UNITED STATES

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 June 30, 2010

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File Number 001-15799

Ladenburg Thalmann Financial Services Inc.

(Exact name of registrant as specified in its charter)

Florida	65-0701248
(State or other jurisdiction of	(I.R.S. Employer
incorporation or organization)	Identification Number)

4400 Biscayne Boulevard, 12th Floor
Miami, Florida	33137
(Address of principal executive offices)	(Zip Code)

(212) 409-2000

(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 þ No ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

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

Large accelerated filer ¨	Accelerated filer ¨
Non-accelerated filer ¨ (Do not check if a smaller reporting company)	Smaller reporting company x

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes ¨ No þ

As of August 9, 2010, there were 181,326,987 shares of the registrant's common stock outstanding.

LADENBURG THALMANN FINANCIAL SERVICES INC.

QUARTERLY REPORT ON FORM 10-Q

FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2010

TABLE OF CONTENTS

		Page
PART I. FINANCIAL INFORMATION

Item 1.	Financial Statements:

	Condensed Consolidated Statements of Financial Condition as of June 30, 2010 (Unaudited) and December 31, 2009	2

	Condensed Consolidated Statements of Operations for the three and six months ended June 30, 2010 (Unaudited) and 2009 (Unaudited)	3

	Condensed Consolidated Statement of Changes in Shareholders’ Equity for the six months ended June 30, 2010 (Unaudited)	4

	Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2010 (Unaudited) and 2009 (Unaudited)	5

	Notes to the Condensed Consolidated Financial Statements (Unaudited)	6

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	14

Item 3.	Quantitative and Qualitative Disclosures about Market Risk	22

Item 4.	Controls and Procedures	22

PART II. OTHER INFORMATION

Item 1.	Legal Proceedings	23

Item 1A.	Risk Factors	23

Item 6.	Exhibits	24

SIGNATURES		24

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

LADENBURG THALMANN FINANCIAL SERVICES INC.

CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION

(in thousands, except share and per share amounts)

	June 30, 2010 (Unaudited)			December 31, 2009
ASSETS

Cash and cash equivalents	$	5,973		$	5,702
Securities owned at fair value		3,297			2,209
Receivables from clearing brokers		13,329			13,406
Receivables from other broker-dealers		1,102			329
Other receivables, net		5,443			6,203
Furniture, equipment and leasehold improvements, net		2,788			3,154
Restricted assets		200			350
Intangible assets, net		26,994			28,509
Goodwill		29,739			29,739
Unamortized debt issue cost		1,738			1,879
Other assets		2,733			3,157

Total assets	$	93,336		$	94,637

LIABILITIES AND SHAREHOLDERS’ EQUITY

Securities sold, but not yet purchased, at market value	$	9		$	9
Accrued compensation		4,216			4,299
Commissions and fees payable		5,589			5,957
Accounts payable and accrued liabilities		4,339			5,671
Deferred rent		3,170			3,378
Deferred income taxes		2,092			1,726
Accrued interest		634			365
Notes payable		25,511			35,438

Total liabilities	$	45,560		$	56,843

Commitments and contingencies (Note 6)
Shareholders’ equity:
Preferred stock, $.0001 par value; 2,000,000 shares authorized; none issued		—			—
Common stock, $.0001 par value; 400,000,000 shares authorized; shares issued and outstanding, 181,326,987 in 2010 and 167,907,038 in 2009		18			17
Additional paid-in capital		187,962			171,349
Accumulated deficit		(140,204	)		(133,572	)

Total shareholders’ equity		47,776			37,794

Total liabilities and shareholders’ equity	$	93,336		$	94,637

See accompanying notes.

LADENBURG THALMANN FINANCIAL SERVICES INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except share and per share amounts)

(Unaudited)

	Three months ended						Six months ended
	June 30,						June 30,
	2010			2009			2010			2009

Revenues:

Commissions and fees	$	38,092		$	29,169		$	74,520		$	55,940
Investment banking		6,302			1,660			10,888			5,673
Asset management		750			452			1,361			907
Principal transactions		(161	)		469			130			173
Interest and dividends		137			820			263			1,856
Other income		2,464			1,755			4,393			3,066

Total revenues	$	47,584		$	34,325		$	91,555		$	67,615

Expenses:

Commissions and fees	$	28,624		$	20,625		$	55,550		$	39,056
Compensation and benefits		10,892			8,988			22,231			18,898
Non-cash compensation		1,605			1,665			3,365			3,585
Brokerage, communication and clearance fees		1,770			1,731			3,354			3,447
Rent and occupancy, net of sublease revenue		863			718			1,739			2,109
Professional services		1,035			1,278			2,147			3,337
Interest		936			1,050			1,892			2,178
Depreciation and amortization		915			931			1,829			1,870
Other		2,985			2,179			5,653			3,975

Total expenses	$	49,625		$	39,165		$	97,760		$	78,455

Loss before income taxes		(2,041	)		(4,840	)		(6,205	)		(10,840	)

Income tax expense		188			318			427			559

Net loss	$	(2,229	)	$	(5,158	)	$	(6,632	)	$	(11,399	)

Net loss per common share (basic and diluted)	$	(0.01	)	$	(0.03	)	$	(0.04	)	$	(0.07	)

Weighted average common shares used in computation of per share data:
Basic		170,744,411			167,318,663			169,326,908			169,510,804
Diluted		170,744,411			167,318,663			169,326,908			169,510,804

See accompanying notes.

LADENBURG THALMANN FINANCIAL SERVICES INC.

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY

(in thousands, except share amounts)

(Unaudited)

	Common Stock					Additional Paid-In			Accumulated
	Shares			Amount		Capital			Deficit			Total

Balance, December 31, 2009		167,907,038		$	17	$	171,349		$	(133,572	)	$	37,794

Issuance of common stock in private equity offering, net of expenses of $116		13,325,000			1		13,208			—			13,209
Issuance of common stock under employee stock purchase plan		28,319			—		29			—			29

Exercise of stock options		132,000			—		75			—			75

Stock options granted to members of former Advisory Board and consultants		—			—		10			—			10

Stock-based compensation to employees		—			—		3,355			—			3,355

Repurchase and retirement of common stock		(65,370	)		—		(64	)		—			(64	)

Net loss		—			—		—			(6,632	)		(6,632	)

Balance, June 30, 2010		181,326,987		$	18	$	187,962		$	(140,204	)	$	47,776

See accompanying notes.

LADENBURG THALMANN FINANCIAL SERVICES INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(Unaudited)

	Six months ended June 30,
	2010			2009
Cash flows from operating activities:
Net loss	$	(6,632	)	$	(11,399	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization		315			286
Adjustment to deferred rent		(4	)		—
Amortization of debt discount		200			409
Amortization of intangible assets		1,514			1,584
Amortization of debt issue cost		141			320
Deferred income taxes		366			361
Accrued interest		269			39
Non-cash compensation expense		3,365			3,585
Disposal of furniture, equipment and leasehold improvements		4			—

(Increase) decrease in operating assets:
Securities owned		(1,088	)		1,209
Receivables from clearing brokers		77			1,569
Receivables from other broker-dealers		(773	)		(116	)
Other receivables, net		760			(1,468	)
Other assets		391			596

Increase (decrease) in operating liabilities:
Securities sold, but not yet purchased		—			(39	)
Accrued compensation		(83	)		(329	)
Commissions and fees payable		(368	)		(474	)
Accounts payable and accrued liabilities		(1,332	)		409
Net cash used in operating activities		(2,878	)		(3,458	)

Cash flows from investing activities:
Purchases of furniture, equipment and leasehold improvements		(123	)		(58	)
Decrease in restricted assets		150			301
Net cash provided by investing activities		27			243

Cash flows from financing activities:
Issuance of common stock in private equity offering		13,209			—
Issuance of common stock under stock plans		104			186
Repurchases of common stock		(64	)		(2,717	)
Principal (payments) borrowings under revolving credit facility, net		(6,700	)		6,350
Principal payments on other notes payable		(3,427	)		(3,302	)
Net cash provided by financing activities		3,122			517

Net increase (decrease) in cash and cash equivalents		271			(2,698	)
Cash and cash equivalents, beginning of period		5,702			6,621
Cash and cash equivalents, end of period	$	5,973		$	3,923

Supplemental cash flow information
Interest paid	$	1,269		$	1,381
Taxes paid		16			34

See accompanying notes.

LADENBURG THALMANN FINANCIAL SERVICES INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except share and per share amounts)

(Unaudited)

1.	Description of Business and Basis of Presentation

Description of Business

Ladenburg Thalmann Financial Services Inc. (“LTS” or the “Company”) is a holding company. Its wholly-owned principal operating subsidiaries are Ladenburg Thalmann & Co. Inc. (“Ladenburg”), Investacorp, Inc. (collectively with related companies, “Investacorp”), Triad Advisors, Inc. (“Triad”) and Ladenburg Thalmann Asset Management Inc. (“LTAM”).

Ladenburg is a full service registered broker-dealer that has been a member of the New York Stock Exchange (“NYSE”) since 1879. Broker-dealer activities include sales and trading and investment banking. Ladenburg provides its services principally for middle market and emerging growth companies and high net worth individuals through a coordinated effort among corporate finance, capital markets, brokerage and trading professionals.

Investacorp and Triad, which were acquired on October 19, 2007 and August 13, 2008, respectively, are registered broker-dealers and investment advisors that have been serving the independent financial advisor community since 1978 and 1998, respectively. Investacorp’s and Triad’s independent financial advisors primarily serve retail clients. Investacorp and Triad derive revenue from advisory fees and commissions, primarily from the sale of mutual funds, variable annuity products and other financial products and services.

LTAM is a registered investment advisor. It offers various asset management products utilized by Ladenburg clients, as well as clients of Investacorp’s and Triad’s financial advisors.

Ladenburg, Investacorp and Triad customer transactions are cleared through a single clearing broker on a fully-disclosed basis. Each of Ladenburg, Investacorp and Triad is subject to regulation by, among others, the Securities and Exchange Commission (“SEC”), the Financial Industry Regulatory Authority and the Municipal Securities Rulemaking Board. Triad is also subject to regulation by the Commodities Futures Trading Commission and the National Futures Association.

Basis of Presentation

The condensed consolidated financial statements are unaudited and have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. In the opinion of management, the interim data includes all adjustments, consisting of normal recurring adjustments, necessary for a fair statement of the results for the periods presented. Because of the nature of the Company’s business, interim period results may not be indicative of full year or future results.

The unaudited condensed consolidated financial statements do not include all information and notes required in annual audited financial statements in conformity with GAAP. The statement of financial condition at December 31, 2009 has been derived from the audited financial statements at that date, but does not include all of the information and notes required by GAAP for complete financial statement presentation. Please refer to the notes to the consolidated financial statements included in the Company’s annual report on Form 10-K for the year ended December 31, 2009, filed with the SEC, for additional disclosures and a description of accounting policies.

Certain prior year items have been reclassified to conform to the current period’s presentation. All significant intercompany balances and transactions have been eliminated.

The Company has evaluated subsequent events through the date the financial statements contained in this report were issued.

LADENBURG THALMANN FINANCIAL SERVICES INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

(Dollars in thousands, except share and per share amounts)

(Unaudited)

2.	Securities Owned and Securities Sold, But Not Yet Purchased

The components of securities owned and securities sold, but not yet purchased, at fair value at June 30, 2010 and December 31, 2009 were as follows:

	Securities owned		Securities sold, but not yet purchased
June 30, 2010
Common stock and warrants	$	975	$	—
Restricted common stock and warrants		2,322		9
Total	$	3,297	$	9

December 31, 2009
Certificates of deposit	$	100	$	—
Common stock and warrants		517		—
Restricted common stock and warrants		1,592		9
Total	$	2,209	$	9

As of June 30, 2010 and December 31, 2009, approximately $1,084 and $687, respectively, of securities owned were deposited with the Company’s subsidiaries’ clearing brokers. Under the clearing agreements with such clearing brokers, the securities may be sold or hypothecated by such clearing brokers. At June 30, 2010, the Company's subsidiaries had a single clearing broker.

Securities sold, but not yet purchased, at fair value represent obligations of the Company’s subsidiaries to purchase the specified financial instrument at the then current market price. Accordingly, these transactions result in off-balance-sheet risk as the Company's subsidiaries’ ultimate obligation to repurchase such securities may exceed the amount recognized in the condensed consolidated statements of financial condition.

The fair value hierarchy, established under authoritative accounting guidance, ranks the quality and reliability of the information used to determine fair values. Financial assets and liabilities carried at fair value are classified and disclosed in one of the following three categories:

•

Level 1 —quoted prices in active markets for identical assets or liabilities.

•

Level 2 —inputs, other than quoted prices in active markets, that are directly or indirectly observable for the asset or liability.

•

Level 3 — unobservable inputs for the asset where there is little or no market data, which requires the reporting entity to develop its own assumptions.

Securities are carried at fair value and classified as follows:

As of June 30, 2010:

Securities owned, at fair value	Level 1		Level 2		Level 3		Total

Common stock and warrants	$	975	$	2,322	$	—	$	3,297

Total	$	975	$	2,322	$	—	$	3,297

LADENBURG THALMANN FINANCIAL SERVICES INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

(Dollars in thousands, except share and per share amounts)

(Unaudited)

Securities sold, but not yet purchased, at fair value	Level 1		Level 2		Level 3		Total

Common stock and warrants	$	—	$	9	$	—	$	9

Total	$	—	$	9	$	—	$	9

As of December 31, 2009:

Securities owned, at fair value	Level 1		Level 2		Level 3		Total

Certificates of deposit	$	—	$	100	$	—	$	100

Common stock and warrants		517		1,592		—		2,109

Total	$	517	$	1,692	$	—	$	2,209

Securities sold, but not yet purchased, at fair value	Level 1		Level 2		Level 3		Total

Common stock and warrants	$	—	$	9	$	—	$	9

Total	$	—	$	9	$	—	$	9

Warrants are valued by using the Black-Scholes option pricing model which takes into account the underlying securities current market value, the market volatility of the underlying securities, the term of the warrants, exercise price, and risk-free rate of return. As of June 30, 2010 and December 31, 2009, the fair value of the warrants was $2,081 and $1,351, respectively, and is included in common stock and warrants (level 2) above.

3.	Net Capital Requirements

As a registered broker-dealer, Ladenburg is subject to the SEC’s Uniform Net Capital Rule 15c3-1, which requires the maintenance of minimum net capital. Ladenburg has elected to compute its net capital under the alternative method allowed by these rules. At June 30, 2010, Ladenburg had net capital, as defined in the SEC’s Net Capital Rule, of $3,919, which exceeded its minimum capital requirement of $250, by $3,669.

Investacorp and Triad are also subject to the SEC’s Net Capital Rule, which requires the maintenance of minimum net capital and requires that the ratio of aggregate indebtedness to net capital, both as defined in the SEC’s Net Capital Rule, not exceed 15 to 1. At June 30, 2010, Investacorp had net capital of $1,196 which was $927 in excess of its required net capital of $269. Investacorp’s net capital ratio was 3.4 to 1. At June 30, 2010, Triad had net capital of $2,338, which was $2,088 in excess of its required net capital of $250. Triad’s net capital ratio was 1.5 to 1.

Ladenburg, Investacorp and Triad claim exemption from the provisions of the SEC’s Rule 15c3-3 pursuant to paragraph (k) (2) (ii) of such Rule as they clear their customer transactions through a correspondent broker on a fully-disclosed basis.

Effective April 5, 2010, Ladenburg withdrew its membership from the National Futures Association.

4.	Income Taxes

Income tax expense for the three months and six months ended June 30, 2010 primarily represents deferred income taxes relating to amortization of goodwill for tax purposes.

LADENBURG THALMANN FINANCIAL SERVICES INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

(Dollars in thousands, except share and per share amounts)

(Unaudited)

5.	Notes Payable

Notes payable consisted of the following:	June 30,		December 31,
	2010		2009
Note payable to former Investacorp shareholder, net of $21and $124 of unamortized discount at June 30, 2010 and December 31, 2009, respectively	$	1,738	$	4,230
Note payable to affiliate of principal shareholder of LTS		11,750		18,450
Note payable to former Triad shareholders, net of $106 and $204 of unamortized discount at June 30, 2010 and December 31, 2009, respectively		2,023		2,758
Note payable to clearing firm under forgivable loan		10,000		10,000
Total