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Table of Contents

 
 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
 
Form 10-Q
(Mark One)
     
þ   QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2010
OR
     
o   TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from                      to                     
Commission file number: 000-53352
Titanium Asset Management Corp.
(Exact name of registrant as specified in its charter)
     
Delaware   20-8444031
(State or other jurisdiction of   (I.R.S. Employer
incorporation or organization)   Identification No.)
     
777 E. Wisconsin Avenue    
Milwaukee, Wisconsin   53202-5310
(Address of principal executive offices)   (Zip Code)
(414) 765-1980
(
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 o
     Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes o       No o
     Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
             
Large accelerated filer o   Accelerated filer o   Non-accelerated filer o   Smaller reporting company þ
        (Do not check if a smaller reporting company)    
     Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o       No þ
     At May 10, 2010, there were 20,514,816 shares of the registrant’s common stock and 612,716 shares of restricted stock outstanding.
 
 

 


 


Table of Contents

PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Titanium Asset Management Corp.
Condensed Consolidated Balance Sheets
                 
    March 31,     December 31,  
    2010   2009  
    (unaudited)          
Assets
               
Current assets
               
Cash and cash equivalents
  $ 947,000     $ 4,773,000  
Investments
    12,009,000       12,549,000  
Accounts receivable
    3,789,000       5,030,000  
Other current assets
    1,121,000       1,162,000  
     
Total current assets
    17,866,000       23,514,000  
 
               
Investments in affiliates
    6,318,000       2,179,000  
Property and equipment, net
    402,000       427,000  
Goodwill
    28,147,000       28,147,000  
Intangible assets, net
    24,091,000       24,920,000  
     
Total assets
  $ 76,824,000     $ 79,187,000  
     
 
               
Liabilities and Stockholders’ Equity
               
Current liabilities
               
Accounts payable
  $ 198,000     $ 237,000  
Acquisition payments due
    1,744,000       1,746,000  
Other current liabilities
    2,541,000       3,504,000  
     
Total current liabilities
    4,483,000       5,487,000  
 
               
Acquisition payments due
    960,000       960,000  
     
Total liabilities
    5,443,000       6,447,000  
Commitments and contingencies
               
Stockholders’ equity
               
Common stock, $0.0001 par value; 54,000,000 shares authorized; 20,564,816 shares issued and outstanding at March 31, 2010 and December 31, 2009
    2,000       2,000  
Restricted common stock, $0.0001 par value; 720,000 shares authorized; 612,716 issued and outstanding at March 31, 2010 and December 31, 2009
           
Preferred stock, $0.0001 par value; 1,000,000 shares authorized; none issued
           
Additional paid-in capital
    100,373,000       100,332,000  
Accumulated deficit
    (29,036,000 )     (27,766,000 )
Other comprehensive income
    42,000       172,000  
     
Total stockholders’ equity
    71,381,000       72,740,000  
     
Total liabilities and stockholders’ equity
  $ 76,824,000     $ 79,187,000  
     
See Notes to Condensed Consolidated Financial Statements contained herein and the Notes to Consolidated Financial Statements in the Titanium Asset Management Corp. Annual Report on Form 10-K for the year ended December 31, 2009 (the “2009 Form 10-K”).

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Titanium Asset Management Corp.
Condensed Consolidated Statement of Operations
(unaudited)
                 
    Three Months Ended  
    March 31,  
    2010     2009  
     
Operating revenues
  $ 5,550,000     $ 5,163,000  
 
               
Operating expenses:
               
Administrative
    6,306,000       6,284,000  
Amortization of intangible assets
    829,000       943,000  
     
Total operating expenses
    7,135,000       7,227,000  
     
Operating loss
    (1,585,000 )     (2,064,000 )
 
               
Other income
               
Interest income
    88,000       120,000  
Gain (loss) on investments
    104,000       (381,000 )
Income from equity investees
    139,000        
Interest expense
    (16,000 )     (14,000 )
     
Loss before taxes
    (1,270,000 )     (2,339,000 )
 
               
Income tax benefit
          (798,000 )
     
 
               
Net loss
  $ (1,270,000 )   $ (1,541,000 )
     
 
               
Earnings (loss) per share
               
Basic
  $ (0.06 )   $ (0.08 )
Diluted
  $ (0.06 )   $ (0.08 )
 
               
Weighted average number of common shares outstanding:
               
Basic
    20,701,493       20,546,491  
Diluted
    20,701,493       20,546,491  
See Notes to Condensed Consolidated Financial Statements contained herein and the Notes to Consolidated Financial Statements in the 2009 Form 10-K.

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Titanium Asset Management Corp.
Condensed Consolidated Statement of Cash Flows
(unaudited)
                 
    Three Months Ended  
    March 31,  
    2010     2009  
     
Cash flows from operating activities
               
Net loss
  $ (1,270,000 )   $ (1,541,000 )
Adjustments to reconcile net loss to net cash used in operating activities:
               
Depreciation and amortization
    854,000       972,000  
Share compensation expense
    41,000       98,000  
Loss (gain) on investments
    (104,000 )     381,000  
Income from equity investees
    (139,000 )      
Accretion of acquisition payments
    16,000       10,000  
Deferred income taxes
          (798,000 )
Changes in assets and liabilities:
               
Decrease (increase) in accounts receivable
    1,241,000       403,000  
Decrease (increase) in other current assets
    41,000       (24,000 )
Increase (decrease) in accounts payable
    (39,000 )     (221,000 )
Increase (decrease) in other current liabilities
    (981,000 )     (63,000 )
     
Net cash used in operating activities
    (340,000 )     (783,000 )
     
 
               
Cash flows from investing activities
               
Purchases of property and equipment
          (93,000 )
Purchases of investments
    (6,675,000 )     (1,514,000 )
Sales and redemptions of investments
    7,189,000        
Investments in equity investees
    4,000,000        
Cash paid for acquisition of subsidiaries, net of cash acquired
          (6,000 )
     
Net cash used in investing activities
    (3,486,000 )     (1,613,000 )
     
 
               
Cash flows from financing activities
               
Payment of deferred acquisition obligations
          (8,145,000 )
     
Net cash used in financing activities
          (8,145,000 )
     
 
               
Net decrease in cash and cash equivalents
    (3,826,000 )     (10,541,000 )
 
               
Cash and cash equivalents:
               
Beginning
    4,773,000       18,753,000  
     
Ending
  $ 947,000     $ 8,212,000  
     
See Notes to Condensed Consolidated Financial Statements contained herein and the Notes to Consolidated Financial Statements in the 2009 Form 10-K.

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Titanium Asset Management Corp.
Notes to Condensed Consolidated Financial Statements
(unaudited)
Note 1 — General
     Titanium Asset Management Corp. (the “Company”) was incorporated on February 2, 2007. The Company commenced operations as a special purpose acquisition company to acquire one or more operating companies engaged in the asset management business. On October 1, 2007, the Company acquired all of the voting common stock of Wood Asset Management, Inc. (“Wood”) and all of the membership interests of Sovereign Holdings, LLC (“Sovereign”), two asset management firms. On March 31, 2008, the Company acquired all of the outstanding capital stock of National Investment Services, Inc. (“NIS”), a third asset management firm. After such business combinations, the Company ceased to act as a special purpose acquisition vehicle. On December 31, 2008, the Company acquired all the membership interests of Boyd Watterson Asset Management, LLC (“Boyd”), a fourth asset management firm. The Company’s strategy is to manage these operating companies as an integrated business.
     The accompanying unaudited interim condensed consolidated financial statements have been prepared by the Company, in accordance with accounting principles generally accepted in the United States (“GAAP”) and pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”) and, in the opinion of management, include all adjustments (all of which were of a normal and recurring nature) necessary for a fair statement of the information for each period contained therein.
     The preparation of consolidated financial statements in accordance with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities as of the date of the consolidated financial statements, and the reported amounts of revenues and expenses during the reporting period. These estimates are based on information available as of the date of these consolidated financial statements. Actual results could differ materially from those estimates.
     The information included in this Quarterly Report on Form 10-Q should be read in conjunction with Management’s Discussion and Analysis of Financial Condition and Results of Operations included herein and in the 2009 Form 10-K and the Consolidated Financial Statements and the Notes thereto included in the 2009 Form 10-K.
Note 2 — Adoption of New Accounting Standards
     The Company’s significant accounting policies are discussed in the Notes to the Company’s Consolidated Financial Statements in the 2009 Form 10-K.
     The following new accounting standards and amendments to standards first became effective for the fiscal year beginning January 1, 2010:
  A standard, which was issued by the Financial Accounting Standards Board (“FASB”) in June 2009, that requires entities to provide more information regarding sales of securitized financial assets and similar transactions. The adoption of this standard did not have a significant impact on the Company’s consolidated financial statements.
  A standard, which was issued by the FASB in June 2009, that modifies how a company determines when an entity that is insufficiently capitalized or is not controlled through voting (or similar rights) should be consolidated. The standard clarifies that the determination of whether a company is required to consolidate an entity is based on, among other things, an entity’s purpose and design and a company’s ability to direct the activities of the entity that most significantly impact the entity’s performance. The standard requires an ongoing reassessment of whether a company is the primary beneficiary of a variable interest entity and also requires additional disclosures about a company’s involvement in variable interest entities and any significant changes in risk exposure due to that involvement. The FASB subsequently amended this standard to defer the consolidation requirements for investments in investment companies. The adoption of this standard did not have a significant impact on the Company’s consolidated financial statements.

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Note 2 — Adoption of New Accounting Standards (continued)
  An amended standard, issued by the FASB in January 2010, that requires additional disclosures about significant transfers in and out of levels 1 and 2 fair value measurements and reasons for the transfers. In addition, the amended standard requires new disclosures relating to the reconciliation for fair value measurements using unobservable inputs (level 3) detailing information about purchases, issuances, and settlements on a gross basis. The adoption of these amended disclosure requirements did not have a significant impact on the Company’s consolidated financial statements.
Note 3 — Investments
The Company’s current portfolio of debt securities and its investment in a commingled stock fund that was originated in 2008 and liquidated in 2009 are accounted for as available-for-sale securities. The Company’s investments in affiliates are accounted for using the equity method of accounting because the Company has significant influence over the management of the funds.
Current portfolio of debt securities
                                 
    Amortized cost   Unrealized gains   Unrealized losses   Fair value
 
March 31, 2010
  $ 11,882,000     $ 153,000     $ (26,000 )   $ 12,009,000  
December 31, 2009
  $ 12,292,000     $ 259,000     $ (2,000 )   $ 12,549,000  
 
Debt securities accounted for as available-for-sale and held at March 31, 2010 mature as flows:
 
                    Amortized cost   Fair value
                     
Within one year
                  $ 6,675,000     $ 6,765,000  
After one year but within five years
                  $ 5,207,000     $ 5,244,000  
During the three months ended March 31, 2010, the Company sold $7,189,000 of investments from its debt security portfolio and, based on the specific identification of the cost basis, realized a net gain of $104,000. During the three months ended March 31, 2009, the Company sold no investments. The following table provides a summary of the changes in and results of investment activities for the three months ended March 31, 2010 and 2009.
                 
    2010   2009
Available-for-sale securities:
               
Proceeds from sale
  $ 7,189,000     $  
Gross realized gains on sales
    119,000        
Gross realized losses on sales
    (15,000 )      
Unrealized gains and (losses)
    (26,000 )     12,000  
Net gains reclassified out of accumulated other comprehensive income to earnings
    104,000        

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Note 3 — Investments (continued)
Commingled stock fund
The Company’s investment in a commingled stock fund consisted of its investment in the Plurima Titanium U.S. Stock Fund, a sub-fund of the Dublin-based Plurima Funds mutual funds complex, to which Wood served as investment advisor. At December 31, 2008, the Company’s investment at fair value was $672,000, net of an unrealized loss in the fund of approximately $294,000, which reflected the losses in the underlying values of the equity securities in which the fund was invested, reflective of the general decline of the equity markets over the last half of 2008. Based on the Company’s ability and intent to hold this investment for a reasonable period of time sufficient for a recovery of fair value, the Company did not consider this investment to be other-than-temporarily impaired at December 31, 2008. In March 2009, the Company’s board of directors determined that additional investments from other parties into the Plurima Titanium U.S. Equity Fund were likely not to be forthcoming. As a result, the Company decided to liquidate its investment in the commingled stock fund. Based on this decision, the Company recognized a $381,000 impairment loss on this investment, including the previously unrecognized loss of $294,000 that was reclassified out of accumulated other comprehensive income into earnings. The Company subsequently liquidated its investment and received proceeds of $587,000 from Plurima in 2009.
Investments in Affiliates
Investments in affiliates include the Company’s investment in the Titanium TALF Opportunity Fund (the “TALF Fund”), which it organized for its clients to invest primarily in securities participating in the Term Asset-Backed Securities Loan Facility (“TALF”) of the Federal Reserve Bank of New York. The Company is the managing member of the TALF Fund and serves as the investment manager for the TALF Fund for which it receives management fees. As of March 31, 2010, the Company’s investment in the TALF Fund (including an additional investment of $2,000,000 made during the three months ended March 31, 2010) represents approximately 11% of the total investments in the TALF Fund. Because the Company has an equity interest in the TALF Fund and has significant influence over the TALF Fund’s daily activities through its role as managing member and investment manager, the Company accounts for this investment using the equity method of accounting.
Investments in affiliates also include the Company’s $2,000,000 investment in the NIS Fixed Income Arbitrage Fund, LTD. (the “NIS ARB Fund”) made during the three months ended March 31, 2010. The Company is the managing member of the NIS ARB fund and serves as the investment manager for the NIS ARB Fund for which it receives management fees. As of March 31, 2010, the Company’s investment in the NIS ARB Fund represents approximately 15% of the total investments in the NIS ARB fund. Because the Company has an equity interest in the NIS ARB Fund and has significant influence over the NIS ARB Fund’s daily activities through its role as managing member and investment manager, the Company accounts for this investment using the equity method of accounting.
The activity related to the Company’s investment in affiliates for the three months ended March 31, 2010 is as follows:
         
Investment at December 31, 2009
  $ 2,179,000  
Additional investments
    4,000,000  
Equity in income of affiliates
    139,000  
 
     
Investments in affiliates at March 31, 2010
  $ 6,318,000  
 
     

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Note 4 — Acquisition Obligations
In connection with the acquisitions of Wood, Sovereign, NIS and Boyd, the acquisition agreements provided for deferred fixed payments and contingent payments based on assets under management or revenues at specified future dates. The deferred fixed amounts due as of March 31, 2010 and December 31, 2009 are as follows:
                 
    2010   2009
     
Current amounts:
               
Sovereign acquisition obligation (a)
  $ 1,015,000     $ 1,033,000  
NIS acquisition obligation (b)
    729,000       713,000  
       
Current acquisition payments due
  $ 1,744,000     $ 1,746,000  
       
 
               
Noncurrent amount -
               
Boyd acquisition obligation (c)
  $ 960,000     $ 960,000  
       
 
(a)   During the period ended March 31, 2010, as part of a settlement agreement with the previous majority owner of Sovereign, the Company agreed to pay $1,015,000 in full satisfaction of all amounts due, or that would become due, under the acquisition agreement. This amount was paid in April 2010.
 
(b)   The NIS acquisition obligation is due currently, payable in cash.
 
(c)   The Boyd acquisition obligation reflects a deferred stock grant of 192,000 shares of common stock valued at $960,000, payable in 2011.
Under terms of the acquisition agreement for Wood, the seller may receive additional payments should Wood achieve certain revenue and assets under management milestones through September 30, 2011. At March 31, 2010, the remaining maximum payments are $3,000,000, of which up to 50% is payable in Company common stock. Based on current estimates for assets under management and revenues, the Company estimates that approximately $995,000 will be due under the assets under management provision in 2011 and that no amount will be due under the revenue provision.
Under terms of the acquisition agreement for Boyd, the sellers may receive an additional deferred payment up to $8,000,000 based on the revenue run rate as of December 31, 2010, payable in 2011. The additional deferred payment is payable 65% cash and 35% Company common stock. Based on current estimates for the future revenues of Boyd, the Company estimates that the full $8,000,000 will be due in 2011.
Note 5 — Stockholders’ Equity
The Company’s authorized capital consists of 54,000,000 shares of common stock with a $0.0001 par value, 720,000 shares of restricted common stock with a $0.0001 par value, and 1,000,000 shares of preferred stock with a $0.0001 par value. The restricted common stock shares carry voting rights and no rights to dividends except in the case of liquidation of the Company. The restricted common stock shares convert on a one for one basis to shares of common stock if at any time within five years of their issue the ten-day average share price of the common stock exceeds $6.90 or if there is a change in control (as defined in the Company’s certificate of incorporation). No preferred stock had been issued at March 31, 2010.
At March 31, 2010, the Company had made common stock grants to certain employees that were compensatory because the grants vest based on continuing employment. These compensatory common stock grants include allocations of 55,322 shares of common stock held by the Titanium Incentive Plan, LLC (“TIP”), a wholly-owned subsidiary, that were allocated to certain employees during January 2009 and which vest June 21, 2010. The aggregate fair value of these shares of common stock at their grant dates was $246,000. During the three months ended March 31, 2010, the Company recognized $41,000 of compensation expense related to these grants and at

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Note 5 — Stockholders’ Equity (continued)
March 31, 2010, there was $42,000 of unrecognized compensation expense related to the non-vested common stock grants.
In connection with the Company’s 2007 private placement, the Company issued 20,000,000 warrants that entitle the holder to purchase one share of common stock at $4.00 per share. The warrants expire in June 2011 unless earlier redeemed by the Company. At March 31, 2010, all 20,000,000 warrants were outstanding.
As part of the private placement, the Company granted an option to Sunrise Securities Corp. to acquire 2 million units at a price of $6.60 (each unit consists of one share of common stock and one warrant to acquire one share of common stock at $4.00 per share). At March 31, 2010, all of these options were outstanding.
Note 6 — Comprehensive Loss
Comprehensive loss for the periods ended March 31, 2010 and 2009 was as follows:
                 
    Three Months Ended
    March 31,
    2010   2009
     
Net loss
  $ (1,270,000 )   $ (1,541,000 )
Fair value gains (losses) on available-for-sale securities, net of tax
    (130,000 )     191,000  
     
Comprehensive loss
  $ (1,400,000 )   $ (1,350,000 )
       
Note 7 Income Taxes
At December 31, 2009, the Company had deferred tax assets of $10,273,000 including the deferred tax benefits related to federal net operating loss carryforwards of approximately $10,636,000 that expire in 2028 and 2029 and state net operating loss carryforwards totaling approximately $10,233,000 that expire between 2023 and 2029.
In assessing the realizability of the Company’s deferred tax assets, we consider all relevant positive and negative evidence in determining whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The realization of the gross deferred tax assets depends on several factors, including the generation of sufficient taxable income prior to the expiration of the net operating loss carryforwards. Pursuant to FASB guidance, a cumulative loss in recent years is a significant piece of negative evidence to be considered in evaluating the need for a valuation allowance that is difficult to overcome. Based on the pretax losses in 2008 and 2009, we determined that it was no longer appropriate to consider expected future income as the primary factor in determining the realizability of our deferred tax assets. As a result, the Company recognized a valuation allowance of $10,273,000 against the full value of deferred tax assets as of December 31, 2009.
Based on the continuation of cumulative losses, the Company continued to fully offset any additional deferred tax assets with additional valuation allowances during the three months ended March 31, 2010.

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Note 8 Earnings per Share
Basic earnings per share (“EPS”) is computed by dividing net income (loss) by the weighted average shares of common stock outstanding. In addition, in periods following the acquisition of Boyd, basic weighted average shares include 192,000 shares of common stock to be issued to the sellers of Boyd in 2011, except under certain circumstances described in the Boyd acquisition agreement. Diluted EPS gives effect to all dilutive potential shares of common stock outstanding during the period. Dilutive potential shares of common stock include the incremental shares of common stock issuable upon the exercise of the outstanding warrants computed using the treasury stock method and the incremental shares of common stock issued under the compensatory common stock grants computed using the treasury stock method. The 612,716 shares of restricted common stock have been excluded from the computation of diluted weighted average shares because their conversion terms require the ten day average share price of the common stock to exceed $6.90 per share. In addition, the option to acquire 2,000,000 units is excluded from the computation of diluted weighted average shares because the effect would have been antidilutive.
The computation of basic and diluted EPS is as follows:
                 
    Three months ended
    March 31,
    2010   2009
     
Basic EPS:
               
Net loss
  $ (1,270,000 )   $ (1,541,000 )
       
 
               
Weighted average shares of common stock outstanding
    20,509,493       20,354,491  
Shares of common stock to be issued in Boyd acquisition
    192,000       192,000  
       
Basic weighted average shares of common stock outstanding
    20,701,493       20,546,491  
       
 
               
Basic EPS
  $ (0.06 )   $ (0.08 )
       
 
               
Diluted EPS:
               
Net loss
  $ (1,270,000 )   $ (1,541,000 )
       
 
               
Basic weighted average shares of common stock outstanding
    20,701,493       20,546,491  
Shares of common stock issuable under warrants
          2,022,472  
Shares of common stock under compensatory common stock grants
    38,627       21,024  
     
Diluted weighted average shares of common stock outstanding
    20,740,120       22,589,986  
       
 
               
Diluted EPS
  $ (0.06 )   $ (0.08 )
       
The diluted weighted average shares amount for the three months ended March 31, 2010 and 2009 are provided for informational purposes, as the net loss for these periods causes basic earnings per share to be the most dilutive.

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Note 9 — Fair Value Disclosures
Under the FASB’s fair value requirements, the fair values for assets and liabilities are to be disclosed based on three levels of input: Level 1 — quoted prices in active markets for identical assets or liabilities; Level 2 — observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities, quoted prices in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities; or Level 3 — unobservable inputs that are supported by little or no market activity and that are significant to the fair value of assets or liabilities. Level 3 assets and liabilities include financial instruments the value of which is determined using pricing models, discounted cash flow methodologies, or similar techniques, as well as instruments for which the determination of fair value requires significant judgment or estimation.
The Company measures the following assets at fair values on a recurring basis:
                         
    Category used for Fair Values
    Level 1   Level 2   Level 3
     
Assets at March 31, 2010
                       
Cash and cash equivalents
  $ 947,000     $     $  
Current securities available for sale — Debt securities
          12,009,000        
Noncurrent investment - Investment in equity investee
          6,318,000        
         
 
  $ 947,000     $ 18,327,000     $  
         
 
                       
Assets at December 31, 2009
                       
Cash and cash equivalents
  $ 4,773,000     $     $  
Current securities available for sale — Debt securities
          12,549,000        
Noncurrent investment - Investment in equity investee
          2,179,000        
         
 
  $ 4,773,000     $ 14,728,000     $  
         

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Note 10 Contingencies
On February 10, 2010, a former client of Sovereign filed suit in the United States District Court for the Northern District of Illinois against the Company and Sovereign, alleging fraudulent conduct and breach of fiduciary duty on the part of Sovereign in investing its assets in auction-rate securities. The claim alleges, among other things, that Sovereign failed to conduct adequate due diligence into the auction rate securities purchased for its account, and that the investment in the auction rate securities was outside of its investment policy. The suit seeks $4,704,000 in damages. Management believes the claim is covered by insurance, subject to the payment of deductible amounts by the Company. While management believes the claim is without merit and intends to defend vigorously against this action, there can be no assurance that the ultimate outcome of the lawsuit will be favorable to the Company or that the defense of the suit or its outcome will not have a material adverse effect on the Company’s business or financial results of operation.
During 2008, the Company received an invoice for $670,000 from the lawyers who worked on the placement of the Company’s shares of common stock on AIM in June 2007. The Company is disputing this invoice and at the current time believes there is no liability. Accordingly no provision has been made in these condensed consolidated financial statements for the invoice. In the event that the Company must pay all or a portion of this amount, the Company’s consolidated results of operations will be unaffected and the Company does not expect its consolidated financial position to materially change.
The Company is from time to time involved in legal matters incidental to the conduct of its business and such matters can involve current and former employees and vendors. Management does not expect these matters would have a material effect on the Company’s consolidated financial position or results of operations.

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Item 2.   Management’s Discussion and Analysis of Financial Condition and Results of Operations
FORWARD-LOOKING STATEMENTS
     This Quarterly Report on Form 10-Q, including particularly the Management’s Discussion and Analysis of Financial Condition and Results of Operations, contains “forward-looking” statements within the meaning of the Private Securities Litigation Reform Act of 1995, which provides a “safe harbor” for statements about future events, products and future financial performance that are based on the beliefs of, estimates made by and information currently available to the management of Titanium Asset Management Corp., a Delaware corporation (referred to as “we,” “our” or the “Company,” and, unless the context indicates otherwise, includes our wholly owned asset management subsidiaries, Wood Asset Management, Inc. (“Wood”), Sovereign Holdings LLC (“Sovereign”), National Investment Services, Inc. (“NIS”), and Boyd Watterson Asset Management, LLC (“Boyd”). We refer to Wood, Sovereign, NIS and Boyd collectively as our subsidiaries. The outcome of the events described in these forward-looking statements is subject to risks and uncertainties. Actual results and the outcome or timing of certain events may differ significantly from those projected in these forward-looking statements due to market fluctuations that alter our assets under management; termination of investment advisory agreements; loss of key personnel; loss of third-party distribution services; impairment of goodwill and other intangible assets; our inability to compete; market pressure on investment advisory fees; problems experienced in the acquisition or integration of target businesses; changes in law, regulation or tax rates; ineffective management of risk; inadequacy of insurance; changes in interest rates, equity prices, liquidity of global markets and international and regional political conditions; terrorism; changes in monetary and fiscal policy, investor sentiment and availability and cost of capital; technological changes and events; outcome of legal proceedings; changes in currency values, inflation and credit ratings; failure of our systems to properly operate; or actions taken by Clal Finance Ltd., (“Clal”), as our significant stockholder; factors listed under “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2009 (the “2009 Form 10-K”); and other factors listed in this Quarterly Report on Form 10-Q and from time to time in our other filings with the Securities and Exchange Commission (“SEC”). For this purpose, statements relating to integrating the operational, administrative and sales activities of our subsidiaries, earning of incentive fees, amount of future assets under management, acquisitions of additional asset management firms and payment therefor, payment of deferred consideration for the purchase of our subsidiaries and anticipated levels of future revenues, expenses or earnings, among other things; any statements using the terms “aim,” “anticipate,” “appear,” “based on,” “believe,” “can,” “continue,” “could,” “are emerging,” “estimate,” “expect,” “expectation,” “intend,” “may,” “ongoing,” “plan,” “possible” “potential, “predict,” “project,” “should” and “would” or similar words or phrases, or the negatives of those words or phrases; or discussions of strategy, plans, objectives or goals, may identify forward-looking statements that involve risks, uncertainties and other factors that could cause our actual results, financial condition and the outcome and timing of certain events to differ materially from those projected or management’s current expectations. By making forward-looking statements, we have not assumed any obligation to, and you should not expect us to, update or revise those statements because of new information, future events or otherwise.
     The following discussion is designed to provide a better understanding of significant trends related to our consolidated financial condition and consolidated results of operations. The discussion should be read in conjunction with our condensed consolidated financial statements and notes thereto included in this Quarterly Report on Form 10-Q, as well as the Management’s Discussion and Analysis of Financial Condition and Results of Operations and the Consolidated Financial Statements and Notes thereto included in our 2009 Form 10-K.
General
     Our principal business is providing investment advisory services to institutional and retail clients. Our core strategy is to develop a broad array of investment management expertise to enable us to offer a full range of investment strategies to our clients. Although we manage and distribute a range of products and services, we operate in one business segment, namely as an investment advisor to institutional and retail clients.
     Through four acquisitions, we have assembled a group of investment managers with solid long-term track records to serve as our core asset management business. Through these investment managers, we have expertise in both fixed-income and equity investment strategies and have a client base that extends from individuals to a range of institutional investors, as well as solid sub-advisory and referral arrangements with a variety of broker-dealers.

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During 2009, we extended our business to include real estate investment advisory services through the hiring of two experienced real estate investment managers. As of March 31, 2010, we had $8.5 billion of assets under management and an additional $1.0 billion of assets, on which we earn referral fees.
     Our asset management services are typically delivered pursuant to investment advisory agreements entered into between each subsidiary and its clients. Investment advisory fees are generally received quarterly, based on the value of assets under management on a particular date, such as the first or last day of a quarter. Our institutional business is generally billed in arrears, whereas the retail business is generally billed in advance. The majority of our investment advisory contracts are generally terminable at any time or on notice of 30 days or less. The nature of these agreements, the notice periods and the billing cycles vary depending on the nature and the source of each client relationship.
     Most of our investment advisory services are provided through the management of separate accounts. However, an increasing percentage of our services are provided through private funds, which allow us to provide our investment strategies to our institutional clients in a more cost efficient manner. We earn incentive fees on two of the funds, which are organized to invest in preferred stocks.
     We also have a referral arrangement with a hedge fund manager through which were earn fees for referring clients to its investment vehicles.
     Our operating revenues are substantially influenced by the changes to our assets under management and shifts in the distribution of assets under management among types of securities and investment strategies. Our assets under management fluctuate based primarily on our investment performance (both absolutely and relative to other investment advisors) and the success of our sales and marketing efforts. A material portion of our results will be influenced by fluctuations in world financial markets. Because they comprise the largest part of our assets under management, the performance of U.S. fixed-income securities should have the greatest influence on our results.
     A significant portion of our expenses, including employee compensation and occupancy, do not vary directly with operating revenues. As a result, our efforts to improve our cost structure have focused on integrating the operational and administrative functions of the acquired subsidiaries, including accounting, information technology, human resources, and risk management activities. During 2009, we completed the staffing and reorganization of our sales staff to better position us to sell the full range of our strategies to our existing customer base and to prospective clients. In addition, we completed the integration of our accounting operations.
     On February 8, 2010, our Board of Directors announced that it had accepted the resignation of Nigel Wightman as Chairman and Chief Executive Officer and had named Mr. Robert Brooks as Chief Executive Officer. In addition to these changes, the Board of Directors also announced the appointments of Mr. Brian Gevry as Chief Operating Officer and Mr. Jonathan Hoenecke as Chief Financial Officer. Further, on April 9, 2010, Mr. John Fisher resigned his positions as a Managing Director and President and Chief Executive Officer of Wood and Sovereign. We believe these changes result in a more centralized team, which should enhance our efforts to integrate our operations, and will reduce our ongoing cost structure. Since March 31, 2009, we have reduced our headcount from 97 to 84. Principally as a result of these reductions, we reduced administrative expenses from $6,284,000 for the three months ended March 31, 2009 to $5,886,000 for the three months ended March 31, 2010, after adjusting the current year period for $420,000 of severance expenses.
Market Developments
     The fixed income and equity markets had solid quarters of performance with the Barclay’s Aggregate Index increasing 1.8% and the S&P 500 Index gaining 5.4%. For the twelve months ended March 31, 2010, the gains were 7.7% and 49.8%, respectively. As a result of the strong market returns and positive net flows, our assets under management increased by $925.9 million, or 12%, since March 31, 2009. The resultant increase in average assets under management further resulted in a 7% increase in investment advisory fees for the three months ended March 31, 2010.

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Assets Under Management
     Our asset management services are delivered pursuant to investment advisory agreements with fees generally determined on a quarterly basis as a percentage (or range of percentages) of either beginning or ending market value of assets under management. Our investment advisory fees vary, among other things, by investment strategy and by client type. Our average fee rates for equity investment strategies generally are higher than those for fixed income strategies. In general, our clients may terminate our services at any time with limited notice.
     We manage a portion of our assets under management through private funds that generally are organized as limited liability companies. We believe the use of these funds allows us to provide our investment strategies to our institutional clients in a more cost effective manner. We earn incentive fees on two of the funds, which are organized to invest in preferred stocks.
     Assets under management of $8.5 billion at March 31, 2010 were 4% higher than the $8.2 billion reported at December 31, 2009 and 12% higher than the $7.6 billion reported at March 31, 2009. The following table presents summary activity for the three months ended March 31, 2010 and 2009, respectively and breakdowns for our assets under management at each period end.
                         
    Three Months Ended     2010  
    March 31,     vs.  
(in millions)   2010     2009     2009  
     
Period Activity:
                       
Beginning balance
  $ 8,151.4     $ 7,573.2       8 %
Inflows
    513.1       518.3       -1 %
Outflows
    (329.7 )     (468.2 )     30 %
Market value change
    163.3       (51.1 )   NM
     
Ending balance
  $ 8,498.1     $ 7,572.2       12 %
     
Average Assets Under Management (1)
  $ 8,324.8     $ 7,572.7       10 %
Average Fee Rate (basis points)
    24       24     NC
 
                       
Period End Balances:
                       
By investment strategy:
                       
Fixed income
  $ 7,485.4     $ 6,795.0       10 %
Equity
    916.5       777.2       18 %
Real estate
    96.2           NM
     
Total
  $ 8,498.1     $ 7,572.2       12 %
     
 
                       
By client type:
                       
Institutional
  $ 6,910.4     $ 5,858.0       18 %
Retail
    1,587.7       1,714.2       -7 %
     
Total
  $ 8,498.1     $ 7,572.2       12 %
     
 
                       
By investment vehicle:
                       
Separate accounts
  $ 7,610.1     $ 7,140.3       7 %
Private funds
    888.0       431.9       106 %
     
Total
  $ 8,498.1     $ 7,572.2       12 %
     
 
(1)   Average assets under management are calculated based on the quarter end balances and include amounts acquired in acquisitions in the first quarter following the acquisition.
NM: Not meaningful
NC: No change

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     Our inflows for the three months ended March 31, 2010 were primarily related to our fixed income business. Since March 31, 2009, a significant portion of our inflows were generated by our participation in the Term Asset-Backed Securities Loan Facility (“TALF”) of the Federal Reserve Bank of New York, which generated approximately $735 million in new assets under management with both separate client accounts and the Titanium TALF Opportunity Fund (“TALF Fund”). The final TALF program auction was conducted in March 2010 and, as a result, further growth from this program will be limited.
     Asset outflows improved during the three months March 31, 2010 as the client losses at Sovereign that we experienced during 2009 substantially subsided during the three months ended March 31, 2010. In addition, the level of withdrawals by pension plan clients of NIS also subsided during the three months ended March 31, 2010.
     The market value change for the three months ended March 31, 2010 reflects the solid performance of both the fixed income and equity markets. The market value change for the three months ended March 31, 2009 reflects the ongoing turmoil in the equity markets that continued through the first quarter of 2009.
     Our mix of assets under management by investment strategy was relatively unchanged as fixed income assets comprised 88% of total assets under management in 2010 compared to 90% in 2009.
     During 2010 our mix of assets under management with institutional clients increased to 81% compared to 77% in 2009, primarily due to the loss of retail accounts at Sovereign. The modest change in mix did not result in a significant change in our average fee rate.
     The increase in assets managed through private funds reflects our organization during the third quarter of 2009 of the TALF Fund. At March 31, 2010, we had approximately $312.8 million of assets under management in the TALF Fund.
     Through April 30, 2010, our aggregate assets under management remained at approximately $8.5 billion.
     We have a referral arrangement with Attalus Capital, or Attalus, whereby we refer investors to investment vehicles sponsored by Attalus and in turn receive a referral fee equal to a percentage of the fees received by Attalus from the new clients. The assets managed by Attalus under this arrangement increased from $974.9 million at December 31, 2009 to $992.1 million at March 31, 2010. The activity related to these assets was as follows:
                 
    Three Months Ended  
    March 31,  
(in millions)   2010     2009  
     
Annual Activity:
               
Beginning balance
  $ 974.9     $ 806.2  
Inflows
    5.2       2.7  
Outflows
           
Market value change
    12.0       16.9  
     
Ending balance
  $ 992.1     $ 825.8  
     
 
               
Average Assets Under Management
  $ 983.5     $ 816.0  

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Results of Operations
Consolidated Results of Operations
                         
    Three Months Ended   2010
    March 31,   vs.
    2010   2009   2009
     
Operating revenues
  $ 5,550,000     $ 5,163,000       7 %
Operating expenses:
                       
Administrative
    6,306,000       6,284,000     NC  
Amortization of intangible assets
    829,000       943,000       -12 %
     
Total operating expenses
    7,135,000       7,227,000       -1 %
     
Operating loss
    (1,585,000 )     (2,064,000 )     23 %
Other income and expense
    315,000       (275,000 )   NM  
     
Loss before taxes
    (1,270,000 )     (2,339,000 )     46 %
Income tax benefit
          (798,000 )   NM  
     
Net loss
  $ (1,270,000 )   $ (1,541,000 )     18 %
     
Net loss per share
                       
basic
  $ (0.06 )   $ (0.08 )     25 %
diluted
  $ (0.06 )   $ (0.08 )     25 %
 
NM: Not meaningful
NC: no change
     The decrease in the net loss for three months ended March 31, 2010 compared to the three months ended March 31, 2009 is primarily attributable to the following:
    An increase in revenue of $387,000, or 7%, reflecting the increase in average assets under management.
 
    An increase in administrative expenses of $22,000, reflecting severance costs of $420,000 which more than offset other cash compensation reductions and a reduction in legal, audit, and other professional services fee expense.
 
    A decrease in amortization charges from $943,000 to $829,000, reflecting the write off of intangible assets during 2009.
 
    An increase in other income of $590,000, primarily reflecting investment income from our investments a portfolio of debt securities and income from two equity investees in 2010 compared to an impairment loss on a commingled stock fund recognized in 2009.
 
    A $798,000 decrease in income tax benefits reflecting the continued establishment of valuation allowances for all deferred tax assets.

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     In evaluating operating performance, we consider operating income and net income, which are calculated in accordance with accounting principles generally accepted in the United States (“GAAP”), as well as Adjusted EBITDA, an internally derived non-GAAP performance measure. We define Adjusted EBITDA as operating income before non-cash charges for amortization and impairment of intangible assets and goodwill, depreciation, and share compensation expense. We believe Adjusted EBITDA is useful as an indicator of our ongoing performance and our ability to service debt, make new investments, and meet working capital requirements. Adjusted EBITDA, as we calculate it, may not be consistent with computations made by other companies. We believe that many investors use this information when analyzing the operating performance, liquidity, and financial position of companies in the investment management industry. The following table provides a reconciliation of operating income to Adjusted EBITDA for the three months ended March 31, 2010 and 2009.
                         
    Three Months Ended     2010  
    March 31,     vs.  
    2010     2009     2009  
     
Operating loss
  $ (1,585,000 )   $ (2,064,000 )     7 %
Amortization of intangible assets
    829,000       943,000       -12 %
Depreciation expense
    25,000       29,000       -14 %
Share compensation expense
    41,000       98,000       -58 %
     
Adjusted EBITDA
  $ (690,000 )   $ (994,000 )     31 %
     
     Adjusted EBITDA for the three months ended March 31, 2010 includes severance costs of $420,000. Excluding severance costs, our Adjusted EBITDA deficit would have been $270,000.
     Operating Revenues
     Our operating revenues include investment advisory fees received for the management of assets within separate accounts and private funds. We also receive incentive fees on an annual basis from the management of two of the private funds that invest in preferred stocks. We also receive referral fees in connection with NIS’s referral arrangement with Attalus. Operating revenues increased by $387,000, or 7%, in 2010 primarily due to the increase in average assets under management. The changes by revenue category are more fully described below.
                         
    Three Months Ended     2010  
    March 31,     vs.  
    2010     2009     2009  
     
Investment advisory fees
  $ 4,943,000     $ 4,621,000       7 %
Referral fees
    607,000       542,000       12 %
     
Total operating revenues
  $ 5,550,000     $ 5,163,000       7 %
     
     Investment advisory fees increased by $322,000, or 7%, in 2010 due to the increase in average assets under management from $7.6 billion in 2009 to $8.3 billion in 2010. The 10% increase in average assets under management was principally the result of strong market returns and positive net flows since March 31, 2009.
     We earn referral fees in connection with NIS’s distribution agreement with Attalus. The $65,000 increase in referral fees primarily reflects a modest increase in average assets under management.
     We also earn incentive fees from two private preferred stock funds managed by NIS. These fees are based on a calendar year performance period and we recognize the fees at the conclusion of the performance period. In 2009, we earned incentive fees of $1,256,000, which were recognized in December 2009. While preferred stock returns are volatile, based on performance through March 31, 2010, we would have earned incentive fees of approximately $200,000.

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     Administrative Expenses
     Administrative expenses increased by $22,000 in 2010 reflecting severance costs of $420,000 which more than offset other cash compensation reductions and a reduction in legal, audit, and other professional services expense. The changes by expense category are more fully described below.
                         
    Three Months Ended   2010
    March 31,   vs.
    2010   2009   2009
     
Employee compensation:
                       
Cash compensation
  $ 4,008,000     $ 3,753,000       7 %
Share-based compensation
    41,000       98,000       -58 %
     
Total compensation
    4,049,000       3,851,000       5 %
Third party distribution expense
    251,000       205,000       22 %
Legal, audit, and other professional services
  554,000       752,000       -26 %
Occupancy
    327,000       328,000     NC  
Other administrative expenses
    1,125,000       1,148,000       -2 %
     
Total administrative expenses
  $ 6,306,000     $ 6,284,000     NC  
     
 
NC: No change
     Cash compensation increased by $255,000, or 7%, in 2010 due to $420,000 of severance costs. Excluding severance, our cash compensation decreased by $165,000, or 4%, primarily due to reduced headcount. Overall, we reduced headcount from 97 at March 31, 2009 to 84 at March 31, 2010.
     Third party distribution expense represents payments made to broker-dealer networks and other outside sales commissions. The increase in 2010 reflects increased levels of business conducted through an outside sales agent and a broker dealer network.
     The $198,000 decrease in legal, audit, and other professional services expense primarily reflects reduced legal and accounting services. During the first quarter of 2009, we incurred significant legal and accounting costs in connection with the completion of our initial Form 10-K.
     Other administrative expenses principally include travel and other marketing related expenses, pricing, trading and other investment management services, and insurance expense.

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     Other Income and Expense
     Other income and expense includes investment income from the investment of excess cash balances offset by interest expense that represents accretion of discounted acquisition obligations.
                         
    Three Months Ended   2010
    March 31,   vs.
    2010   2009   2009
     
Interest income
  $ 88,000     $ 120,000       -27 %
Realized gains on investments
    104,000           NM
Impairment loss on investment in commingled stock fund
          (381,000 )   NM
Income from equity investees
    139,000           NM
Interest expense
    (16,000 )     (14,000 )     14 %
     
Total other income (expense)
  $ 315,000     $ (275,000 )   NM
     
 
NM: Not meaningful
     Our interest income was $88,000 in 2010 compared to $120,000 in 2009. The decrease in interest income reflects the use of $6,000,000 to invest in two of our private funds since March 31, 2009. At March 31, 2010, we had $12,009,000 invested in the portfolio of debt securities compared to $12,209,000 at March 31, 2009. Realized gains on investments represent gains on the sale or redemptions of securities from the portfolio.
     The impairment loss represents a loss incurred in connection with our investment in the Plurima Titanium U.S. Stock Fund, a sub-fund of the Dublin-based Plurima Funds mutual funds complex, to which Wood served as investment advisor. During 2008, we invested $968,000 in the commingled stock fund as seed money for its development. In March 2009, the Company’s board of directors determined that additional investments from other parties into the Plurima Titanium U.S. Equity Fund were likely not to be forthcoming. As a result, we decided to liquidate our investment in the commingled stock fund. Based on this decision, we recognized a $381,000 impairment loss on this investment. We subsequently liquidated our investment and received proceeds of $587,000 from Plurima in 2009.
     Income from equity investees represents our share of the net income of two investments in affiliates.
     Our investment in affiliates includes an investment in the Titanium TALF Opportunity Fund, which we organized for our clients to invest primarily in securities participating in the Term Asset-Backed Securities Loan Facility of the Federal Reserve Bank of New York. We are the managing member of the TALF Fund and serve as the investment manager for the TALF Fund for which we receive management fees. As of March 31, 2010, our investment in the TALF Fund represents approximately 11% of the total investments in the TALF Fund. Because we have an equity interest in the TALF Fund and have significant influence over the TALF Fund’s daily activities through our role as managing member and investment manager, we account for this investment using the equity method of accounting.
     Our investment in affiliates also includes a $2,000,000 investment in the NIS Fixed Income Arbitrage Fund, LTD. (the “NIS ARB Fund”) made during the three months ended March 31, 2010. We are the managing member of the NIS ARB fund and serve as the investment manager for the NIS ARB Fund for which we receive management fees. As of March 31, 2010, our investment in the NIS ARB Fund represents approximately 15% of the total investments in the NIS ARB fund. Because we have an equity interest in the NIS ARB Fund and have significant influence over the NIS ARB Fund’s daily activities through our role as managing member and investment manager, we account for this investment using the equity method of accounting.

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Liquidity and Capital Resources
     At March 31, 2010, we had $19,274,000 of funds available consisting of $947,000 of cash and cash equivalents, $12,009,000 of securities available for sale, and $6,318,000 invested in the two private funds that we manage. At December 31, 2009, these combined balances were $19,501,000.
                 
    Three Months Ended March 31,  
    2010     2009  
     
Net cash used in operating activities
  $ (340,000 )   $ (783,000 )
Net cash used in investing activities
  $ (3,486,000 )   $ (1,613,000 )
Net cash used in financing activities
  $     $ (8,145,000 )
     Net cash used in operating activities decreased from $783,000 in 2009 to $340,000 in 2010 primarily as a result of operating revenues increasing by more than the increase in administrative expenses.
     Net cash used in investing activities in 2010 primarily reflects the use of approximately $4,000,000 for additional investments in two private funds that we manage. Net cash used in investing activities in 2009 reflects an increase to the portfolio of debt securities during the three months ended March 31, 2009.
     Net cash used for financing activities in 2009 reflects the payments of acquisition obligations related to our acquisition of Boyd.
     In connection with the acquisitions of Wood, Sovereign, NIS and Boyd, the acquisition agreements provided for deferred fixed payments and contingent payments based on assets under management or revenues at specified future dates. The deferred fixed amounts due as of March 31, 2010 and December 31, 2009 are as follows:
                 
    2010     2009  
     
Current amounts:
               
Sovereign acquisition obligation (a)
    $1,015,000     $ 1,033,000  
NIS acquisition obligation (b)
    729,000       713,000  
     
Current acquisition payments due
  $ 1,744,000     $ 1,746,000  
     
 
               
Noncurrent amount -
               
Boyd acquisition obligation (c)
  $ 960,000     $ 960,000  
     
 
(a)   During the period ended March 31, 2010, as part of a settlement agreement with the previous majority owner of Sovereign, the Company agreed to pay $1,015,000 in full satisfaction of all amounts due, or that would become due, under the acquisition agreement. This amount was paid in April 2010.
 
(b)   The NIS acquisition obligation is due currently payable in cash.
 
(c)   The Boyd acquisition obligation reflects a deferred stock grant of 192,000 shares of common stock valued at $960,000, payable in 2011.
     Under terms of the acquisition agreement for Wood, the seller may receive additional payments should Wood achieve certain revenue and assets under management milestones through September 30, 2011. At March 31, 2010, the remaining maximum payments are $3,000,000, of which up to 50% is payable in Titanium common stock. Based on current estimates for assets under management and revenues, the Company estimates that approximately $995,000 will be due under the assets under management provision in 2011 and that no amount will be due under the revenue provision.
     Under terms of the acquisition agreement for Boyd, the sellers may receive an additional deferred payment up to $8,000,000 based on the revenue run rate as of December 31, 2010, payable in 2011. The additional deferred

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payment is payable 65% cash and 35% Titanium common stock. Based on current estimates for the future revenues of Boyd, the Company estimates that the full $8,000,000 will be due in 2011.
     We believe our current level of cash and cash equivalents and short-term securities available for sale are sufficient to fund our ongoing operations, to fund current obligations under our completed acquisitions, to fund the expected cash portion of contingent payments due under our completed acquisitions, and to provide consideration for additional acquisitions. We expect to fund future acquisitions partly through issuance of additional common stock and with cash from the conversion of our outstanding warrants, although we may incur bank debt as well.
Critical Accounting Policies
     Our condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America. Preparation of these statements requires us to make judgments and estimates. Some accounting policies have a significant impact on amounts reported in these financial statements. A summary of significant accounting policies and a description of critical accounting estimates may be found in our 2009 Form 10-K in the Notes to the Consolidated Financial Statements and the Critical Accounting Estimates section of Management’s Discussion and Analysis of Financial Condition and Results of Operations.
Recent Accounting Pronouncements
     The following new accounting standards and amendments to standards first became effective for the fiscal year beginning January 1, 2010:
  A standard, which was issued by the FASB in June 2009, that requires entities to provide more information regarding sales of securitized financial assets and similar transactions. The adoption of this standard did not have a significant impact on the Company’s consolidated financial statements.
  A standard, which was issued by the FASB in June 2009, that modifies how a company determines when an entity that is insufficiently capitalized or is not controlled through voting (or similar rights) should be consolidated. The standard clarifies that the determination of whether a company is required to consolidate an entity is based on, among other things, an entity’s purpose and design and a company’s ability to direct the activities of the entity that most significantly impact the entity’s performance. The standard requires an ongoing reassessment of whether a company is the primary beneficiary of a variable interest entity and also requires additional disclosures about a company’s involvement in variable interest entities and any significant changes in risk exposure due to that involvement. The FASB subsequently amended this standard to defer the consolidation requirements for investments in investment companies. The adoption of this standard did not have a significant impact on the Company’s consolidated financial statements.
  An amended standard, issued by the FASB in January 2010, that require additional disclosures about significant transfers in and out of levels 1 and 2 fair value measurements and reasons for the transfers. In addition, the amended standard requires new disclosures relating to the reconciliation for fair value measurements using unobservable inputs (level 3) detailing information about purchases, issuances, and settlements on a gross basis. The adoption of these amended disclosure requirements did not have a significant impact on the company’s consolidated financial statements.
Item 3.   Quantitative and Qualitative Disclosures About Market Risk
     Not applicable.
Item 4T.   Controls and Procedures
     Evaluation of disclosure controls and procedures. Based on the evaluation of our disclosure controls and procedures (as defined in the Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), required by Exchange Act Rules 13a-15(b) or 15d-15(b)), our principal executive officer and

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principal financial officer have concluded that our disclosure controls and procedures were effective as of the end of the period covered by this report to ensure that information required to be disclosed by us in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and include controls and procedures designated to ensure that information required to be disclosed by us in such reports is accumulated and communicated to our management, including the principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure.
     Changes in internal control over financial reporting. There were no changes in our internal control over financial reporting that occurred during the three months ended March 31, 2010 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
PART II. OTHER INFORMATION
Item 1.   Legal Proceedings
     For information regarding legal proceedings related to the Company, see Note 10 – Contingencies.
Item 1A.   Risk Factors
     Not applicable.
Item 2.   Unregistered Sales of Equity Securities and Use of Proceeds
     None.
Item 3.   Defaults Upon Senior Securities
     None.
Item 4.   (Removed and Reserved)
     None.
Item 5.   Other Information
     None.
Item 6.   Exhibits
     
Exhibit Number   Description
31.1
  Chief Executive Officer Certification pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934.
 
   
31.2
  Chief Financial Officer Certification pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934.
 
   
32.1
  Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
 
   
32.2
  Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

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SIGNATURES
     Pursuant to the requirements 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.
         
  TITANIUM ASSET MANAGEMENT CORP.
 
 
May 17, 2010  By:   /s/ Robert Brooks    
    Name:   Robert Brooks   
    Title:   Chief Executive Officer
(Principal Executive Officer) 
 
 
     
May 17, 2010  By:   /s/ Jonathan Hoenecke    
    Name:   Jonathan Hoenecke   
    Title:   Chief Financial Officer
(Principal Financial Officer and Principal Accounting Officer) 
 

 


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EXHIBIT INDEX
     
Exhibit Number   Description
31.1
  Chief Executive Officer Certification pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934.
 
   
31.2
  Chief Financial Officer Certification pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934.
 
   
32.1
  Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
 
   
32.2
  Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.