v2.3.0.15

DOCUMENT AND ENTITY INFORMATION

9 Months Ended

Sep. 30, 2011

Nov. 10, 2011

Entity Registrant Name

Counsel RB Capital Inc.

 

Entity Central Index Key

0000849145

 

Current Fiscal Year End Date

--12-31

 

Entity Filer Category

Non-accelerated Filer

 

Trading Symbol

crbn

 

Entity Common Stock, Shares Outstanding

 

27,109,305

Document Type

10-Q

 

Amendment Flag

false

 

Document Period End Date

Sep. 30, 2011

Document Fiscal Period Focus

Q3

 

Document Fiscal Year Focus

2011

 

 

 

 

 

 

 

 

CONDENSED CONSOLIDATED BALANCE SHEETS (USD $)
In Thousands

Sep. 30, 2011

Dec. 31, 2010

ASSETS

 

 

Cash and cash equivalents

$ 7,917

$ 2,608

Amounts receivable (net of allowance for doubtful accounts of $186; 2010 - $168)

1,209

203

Receivable from a related party

0

392

Deposits

509

771

Inventory - equipment

2,248

2,594

Deferred income tax

2,488

2,228

Other current assets

203

63

Total current assets

14,574

8,859

Other assets:

 

 

Inventory - real estate

1,773

1,573

Asset liquidation investments

461

3,548

Investments

2,758

2,706

Property, plant and equipment

19

0

Goodwill

505

0

Total assets

20,090

16,686

LIABILITIES AND EQUITY

 

 

Accounts payable and accrued liabilities

688

2,555

Income taxes payable

252

198

Debt payable to third parties

2,362

4,485

Debt payable to a related party

92

0

Total liabilities

3,394

7,238

Commitments and contingencies

 

 

Equity:

 

 

Common stock, $0.01 par value, authorized 300,000,000 shares; issued and outstanding 27,109,305 shares at September 30, 2011 and 25,960,080 shares at December 31, 2010

271

259

Additional paid-in capital

278,288

275,641

Accumulated deficit

(261,869)

(266,458)

Total equity

16,696

9,448

Total liabilities and equity

20,090

16,686

Convertible Preferred Stock [Member]

 

 

Equity:

 

 

Preferred stock, $10.00 par value, authorized 10,000,000 shares; issued and outstanding 592 Class N shares at September 30, 2011 and December 31, 2010, liquidation preference of $592 at September 30, 2011 and December 31, 2010

$ 6

$ 6

 

 

CONDENSED CONSOLIDATED BALANCE SHEETS [Parenthetical] (USD $)
In Thousands, except Share data

Sep. 30, 2011

Dec. 31, 2010

Allowance for doubtful accounts (in thousands of dollars)

$ 186

$ 168

Preferred stock, par value (in dollars per share)

$ 10

$ 10

Preferred stock, shares authorized

10,000,000

10,000,000

Common stock, par value (in dollars per share)

$ 0.01

$ 0.01

Common stock, shares authorized

300,000,000

300,000,000

Common stock, shares issued

27,109,305

25,960,080

Common stock, shares outstanding

27,109,305

25,960,080

Convertible Preferred Stock [Member]

 

 

Preferred stock, par value (in dollars per share)

$ 10

$ 10

Preferred stock, shares issued

592

592

Preferred stock, shares outstanding

592

592

Preferred stock, liquidation preference (in thousands of dollars)

$ 592

$ 592

 

v2.3.0.15

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (USD $)
In Thousands, except Per Share data

3 Months Ended

9 Months Ended

Sep. 30, 2011

Sep. 30, 2010

Sep. 30, 2011

Sep. 30, 2010

Revenue:

 

 

 

 

Asset sale proceeds

$ 1,190

$ 195

$ 13,415

$ 2,695

Commissions and other

959

145

1,203

366

Total asset liquidation revenue

2,149

340

14,618

3,061

Operating costs and expenses:

 

 

 

 

Asset liquidation

900

243

7,036

2,079

Inventory maintenance

(6)

(16)

1,547

(32)

Patent licensing and maintenance

5

12

75

19

Selling, general and administrative

1,069

548

3,017

1,559

Expenses paid to related parties

143

113

441

338

Total operating costs and expenses

2,111

900

12,116

3,963

Operating Income (Loss) before Earnings of Equity Accounted Asset Liquidation Investments

38

(560)

2,502

(902)

Earnings of equity accounted asset liquidation investments

478

1,370

2,195

4,408

Operating income

516

810

4,697

3,506

Other income (expenses):

 

 

 

 

Other income

8

153

24

28

Interest expense - third party

(45)

(48)

(181)

(246)

Interest expense - related party

0

0

0

(64)

Total other income (expenses)

(37)

105

(157)

(282)

Income from continuing operations before the undernoted

479

915

4,540

3,224

Income tax expense (recovery)

(416)

(110)

(36)

271

Earnings (loss) of other equity accounted investments (net of $0 tax)

(35)

(93)

13

58

Net income and comprehensive income

860

932

4,589

3,011

Net income and comprehensive income attributable to non-controlling interest

0

(283)

0

(990)

Net income and comprehensive income attributable to controlling interest

$ 860

$ 649

$ 4,589

$ 2,021

Weighted average common shares outstanding (in thousands) (in shares)

27,088

22,718

26,739

22,718

Weighted average preferred shares outstanding (in thousands) (in shares)

1

1

1

1

Earnings per share - basic:

 

 

 

 

Common shares (in dollars per share)

$ 0.03

$ 0.03

$ 0.17

$ 0.09

Preferred shares (in dollars per share)

$ 1.27

$ 1.14

$ 6.86

$ 3.55

Earnings per share -diluted:

 

 

 

 

Common shares (in dollars per share)

$ 0.03

$ 0.03

$ 0.17

$ 0.09

Preferred shares (in dollars per share)

$ 1.26

$ 1.14

$ 6.79

$ 3.55

 

 

 

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME [Parenthetical] (USD $)
In Thousands

3 Months Ended

9 Months Ended

Sep. 30, 2011

Sep. 30, 2010

Sep. 30, 2011

Sep. 30, 2010

Tax on Earnings (loss) of other equity accounted investments

$ 0

$ 0

$ 0

$ 0

 

v2.3.0.15

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY (USD $)
In Thousands, except Share data

Preferred Stock [Member]

Common Stock [Member]

Additional Paid In Capital [Member]

Retained Earnings [Member]

Noncontrolling Interest [Member]

Total

Balance at Dec. 31, 2008

$ 6

$ 227

$ 274,761

$ (270,023)

$ 0

$ 4,971

Balance (in shares) at Dec. 31, 2008

594

22,745,536

 

 

 

 

Capital contribution

0

0

0

0

237

237

Purchase and cancellation of preferred and common stock

0

0

(126)

0

0

(126)

Purchase and cancellation of preferred and common stock (in shares)

(2)

(27,456)

 

 

 

 

Compensation cost related to stock options

0

0

71

0

0

71

Net income (loss)

0

0

0

(1,264)

65

(1,199)

Balance at Dec. 31, 2009

6

227

274,706

(271,287)

302

3,954

Balance (in shares) at Dec. 31, 2009

592

22,718,080

 

 

 

 

Issuance of common stock

0

32

0

0

(32)

0

Issuance of common stock (in shares)

0

3,242,000

 

 

 

 

Distribution to non-controlling interest

0

0

0

0

(766)

(766)

Transfer from non-controlling interest to controlling interest

0

0

889

0

(889)

0

Compensation cost related to stock options

0

0

46

0

0

46

Net income (loss)

0

0

0

4,829

1,385

6,214

Balance at Dec. 31, 2010

6

259

275,641

(266,458)

0

9,448

Balance (in shares) at Dec. 31, 2010

592

25,960,080

 

 

 

 

Issuance of common stock

0

12

1,995

0

0

2,007

Issuance of common stock (in shares)

0

1,122,950

 

 

 

 

Issuance of options

0

0

460

0

0

460

Exercise of options

0

0

16

0

0

16

Exercise of options (in shares)

0

26,275

 

 

 

 

Compensation cost related to stock options

0

0

176

0

0

176

Net income (loss)

0

0

0

4,589

0

4,589

Balance at Sep. 30, 2011

$ 6

$ 271

$ 278,288

$ (261,869)

$ 0

$ 16,696

Balance (in shares) at Sep. 30, 2011

592

27,109,305

 

 

 

 

 

 

 

 

 

v2.3.0.15

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (USD $)
In Thousands

9 Months Ended

Sep. 30, 2011

Sep. 30, 2010

Cash flows from operating activities:

 

 

Net income

$ 4,589

$ 3,011

Adjustments to reconcile net income to net cash provided by operating activities:

 

 

Accrued interest added to principal of third party debt

13

10

Amortization of financing costs on debt payable to third party

32

80

Stock-based compensation expense

176

43

Earnings of other equity accounted investments

(13)

(58)

Provision for doubtful accounts

40

0

Depreciation and amortization

1

0

Writedown of inventory

0

(123)

Changes in operating assets and liabilities:

 

 

Decrease (increase) in accounts receivable

(554)

807

Decrease in note receivable

0

653

Increase in lease receivable

(181)

0

Decrease in deposits

262

300

Decrease in inventory

146

631

Decrease (increase) in asset liquidation investments

3,087

(335)

Increase in other assets

(190)

(253)

Decrease (increase) in deferred income tax assets

(260)

141

Decrease in accounts payable and accrued liabilities

(1,867)

(363)

Increase in income taxes payable

54

120

Net cash provided by operating activities

5,335

4,664

Cash flows from investing activities:

 

 

Investment in other equity accounted investments

(42)

(305)

Cash distributions from other equity accounted investments

3

292

Cash portion of business acquisition

(175)

0

Net cash used in investing activities

(214)

(13)

Cash flows from financing activities:

 

 

Proceeds from issuance of common shares, net of share issuance costs

1,824

0

Proceeds from exercise of options to purchase common shares

16

0

Proceeds of debt payable to third parties

3,814

7,597

Repayment of debt payable to third parties

(5,950)

(9,659)

Proceeds of debt payable to a related party

1,282

1,551

Repayment of debt payable to a related party

(798)

(3,115)

Net cash provided by (used in) financing activities

188

(3,626)

Increase in cash and cash equivalents

5,309

1,025

Cash and cash equivalents at beginning of period

2,608

93

Cash and cash equivalents at end of period

7,917

1,118

Supplemental schedule of non-cash investing and financing activities:

 

 

Issuance of common stock in exchange for assets of acquired business

184

0

Issuance of options to purchase common stock in exchange for assets of acquired business

460

0

Supplemental cash flow information:

 

 

Taxes paid

202

21

Interest paid

$ 117

$ 79

 

 

 

 

 

 

 

 

 

v2.3.0.15

Basis of Presentation

9 Months Ended

Sep. 30, 2011

Organization, Consolidation and Presentation of Financial Statements [Abstract]

 

Organization, Consolidation and Presentation of Financial Statements Disclosure [Text Block]

Note 1 –Basis of Presentation

 

These unaudited condensed consolidated financial statements include the accounts of Counsel RB Capital Inc. together with its subsidiaries, including Counsel RB Capital LLC (“Counsel RB”), Equity Partners CRB LLC, C2 Communications Technologies Inc., and C2 Investments Inc.  These entities, collectively, are referred to as “CRBCI”, the “Company”, “we” or “our” in these condensed consolidated financial statements.  Our unaudited condensed consolidated financial statements were prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”) as outlined in the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) and include the assets, liabilities, revenues, and expenses of all subsidiaries over which CRBCI exercises control.  All significant intercompany accounts and transactions have been eliminated upon consolidation.

 

We have prepared the condensed consolidated financial statements included herein, without audit, pursuant to the rules and regulations of the United States Securities and Exchange Commission (“SEC”).  In our opinion, these condensed consolidated financial statements reflect all adjustments that are necessary to present fairly the results for interim periods.  Certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations; however, we believe that the disclosures are appropriate.  These unaudited condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and the notes thereto included in the Company’s Annual Report on Form 10-K and Annual Report on Form 10-K/A for the year ended December 31, 2010, filed with the SEC on March 31, 2011 and August 31, 2011, respectively.

 

Certain items in the condensed consolidated statement of operations and comprehensive income for the nine months ended September 30, 2010 have been reclassified to conform to current year presentation.  These changes had no effect on previously reported net income and comprehensive income, or stockholders’ equity.

 

The results of operations for the nine-month period ended September 30, 2011 are not necessarily indicative of those operating results to be expected for any subsequent interim period or for the entire year ending December 31, 2011.

 

v2.3.0.15

Acquisition of EP USA, LLC

9 Months Ended

Sep. 30, 2011

Business Combinations [Abstract]

 

Business Combination Disclosure [Text Block]

Note 2 –Acquisition of EP USA, LLC

 

On June 23, 2011, Counsel RB, through its wholly-owned subsidiary Equity Partners CRB LLC (“CRB”), acquired 100% of the business of EP USA, LLC (d/b/a Equity Partners) (“Equity Partners”), a boutique investment banking firm and leading provider of financial solutions for distressed businesses and properties.  The acquisition of Equity Partners is consistent with CRBCI’s strategy to significantly expand and diversify the services provided by Counsel RB.  In connection with the acquisition, CRBCI entered into employment and consulting agreements with the previous owners and employees of Equity Partners.

 

The cost of the acquisition was satisfied by the payment of $175 in cash, the issuance of 122,950 CRBCI common shares valued at $1.50 per share and the granting of options to purchase 230,000 CRBCI common shares with a fair value of $1.9992 per option.  Additionally, one of the previous owners was issued a put option from CRBCI that expired without exercise in September 2011, and another entered into a lock-up agreement with respect to his shares and options that will expire in 2013.  The acquisition included other terms and conditions that are customary for agreements of this nature.

 

The following table summarizes the consideration paid for Equity Partners and the amounts of the assets acquired and liabilities assumed recognized:

 

At September 30, 2011

 

 

 

 

 

$

 

 

Consideration

 

 

 

 

Cash

 

 

175

 

Equity instruments:

 

 

 

 

122,950 CRBCI common shares

 

 

184

 

230,000 options to purchase CRBCI common shares

 

 

460

 

Fair value of total consideration

 

 

819

 

 

 

 

 

 

Acquisition related costs (included in selling, general, and administrative expenses in CRBCI’s condensed consolidated statement of operations for the nine months ended September 30, 2011)

 

 

  46

 

 

 

 

 

 

Recognized amounts of identifiable assets acquired and liabilities assumed

 

 

 

 

Accounts receivable

 

 

312

 

Property, plant and equipment

 

 

2

 

Goodwill

 

 

505

 

Total identifiable net assets

 

 

819

 

 

The fair value of the 122,950 CRBCI common shares issued as part of the consideration was determined using the closing price of the shares on June 22, 2011.  The fair value of the 230,000 options to purchase CRBCI common shares was determined using the Black-Scholes Option Pricing Model.  Inputs to the model included an expected volatility of 323%, a risk-free interest rate of 2.10%, an expected life of 4.75 years, and an expected dividend yield of zero.

 

The fair value of the accounts receivable is the value as reported in the above table, and includes an allowance of $0.

 

The fair value of the goodwill, as reported above, is provisional pending final determination of the valuation of the assets.

 

The only transactions recognized separately from the acquisition were approximately $46 of professional fees incurred by the Company, which have been expensed in the nine months ended September 30, 2011.

 

v2.3.0.15

Summary of Significant Accounting Policies

9 Months Ended

Sep. 30, 2011

Accounting Policies [Abstract]

 

Significant Accounting Policies [Text Block]

Note 3 – Summary of Significant Accounting Policies

 

Use of estimates

 

The preparation of the Company’s consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements, as well as the reported amounts of revenues and expenses during the reporting period.  Management bases its estimates and judgments on historical experience and various other factors that are believed to be reasonable under the circumstances.   Actual results could differ from those estimates.

 

Significant estimates include the assessment of collectability of revenue recognized, amounts receivable valuation, inventory valuation, investment valuation, valuation of assets acquired, valuation of deferred income tax assets, valuation of goodwill, liabilities, and stock-based compensation.  These estimates have the potential to significantly impact our consolidated financial statements, either because of the significance of the financial statement item to which they relate, or because they require judgment and estimation due to the uncertainty involved in measuring, at a specific point in time, events that are continuous in nature.

 

The critical accounting policies used in the preparation of our audited consolidated financial statements are discussed in our Annual Report on Form 10-K for the year ended December 31, 2010.  There have been no changes to these policies in the first nine months of 2011.

 

Recent Accounting Pronouncements

 

In July 2010, the FASB issued Accounting Standards Update 2010-20, Receivables (“ASU 2010-20”).  ASU 2010-20 amends an entity’s disclosures about its receivables by requiring more detailed and disaggregated disclosures about the credit quality of an entity’s financing receivables and its allowance for credit losses.  Financing receivables are defined as contractual rights to receive money on demand or on fixed or determinable dates, which rights are recognized as an asset in the entity’s statement of financial position.  The objective is to improve financial statement users’ understanding of 1) the nature of the credit risk associated with an entity’s financing receivables, and 2) the entity’s assessment of that risk in estimating its allowance for credit losses as well as changes in the allowance and the reasons for those changes.  For information as of the end of a reporting period, ASU 2010-20 is effective for the first interim or annual reporting period ending on or after December 15, 2010.  For information about activity during a reporting period, ASU 2010-20 is effective for the first interim or annual reporting period beginning after December 15, 2010.  The Company has therefore included the disclosures required by ASU 2010-20 in Note 4.

 

In April 2011, the FASB issued Accounting Standards Update 2011-02, A Creditor’s Determination of Whether a Restructuring Is a Troubled Debt Restructuring (“ASU 2011-02”).  ASU 2011-02 clarifies when a loan modification or restructuring is considered a troubled debt restructuring, and was issued due to the FASB’s belief that the complexity of the evaluation, together with the increased volume of loan modifications, required additional clarification.  ASU 2011-02 is effective for the first interim or annual reporting period beginning on or after June 15, 2011.  It must be applied retrospectively to modifications occurring at or right after the beginning of the annual period of adoption.  The adoption of ASU 2011-02 by the Company had no effect on its financial statements.

 

Future Accounting Pronouncements

 

In May 2011, the FASB issued Accounting Standards Update 2011-04, Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs (“ASU 2011-04”).  ASU 2011-04 results from joint efforts by the FASB and the International Accounting Standards Board (“IASB”) to develop converged guidance on how to measure fair value and what disclosures to provide about fair value measurements.  Although ASU 2011-04 is largely consistent with the existing US GAAP fair value measurement principles, it expands existing disclosure requirements and makes other amendments.  ASU 2011-04 is effective for interim or annual reporting periods ending on or after December 15, 2011, with early adoption not permitted.  The Company is currently evaluating the impact of adopting ASU 2011-04.

 

In June 2011, the FASB issued Accounting Standards Update 2011-05, Presentation of Comprehensive Income (“ASU 2011-05”).  ASU 2011-05 revises the manner in which entities present comprehensive income in their financial statements, by removing the existing presentation options under US GAAP and requiring entities to report components of comprehensive income in either (1) a continuous statement of comprehensive income or (2) two separate but consecutive statements.  Under the two-statement approach, the first statement would include components of net income, which is consistent with the income statement format used today, and the second statement would include components of other comprehensive income (“OCI”).  ASU 2011-05 does not change the items that must be reported in OCI.  ASU 2011-05 is effective for interim or annual reporting periods beginning after December 15, 2011, with early adoption permitted.  The guidance must be applied retrospectively for all periods presented in the financial statements.  The Company is currently evaluating the impact of adopting ASU 2011-05.

 

In September 2011, the FASB issued Accounting Standards Update 2011-08, Testing Goodwill for Impairment (“ASU 2011-08”).  ASU 2011-08 amends the goodwill impairment testing guidance in Accounting Standards Codification (“ASC”) 350-20, by providing the option to perform a qualitative assessment before calculating the fair value of the reporting unit (i.e.:  before performing Step 1 of the goodwill impairment test).  If it is determined, on the basis of qualitative factors, that the fair value of the reporting unit is more likely than not less than the carrying amount, the existing two-step impairment test would be required.  If it is determined that the fair value more likely than not exceeds the carrying value, further testing would not be required.  ASU 2011-08 does not change the calculation of goodwill or its assignment to reporting units.  It also does not change the requirement to test goodwill annually for impairment, or to test for impairment between annual tests if warranted by events or circumstances.  However, it does revise the examples of events and circumstances that should be considered.  ASU 2011-08 is effective for annual and interim goodwill impairment tests performed for fiscal years beginning after December 15, 2011, with early adoption permitted.  The Company did not early adopt ASU 2011-08 in the third quarter of 2011, and is evaluating the impact of its adoption.

 

 

 

v2.3.0.15

Amounts Receivable

9 Months Ended

Sep. 30, 2011

Receivables [Abstract]

 

Loans, Notes, Trade and Other Receivables Disclosure [Text Block]

Note 4 – Amounts Receivable

 

The Company’s amounts receivable are primarily related to the operations of Counsel RB and its subsidiary, Equity Partners.  They are composed of both amounts receivable assumed by Counsel RB as a component of an asset acquisition, and amounts receivable resulting from asset sales or from services provided by Counsel RB personnel.  The initial value of an amount receivable corresponds to the fair value of the underlying goods or services.  To date all receivables have been classified as current and, due to their short-term nature, any decline in fair value would be due to issues involving collectability.  At each financial statement date the collectability of each outstanding amount receivable is evaluated, and an allowance is recorded if the book value exceeds the amount that is deemed collectable.  Collectability is determined on the basis of payment history.

 

To date the Company has recorded only one interest-bearing note receivable, in the amount of $225.  This note was acquired when Counsel RB commenced operations in the second quarter of 2009.  It is in default and on non-accrual status.  An allowance of $146 was recorded in the fourth quarter of 2010, and a further allowance of $40 was recorded in the second quarter of 2011.  Therefore the Company’s recorded investment in financing receivables on non-accrual status is $39 at September 30, 2011.  At this time, the Company does not expect to collect interest on this note and therefore does not anticipate that it will resume accruing interest receivable.

 

In the first quarter of 2011, the Company acquired a lease receivable in the amount of $248, which is being reduced by monthly payments of $12 that began in April.  The lease receivable began accruing interest on April 1, 2011.

 

At September 30, 2011 the Company has no investment in non-interest bearing financing receivables that are past due.  The Company’s single past due receivable, which had a balance of $5 at March 31, 2011, was paid in full during the second quarter.

 

Counsel RB’s amounts receivable consist of three major categories:  receivables from Joint Venture partners, receivables from asset sales, and fees and retainers relating to the business of Equity Partners.

 

To date, the Company has not experienced any significant collectability issues with respect to either the receivables from Joint Venture partners or the receivables from asset sales.  Given this experience, together with the ongoing business relationships between the Company and its partners, the Company has not yet been required to develop a policy for formal credit quality assessment  The Equity Partners business has similarly not required formal credit quality assessments.  As the Company’s asset liquidation business continues to develop, more comprehensive credit assessments may be required.

 

During the first nine months of 2011, there were no changes in the Company’s accounting policies for financing receivables, and therefore no related change in the current-period provision for credit losses.  During the same period, there were no purchases, sales or reclassifications of financing receivables.  There were no troubled debt restructurings during the first nine months of 2011.

 

Amounts receivable consisted of the following at September 30, 2011 and December 31, 2010:

 

 

 

September 30, 

2011

 

 

December 31, 

2010

 

Accounts receivable (net of allowance for doubtful accounts of $0; 2010 - $22)

 

$

989

 

 

$

124

 

Notes receivable (net of allowance for doubtful accounts of $186; 2010 - $146)

 

 

39

 

 

 

79

 

Lease receivable

 

 

181

 

 

 

 

 

 

$

1,209

 

 

$

203

 

 

v2.3.0.15

Stock-based Compensation

9 Months Ended

Sep. 30, 2011

Disclosure Of Compensation Related Costs, Share-Based Payments [Abstract]

 

Disclosure of Compensation Related Costs, Share-based Payments [Text Block]

Note 5 – Stock-based Compensation

 

At September 30, 2011 the Company had six stock-based compensation plans, which are described more fully in Note 14 to the audited consolidated financial statements contained in the Company’s most recently filed Annual Report on Form 10-K.

 

The Company’s total compensation cost related to stock options is $110 and $176 for the three and nine months ended September 30, 2011, respectively, as compared to $8 and $43 for the three and nine months ended September 30, 2010.  The increase in 2011 is due to options granted to employees and officers of both the Company and its parent, Counsel Corporation (together with its subsidiaries, “Counsel”), as detailed below.  The fair value compensation costs of unvested stock options in the first nine months of 2011 and 2010 were determined using the Black-Scholes Option Pricing Model for grant dates between 2006 and 2011.  Historical inputs to the model included expected volatility between 79% and 323%, risk-free interest rates between 1.49% and 5.07%, expected lives of 4.75 or 6.25 years, and an expected dividend yield of zero.  The Company’s estimated forfeiture rate of its stock options is nil.

 

During the quarter ended September 30, 2011, 30,000 options that had been issued to directors of the Company in 2004 were exercised in exchange for total cash payments of $17.  The Company recognized a tax benefit of $44 associated with these exercises.  No options were exercised during the three and nine months ending September 30, 2010 and therefore no tax benefit from stock-based compensation was recognized.  The Company’s stock-based compensation had no effect on its cash flows during the three and nine months ended September 30, 2010.

 

During the first quarter of 2011, as detailed in the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2011, as filed with the SEC, the Company issued a total of 1,540,000 options to officers, employees and directors.  During the second quarter of 2011, as detailed in the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2011, as filed with the SEC, the Company issued a total of 880,000 options to the previous owners of Equity Partners, the President of the Company, and officers of Counsel.

 

On September 21, 2011, 100,000 options, having an exercise price of $2.40 and a fair value of $2.399, were granted to an employee of the Company.  These options are part of the 2003 Stock Options and Appreciation Rights Plan.  The inputs to the Black-Scholes Option Pricing Model were an expected volatility of 320%, a risk-free interest rate of 1.49%, an expected term of 4.75 years, and an expected dividend yield of zero.

 

With the exception of the 40,000 options granted to the Company’s directors in the first quarter of 2011, no similar grants were made during the first nine months of 2010.

 

The following summarizes the changes in common stock options for the nine months ended September 30, 2011 and 2010, respectively:

 

 

 

Options

 

 

Weighted

Average

Exercise

Price

 

Outstanding at December 31, 2010

 

 

728,246

 

 

$

0.89

 

Granted

 

 

2,520,000

 

 

$

1.88

 

Exercised

 

 

(30,000

)

 

$

0.83

 

Expired

 

 

(37,048

)

 

$

3.87

 

Outstanding at September 30, 2011

 

 

3,181,198

 

 

$

1.64

 

 

 

 

 

 

 

 

 

 

Options exercisable at September 30, 2011

 

 

831,198

 

 

$

1.07

 

 

 

 

 

Options

 

 

Weighted

Average

Exercise

Price

 

Outstanding at December 31, 2009

 

 

994,027

 

 

$

6.02

 

Granted

 

 

40,000

 

 

$

0.08

 

Expired

 

 

(305,781

)

 

$

17.47

 

Outstanding at September 30, 2010

 

 

728,246

 

 

$

0.89

 

 

 

 

 

 

 

 

 

 

Options exercisable at September 30, 2010

 

 

630,746

 

 

$

0.98

 

 

v2.3.0.15

Earning (Loss) Per Share

9 Months Ended

Sep. 30, 2011

Earnings Per Share [Abstract]

 

Earnings Per Share [Text Block]

Note 6 – Earning (Loss) Per Share

 

The Company is required, in periods in which it has net income, to calculate basic earnings per share (“basic EPS”) using the two-class method.  The two-class method is required because the Company’s Class N preferred shares, each of which is convertible to 40 common shares, have the right to receive dividends or dividend equivalents should the Company declare dividends on its common stock.  Under the two-class method, earnings for the period, net of any deductions for contractual preferred stock dividends and any earnings actually distributed during the period, are allocated on a pro-rata basis to the common and preferred stockholders.  The weighted-average number of common and preferred shares outstanding during the period is then used to calculate basic EPS for each class of shares.

 

In periods in which the Company has a net loss, basic loss per share is calculated by dividing the loss attributable to common stockholders by the weighted-average number of common shares outstanding during the period.  The two-class method is not used, because the preferred stock does not participate in losses.

 

Options, warrants and convertible debt are included in the calculation of diluted earnings per share, since the instruments are assumed to be exercised or converted, except when their effect would be anti-dilutive.  For the three months ended September 30, 2011, the effect of including the Company’s potential common shares had no effect on basic EPS per common share, and reduced basic EPS per preferred share by $0.01.  For the nine months ended September 30, 2011, the effect of including the Company’s potential common shares had no effect on basic EPS per common share, and reduced basic EPS per preferred share by $0.07.  For the three and nine months ended September 30, 2010, the net effect of including the Company’s potential common shares did not change the EPS amount, and therefore diluted EPS equals basic EPS.

 

Potential common shares that were not included in the computation of earnings (loss) per share because they would have been anti-dilutive are as follows:

 

 

 

September 30,

 

 

 

2011

 

 

2010

 

 

 

 

 

Assumed exercise of options to purchase shares of common stock

 

 

66,350

 

 

 

648,246

 

 

v2.3.0.15

Composition of Certain Financial Statements Captions

9 Months Ended

Sep. 30, 2011

Composition Of Certain Financial Statements Captions [Abstract]

 

Composition Of Certain Financial Statements Captions [Text Block]

Note 7 – Composition of Certain Financial Statement Items

 

Accounts payable and accrued liabilities

 

Accounts payable and accrued liabilities consisted of the following at September 30, 2011 and December 31, 2010:

 

 

 

September 30,

2011

 

 

December 31,

2010

 

Regulatory and legal fees

 

$

84

 

 

$

612

 

Distributions payable to former non-controlling interest

 

 

 

 

 

766

 

Accounting, auditing and tax consulting

 

 

193

 

 

 

118

 

Due to Joint Venture partners

 

 

58

 

 

 

178

 

Asset liquidation expense

 

 

24

 

 

 

 

Customer deposits

 

 

47

 

 

 

313

 

Patent licensing and maintenance

 

 

48

 

 

 

118

 

Sales and other taxes

 

 

84

 

 

 

81

 

Remuneration and benefits

 

 

91

 

 

 

228

 

Other

 

 

59

 

 

 

141

 

 

 

 

 

 

 

 

 

 

Total accounts payable and accrued liabilities

 

$

688

 

 

$

2,555

 

 

 

v2.3.0.15

Investments

9 Months Ended

Sep. 30, 2011

Equity Method Investments and Joint Ventures [Abstract]

 

Investments in and Advances to Affiliates [Text Block]

Note 8 – Investments

 

The Company’s investments as at September 30, 2011 and December 31, 2010 consisted of the following:

 

 

 

September 30,

 2011

 

 

December 31,

2010

 

 

 

 

 

 

 

 

 

 

Knight’s Bridge Capital Partners Internet Fund No. 1 GP LLC

 

$

18

 

 

$

18

 

Polaroid

 

 

2,740

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