to clearing and other brokers
            
            
            6,368
            
            
            5,619Net
                cash used in operating activities
            
            
            (23,761,688
            )
            
            (966,132
            )Cash
                flows from investing activities:Purchase
                of equipment and fixtures
            
            
            (202,398
            )
            
            (291,687
            )Investment
                in MedPanel
            
            
            ─
            
            
            (24,585
            )Investment
                in Catalyst
            
            
            ─
            
            
            163,219Net
                cash used in investing activities
            
            
            (202,398
            )
            
            (153,053
            )Cash
                flows from financing activities:Proceeds
                from the exercise of stock options and warrants
            
            
            436,225
            
            
            172,996Proceeds
                from the issuance of common stock
            
            
            ─
            
            
            185,041Debt
                service principal payments
            
            
            (519,585
            )
            
            (514,725
            )Net
                cash used in financing activities
            
            
            (83,360
            )
            
            (156,688
            )Decrease
                in cash and cash equivalents
            
            
            (24,047,446
            )
            
            (1,275,873
            )Cash
                and cash equivalents at beginning of period
            
            
            31,962,201
            
            
            13,746,590Cash
                and cash equivalents at end of period
            
            $
            7,914,755
            
            $
            12,470,717Supplementary
                disclosure of cash flow information:Cash
                paid during the period:Interest
            
            $
            59,089
            
            $
            72,023Income
                taxes
            
            $
            574,497
            
            $
            38,400Supplementary
                non-cash information:Conversion
                of note payable into common stock
            
            $
            200,000
            
            
            ─Property
                acquired through capitalized leases
            
            $
            805,776
            
            
            ─




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


5





**MERRIMAN
      CURHAN FORD GROUP, INC.**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**


**(unaudited)**




**1.
      Significant Accounting Policies**




*Basis
      of Presentation*




The
      interim financial statements included herein for Merriman Curhan Ford Group,
      Inc. (formerly MCF Corporation), or the Company, have been prepared, without
      audit, pursuant to the rules and regulations of the Securities and Exchange
      Commission. In the opinion of management, the financial statements included
      in
      this report reflect all normal recurring adjustments that the Company considers
      necessary for the fair presentation of the results of operations for the interim
      periods covered and the financial position of the Company at the date of the
      interim statement of financial condition. Certain information and footnote
      disclosures normally included in annual financial statements prepared in
      accordance with accounting principles generally accepted in the United States
      have been condensed or omitted pursuant to such rules and regulations. However,
      the Company believes that the disclosures are adequate to understand the
      information presented. The operating results for interim periods are not
      necessarily indicative of the operating results for the entire year. These
      financial statements should be read in conjunction with the Company’s 2007
      audited consolidated financial statements and notes thereto included in the
      Company’s Annual Report on Form 10-K for the year ended December 31,
      2007.





*Securities
      Owned*




“Securities
      owned” and “Securities sold, but not yet purchased” are reflected in the
      consolidated statements of financial condition on a trade-date basis. Related
      unrealized gains or losses are generally recognized in “Principal transactions
      revenue” in the consolidated statements of operations. The fair value of a
      financial instrument is the amount 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 (the exit price). Instruments that the
      Company owns (long positions) are marked to bid prices, and instruments that
      the
      Company has sold, but not yet purchased (short positions), are marked to offer
      prices. Fair value measurements are not adjusted for transaction
      costs.





*Investment
      Banking Revenue*




Investment
      banking revenue includes underwriting and private placement agency fees earned
      through the Company’s participation in public offerings and private placements
      of equity and convertible debt securities and fees earned as financial advisor
      in mergers and acquisitions and similar transactions. Underwriting revenue
      is
      earned in securities offerings in which the Company acts as an underwriter
      and
      includes management fees, selling concessions and underwriting fees. Fee revenue
      relating to underwriting commitments is recorded when all significant items
      relating to the underwriting cycle have been completed and the amount of the
      underwriting revenue has been determined. This generally is the point at which
      all of the following have occurred: (i) the issuer’s registration statement
      has become effective with the SEC, or other offering documents are finalized,
      (ii) the Company has made a firm commitment for the purchase of the shares
      or debt from the issuer, and (iii) the Company has been informed of the
      exact number of shares or the principal amount of debt that it has been
      allotted.




Syndicate
      expenses related to securities offerings in which the Company acts as
      underwriter or agent are deferred until the related revenue is recognized or
      we
      determine that it is more likely than not that the securities offerings will
      not
      ultimately be completed. Underwriting revenue is presented net of related
      expenses. As co-manager for registered equity underwriting transactions,
      management must estimate the Company’s share of transaction related expenses
      incurred by the lead manager in order to recognize revenue. Transaction related
      expenses are deducted from the underwriting fee and therefore reduces the
      revenue that is recognized as co-manager. Such amounts are adjusted to reflect
      actual expenses in the period in which the Company receives the final
      settlement, typically 90 days following the closing of the
      transaction.




Merger
      and acquisition fees and other advisory service revenue are generally earned
      and
      recognized only upon successful completion of the engagement. Unreimbursed
      expenses associated with private placement and advisory transactions are
      recorded as expenses as incurred.


6




**MERRIMAN
      CURHAN FORD GROUP, INC.**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS—CONTINUED**


**(unaudited)**




**1.
      Significant Accounting Policies - Continued**




*Commissions
      and Principal Transactions Revenue*




Commissions
      revenue includes revenue resulting from executing stock exchange-listed
      securities, over-the counter securities and other transactions as agent for
      the
      Company’s clients. Principal transactions consist of a portion of dealer spreads
      attributed to the Company’s securities trading activities as principal in
      NASDAQ-listed and other securities, and include transactions derived from
      activities as a market-maker. Additionally, principal transactions include
      gains
      and losses resulting from market price fluctuations that occur while holding
      positions in trading security inventory. Commissions revenue and related
      clearing expenses are recorded on a trade-date basis as security transactions
      occur. Principal transactions in regular-way trades are recorded on the trade
      date, as if they had settled. Profit and loss arising from all securities and
      commodities transactions entered into for the account and risk of the Company
      are recorded on a trade-date basis.




*Share-Based
      Compensation Expense*




The
      Company measures and recognizes compensation expense based on estimated fair
      values for all share-based awards made to employees and directors, including
      stock options, non-vested stock, and participation in the Company’s employee
      stock purchase plan. The Company estimates fair value of share-based awards
      on
      the date of grant using an option-pricing model. The value of the portion of
      the
      award that is ultimately expected to vest is recognized as expense in the
      Company’s consolidated statements of operations over the requisite service
      periods. Share-based compensation expense recognized in the Company’s
      consolidated statement of operations includes compensation expense for
      share-based awards granted (i) prior to, but not yet vested as of
      December 31, 2005, based on the grant date fair value, and
      (ii) subsequent to December 31, 2005. Compensation expense for all
      share-based awards subsequent to December 31, 2005 is recognized using the
      straight-line single-option method. Because share-based compensation expense
      is
      based on awards that are ultimately expected to vest, share-based compensation
      expense has been reduced to account for estimated forfeitures. Forfeitures
      are
      estimated at the time of grant and revised, if necessary, in subsequent periods
      if actual forfeitures differ from those estimates.




To
      calculate option-based compensation, the Company uses the Black-Scholes option
      pricing model, which is affected by the Company’s stock price as well as
      assumptions regarding a number of subjective variables. These variables include,
      but are not limited to the Company’s expected stock price volatility over the
      term of the awards, and actual and projected employee stock option exercise
      behaviors. No tax benefits were attributed to the share-based compensation
      expense because a valuation allowance was maintained for all net deferred tax
      assets.




*Income
      Taxes*




The
      Company uses the asset and liability method of accounting for income taxes.
      Deferred tax assets and liabilities are recognized for the estimated future
      tax
      consequences attributable to differences between the financial statement
      carrying amounts of existing assets and liabilities and their respective tax
      bases. 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. A valuation allowance
      is
      recorded to reduce deferred tax assets to an amount whose realization is more
      likely than not. The effect on deferred tax assets and liabilities of a change
      in tax rates is recognized in the consolidated statements of operations in
      the
      period that includes the enactment date. Merriman Curhan Ford Group, Inc.
      adopted FIN No. 48 on January 1, 2007.




*Segment
      Reporting*




The
      Company organizes its operations into three operating segments for the purpose
      of making operating decisions and assessing performance. These operating
      segments are organized along operating subsidiaries, Merriman Curhan
      Ford & Co., MCF Asset Management, LLC and Panel Intelligence, LLC.
      Accordingly, the Company operated in three reportable operating segments in
      the
      United States during 2008.





*Use
      of Estimates*




The
      preparation of financial statements in conformity with accounting principles
      generally accepted in the United States requires management to make estimates,
      judgments and assumptions that affect the reported amounts of assets,
      liabilities, revenue and expenses. Actual results could differ from those
      estimates.




7




**MERRIMAN
      CURHAN FORD GROUP, INC.**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS—CONTINUED**


**(unaudited)**




**1.
      Significant Accounting Policies - Continued**




*New
      Accounting Pronouncements*




SFAS
      141(R). In December 2007, the FASB issued SFAS No. 141(R), Business
      Combinations. SFAS 141(R) expands the definition of transactions and events
      that
      qualify as business combinations; requires that the acquired assets and
      liabilities, including contingencies, be recorded at the fair value determined
      on the acquisition date and changes thereafter reflected in revenue, not
      goodwill; changes the recognition timing for restructuring costs; and requires
      acquisition costs to be expensed as incurred. Adoption of SFAS 141(R) is
      required for combinations after December 15, 2008. Early adoption and
      retroactive application of SFAS 141(R) to fiscal years preceding the effective
      date are not permitted. The Company is evaluating the impact of adoption on
      its
      consolidated financial statements.




**2.
      Fair Value of Assets and Liabilities**




Securities
      owned, and securities sold but not yet purchased, are presented at fair value.
      Fair value is defined as the price at which an asset would be received to sell
      an asset or paid to transfer a liability in an orderly transaction between
      market participants at the measurement date (the exit price). Where available,
      fair value is based on observable market prices or parameters or derived from
      such prices or parameters. Where observable prices or inputs are not available,
      valuation models are applied. These valuation techniques involve some level
      of
      management estimation and judgment, the degree of which is dependent on the
      price transparency for the instruments or market and the instruments’
complexity. Assets and liabilities recorded at fair value in the consolidated
      statement of financial condition are categorized based upon the level of
      judgment associated with the inputs used to measure their fair value.
      Hierarchical levels, defined by SFAS 157 and directly related to the amount
      of
      subjectivity associated with the inputs to fair valuation of these assets and
      liabilities, are as follows:




Level
      1 —
Inputs are unadjusted, quoted prices in active markets for identical assets
      or
      liabilities at the measurement date. The types of assets and liabilities carried
      at Level 1 fair value generally are G-7 government and agency securities,
      equities listed in active markets, investments in publicly traded mutual funds
      with quoted market prices and listed derivatives.




Level
      2 —
Inputs (other than quoted prices included in Level 1) are either directly or
      indirectly observable for the asset or liability through correlation with market
      data at the measurement date and for the duration of the instrument’s
      anticipated life. Fair valued assets that are generally included in this
      category are stock warrants for which there are market-based implied
      volatilities, unregistered common stock and thinly-traded common
      stock.




Level
      3 —
Inputs reflect management’s best estimate of what market participants would use
      in pricing the asset or liability at the measurement date. Consideration is
      given to the risk inherent in the valuation technique and the risk inherent
      in
      the inputs to the model. Generally, assets carried at fair value and included
      in
      this category include stock warrants for which market-based implied volatilities
      are not available.





Assets
      measured at fair value on a recurring basis are categorized in the table below
      based upon the lowest level of significant input to the
      valuations.


8




**MERRIMAN
      CURHAN FORD GROUP, INC.**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS—CONTINUED**


**(unaudited)**




**2.
      Fair Value of Assets and Liabilities (continued)**




**Assets
                at Fair Value at September 30, 2008****Level
                1**
            
            **Level
                2**
            
            **Level
                3**
            
            **Total**Corporate
                equities
            
            $
            5,251,397
            
            $
            25,000
            
            $
            422,838
            
            $
            5,699,235Stock
                warrants
            
            
            —
            
            
            —
            
            
            3,052,184
            
            
            3,052,184Underwriters’
                purchase option
            
            
            —
            
            
            —
            
            
            130,266
            
            
            130,266Preferred
                stock
            
            
            108
            
            
            —
            
            
            —
            
            
            108$
            5,251,505
            
            $
            25,000
            
            $
            3,605,288
            
            $
            8,881,793




**Assets
                at Fair Value at December 31, 2007****Level
                1**
            
            **Level 2**
            
            **Level
                3**
            
            **Total**Corporate
                equities
            
            $
            13,696,019
            
            $
            —
            
            $
            489,453
            
            $
            14,185,472Stock
                warrants
            
            
            —
            
            
            —
            
            
            1,756,580
            
            
            1,756,580Underwriters’
                purchase option
            
            
            —
            
            
            —
            
            
            194,957
            
            
            194,957Convertible
                notes
            
            
            228,456
            
            
            —
            
            
            —
            
            
            228,456Preferred
                stock
            
            
            225
            
            
            —
            
            
            —
            
            
            225$
            13,924,700
            
            $
            —
            
            $
            2,440,990
            
            $
            16,365,690




Liabilities
      measured at fair value on a recurring basis consisted of Securities sold, not
      yet purchased which are categorized as Level 1. The fair value of Securities
      sold, not yet purchased as of September 30, 2008 and December 31, 2007 was
      approximately $1,200 and $3,805,000, respectively.




The
      following summarizes the change in carrying values associated with Level 3
      financial instruments for the nine months ended September 30, 2008:




**Corporate**
              **Equities**
            
            **Stock**
              **Warrants**
            
            **Underwriters’**
              **Purchase Option**
            
            **Total**Balance
                at December 31, 2007
            
            $
            489,453
            
            $
            1,756,580
            
            $
            194,957
            
            $
            2,440,990Purchases,
                issuances and settlements
            
            
            607,221
            
            
            1,222,748
            
            
            —
            
            
            1,829,969Net
                transfers in / (out)
            
            
            (574,457
            )
            
            —
            
            
            —
            
            
            (574,456
            )Gains
                / (losses)Realized
            
            
            —
            
            
            —
            
            
            —
            
            
            —Unrealized
            
            
            (99,379
            )
            
            72,856
            
            
            (64,691
            )
            
            (91,214
            )Balance
                at September 30, 2008
            
            $
            422,838
            
            $
            3,052,184
            
            $
            130,266
            
            $
            3,605,288




Gains/(losses)
      (both realized and unrealized) for Level 3 financial instruments are a
      component of Principal transactions revenue in the consolidated statements
      of
      operations.


9




**MERRIMAN
      CURHAN FORD GROUP, INC.**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS—CONTINUED**


**(unaudited)**




**3.
      Goodwill and Intangible Assets**




Goodwill
      is related to the acquisition of MedPanel, Inc. Goodwill, totaling $3,130,000,
      was allocated to the Primary Research segment pursuant to SFAS No. 142,
“Goodwill and Other Intangible Assets”. Goodwill represents the excess cost of a
      business acquisition over the fair value of the net assets acquired at the
      acquisition date. Identifiable intangible assets capitalized in connection
      with
      the acquisition of MedPanel included customer relationships, customer backlog,
      technology platform and the database of registered panelists. The estimated
      fair
      market value of these amortizable intangible assets at the date of acquisition
      amounting to $1,990,000 is being amortized over periods ranging from 8 months
      to
      56 months. In addition, an indefinite lived intangible asset was recorded for
      the acquired tradename in the amount of $710,000.





In
      accordance with SFAS No. 142, indefinite-life intangible assets and goodwill
      are
      not amortized. Rather, they are subject to impairment testing on an annual
      basis, or more often if events or circumstances indicate there may be
      impairment. This test involves assigning tangible assets and liabilities,
      identified intangible assets and goodwill to reporting units and comparing
      the
      fair value of each reporting unit to its carrying amount. If the fair value
      is
      less than the carrying amount, a further test is required to measure the amount
      of the impairment.




When
      available, the Company uses recent, comparable transactions to estimate the
      fair
      value of the respective reporting unit. The Company calculates an estimated
      fair
      value based on multiples of revenue, earnings, and book value of comparable
      transactions. However, when such comparable transactions are not available
      or
      have become outdated, the Company uses discounted cash flow scenarios to
      estimate the fair value of the reporting units. As of April 30, 2008,
      the Company performed its annual impairment testing and recorded an impairment
      loss of $2,602,000 related to goodwill and tradename in its consolidated
      statement of operations for the three months ended June 30, 2008. For the three
      months ended September 30, 2008, no additional impairment was
      recorded.




**4.
      Share-Based Compensation Expense**





*Stock
      Options*




As
      of
      September 30, 2008, there were 6,961,430 shares authorized for issuance under
      the Option Plans, and 612,858 shares authorized for issuance outside of the
      Option Plans. As of September 30, 2008, 1,313,276 shares were available for
      future option grants under the Option Plans. There were no shares available
      for
      future option grants outside of the Options Plans. Compensation expense for
      stock options during the three months and nine months ended September 30, 2008
      was $421,000 and $1,204,000, respectively. Compensation expense for stock
      options during the three months and nine months ended September 30, 2007 was
      $368,000 and $1,017,000, respectively.




The
      following table is a summary of the Company’s stock option activity for the nine
      months ended September 30, 2008:




**Options**
              **Outstanding**
            
            **Weighted**
              **Average**
              **Exercise Price**Balance
                as of December 31, 2007
            
            
            4,066,259
            
            $
            6.00Granted
            
            
            707,280
            
            
            3.46Exercised
            
            
            (64,628
            )
            
            (2.36
            )Canceled
            
            
            (432,182
            )
            
            (6.25
            )Balance
                as of September 30, 2008
            
            
            4,276,729
            
            $
            5.61Exercisable
                as of September 30, 2008
            
            
            3,078,766
            
            $
            6.16




10





**MERRIMAN
      CURHAN FORD GROUP, INC.**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS—CONTINUED**


**(unaudited)**




**4.
      Share Based Compensation Expense (continued)**





The
      following table summarizes information with respect to stock options outstanding
      at September 30, 2008:




**Options
                Outstanding**
            
            **Vested
                Options****Range
                of Exercise Price**
            
            **Number**
            
            **Weighted**
              **Average**
              **Remaining**
              **Contractual**
              **Life (Years)**
            
            **Weighted**
              **Average**
              **Exercise**
              **Price**
            
            **Aggregate**
              **Intrinsic**
              **Value**
            
            **Number**
            
            **Weighted**
              **Average
                Exercise**
              **Price**
            
            **Aggregate**
              **Intrinsic**
              **Value**$
                0.00 - $ 3.50
            
            
            2,071,878
            
            
            4.81
            
            $
            2.93
            
            $
            ─
            
            
            1,902,633
            
            $
            3.02
            
            $
            ─$
                3.51 - $ 7.00
            
            
            1,513,387
            
            
            7.94
            
            $
            4.41
            
            
            ─
            
            
            524,033
            
            
            4.37
            
            
            ─$
                7.01 - $14.00
            
            
            395,796
            
            
            5.55
            
            $
            9.28
            
            
            ─
            
            
            356,432
            
            
            9.39
            
            
            ─$14.01
                - $28.00
            
            
            256,381
            
            
            2.10
            
            $
            22.04
            
            
            ─
            
            
            256,381
            
            
            22.04
            
            
            ─$28.01
                - $49.00
            
            
            39,287
            
            
            1.40
            
            $
            49.00
            
            
            ─
            
            
            39,287
            
            
            49.00
            
            
            ─4,276,729
            
            
            5.79
            
            $
            5.61
            
            $
            ─
            
            
            3,078,766
            
            $
            6.16
            
            $
            ─




As
      of
      September 30, 2008, total unrecognized compensation expense related to unvested
      stock options was $3,193,000. This amount is expected to be recognized as
      expense over a weighted-average period of 1.42 years.





*Non-Vested
      Stock*




At
      the
      date of grant, the recipients of non-vested stock have most of the rights of
      a
      stockholder other than voting rights, subject to certain restrictions on
      transferability and a risk of forfeiture. Non-vested shares typically vest
      over
      a two to four year period beginning on the date of grant. The fair value of
      non-vested stock is equal to the market value of the shares on the date of
      grant. The Company recognizes the compensation expense for non-vested stock
      on a
      straight-line basis over the requisite service period. Compensation expense
      for
      non-vested stock during the three months and nine months ended September 30,
      2008 was $160,000 and $693,000, respectively. Compensation expense for
      non-vested stock during the three months and nine months ended September 30,
      2007 was $298,000 and $986,000, respectively.





The
      following table is a summary of the Company's non-vested stock activity for
      the
      nine months ended September 30, 2007:





**Non-Vested**
                **Stock**
                **Outstanding**
              
              **Weighted**
                **Average**
                **Grant
                  Date**
                **Fair
                  Value**
              
              **Intrinsic**
                **Value
                  at**
                **September 30, 2008**Balance
                  as of December 31, 2007
              
              
              180,620
              
              $
              7.51Granted
              
              
              62,392
              
              
              2.84Vested
              
              
              (124,106
              )
              
              (5.53
              )Canceled
              
              
              (10,716
              )
              
              (7.66
              )Balance
                  as of September 30, 2008
              
              
              108,190
              
              $
              7.07
              
              $
              101,699




As
      of
      September 30, 2008, total unrecognized compensation expense related to
      non-vested stock was $398,000. This expense is expected to be recognized over
      a
      weighted-average period of 0.75 years.


11





**MERRIMAN
      CURHAN FORD GROUP, INC.**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS—CONTINUED**


**(unaudited)**




**4.
      Share-Based Compensation Expense (continued)**




*2002
      Employee Stock Purchase Plan*




The
      Company issued all shares previously available under the Employee Stock Purchase
      Plan, or ESPP, to its employees through August 15, 2007. As of September
      30, 2008, there are no shares available under the ESPP plan and the Company
      has
      no plan to request additional shares from the stockholders for this program.
      Compensation expense for ESPP during each of the three months and nine months
      ended September 30, 2008 was $0. Compensation expense for the ESPP during the
      three months and nine months ended September 30, 2007 were $28,000 and $143,000,
      respectively.





*Fair
      Value and Assumptions Used to Calculate Fair Value*




The
      weighted average fair value of each stock option granted for the three months
      and nine months ended September 30, 2008 was $0.64 and $2.19,
      respectively. The weighted average fair value of each stock option granted
      for the three months and nine months ended September 30, 2007 was $2.84 and
      $2.67, respectively. The fair value of each option award is estimated on
      the date of grant using the Black-Scholes stock option pricing model, with
      the
      following assumptions for the nine months ended September 30, 2008 and
      2007:




**Nine
                months Ended**
              **September
                30,****2008**
            
            **2007**Expected
                volatility
            
            
            69.54
            %
            
            63.81
            %Expected
                life (years)
            
            
            6.30
            
            
            4.20Risk-free
                interest rate
            
            
            3.11
            %
            
            4.66
            %Expected
                dividend yield
            
            
            0
            %
            
            0
            %





The
      weighted average fair value of the non-vested stock granted under the Company's
      stock option plans for the three months and nine months ended September 30,
      2008
      was $1.27 and $2.84 per share, respectively. The weighted average fair value
      of
      the non-vested stock granted under the Company's stock option plans for the
      three months and nine months ended September 30, 2007 was $4.32 and $4.66 per
      share, respectively. The fair value of the non-vested stock award is estimated
      on the date of grant using the intrinsic value method.





**5.
      Income Taxes**





Income
      tax expense is a result of applying the estimated annual effective tax rate
      to
      cumulative income before taxes adjusted for certain discrete items which are
      fully recognized in the period they occur. For the three months and nine months
      ended September 30, 2008, the Company recorded an income tax expense of $198,000
      and ($1,641,000), respectively. The Company’s tax rate is affected by recurring
      items, which it expects to be fairly consistent in the near term, and by
      discrete items that are not consistent from year to year. The effective tax
      rate
      for the nine months ended September 30, 2008 is 7.03%, which is mainly
      attributable to the release of the FIN 48 liability due to the approval of
      an
      accounting method change for federal tax purposes.




Historically
      and currently, the Company has recorded a valuation allowance on the deferred
      tax assets, a significant component of which relates to net operating loss
      carryforwards. Management continually evaluates the realizability of its
      deferred tax assets based upon negative and positive evidence available. Based
      on the evidence available at this time, the Company continues to conclude that
      it is not “more likely than not” that we will be able to realize the benefit of
      our deferred tax assets in the future.




The
      Company adopted Interpretation No. 48 on January 1, 2007. Upon the adoption
      of
      FIN 48, the Company recognized no adjustment in the liability for unrecognized
      income tax benefits and no corresponding change in retained earnings. At the
      end
      of the fiscal year 2007, the Company recorded a liability for an uncertain
      tax
      position related to certain investments in the amount of $1,839,000. This entire
      amount has been derecognized as of September 30, 2008 due to an Internal Revenue
      service approved accounting method change.




12






**MERRIMAN
      CURHAN FORD GROUP, INC.**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS—CONTINUED**


**(unaudited)**





**5.
      Income Taxes (continued)**





The
      Company’s tax years 2005-2007 will remain open for three years for examination
      by the Internal Revenue Service from the date the federal corporation tax
      returns were filed.  The Company’s tax years 2003-2007 will remain open for
      three to four years for examination by state tax authorities from the date
      the
      state corporation tax returns were filed.  Net operating losses deducted
      are subject to review and adjustment for three to four years after the net
      operating losses are deducted on the U.S. and state returns filed.





**6.
      (Loss)/Earnings per Share**




The
      following is a reconciliation of the basic and diluted net (loss) income
      available to common stockholders and the number of shares used in the basic
      and
      diluted net (loss) income per common share computations for the periods
      presented:





**Three Months Ended September 30,**
            
            **Nine Months Ended September 30,****2008**
            
            **2007**
            
            **2008**
            
            **2007**Net
                (loss) income available to stockholders - basic
            
            $
            (11,723,338
            )
            $
            188,460
            
            $
            (23,887,155
            )
            $
            2,578,089Interest
                on dilutive securities
            
            
            0
            
            
            4,084
            
            
            4,584
            
            
            12,252Net
                (loss) income available to stockholders - diluted
            
            $
            (11,723,338
            )
            $
            192,544
            
            $
            (23,882,571
            )
            $
            2,590,341Weighted-average
                number of common shares - basic
            
            
            12,672,598
            
            
            11,999,656
            
            
            12,498,687
            
            
            11,337,346Weighted-average
                number of common shares-diluted
            
            
            12,672,598
            
            
            13,139,384
            
            
            12,498,687
            
            
            12,499,544Basic
                net income (loss) per common share:
            
            $
            (0.93
            )
            $
            0.02
            
            $
            (1.91
            )
            $
            0.23Diluted
                net loss per common share:
            
            $
            (0.93
            )
            $
            0.01
            
            $
            (1.91
            )
            $
            0.21





Basic
      (loss) earnings per share is computed by dividing net (loss) income by the
      weighted average number of common shares outstanding, excluding shares of
      non-vested stock. Diluted earnings per share is calculated by dividing net
      income, plus interest and dividends on dilutive securities, by the weighted
      average number of common shares used in the basic earnings per share calculation
      plus the number of common shares that would be issued assuming exercise or
      conversion of all potentially dilutive common shares outstanding, including
      non-vested stock. Diluted loss per share is unchanged from basic loss per share
      for the three months and nine months ended September 30, 2008 because the
      addition of common shares that would be issued assuming exercise or conversion
      would be anti-dilutive.




13




**MERRIMAN
      CURHAN FORD GROUP, INC.**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS—CONTINUED**


**(unaudited)**





**6.
      (Loss)/Earnings per Share (continued)**





Shares
      used in the diluted net income per share computation include the dilutive impact
      of the Company's stock options and warrants. The impact of the Company's stock
      options and warrants on shares used for the diluted earnings per share
      computation is calculated based on the average share price of the Company's
      common stock for each period using the treasury stock method. Under the treasury
      stock method, the tax-effected proceeds that would be hypothetically received
      from the exercise of all stock options and warrants with exercise prices below
      the average share price of the Company's common stock are assumed to be used
      to
      repurchase shares of the Company's common stock. Because the Company reported
      a
      net loss during the three months and nine months ended September 30, 2008,
      the
      Company excluded the impact of all stock options and warrants in the computation
      of dilutive earnings per share, as their effect would be
      anti-dilutive.





The
      Company excludes all potentially dilutive securities from its diluted net (loss)
      income per share computation when their effect would be anti-dilutive. The
      following common stock equivalents were excluded from the earnings per share
      computation, as their inclusion would have been anti-dilutive:





**Three Months Ended September 30,**
            
            **Nine
                Months Ended September 30,****2008**
            
            **2007**
            
            **2008**
            
            **2007**Stock
                options and warrants excluded due to the exercise price exceeding
                the
                average fair value of the Company's common stock during the
                period
            
            
            4,566,130
            
            
            2,093,089
            
            
            3,746,387
            
            
            1,756,224Weighted
                average non-vested stock, stock options and stock warrants, calculated
                using the treasury stock method, that were excluded due to the Company
                reporting a net loss during the period
            
            
            86,155
            
            
            ─
            
            
            264,782
            
            
            ─Weighted
                average shares issuable for the period prior to the conversion of
                the
                convertible notes payable
            
            
            ─
            
            
            ─
            
            
            62,556
            
            
            ─Total
                common stock equivalents excluded from diluted net (loss) income
                per
                share
            
            
            4,652,285
            
            
            2,093,089
            
            
            4,073,725
            
            
            1,756,224





**7.
      Regulatory Requirements**




Merriman
      Curhan Ford & Co. is a broker-dealer subject to Rule 15c3-1 of the
      Securities and Exchange Commission, which specifies uniform minimum net capital
      requirements, as defined, for their registrants. As of September 30, 2008,
      Merriman Curhan Ford & Co. had regulatory net capital, as defined, of
      $2,053,145, which exceeded the amount required by $1,053,145. Merriman Curhan
      Ford & Co. is exempt from Rules 15c3-3 and 17a-13 under the Securities
      Exchange Act of 1934 because it does not carry customer accounts, nor does
      it
      hold customer securities or cash.




14





**MERRIMAN
      CURHAN FORD GROUP, INC.**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS—CONTINUED**


**(unaudited)**




**8.
      Business Segments**




The
      Company’s business results are categorized into the following three segments:
      investment bank / broker-dealer, primary research, and asset management. The
      investment bank / broker-dealer segment includes a broad range of services,
      such
      as capital raising and financial advisory services for corporate clients, and
      brokerage and equity research services for our institutional investor clients.
      Our primary research segment offers custom, independent primary research
      services to CleanTech, Consumer/Internet/Media and Health Care companies, as
      well as financial services firms that invest in these companies. Our asset
      management segment manages investment products for investors.




The
      accounting policies of the segments are consistent with those described in
      the
      Significant Accounting Policies in Note 2. Revenue generating activities between
      segments are eliminated from the segments results for reporting purposes. These
      activities include fees paid by the Asset Management segment to the Primary
      Research segment for the management of its investment portfolio.


The
      Company’s segment information for the three months and nine months ended
      September 30, 2008 and 2007 is prepared using the following
      methodology:




**·**
            
            Revenue
                and expenses directly associated with each segment are included in
                determining income.




**·**
            
            Each
                segment’s operating expenses include compensation and benefits expenses
                and other operating expenses that are incurred directly in support
                of the
                segments. These other operating expenses, include brokerage and clearing
                fees, cost of primary research services, professional services, occupancy
                and equipment, communications and technology, depreciation and
                amortization, amortization of intangible assets, travel and business
                development and other operating
                expenses.




**·**
            
            Corporate
                operating expenses include compensation and benefits for corporate
                support
                employees as well as operating expenses that are not incurred directly
                in
                support of our three segments.




15




**MERRIMAN
      CURHAN FORD GROUP, INC.**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS—CONTINUED**


**(unaudited)**




Management
      believes that the following information provides a reasonable representation
      of
      each segment’s contribution to revenue, income and assets:




**Three Months Ended September 30,**
            
            **Nine Months Ended
                September 30,****2008**
            
            **2007**
            
            **2008**
            
            **2007**Broker-Dealer
            
            Revenue
            
            $
            4,585,876
            
            $
            16,253,565
            
            $
            29,499,752
            
            $
            49,197,978Operating
              expenses
            
            
            8,992,724
            
            
            12,986,080
            
            
            36,067,439
            
            
            39,044,315Operating
                  (loss) income
            
            $
            (4,406,848
            )
            $
            3,267,485
            
            $
            (6,567,687
            )
            $
            10,153,663Segment
                  assets
            
            $
            20,673,366
            
            $
            32,976,207
            
            $
            20,673,366
            
            $
            32,976,207Primary
                Research
            
            Revenue
            
            
            1,431,308
            
            
            1,194,627
            
            $
            4,471,246
            
            $
            2,167,930Operating
                  expenses
            
            
            1,893,793
            
            
            1,955,379
            
            
            8,391,666
            
            
            3,401,355Operating
                  (loss) income (1)
            
            $
            (462,485
            )
            $
            (760,752
            )
            $
            (3,920,420
            )
            $
            (1,233,425
            )Segment
                  assets
            
            $
            3,998,874
            
            $
            7,092,957
            
            $
            3,998,874
            
            $
            7,092,957Asset
                Management
            
            Revenue
            
            
            (35,648
            )
            
            212,001
            
            $
            (421,684
            )
            $
            989,779Operating
                  expenses
            
            
            414,491
            
            
            387,954
            
            
            1,432,053
            
            
            836,644Operating
                  (loss) income
            
            $
            (450,139
            )
            $
            (175,953
            )
            $
            (1,853,737
            )
            $
            153,135Segment
                  assets
            
            $
            2,096,520
            
            $
            3,186,896
            
            $
            2,096,520
            
            $
            3,186,896Corporate
                Support
            
            Operating
              loss
            
            
            (6,378,469
            )
            
            (2,259,410
            )
            
            (13,450,071
            )
            
            (6,706,119
            )Assets
            
            
            1,084,185
            
            
            918,363
            
            
            1,084,185
            
            
            918,363Consolidated
                Entity
            
            Revenue
            
            
            5,981,535
            
            
            17,660,194
            
            
            33,549,314
            
            
            52,355,687Operating
                  expenses
            
            
            17,679,477
            
            
            17,588,823
            
            
            59,341,229
            
            
            49,988,433Operating
                  (loss) income
            
            $
            (11,697,942
            )
            $
            71,371
            
            $
            (25,791,915
            )
            $
            2,367,254Total
                  assets
            
            $
            27,852,945
            
            $
            44,174,423
            
            $
            27,852,945
            
            $
            44,174,423





**(1)**
            **Note:**The operating loss for the nine months ended September 30, 2008 includes
                $2.6 million of non-cash based impairment of goodwill and an intangible
                asset associated with the acquisition which is a non-cash expense.
                The
                impairment was assessed as of April 30,
                2008.




**9.
      Contingencies**





Several
      lawsuits have recently been filed against our subsidiary, Merriman Curhan Ford
      & Co. (including one which also names the parent company as the defendant)
      in connection with the alleged actions of a former client of the Company (the
      "Customer"), and a former retail broker of Merriman Curhan Ford & Co.
 The total amount of damages sought under such lawsuits is over $43
      million. The Company anticipates at least two additional lawsuits will be filed
      against Merriman Curhan Ford & Co. by a lender to the Customer on similar
      facts to the lawsuits described below, with claims believed to be approximately
      $12 million.  The Company denies any involvement and will vigorously
      contest the lawsuits, which are in their early stages.  Due to the early
      stages of these legal matters, we cannot estimate the amount of damages if
      they
      are resolved unfavorably and accordingly, we have not provided an accrual for
      these lawsuits. If
      Merriman Curhan Ford & Co. were to be found liable in all of these lawsuits
      and the plaintiffs were to be awarded the damages they seek, it may have a
      severe impact on the Company's financial condition. Even if the Company
      ultimately prevails in all of these lawsuits, it may incur significant legal
      fees which may have a severe impact on the Company's financial
      condition.




Unrelated
      to the actions of the former client, the Company is in arbitration with regards
      to an action brought by a former at-will employee of the Company who worked
      in
      the investment banking department. No decision has yet been rendered. The former
      employee resigned from Merriman Curhan Ford & Co. in July 2005. The former
      employee alleges breach of an implied employment contract, quantum meruit,
      and
      unjust enrichment based on his allegations that he was to be paid more for
      his
      work. In the event the former employee prevails, the Company will be liable,
      but
      the amount of the liability is not estimable at present.





**10.
      Reduction in Force**





During
      the third quarter 2008, the Company took substantial measures to align its
      cost
      structure with its revenue expectations, market demand, and areas of focus.
      These measures focused on headcount reductions, salary reductions, better
      alignment of certain businesses and general spending controls. The measures
      involved the elimination of approximately 20% of the company’s workforce,
      bringing headcount to about 150 employees company-wide and 92 in the
      broker-dealer. Severance and related costs were $216,000 which was expensed
      in
      the third quarter as Compensation and Benefits. Merriman Curhan Ford & Co.,
      the broker-dealer, incurred $156,000 of the costs while Panel Intelligence
      incurred $42,000 and MCF Asset Management incurred $18,000.




16




**MERRIMAN
      CURHAN FORD GROUP, INC.**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS—CONTINUED**


**(unaudited)**




**11.
      Subsequent Events**





*Restructuring
      and Severance Charges*





As
      the
      market continued to be adverse for the financial services industry, the Company
      took additional actions. In October, the Company continued its efforts to focus
      the business and manage non-core expenses. The Company executed another
      reduction in force in face of persistent and worsening market conditions. Among
      other measures, the plan involved the elimination of another 10% of the
      Company’s workforce, bringing the headcount to about 130 employees company-wide.
      Severance and related costs are estimated to be under $200,000 which will
      largely be expensed in the fourth quarter. The Company will continue to focus
      on
      growing its recurring revenue business lines, as well as strengthen its core
      institutional brokerage and investment banking businesses.





*Employee
      Stock Option Give-Back*





On
      October 27, 2008, the Company established a program whereby its employees could
      give back employee stock options that had been granted in prior periods. There
      was no *quid
      pro quo* for any
      stock options given back. In addition, the employees were notified that those
      giving stock options back could not be granted new stock options for a period
      of
      at least six months.





It
      is
      expected that the number of stock options given back will be significant. This
      will enable the Company to grant new stock options under the existing limits
      of
      the current stock option plans. These limits are established and modified by
      the
      Company’s stockholders.




17




**ITEM 2
       Management's Discussion and Analysis of Financial Condition and Results of
      Operations**





This
      Quarterly Report on Form 10-Q, including this Management's Discussion and
      Analysis of Financial Condition and Results of Operations contains
      forward-looking statements regarding future events and our future results that
      are based on current expectations, estimates, forecasts, and projections about
      the industries in which we operate and the beliefs and assumptions of our
      management. Words such as “may,” “will,” “should,” “expects,” “anticipates,”
“targets,” “goals,” “projects,” “intends,” “plans,” “believes,” “seeks,”
“estimates,” “predicts,” “potential” or “continue,” variations of such words,
      and similar expressions are intended to identify such forward-looking
      statements. In addition, any statements that refer to projections of our future
      financial performance, our anticipated growth and trends in our businesses,
      and
      other characterizations of future events or circumstances, are forward-looking
      statements. Readers are cautioned that these forward-looking statements are
      only
      predictions and are subject to risks, uncertainties, and assumptions that are
      difficult to predict. Therefore, actual results may differ materially and
      adversely from those expressed in any forward-looking statements. Readers are
      referred to risks and uncertainties identified under **“** Risk
      Factors” on Page 31 and elsewhere herein. We undertake no obligation to revise
      or update publicly any forward-looking statements for any reason. Numbers
      expressed herein may be rounded to thousands of dollars.




**Overview**




We
      are a
      financial services holding company that provides investment research, capital
      markets services, corporate and executive services, investment banking, venture
      services, asset management and primary research through our operating
      subsidiaries, Merriman Curhan Ford & Co., MCF Asset Management, LLC and
      Panel Intelligence, LLC.




Merriman
      Curhan Ford & Co. is an investment bank and securities broker-dealer
      focused on fast growing companies and institutional investors. Our mission
      is to
      become a leader in the researching, advising, financing, trading and investing
      in fast growing companies under $2 billion in market capitalization. We provide
      equity research, brokerage and trading services primarily to institutions,
      as
      well as investment banking and advisory services to corporate clients. We are
      gaining market share by originating differentiated research for our
      institutional investor clients and providing specialized and integrated services
      for our fast-growing corporate clients. Institutional Cash Distributors (ICD),
      a
      division of Merriman Curhan Ford & Co., is a broker of money market funds
      serving the short-term investing needs of corporate finance departments at
      companies throughout the United States and Europe.




Panel
      Intelligence, LLC provides custom and published primary research to industry
      clients and investment professionals through online panel discussions,
      quantitative surveys and an extensive research library. Panel Intelligence
      is
      positioned to provide greater access, compliance, insights and productivity
      to
      clients in the Company’s three growth industry sectors: CleanTech,
      Consumer/Internet/Media, and Health Care.




MCF
      Asset
      Management, LLC manages absolute return investment products for institutional
      and high-net worth clients. As of September 30, 2008, assets under management
      across our fund products were approximately $33 million.




**Executive
      Summary**




Revenue
      declined by 66% in the latest quarter relative to the third quarter 2007 during
      the most tumultuous capital market environment in current history. Our
      commission revenue grew 1% year-over-year, supported by continued growth with
      our Institutional Cash Distributors money fund business as well as high market
      volatility which drove solid customer trading activity. Investment banking
      revenue declined 64% sequentially from the second quarter and declined 72%
      year-over year as very few companies have come to market during the first nine
      months of 2008, particularly in the third quarter. Principal Transactions swung
      to a loss of $5,384,000 after posting gains during the second quarter 2008
      and
      third quarter 2007.




**Business
      Environment**





Stocks
      declined sharply to date during 2008, reflecting a U.S. recession marked by
      two
      consecutive quarters of shrinking GDP and multiple bank failures. The aggressive
      interventions by the Federal Reserve Board, including engineering the rescue
      of
      AIG, multiple reductions of key target short-term interest rates as well as
      the
      government’s willingness to intervene did not help stabilize stock or bond
      prices toward the end of the third quarter, which saw unprecedented volatility.
      The overall credit market, which had staged a slight recovery in April and
      May,
      nearly collapsed as prices of mortgage securities and corporate bonds fell.
      Market sentiment took a big hit as the Dow dropped 17% year-to-date at the
      close
      of the quarter. Eight days later, it proceeded to drop by 29% year-to-date.
      The
      high degree of volatility has led many funds to freeze activity to cope with
      massive redemptions which has a direct impact on our corporate financing
      activity levels. Overall, the environment for small and micro cap stocks to
      date
      in 2008 was perceived by many market participants as the most difficult they
      had
      ever experienced.




18




Our
      securities broker-dealer and investment banking activities are linked to the
      capital markets. In addition, our business activities are focused in three
      growth industry sectors: CleanTech, Consumer/Internet/Media and Health Care.
      By
      their nature, our business activities are highly competitive and are not only
      subject to general market conditions, volatile trading markets and fluctuations
      in the volume of market activity, but also to the conditions affecting the
      companies and markets in our areas of focus.





Fluctuations
      in revenue also occur due to the overall level of market activity, which, among
      other things, affects the flow of investment dollars and the size, number and
      timing of investment banking transactions. In addition, a downturn in the level
      of market activity can lead to a decrease in brokerage commissions. Therefore,
      revenue in any particular period may vary significantly from year to
      year.





**Results
      of Operations**





The
      following table sets forth the results of operations for the three months and
      nine months ended September 30, 2008 and 2007:




**Three Months Ended**
            
            **Nine Months Ended****September 30,**
              **2008**
            
            **September 30,**
              **2007**
            
            **September 30,**
              **2008**
            
            **September 30,**
              **2007**Revenue:Commissions
            
            $
            7,992,614
            
            $
            7,923,963
            
            $
            24,353,696
            
            $
            22,807,243Principal
                transactions
            
            
            (5,384,303
            )
            
            2,478,297
            
            
            (5,280,550
            )
            
            10,804,073Investment
                banking
            
            
            1,600,260
            
            
            5,616,491
            
            
            9,423,666
            
            
            15,480,518Primary
                research
            
            
            1,431,154
            
            
            1,165,428
            
            
            4,471,092
            
            
            2,116,490Advisory
                and other fees
            
            
            341,810
            
            
            476,015
            
            
            581,410
            
            
            1,147,363Total
                revenue
            
            
            5,981,535
            
            
            17,660,194
            
            
            33,549,314
            
            
            52,355,687Operating
                expenses:Compensation
                and benefits
            
            
            8,743,732
            
            
            12,096,131
            
            
            34,016,942
            
            
            35,673,505Brokerage
                and clearing fees
            
            
            558,344
            
            
            627,223
            
            
            2,042,828
            
            
            1,921,920Cost
                of primary research services
            
            
            548,943
            
            
            555,185
            
            
            1,743,236
            
            
            950,403Professional
                services
            
            
            3,987,874
            
            
            518,045
            
            
            7,290,374
            
            
            1,603,163Occupancy
                and equipment
            
            
            650,678
            
            
            499,459
            
            
            1,877,288
            
            
            1,395,048Communications
                and technology
            
            
            702,654
            
            
            921,853
            
            
            2,653,501
            
            
            2,618,799Depreciation
                and amortization
            
            
            308,220
            
            
            193,284
            
            
            614,390
            
            
            556,332Amortization
                of intangible assets
            
            
            116,536
            
            
            264,771
            
            
            349,607
            
            
            485,414Travel
                and entertainment
            
            
            674,161
            
            
            635,353
            
            
            2,645,964
            
            
            1,789,971Other
            
            
            1,388,335
            
            
            1,277,519
            
            
            3,505,583
            
            
            2,993,878Impairment
                of goodwill
            
            
            —
            
            
            —
            
            
            2,601,516
            
            
            —Total
                operating expenses
            
            
            17,679,477
            
            
            17,588,823
            
            
            59,341,229
            
            
            49,988,433Operating
                (loss) income
            
            
            (11,697,942
            )
            
            71,371
            
            
            (25,791,915
            )
            
            2,367,254Interest
                income
            
            
            195,283
            
            
            132,965
            
            
            325,703
            
            
            362,919Interest
                expense
            
            
            (22,665
            )
            
            (15,876
            )
            
            (61,673
            )
            
            (97,087
            )(Loss)
                income before taxes
            
            
            (11,525,324
            )
            
            188,460
            
            
            (25,527,885
            )
            
            2,633,089Income
                tax expense
            
            
            (198,014
            )
            
            —
            
            
            1,640,730
            
            
            (55,000
            )Net
                (loss) income
            
            $
            (11,723,338
            )
            $
            188,460
            
            $
            (23,887,155
            )
            $
            2,578,089




Our
      net
      (loss) income for the three months and nine months ended September 30, 2008
      and
      2007 included the following non-cash expenses:


**Three Months Ended**
              
              **Nine Months Ended****September 30,**
                **2008**
              
              **September 30,**
                **2007**
              
              **September 30,**
                **2008**
              
              **September 30,**
                **2007**Stock-based compensation
              
              $
              580,428
              
              
              694,574
              
              $
              1,897,033
              
              $
              2,146,436Depreciation
                  and amortization
              
              
              308,220
              
              
              193,284
              
              
              614,390
              
              
              556,332Amortization
                  of intangible assets
              
              
              116,536
              
              
              264,771
              
              
              349,607
              
              
              485,414Provision
                  for uncollectible accounts receivable (1)
              
              
              (124,243
              )
              
              140,105
              
              
              156,300
              
              
              368,272Impairment
                  of goodwill and intangible assets
              
              
              —
              
              
              —
              
              
              2,208,735
              
              
              —Amortization
                  of discounts on debt
              
              
              —
              
              
              2,583
              
              
              2,584
              
              
              7,749Total
              
              $
              880,941
              
              
              1,295,317
              
              $
              5,028,649
              
              $
              3,564,203




Note
      (1):
      The provision for uncollectible accounts receivable was negative due to
      collection of an item previously reserved and written off.


19


***Investment
      Banking Revenue***




Our
      investment banking activity includes the following:




·
            *Capital
                Raising*-
                Capital raising includes private placements of equity and debt instruments
                and underwritten public offerings.




·
            *Financial
                Advisory*-
                Financial advisory includes advisory assignments with respect to
                mergers
                and acquisitions, divestures, restructurings and
                spin-offs.




The
      following table sets forth our revenue and transaction volumes from our
      investment banking activities for the three months and nine months ended
      September 30, 2008 and 2007:


**Three Months Ended**
              
              **Nine Months Ended****September 30,**
                **2008**
              
              **September 30,**
                **2007**
              
              **September 30,**
                **2008**
              
              **September 30,**
                **2007****Revenue:**Capital
                  raising
              
              $
              1,379,382
              
              $
              3,881,491
              
              $
              8,862,067
              
              $
              13,028,018Financial
                  advisory and other
              
              
              220,878
              
              
              1,735,000
              
              
              561,599
              
              
              2,452,500Total
                  investment banking revenue
              
              $
              1,600,260
              
              $
              5,616,491
              
              $
              9,423,666
              
              $
              15,480,518**Transaction
                  Volumes:**Public
                  offerings:Capital
                  underwritten participations
              
              $
              0
              
              $
              8,505,000
              
              $
              8,153,000
              
              $
              113,744,000Number
                  of transactions
              
              
              0
              
              
              1
              
              
              2
              
              
              7Private
                  placements:Capital
                  raised
              
              $
              19,100,000
              
              $
              101,210,000
              
              $
              94,800,000
              
              $
              187,795,000Number
                  of transactions
              
              
              1
              
              
              8
              
              
              11
              
              
              15




Our
      investment banking revenue was $1.6 million or 27% of our revenue during third
      quarter 2008, representing a 62% decrease from the similar quarter in 2007.
      Third quarter of 2008 represented a different operating environment where the
      ability to execute virtually any type of transactions was more challenging
      than
      what we have experienced in the second quarter of 2008 as well as all of 2007.
      During the quarter we completed only one private transaction versus a total
      of 8
      deals, including 2 public transaction in the second quarter and 9 deals in
      the
      same period in 2007.




During
      the nine months ended September 30, 2008, we had one investment banking client
      that accounted for 20% of our revenue, while no single investment banking client
      accounted for more than 10% of our revenue during the same period in
      2007.





***Commissions
      and Principal Transactions Revenue***




Our
      broker-dealer activity includes the following:




·
            *Commissions*-
                Commissions include revenue resulting from executing stock trades
                for
                exchange-listed securities, over-the-counter securities and other
                transactions as agent.




·
            *Principal
                Transactions*-**Principal
                transactions consist of a portion of dealer spreads attributed to
                our
                securities trading activities as principal in NASDAQ-listed and other
                securities, and include transactions derived from our activities
                as a
                market-maker. Additionally, principal transactions include gains
                and
                losses resulting from market price fluctuations that occur while
                holding
                positions in our trading security
                inventory.




20





The
      following table sets forth our revenue and several operating metrics which
      we
      utilize in measuring and evaluating performance and the results of our trading
      activity operations:





**Three Months Ended**
            
            **Nine Months Ended****September 30,**
              **2008**
            
            **September 30,**
              **2007**
            
            **September 30,**
              **2008**
            
            **September 30,**
              **2007****Revenue:**Commissions
            
            $
            7,992,614
            
            $
            7,923,963
            
            $
            24,353,696
            
            $
            22,807,243Principal
                transactions:Customer
                principal transactions, proprietary trading and market
                making
            
            $
            (2,217,319
            )
            $
            1,888,770
            
            $
            (5,889,424
            )
            $
            9,243,523Investment
                portfolio
            
            
            (3,166,984
            )
            
            589,527
            
            
            608,874
            
            
            1,560,550Total
                principal transactions revenue
            
            $
            (5,384,303
            )
            $
            2,478,297
            
            $
            (5,280,550
            )
            $
            10,804,073**Transaction
                Volumes:**Number
                of shares traded
            
            
            321,882,832
            
            
            315,936,384
            
            
            1,094,758,300
            
            
            793,084,262Number
                of active clients
            
            
            291
            
            
            374
            
            
            475
            
            
            537





Commissions
      amounted to $7,993,000, representing a 1% increase from the similar period
      in
      2007. Lower brokerage commissions were offset by higher revenue for brokering
      institutional money funds by our Institutional Cash Distributors
      division.




Principal
      transactions produced a substantial loss of $5,384,000 during the third quarter
      2008 versus our record gains experienced in 2007. The 2008 loss was largely
      driven by a decline in the fair value of the Proprietary and Investment
      accounts. As of September 30, 2008, we made markets in 1,406 stocks, which
      increased from 1,100 stocks as of September 30, 2007. We view “intelligent
      market making” in small cap stocks as a key element to differentiating ourselves
      from our competition. Principal transactions revenue consists of four different
      activities - customer principal trades, market making, trading for our
      proprietary account, and realized and unrealized gains and losses in our
      investment portfolio. As a broker-dealer, we account for all of our marketable
      security positions on a trading basis and as a result, all security positions
      are marked to fair market value each day. Returns from market making and
      proprietary trading activities tend to be more volatile than acting as agent
      or
      principal for customers.




During
      2008 and 2007, no single brokerage customer accounted for more than 10% of
      our
      revenue from continuing operations.





***Primary
      Research Revenue***




Panel
      Intelligence provides primary market research to corporate and financial clients
      in the Health Care and CleanTech growth industry sectors. The predecessor
      business which was called MedPanel was acquired April 17, 2007. For the
      quarter ended September 30, 2008, Panel revenues were up 24% to $1,431,000
      versus the same period in 2007. The growth has been primarily driven by
      increased business in the Health Care industry. However, we have not seen the
      acceleration in the financial services industry that was originally estimated
      when we acquired the business. We believe this is more related to the current
      challenging market environment and not a reduction in
      opportunity.


21





***Compensation
      and Benefits Expenses***




Compensation
      and benefits expense represents the largest component of our operating expenses
      and includes incentive compensation paid to sales, trading, research and
      investment banking professionals, as well as discretionary bonuses, salaries
      and
      wages, and stock-based compensation. Incentive compensation varies primarily
      based on revenue production. Discretionary bonuses paid to research analysts
      also vary with commissions revenue production, but includes other qualitative
      factors as well. Salaries, payroll taxes and employee benefits vary based on
      overall headcount.





The
      following table sets forth the major components of our compensation and benefits
      for the three months ended September 30, 2008 and 2007:


**Three Months Ended**
              
              **Nine Months Ended****September 30,**
                **2008**
              
              **September 30,**
                **2007**
              
              **September 30,**
                **2008**
              
              **September 30,**
                **2007**Incentive compensation
                  and discretionary bonuses
              
              $
              3,446,193
              
              $
              6,566,759
              
              $
              15,801,261
              
              $
              19,950,445Salaries
                  and wages
              
              
              3,967,160
              
              
              3,928,087
              
              
              12,519,535
              
              
              10,527,878Stock-based
                  compensation
              
              
              580,428
              
              
              694,574
              
              
              1,897,033
              
              
              2,146,436Payroll
                  taxes, benefits and other
              
              
              749,951
              
              
              906,711
              
              
              3,799,113
              
              
              3,048,746Total
                  compensation and benefits
              
              $
              8,743,732
              
              $
              12,096,131
              
              $
              34,016,942
              
              $
              35,673,505Total
                  compensation and benefits as a percentage of revenue
              
              
              146
              %
              
              68
              %
              
              101
              %
              
              68
              %Cash
                  compensation and benefits as a percentage of revenue
              
              
              136
              %
              
              65
              %
              
              96
              %
              
              64
              %




The
      decrease in compensation and benefits expense of $3,352,000 or 27%, from the
      third quarter 2007 to the third quarter 2008 represents lower incentive
      compensation, which is directly correlated to revenue production and reduced
      headcount. Cash compensation is equal to total compensation and benefits expense
      excluding stock-based compensation, which is a non-cash expense. Cash
      compensation and benefits expense as a percentage of revenue increased to 146%
      during the three months ended September 30, 2008 as compared to 68% during
      the
      similar period in 2007. The increase was largely attributed to lower than
      anticipated revenues during the three months ended September 30, 2008 versus
      same period in 2007. As revenues decrease, the fixed portion of the compensation
      base becomes a larger impact on the percentage of total revenues.




No
      single
      sales professional accounted for more than 10% of our revenue during the three
      months ended September 30, 2008. For the three months ended September 30, 2007,
      one sales professional accounted for over 10% of our revenues.




Stock-based
      compensation expense decreased by $114,146 during the third quarter 2008, as
      compared to the similar quarter in 2007. The decline in stock-based compensation
      expense was due in part to fewer non-vested restricted shares outstanding in
      2008.





***Other
      Operating Expenses***




Brokerage
      and clearing fees include trade processing expenses that we pay to our clearing
      broker and execution fees that we pay to floor brokers and electronic
      communication networks. Merriman Curhan Ford & Co. is a fully-disclosed
      broker-dealer, which has engaged a third party clearing broker to perform all
      of
      the clearance functions. The clearing broker-dealer processes and settles the
      customer transactions for Merriman Curhan Ford & Co. and maintains the
      detailed customer records. Additionally, security trades are executed by
      third-party broker-dealers and electronic trading systems. These expenses are
      almost entirely variable with commission revenue and the volume of brokerage
      transactions. Our brokerage and clearing fees decreased by $69,000 during the
      third quarter of 2008 as compared to the third quarter of 2007. The decrease
      was
      primarily due to a shift in the mix of types of trades and reduction of some
      costs, such as traders’ subscriptions to information services.





Cost
      of
      primary research revenue principally consists of panelist honorarium and
      recruitment costs. Technical experts (mostly in the medical field but including
      those in the CleanTech and technology fields) receive cash honoraria for
      participating in qualitative panels and quantitative surveys. We pay the
      honoraria to the panelists when the panel or survey has been completed and
      record this expense as incurred. We closed the acquisition of MedPanel on
      April 17, 2007 and began recognizing primary research revenue and related
      expenses since that date.




Professional
      services expense includes legal, audit, consulting fees, as well as expenses
      related to investment banking transactions. The increase of $3,469,829 from
      the
      third quarter of 2007 to the third quarter of 2008 was primarily attributed
      to
      higher legal fees associated with defending the Company in the litigations
      in
      which it is involved and with various projects, as well as higher business
      development costs associated with investment banking transactions. We believe
      that the third quarter 2008 represents the peak in legal spending and we
      anticipate declines in the fourth quarter of 2008.


22




Occupancy
      and equipment includes rental costs for our office facilities and equipment,
      as
      well as equipment, software and leasehold improvement expenses. These expenses
      are largely fixed in nature. The increase of $151,000 or 30%, from the tjord
      quarter of 2007 to the third quarter of 2008 was in part due to inclusion of
      expenses from Panel Intelligence and a subsequent move to a new office location
      in August of 2007, as well as higher costs associated with a new lease for
      our
      New York office, which commenced in March 2008.




Communications
      and technology expense includes market data and quote services, voice, data
      and
      Internet service fees, and data processing costs. Historically, these costs
      have
      increased as we hire additional employees. The decrease of $219,000, or 24%,
      from the third quarter of 2007 to the third quarter of 2008 was primarily due
      to
      a decline in the number of employees and the reduced associated costs, such
      as
      subscriptions to information services.




Depreciation
      and amortization expense primarily relate to the depreciation of our computer
      equipment and leasehold improvements. The increase of $115,000, or 59%, from
      the
      third quarter of 2007 to the third quarter of 2008 was due to additional
      equipment purchased and leasehold improvements made in connection with the
      Company’s new facilities in New York City.





As
      of
      April 30, 2008, the Company determined there was an impairment to the goodwill
      and intangible assets related to the acquisition of MedPanel, Inc. (currently
      its subsidiary Panel Intelligence, LLC). The Company calculates an estimated
      fair value based on multiples of revenue, earnings, and book value of comparable
      transactions. However, when such comparable transactions are not available
      or
      have become outdated, the Company uses discounted cash flow scenarios to
      estimate the fair value of the reporting units. As of April 30, 2008,
      the Company performed its annual impairment testing and recorded an impairment
      loss of $2,600,000 in its consolidated statement of operations for the three
      months ended June 30, 2008 related to the goodwill and tradename. No additional
      impairment was recorded in the three months ended September 30, 2008. The
      impairment is a non-cash expense item.




Travel
      and entertainment expense results from business development activities across
      our various businesses. The increase of $39,000 or 6%, from the third quarter
      of
      2007 to the third quarter of 2008 was due mostly to increased costs associated
      with non-deal related roadshows, client visits, and business
      development.





Other
      operating expense includes company events, recruiting fees, professional
      liability and property insurance, marketing, business licenses and taxes, office
      supplies and other miscellaneous office expenses. The increase of approximately
      $111,000 or 9%, from the third quarter of 2007 to the third quarter of 2008
      was
      partly due to increased marketing expenses somewhat offset by lower recruiting
      fees.




***Income
      Tax Expense***




At
      the
      end of each interim reporting period the Company calculates an effective tax
      rate based on the Company’s estimate of the tax provision (benefit) that will be
      provided for the full year, stated as a percentage of estimated annual pre-tax
      income (loss). The tax provision (benefit) for the interim period is determined
      using this estimated annual effective tax rate. For the three months and nine
      months ended September 30, 2008, the Company recorded $198,000 and $(1,641,000)
      of income tax expense, respectively. The effective tax rate for the nine months
      ended September 30, 2008 is 7.03%, which is mainly attributable to the release
      of the FIN 48 liability due to the approval of an accounting method change
      for
      federal tax purposes.




Historically
      and currently, the Company has recorded a valuation allowance on the deferred
      tax assets, the significant component of which relates to net operating loss
      tax
      carryforwards. Management continually evaluates the realizability of its
      deferred tax assets based upon negative and positive evidence available. Based
      on the evidence available at this time, the Company continues to conclude that
      it is not “more likely than not” that we will be able to realize the benefit of
      our deferred tax assets in the future.




In
      October, the United States Internal Revenue Service informed us that it will
      audit our 2006 corporate tax return. The IRS audit may result in additional
      tax payments by us together with interest and penalties, the amount of which
      may
      be material, but will not be known until the IRS audit is finalized. Any such
      payments could have a material adverse effect on our financial condition and
      results of operations


23





***Off-Balance
      Sheet Arrangements***





We
      were
      not a party to any off-balance sheet arrangements during the nine months ended
      September 30, 2008 and 2007. In particular, we do not have any interest in
      so-called limited purpose entities, which include special purpose entities
      and
      structured finance entities.




***Commitments***





The
      following table summarizes our significant commitments as of September 30,
      2008,
      consisting of payments related to capital leases and future minimum lease
      payments under all non-cancelable operating leases with initial or remaining
      terms in excess of one year.




**Operating**
              **Leases**
            
            **Capital**
              **Leases**2008
            
            $
            780,215
            
            $
            201,6482009
            
            
            2,624,011
            
            
            634,9682010
            
            
            2,019,930
            
            
            319,7332011
            
            
            1,923,516
            
            
            146,6472012
            
            
            1,174,323
            
            
            —Thereafter
            
            
            704,000
            
            
            —Total
                commitments
            
            $
            9,225,994
            
            $
            1,302,995




**Critical
      Accounting Policies and Estimates**




The
      consolidated financial statements are prepared in accordance with accounting
      principles generally accepted in the United States, which require us to make
      estimates and judgments that affect the reported amounts of assets, liabilities,
      revenues and expenses, and related disclosure of contingent assets and
      liabilities. On an on-going basis, we evaluate our estimates, including those
      related to the valuation of securities owned and deferred tax assets. We base
      our estimates on historical experience and on various other assumptions that
      are
      believed to be reasonable under the circumstances, the results of which form
      the
      basis for making judgments about the carrying values of assets and liabilities
      that are not readily apparent from other sources. Actual results could differ
      from those estimates. We believe the following critical accounting policies
      affect our more significant judgments and estimates used in the preparation
      of
      our consolidated financial statements.


24




*Valuation
      of Securities Owned*




“Securities
      owned” and “Securities sold, but not yet purchased” are reflected in the
      consolidated statements of financial condition on a trade-date basis. Related
      unrealized gains or losses are generally recognized in “Principal transactions
      revenue” in the consolidated statements of operations. The use of fair value to
      measure financial instruments is fundamental to our financial statements and
      is
      one of our most critical accounting policies.




The
      fair
      value of a financial instrument is the amount 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 (the exit price). Instruments that the
      Company owns (long positions) are marked to bid prices, and instruments that
      the
      Company has sold, but not yet purchased (short positions), are marked to offer
      prices. Fair value measurements are not adjusted for transaction costs. Fair
      values of our financial instruments are generally obtained from quoted market
      prices in active markets, broker or dealer price quotations, or alternative
      pricing sources with reasonable levels of price transparency. To the extent
      certain financial instruments trade infrequently or are non-marketable
      securities and, therefore, have little or no price transparency, we value these
      instruments based on management’s estimates.




The
      Company has categorized its financial instruments measured at fair value into
      a
      three-level classification in accordance with SFAS 157. Level 1fair value
      measurements of financial instruments uses quoted prices in active markets
      for
      identical assets or liabilities. Fair value measurements of financial instrument
      with inputs (other than quoted prices included in Level 1) are either directly
      or indirectly observable for the asset or liability through correlation with
      market data at the measurement date and for the duration of the instrument’s
      anticipated life are categorized as Level 2. Finally, fair value measurements
      of
      financial instruments that have no direct observable levels are generally
      categorized as Level 3. The lowest level input that is significant to the fair
      value measurement of a financial instrument is used to categorize the instrument
      and reflects the judgment of management.




*Revenue
      Recognition*




Commissions
      revenue and related clearing expenses are recorded on a trade-date basis as
      security transactions occur. Principal transactions in regular-way trades are
      recorded on the trade date, as if they had settled. Profit and loss arising
      from
      all securities and commodities transactions entered into for the account and
      risk of our company are recorded on a trade-date basis.




Investment
      banking revenue includes underwriting and private placement agency fees earned
      through our participation in public offerings and private placements of equity
      and convertible debt securities and fees earned as financial advisor in mergers
      and acquisitions and similar transactions. Underwriting revenue is earned in
      securities offerings in which we act as an underwriter and includes management
      fees, selling concessions and underwriting fees. Management fees are recorded
      on
      the offering date, selling concessions on settlement date, and underwriting
      fees
      at the time the underwriting is completed and the related income is reasonably
      determinable. Syndicate expenses related to securities offerings in which we
      act
      as underwriter or agent are deferred until the related revenue is recognized
      or
      we determine that it is more likely than not that the securities offerings
      will
      not ultimately be completed. Merger and acquisition fees and other advisory
      services revenue are generally earned and recognized only upon successful
      completion of the engagement. Underwriting revenue is presented net of related
      expenses. Unreimbursed expenses associated with private placement and advisory
      transactions are recorded as expenses as incurred.




As
      co-manager for registered equity underwriting transactions, management must
      estimate our share of transaction related expenses incurred by the lead manager
      in order to recognize revenue. Transaction related expenses are deducted from
      the underwriting fee and therefore reduces the revenue that is recognized as
      co-manager. Such amounts are adjusted to reflect actual expenses in the period
      in which we receive the final settlement, typically 90 days following the
      closing of the transaction.





*Stock-Based
      Compensation*




On
      January 1, 2006, we adopted SFAS 123(R), “Share-Based Payment,” which
      requires the measurement and recognition of compensation expense, based on
      estimated fair values, for all share-based awards made to employees and
      directors, including stock options, non-vested stock, and participation in
      our
      employee stock purchase plan. Share-based compensation expense recognized in
      our
      consolidated statement of operations for the three months and nine months ended
      September 30, 2008 and 2007 includes compensation expense for share-based awards
      granted (i) prior to, but not yet vested as of December 31, 2005,
      based on the grant date fair value estimated in accordance with the provisions
      of SFAS 123, and (ii) subsequent to December 31, 2005, based on the
      grant date fair value estimated in accordance with the provisions of SFAS
      123(R).




We
      estimate the fair value of stock options granted using the Black-Scholes option
      pricing method. This option pricing model requires the input of highly
      subjective assumptions, including the option’s expected life and the price
      volatility of the underlying stock. The expected life of employee stock options
      represents the weighted-average period the stock options are expected to remain
      outstanding. The Company calculated the expected term using the lattice model
      with specific assumptions about the suboptimal exercise behavior, post-vesting
      termination rates and other relevant factors. The expected stock price
      volatility was determined using the historical volatility of our common stock.
      The fair value is then amortized on a straight-line basis over the requisite
      service periods of the awards, which is generally the vesting
      period.


25




Because
      share-based compensation expense is based on awards that are ultimately expected
      to vest, it has been reduced to account for estimated forfeitures. SFAS 123(R)
      requires forfeitures to be estimated at the time of grant and revised, if
      necessary, in subsequent periods if actual forfeitures differ from those
      estimates. Changes in these inputs and assumptions can materially affect the
      measure of estimated fair value of our share-based compensation.




*Deferred
      Tax Valuation Allowance*




We
      account for income taxes in accordance with the provision of SFAS
      No. 109, *Accounting for Income Taxes* ,
      which
      requires the recognition of deferred tax assets and liabilities at tax rates
      expected to be in effect when these balances reverse. Future tax benefits
      attributable to temporary differences are recognized to the extent that the
      realization of such benefits is more likely than not. We have concluded that
      it
      is more likely than not that our deferred tax assets as of September 30, 2008
      and 2007 will not be realized based on the scheduling of deferred tax
      liabilities and projected taxable income. The amount of the deferred tax assets
      actually realized, however, could vary if there are differences in the timing
      or
      amount of future reversals of existing deferred tax liabilities or changes
      in
      the actual amounts of future taxable income. Should we determine that we will
      be
      able to realize all or part of the deferred tax asset in the future, an
      adjustment to the deferred tax asset will be recorded in the period such
      determination is made.





**Liquidity
      and Capital Resources**




Historically,
      we have satisfied our liquidity and regulatory capital needs through the
      generation of operating profits and the issuance of equity and debt securities,
      although we have not accessed the capital markets since 2004. As of September
      30, 2008, liquid assets consisted primarily of cash and cash equivalents of
      $7,914,755 and marketable securities, net of securities sold not yet purchased,
      of $7,723,865, for a total of $15,638,620.




Cash
      and
      cash equivalents decreased by $24,047,446 during the nine months ended September
      30, 2008 primarily due to the payment of higher employee bonuses in February
      2008 for the Company’s 2007 performance and growing operating losses in 2008.
      The Company’s performance in 2007 was better than in 2006 for which bonus was
      paid in the same period 2007. Cash used in operating activities for the nine
      months ending September 30, 2008 were $23,761,688 which consisted of our net
      income adjusted for non-cash expenses including stock-based compensation,
      depreciation and amortization. In addition realized losses were more than offset
      by unrealized gains in the firm’s various investment accounts. Cash used in
      investing activities amounted to $202,398 for the nine months ending September
      30, 2008 which consisted primarily of purchase of equipment and fixtures. Cash
      used in financing activities was $83,360. Our financing activities included
      capital lease activity.





Merriman
      Curhan Ford & Co., as a broker-dealer, is subject to Rule 15c3-1 of the
      Securities Exchange Act of 1934, which specifies uniform minimum net capital
      requirements, as defined, for their registrants. As of September 30, 2008,
      Merriman Curhan Ford & Co. had regulatory net capital of $2,053,145 which
      exceeded the required amount by $1,053,145.




Depending
      on the progress and outcome of the lawsuits filed against us, as well as our
      actual vs. forecasted operating results, we forecast our existing cash balances
      and investments to be sufficient to meet our liquidity and capital spending
      requirements for the next twelve months. However, we may require additional
      capital investment to fund our working capital if we incur future operating
      losses. We cannot be certain that additional debt or equity financing will
      be
      available when required or, if available, that we can secure it on terms
      satisfactory to us.





**Restructuring
      and Severance Charges**





During
      the third quarter 2008, the company took substantial measures to begin aligning
      its cost structure with its current revenue expectations, market demand, and
      areas of focus. These measures focused on headcount reductions, salary
      reductions, better alignment of certain businesses and general spending
      controls. The measures involved the elimination of approximately 20% of the
      company’s workforce, bringing the headcount to about 150 employees company-wide
      and 92 in the broker-dealer. Severance and related costs were $216,000 which
      was
      expensed in the third quarter under Compensation and Benefits. We originally
      estimated that these measures would reduce operating expenses by about $7
      million annually. By the end of the third quarter, we believe we have achieved
      at least $6 million of those savings and are on track for an additional $1
      million savings by year-end.





In
      October, the firm continued its efforts to focus the business and manage
      non-core expenses. The firm executed another reduction in force in face of
      persistent and worsening market conditions. When the effects of the second
      reduction in force are fully reflected in our results by the end of the fourth
      quarter 2008, the action will reduce annual operating expenses by approximately
      an additional $3 million.  This should bring the savings from cost
      reductions during 2008 to almost $10 million in total annual savings. Among
      other measures, the reduction in force involved the elimination of an additional
      10% of the Company’s workforce, bringing the headcount to about 130 employees
      company-wide. Severance and related costs are estimated to be under $200,000
      which will largely be expensed in the fourth quarter. The Company will continue
      to focus on growing its recurring revenue business lines, as well as strengthen
      its core institutional brokerage and investment banking business
      units.


26


**Item  3.  
      Quantitative and Qualitative Disclosures About Market Risk**




The
      following discussion about market risk disclosures involves forward-looking
      statements. Actual results could differ materially from those projected in
      the
      forward-looking statements. We may be exposed to market risks related to changes
      in equity prices, interest rates and foreign currency exchange rates. We do
      not
      use derivative financial instruments for speculative, trading or any other
      purpose.




*Equity
      Price Risk*




The
      potential for changes in the market value of our trading positions is referred
      to as “market risk.” Our trading positions result from proprietary trading
      activities. These trading positions in individual equities and equity indices
      may be either long or short at any given time. Equity price risks result from
      exposures to changes in prices and volatilities of individual equities and
      equity indices. We seek to manage this risk exposure through diversification
      and
      limiting the size of individual positions within the portfolio. The effect
      on
      earnings and cash flows of an immediate 10% increase or decrease in equity
      prices generally is not ascertainable and could be positive or negative,
      depending on the positions we hold at the time. We do not establish hedges
      in
      related securities or derivatives. From time to time, we also hold equity
      securities received as compensation for our services in investment banking
      transactions. These equity positions are always long. However, as the prices
      of
      individual equity securities do not necessarily move in tandem with the
      direction of the general equity market, the effect on earnings and cash flows
      of
      an immediate 10% increase or decrease in equity prices generally is not
      ascertainable.




*Interest
      Rate Risk*




Our
      exposure to market risk resulting from changes in interest rates relates
      primarily to our investment portfolio and long-term debt obligations. Our
      interest income and cash flows may be impacted by changes in the general level
      of U.S. interest rates. We do not hedge this exposure because we believe that
      we
      are not subject to any material market risk exposure due to the short-term
      nature of our investments. We would not expect an immediate 10% increase or
      decrease in current interest rates to have a material effect on the fair market
      value of our investment portfolio.




Our
      long-term debt obligations bear interest at a fixed rate. Accordingly, an
      immediate 10% increase or decrease in current interest rates would not have
      an
      impact on our interest expense or cash flows. The fair market value of our
      long-term fixed interest rate debt is subject to interest rate risk. Generally,
      the fair market value of fixed interest rate debt will increase as interest
      rates fall and decrease as interest rates rise. We would not expect an immediate
      10% increase or decrease in current interest rates to have a material impact
      on
      the fair market value of our long term debt obligations.




*Foreign
      Currency Risk*




We
      do not
      have any foreign currency denominated assets or liabilities or purchase
      commitments and have not entered into any foreign currency contracts.
      Accordingly, we are not exposed to fluctuations in foreign currency exchange
      rates.


27


**Item 4. 
      Controls and Procedures**





**Evaluation
      of Disclosure Controls and Procedures** -
      We have established disclosure controls and procedures to ensure that material
      information relating to the Company, including its consolidated subsidiaries,
      is
      made known to the officers who certify the Company's financial reports and
      to
      other members of senior management and the Board of Directors.





Based
      on
      their evaluation of the Company's disclosure controls and procedures (as defined
      in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of
      1934), the Principal Executive Officer and Principal Financial Officer of the
      Company have concluded that the disclosure controls and procedures are effective
      as of September 30, 2008.





**Changes
      in internal controls** -
      There was no change in the Company's internal control over financial reporting
      (as defined in Rules 13a-15(d) and 15d-15(d) of the Exchange Act) that occurred
      during the quarter ended September 30, 2008, that materially affected, or is
      reasonably likely to materially affect, the Company's internal control over
      financial reporting.


28


**PART
      II.   OTHER INFORMATION**




**Item 1. Legal
      Proceedings**




The
      Company has responded to a Grand Jury subpoena from the U.S. Attorney’s Office
      for the Northern District of California for documents relating to the activities
      of a former retail broker of the Company, David Scott Cacchione, and one of
      his
      customers, William Del Biaggio III.  Cacchione’s activities under
      investigation relate primarily to the apparent misuse of various client accounts
      as collateral for loans to Del Biaggio.  Cacchione purportedly signed
“account control agreements” in which he purported to act on behalf of the
      Company to authorize the use of various client accounts as security for loans
      to
      the customer from various third party lenders.





Cacchione
      appears to have improperly provided client account statements to third-party
      lenders or to Del Biaggio for the purpose of representing to the lenders that
      the accounts belonged to Del Biaggio.  The retail client account statements
      were altered so that the accounts appear to belong to Del Biaggio when in fact
      some of the accounts belonged to other Merriman Curhan Ford & Co. retail
      clients.  Del Biaggio is no longer a customer of the Company.





Cacchione
      has been terminated.  The Company’s internal investigation thus far has
      found no evidence that any of Cacchione’s supervisors or any member of
      management was aware of these activities until they were uncovered.  The
      Company is fully cooperating with the Grand Jury inquiry and produced the
      documents called for by the subpoena.





The
      Company is also subject to a formal investigation commenced by the Securities
      and Exchange Commission (“SEC”).  The SEC investigation appears to relate
      in part to the subject matter of the Grand Jury inquiry, *i.e.,* Cacchione’s misuse of client accounts as collateral for loans to the
      customer.  It also appears to relate to other possible violations of
      Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder
      by Cacchione in the handling of his client accounts.  The SEC investigation
      further appears to relate to the Company’s trading activities in various stocks
      in possible violation of Rule 10b-5 as well as to a failure to adequately
      supervise its personnel with a view toward preventing violations of the federal
      securities laws.  The Company is cooperating fully with the SEC in its
      investigation.





The
      investigation relating to client accounts appears to involve only Cacchione’s
      retail accounts.  The Company’s high-net-worth client retail brokerage
      business accounted for less than 1% of the Company’s revenue in 2007.  The
      Company is phasing out this business and will concentrate on strengthening
      its
      core institutional brokerage and investment banking businesses.  The
      Company also is re-examining its compliance policies and procedures as well
      as
      the alignment of the supervisory and compliance related functions of various
      members of management.





Cacchione’s
      activities have given rise to a number of lawsuits against the Company. 
They are as follows:




**DGB
      Investments, Inc. v. Merriman Curhan Ford & Co.**




In
      May
      2008, Merriman Curhan Ford & Co. was served with a complaint filed by DGB
      Investments, Inc. which loaned money to William Del Biaggio III, the former
      client of the Company, against Del Biaggio, David Scott Cacchione, a former
      retail broker of Merriman Curhan Ford & Co., and the Company. Plaintiff
      alleges that Del Biaggio defaulted on a multi-million dollar loan obtained
      from
      Plaintiff.  The Company had suspended and, effective June 4, 2008,
      terminated Cacchione’s employment.   The complaint further alleges
      that Cacchione, while still employed with Merriman Curhan Ford & Co., signed
      an account control agreement purporting to pledge a retail client stock account
      as collateral for the Del Biaggio loan. On the basis of these allegations,
      Plaintiff asserts various claims against the Company and others.  Plaintiff
      seeks $3 million in damages.  We believe that we have meritorious defenses
      and intend to contest this claim vigorously.




**Heritage
      Bank of Commerce v. Merriman Curhan Ford & Co.**




In
      May
      2008, Merriman Curhan Ford & Co. was served with a complaint filed by
      Heritage Bank of Commerce, which loaned money to Del Biaggio, against Del
      Biaggio and the Company.  Plaintiff alleges that Del Biaggio defaulted on a
      multi-million dollar loan obtained from Plaintiff.  The complaint further
      alleges that Cacchione, while still employed with Merriman Curhan Ford &
Co., signed an account control agreement purporting to pledge various retail
      client stock accounts as collateral for the Del Biaggio loan. On the basis
      of
      these allegations, Plaintiff asserts various claims against the Company and
      others.  Plaintiff seeks $ 4 million in damages.  We believe that we
      have meritorious defenses and intend to contest this claim
      vigorously.




**Modern
      Bank, N.A. v. Merriman Curhan Ford & Co.**




In
      June
      2008, Merriman Curhan Ford & Co. was served with a complaint filed by Modern
      Bank, N.A., which loaned money to Del Biaggio, against Del Biaggio, the Company,
      and Cacchione, the same former retail broker of the Company named in the
      lawsuits above.  Plaintiff alleges that Del Biaggio defaulted on a
      multi-million dollar loan obtained from Plaintiff.  The complaint further
      alleges that Cacchione, while still employed with Merriman Curhan Ford &
Co., signed an account control agreement purporting to pledge a retail client
      stock account as collateral for the Del Biaggio loan. On the basis of these
      allegations, Plaintiff asserts various claims against the Company and
      others.  Plaintiff seeks $10 million in damages.  We believe that we
      have meritorious defenses and intend to contest this claim vigorously.


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**Security
      Pacific Bank v. Merriman Curhan Ford & Co.**




In
      June
      2008, Merriman Curhan Ford & Co. was served with a complaint filed by
      Security Pacific Bank, which loaned money to Del Biaggio, against Del Biaggio,
      the Company, and Cacchione named in the lawsuits above.  Plaintiff alleges
      that Del Biaggio defaulted on a multi-million dollar loan obtained from
      Plaintiff.  The complaint further alleges that Cacchione, while still
      employed with Merriman Curhan Ford & Co., signed an account control
      agreement purporting to pledge a retail client stock accounts as collateral
      for
      the Del Biaggio loan. On the basis of these allegations, Plaintiff asserts
      various claims against the Company and others.  Plaintiff seeks $5 million
      in damages.  We believe that we have meritorious defenses and intend to
      contest this claim vigorously.




**AEG
      Facilities, Inc. v. Merriman Curhan Ford & Co.**




In
      June
      2008, Merriman Curhan Ford & Co. was served with a complaint filed by AEG
      Facilities, Inc. which loaned money to Del Biaggio, against Del Biaggio, the
      Company, and the same former retail broker of the Company named in the lawsuits
      above.  Plaintiff alleges that Del Biaggio defaulted on a multi-million
      dollar loan obtained from Plaintiff.  The complaint further alleges that
      Cacchione, while still employed with Merriman Curhan Ford & Co., signed an
      account control agreement purporting to pledge various retail client stock
      accounts as collateral for the Del Biaggio loan. On the basis of these
      allegations, Plaintiff asserts various claims against the Company and
      others.  Plaintiff seeks $7 million in damages.  We believe that we
      have meritorious defenses and intend to contest this claim
      vigorously.




**Valley
      Community Bank v. Merriman Curhan Ford & Co.**




In
      June
      2008, Merriman Curhan Ford & Co. was served with a complaint filed by Valley
      Community Bank, which loaned money to Del Biaggio, against Del Biaggio, the
      Company, and the same former retail broker of the Company named in the lawsuits
      above.  Plaintiff alleges that Del Biaggio defaulted on a multi-million
      dollar loan obtained from Plaintiff.  The complaint further alleges that
      Cacchione, while still employed with Merriman Curhan Ford & Co., signed
      account control agreements purporting to pledge various retail client stock
      accounts as collateral for the Del Biaggio loan. On the basis of these
      allegations, Plaintiff asserts various claims against the Company and
      others.  Plaintiff seeks over $4 million in damages.  We believe that
      we have meritorious defenses and intend to contest this claim
      vigorously.




The
      Company anticipates at least one additional lawsuit will be filed against it
      by
      a lender to Del Biaggio, on similar facts to the lawsuits described above,
      with
      a claim believed to be approximately $10 million.




**United
      American Bank v. Merriman Curhan Ford & Co.**





In
      July
      2008, Merriman Curhan Ford & Co. was served with a complaint filed by United
      American Bank, which loaned money to Del Biaggio alleging that the Company
      entered into an account control agreement for an account that Del Biaggio
      had previously pledged to another lender.  The account pledged was in
      the name of Del Biaggio.  Plaintiff has brought claims for, among other
      things, fraud arising out of the failure to disclose the alleged previous
      pledge.  Plaintiff alleges damages in the amount of $1.75 million.  We
      believe that we have meritorious defenses and intend to contest this claim
      vigorously.




**David
      Hengehold v. Merriman Curhan Ford & Co.**




In
      June
      2008, Merriman Curhan Ford & Co. was served with a complaint filed by David
      Hengehold.  Plaintiff alleges, among other things, fraud based on a former
      employee of the Company having induced plaintiff into making loans to an entity
      associated with Del Biaggio.  This plaintiff is a former client of the
      Company.  This matter does not involve account control agreements.
      Plaintiff in this lawsuit alleges damages of over $500,000.  We believe
      that we have meritorious defenses and intend to contest this claim
      vigorously.





**Don
      Arata, et al. v. Merriman Curhan Ford & Co.**





In
      July
      2008, Merriman Curhan Ford & Co. and Merriman Curhan Ford Group, Inc. were
      served with a complaint filed by several plaintiffs who made loans to Del
      Biaggio and related entities.  Plaintiffs allege, among other things, fraud
      based on Cacchione having induced plaintiff into making loans to Del Biaggio
      and
      certain related entities including Sand Hill Capital Partners III.  This
      matter does not involve account control agreements. Plaintiff in this lawsuit
      alleges damages of $3,025,000.  We believe that we have meritorious
      defenses and intend to contest this claim vigorously.


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**The
      Private Bank of the Peninsula v. Merriman Curhan Ford &
Co.**




In
      July
      2008, Merriman Curhan Ford & Co. was served with a complaint filed by The
      Private Bank of the Peninsula.  Plaintiff alleges, among other things,
      fraud based on Cacchione having induced plaintiff into making loans to Del
      Biaggio.  This matter does not involve account control agreements.
      Plaintiff in this lawsuit alleges damages of $916,666.65.  We believe that
      we have meritorious defenses and intend to contest this claim
      vigorously.




**Paul
      Davis, et al. v. Merriman Curhan Ford & Co.**




**** In
      August 2008, Merriman Curhan Ford & Co. was served with a complaint filed by
      several plaintiffs who made loans to Del Biaggio and related entities. 
Plaintiffs allege, among other things, fraud based on Cacchione having induced
      plaintiff into making loans to Del Biaggio and entities associated with
      him.  This matter does not involve account control agreements. Plaintiffs
      in this lawsuit allege damages of $1.65 million.  We believe that we have
      meritorious defenses and intend to contest this claim vigorously





**Gary
      t. Cook et. al. v. Merriman Curhan Ford & Co.**





In
      September 2008, Merriman Curhan Ford & Co. was served with a complaint filed
      by several plaintiffs who made loans to Del Biaggio and related entities. 
Plaintiffs allege, among other things, fraud based on Cacchione having induced
      plaintiff into making loans to Del Biaggio and entities associated with
      him.  This matter does not involve account control agreements. Plaintiffs
      in this lawsuit allege damages of $2.59 million.  We believe that we have
      meritorious defenses and intend to contest this claim vigorously.





**Thomas
      O'Shea v. Merriman Curhan Ford & Co.**





Unrelated
      to the Del Biaggio/Cacchione matters, in June 2006, our broker-dealer subsidiary
      Merriman Curhan Ford & Co. was served with a claim in NASD Arbitration
      by Thomas O’Shea. Mr. O’Shea is a former at-will employee of Merriman
      Curhan Ford & Co. and worked in the investment banking department.
      Mr. O’Shea resigned from Merriman Curhan Ford & Co. in July 2005.
      Mr. O’Shea alleges breach of an implied employment contract, quantum
      meruit, and unjust enrichment based on his allegations that he was to be paid
      more for his work. The matter proceeded to an arbitration hearing in October
      2008 but we do not yet have a decision. We believe that we have meritorious
      defenses and contested these claims vigorously. However, in the event that
      we do
      not prevail, based upon the facts as we know them to date, we do not believe
      that the outcome will have a material effect on our financial position,
      financial results or cash flows.





Additionally,
      from time to time, we are involved in ordinary routine litigation incidental
      to
      our business.





**Item
      1A. Risk Factors**




In
      addition to the other information set forth in this report, including reports
      we
      incorporate by reference, you should carefully consider the risk factors
      previously disclosed in response to Item 1A to Part 1 of our Annual Report
      on
      Form 10-K for the year ended December 31, 2007 and the additional risk
      factor described below.




**Merriman
      Curhan Ford & Co. is the defendant in numerous large pending lawsuits, and
      expect more lawsuits to be filed.**


****


Several
      lawsuits have recently been filed against Merriman Curhan Ford & Co. in
      connection with the alleged actions of a former client of Merriman Curhan Ford
      & Co., William Del Biaggio III, and a former retail broker of Merriman
      Curhan Ford & Co., David Scott Cacchione, as more fully described under
      the heading “Legal Proceedings in Part II, Item 1”.  The total amount of
      damages sought under such lawsuits is over $43 million.  The Company
      anticipates at least two additional lawsuits will be filed against Merriman
      Curhan Ford & Co. by a lender to Del Biaggio, on similar facts to the
      lawsuits described above, with claims believed to be approximately $12
      million.  We can not assure you that we will prevail in any of these
      lawsuits.  We do, however, deny all allegations and will vigorously contest
      the lawsuits, which are in their early stages.  If Merriman Curhan Ford
& Co. is found liable in all of these lawsuits and the plaintiffs were to be
      awarded all of the damages they seek, it is likely that we would not be able
      to
      continue in business.  If we were to lose a significant portion of these
      lawsuits, our business and financial condition are likely to be adversely
      affected.  Even if we ultimately prevail in all of these lawsuits, we may
      incur significant legal fees and diversion of management’s time and attention
      from our core businesses, and our business and financial condition may be
      adversely affected.





**We
      have been informed that we will be subject to an IRS
      audit.**





The
      United States Internal Revenue Service has informed us that it will audit our
      2006 corporate tax return. The IRS audit may result may result in additional
      tax
      payments by us together with interest and penalties, the amount of which may
      be
      material, but will not be known until that IRS audit is finalized. Any such
      payments could have a material adverse effect on our financial condition and
      results of operations.


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**Item
      6. Exhibits**




31.1
            
            Certification
                of Principal Executive Officer Pursuant To Section 302 of the
                Sarbanes-Oxley Act of 2002.31.2
            
            Certification
                of Chief Financial Officer Pursuant To Section 302 of the Sarbanes-Oxley
                Act of 2002.32.1
            
            Certification
                of Chief Executive Officer and Chief Financial Officer Pursuant to
                18
                U.S.C. Section 1350 as Adopted Pursuant to Section 906 of the
                Sarbanes-Oxley Act of 2002.




32





**SIGNATURES**




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




MERRIMAN
                CURHAN FORD GROUP, INC.November
                10, 2008
            By:
            /s/ D.
                JONATHAN MERRIMAND.
                Jonathan Merriman,
              Chief
                Executive Officer
              (Principal
                Executive Officer)November
                10, 2008
            By:
            /s/ PETER
                V. COLEMANPeter
                V. Coleman
              Chief
                Financial Officer
              (Principal
                Financial Officer)


33