HGBL 10-Q Quarterly Report June 30, 2010

HERITAGE GLOBAL INC.

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10-Q 1 v192722_10q.htm Unassociated Document

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

x QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2010

¨ TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number: 0-17973

C2 Global Technologies Inc.

(Exact name of registrant as specified in its charter)

FLORIDA

(State or other jurisdiction of

Incorporation or Organization)

59-2291344

(I.R.S. Employer Identification No.)

40 King St. West, Suite 3200, Toronto, ON M5H 3Y2

(Address of Principal Executive Offices)

(416) 866-3000

(Registrant’s Telephone Number)

N/A

(Registrant’s Former Name)

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 and Exchange Act of 1934 during the preceding 12 months (or for such shorter time 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 R No ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ¨ No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer (as defined in Exchange Act Rule 12b-2).

Large Accelerated Filer £	Accelerated Filer £
Non-Accelerated Filer R	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 £ No R

As of August 5, 2010, there were 22,718,074 shares of common stock, $0.01 par value, outstanding.

TABLE OF CONTENTS

Part I.	Financial Information

Item 1.	Financial Statements

	Unaudited Condensed Consolidated Balance Sheets as of June 30, 2010 and December 31, 2009	3

	Unaudited Condensed Consolidated Statements of Operations for the three and six months ended June 30, 2010 and 2009	4

	Unaudited Condensed Consolidated Statement of Changes in Stockholders’ Equity for the period ended June 30, 2010	5

	Unaudited Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2010 and 2009	6

	Notes to Unaudited Condensed Consolidated Financial Statements	7

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	18

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	29

Item 4T.	Controls and Procedures	29

Part II.	Other Information

Item 1.	Legal Proceedings	30

Item 1A.	Risk Factors	30

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	30

Item 3.	Defaults Upon Senior Securities	30

Item 4.	Reserved	30

Item 5.	Other Information	30

Item 6.	Exhibits	31

PART I – FINANCIAL INFORMATION

Item 1 – Financial Statements.

C2 GLOBAL TECHNOLOGIES INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(unaudited)

(In thousands of US dollars, except share and per share amounts)	June 30, 2010			December 31, 2009

ASSETS
Current assets:
Cash	$	1,856		$	93
Accounts receivable (net of $0 allowance for doubtful accounts)		120			1,000
Note receivable		—			653
Deposits		125			300
Inventory – equipment		306			442
Other current assets		36			110
Deferred income tax assets		453			729
Total current assets		2,896			3,327
Other assets:
Inventory – real estate		1,273			1,396
Asset liquidation investments		4,750			3,943
Investments		2,933			2,788
Goodwill		173			173
Total assets	$	12,025		$	11,627

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable and accrued liabilities	$	1,409		$	1,457
Income taxes payable		126			26
Debt payable to third parties		4,301			4,626
Debt payable to a related party		121			1,564
Total liabilities		5,957			7,673

Commitments and contingencies

Stockholders’ equity:
Preferred stock, $10.00 par value, authorized 10,000,000 shares; issued and outstanding 592 Class N shares at June 30, 2010 and December 31, 2009, liquidation preference of $592 at June 30, 2010 and December 31, 2009		6			6
Common stock, $0.01 par value, authorized 300,000,000 shares; issued and outstanding 22,718,074 shares at June 30, 2010 and December 31, 2009		227			227
Additional paid-in capital		274,741			274,706
Accumulated deficit		(269,915	)		(271,287	)
		5,059			3,652
Non-controlling interest in subsidiary		1,009			302
Total stockholders’ equity		6,068			3,954
Total liabilities and stockholders’ equity	$	12,025		$	11,627

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

C2 GLOBAL TECHNOLOGIES INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

AND COMPREHENSIVE INCOME

(unaudited)

	Three Months Ended June 30,						Six Months Ended June 30,
(In thousands of US dollars, except share and per share amounts)	2010			2009			2010			2009

Revenue:
Asset liquidation	$	488		$	35		$	2,721		$	35
		488			35			2,721			35
Operating costs and expenses:
Asset liquidation		298			—			1,836			—
Patent licensing		—			1			7			2
Selling, general and administrative		610			708			1,236			1,095
Total operating costs and expenses		908			709			3,079			1,097
		(420	)		(674	)		(358	)		(1,062	)
Earnings of equity accounted asset liquidation investments		2,601			392			3,038			392
Operating income (loss)		2,181			(282	)		2,680			(670	)
Other income (expenses):
Other income (expenses)		(108	)		21			(109	)		22
Interest expense – third party		(97	)		(28	)		(198	)		(28	)
Interest expense – related party		(35	)		(35	)		(64	)		(35	)
Total other income (expenses)		(240	)		(42	)		(371	)		(41	)
Income (loss) from continuing operations before the undernoted		1,941			(324	)		2,309			(711	)
Earnings of other equity accounted investments (net of $0 tax)		73			19			151			20
Income tax expense (recovery)		314			(46	)		381			(53	)
Net income (loss) and comprehensive income (loss)		1,700			(259	)		2,079			(638	)
Net (income) loss and comprehensive (income) loss attributable to non-controlling interest		(551	)		6			(707	)		43
Net income (loss) and comprehensive income (loss) attributable to controlling interest	$	1,149		$	(253	)	$	1,372		$	(595	)

Weighted average common shares outstanding (in thousands)		22,718			22,718			22,718			22,729
Weighted average preferred shares outstanding (in thousands)		1			1			1			1

Earnings (loss) per share – basic and diluted:

Earnings (loss) before (income) loss attributable to non-controlling interest
Common shares	$	0.07		$	(0.01	)	$	0.09		$	(0.03	)
Preferred shares	$	2.99			N/A		$	3.66			N/A

Earnings (loss) attributable to controlling interest
Common shares	$	0.05		$	(0.01	)	$	0.06		$	(0.03	)
Preferred shares	$	2.02			N/A		$	2.41			N/A

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

C2 GLOBAL TECHNOLOGIES INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY

For the period ended June 30, 2010

(in thousands of US dollars, except share amounts)

(unaudited)

`	Preferred stock					Common stock						Additional paid-in			Accumulated Equity			Non- controlling
	Shares			Amount		Shares			Amount			capital			(Deficit)			interest		Total

Balance at December 31, 2007		607		$	6		23,095,010		$	231		$	274,672		$	(275,850	)	$	—	$	(941	)
Conversion of Class N preferred stock to common stock		(13	)		—		520			—			—			—			—		—
Cancellation of common stock		—			—		(350,000	)		(4	)		4			—			—		—
Compensation cost related to stock options		—			—		—			—			85			—			—		85
Net income		—			—		—			—			—			5,827			—		5,827
Balance at December 31, 2008		594			6		22,745,530			227			274,761			(270,023	)		—		4,971
Capital contribution		—			—		—			—			—			—			237		237
Purchase and cancellation of preferred and common stock		(2	)		—		(27,456	)		—			(126	)		—			—		(126	)
Compensation cost related to stock options		—			—		—			—			71			—			—		71
Net income (loss)		—			—		—			—			—			(1,264	)		65		(1,199	)
Balance at December 31, 2009		592			6		22,718,074			227			274,706			(271,287	)		302		3,954
Compensation cost related to stock options		—			—		—			—			35			—			—		35
Net income		—			—		—			—			—			1,372			707		2,079
Balance at June 30, 2010		592		$	6		22,718,074		$	227		$	274,741		$	(269,915	)	$	1,009	$	6,068

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

C2 GLOBAL TECHNOLOGIES INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited)

(In thousands of US dollars)	Six months ended June 30,
	2010			2009
Cash flows from operating activities:
Net income (loss)	$	2,079		$	(638	)
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Accrued interest added to principal of third party debt		9			13
Amortization of financing costs on debt payable to third party		80			15
Accrued interest added to principal of related party debt		64			35
Stock-based compensation expense		35			36
Earnings of other equity accounted investments		(151	)		(20	)
Writedown of inventory		(123	)		—
Decrease (increase) in deferred income tax assets		276			(146	)
Gain on sale of investments		—			(21	)

Changes in operating assets and liabilities:
Decrease (increase) in accounts receivable		880			(532	)
Decrease in note receivable		653			—
Decrease in deposits		175			—
Decrease (increase) in inventory		382			(3,313	)
Increase in asset liquidation investments		(807	)		(1,325	)
Decrease (increase) in other assets		(6	)		36
Increase (decrease) in accounts payable and accrued liabilities		(48	)		654
Increase in income taxes payable		100			—
Net cash provided by (used in) operating activities		3,598			(5,206	)

Cash flows from investing activities:
Investments		(286	)		(2,621	)
Cash distributions from investments		292			3
Proceeds from sale of investments		—			121
Net cash provided by (used in) investing activities		6			(2,497	)

Cash flows from financing activities:
Proceeds from issuance of debt payable to third parties		5,228			3,915
Proceeds from issuance of note payable to a related party		1,312			2,810
Purchase and cancellation of common shares		—			(125	)
Repayment of debt payable to a third party		(5,562	)		(1,581	)
Repayment of note payable to a related party		(2,819	)		(1,410	)
Non-controlling interest contribution		—			244
Net cash provided by (used in) financing activities		(1,841	)		3,853
Increase (decrease) in cash		1,763			(3,850	)
Cash at beginning of period		93			4,076
Cash at end of period	$	1,856		$	226

Supplemental cash flow information:
Taxes paid		21			92
Interest paid		79			—

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

C2 GLOBAL TECHNOLOGIES INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except share and per share amounts and where specifically indicated)

Note 1 –Basis of Presentation

These unaudited condensed consolidated financial statements include the accounts of C2 Global Technologies Inc. together with its subsidiaries, including C2 Communications Technologies Inc., C2 Investments Inc. and Counsel RB Capital LLC (“Counsel RB”). These entities, on a combined basis, are referred to as “C2”, the “Company”, “we” or “our” in these 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 FASB Accounting Standards Codification (“ASC”) and include the assets, liabilities, revenues, and expenses of all majority-owned subsidiaries over which C2 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 Securities and Exchange Commission (SEC). In our opinion, these 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 for the year ended December 31, 2009, filed with the Securities and Exchange Commission on March 31, 2010.

The results of operations for the six-month period ended June 30, 2010 are not necessarily indicative of those operating results to be expected for any subsequent interim period or for the entire year ending December 31, 2010.

Note 2 – Summary of Significant Accounting Policies

Use of estimates

The preparation of 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, accounts receivable valuation, inventory valuation, investment valuation, valuation of goodwill and intangible assets, valuation of deferred income tax assets, 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.

Recent Accounting Pronouncements

In June 2009, the FASB updated “Consolidation – Consolidation of Variable Interest Entities” (“Consolidation”). The update amends the consolidation guidance that applies to variable interest entities (“VIEs”), and will significantly affect an entity’s overall consolidation analysis. The amendments to the consolidation guidance affect all entities currently within the scope of Consolidation as well as qualifying special-purpose entities that are outside of its scope. An enterprise will need to reconsider its previous conclusions regarding the entities that it consolidates, as the update involves a shift to a more qualitative approach that identifies which entities have the power to direct the activities that most significantly impact the VIE’s economic performance and the obligation to absorb its losses or the right to receive benefits from it, as compared to the existing quantitative-based risks and rewards calculation. The update also requires ongoing assessment of whether an entity is the primary beneficiary of a VIE, modifies the presentation of consolidated VIE assets and liabilities, and requires additional disclosures. The updated guidance is effective as of the beginning of an entity’s first fiscal year that begins after November 15, 2009, with early adoption prohibited. The Company adopted the new guidance on January 1, 2010, which had no impact on its financial statements.

In January 2010, the FASB issued Accounting Standards Update 2010-06, Improving Disclosures About Fair Value Measurements (“ASU 2010-06”). ASU 2010-06 amends the existing guidance to add new requirements for disclosures about transfers into and out of Levels 1 and 2, and separate disclosures about purchases, sales, issuances, and settlements relating to Level 3 measurements. It also clarifies existing fair value disclosures about the level of disaggregation and about inputs and valuation techniques used to measure fair value. As well, it amends guidance on employers’ disclosures about postretirement benefit plan assets to require that disclosures be provided by classes of assets instead of by major categories of assets. With one exception, ASU 2010-06 is effective for reporting periods, including interim periods, beginning after December 15, 2009. The exception is that the requirement to provide the Level 3 activity of purchases, sales, issuances, and settlements on a gross basis is effective for fiscal years beginning after December 15, 2010. Early adoption is permitted. The Company adopted ASU 2010-06 on January 1, 2010, which did not significantly impact its financial statements.

Future accounting pronouncements

In October 2009, the FASB issued Accounting Standards Update 2009-13, Revenue Recognition (“ASU 2009-13”). ASU 2009-13 amends the criteria for separating consideration in multiple-deliverable revenue arrangements, and establishes a hierarchy of selling prices to determine the selling price of each specific deliverable. As part of this, ASU 2009-13 eliminates the residual method for allocating revenue among the elements of an arrangement and requires that consideration be allocated at the inception of an arrangement. As well, it expands disclosure requirements. ASU 2009-13 is effective for fiscal years beginning on or after June 15, 2010, and therefore will be adopted by the Company on January 1, 2011. At June 30, 2010, the Company has no revenue generating activities that would be impacted by the adoption of ASU 2009-13.

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 is currently evaluating the impact of adopting ASU 2010-20.

The FASB, the EITF and the SEC have issued other accounting pronouncements and regulations during 2009 and 2010 that will become effective in subsequent periods. The Company’s management does not believe that these pronouncements will have a significant impact on the Company’s financial statements at the time they become effective.

Note 3 – Stock-based Compensation

At June 30, 2010 the Company had five 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 for the three and six months ended June 30, 2010 is $17 and $35, respectively, as compared to $18 and $36 for the same periods in 2009. The fair value compensation costs of unvested stock options in the first six months of 2010 and 2009 were determined using the Black-Scholes Option Pricing Model for grant dates between 2006 and 2010. Historical inputs to the model for this period included expected volatility between 79% and 258%, risk-free interest rates between 1.37% and 5.07%, expected life of 4.75 years, and an expected dividend yield of zero. The Company’s estimated forfeiture rate of its stock options is nil.

No tax benefit from stock-based compensation was recognized in the first six months of either 2010 or 2009, as no options were exercised. The Company’s stock-based compensation had no effect on its cash flows during either period.

On March 31, 2010, 40,000 options, having an exercise price and fair value of $0.08, were granted to the Company’s independent directors in accordance with their compensation plan, which includes a grant of 10,000 options annually to each independent director on March 31 or the next business day. 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 258%, a risk-free interest rate of 1.4%, an expected term of 4.75 years, and an expected dividend yield of zero. These were the only options granted during the first six months of 2010. A similar grant of 40,000 options was made during the first six months of 2009.

The following summarizes the changes in common stock options for the six months ended June 30, 2010 and 2009, respectively:

	Options			Weighted Average Exercise Price
Outstanding at December 31, 2009		994,027		$	6.02
Granted		40,000		$	0.08
Expired		(80,781	)	$	59.25
Outstanding at June 30, 2010		953,246		$	1.26

Options exercisable at June 30, 2010		749,496		$	1.44

	Options			Weighted Average Exercise Price
Outstanding at December 31, 2008		979,027		$	7.73
Granted		40,000		$	0.15
Expired		(15,000	)	$	58.23
Outstanding at June 30, 2009		1,004,027		$	6.67

Options exercisable at June 30, 2009		699,027		$	9.26

Note 4 – 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 and warrants 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 and six months ended June 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. For the three and six months ended June 30, 2009, the net effect of including the Company’s potential common shares is anti-dilutive, 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:

	June 30,
	2010		2009

Assumed exercise of options and warrant to purchase shares of common stock		873,246		2,004,027

Note 5 – Composition of Certain Financial Statements Captions

The Company’s goodwill of $173 relates to an investment in a subsidiary company that holds certain of the Company’s patent rights.

Accounts payable and accrued liabilities consisted of the following at June 30, 2010 and December 31, 2009:

	June 30, 2010		December 31, 2009
Regulatory and legal fees	$	517	$	628
Accounting, auditing and tax consulting		152		89
Patent licensing costs		2		—
Due to joint venture partners		349		522
Sales and other taxes		71		62
Remuneration and benefits		236		91
Other		82		65

Total accounts payable and accrued liabilities	$	1,409	$	1,457

Note 6 – Investments

The Company’s investments as at June 30, 2010 and December 31, 2009 consisted of the following:

	June 30 , 2010		December 31 , 2009

Buddy Media, Inc.	$	124	$	124
Knight’s Bridge Capital Partners Internet Fund No. 1 GP LLC		18		18
Polaroid		2,791		2,646

Total investments	$	2,933	$	2,788

Buddy Media, Inc.

The Company accounts for its investment under the cost method. Based on its analysis of Buddy Media’s financial statements and projections as at June 30, 2010, the Company concluded that the investment’s cost is the best available estimate of its fair value.

Knight’s Bridge Capital Partners Internet Fund No. 1 GP LLC (“Knight’s Bridge GP”)

The Company accounts for its investment under the equity method. For the year ended December 31, 2009, the Company recorded $6 as its share of Knight’s Bridge GP’s earnings, and received cash distributions of $5. During the first six months of 2010, the Company recorded $3 as its share of Knight’s Bridge GP’s earnings, and received $3 of cash distributions. Based on the Company’s analysis of Knight’s Bridge GP’s financial statements and projections as at June 30, 2010, the Company concluded that there has been no other than temporary impairment in the fair value of its investment, and that its book value is the best estimate of its fair value.

Polaroid

Effective May 5, 2009, the Company invested $2,621 to indirectly acquire an approximate 5% interest in Polaroid Corporation, pursuant to a Chapter 11 reorganization in a U.S. bankruptcy court. The investment was made as part of a joint venture investor group (the “JV Group”) that includes both related parties and non-related parties. The JV Group formed two operating companies (collectively, “Polaroid”) to hold the acquired intellectual property (PLR IP Holdings, LLC) and inventory (PLR Acquisition, LLC). The Company, the related parties and two of the unrelated parties formed KPL, LLC (“KPL” or the “LLC”) to pool their individual investments in Polaroid. The pooled investments totalled approximately $19 million of the aggregate purchase price of approximately $55 million. KPL is managed by a related party, Knight’s Bridge Capital Partners Management, L.P. (the “Management LP”), who acts as the General Partner of the LLC. The Management LP is a wholly-owned subsidiary of the Company’s majority shareholder, Counsel Corporation (together with its subsidiaries, “Counsel”).

C2’s initial investment in the LLC had two components:

$530 of Class D units. These units are subject to a 2% annual management fee, payable to the General Partner. The units have a 10% per annum preferred return; any profits generated in addition to the preferred return, subsequent to the return of invested capital, are subject to the Management LP’s 20% carried interest. This investment is approximately 1% of Polaroid and approximately 3% of the LLC. Following cash distributions of $46 in the fourth quarter of 2009 and $56 in the first six months of 2010, the initial investment has been reduced to $428.

$2,091 to acquire Counsel’s rights and obligations as an indirect limited partner (but not Counsel’s limited partnership interest) in Knight’s Bridge Capital Partners Fund I, L.P. (“Knight’s Bridge Fund”), a related party, with respect to the Polaroid investment. The investment in these units is held by Knight’s Bridge Fund in the name of a Canadian limited partnership (the “LP”) comprised of Counsel (95.24%) and several parties related to Counsel. The $2,091 was Counsel’s share of the LP’s investment and was funded by Counsel. Subsequent to making the investment in the LP, Counsel sold, to C2, the economic benefit of its indirect investment in Polaroid in return for a loan (under a pre-existing loan facility that is discussed in more detail in Note 7 and Note 10) bearing interest at 10% per annum. C2 is also responsible for reimbursing Counsel for its share of the management fees, which are 2% of the investment. The economic interest entitles C2 to an 8% per annum preferred return; any profits generated in addition to the preferred return, subsequent to the return of invested capital, are subject to the general partner of the Knight’s Bridge Fund’s 20% carried interest. This investment is approximately 3% of Polaroid and approximately 11% of the LLC. Following additional investments totalling $21 in 2009 and the first six months of 2010, and cash distributions of $186 in the fourth quarter of 2009 and $233 in the first six months of 2010, the initial investment has been reduced to $1,693.

The Company accounts for its investment in the LLC under the equity method. For the year ended December 31, 2009, the Company recorded $246 as its cumulative share of earnings. During the first six months of 2010, the Company recorded $140 as its share of earnings with respect to its original investment. During 2009, subsequent to its initial investment, the Company invested an additional $10 as its share of the management fees referenced above, and invested an additional $11 in the first quarter of 2010.

In the second quarter of 2010, the Company invested an additional $275 in the LLC, as its share of the LLC’s additional $1,915 investment in PLR IP Holdings, LLC (“PLR IP”). The purpose of the investment was to enable PLR IP to assist its anchor licensee to settle a legacy supplier issue. The LLC will earn a 10% per annum preferred return on its investment. In the second quarter of 2010, the Company recorded $8 as its share of earnings with respect to this additional investment.

At June 30, 2010, the Company estimates that the fair value of its investment in Polaroid significantly exceeds its book value.

Note 7 – Debt

At June 30, 2010 and December 31, 2009 the Company’s outstanding debt was $4,422 and $6,190, respectively. Details of the debt are as follows.

	June 30, 2010		December 31, 2009

Promissory note	$	—	$	1,413
Revolving credit facility		4,301		3,213
		4,301		4,626
Debt payable to a related party		121		1,564
		4,422		6,190
Less current portion		4,422		6,190
Long-term debt	$	—	$	—

Promissory note

In connection with Counsel RB’s acquisition of assets in June 2009, Counsel RB issued a promissory note with a principal amount of approximately $1.36 million (the “Promissory Note”) to the vendor. The Promissory Note bore interest at 6% annually, with both principal and interest payable one year from the date of the issuance, and contained other terms and provisions customary for agreements of this nature. The Promissory Note was repaid in full in May 2010.

Revolving credit facility

Counsel RB has a revolving credit facility (the “Credit Facility”) with a U.S. bank under the terms and provisions of a certain Loan and Security Agreement, dated as of June 2, 2009 (the “Loan Agreement”), in order to finance the acquisition of eligible equipment for purposes of resale. The Credit Facility bears interest at the greater of prime rate + 1.5% or 5%, and the maximum borrowing available under the Credit Facility is US $7.5 million, subject to Counsel RB maintaining a 1:2 ratio of capital funds, i.e. the sum of Counsel RB’s tangible net worth plus subordinated indebtedness, as defined in the Loan Agreement, to the outstanding balance. The amount of any advance is determined based upon the value of the eligible assets being acquired. The Credit Facility contains other terms and provisions customary for agreements of this nature, and has been guaranteed by both the Company and Counsel. At June 30, 2010 and December 31, 2009 the balance of the Credit Facility, including accrued interest, was $4,301 and $3,213, respectively, and the Company was in compliance with all covenants of the facility.

Debt payable to a related party

During the first six months of 2010, the Company made net repayments of $1,507 to Counsel to reduce the balance owing under an existing loan facility (the “Counsel Loan”) that bears interest at 10% and is due on demand. At June 30, 2010 and December 31, 2009 the balance of the Counsel Loan, including accrued interest, was $121 and $1,564, respectively.

For further discussion of the related party debt and other transactions with Counsel, see Note 10.

Note 8 – Patent Participation Fee

In the fourth quarter of 2003, C2 acquired patent rights associated with the VoIP Patent from a third party. Consideration provided was $100 plus a 35% residual payable to the third party relating to the net proceeds from future licensing and/or enforcement actions from the C2 VoIP Patent Portfolio. Net proceeds are defined as amounts collected from third parties net of the direct costs associated with putting the licensing or enforcement in place and related collection costs. The $100 cost of the patent rights was recorded as an intangible asset in the Company’s financial statements, and was amortized on a straight-line basis over the five years ending December 31, 2008. Equivalent patent rights have been granted or validated in Australia, Canada, China, Europe and Hong Kong, the earliest of which expire in 2015. No patent participation fee is payable for the six month period ended June 30, 2010.

Note 9 – Income Taxes

In the second quarter of 2010, the Company recognized current income tax expense of $103 and deferred income tax expense of $211, increasing the aggregate current income tax expense and deferred income tax expense for the six months ended June 30, 2010 to $106 and $275, respectively. The net deferred income tax expense in the current year is primarily due to a change in estimate of the tax effect of available tax loss carryforwards expected to be utilized. The remaining $453 net deferred income tax asset balance at June 30, 2010 therefore reflects the tax benefit of available tax losses considered “more likely than not” to be utilized during the remainder of 2010 and 2011. The Company recognized a net deferred income tax recovery of $53 in the six months ended June 30, 2009, primarily due to a change in estimate of the tax effect of available tax loss carryforwards expected to be utilized in the future.

As at June 30, 2010, the unrecognized tax benefit determined pursuant to the Income Taxes Topic of the ASC is $12,059. There has been no change in the second quarter of 2010 in the estimate of the balance of unrecognized tax benefits previously determined.

In the unlikely event that these tax benefits are recognized in the future, there should be no impact on the Company’s effective tax rate, unless recognition occurs at a time when all of the Company’s historic tax loss carryforwards have been utilized and the associated valuation allowance against the Company’s deferred tax assets has been reversed. In such circumstances, the amount recognized at that time should result in a reduction in the Company’s effective tax rate.

The Company’s policy is to recognize accrued interest and penalties related to unrecognized tax benefits in income tax expense. Because the Company has tax loss carryforwards in excess of the unrecognized tax benefits, the Company did not accrue for interest and penalties related to unrecognized tax benefits either upon the initial derecognition of uncertain tax positions or in the current period.

It is possible that the total amount of the Company’s unrecognized tax benefits will significantly increase or decrease within the next 12 months. These changes may be the result of future audits, the application of “change in ownership” rules leading to further restrictions in tax losses arising from changes in the capital structure of the Company and/or that of its parent company Counsel, reductions in available tax loss carryforwards through future merger, acquisition and/or disposition transactions, failure to continue a significant level of business activities, or other circumstances not known to management at this time. Any such additional limitations could require the Company to pay income taxes on its future earnings and record an income tax expense to the extent of such liability, despite the existence of tax loss carryforwards. At this time, an estimate of the range of reasonably possible outcomes cannot be made.

The Company has a history of incurring annual tax losses since 1991. All loss taxation years remain open for audit pending the application of the respective tax losses against income in a subsequent taxation year. In general, the statute of limitations expires three years from the date that a company files a tax return applying prior year tax loss carryforwards against income for tax purposes in the later year. The Company applied historic tax loss carryforwards to offset debt forgiveness in 2006 and income for tax purposes in 2008, respectively. The 2006 through 2009 taxation years remain open for audit.

The Company’s estimated remaining federal tax loss carryforwards at June 30, 2010 are comprised of approximately $54,600 of unrestricted net operating tax losses, $32,100 of restricted net operating tax losses subject to an annual usage restriction of $2,500 per annum until 2008 and $1,700 per annum thereafter, and $34,600 of unrestricted capital losses, substantially all of which expire at the end of 2010.

The Company is subject to state income tax in multiple jurisdictions. While the Company had net operating loss carryforwards for state income tax purposes in certain states where it previously conducted business, its available state tax loss carryforwards may differ substantially by jurisdiction and, in general, are subject to the same or similar restrictions as to expiry and usage described above. In addition, in certain states the Company’s state tax loss carryforwards that were attributable to certain legacy businesses sold in recent years ceased to be available to the Company following their sale. Therefore, it is possible that the Company may not have tax loss carryforwards available to shield future income which is attributable to a particular state from being subject to tax in that particular state.

Note 10 – Related Party Transactions

Transactions with Counsel

At June 30, 2010 the Company was indebted to Counsel in the amount of $121, as compared to $1,564 at December 31, 2009. The debt is secured by a collateralized promissory note and loan agreement. The Counsel Loan, which was originally entered into during the fourth quarter of 2003, accrues interest at 10% per annum compounded quarterly from the date funds are advanced. The Counsel Loan has been amended several times, most recently during the second quarter of 2009 when it was converted into a demand loan. The Counsel Loan is secured by the assets of the Company and is subject to certain events of default.

As consideration for Counsel’s assistance, during the second quarter of 2010, in completing a transaction in Canada, Counsel RB paid Counsel a fee of $25.

Counsel Management Services

Since December 2004, C2 and Counsel have entered into successive annual management services agreements (the “Agreement”). Under the terms of the Agreement, C2 agrees to pay Counsel for ongoing services provided to C2 by Counsel personnel. The basis for such services charged is an allocation, based on time incurred, of the cost of the base compensation paid by Counsel to those employees providing services to C2. The amounts due under the Agreement are payable within 30 days following the respective year end, subject to applicable restrictions. Any unpaid amounts bear interest at 10% per annum commencing on the day after such year end. In the event of a change of control, merger or similar event of C2, all amounts owing, including fees incurred up to the date of the event, will become due and payable immediately upon the occurrence of such event. For the year ended December 31, 2009, the amount payable pursuant to the Agreement was $360, and $180 of that amount was expensed in the first six months of 2009. Counsel has continued to provide these services in 2010 on the same cost basis, resulting in an expense of $180 for the first six months of 2010.

Note 11 – Segment Reporting

Effective the fourth quarter of 2005, the Company operated in a single business segment, Patent Licensing. With the commencement of Counsel RB’s operations in the second quarter of 2009, the Company diversified into a second segment, Asset Liquidation.

There are no material inter-segment revenues. The Company’s business is conducted principally in the U.S. The table below presents information about the segments of the Company as of and for the three and six months ended June 30, 2010 and 2009:

	For the Three Months Ended June 30, 2010
	Reportable Segments
	Asset Liquidation			Patent Licensing			Total
Revenues from external customers	$	488		$	—		$	488
Earnings from equity accounted asset liquidation investments		2,601			—			2,601
Other expense		(108	)		—			(108	)
Interest expense		(97	)		—			(97	)
Segment income (loss)		2,208			(6	)		2,202
Investment in equity accounted asset liquidation investees at June 30		4,750			—			4,750
Segment assets at June 30		8,891			202			9,093

	For the Three Months Ended June 30, 2009
	Reportable Segments
	Asset Liquidation			Patent Licensing			Total
Revenues from external customers	$	35		$	—		$	35
Earnings from equity accounted asset liquidation investments		392			—			392
Interest expense		(28	)		—			(28	)
Segment loss		(26	)		(9	)		(35	)
Investment in equity accounted asset liquidation investees at June 30		1,325			—			1,325
Segment assets at June 30		5,191			198			5,389

	For the Six Months Ended June 30, 2010
	Reportable Segments
	Asset Liquidation			Patent Licensing			Total
Revenues from external customers	$	2,721		$	—		$	2,721
Earnings from equity accounted asset liquidation investments		3,038			—			3,038
Other expense		(109	)		—			(109	)
Interest expense		(198	)		—			(198	)
Segment income (loss)		2,856			(14	)		2,842

	For the Six Months Ended June 30, 2009
	Reportable Segments
	Asset Liquidation			Patent Licensing			Total
Revenues from external customers	$	35		$	—		$	35
Earnings from equity accounted asset liquidation investments		392			—			392
Interest expense		(28	)		—			(28	)
Segment loss		(173	)		(16	)		(189	)

The following table reconciles reportable segment information to the unaudited condensed consolidated financial statements of the Company:

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

Total other income and earnings from equity accounted investments for reportable segments	$	2,493		$	392		$	2,929		$	392
Unallocated other income and earnings from equity investments from corporate accounts		73			40			151			42
	$	2,566		$	432		$	3,080		$	434

Total interest expense for reportable segments	$	97		$	28		$	198		$	28
Unallocated interest expense from related party debt		35			35			64			35
	$	132		$	63		$	262		$	63

Total depreciation and amortization for reportable segments	$	—		$	—		$	—		$	—
Other unallocated depreciation from corporate assets		—			—			—			—
	$	—		$	—		$	—		$	—

Total segment income (loss)	$	2,202		$	(35	)	$	2,842		$	(189	)
Other income		73			40			151			42
Other corporate expenses (primarily corporate level interest, general and administrative expenses)		(261	)		(310	)		(533	)		(544	)
Income tax expense (recovery)		314			(46	)		381			(53	)
Net income (loss) from continuing operations	$	1,700		$	(259	)	$	2,079		$	(638	)

Segment assets	$	9,093		$	5,389
Intangible assets not allocated to segments		—			—
Other assets not allocated to segments (1)		2,932			4,022
	$	12,025		$	9,411

(1)

Other assets not allocated to segments are corporate assets such as cash, non-trade accounts receivable, prepaid insurance, investments and deferred income tax assets.

Note 12 – Commitments and Contingencies

At June 30, 2010, C2 has no commitments other than its accounts payable, accrued liabilities and a lease on one of its offices, which expires February 28, 2014. The annual lease obligations are as shown below:

2010	$	37
2011		74
2012		74
2013		74
2014		14

At June 30, 2010, Counsel RB has guaranteed $202 mortgage debt held by a Joint Venture in which it holds an investment. The mortgage debt is a demand loan that bears interest at 6.5%.

The Company is involved in various other legal matters arising out of its operations in the normal course of business, none of which are expected, individually or in the aggregate, to have a material adverse effect on the Company.

Note 13 – Subsequent Events

The Company has evaluated events subsequent to June 30, 2010 for disclosure. There have been no material events requiring disclosure in this Report.

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

(All dollar amounts are presented in thousands of U.S. dollars, unless otherwise indicated, except per share amounts)

The following discussion and analysis should be read in conjunction with the information contained in the unaudited condensed consolidated financial statements of the Company and the related notes thereto, appearing elsewhere herein, and in conjunction with the Management’s Discussion and Analysis of Financial Condition and Results of Operations set forth in the Company’s Annual Report on Form 10-K for the year ended December 31, 2009, filed with the Securities and Exchange Commission (“SEC”).

Forward Looking Information

This Quarterly Report on Form 10-Q (the “Report”) contains certain “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Exchange Act of 1934, as amended, that are based on management’s exercise of business judgment as well as assumptions made by, and information currently available to, management. When used in this document, the words “may”, " will”, “anticipate”, “believe”, “estimate”, “expect”, “intend”, and words of similar import, are intended to identify any forward-looking statements. You should not place undue reliance on these forward-looking statements. These statements reflect our current view of future events and are subject to certain risks and uncertainties, as noted in the Company’s Annual Report on Form 10-K, filed with the SEC, and as noted below. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, our actual results could differ materially from those anticipated in these forward-looking statements. We undertake no obligation, and do not intend, to update, revise or otherwise publicly release any revisions to these forward-looking statements to reflect events or circumstances after the date hereof, or to reflect the occurrence of any unanticipated events. Although we believe that our expectations are based on reasonable assumptions, we can give no assurance that our expectations will materialize.

Overview and Recent Developments

C2 Global Technologies Inc. (“C2”, “we” or the “Company”) was incorporated in the State of Florida in 1983 under the name “MedCross, Inc.” which was changed to “I-Link Incorporated” in 1997, to “Acceris Communications Inc.” in 2003, and to “C2 Global Technologies Inc.” in 2005. The most recent name change reflects a change in the strategic direction of the Company following the disposition of its Telecommunications business in the third quarter of 2005.

The Company operates in two business segments, Asset Liquidation and Patent Licensing.

The operations of Counsel RB Capital LLC (“Counsel RB”) constitute the Company’s Asset Liquidation segment. The Company established Counsel RB in February 2009 and it commenced operations in the second quarter of 2009. Counsel RB is owned 75% by the Company and 25% by its Co-CEO’s. It specializes in the acquisition and disposition of distressed and surplus assets throughout the United States and Canada. Counsel RB’s operations are discussed in more detail in Note 2 of the audited consolidated financial statements included in the Company’s most recently filed Report on Form 10-K.

Licensing of intellectual property constitutes the Company’s Patent Licensing operating segment. C2 owns certain patents, including two foundational patents in voice over internet protocol (“VoIP”) technology – U.S. Patent Nos. 6,243,373 (the “VoIP Patent”) and 6,438,124 (the “C2 Patent”) (together the “VoIP Patent Portfolio”), which it licenses. The Company’s patents are discussed in more detail in “Company History” and “Intellectual Property”, below. C2’s target market consists of carriers, equipment manufacturers, service providers and end users in the internet protocol telephone market who are using C2’s patented VoIP technologies by deploying VoIP networks for phone-to-phone communications. The Company engages in licensing agreements with third parties domestically and internationally. The Company obtains licensing and royalty revenue from the target market for its patents, with the assistance of outside counsel, in order to realize value from its intellectual property. In 2008 the Company entered into settlement and license agreements with six major U.S. telecommunications carriers, under which C2 granted the defendants non-exclusive, perpetual, worldwide, fully paid up, royalty free licenses under any of C2’s present patents and patent applications, including the VoIP Patent, to make, use, sell or otherwise dispose of any goods and services based on such patents.

On August 27, 2009 C2 Communications Technologies Inc. filed a lawsuit against PAETEC Corporation, Matrix Telecom, Inc., Windstream Corporation, and Telephone and Data Systems, Inc. The complaint was filed in the United States District Court for the Eastern District of Oklahoma and also alleges that the defendants’ services and systems utilizing VoIP infringe the Company’s U.S. Patent No. 6,243,373. The complaint seeks an injunction, monetary damages and costs. In the fourth quarter of 2009, the complaint against Matrix Telecom, Windstream Corporation and Telephone and Data Systems, Inc. was dismissed without prejudice. Also in the fourth quarter of 2009, the case was transferred to the Eastern District of Texas. A trial date has not been set.

In the third quarter of 2007, the Company began investing in Internet-based e-commerce businesses, when it acquired minority positions in MyTrade.com, Inc., Buddy Media, Inc. (“Buddy Media”) and LIMOS.com LLC (“LIMOS.com”). Its investments in MyTrade.com, Inc. and LIMOS.com were subsequently sold in 2007 and 2008, respectively, and in the second quarter of 2009 the Company sold a portion of its investment in Buddy Media. In the fourth quarter of 2007 the Company acquired a one-third interest in Knight’s Bridge Capital Partners Internet Fund No. 1 GP LLC (“Knight’s Bridge GP”). The additional two-thirds interest in Knight’s Bridge GP was acquired by parties affiliated with the Company’s majority stockholder, Counsel Corporation (together with its subsidiaries, “Counsel”). In the second quarter of 2009, the Company invested $2,621 to indirectly acquire an approximate 5% interest in Polaroid Corporation, pursuant to a Chapter 11 reorganization in a U.S. bankruptcy court. C2’s interest is managed by Knight’s Bridge Capital Management L.P., an affiliate of Counsel. The Company’s investments are discussed in more detail in Note 6 of the unaudited condensed consolidated financial statements.

Company History

In 1994, we began operating as an Internet service provider and quickly identified that the emerging IP environment was a promising basis for enhanced service delivery. We soon turned to designing and building an IP telecommunications platform consisting of proprietary software and hardware, and leased telecommunications lines. The goal was to create a platform with the quality and reliability necessary for voice transmission. In 1997, we began offering enhanced services over a mixed IP-and-circuit-switched network platform. These services offered a blend of traditional and enhanced communication services and combined the inherent cost advantages of an IP-based network with the reliability of the existing Public Switched Telephone Network (“PSTN”).

In August 1997, we acquired MiBridge, Inc. (“MiBridge”), a communications technology company engaged in the design, development, integration and marketing of a range of software telecommunications products that support multimedia communications over the PSTN, local area networks (“LANs”) and IP networks. The acquisition of MiBridge permitted us to accelerate the development and deployment of IP technology across our network platform.

In 1998, we first deployed our real-time IP communications network platform. With this new platform, all core operating functions such as switching, routing and media control became software-driven. This new platform represented the first nationwide, commercially viable VoIP platform of its kind. Following the launch of our software-defined VoIP platform in 1998, we continued to refine and enhance the platform to make it even more efficient and capable for our partners and customers.

In 2001, the Company entered the Telecommunications business. This business was sold effective September 30, 2005.

In 2002, the U.S. Patent and Trademark Office issued U.S. Patent No. 6,438,124 (the “C2 Patent”) for the Company’s Voice Internet Transmission System. Filed in 1996, the C2 Patent reflects foundational thinking, application, and practice in the VoIP services market. The C2 Patent encompasses the technology that allows two parties to converse phone-to-phone, regardless of the distance, by transmitting voice/sound via the Internet. No special telephone or computer is required at either end of the call. The apparatus that makes this technically possible is a system of Internet access nodes, or voice engines, which provide digitized, compressed, and encrypted duplex or simplex Internet voice/sound. The end result is a high-quality calling experience whereby the Internet serves only as the transport medium and as such, can lead to reduced toll charges. On May 1, 2003, shortly after the issuance of our core C2 Patent, we disposed of our domestic U.S. VoIP network. The sale included the physical assets required to operate our nationwide network using our patented VoIP technology (constituting the core business of the I-Link Communications Inc. (“ILC”) business) and included a fully paid non-exclusive perpetual license to our proprietary software-based network convergence solution for voice and data. As part of the sale, we retained all of our intellectual property rights and patents.

In 2003, we added to our VoIP patent holdings when we acquired the VoIP Patent, which included a corresponding foreign patent and related international patent applications. The vendor of the VoIP Patent was granted a first priority security interest in the patent in order to secure C2’s obligations under the associated purchase agreement. The VoIP Patent, together with the existing C2 Patent and related international patents and patent applications, form our international VoIP Patent Portfolio that covers the basic process and technology that enable VoIP communication as it is used in the market today. Telecommunications companies that enable their customers to originate a phone call on a traditional handset, transmit any part of that call via IP, and then terminate the call over the traditional telephone network, are utilizing C2’s patented technology. The comprehensive nature of the VoIP Patent is summarized in the patent’s abstract, which, in pertinent part, describes the technology as follows: “A method and apparatus are provided for communicating audio information over a computer network. A standard telephone connected to the PSTN may be used to communicate with any other PSTN-connected telephone, where a computer network, such as the Internet, is the transmission facility instead of conventional telephone transmission facilities.” As part of the consideration for the acquisition of the VoIP Patent, the vendor is entitled to receive 35% of the net proceeds from the licensing and/or enforcement of our VoIP Patent Portfolio.

Up to December 31, 2004, revenue related to our intellectual property was based on the sales and deployment of our VoIP solutions, which we ceased directly marketing in 2005. No revenue was due to the receipt of licensing fees and royalties. Revenue in 2008 was the result of entering into settlement and license agreements with six major U.S. telecommunications carriers, as described above. We expect to generate ongoing licensing and royalty revenue in this business as we gain recognition of the underlying value in our VoIP Patent Portfolio through the enforcement of our intellectual property rights, as discussed above under “Overview and Recent Developments”.

The Company last conducted research and development activities related to its patents in 2005, when it invested $389. The Company suspended its investment in research and development in the third quarter of 2005 in conjunction with its decision to focus on the realization of licensing fees associated with its intellectual property.

As discussed above under “Overview and Recent Developments”, in the third quarter of 2007, the Company began investing in Internet-based e-commerce businesses, with its investment in Polaroid in the second quarter of 2009 being its most significant investment to date. At June 30, 2010 the Company’s investment in these businesses totaled $2,933. The Company’s objective is to realize long-term capital appreciation as the value of these businesses is developed and recognized.

As also discussed above under “Overview and Recent Developments”, in 2009 the Company diversified into the asset liquidation business when it established Counsel RB. To date, Counsel RB’s operations have been profitable, and the Company intends to continue to pursue opportunities in this line of business.

Intellectual Property

Below is a summary of the Company’s patents:

Type	Title	Numbe r	Status

VoIP Architecture	Computer Network/Internet	U.S. No. 6,243,373	Issued: June 5, 2001
	Telephone System		Expires: November 1, 2015
	(“VoIP Patent”)
		Australia No. 716096	Issued: June 1, 2000
			Expires: October 29, 2016

		People’s Republic of	Issued: December 14, 2005
		China No. ZL96199457.6	Expires: October 29, 2016

		Canada No. 2,238,867	Issued: October 18, 2005
			Expires: October 29, 2016

		Hong Kong	Issued: August 11, 2006
		No. HK1018372	Expires: October 29, 2016

		Europe No. 0873637	Granted March 21, 2007 1

	Voice Internet Transmission	U.S. No. 6,438,124	Issued: August 20, 2002
	System (“C2 Patent”)		Expires: July 22, 2018

		People’s Republic of	Issued: May 21, 2004
		China No. ZL97192954.8	Expires: February 5, 2017

		Canada No. 2,245,815	Issued: October 10, 2006
			Expires: February 5, 2017

		South Korea No. 847335	Issued: July 14, 2008
			Expires: February 5, 2017

		South Korea No. 892950	Issued: April 3, 2009
			Expires: February 5, 2017

		South Korea No. 923483	Issued: October 19, 2009
			Expires: February 5, 2017

	Private IP Communication	U.S. No. 7,215,663	Issued: May 8, 2007
	Network Architecture		Expires: June 12, 2017

Conferencing	Delay Synchronization in	U.S. No. 5,754,534	Issued: May 19, 1998
	Compressed Audio System		Expires: May 6, 2016

	Volume Control Arrangement	U.S. No. 5,898,675	Issued: April 27, 1999
	for Compressed Information Signal Delays		Expires: April 29, 2016

1 The European patent has been validated in Austria, Belgium, Denmark, Finland, France, Germany, Great Britain, Greece, Ireland, Italy, the Netherlands, Portugal, Spain, Sweden and Switzerland.

In addition to the C2 and VoIP Patents, which cover the foundation of any VoIP system, our patent portfolio includes:

Private IP Communication Network Architecture (U.S. Patent No. 7,215,663 granted May 8, 2007) – This invention relates generally to multimedia communications networks. The patent’s Internet Linked Network Architecture delivers telecommunication type services across a network utilizing digital technology. The unique breadth and flexibility of telecommunication services offered by the Internet Linked Network Architecture flow directly from the network over which they are delivered and the underlying design principles and architectural decisions employed during its creation.

C2 also owns intellectual property that solves teleconferencing problems:

Delay Synchronization in Compressed Audio Systems (U.S. Patent No. 5,754,534 granted May 19, 1998) - This invention eliminates popping and clicking when switching between parties in a communications conferencing system employing signal compression techniques to reduce bandwidth requirements.

Volume Control Arrangement for Compressed Information Signals (U.S. Patent No. 5,898,675 granted April 27, 1999) - This invention allows for modifying amplitude, frequency or phase characteristics of an audio or video signal in a compressed signal system without altering the encoder or decoder employed by each conferee in a conferencing setting, so that individuals on the conference call can each adjust their own gain levels without signal degradation.

Industry and Competition

Asset Liquidation

Our asset liquidation business, Counsel RB, is involved primarily in the purchase and sale, including at auction, of industrial machinery and equipment, real estate, inventories, accounts receivable and distressed debt. The market for these assets is highly fragmented. Counsel RB competes with other liquidators, auction companies, dealers and brokers. It competes for potential purchasers with other liquidators and auction companies, as well as with equipment manufacturers, distributors, dealers and equipment rental companies. Some of Counsel RB’s competitors have significantly greater financial and marketing resources and name recognition.

Patent Licensing

The communications services industry continues to evolve, both domestically and internationally, providing significant opportunities and risks to the participants in these markets. Factors that have driven this change include:

entry of new competitors and investment of substantial capital in existing and new services, resulting in significant price competition

technological advances resulting in a proliferation of new services and products and rapid increases in network capacity

the Telecommunications Act of 1996; as amended, and

growing deregulation of communications services markets in the United States and in other countries around the world

Historically, the communications services industry transmitted voice and data over separate networks using different technologies. Traditional carriers have typically built telephone networks based on circuit switching technology, which establishes and maintains a dedicated path for each telephone call until the call is terminated.

VoIP is a technology that can replace the traditional telephone network. This type of data network is more efficient than a dedicated circuit network because the data network is not restricted by the one-call, one-line limitation of a traditional telephone network. This improved efficiency creates cost savings that can be either passed on to the consumer in the form of lower rates or retained by the VoIP provider. In addition, VoIP technology enables the provision of enhanced services such as unified messaging.

We are seeking to have telecommunications service providers (“TSPs”), equipment suppliers (“ESs”) and end users license our patents. In this regard, our competition is existing technology, outside the scope of our patents, which allows TSPs and ESs to deliver communication services to their customers.

VoIP has become a widespread and accepted telecommunications technology, with a variety of applications in the telecommunications and other industries. While we believe that there will be continued proliferation of this technology in the coming years and that this proliferation will occur within the context of our patents, there is no certainty that this will occur or that it will occur in a manner that requires organizations to license our patents.

Government Regulation

Recent legislation in the United States, including the Sarbanes-Oxley Act of 2002, has increased regulatory and compliance costs as well as the scope and cost of work provided to us by our independent registered public accountants and legal advisors. The Company became subject to Section 404 reporting as of December 31, 2007. As implementation guidelines continue to evolve, we expect to continue to incur costs in order to comply with legislative requirements or rules, pronouncements and guidelines by regulatory bodies.

Critical Accounting Policies

Management’s Discussion and Analysis of Financial Condition and Results of Operations discusses our unaudited condensed consolidated financial statements, which have been prepared in accordance with generally accepted accounting principles (“GAAP”) in the United States. This requires management to make estimates and assumptions based on historical experience and various other factors that are considered to be reasonable under the circumstances. These 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. Actual results could differ from these estimates.

Significant estimates required for the preparation of the unaudited condensed consolidated financial statements included in this Report were those related to revenue recognition, accounts receivable valuation, allowance for doubtful accounts, inventory valuation, investment valuation, valuation of goodwill, deferred income tax assets, liabilities and stock-based compensation. These estimates are considered significant because of the significance of the financial statement items 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, 2009. To aid in the understanding of our financial reporting, key policies are provided in Note 2 of the unaudited condensed consolidated financial statements included in this Report.

Management’s Discussion of Financial Condition

Liquidity and Capital Resources

At June 30, 2010 the Company had a working capital deficit of $3,061, as compared to a working capital deficit of $4,346 at December 31, 2009. The primary contributors to the reduction were an increase of $1,763 in cash and a $1,443 decrease in debt payable to a related party. The primary offsetting items were a decrease of $880 in accounts receivable and a decrease of $653 in a note receivable. During the first six months of 2010, the Company’s primary sources of cash, exclusive of borrowings under Counsel RB’s revolving credit facility, were Counsel RB’s gross profit of $3,923, the reductions of $880 and $653 in accounts receivable and a note receivable, and receipt of $289 of cash distributions from Polaroid. Cash disbursements, other than those related to repayment of debt, were primarily related to operating expenses of $1,236. During the first six months of 2010, the Company also invested an additional $286 in Polaroid.

It should be noted that GAAP requires the Company to classify both real estate inventory and asset liquidation investments as non-current, although they are expected to be converted to cash within a year. If these assets were classified as current, the Company would report working capital of $2,962 at June 30, 2010 and working capital of $993 at December 31, 2009.

The Company is continuing to pursue licensing and royalty agreements with respect to its patents. Even if the Company does not enter into such agreements within the next twelve months, it expects to generate sufficient cash from Counsel RB’s operations to meet its ongoing operating cash requirements for at least that period of time. As well, Counsel RB has a revolving credit facility in the amount of up to $7.5 million in place to finance its purchases of assets for resale.

Ownership Structure and Capital Resources

At June 30, 2010 the Company had stockholders’ equity of $6,068, as compared to $3,954 at December 31, 2009.

The Company is 90.9% owned by Counsel. The remaining 9.1% is owned by public stockholders.

Beginning in 2001, Counsel invested over $100,000 in C2 to fund the development of C2’s technology and its Telecommunications business, and at December 29, 2006 C2 owed $83,582 to Counsel, including accrued and unpaid interest. On December 30, 2006 Counsel converted $3,386 of this debt into 3,847,475 common shares of C2, and forgave the balance of $80,196. Counsel subsequently provided additional advances, of which $121 was outstanding at June 30, 2010.

Cash Position and Cash Flows

Cash at June 30, 2010 was $1,856 as compared to $93 at December 31, 2009, an increase of $1,763.

Cash provided by or used in operating activities Cash provided by operating activities during the six months ended June 30, 2010 was $3,598, as compared to $5,206 cash used during the same period in 2009. During the first six months of 2010 the Company had net income from continuing operations of $2,079, as compared to a net loss of $638 for the same period in 2009. In both periods, the operations of Counsel RB were the primary source of cash receipts and disbursements.

In the first six months of 2010, the primary use of cash was the net investment of $807 in asset liquidation investments. This was more than offset by decreases of $880 in accounts receivable, $653 in a note receivable, $175 in deposits and $259 in inventory. In the first six months of 2009, the commencement of Counsel RB’s operations was the primary use of cash, with $3,313 used to acquire inventory and $1,325 invested in asset liquidation investments.

Cash flows from investing activities Cash provided by investing activities during the six months ended June 30, 2010 was $6, as compared to $2,497 of cash used during the same period in 2009. In 2010 this consisted of $292 of cash distributions from investments in which the Company has significant influence, $289 of which were from Polaroid. These were offset by an additional investment of $286 in Polaroid. In 2009, $2,621 was used for the initial investment in Polaroid, partially offset by $121 proceeds from the sale of a portion of the Company’s investment in Buddy Media, and $3 in cash distributions.

Cash flows used in financing activities Cash used by financing activities was $1,841 during the six months ended June 30, 2010, as compared to $3,853 cash provided during the same period in 2009. In 2010, in connection with the operations of Counsel RB, the Company repaid net $334 to third party lenders, including the repayment in full of the $1,413 Promissory Note that was outstanding at December 31, 2009. During the same period, the Company repaid net $1,507 to its parent, Counsel. In 2009, net $2,334 was received from third party lenders, net $1,400 was received from Counsel, and $125 was used to purchase and cancel common shares. In 2009, $244 was invested by the non-controlling interest in Counsel RB.

Contractual Obligations

The following table summarizes the amounts of payments due, including interest accrued to June 30, 2010 and estimated interest to maturity, under specified contractual obligations outstanding at June 30, 2010. We have no liabilities associated with income taxes that require disclosure.

	Payment due by period
Contractual obligations :	Total		Less than 1 year		1-3 years		3-5 years		More than 5 years
Revolving credit facility		4,479		4,479		—		—		—
Related party debt		129		129		—		—		—
Operating leases		273		74		149		50		—
Total	$	4,881	$	4,682	$	149	$	50	$	—

Management’s Discussion of Results of Operations

Asset liquidation revenue is earned from the acquisition and subsequent disposition of distressed and surplus assets, including industrial machinery and equipment, real estate, inventories, accounts receivable and distressed debt. It is also earned from more traditional asset disposition services, such as on-site and webcast auctions, liquidations and negotiated sales. The Company also earns income from its asset liquidation business through its earnings from equity accounted asset liquidation investments. The Company began operating in the asset liquidation segment in the second quarter of 2009 when Counsel RB, its 75%-owned subsidiary that was established in the first quarter of 2009, commenced operations.

Patent licensing revenue is derived from licensing our intellectual property.

Three-Month Period Ended June 30, 2010 Compared to Three-Month Period Ended June 30, 2009

Asset liquidation revenue was $488 during the quarter ended June 30, 2010, compared to $35 during the same period in 2009, which was Counsel RB’s first quarter of operations.

Asset liquidation expense was $298 during the quarter ended June 30, 2010, compared to $0 during the same period in 2009.

Earnings of equity accounted asset liquidation investments were $2,601 during the quarter ended June 30, 2010, compared to $392 during the same period in 2009.

Patent licensing revenues were $0 during the quarters ended June 30, 2010 and 2009.

Patent licensing expense was $0 during the quarter ended June 30, 2010, compared to $1 during the same period in 2009.

Selling, general and administrative expense was $610 during the quarter ended June 30, 2010, compared to $708 during the same period in 2009. The significant items included:

Compensation expense was $342 in the second quarter of 2010, compared to $327 in the second quarter of 2009. The primary expense in both years was salary and benefits related to Counsel RB, which was $290 in 2010 and $274 in 2009. With respect to C2’s operations, the salary earned by the CEO remained unchanged at $35. Stock based compensation was almost unchanged at $17 in the second quarter of 2010 and $18 in the second quarter of 2009.

Legal expense was $8 in the second quarter of 2010, compared to $115 in the second quarter of 2009.

Accounting and tax consulting expenses were $37 in the second quarter of 2010, compared to $26 in the second quarter of 2009.

Directors’ fees were $32 in the second quarter of both 2010 and 2009.

Consulting expense was $13 in the second quarter of 2010 as compared to $38 in the second quarter of 2009, and related solely to the operations of Counsel RB.

Management fees charged by our controlling stockholder, Counsel, were $90 in the second quarter of both 2010 and 2009.

Directors and officers liability insurance expense was $13 in the second quarter of 2010 and $29 in the second quarter of 2009. The decrease reflects a decrease in the premium, which became effective in June 2009.

Office rent was $21 in the second quarter of 2010 as compared to $19 in the second quarter of 2009, and related solely to the operations of Counsel RB.

Other insurance expense was $9 in the second quarter of 2010 as compared to $4 in the second quarter of 2009. The increase relates to the commencement of Counsel RB’s operations.

Travel expense was $21 in the second quarter of 2010, as compared to $4 in the second quarter of 2009, and related solely to the operations of Counsel RB.

Other income (expense) and earnings of other equity accounted investments – the significant items included:

Other expense was $108 in the second quarter of 2010, as compared to other income of $21 in the second quarter of 2009. In 2010 the expense consisted of a $123 writedown of Counsel RB’s real estate inventory. This was partially offset by $8 of net operating income from properties held by Counsel RB, and by $7 of interest income. In 2009 the income was the gain on the sale of a portion of the Company’s investment in Buddy Media.

Third party interest expense was $97 in the second quarter of 2010, as compared to $28 in the second quarter of 2009. All of the expense related to the third party debt owed by Counsel RB.

Related party interest expense was $35 in the second quarter of both 2010 and 2009. All of the expense related to the Company’s loan from its parent, Counsel. The Company began receiving advances from its parent, Counsel, in the second quarter of 2009.

In the second quarter of 2010, the Company recorded $73 of earnings from its other equity accounted investments, as compared to $19 in the second quarter of 2009. In 2010 the earnings consisted of $72 from Polaroid and $1 from Knight’s Bridge GP. In 2009, the earnings consisted of $18 from Polaroid and $1 from Knight’s Bridge GP.

Six-Month Period Ended June 30, 2010 Compared to Six-Month Period Ended June 30, 2009

Asset liquidation revenue was $2,721 during the six months ended June 30, 2010, compared to $35 during the same period in 2009. Counsel RB commenced operations during the second quarter of 2009.

Asset liquidation expense was $1,836 during the six months ended June 30, 2010, compared to $0 during the same period in 2009.

Earnings of equity accounted asset liquidation investments were $3,038 during the six months ended June 30, 2010, compared to $392 during the same period in 2009.

Patent licensing revenues were $0 during the six months ended June 30, 2010 and 2009.

Patent licensing expense was $7 during the six months ended June 30, 2010, compared to $2 during the same period in 2009.

Selling, general and administrative expense was $1,236 during the six months ended June 30, 2010, compared to $1,095 during the same period in 2009. The significant items included:

Compensation expense was $694 in the first half of 2010, compared to $510 in the first half of 2009. The primary expense in both years was salary and benefits related to Counsel RB, which were $590 in 2010 as compared to $405 in 2009. The difference is due to the fact that Counsel RB was established during the first quarter of 2009 and therefore salaries were not paid for the full six months of that year. With respect to C2’s operations, the salary earned by the CEO remained unchanged at $69. Stock based compensation was almost unchanged at $35 during the first half of 2010 and $36 during the first half of 2009.

Legal expense was $19 in the first half of 2010, compared to $122 in the first half of 2009.

Accounting and tax consulting expenses were $70 in the first half of 2010, compared to $40 in the first half of 2009. The increase is due to the increased complexity of operations following the establishment of Counsel RB in 2009.

Directors’ fees were $65 in the first half of 2010 as compared to $63 in the first half of 2009.

Consulting expense was $19 in the first half of 2010 as compared to $38 in the first half of 2009, and related solely to the operations of Counsel RB.

Management fees charged by our controlling stockholder, Counsel, were $180 in the first half of both 2010 and 2009.

Directors and officers liability insurance expense was $26 in the first half of 2010 as compared to $66 in the first half of 2009. The decrease reflects a decrease in the premium, which became effective in June 2009.

Office rent was $42 in the first half of 2010 as compared to $25 in the first half of 2009, and related solely to the operations of Counsel RB.

Franchise tax was $23 in the first half of 2010 as compared to $0 in the first half of 2009.

Other insurance expense was $16 in the first half of 2010 as compared to $7 in the first half of 2009. The increase relates to the commencement of Counsel RB’s operations.

Travel expense was $28 in the first half of 2010, as compared to $4 in the first half of 2009, and related solely to the operations of Counsel RB.

Other income (expense) and earnings of other equity accounted investments – the significant items included:

Other expense was $109 in the first half of 2010, as compared to other income of $22 in the first half of 2009. In 2010 the expense consisted of a $123 writedown of Counsel RB’s real estate inventory, and $2 of net operating costs of properties held by Counsel RB. This was partially offset by $16 of interest income. In 2009, $21 of the income was the gain on the sale of a portion of the Company’s investment in Buddy Media, and $1 was interest income.

Third party interest expense was $198 in the first half of 2010, as compared to $28 in the first half of 2009. All of the expense related to the third party debt owed by Counsel RB, which was entered into during the second quarter of 2009.

Related party interest expense was $64 in the first half of 2010, as compared to $35 in the first half of 2009. All of the expense related to the Company’s loan from its parent, Counsel. The Company began receiving advances from its parent, Counsel, in the second quarter of 2009.

In the first half of 2010, the Company recorded $151 of earnings from its other equity accounted investments, as compared to recording $20 in the first half of 2009. In 2010 the earnings consisted of $148 from Polaroid and $3 from Knight’s Bridge GP. In 2009, the earnings consisted of $18 from Polaroid and $2 from Knight’s Bridge GP.

Inflation . Inflation did not have a significant impact on our results during the last fiscal quarter.

Off-Balance Sheet Transactions . We have not engaged in material off-balance sheet transactions.

Item 3. Quantitative and Qualitative Disclosures about Market Risk.

Our exposure to market risk is limited to interest rate sensitivity, which is affected by changes in the general level of interest rates. Due to the fact that our cash is deposited with major financial institutions, we believe that we are not subject to any material interest rate risk as it relates to interest income. As to interest expense, we have one debt instrument that has a variable interest rate. Our revolving credit facility provides that the principal amount outstanding bears interest at the lender’s prime rate + 1.5%, or a minimum of 5%. Assuming that the debt amount on the revolving credit facility at June 30, 2010 was constant during the next twelve-month period, the impact of a one percent increase in the interest rate would be an increase in interest expense of approximately $43 for that twelve-month period. We do not believe that, in the near term, we are subject to material market risk on either our fixed rate third party or related party debt.

We did not have any foreign currency hedges or other derivative financial instruments as of June 30, 2010. We do not enter into financial instruments for trading or speculative purposes and do not currently utilize derivative financial instruments. Our operations are conducted primarily in the United States and as such are not subject to material foreign currency exchange rate risk.

Item 4T. Controls and Procedures.

As of the end of the period covered by this Quarterly Report, our Chief Executive Officer and Chief Financial Officer (the “Certifying Officers”) conducted evaluations of our disclosure controls and procedures. As defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), the term “disclosure controls and procedures” means controls and other procedures of an issuer that are designed to ensure that information required to be disclosed by the issuer in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the Commission’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by an issuer in the reports that it files or submits under the Exchange Act is accumulated and communicated to the issuer’s management, including the Certifying Officers, to allow timely decisions regarding required disclosure. Based on this evaluation, the Certifying Officers have concluded that our disclosure controls and procedures were effective.

Further, there were no changes in our internal control over financial reporting during the second fiscal quarter of 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

There have been no material changes to the legal proceedings discussed in our Annual Report on Form 10-K for the year ended December 31, 2009, as filed with the SEC on March 31, 2010.

Item 1A. Risk Factors

There have been no material changes to the risk factors discussed in our Annual Report on Form 10-K for the year ended December 31, 2009, as filed with the SEC on March 31, 2010.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

None.

Item 3. Defaults Upon Senior Securities.

None.

Item 4. Reserved.

Item 5. Other Information.

None.

Item 6. Exhibits.

(a) Exhibits

Exhibit No.		Identification of Exhibit

10.1		Promissory Note for $341,978.44 dated June 30, 2010 between C2 Global Technologies Inc. and Counsel Corporation.

10.2		Promissory Note for $90,000.00 dated June 30, 2010 between C2 Global Technologies Inc. and Counsel Corporation.

10.3		Promissory Note for $26,781.64 dated June 30, 2010 between C2 Global Technologies Inc. and Counsel Corporation.

31.1		Certification of Chief Executive Officer pursuant to Rule 13a-14(a) and 15d-14(a) as adopted under Section 302 of the Sarbanes-Oxley Act of 2002

31.2		Certification of Chief Financial Officer pursuant to Rule 13a-14(a) and 15d-14(a) as adopted under Section 302 of the Sarbanes-Oxley Act of 2002

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

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 thereunder duly authorized.

	C2 Global Technologies Inc.

	By:	/s/ Allan C. Silber
Date: August 6, 2010		Allan C. Silber
		Chairman of the Board and Chief Executive Officer
		(Principal Executive Officer)

	By:	/s/ Stephen A. Weintraub
		Stephen A. Weintraub
		Chief Financial Officer and Corporate Secretary
		(Principal Financial Officer)

TABLE OF CONTENTS

Part I Financial Information Item 1 Financial Statements Note 1 Basis Of Presentation Note 2 Summary Of Significant Accounting Policies Note 3 Stock-based Compensation Note 4 Earning (loss) Per Share Note 5 Composition Of Certain Financial Statements Captions Note 6 Investments Note 7 Debt Note 8 Patent Participation Fee Note 9 Income Taxes Note 10 Related Party Transactions Note 11 Segment Reporting Note 12 Commitments and Contingencies Note 13 Subsequent Events Item 2. Management S Discussion and Analysis Of Financial Condition and Results Of Operations Item 3. Quantitative and Qualitative Disclosures About Market Risk Item 4T. Controls and Procedures Part II Other Information Item 1. Legal Proceedings Item 1A. Risk Factors Item 2. Unregistered Sales Of Equity Securities and Use Of Proceeds Item 3. Defaults Upon Senior Securities Item 4. Reserved Item 5. Other Information Item 6. Exhibits

HGBL 10-Q Quarter ended June 30, 2010