Attached files

file filename
EX-21 - Heritage Global Inc.v215983_ex21.htm
EX-31.2 - Heritage Global Inc.v215983_ex31-2.htm
EX-32.2 - Heritage Global Inc.v215983_ex32-2.htm
EX-32.1 - Heritage Global Inc.v215983_ex32-1.htm
EX-31.1 - Heritage Global Inc.v215983_ex31-1.htm
EX-10.29 - Heritage Global Inc.v215983_ex10-29.htm
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-K
 
x ANNUAL REPORT PURSUANT TO SECTION 13
OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 2010
 
Commission File No. 0-17973
COUNSEL RB CAPITAL INC.
(Exact Name of Registrant as Specified in Its Charter)

 
Florida
59-2291344
(State or Other Jurisdiction of Incorporation or Organization)
(I.R.S. Employer Identification No.)
   
700 – 1 Toronto St., Toronto, Ontario, Canada
M5C 2V6
(Address of Principal Executive Offices)
(Zip Code)
 
(416) 866-3000
(Registrant’s Telephone Number, Including Area Code)
 
Securities registered pursuant to Section 12(b) of the Act: None.

Securities registered pursuant to Section 12(g) of the Act: Common Stock, $0.01 par value.

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes £ No R

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes £ No R

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes 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 o No o

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. £

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company (as defined in Rule 12b-2 of the Exchange Act).
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 Act). Yes £ No R

The aggregate market value of Common Stock held by non-affiliates based upon the closing price of $0.75 per share on June 30, 2010, as reported by the OTC - Bulletin Board, was approximately $1.555 million.
 
As of March 15, 2011, there were 26,960,080 shares of Common Stock, $0.01 par value, outstanding.
 
 
 

 
 
TABLE OF CONTENTS
       
PAGE
   
PART I
   
Item 1.
 
Business.
 
  3
Item 1A.
 
Risk Factors.
 
  8
Item 1B.
 
Unresolved Staff Comments.
 
10
Item 2.
 
Properties.
 
10
Item 3.
 
Legal Proceedings.
 
10
Item 4.
 
[Removed and Reserved].
 
10
         
   
PART II
   
Item 5.
 
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.
 
11
Item 6.
 
Selected Financial Data.
 
14
Item 7.
 
Management’s Discussion and Analysis of Financial Condition and Results of Operations.
 
15
Item 7A.
 
Quantitative and Qualitative Disclosures About Market Risk.
 
23
Item 8.
 
Financial Statements and Supplementary Data.
 
23
Item 9.
 
Changes In and Disagreements With Accountants on Accounting and Financial Disclosure.
 
23
Item 9A(T).
 
Controls and Procedures.
 
23
Item 9B.
 
Other Information.
 
24
         
   
PART III
   
Item 10.
 
Directors, Executive Officers and Corporate Governance.
 
25
Item 11.
 
Executive Compensation.
 
29
Item 12.
 
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.
 
39
Item 13.
 
Certain Relationships and Related Transactions, and Director Independence.
 
40
Item 14.
 
Principal Accountant Fees and Services.
 
41
         
   
PART IV
   
Item 15.
 
Exhibits and Financial Statement Schedules.
 
43
 
 
2

 
 
Forward-Looking Information

This Annual Report on Form 10-K (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 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.

PART I

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

Item 1. Business.

Overview, History and Recent Developments

Counsel RB Capital Inc. (“CRBCI”, “we” or the “Company”) was incorporated in the State of Florida in 1983 under the name “MedCross, Inc.”  The Company’s name was changed to “I-Link Incorporated” in 1997, to “Acceris Communications Inc.” in 2003, and to “C2 Global Technologies Inc.” in 2005.  In December 2010, the Company filed an Information Statement with the U.S. Securities and Exchange Commission (“SEC”), evidencing consent action by the Company’s shareholders to change its name to “Counsel RB Capital Inc.”  The name change was finalized on January 20, 2011.  The most recent name change reflects the significance of the asset liquidation business carried out by the Company’s wholly-owned subsidiary, Counsel RB Capital LLC (“Counsel RB”), which commenced operations in the second quarter of 2009.

In 1994, we began operating as an Internet service provider, and soon turned to designing and building an internet protocol (“IP”) telecommunications platform consisting of proprietary software and hardware, and leased telecommunications lines.  In 1997, we began offering enhanced services over a mixed IP-and-circuit-switched network platform and 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 Public Switched Telephone Network (“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, which represented the first nationwide, commercially viable VoIP platform of its kind.  In 2001, the Company entered the Telecommunications business, through a wholly-owned subsidiary, WXC Corp.  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.  It 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 the 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, included a fully paid non-exclusive perpetual license to our proprietary software-based network convergence solution for voice and data, and removed essentially all operations that did not pertain to this convergence solution.  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 U.S. Patent No. 6,243,373, “Method and Apparatus for Implementing a Computer Network/Internet Telephone System” (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 CRBCI’s obligations under the associated purchase agreement.  The VoIP Patent, together with the 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 CRBCI’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 earnings from our VoIP Patent Portfolio.

 
3

 
 
The Company’s objective is to obtain ongoing licensing and royalty revenue from the target market for its patents.  All activities relating to the Company’s licensing of the VoIP Patent Portfolio, or its other intellectual property, constitute the Company’s Patent Licensing operating segment.  CRBCI’s target market consists of carriers, equipment manufacturers, service providers and end users in the IP telephone market who are using CRBCI’s patented VoIP technologies by deploying VoIP networks for phone-to-phone communications.

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.  In the third quarter of 2005, the Company retained legal counsel with expertise in the enforcement of intellectual property rights, and in June 2006, C2 Communications Technologies Inc., a wholly-owned subsidiary of the Company, filed a patent infringement lawsuit against seven major U.S. telecommunications carriers, which alleged that these companies’ VoIP services and systems infringed the VoIP Patent.  The complaint sought an injunction, monetary damages, and costs.  The litigation resulted in the Company entering into settlement and license agreements in 2008, for which CRBCI was paid $17,625 in aggregate, whereby CRBCI granted the defendants non-exclusive, perpetual, worldwide, fully paid up, royalty free licenses under any of CRBCI’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 similar 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 by acquiring minority positions in several companies.  It has since sold several of those interests, realizing gains in each case.  The Company’s most significant investment took place in the second quarter of 2009, when it 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.  CRBCI’s interest is managed by Knight’s Bridge Capital Management L.P., an affiliate of the Company’s majority shareholder and parent, Counsel Corporation (together with its subsidiaries, “Counsel”).  The Company’s objective with respect to its investments is to realize long-term capital appreciation as the value of the underlying businesses is developed and recognized.  The Company’s investments are discussed in more detail in Note 5 of the audited consolidated financial statements included in Item 15 of this Report.

In February 2009 the Company established Counsel RB, which commenced operations in the second quarter of 2009, allowing the Company to diversify into a new operating segment.  Counsel RB has become a leader in capital asset solutions, which involve finding, acquiring and monetizing distressed and surplus assets.  In addition to acquiring turnkey manufacturing facilities and used industrial machinery and equipment, Counsel RB arranges traditional asset disposition sales, including liquidation and auction sales, and its objective is to be the leading resource for clients requiring capital asset solutions.  Counsel RB’s operations constitute the Company’s Asset Liquidation operating segment and are discussed in more detail in Note 2 of the audited consolidated financial statements.  Counsel RB was originally owned 75% by the Company and 25% by Counsel RB’s Co-CEOs.  In November 2010, the Company acquired the Co-CEOs’ 25% interest in exchange for approximately 3.2 million shares of the Company.  This transaction is discussed in more detail in Note 2 of the audited consolidated financial statements.

The Company’s segments are discussed in more detail in Note 15 of the audited consolidated financial statements.

 
4

 
 
Intellectual Property
 
Below is a summary of the Company’s patents:
 
Type
 
Title
 
Number
 
Status
             
VoIP Architecture
 
Computer Network/Internet
 
U.S. No. 6,243,373 1
 
Issued:    June 5, 2001
   
Telephone System
(“VoIP Patent”)
     
Expires:  November 1, 2015
       
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 2
              
   
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 Systems
     
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 In August 2010, as a result of ex parte requests for re-examination of U.S. Patent No. 6,243,373, the United States Patent and Trademark Office (“USPTO”) issued a non-final office action rejecting the claims of the patent.  On March 24, 2011, the USPTO confirmeded the patentability of the claims of the patent.
 
 
5

 
 
2 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) - 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.

CRBCI also owns intellectual property that solves teleconferencing problems:

Delay Synchronization in Compressed Audio Systems (U.S. Patent No. 5,754,534) - 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) - 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.

Employees

As of December 31, 2010, CRBCI had thirteen employees.  Seven of them are employed directly by Counsel RB.  Six employees are also employees of Counsel, and, except for the CEO, their salaries are paid by Counsel.  Under the terms of a management services agreement (the “Agreement”), as described in Item 11 of this Report, the Counsel employees provide management and administrative services to CRBCI and the associated costs are allocated to CRBCI.  The CEO has a separate employment arrangement with CRBCI, as discussed in Item 11.

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.  In acquiring assets for resale, 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.

Counsel RB’s business strategy includes the option of partnering with one or more additional purchasers, pursuant to a partnership, joint venture or limited liability company agreement (collectively, “Joint Ventures”).  These Joint Ventures allow Counsel RB to have access to more opportunities, and to mitigate some of the competition from the market’s larger participants.  Counsel RB’s objective is to be the leading resource for clients requiring capital asset solutions.  To achieve this objective, it plans to strengthen its core competencies, create a full-service industrial auction division, develop an asset-based debtor in possession (“DIP”) facility and build out a valuation practice to provide equipment appraisals to companies and financial institutions.  As part of this process, Counsel RB has recently hired several key employees with equipment and real estate expertise as well as experience in business development and client relations.

Patent Licensing
The communications services industry continues to evolve, both domestically and internationally, providing significant opportunities and risks to the participants in these markets.  Technological advances, along with the growing deregulation of communications services markets in the United States and in other countries around the world, have resulted in a proliferation of new services and products and rapid increases in network capacity.  There is also significant price competition.

 
6

 
 
Historically, the communications services industry transmitted voice and data over separate networks using different technologies, such as circuit switching.  VoIP technology can replace the traditional telephone network, and is more efficient than a dedicated circuit network, because it is not restricted by the one-call, one-line limitation of a traditional telephone network.  In addition, VoIP technology enables the provision of enhanced services such as unified messaging.

Our objective is 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, and 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 and the Dodd-Frank Act of 2010, has increased public companies’ regulatory and compliance costs as well as the scope and cost of work provided by independent registered public accountants and legal advisors.  The Company became subject to Sarbanes-Oxley Section 404 reporting as of December 31, 2007.  As implementation guidelines continue to evolve, we expect to continue to incur costs, which may or may not be material, in order to comply with legislative requirements or rules, pronouncements and guidelines by regulatory bodies.

Available Information

CRBCI is subject to the informational requirements of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), which requires that CRBCI file reports, proxy statements and other information with the SEC.  The SEC maintains a website at http://www.sec.gov that contains reports, proxy and information statements, and other information regarding issuers, including CRBCI, which file electronically with the SEC.  In addition, CRBCI’s Exchange Act filings may be inspected and copied at the SEC’s Public Reference Room at 100 F Street, NE, Washington, D.C. 20549.  The public may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330.  The Company makes available free of charge through its web site, http://www.counselrb.com (follow Investor Relations tab to link to “SEC Filings”) its annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act as soon as reasonably practicable after such material has been electronically filed with, or furnished to, the SEC.
 
 
7

 

Item 1A. Risk Factors.

You should carefully consider and evaluate these risk factors, as any of them could materially and adversely affect our business, financial condition and results of operations, which, in turn, can adversely affect the price of our securities.

We have increased our exposure to the risks of our asset liquidation business.
In the first quarter of 2009 the Company established its 75%-owned subsidiary, Counsel RB.  As discussed elsewhere in this Report, in the fourth quarter of 2010 the Company acquired the remaining 25% of Counsel RB.  The Company has therefore increased its exposure to the risks inherent in this business, such as those associated with the collectability of accounts receivable, inventory valuation and turnover.

We face significant competition in our asset liquidation business.
Our asset liquidation business depends on our ability to successfully obtain a continuous supply of distressed and surplus assets for profitable resale to third parties.  In this regard, we compete with numerous other organizations, some of which are much larger and better-capitalized, with greater resources available for both asset acquisition and associated marketing to potential customers.  As competition in this business increases, we may be unable to compete successfully against current and future competitors.

Our asset liquidation business is subject to inventory risk and credit risk.
Under our business model, we assume the general and physical inventory and credit risks associated with purchasing assets for subsequent resale.  Although we do enter into transactions for which a subsequent purchaser has already been identified, in most cases we purchase assets and assume the risk that they may sell for less than our forecasted price.  As well, we may miscalculate demand or resale value, and subsequently sell the assets for less than their original purchase price.  Either situation could have a material adverse effect upon our use of working capital and our results of operations.

A significant portion of our asset liquidation business is conducted through Joint Ventures.
Conducting business through Joint Ventures, as described above under “Industry and Competition”, allows us to participate in significantly larger deals than those we could fund independently.  If we ceased entering into Joint Ventures, the pool of potential transactions would be reduced.  This could negatively impact our ability to obtain a continuous supply of assets for resale, and could have a material adverse effect upon our use of working capital and our results of operations.

Our asset liquidation business is subject to environmental risk.
Our asset liquidation business at times includes the purchase and resale of buildings and land.  Although our purchase process includes due diligence to determine that there are no adverse environmental issues, it is possible that such issues could be discovered subsequent to a completed purchase.  Any remediation and related costs could have a material adverse effect upon our business and results of operations.

We are dependent upon key personnel.
Our operations, particularly those of Counsel RB, are substantially dependent on the knowledge, skills and performance of our executive officers.  The loss of any one of these officers could damage key relationships, and result in the loss of essential information and expertise.  As our operations expand we will be required to hire additional employees, and may face competition for them.  Therefore, either the loss of the services of our existing officers, or the inability to attract and retain appropriately skilled new employees, could have a material adverse effect upon our business and therefore our results of operations.

We may require additional financing in the future, which may not be available, or may not be available on favourable terms.
We may need additional funds to finance our operations, particularly our asset liquidation business, to make additional investments, or to acquire complementary businesses or assets.  We may be unable to generate these funds from our operations.  If funds are not available, or not available on acceptable terms, we could experience a material adverse effect upon our business.

We have a significant investment in non-publicly traded equity.
The Company’s investment in Polaroid, which was initially made during 2009, represents approximately 16% of its total assets at December 31, 2010.  The investment is in a private company and therefore not easily liquidated.  Although the Company’s analysis of this investment opportunity concluded that it will generate positive returns, there can be no assurance that the Company will either recover the entire value of its initial investment or earn a positive return to the extent that it expects.

We are subject to litigation.
We are, from time to time, involved in various claims, legal proceedings and complaints arising in the ordinary course of business.  The significant litigation matters in which we are involved at this time are detailed in Item 3 of this Report.

 
8

 
 
We may fail to either adequately protect our proprietary technology and processes, or enforce our intellectual property rights, which would allow competitors to take advantage of our development efforts.
The Company’s VoIP Patent Portfolio consists of United States Patents No. 6,243,373 and No. 6,438,124.  The ultimate value of these patents has yet to be determined.  If we fail to obtain or maintain adequate protections, or are unsuccessful in enforcing our patent rights, we may not be able to either realize additional value from our patents, or prevent third parties from benefiting from those patents without benefit to the Company.  Any currently pending or future patent applications may not result in issued patents.  In addition, any issued patents may not have priority over any patent applications of others or may not contain claims sufficiently broad to protect us against third parties with similar technologies, products or processes.  In addition, the Company’s existing patents have finite lives (although they may be extended by filing continuations and/or divisional applications), most of which expire over the next five to seven years.  There is no guarantee that they will be fully exploited or commercialized before expiry.

The telecommunications market is volatile.
During the last several years, the telecommunications industry has been very volatile as a result of overcapacity, which has led to price erosion and bankruptcies.  These negative trends may become even more significant during the current economic downturn.  Our potential licensees may experience increased customer attrition, may have difficulty generating and collecting revenue, or may even be forced into bankruptcy.  Our potential revenue could therefore decrease significantly as the licensees become unable to meet their financial obligations.

Our principal stockholder, Counsel, has voting control of the Company and certain of our executive officers are employees of Counsel.
Counsel owns approximately 77% of our outstanding common stock.  As a result, Counsel controls all matters requiring approval by the stockholders, including the election of the Board of Directors and significant corporate transactions.  Our Board of Directors has five members, four of whom are not employees or otherwise affiliated with Counsel.  The Board establishes corporate policies and has the sole authority to nominate and elect officers to carry out those policies.  Our President, Chief Financial Officer, Vice President of Accounting and Corporate Secretary are all employees of Counsel.  Counsel’s control over CRBCI could delay or prevent a change in control of the Company, impede a merger, consolidation, takeover or other business combination, or discourage a potential acquirer from making a tender offer or otherwise attempting to obtain control of the Company.

Provisions in our Articles of Incorporation, as amended, could prevent or delay stockholders' attempts to replace or remove current management.
Our Articles of Incorporation, as amended, provide for staggered terms for the members of our Board.  The Board is divided into three staggered classes, and each director serves a term of three years.  At each annual stockholders’ meeting only those directors comprising one of the three classes will have completed their term and stand for re-election or replacement.  These provisions may be beneficial to our management and the Board in a hostile tender offer, and may have an adverse impact on stockholders who may want to participate in such a tender offer, or who may want to replace some or all of the members of the Board.

Our Board of Directors may issue additional shares of preferred stock without stockholder approval.
Our Articles of Incorporation, as amended, authorize the issuance of up to 10,000,000 shares of preferred stock, $10.00 par value per share.  The Board is authorized to determine the rights and preferences of any additional series or class of preferred stock.  The Board may, without stockholder approval, issue shares of preferred stock with dividend, liquidation, conversion, voting or other rights which are senior to our shares of common stock or which could adversely affect the voting power or other rights of the existing holders of outstanding shares of preferred stock or common stock.  The issuance of additional shares of preferred stock may also hamper or discourage an acquisition or change in control of CRBCI.

We may conduct future offerings of our common stock and preferred stock and pay debt obligations with our common and preferred stock that may diminish our investors’ pro rata ownership and depress our stock price.
We reserve the right to make future offers and sales, either public or private, of our securities including shares of our preferred stock, common stock or securities convertible into common stock at prices differing from the price of the common stock previously issued.  In the event that any such future sales of securities are effected or we use our common or preferred stock to pay principal or interest on our debt obligations, an investor’s pro rata ownership interest may be reduced to the extent of any such issuances and, to the extent that any such sales are effected at consideration which is less than that paid by the investor, the investor may experience dilution and a diminution in the market price of the common stock.

There is a limited public trading market for our common stock; the market price of our common stock has been volatile and could experience substantial fluctuations.
Our common stock is currently quoted on the OTC Bulletin Board and has a limited public trading market.  Without an active trading market, there can be no assurance regarding the liquidity or resale value of the common stock.  In addition, the market price of our common stock has been, and may continue to be, volatile.  Such price fluctuations may be affected by general market price movements or by reasons unrelated to our operating performance or prospects such as, among other things, announcements concerning us or our competitors, technological innovations, government regulations, and litigation concerning proprietary rights or other matters.

 
9

 
 
We may not be able to utilize income tax loss carryforwards.
Restrictions in our ability to utilize income tax loss carry forwards have occurred in the past due to the application of certain changes in ownership tax rules in the United States.  There is no certainty that the application of these rules may not recur.  In addition, further restrictions of, reductions in, or expiry of net operating loss and net capital loss carry forwards may occur through future merger, acquisition and/or disposition transactions or failure to continue a significant level of business activities.  Any such additional limitations could require us to pay income taxes in the future and record an income tax expense to the extent of such liability.  We could be liable for income taxes on an overall basis while having unutilized tax loss carry forwards since these losses may be applicable to one jurisdiction and/or particular line of business while earnings may be applicable to a different jurisdiction and/or line of business.  Additionally, income tax loss carry forwards may expire before we have the ability to utilize such losses in a particular jurisdiction and there is no certainty that current income tax rates will remain in effect at the time when we have the opportunity to utilize reported tax loss carry forwards.

We have not declared any dividends on our common stock to date and have no expectation of doing so in the foreseeable future.
The payment of cash dividends on our common stock rests within the discretion of our Board of Directors and will depend, among other things, upon our earnings, unencumbered cash, capital requirements and our financial condition, as well as other relevant factors.  To date, we have not paid dividends on our common stock nor do we anticipate that we will pay dividends in the foreseeable future.  As of December 31, 2010, we do not have any preferred stock outstanding that has any preferential dividends.

Item 1B. Unresolved Staff Comments
Not applicable.

Item 2. Properties.

The Company, in connection with its intellectual property licensing business, rents approximately 200 square feet of office space in Marshall, TX on a month to month basis for a nominal amount.  Should the Company be required to vacate these premises, ample alternative space is available.

The Company, in connection with its asset liquidation business, leases office space in White Plains, NY and Los Angeles, CA.  The White Plains space is approximately 3,500 square feet and its lease is in effect until December 31, 2015.  The Los Angeles space is approximately 300 square feet and its lease is in effect until September 30, 2013.

All accounting and reporting functions are carried out from the corporate office of the Company’s majority stockholder, Counsel, located in Toronto, Ontario, Canada.  The Company is not required to pay rent or other occupancy costs to Counsel.

Item 3. Legal Proceedings.

Intellectual Property Enforcement Litigation
On August 27, 2009 the Company’s wholly-owned subsidiary, C2 Communications Technologies Inc., filed a patent infringement 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 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.

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.

Item 4. [Removed and Reserved]

 
10

 

PART II

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.

Market Information

Shares of CRBCI’s common stock, $0.01 par value per share, are traded on the OTC Bulletin Board (“OTCBB”) under the symbol CRBN.OB.

The following table sets forth the high and low prices for our common stock, as quoted on the OTCBB, for the calendar quarters from January 1, 2009 through December 31, 2010, based on inter-dealer quotations, without retail mark-up, mark-down or commissions.  These prices may not represent actual transactions:

Quarter Ended
 
High
   
Low
 
March 31, 2009
  $ 0.50     $ 0.14  
June 30, 2009
    0.30       0.15  
September 30, 2009
    0.45       0.08  
December 31, 2009
    0.45       0.07  
                 
March 31, 2010
  $ 0.16     $ 0.08  
June 30, 2010
    1.18       0.06  
September 30, 2010
    0.85       0.10  
December 31, 2010
    0.26       0.10  

On March 15, 2011, the closing price for a share of the Company’s common stock was $0.35.

Holders

As of March 15, 2011, the Company had approximately 230 holders of common stock of record.

Dividends

To date, we have not paid dividends on our common stock nor do we anticipate that we will pay dividends in the foreseeable future.  As of December 31, 2010, we do not have any preferred stock outstanding which has any preferential dividends.

Securities Authorized for Issuance Under Equity Compensation Plans

The following table sets forth, as of December 31, 2010, information with respect to equity compensation plans (including individual compensation arrangements) under which the Company’s securities are authorized for issuance.

During the twelve months ended December 31, 2010, 40,000 options were granted to directors under the 2003 Employee Stock Option and Appreciation Rights Plan.  These options were issued with an exercise price of $0.08/share, which equalled fair market value on the date of the grant, and they vest over a 4-year period subject to the grantee’s continued service as a director with the Company.  The Company relied on an exemption from registration under Section 4(2) of the Securities Act of 1933, as amended (the “1933 Act”).  No other options were granted during the twelve months ended December 31, 2010.

 
11

 

 
Plan Category (1)
 
Number of Securities to be
issued upon exercise of
outstanding options
   
Weighted-average
exercise price of
outstanding options
   
Number of
securities
remaining available
for future issuance
under equity
compensation plans
(excluding
securities reflected
in column (a))
 
   
(a)
   
(b)
   
(c)
 
Equity compensation plans approved by security holders:
                 
                   
2010 Non-Qualified Stock Option Plan
                1,250,000  
                         
2003 Stock Option and Appreciation Rights Plan
    493,250     $ 0.77       1,506,750  
                         
1997 Recruitment Stock Option Plan
    234,163       0.87       135,837  
                         
1995 Directors Stock Option and Appreciation Rights Plan
                12,500  
                         
1995 Employee Stock Option and Appreciation Rights Plan
                20,000  
                         
Equity compensation plans not approved by security holders:
                       
Issuance of non-qualified options to employees and outside consultants
    833       78.00        
                         
Total
    728,246     $ 0.89       2,925,087  

 
(1) For a description of the material terms of these plans, see Note 14 in the Company’s audited financial statements included in Item 15 of this Report.

Recent Sales of Unregistered Securities; Use of Proceeds from Registered Securities.

None other than those previously reported in a Current Report on Form 8-K.

Issuer Purchases of Equity Securities.

We did not make any stock repurchases during the last quarter of 2010.

Performance Graph.

The following Performance Graph and related information shall not be deemed “soliciting material” or to be “filed” with the Securities and Exchange Commission, nor shall such information be incorporated by reference into any future filings under the Securities Act of 1933 or Securities Exchange Act of 1934, each as amended, except to the extent that the Company specifically incorporates it by reference into such filing.

The following graph compares our cumulative total stockholder return with that of the Russell 2000 index of small-capitalization companies, our former peer group (“Former Group”), and our current peer group (“Current Group”). The graph assumes an initial investment of $100.00 made on December 31, 2005, and the reinvestment of dividends (where applicable). We have never paid a dividend on our common stock.

 
12

 
 
In 2009, following our investment in Counsel RB and diversification of our business into asset liquidation, we reevaluated the composition of our Former Group, as previously utilized to assess our stock performance, and concluded that it required amendment.  In 2010, we did a similar evaluation and concluded that further amendment was needed.  Accordingly, we constructed the Current Group.  The Current Group consists of Acacia Research Corporation, Patriot Scientific Corporation, Ritchie Bros. Auctioneers and Great American Group, Inc.  The Former Group consists of Acacia Research Corporation, Patriot Scientific Corporation, Network-1 Security Solutions Inc. and Ritchie Bros. Auctioneers.

 
 
Total Return Analysis
     
   
12/31/05
   
12/31/06
   
12/31/07
   
12/31/08
   
12/31/09
   
12/31/10
 
                                     
Counsel RB Capital Inc.
  $ 100.00     $ 65.57     $ 50.82     $ 22.95     $ 24.59     $ 19.67  
Russell 2000 Index
  $ 100.00     $ 118.37     $ 116.51     $ 77.15     $ 98.11     $ 124.46  
Current Peer Group
  $ 100.00     $ 143.86     $ 196.27     $ 139.06     $ 159.24     $ 190.19  
Former Peer Group
  $ 100.00     $ 144.91     $ 198.15     $ 139.98     $ 161.73     $ 200.78  
 
Source:  Morningstar, Inc.  (312) 384-4055

 
13

 
 
Item 6. Selected Financial Data.

The following selected consolidated financial information was derived from the audited consolidated financial statements and notes thereto.  The information set forth below is not necessarily indicative of the results of future operations and should be read in conjunction with Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” as well as the Consolidated Financial Statements and Notes thereto included in Item 15 in this Report.
 
   
2010
   
2009
   
2008
   
2007
   
2006
 
                               
Statement of Operations Data :
                             
                               
Asset liquidation revenue
  $ 3,266     $ 5,991     $     $     $  
Patent licensing revenue
                17,625              
                                         
Earnings of equity accounted asset liquidation investments
    7,586       64                    
                                         
Operating income (loss)
    5,380       (769 )     5,603       (1,236 )     (1,301 )
                                         
Other income (expense)
    (5 )     (88 )     442       (213 )     155  
                                         
Goodwill impairment
    (173 )                        
                                         
Interest expense
    (336 )     (325 )     (43 )     (196 )     (10,900 )
                                         
Income tax expense (recovery)
    (1,318 )     269       125       (1,000 )      
                                         
Earnings (loss) from equity accounted investments
    30       252       (38 )     6        
                                         
Income (loss) from continuing operations
    6,214       (1,199 )     5,839       (639 )     (12,046 )
                                         
Income (loss) from discontinued operations
                (12 )     (6 )     4,370  
                                         
Net (income) loss attributable to non-controlling interest
    (1,385 )     (65 )                  
                                         
Net income (loss) attributable to controlling interest
    4,829       (1,264 )     5,827       (645 )     (7,676 )
                                         
Earnings (loss) from continuing operations per common share – basic and diluted:
  $ 0.21     $ (0.06 )   $ 0.25     $ (0.03 )   $ (0.63 )
                                         
Balance Sheet Data:
                                       
Total assets
  $ 16,686     $ 11,627     $ 5,443     $ 1,796     $ 1,386  
Total current liabilities
  $ 7,238     $ 7,673     $ 472     $ 2,737     $ 1,855  
Total long-term obligations
  $     $     $     $     $  
Stockholders’ equity (deficit)
  $ 9,448     $ 3,954     $ 4,971     $ (941 )   $ (469 )

 
14

 

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

(All dollar amounts are presented in thousands of USD, unless otherwise indicated, except per share amounts)

The following discussion and analysis should be read in conjunction with our Consolidated Financial Statements and Notes thereto, included in Item 15 of this Report.  Our accounting policies have the potential to have a significant impact on our 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 which are continuous in nature.

Business Overview, Recent Developments and Outlook

Please see Item 1, above, of this Report for an overview of the Company’s business and development.  Please see Item 1A, above, for a discussion of the risk factors that may impact the Company’s current and future operations, and financial condition.

Liquidity and Capital Resources

Liquidity

At December 31, 2010 the Company’s working capital was $1,621, as compared to a working capital deficit of $4,346 at December 31, 2009.  The primary contributors to the change were an increase of $2,515 in cash, an increase of $2,152 in equipment inventory, an increase of $471 in deposits, and a decrease of $141 in debt payable to third parties.  These increases more than offset the $1,450 decrease in amounts receivable and the $1,098 increase in accounts payable and accrued liabilities  During 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 $8,740, the reduction of $1,450 in accounts receivable, a gain of $332 on the Company’s sale of its investment in Buddy Media, Inc. and receipt of $304 in cash distributions from the Company’s investments.  Cash disbursements, other than those related to repayment of debt, were primarily related to operating expenses of $3,232.  During 2010, the Company also invested an additional $316 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 $6,742 at December 31, 2010 and working capital of $993 at December 31, 2009.

Counsel RB has a revolving credit facility in the amount of up to $7,500 in place to finance its purchases of assets for resale, as discussed in Note 7 of the audited consolidated financial statements.

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 cash requirements for at least that period of time.

The Company’s portfolio investments are in companies that are not publicly traded, and therefore these investments are illiquid.  Although the Company’s investments were made with the objective of recognizing long-term capital gains, neither the amount nor the timing of such gains can be predicted with any certainty.  To date the Company has realized capital gains on its investments in MyTrade.com, LIMOS.com and Buddy Media, Inc., and has not sold any investments at a loss.

Ownership Structure and Capital Resources

 
·  
At December 31, 2010 the Company had stockholders’ equity of $9,448, as compared to $3,954 at December 31, 2009.

 
·  
At December 31, 2010 the Company was 79.5% owned by Counsel.  The Co-CEOs of Counsel RB each owned 6.25% of the Company, and the remaining 8.0% was owned by public stockholders.  On March 15, 2011, as discussed in Note 16 of the audited consolidated financial statements, the Company issued one million common shares through a private placement, representing 3.7% of the outstanding common shares.  Counsel’s ownership thereby decreased to 76.6%, that of the Co-CEOs to 6.0% each, and that of the remaining public stockholders to 7.7%.

 
·  
As discussed in Note 2 of the audited consolidated financial statements, Counsel RB was originally owned 75% by the Company and 25% by Counsel RB’s Co-CEOs, and at November 30, 2010 the Company acquired the 25% interest in Counsel RB in exchange for 3,242,000 common shares of CRBCI.  The net result of this transaction was a transfer of $921 from the non-controlling interest to the Company, $32 of which was allocated to common shares and $889 of which was allocated to additional paid-in capital.  The remaining balance of the non-controlling interest was distributed to Counsel RB’s Co-CEOs.
 
 
15

 
 
 
·  
Beginning in 2001, Counsel invested over $100,000 in CRBCI to fund the development of CRBCI’s technology and its Telecommunications business, and at December 29, 2006 CRBCI 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 CRBCI, and forgave the balance of $80,196.

Cash Position and Cash Flows

Cash at December 31, 2010 was $2,608 compared to $93 and $4,076 at the same date in 2009 and 2008, respectively.

Cash provided by or used in operating activities.  Cash provided by operating activities during 2010 was $4,555, as compared to cash used of $7,842 in 2009 and cash provided of $5,680 in 2008.  In 2010 the Company had income of $6,214 from continuing operations, as compared to a loss of $1,199 in 2009 and income of $5,839 in 2008.  In 2010 and 2009, the operations of Counsel RB were the primary source of cash receipts and disbursements; in 2008 patent licensing was the Company’s only operating segment

During 2010 the Company recorded a $123 write-down of inventory, as compared to a write-down of $113 in 2009.  No write-downs of equity accounted asset liquidation investments were recorded in 2010, as compared to write-downs of $212 in 2009.  There were no similar transactions during 2008.  During 2010, the Company also determined that its goodwill of $173 was impaired, and recorded an impairment charge for the full amount.  There were no similar transactions during 2009 or 2008.

During 2010, the Company accrued interest of $13 on third party debt, as compared to accruing $61 in 2009 and $0 in 2008.  The decrease in 2010 is related to the 2010 repayment of a promissory note that was outstanding at December 31, 2009.  Also in connection with the promissory note, the Company amortized deferred financing costs of $80 in 2010 and $112 in 2009.  In the third quarter of 2010, the Company fully repaid the related party loan of $1,564 that was outstanding at December  31, 2009, and therefore no accrued interest was recorded for 2010, compared to $108 in 2009 and $0 in 2008.

The Company recorded $30 in earnings from equity accounted investments during 2010, $14 of which was from Polaroid, as compared to earnings of $252 during 2009 and a loss of $38 in 2008.  The Company’s gains on the sale of investments were $332 in 2010, $21 in 2009 and $425 in 2008.  In both 2010 and 2009, the gains related to sales of the investment in Buddy Media, Inc.; in 2008 the gain related to the sale of the investment in LIMOS.com.

During 2010, the Company recorded an increase of $1,499 in its deferred income tax asset, as compared to decreases of $146 and $125 in 2009 and 2008, respectively.  The 2010 amount relates to projections regarding Counsel RB’s operations during 2011.

Cash flows from investing activities.  Net cash provided by investing activities during 2010 was $444, as compared to $2,273 of cash used and $664 of cash provided during 2009 and 2008, respectively.  During 2010, the Company invested an additional $316 in Polaroid, compared to its initial investment of $2,631 in 2009.  These investments were partially offset by cash distributions from Polaroid totaling $288 in 2010 and $232 in 2009.  The Company also received cash distributions from Knight’s Bridge GP totaling $16 in 2010, $5 in 2009 and $8 in 2008.  In 2010, proceeds from the sale of the Company’s remaining investment in Buddy Media were $456, compared to proceeds of $121 in 2009 from its initial sale of a portion of the Buddy Media investment.  Proceeds of $781 in 2008 related to the Company’s sale of its investment in LIMOS.com.

Cash flows from financing activities.  Net cash of $2,484 was used in financing activities during 2010, as compared to cash provided of $6,132 in 2009 and cash used of $2,335 in 2008.  In 2010, in connection with the operations of Counsel RB, the Company repaid net cash of $154 to third party lenders as compared to receiving net cash of $4,565 in 2009.  Also in 2010, net cash of $1,564 was repaid to the Company’s parent, Counsel, as compared to the receipt of net cash of $1,456 in 2009, and the repayment of $2,335 during 2008.  During 2010, in connection with the Company’s acquisition of the 25% non-controlling interest in Counsel RB, the Company made a distribution of $766 to the non-controlling interest.  In 2009 the non-controlling interest made a net contribution of $237.  In 2009, $126 was used to purchase and cancel preferred and common shares, as part of a settlement with dissenting shareholders; there were no similar transactions in 2010 or 2008.

 
16

 
 
Contractual Obligations

The following table summarizes the amounts of payments due, including accrued interest to December 31, 2010 and estimated interest to maturity, under specified contractual obligations outstanding at December 31, 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
  $ 4,710     $ 4,710     $     $     $  
Operating leases
    751       152       310       289        
Total
  $ 5,461     $ 4,862     $ 310     $ 289     $  

Consolidated Results of Operations

Key selected financial data for the three years ended December 31, 2010, 2009 and 2008 are as follows:

   
2010
   
2009
   
2008
 
                   
Revenue:
                 
Asset liquidation
  $ 3,266     $ 5,991     $  
Patent licensing
                17,625  
Total revenue
    3,266       5,991       17,625  
                         
Operating costs and expenses:
                       
Asset liquidation
    2,112       4,138        
Patent licensing and maintenance
    128       29       10,729  
Selling, general and administrative
    3,232       2,657       1,273  
Depreciation and amortization
                20  
Total operating costs and expenses
    5,472       6,824       12,022  
      (2,206 )     (833 )     5,603  
Earnings of equity accounted asset liquidation investments
    7,586       64        
Operating income (loss)
    5,380       (769 )     5,603  
Other income (expenses):
                       
Other income (expense)
    (5 )     (88 )     442  
Goodwill impairment
    (173 )            
Interest expense – third party
    (272 )     (217 )      
Interest expense – related party
    (64 )     (108 )     (43 )
Total other income (expense)
    (514 )     (413 )     399  
Income (loss) from continuing operations before the undernoted
    4,866       (1,182 )     6,002  
Income tax expense
    (1,318 )     269       125  
Earnings (loss) of equity accounted investments (net of $0 tax)
    30       252       (38 )
Income (loss) from continuing operations
    6,214       (1,199 )     5,839  
Loss from discontinued operations
                (12 )
Net income (loss)
    6,214       (1,199 )     5,827  
Net income attributable to non-controlling interest
    (1,385 )     (65 )      
Net income (loss) attributable to controlling interest
  $ 4,829     $ (1,264 )   $ 5,827  

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, as discussed in Note 2 of the audited consolidated financial statements.  The Company began operating in the asset liquidation segment in the second quarter of 2009 when Counsel RB, which was established in the first quarter of 2009, commenced operations.

Patent licensing revenue is derived from licensing our intellectual property.  Our VoIP Patent Portfolio is an international patent portfolio covering the basic process and technology that enable VoIP communications.

 
17

 
 
2010 Compared to 2009

Asset liquidation revenues were $3,266 in 2010 compared to $5,991 in 2009, asset liquidation expense was $2,112 in 2010 compared to $4,138 in 2009, and earnings of equity accounted asset liquidation investments were $7,586 in 2010 compared to $64 in 2009.  The net earnings of these three items were $8,740 in 2010 compared to $1,917 in 2009.  Because Counsel RB conducts its asset liquidation operations both independently and through partnerships, as discussed in Note 2 of the audited consolidated financial statements, and the ratio of the two is unlikely to remain constant year over year, the operations must be considered as a whole rather than on a line-by-line basis.  The earnings in 2010 significantly exceeded those in 2009 both because Counsel RB did not begin operating until the second quarter of 2009, and because as Counsel RB has become more established, its operations have expanded.

Patent licensing revenues were $0 in both 2010 and 2009.

Patent licensing and maintenance expense was $128 in 2010 compared to $29 in 2009. This expense includes four components:  disbursements directly related to patent licensing, contingency fees earned by our legal counsel, ongoing business expenses related to patent licensing and maintenance, and the participation fee of 35% payable to the vendor of the VoIP Patent.  Expenses were only incurred with respect to the third component in 2010 and 2009.

Selling, general, administrative and other expense was $3,232 for the year ended December 31, 2010 as compared to $2,657 for the year ended December 31, 2009.  The significant changes included:

 
·  
Compensation expense in 2010 was $1,741 compared to $1,163 in 2009.  In 2010, compensation paid to Counsel RB employees was $1,281, as compared to $954 paid in 2009.  The increase was due to two factors.  The first is that compensation paid in 2010 was for the entire year, whereas for 2009 it was paid for only 10 months, as Counsel RB was founded in 2009.  The second is that during 2010, as Counsel RB’s operations have continued to expand, the number of direct employees has increased from four to seven.  In both 2010 and 2009 the salary earned by the CEO of CRBCI was $138.  However, in 2010 a bonus of $275 was awarded to the CEO of CRBCI; there was no corresponding expense in 2009.  Stock-based compensation expense decreased by $25, from $71 in 2009 to $46 in 2010.

 
·  
Legal expenses in 2010 were $143, a decrease of $393 compared to $536 in 2009.  In 2010, $80 of these expenses were related to Counsel RB’s operations, and the majority of the remaining expense related to the Company’s acquisition of Counsel RB’s non-controlling interest.  In 2009, Counsel RB incurred $85 of legal expense and the remaining expense was primarily due to costs incurred with respect to the formation of proposed investment fund vehicles.

 
·  
Accounting and tax consulting expenses in 2010 were $138 compared to $97 in 2009.

 
·  
Fees paid to the members of our Board of Directors were $136 in 2010 compared to $126 in 2009, due to more meetings held during 2010.

 
·  
Consulting expense was $105 in 2010 as compared to $82 in 2009, and related solely to the operations of Counsel RB.

 
·  
Management fee expense charged by our majority stockholder, Counsel, remained unchanged at $360 in both 2010 and 2009.  See Item 13 of this Report for details regarding these management fees.

 
·  
Directors and officers liability insurance expense was $51 in 2010 as compared to $91 in 2009.  The decrease reflects a decrease in the premium.

 
·  
Office rent was $100 in 2010 as compared to $64 in 2009, and related solely to the operations of Counsel RB.  The increase is due to the growth of the business and the requirement for additional space as the number of employees has increased.

 
·  
Travel and entertainment expense was $75 in 2010 as compared to $30 in 2009, and in both years was primarily related to the operations of Counsel RB.  The increase is due to the growth of Counsel RB’s business during 2010.

 
·  
General insurance expense was $44 in 2010 as compared to $20 in 2009.  The increase is due to the growth of Counsel RB’s operations.
 
 
18

 
 
 
·  
During 2010, the Company recorded a provision of $168 on accounts and notes receivable related to Counsel RB’s operations.  There were no similar transactions during 2009.

Other income (expense) and earnings of equity accounted investments – the changes are related to the following:

 
·  
Other expense was $5 in 2010, as compared to other expense of $88 in 2009.  In 2010, the Company realized a gain of $332 on the fourth quarter sale of its remaining investment in Buddy Media.  The other significant source of other income was a $153 settlement from legacy litigation involving a joint venture in which Counsel RB had invested.  Counsel RB also earned interest income of $25.  These items were partially offset by a $123 writedown of Counsel RB’s real estate inventory, and $392 of net operating expenses relating to properties held for sale by Counsel RB.  In 2009 the expense consisted primarily of a write down of $113 taken against Counsel RB inventory, of which $24 related to equipment and $89 to real estate.  These losses were partially offset by a gain of $21 on the Company’s sale of a portion of its investment in Buddy Media and $4 of bank interest.

 
·  
Third party interest expense was $272 in 2010 as compared to $217 in 2009, all of which related to the third party debt owed by Counsel RB.  In 2010, $80 of this expense represents the amortization of deferred financing costs, as compared to $112 in 2009.

 
·  
Related party interest expense was $64 in 2010, as compared to $108 in 2009.  During 2010 the Company repaid all of the 2009 and 2010 advances from Counsel, and at December 31, 2010 the Company had a receivable from Counsel of $392.

 
·  
In 2010, the Company recorded $30 of earnings from its equity accounted investments, as compared to earnings of $252 in 2009.  In 2010, the earnings consisted of $14 from Polaroid and $16 from Knight’s Bridge GP.  In 2009, the comparable amounts were earnings of $246 from Polaroid and $6 from Knight’s Bridge GP.

2009 Compared to 2008

In 2009, asset liquidation revenues were $5,991, asset liquidation expense was $4,138, and earnings of equity accounted asset liquidation investments were $64, for net earnings of $1,917.  There were no similar earnings in 2008 because Counsel RB did not begin operating until the second quarter of 2009.

Patent licensing revenues were $0 in 2009 and $17,625 in 2008.  In 2008 these revenues were from settlement and license agreements entered into with several U.S. telecommunications carriers.

Patent licensing and maintenance expense was $29 in 2009 compared to $10,729 in 2008. This expense includes four components:  disbursements directly related to patent licensing, contingency fees earned by our legal counsel, ongoing business expenses related to patent licensing, and the participation fee of 35% payable to the vendor of the VoIP Patent.

Selling, general, administrative and other expense was $2,657 for the year ended December 31, 2009 as compared to $1,273 for the year ended December 31, 2008.  The significant changes included:

 
·  
Compensation expense in 2009 was $1,163 compared to $361 in 2008.  The increase was primarily due to $954 of compensation paid to Counsel RB employees, for which there was no corresponding expense in 2008.  The salary earned by the CEO of CRBCI remained unchanged at $138.  There was no bonus paid to the CEO of CRBCI in 2009, compared to $138 paid in 2008.  Stock-based compensation expense decreased by $14, from $85 in 2008 to $71 in 2009.

 
·  
Legal expenses in 2009 were $536, an increase of $448 compared to $88 in 2008.  The increase was primarily due to costs incurred with respect to the formation of proposed investment fund vehicles.  As well, Counsel RB incurred $85 of legal expense during 2009.

 
·  
Accounting and tax consulting expenses in 2009 were $97 compared to $122 in 2008.

 
·  
Fees paid to the members of our Board of Directors remained unchanged at $126 in both 2009 and 2008.
 
 
19

 
 
 
·  
Consulting expense was $82 in 2009, and related solely to the operations of Counsel RB.  There was no comparable expense in 2008.

 
·  
Management fee expense charged by our majority stockholder, Counsel, remained unchanged at $360 in both 2009 and 2008.  See Item 13 of this Report for details regarding these management fees.

 
·  
Directors and officers liability insurance expense was $91 in 2009 as compared to $150 in 2008.  The decrease reflects a decrease in the premium, which became effective in June 2009.

 
·  
Office rent was $64 in 2009 and related solely to the operations of Counsel RB.  There was no comparable expense in 2008.

Depreciation and amortization – This expense was $0 in 2009 as compared to $20 in 2008.  The 2008 expense relates to the amortization of the cost of the VoIP Patent, which was fully amortized at December 31, 2008.

Other income (expense) and earnings of equity accounted investments – the changes are related to the following:

 
·  
Other expense was $88 in 2009, as compared to other income of $442 in 2008.  In 2009 this consisted primarily of a write down of $113 taken against Counsel RB inventory, of which $24 related to equipment and $89 to real estate.  These losses were partially offset by a gain of $21 on the Company’s sale of a portion of its investment in Buddy Media and $4 of bank interest.  In 2008 this consisted of a $425 gain on the sale of the Company’s investment in LIMOS.com, $15 of interest income and $2 received as a reduction of prior years’ insurance premiums.

 
·  
Third party interest expense was $217 in 2009, all of which related to the third party debt owed by Counsel RB.  $112 of this expense represents the amortization of deferred financing costs.  There was no corresponding expense in 2008, as the Company had no third party debt outstanding during the year.

 
·  
Related party interest expense was $108 in 2009, as compared to $43 in 2008.  The Company began receiving advances from its parent, Counsel, in the second quarter of 2009, and at December 31, 2009, total principal and interest outstanding totaled $1,564.  In the first quarter of 2008, the Company accrued $43 of interest on the related party loan balance that was outstanding at December 31, 2007.  This debt was repaid in March 2008 and therefore the Company incurred no interest expense subsequent to that date.

 
·  
In 2009, the Company recorded $252 of earnings from its equity accounted investments, as compared to recording a loss of $38 in 2008.  In 2009, the earnings consisted of $246 from Polaroid and $6 from Knight’s Bridge GP.  In 2008, the Company recorded a loss of $38, consisting of a $43 loss from LIMOS.com, partially offset by $5 earnings from Knight’s Bridge GP.

Future 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 this Report.

The FASB and the SEC have issued other accounting pronouncements and regulations during 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.

 
20

 
 
Critical Accounting Policies

Use of estimates

Our audited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”).  This requires management to make estimates and assumptions based on historical experience and various other factors that are believed 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 those estimates.

Significant estimates required in the preparation of the audited consolidated financial statements included in Item 15 of this Report 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 are considered significant 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.

Amounts receivable

The Company’s amounts receivable are primarily related to the operations of Counsel RB.  They are composed of both accounts 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.  In the fourth quarter of 2010, the Company recorded an allowance of $22 on an account receivable, and an allowance of $146 on a note receivable.

To date the Company has funded only one interest-bearing note receivable.  As it is in default and an allowance has been recorded, the Company is not accruing interest income.  In the event other notes receivable were funded, interest would be recognized according to the specific terms of each agreement, and any net deferred fees or costs would be amortized over the contracted term.

Inventory

The Company’s inventory consists of assets acquired for resale by Counsel RB, which are normally expected to be sold within a one-year operating cycle.  They are recorded at the lower of cost and net realizable value.  Since the commencement of Counsel RB’s operations in the second quarter of 2009, the assets’ selling prices have in general been in excess of their cost.  However, in 2009 equipment inventory was written down by $24, and real estate inventory was written down by $89, and in 2010 real estate inventory was written down by $123.

Asset Liquidation Investments

Asset liquidation transactions that involve the Company acting jointly with one or more additional purchasers, pursuant to a Joint Venture agreement, require that they be accounted for using the equity method of accounting wherein the Company’s proportionate share of the Joint Venture’s net income (loss) be reported in the consolidated statement of operations as Earnings (Loss) of Equity Accounted Asset Liquidation Investments.  At the balance sheet date, the Company’s investments in Joint Ventures are reported in the consolidated balance sheet as Asset Liquidation Investments.  The Company monitors the value of the Joint Venture’s underlying assets and liabilities, and will record a writedown of its investments should the Company conclude that there has been a decline in the value of the net assets.

Investments

The Company holds investments in two private companies:  an equity interest in KPL, LLC (“Polaroid) and an equity interest in Knight’s Bridge Capital Partners Internet Fund No. 1 GP LLC (“Knight’s Bridge GP”).  Since neither of these investments are traded on an open market, and they are not convertible into investments that are traded on an open market, significant judgment is involved in estimating their fair values.

 
21

 
 
Both investments are accounted for under the equity method.  Under this method, the investments are carried at cost, plus or minus the Company’s share of increases and decreases in the investee’s net assets and certain other adjustments.  The Company’s share of the net income or loss of the investee is reported separately in the Company’s income statement, and any return of capital or dividend received from the investee is credited to the investment account.  The Company also recognizes any other-than-temporary impairments of equity accounted investments.

The fair value estimates of these investments are based on Level 3 inputs.  For Polaroid, an internal valuation, based on current financial statements and projections, was used.  The Company concluded that its investment was not impaired and that the fair value exceeded book value.  The value of Knight’s Bridge GP is primarily based on the value of the investments held by its own equity method investee, the Internet Fund.  These investments are also not publicly traded, and their values are estimated using Level 3 inputs, primarily investee financial statements and projections.  Based on an analysis of Knight’s Bridge GP and the Internet Fund at December 31, 2010, management concluded that its equity investment was not impaired and that cost is the best estimate of fair value.

Deferred income tax assets

The Company recognizes deferred tax assets and liabilities for temporary differences between the tax bases of assets and liabilities and the amounts at which they are carried in the financial statements, based upon the enacted tax rates in effect for the year in which the differences are expected to reverse. The Company establishes a valuation allowance when necessary to reduce deferred tax assets to the amount expected to be realized.

The accounting for uncertainty in income taxes requires a more-likely-than-not threshold for financial statement recognition and measurement of tax positions taken or expected to be taken in a tax return.  Upon adoption of this principle, effective January 1, 2007, the Company derecognized certain tax positions that, upon examination, more likely than not would not have been sustained as a recognized tax benefit.  However, to date the adoption has had no material effect on the Company’s financial position, operations or cash flow.

The Company periodically assesses the value of its deferred tax assets, which have been generated by a history of net operating and net capital losses, and determines the necessity for a valuation allowance.  The Company evaluates which portion of the deferred tax assets, if any, will more likely than not be realized by offsetting future taxable income, taking into consideration any limitations that may exist on its use of its net operating and net capital loss carryforwards.  For further discussion of the Company’s income taxes, see Note 10 of the audited consolidated financial statements included in Item 15 of this Report.
 
Liabilities
 
In the normal course of its business, the Company may be subject to contingent liability with respect to assets sold either directly or through Joint Ventures. At December 31, 2010 the Company does not expect any of these liabilities, individually or in the aggregate, to have a material adverse effect on its assets or operations. 
 
The Company is involved from time to time in various legal matters arising out of its operations in the normal course of business.  On a case by case basis, the Company evaluates the likelihood of possible outcomes for this litigation.  Based on this evaluation, the Company determines whether a liability accrual is appropriate.  If the likelihood of a negative outcome is probable, and the amount is estimable, the Company accounts for the liability in the current period.  At this time, the Company is not involved in any material litigation and therefore no such liabilities have been recorded.
 
Asset liquidation revenue
 
Asset liquidation revenue consists of Counsel RB’s proceeds from asset inventory resale.  Asset proceeds are derived from auctions and negotiated sales.  Revenue is recognized when persuasive evidence of an arrangement exists, the amount of the proceeds is fixed, delivery terms are arranged and collectability is reasonably assured.
 
Patent licensing revenue
 
To date, patent licensing revenue has been in the form of one-time payments for past and future use of the Company’s patented technology.  These payments were not contingent upon the occurrence or non-occurrence of any events, and the parties had no further obligations or performance commitments, nor any unilateral ability to rescind the agreement.  The full payment amounts were recognized as revenue in the quarter in which the agreements were completed.  In general, patent licensing revenue is recognized when persuasive evidence of an arrangement exists, delivery has occurred or services have been rendered, the Company’s price to the customer is fixed or determinable, and collection of the resulting receivable is reasonably assured.  Revenues where collectability is not assured are recognized when the total cash collections to be retained by the Company are finalized.

 
22

 
 
Item 7A. 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 December 31, 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 $45 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 December 31, 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 8. Financial Statements and Supplementary Data.

See Consolidated Financial Statements and supplementary data beginning on pages F-1 and S-1.

Item 9. Changes In and Disagreements With Accountants on Accounting and Financial Disclosure.

None.

Item 9A(T). Controls and Procedures.

Evaluation of Disclosure Controls and Procedures

As of the end of the period covered by this Annual Report, under the supervision and with the participation of management, including the Chief Executive Officer and Chief Financial Officer (the “Certifying Officers”), the Company conducted an evaluation of its disclosure controls and procedures.  As defined in Rules 13a-15(e) and 15d-15(e) of 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 the Company’s disclosure controls and procedures were effective as of December 31, 2010.

Management’s Annual Report on Internal Control Over Financial Reporting

The Company’s management is responsible for establishing and maintaining adequate internal control over financial reporting, in accordance with Rules 13a-15(f) and 15d-15(f) of the Exchange Act.  Under the supervision and with the participation of the Company’s management, including the Certifying Officers, we conducted an evaluation of the effectiveness of the Company’s internal control over financial reporting based on the framework in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission.

The Company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles in the United States of America. The Company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the Company’s assets that could have a material effect on the financial statements.

 
23

 
 
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Based on its assessment using these criteria, the Company’s management concluded that the Company‘s internal control over financial reporting was effective as of December 31, 2010.

This Report does not include an attestation report of the Company’s independent registered public accounting firm regarding internal control over financial reporting.  Management’s report is not subject to attestation by the Company’s independent registered public accounting firm pursuant to the rules of the SEC that permit the Company to provide only management’s report in this Report.

Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting during the fourth fiscal quarter of 2010 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Item 9B. Other Information.
None.

 
24

 
 
PART III

Item 10. Directors, Executive Officers and Corporate Governance.

Under our Articles of Incorporation, as amended, the Board of Directors is divided into three classes, with the total number of directors to be not less than five and not more than nine.  Each director is to serve a term of three years or until his or her successor is duly elected and qualified.  As of the date hereof, the Board of Directors consists of five members:  one Class I director (Mr. Shimer), three Class II directors (Messrs. Toh, Heaton, and Silber) and one Class III director (Mr. Turock).  The following table sets forth the names, ages and positions with CRBCI of the persons who currently serve as our directors and executive officers.  With the exception of Jonathan Reich and Adam Reich, who are brothers, there are no family relationships between any present executive officers and directors.

Name
 
Age (1)
 
Title
Allan C. Silber
 
62
 
Chairman of the Board and President
Hal B. Heaton
 
60
 
Director (2), (3), (4)
Henry Y.L. Toh
 
53
 
Director (2), (3), (4)
Samuel L. Shimer
 
47
 
Director (2)
David L. Turock
 
53
 
Director (2)
Jonathan S. Reich
 
47
 
Co-Chief Executive Officer
Adam M. Reich
 
44
 
Co-Chief Executive Officer
Stephen A. Weintraub
 
63
 
Executive Vice President, Corporate Secretary and Chief Financial Officer

 
(1)
As of December 31, 2010.
 
(2)
Independent Director
 
(3)
Member of the Audit Committee
 
(4)
Member of the Compensation Committee

Set forth below are descriptions of the backgrounds of the executive officers and directors of the Company, their principal occupations for the past five years, and their directorships held at public companies and registered investment companies at any time during the last five years:

Allan C. Silber, Chairman of the Board and President.  Mr. Silber was elected to the Board of Directors as a Class II director in September 2001.  He was appointed as Chairman of the Board in November 2001, a position he held until October 2004, and was again appointed as Chairman of the Board in March 2005.  On January 19, 2011, in connection with the appointment of Jonathan Reich and Adam Reich as Co-Chief Executive Officers of CRBCI Mr. Silber resigned the position of Chief Executive Officer and assumed the position of President.  Mr. Silber is the Chairman and CEO of Counsel Corporation, which he founded in 1979, the Chairman of Knight’s Bridge Capital Partners Inc., a wholly-owned subsidiary of Counsel that is a financial services provider, and, since 2007, the Chairman and, until December 2010, the CEO of Terra Firma Capital Corporation, a TSX Venture Exchange listed company of which Counsel owns approximately 21%.  Mr. Silber attended McMaster University and received a Bachelor of Science degree from the University of Toronto.

Hal B. Heaton, Director.  Dr. Heaton was appointed by the Board of Directors as a Class II director on June 14, 2000 to fill a Board vacancy.  Mr. Heaton has expertise in capital markets, corporate finance, emerging markets and entrepreneurial finance, all of which have relevance to the Company as it pursues varied investment and business opportunities both in North America and foreign markets.  From 1983 to the present he has been a professor of Finance at Brigham Young University and between 1988 and 1990 was a visiting professor of Finance at Harvard University.  Dr. Heaton holds a Bachelor’s degree in Computer Science/Mathematics and a Master’s in Business Administration from Brigham Young University, as well as a Master’s degree in Economics and a Ph.D. in Finance from Stanford University.

Henry Y.L. Toh, Director.  The Board of Directors elected Mr. Toh as a Class II director and as Vice Chairman of the Board of Directors in April 1992.  Mr. Toh has valuable experience as a director with a variety of technology-oriented companies, in addition to extensive hands-on experience as an executive officer of the Company.  Mr. Toh became President of CRBCI in May 1993, Acting Chief Financial Officer in September 1995 and Chairman of the Board in May 1996, and served as such through September 1996.  Mr. Toh was appointed as Chairman of the Audit Committee in March 2005.  Mr. Toh currently serves as Vice Chairman/Executive Vice President and Director of NuGen Holdings Inc. (formerly InovaChem, Inc.), a research, development and production company specializing in Axio flux electric motor systems, since January 2008, and President and CEO of Amerique Investments International Corporation since 1992.  He previously served as Executive Vice President and a director of NuGen Holdings Inc, from February 2008 to December 2009.  Mr. Toh has served as a director of iDNA, Inc., a specialized finance and entertainment company, since 1999; a director of Teletouch Communications, Inc., a retail provider of internet, cellular and paging services, since 2002; a director of Isolagen, Inc., a biotechnology company, from 2003 until 2009; and a director of American Surgical Holdings, Inc. since 2007.  Mr. Toh is a graduate of Rice University.

 
25

 
 
Samuel L. Shimer, Director.  Mr. Shimer was appointed by the Board of Directors as a Class I director on April 15, 2001 to fill a Board vacancy.  Mr. Shimer has extensive expertise in mergers and acquisitions, including those transactions that occurred while he was an officer of the Company and Counsel, where he was initially employed as a Managing Director in 1997.  He was appointed Senior Vice President, Mergers & Acquisitions and Business Development in February 2003 and he terminated his employment with the Company in February 2004 to join J. H. Whitney & Co., a private equity fund management company, where he remained as a Partner until December 2010.  Mr. Shimer is currently Managing Director of SLC Capital Partners, LP, a private equity fund that he co-founded in April 2010.  From 1991 to 1997, Mr. Shimer worked at two merchant banking funds affiliated with Lazard Frères & Co., Center Partners and Corporate Partners, ultimately serving as a Principal.  Mr. Shimer earned a Bachelor of Science in Economics degree from The Wharton School of the University of Pennsylvania, and a Master’s of Business Administration degree from Harvard Business School.

David L. Turock, Director.  Mr. Turock was appointed by the Board of Directors as a Class III director on January 16, 2008 to fill a Board vacancy.  Mr. Turock is the inventor of the Company’s VoIP Patent, and an expert on numerous technologies and their applications.  Mr. Turock began his career working with AT&T Bell Laboratories in 1982 and Bell Communications Research in 1988, and subsequently founded enhanced telephone service provider, Call Sciences.  He later formed Interexchange, which designed and operated one of the world’s largest debit card systems.  Most recently, from 2001 to 2007, Mr. Turock was Chief Technology Officer of Therap Services, a provider of informatics services to disabled patients.  Mr. Turock received his B.S. in Experimental Psychology from Syracuse University, his M.S. and Ph.D. degrees in Cognitive Psychology from Rutgers University, and his M.S.E. in Computer Science from the Moore School of the University of Pennsylvania.

Jonathan S. Reich, Co-Chief Executive Officer.  Together with his brother, Adam M. Reich, Mr. Reich was appointed Co-Chief Executive Officer of CRBCI on January 19, 2011.  Prior to this appointment, and beginning in February 2009, the Mssrs. Reich each served as Co-Chief Executive Officers of CRBCI’s subsidiary, Counsel RB, and continue to hold these positions.  Mr. Reich, who received his Juris Doctor in law from Fordham University, is an accredited lawyer and is licensed in New York and Connecticut.  He is a member of the American Bankruptcy Institute and the Turnaround Management Association, and is a former practicing bankrupt attorney who has assisted legal, financial and corporate clients with their surplus asset management needs for over twenty years.  He has extensive experience representing debtors and secured and unsecured creditors with complex asset transactions that arise from bankruptcies, plant closures and restructuring situations, and over the years has recovered millions of dollars from asset dispositions on behalf of his clients.

Adam M. Reich, Co-Chief Executive Officer.  Together with his brother, Jonathan S. Reich, Mr. Reich was appointed Co-Chief Executive Officer of CRBCI on January 19, 2011.  Prior to this appointment, and beginning in February 2009, the Mssrs. Reich each served as Co-Chief Executive Officers of CRBCI’s subsidiary, Counsel RB, and continue to hold these positions.  Mr. Reich, who received his Juris Doctor in law from the New York University School of Law, is an accredited lawyer and is licensed in New York, California and Connecticut.  He is a member of the American Bankruptcy Institute, Commercial Finance Association, Turnaround Management Association, and National Association of Bankruptcy Trustees.  He is a former practicing bankrupt attorney and has assisted legal, financial and corporate clients with their surplus asset management needs for over twenty years.  He has extensive experience representing debtors and secured and unsecured creditors with complex asset transactions that arise from bankruptcies, plant closures and restructuring situations, and over the years has recovered millions of dollars from asset dispositions on behalf of his clients.

Stephen A. Weintraub, Executive Vice President, Corporate Secretary and Chief Financial Officer.  Mr. Weintraub was appointed Senior Vice President and Secretary of CRBCI in December 2002.  Mr. Weintraub was elected as a Class I director on November 26, 2003, and served as a director until June 15, 2004.  He became an Executive Vice President in October 2005 and was appointed Chief Financial Officer in December 2005.  Mr. Weintraub joined Counsel in June 1983 as Vice President, Finance and Chief Financial Officer.  He has been and is an officer and director of Counsel and various Counsel subsidiaries.  He has been Secretary of Counsel since 1987 and was appointed Senior Vice President in 1989.  In December 2004, Mr. Weintraub was promoted to Executive Vice President and Secretary and became Chief Financial Officer again in December 2005.  Mr. Weintraub received a Bachelor’s degree in Commerce from the University of Toronto in 1969, qualified as a Chartered Accountant with Clarkson, Gordon (now Ernst & Young LLP) in 1972 and received his law degree (LL.B.) from Osgoode Hall Law School, York University in 1975.

Each officer of CRBCI has been appointed by the Board of Directors and holds his office at the discretion of the Board of Directors.

 
26

 
 
With one exception, no director or officer of our company has, during the last ten years: (i) been subject to or involved in any legal proceedings described under Item 401(f) of Regulation S-K, including, without limitation, any criminal proceeding (excluding traffic violations or similar misdemeanors) or (ii) been a party to a civil proceeding of a judicial or administrative body of competent jurisdiction and as a result of such proceeding was or is subject to a judgment, decree or final order enjoining future violations of, or prohibiting or mandating activities subject to, United States federal or state securities laws, or finding any violations with respect to such laws.  Mr. Henry Toh, in his capacity as a director of American Surgical Holdings, Inc., was named in a Class Action filed in Delaware on January 14, 2011.
 
Section 16(a) Beneficial Ownership Reporting Compliance
 
Section 16(a) of the Exchange Act requires our officers and directors, and persons who own more than ten percent of a registered class of our equity securities, to file reports of ownership and changes in ownership of equity securities of CRBCI with the SEC.  Officers, directors, and greater than ten percent stockholders are required by the SEC regulation to furnish us with copies of all Section 16(a) forms that they file.

Based solely upon a review of Forms 3 and Forms 4 furnished to us pursuant to Rule 16a-3 under the Exchange Act during our most recent fiscal year, and Forms 5 with respect to our most recent fiscal year, we believe that all such forms required to be filed pursuant to Section 16(a) were timely filed as necessary, by the executive officers, directors and security holders required to file same during the fiscal year ended December 31, 2010.

Code of Ethics

CRBCI has adopted a Code of Ethics that applies to its employees, including its principal executive, financial and accounting officers or persons performing similar functions.  The CRBCI Code of Conduct (the “Code”) can be found on the Company’s website at http://www.counselrb.com (follow Corporate Governance link to Governance Documents tab).  The Company intends to satisfy the disclosure requirements under Item 5.05 of Form 8-K regarding any amendments to, or waivers from, a provision of the Code that applies to its principal executive, financial and accounting officers or persons performing similar functions by posting such information on its website at the website address set forth above.

 
27

 
 
Corporate Governance

Board Leadership and Risk Oversight
CRBCI is a small organization, with a market capitalization at December 31, 2010 of approximately $3.1 million, of which approximately 79.5% was owned by its parent, Counsel.  Mr. Allan Silber is the Chairman and CEO of Counsel, and he also assumes the roles of Chairman and President at CRBCI.  Also, as noted above, Mr. Stephen Weintraub has the role of CFO for both Counsel and CRBCI.  Consequently, CRBCI’s operations are largely directed by Counsel.  In prior years, prior to CRBCI’s success with its asset liquidation and patent licensing businesses, CRBCI’s operations were principally funded by Counsel.  The Board does not have a lead independent director since, given the relatively modest size and scale of the Company’s operations, the Company believes the Board, as a whole, effectively oversees the strategic priorities of the Company and its operations.  It should also be noted that Mssrs. Jonathan and Adam Reich, Co-CEOs of CRBCI, also assume the roles of Co-CEOs of Counsel RB.

CRBCI’s operations are modest and it has few employees, as detailed in Item 11 of this report, and therefore requires limited oversight by the Board.  As such, the Board meets quarterly to review and approve the Company’s operating results.  It meets annually to review and approve the Company’s strategy and budget.  Material matters such as acquisitions and dispositions, investments and business initiatives are approved by the full Board.

Board Meetings and Committees
The Board held six meetings during the fiscal year ended December 31, 2010.  The Board has designated two standing committees:  the Audit Committee and the Compensation Committee.  CRBCI does not have a nominating or a corporate governance committee.  However, corporate governance functions are included in the Audit Committee Charter, and Board nominations are considered by the full Board.  There are no specific criteria for Director nominees, and the Company does not specifically consider diversity with respect to the selection of its Board nominees.  Given the combination of the Company’s limited operations and its majority ownership by Counsel, the Company believes that it would have difficulty identifying and attracting a diverse selection of candidates.  To date, it has been deemed most effective to nominate and appoint individuals who are either former employees with detailed knowledge of the business, such as Mr. Toh and Mr. Shimer, or individuals with expertise that is unique to the Company’s operations, such as Mr. Turock.  There has been no material change in the procedures by which our shareholders may recommend nominees to our Board since such procedures were adopted and implemented.

Audit Committee
The Audit Committee is responsible for making recommendations to the Board of Directors concerning the selection and engagement of independent accountants and for reviewing the scope of the annual audit, audit fees, results of the audit and independent registered public accounting firm’s independence.  The Audit Committee is also responsible for corporate governance, and reviews and discusses with management and the Board of Directors such matters as accounting policies, internal accounting controls and procedures for preparation of financial statements.  Its membership is currently comprised of Mr. Toh (Chairman) and Mr. Heaton, both independent directors.  The Audit Committee held five meetings during the fiscal year ended December 31, 2010.  On June 9, 2000, the Board of Directors approved CRBCI’s Audit Committee Charter, which was subsequently revised and amended on July 10, 2001 and again on February 12, 2003 in order to incorporate certain updates in light of the most recent regulatory developments, including the Sarbanes-Oxley Act of 2002.  A copy of the current Audit Committee Charter is available on the Company’s website www.counselrb.com.

Audit Committee Financial Expert
The Board has determined that Mr. Henry Y.L. Toh is an Audit Committee financial expert as defined by Item 407(d) of Regulation S-K and is “independent” as such term is defined under Nasdaq Marketplace Rules and applicable federal securities laws and regulations.

 
28

 

Item 11. Executive Compensation.

Compensation Discussion and Analysis

Summary

This report is the Compensation Discussion and Analysis of our executive compensation program and an explanation and analysis of the material elements of total compensation paid to each of our named executive officers.  Included in the discussion is an overview and description of:

 
our compensation philosophy and program;
 
the objectives of our compensation program;
 
what our compensation program is designed to reward;
 
each element of compensation;
 
why we choose to pay each element;
 
how we determine the amount for each element; and
 
how each compensation element and our decision regarding that element fit into our overall compensation objectives and affect decisions regarding other elements, including the relationship between our compensation objectives and our overall risk management.

In reviewing our executive compensation program, we considered issues pertaining to policies and practices for allocating between long-term and currently paid compensation and those policies for allocating between cash and non-cash compensation.  We also considered the determinations for granting awards, performance factors for our company and our named executive officers, and how specific elements of compensation are structured and taken into account in making compensation decisions.  Questions related to the benchmarking of total compensation or any material element of compensation, the tax and accounting treatment of particular forms of compensation and the role of executive officers (if any) in the total compensation process also are addressed where appropriate.  In addition to the named executive officers discussed below, the Company has only five salaried employees.  As their compensation does not contain any elements that promote risk-taking, and thus could not have a material adverse effect on the Company, this compensation requires no discussion.

General Executive Compensation Philosophy

We compensate our executive management through a combination of base salaries, merit based performance bonuses, and long-term equity compensation that is designed to be competitive with similarly situated companies within our industry.  During 2009 and until December 10, 2010, the Counsel RB Co-Chief Executive Officers (“Co-CEOs”) collectively owned 25% of Counsel RB and were entitled to earn 25% of its profits.  Effective December 13, 2010 these ownership interests were exchanged for 3,242,000 common shares of CRBCI.  Subsequently, on January 19, 2011, the Co-CEOs also became Co-CEOs of CRBCI, and entered into employment agreements with CRBCI containing provisions for ongoing merit based performance bonuses and an equity compensation award of options to purchase common shares of CRBCI.

Given that Counsel RB’s operations are the Company’s primary business, we believe that the above compensation plans are structured to align management’s incentives with the long-term interests of our shareholders, and to maximize profitability and shareholder value.

We adhere to the following compensation policies, which are designed to support the achievement of our business strategies:

 
• 
Our executive compensation program should strengthen the relationship between compensation, both cash and equity-based, and performance by emphasizing variable, at-risk earnings that are dependent upon the successful achievement of specified corporate, business unit and individual performance goals.

 
• 
A portion of each executive’s total compensation should be comprised of long-term, at-risk compensation to focus management on the long-term interests of shareholders.

 
• 
An appropriately balanced mix of at-risk incentive cash and equity-based compensation aligns the interests of our executives with that of our shareholders. The equity-based component promotes a continuing focus on building profitability and shareowner value.

 
• 
Total compensation should enhance our ability to attract, retain, motivate and develop knowledgeable and experienced executives upon whom, in large part, our successful operation and management depends.
 
 
29

 
 
 
Total compensation should encourage our executives to ensure that the risks involved in any business decision align that executive’s potential personal return with maximal return to shareholders.
 
We set compensation by establishing targeted compensation levels for each senior executive and allocating that compensation amount, where appropriate, among base salary, merit-based compensation bonuses, and long-term equity compensation.  At the highest and most senior levels, we offer incentive based compensation to reward company wide performance and to maximize future profitability, stock appreciation and shareholder value.

A core principle of our executive compensation program is the belief that compensation paid to executive officers should be closely aligned with our near- and long-term success, while simultaneously giving us the flexibility to recruit and retain the most qualified key executives.  Our compensation program is structured so that it is related to our stock performance and other factors, direct and indirect, all of which may influence long-term shareholder value and our success.

We utilize each element of executive compensation to ensure proper balance between our short- and long-term success as well as between our financial performance and shareholder return. In this regard, we believe that the executive compensation program for our named executive officers is consistent with our financial performance and the performance of each named executive officer.  We do not utilize the services of compensation consultants in determining or recommending executive or director compensation.

Our Named Executive Officers for 2010

This analysis focuses on the compensation paid to our “named executive officers,” which is a defined term generally encompassing all persons that served as our principal executive officer or principal financial officer at any time during the fiscal year, as well as certain other highly paid executive officers serving in such positions at the end of the fiscal year.  During 2010, our named executive officers consisted of the following officers:

Allan C. Silber - our Chairman of the Board.  Mr. Silber also held the position of Chief Executive Officer during 2010.  As discussed above, on January 19, 2011, Messrs. Reich were appointed to the position of Co-CEOs, at which time Mr. Silber resigned as Chief Executive Officer and was appointed President.  Mr. Silber is the Chairman and CEO of Counsel Corporation, our majority shareholder, which he founded in 1979.

Stephen A. Weintraub – our Executive Vice President, Corporate Secretary and Chief Financial Officer since December 2005. Mr. Weintraub is the Executive Vice President, Corporate Secretary and Chief Financial Officer of Counsel Corporation.

Jonathan Reich – one of two Co-CEOs.  As discussed above, Mr. Reich was appointed to this position on January 19, 2011.  He formerly served, and continues to serve, as Co-CEO of Counsel RB.  Counsel RB was formed, and Mr. Reich became Co-CEO, in the first quarter of 2009.

Adam Reich – one of two Co-CEOs.  As discussed above, Mr. Reich was appointed to this position on January 19, 2011.  He formerly served, and continues to serve, as Co-CEO of Counsel RB.  Counsel RB was formed, and Mr. Reich became Co-CEO, in the first quarter of 2009.

Mr. Silber, Mr. Weintraub and Messrs. Reich were our named executive officers during 2010 and 2009.  During 2008, our named executive officers were Mr. Silber and Mr. Weintraub, who held the positions described above.

During 2010 and 2009, Mr. Silber and Messrs. Reich were paid employees.  During 2008, with the exception of Mr. Silber, our company had no paid employees.

Elements of Compensation

Base Salaries

Unless specified otherwise in their employment agreements, the base salaries of the Company’s named executive officers are evaluated annually.  In evaluating appropriate pay levels and salary increases for such officers, the Compensation Committee considers achievement of the Company’s strategic goals, level of responsibility, individual performance, and internal equity and external pay practices.  In addition, the Committee considers the scope of the executives’ responsibilities, taking into account competitive market compensation for similar positions, as well as seniority of the individual, our ability to replace the individual and other primarily judgmental factors deemed relevant by our Board of Directors and Compensation Committee.

 
30

 
 
Base salaries are reviewed annually by our Compensation Committee and our Board, and adjusted from time to time pursuant to such review or at other appropriate times, in order to align salaries with market levels after taking into account individual responsibilities, performance and experience.

During 2010 and 2009, the Company’s CEO and the two Counsel RB Co-CEOS were paid employees.  During 2008, with the exception of the CEO, the Company had no paid employees.  As noted above, the Company’s CEO during 2010 and 2009, Mr. Allan Silber, is also the CEO of Counsel.  Mr. Silber’s annual salary of $137.5, and a discretionary bonus of up to 100% of his base salary, have been fixed at these amounts since 2005.

Mr. Jonathan Reich and Mr. Adam Reich each earn base salaries of $450, which amount has remained unchanged since it was negotiated in the first quarter of 2009.  As Co-CEOs of Counsel RB, they were not eligible for discretionary bonuses.  As Co-CEOs of CRBCI, they are eligible for discretionary bonuses of up to 50% of the base salary.

Bonuses

Bonus awards are designed to focus management attention on key operational goals for the current fiscal year.  Our company executives may earn a bonus based upon achievement of their specific operational goals and achievement by the Company or business unit of its financial targets.  Cash bonus awards are distributed based upon the Company and the individual meeting performance criteria objectives.  The final determination for all bonus payments is made by our Compensation Committee.

We set bonuses based on certain performance measures in order to maximize and align the interests of our officers with those of our shareholders.  Although performance goals are generally standard for determining bonus awards, we have and will consider additional performance rating goals when evaluating the bonus compensation structure of our executive management.  In addition, in instances where the employee has responsibility over a specific area, performance goals may be directly tied to the overall performance of that particular area.

As noted above, Mr. Silber is entitled to a bonus of up to 100% of his annual salary.  Since assuming the role of CEO, he has received a bonus in 2010 and 2008.  In 2010, in addition to his discretionary bonus of $137.5, Mr. Silber was awarded a special bonus of $137.5 in recognition of his efforts in establishing the Company’s asset liquidation business.  In 2008, Mr. Silber received his discretionary bonus of $137.5.

Also as noted above, Messrs. Reich are entitled to a bonus of up to 50% of their annual salaries.  This bonus requirement becomes effective in 2011.  Each of Messrs. Reich received a bonus of $100 upon accepting the position of Co-CEO of CRBCI.

As the bonuses described above can only be awarded at the discretion of the Compensation Committee, they do not encourage inappropriate risk-taking on the part of Mr. Silber or Messrs. Reich, nor represent a risk to the Company.

Equity Incentive Grants

In keeping with our philosophy of providing a total compensation package that favors at-risk components of pay, long-term incentives can comprise a significant component of our executives’ total compensation package. These incentives are designed to motivate and reward executives for maximizing shareowner value and encourage the long-term employment of key employees. Our objective is to provide executives with above-average, long-term incentive award opportunities.

We view stock options as our primary long-term compensation vehicle for our executive officers. Stock options generally are granted at the prevailing market price on the date of grant and will have value only if our stock price increases. Grants of stock options generally are based upon our performance, the level of the executive’s position, and an evaluation of the executive’s past and expected future performance.  We do not time or plan the release of material, non-public information for the purpose of affecting the value of executive compensation.

We believe that stock options will continue to be used as the predominant form of stock-based compensation.  The most recent option grants occurred in January 2011, when Mssrs. Reich were each granted 625,000 options to purchase common stock.  All of these options have an exercise price that is between twelve and fourteen times the market price on the grant date.  Prior to these grants, in 2006 Mr. Silber, as well as other employees of Counsel who receive no direct compensation from the Company, were awarded a total of 455,000 options to purchase common stock.

 
31

 
 
Other Benefits

The only additional benefits provided to employees at this time are the payment of health insurance premiums, Social Security and Medicare for the Co-CEOs.  There are no pension, severance or change in control benefits.

Tax Considerations

Section 162(m) of the Internal Revenue Code places limits on the deductibility of compensation in excess of $1 million paid to executive officers of publicly held companies.  The Compensation Committee does not believe that Section 162(m) has had or will have any impact on the compensation policies followed by the Company.

 
32

 
 
Executive Compensation Process

Compensation Committee

Our Compensation Committee oversees and approves all compensation and awards made to the President.  The Compensation Committee reviews the performance and compensation of the President (the former Chief Executive Officer), without his participation, and establishes his compensation accordingly, with consultation from others when appropriate.  For the remaining executive officers, at this time consisting of the Co-CEOs, the Chairman of the Board reviews performance and determines the amount of any bonus to be awarded.

Executive and Director Compensation – Tabular Disclosure

Please note that all amounts reported in the tables below, and the accompanying notes, are in dollars, rounded to the nearest dollar.

Summary Compensation Table

The following table sets forth the aggregate compensation for services rendered during the fiscal years ended December 31, 2010, 2009 and 2008 by our Named Executive Officers. We had no other executive officers whose compensation exceeded $100,000 during 2010.  As discussed below and in Item 13, certain employees of Counsel provide services to CRBCI, and compensation for those services is provided and paid for under the terms and provisions of a Management Services Agreement (the “Agreement”) entered into between Counsel and CRBCI.

Name and Principal Position
 
Year
 
Salary
   
Bonus
   
Option
Awards1
   
All Other
Compensation2
   
Total
 
Allan Silber
 
2010
  $ 137,500     $ 275,000     $ 19,581     $     $ 432,081  
Chairman of the Board and Chief
 
2009
    137,500             33,563             171,063  
Executive Officer
 
2008
    137,500       137,500       33,563             308,563  
                                             
Stephen Weintraub
 
2010
                7,220             7,220  
Executive Vice President, Chief
 
2009
                12,375             12,375  
Financial Officer and Corporate Secretary
 
2008
                12,375             12,375  
                                             
Jonathan Reich
 
2010
    450,000                   31,906       481,906  
Co-CEO, Counsel RB
 
2009
    393,750                   27,068       420,818  
   
2008
    N/A       N/A       N/A       N/A       N/A  
                                             
Adam Reich
 
2010
    450,000                   31,524       481,524  
Co-CEO, Counsel RB
 
2009
    393,750                   27,081       420,831  
   
2008
    N/A       N/A       N/A       N/A       N/A  
 
1 The amounts reported in this column relate solely to compensation expense associated with options issued in 2006.  Please see the “Grants of Plan-Based Awards for the Year Ended December 31, 2006” table, as included in our Annual Report on Form 10-K for the year ended December 31, 2006, for details of these options.
 
2 The amounts reported in this column relate solely to health insurance premiums, Social Security and Medicare.
 
Grants of Plan-Based Awards

There were no grants of plan-based awards to the Chief Executive Officer, the Chief Financial Officer or the Counsel RB Co-CEOs during the years ended December 31, 2008, 2009 and 2010.

Allan Silber, the President of CRBCI, is an employee of Counsel.  As President of CRBCI, he is entitled to an annual salary of $137,500, plus a discretionary bonus of up to 100% of the base salary.  In 2010, in addition to his full discretionary bonus entitlement, Mr. Silber was awarded a special bonus of $137,500 in recognition of his efforts in establishing the Company’s asset liquidation business.  No bonus was awarded for 2009.  Mr. Silber was awarded his full bonus entitlement in 2008 in recognition of his involvement in the successful prosecution and settlement of the Company’s patent infringement litigation.

 
33

 
 
Stephen Weintraub, the CFO of CRBCI, is an employee of Counsel.  Mr. Weintraub has no employment contract with CRBCI.  The cost of Mr. Weintraub’s services to CRBCI is a component of the Agreement between CRBCI and Counsel.  The Agreement was first entered into in December 2004 and successive Agreements have been entered into in each subsequent year.  Under the terms of the Agreement, CRBCI agrees to pay Counsel for ongoing services provided to CRBCI 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 CRBCI.  For the years ended December 31, 2010, 2009 and 2008, the cost was $360,000.  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 CRBCI, 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.  The Company expects that Counsel will continue to provide these services in 2011 on the same cost basis.

Outstanding Equity Awards at Fiscal Year-End

The following table sets forth the detail of outstanding equity awards, as regards exercisable and unexercisable options, at December 31, 2010.

Name
 
Number of
Securities
Underlying
Unexercised
Options: 
Exercisable
   
Option
Exercise
Price($/Sh)
 
Option
Expiration
Date
 
Allan Silber
    225,000     $ 0.66  
August 1, 2013
 
Allan Silber
      75,000       1.11  
August 1, 2013
 
Stephen Weintraub
      75,000       1.01  
August 1, 2013
 
                     
1 The options vest 25% annually beginning on the first anniversary of the grant date, which was August 1, 2006 for all options reported in this table.
 
There were no adjustments or changes in the terms of any of the Company’s equity awards in 2010.

Compensation of Directors

The following table sets forth the aggregate compensation for services rendered during the fiscal year ended December 31, 2010 by each person serving as a director.

Name
 
Fees Earned or Paid in Cash
   
Option Awards1
   
Total
 
Henry Y.L. Toh
  $ 46,000     $ 4,074     $ 50,074  
Hal B. Heaton
    38,000       4,074       42,074  
Samuel L. Shimer
    26,000       4,074       30,074  
David L. Turock
    26,000       2,717       28,717  
                         
1 The options vest 25% annually beginning on the first anniversary of the grant date.  The amount reported in this column relates to compensation expense associated with options issued in each year from 2006 to 2010.  The table below provides information regarding the current year compensation expense and grant date fair value of each option award underlying the reported 2010 compensation expense.
 
 
34

 

 
DETAIL OF DIRECTOR OPTION AWARDS EXPENSE
 
Name
 
Grant Date
 
Number of
Options
Awarded
   
Grant Date Fair
Value of Option
Award
   
2010 Expense
 
Henry Y. L. Toh
 
April 3, 2006
    10,000     $ 3,300     $ 207  
   
April 2, 2007
    10,000       4,600       1,150  
   
March 31, 2008
    10,000       8,700       2,175  
   
March 31, 2009
    10,000       1,500       375  
   
March 31, 2010
    10,000          800       167  
                        $ 4,074  
                             
Hal B. Heaton
 
April 3, 2006
    10,000     $ 3,300     $ 207  
   
April 2, 2007
    10,000       4,600       1,150  
   
March 31, 2008
    10,000       8,700       2,175  
   
March 31, 2009
    10,000       1,500       375  
   
March 31, 2010
    10,000          800       167  
                        $ 4,074  
                             
Samuel L. Shimer
 
April 3, 2006
    10,000     $ 3,300     $ 207  
   
April 2, 2007
    10,000       4,600       1,150  
   
March 31, 2008
    10,000       8,700       2,175  
   
March 31, 2009
    10,000       1,500       375  
   
March 31, 2010
    10,000          800       167  
                        $ 4,074  
                             
David L. Turock
 
March 31, 2008
    10,000       8,700     $ 2,175  
   
March 31, 2009
    10,000       1,500       375  
   
March 31, 2010
    10,000          800       167  
                        $ 2,717  

Each director who is not employed by CRBCI or by Counsel receives a $20,000 per year cash retainer, $1,000 per meeting attended in person or by telephone, and an annual grant of stock options to purchase 10,000 shares of common stock, which is awarded on March 31 or the next business day.  In addition, the Chairman of the Audit Committee receives a cash retainer of $10,000 per year, Audit Committee members who are not the chair receive a cash retainer of $5,000 per year, and other committee chairpersons receive an annual cash retainer of $2,000 per year.  The directors are also eligible to receive options under our stock option plans at the discretion of the Board of Directors.  No discretionary stock options were awarded during 2010, 2009 or 2008.

Compensation Committee Interlocks and Insider Participation

The Compensation Committee reviews and approves the compensation for executive employees.  The Compensation Committee Charter was first approved by CRBCI’s Board of Directors on February 12, 2003 and was subsequently revised on December 9, 2005.  The Compensation Committee Charter is available on the Company’s website www.counselrb.com.

According to the Compensation Committee’s charter, the majority of the members must be independent directors.  The membership is currently comprised of Messrs. Heaton (Chairman) and Toh, both independent directors.  The Compensation Committee held no meetings during the fiscal year ended December 31, 2010.

No Compensation Committee members or other directors served:

 
·  
as a member of the compensation committee of another entity which has had an executive officer who has served on our compensation committee;
 
·  
as a director of another entity which has had an executive officer who has served on our compensation committee; or
 
·  
as a member of the compensation committee of another entity which has had an executive officer who has served as one of our directors.

 
35

 
 
Compensation Committee Report

The following paragraphs in this section constitute information required pursuant to Section 407(e)(5) of Regulation S-K promulgated under the Securities Act. In accordance with these rules, the information so provided is “”furnished”, not “filed” with the SEC.

1.           The Compensation Committee has reviewed and discussed the Compensation Discussion and Analysis (“CD&A”) set forth above with the management of the Company; and

2.           Based on the review and discussions, the Compensation Committee recommended to the Board of Directors that the CD&A be included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2010, and, as applicable, the Company’s proxy statement.

By the Compensation Committee:
 
/s/ Hal. B. Heaton
 
Hal B. Heaton, Chairman

/s/ Henry Y.L. Toh
 
Henry Y. L. Toh

Date:  March 31, 2011

 
36

 
 
Stock Option Plans

At December 31, 2010, the Company had six stock-based employee compensation plans, which are described below.  All share amounts disclosed below reflect the effect of the 1-for-20 reverse stock split which was approved by the stockholders on November 26, 2003.

1995 Director Stock Option and Appreciation Rights Plan
The 1995 Director Stock Option and Appreciation Rights Plan (the “1995 Director Plan”) provides for the issuance of incentive stock options, non-qualified stock options and stock appreciation rights (“SARs”) to directors of the Company up to 12,500 shares of common stock (subject to adjustment in the event of stock dividends, stock splits, and other similar events).  If any incentive option, non-qualified option or SAR terminates prior to exercise thereof and during the duration of the 1995 Director Plan, the shares of common stock as to which such option or right was not exercised will become available under the 1995 Director Plan for the grant of additional options or rights to any eligible director.  Each option is immediately exercisable for a period of ten years from the date of grant.  The Company has 12,500 shares of common stock reserved for issuance under the 1995 Director Plan.  As of December 31, 2010 and 2009, there were no options outstanding under the 1995 Director Plan.

1995 Employee Stock Option and Appreciation Rights Plan
The 1995 Employee Stock Option and Appreciation Rights Plan (the “1995 Employee Plan”) provides for the grant of incentive stock options, non-qualified stock options, and SARs of up to 20,000 shares of common stock (subject to adjustment in the event of stock dividends, stock splits, and other similar events).  Directors of the Company are not eligible to participate in the 1995 Employee Plan.  The 1995 Employee Plan provides for the grant of stock options, which qualify as incentive stock options under Section 422 of the Internal Revenue Code, to be issued to officers who are employees and other employees, as well as for the grant of non-qualified options to be issued to officers, employees and consultants.  In addition, SARs may be granted in conjunction with the grant of incentive and non-qualified options.  To the extent that an incentive option or non-qualified option is not exercised within the period of exercisability specified therein, it will expire as to the then unexercisable portion.  If any incentive option, non-qualified option or SAR terminates prior to exercise thereof and during the duration of the 1995 Employee Plan, the shares of common stock as to which such option or right was not exercised will become available under the 1995 Employee Plan for the grant of additional options or rights to any eligible employee.  The shares of common stock subject to the 1995 Employee Plan may be made available from either authorized but unissued shares, treasury shares or both. The Company has 20,000 shares of common stock reserved for issuance under the 1995 Employee Plan.  As of December 31, 2010 and 2009, there were no options outstanding under the 1995 Employee Plan.

1997 Recruitment Stock Option Plan
In October 2000, the stockholders of the Company approved an amendment of the 1997 Recruitment Stock Option Plan (the “1997 Plan”) which provides for the issuance of incentive stock options, non-qualified stock options and SARs up to an aggregate of 370,000 shares of common stock (subject to adjustment in the event of stock dividends, stock splits, and other similar events).  The price at which shares of common stock covered by the option can be purchased is determined by the Company’s Board of Directors; however, in all instances the exercise price is never less than the fair market value of the Company’s common stock on the date the option is granted.

As of December 31, 2010, there were options to purchase 234,163 shares (2009 – 236,111 shares) of the Company’s common stock outstanding under the 1997 Plan.  225,000 options with an exercise price of $0.66 per share were vested at December 31, 2010 (2009 – 168,750).  9,163 options with exercise prices of $1.40 to $15.62 per share were vested at December 31, 2010 (2009 – 11,111 options with exercise prices of $1.40 to $111.26 per share).  The options with an exercise price of $0.66 must be exercised within seven years of grant date and can only be exercised while the option holder is an employee of the Company.  The remaining options must be exercised within ten years of grant date and can only be exercised while the option holder is an employee of the Company.  The Company has not awarded any SARs under the 1997 Plan.  During 2010, no options to purchase shares of common stock were issued, and 1,948 options expired.  During 2009, no options to purchase shares of common stock were issued, and 1,250 options expired.  There were no exercises during 2010 or 2009.

2000 Employee Stock Purchase Plan
The 2000 Employee Stock Purchase Plan (the “Stock Purchase Plan”) provides for the purchase of common stock, in the aggregate, up to 125,000 shares.  The purpose of the Stock Purchase Plan is to provide incentives for all eligible employees of CRBCI (or any of its subsidiaries), who have been employees for at least three months, to participate in stock ownership of CRBCI by acquiring or increasing their proprietary interest in CRBCI.  The Stock Purchase Plan is designed to encourage employees to remain in the employ of CRBCI.  It is the intention of CRBCI to have the Stock Purchase Plan qualify as an “employee stock purchase plan” within the meaning of Section 423 of the Internal Revenue Code, as amended.  This plan allows all eligible employees of the Company to have payroll withholding of 1 to 15 percent of their wages.  The amounts withheld during a calendar quarter are then used to purchase common stock at a 15 percent discount off the lower of the closing sale price of the Company’s stock on the first or last day of each quarter.  This plan was effective beginning the third quarter of 2000.  The Company issued 1,726 shares to employees based upon payroll withholdings during 2001.  There have been no issuances since 2001.

 
37

 
 
2003 Stock Option and Appreciation Rights Plan
In November 2003, the stockholders of the Company approved the 2003 Stock Option and Appreciation Rights Plan (the “2003 Plan”) which provides for the issuance of incentive stock options, non-qualified stock options and SARs up to an aggregate of 2,000,000 shares of common stock (subject to adjustment in the event of stock dividends, stock splits, and other similar events).  The price at which shares of common stock covered by the option can be purchased is determined by the Company’s Board of Directors or a committee thereof; however, in the case of incentive stock options the exercise price shall not be less than the fair market value of the Company’s common stock on the date the option is granted.  As of December 31, 2010, there were options to purchase 493,250 shares (2009 - 678,250 shares) of the Company’s common stock outstanding under the 2003 Plan.  The outstanding options vest over four years at exercise prices ranging from $0.08 to $2.19 per share.  During 2010, 40,000 options (2009 – 40,000 options) were granted.  During 2010, 225,000 options to purchase shares of common stock were forfeited or expired (2009 – 0).  There were no options exercised during 2010 and 2009, and no SARs have been issued under the 2003 Plan.

2010 Non-Qualified Stock Option Plan
In the fourth quarter of 2010, the Company’s Board of Directors approved the 2010 Non-Qualified Stock Option Plan (the “2010 Plan”) to induce certain key employees of the Company or any of its subsidiaries who are in a position to contribute materially to the Company’s prosperity to remain with the Company, to offer such persons incentives and rewards in recognition of their contributions to the Company’s progress, and to encourage such persons to continue to promote the best interests of the Company.  The Company has reserved 1,250,000 shares of common stock of the Company (subject to adjustment under certain circumstances) for issuance or transfer upon exercise of options to be granted under the 2010 Plan.  Options may be issued under the 2010 Plan to any key employees or consultants selected by the Company’s Board of Directors (or a committee appointed by the board).  Each option granted under the 2010 Plan will be evidenced by a stock option agreement.  Options may not be granted with an exercise price less than the fair market value of the common stock of the Company as of the day of the grant.  Options granted pursuant to the plan are subject to limitations on transfer and execution and may be issued subject to vesting conditions.  Options may also be forfeited in certain circumstances.  During 2010, no options were granted under the 2010 Plan.

 
38

 

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.

Please see Item 5 for detail of the Company’s securities authorized for issuance under equity compensation plans.

The following table sets forth information regarding the ownership of our common stock as of March 15, 2011 by: (i) each director; (ii) each of the Named Executive Officers in the Summary Compensation Table; (iii) all executive officers and directors of the Company as a group; and (iv) all those known by us to be beneficial owners of more than five percent of our common stock.  As of March 15, 2011, there are 26,960,080 shares of common stock and 592 shares of Series N Preferred stock issued and outstanding.  Each share of Series N Preferred Stock is entitled to 40 votes.

Name and Address of 
Beneficial Owner (1)
 
Number of Shares
Beneficially Owned
(2)
   
Percentage
of Common Stock
Beneficially Owned
 
Allan C. Silber
    300,000 (3)     1 %
Adam M. Reich
    1,621,000       5.9 %
Jonathan S. Reich
    1,621,000       5.9 %
Hal B. Heaton
    58,500 (4)     * %
Henry Y.L. Toh
    57,698 (4)     * %
Samuel L. Shimer
    55,000 (5)     * %
David L. Turock
    15,000 (4)     * %
Stephen A. Weintraub
    75,000 (6)     * %
Counsel Corporation and subsidiaries
1 Toronto Street  Suite 700
Toronto, Ontario M5C 2V6
    20,644,481       77 %
All Executive Officers and Directors as a Group (6 people)
    3,803,198       14 %

 
*
Indicates less than one percent

 
(1)
Unless otherwise noted, all listed shares of common stock are owned of record by each person or entity named as beneficial owner and that person or entity has sole voting and dispositive power with respect to the shares of common stock owned by each of them.  All addresses are c/o Counsel RB Capital Inc. unless otherwise indicated.

 
(2)
As to each person or entity named as beneficial owners, that person’s or entity’s percentage of ownership is determined based on the assumption that any options or convertible securities held by such person or entity which are exercisable or convertible within 60 days have been exercised or converted, as the case may be.

 
(3)
Represents shares of common stock issuable pursuant to options.  Mr. Silber is Chairman, Chief Executive Officer and President of Counsel, and a beneficial owner of approximately 7,855,776 shares or 9.9% of the outstanding common stock of Counsel.  Mr. Silber disclaims beneficial ownership of the shares of CRBCI’s common stock beneficially owned by Counsel.

 
(4)
Represents shares of common stock issuable pursuant to options.

 
(5)
Represents shares of common stock issuable pursuant to options.  Mr. Shimer is a beneficial owner of 819,011 shares in Counsel, which represents a 1.1% beneficial ownership of Counsel. Mr. Shimer disclaims beneficial ownership of the shares of CRBCI’s common stock beneficially owned by Counsel.

 
(6)
Represents shares of common stock issuable pursuant to options.  Mr. Weintraub is Executive Vice President, Secretary and Chief Financial Officer of Counsel and a beneficial owner of 516,901 shares in Counsel, which represents less than 1% beneficial ownership of Counsel.  Mr. Weintraub disclaims beneficial ownership of the shares of CRBCI’s common stock beneficially owned by Counsel.

There are no arrangements, known to the Company, including any pledge by any person of securities of the registrant or any of its parents, the operation of which may at a subsequent date result in a change of control of the registrant.

 
39

 

Item 13. Certain Relationships and Related Transactions, and Director Independence.

Transactions with Management and Others

See Item 11 hereof for descriptions of the terms of employment, consulting and other agreements between the Company and certain officers, directors and other related parties.

Transactions with Counsel

Collateralized Loan Agreement
At December 31, 2010 the Company had a receivable from Counsel in the amount of $392, as compared to a loan payable of $1,564 at December 31, 2009 (the “Counsel Loan”).  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, CRBCI and Counsel have entered into successive annual management services agreements (the “Agreement”).  Under the terms of the Agreement, CRBCI agrees to pay Counsel for ongoing services provided to CRBCI 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 CRBCI.  For the years ended December 31, 2010, 2009 and 2008, the cost was $360.  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 CRBCI, 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.  The Company expects that Counsel will continue to provide these services in 2011 on the same cost basis.

Transactions with Other Related Parties

On November 30, 2010, the Company acquired the 25% non-controlling interest in Counsel RB from Counsel RB’s Co-CEOs.  This transaction is discussed in more detail in Note 2 of the audited consolidated financial statements.

The Company leases office space in White Plains, NY, as part of the operations of Counsel RB.  The building is owned by an entity that is owned by Jonathan Reich, a Co-CEO of Counsel RB and the Company.  During 2010 and 2009, the Company paid rent of $74 and $62, respectively, to the entity.

Director Independence

As an OTC-Bulletin Board company, we elect to comply with the “independence” requirements under the Nasdaq Marketplace Rules.  Pursuant to the requirements, the Board undertook its annual review of director independence.  During this review, the Board considered transactions and relationships between each director or any member of his or her immediate family and CRBCI and its subsidiaries and affiliates.  The purpose of this review was to determine whether any such relationships or transactions existed that were inconsistent with a determination that the director is independent.   As a result of this review, the Board affirmatively determined that during 2010 Mr. Toh, Mr. Heaton, Mr. Shimer and Mr. Turock are independent for purposes of the independence requirements as defined under the Nasdaq Marketplace Rules.  The Board further determined that each of the foregoing directors met the independence requirements needed to serve on the Board committees for which they serve.

 
40

 
 
Item 14. Principal Accountant Fees and Services.

Fees paid or expected to be paid to Deloitte & Touche LLP, our independent registered chartered accountants for the fiscal periods ended December 31, 2010 and 2009, are set forth below.

   
Year Ended December 31,
 
 
 
2010
   
2009
 
Audit fees
  $ 108     $ 88  
Audit-related fees
           
Tax fees
           
All other fees
           
Total
  $ 108     $ 88  

Audit Fees

Audit fees are for professional services for the audit of our annual financial statements for the years ended December 31, 2009 and 2010, the reviews of the financial statements included in our quarterly reports on Form 10-Q for the years ended December 31, 2009 and 2010, and services in connection with our statutory and regulatory filings for the years ended December 31, 2009 and 2010.

Audit-Related Fees

Audit related fees are for assurance and related services that are reasonably related to the audit and reviews of our financial statements for the years ended December 31, 2009 and 2010, exclusive of the fees disclosed as Audit Fees above.  These fees include benefit plan audits and accounting consultations.

Tax Fees

Tax fees are for services related to tax compliance, consulting and planning services for the years ended December 31, 2009 and 2010 and included preparation of tax returns, review of restrictions on net operating loss carryforwards and other general tax services.  For 2009 and 2010, these services were provided by independent registered public accounting firms other than Deloitte.

All Other Fees

We did not incur fees for any services, other than the fees disclosed above relating to audit, audit-related and tax services, rendered during the years ended December 31, 2009 and 2010.

Audit and Non-Audit Service Pre-Approval Policy

In accordance with the requirements of the Sarbanes-Oxley Act of 2002 and the rules and regulations promulgated thereunder, the Audit Committee has adopted an informal approval policy to pre-approve services performed by the independent registered public accounting firm.  All proposals for services to be provided by the independent registered public accounting firm, which must include a detailed description of the services to be rendered and the amount of corresponding fees, are submitted to the Chairman of the Audit Committee and the Chief Financial Officer.  The Chief Financial Officer authorizes services that have been pre-approved by the Audit Committee.  If there is any question as to whether a proposed service fits within a pre-approved service, the Audit Committee chair is consulted for a determination.  The Chief Financial Officer submits requests or applications to provide services that have not been pre-approved by the Audit Committee, which must include an affirmation by the Chief Financial Officer and the independent registered public accounting firm that the request or application is consistent with the SEC’s rules on auditor independence, to the Audit Committee (or its Chairman or any of its other members pursuant to delegated authority) for approval.
`
Audit Services. Audit services include the annual financial statement audit (including quarterly reviews) and other procedures required to be performed by the independent registered public accounting firm to be able to form an opinion on our financial statements.  The Audit Committee pre-approves specified annual audit services engagement terms and fees and other specified audit fees.  All other audit services must be specifically pre-approved by the Audit Committee.  The Audit Committee monitors the audit services engagement and may approve, if necessary, any changes in terms, conditions and fees resulting from changes in audit scope or other items.

Audit-Related Services. Audit-related services are assurance and related services that are reasonably related to the performance of the audit or review of our financial statements which historically have been provided to us by the independent registered public accounting firm and are consistent with the SEC’s rules on auditor independence.  The Audit Committee pre-approves specified audit-related services within pre-approved fee levels.  All other audit-related services must be pre-approved by the Audit Committee.

 
41

 
 
Tax Services. The Audit Committee pre-approves specified tax services that the Audit Committee believes would not impair the independence of the independent registered public accounting firm and that are consistent with SEC rules and guidance.  All other tax services must be specifically approved by the Audit Committee.

All Other Services. Other services are services provided by the independent registered public accounting firm that do not fall within the established audit, audit-related and tax services categories.  The Audit Committee pre-approves specified other services that do not fall within any of the specified prohibited categories of services.

 
42

 
 
PART IV

Item 15. Exhibits and Financial Statement Schedules

 
(a)
The following financial statements and those financial statement schedules required by Item 8 hereof are filed as part of this Report:

1.    Financial Statements:

Report of Independent Registered Chartered Accountants

Consolidated Balance Sheets as of December 31, 2010 and 2009

Consolidated Statements of Operations for the years ended December 31, 2010, 2009 and 2008

Consolidated Statement of Changes in Stockholders’ Equity for the years ended December 31, 2010, 2009 and 2008

Consolidated Statements of Cash Flows for the years ended December 31, 2010, 2009 and 2008

Notes to Consolidated Financial Statements

2.    Financial Statement Schedule:

Schedule II – Valuation and Qualifying Accounts

All other schedules are omitted because of the absence of conditions under which they are required or because the required information is presented in the Financial Statements or Notes thereto.

 
(b)
The following exhibits are filed as part of this Report:

Exhibit Number
 
Title of Exhibit
     
    3.1(i)
 
Amended and Restated Articles of Incorporation. (1)
   
 
     3.2(ii)
 
Bylaws as amended (2)
     
     3.2(iii)
 
Articles of Amendment to the Amended and Restated Articles of Incorporation (11)
     
10.1*
 
1997 Recruitment Stock Option Plan. (3)
   
 
10.2*
 
2001 Stock Option and Appreciation Rights Plan. (4)
   
 
10.2.1*
 
2003 Stock Option and Appreciation Rights Plan. (5)
     
10.3*
 
2010 Non-Qualified Stock Option Plan (12)
     
10.4*
 
Counsel Management Agreement. (7)
     
10.5
 
Stipulation of Dismissal with Prejudice dated as of March 12, 2009. (8)
     
10.6
 
LLC Membership Interest Purchase Agreement among Greystone & Co. Holdings LLC and Counsel RB Capital LLC, dated as of May 28, 2009. (9)
     
10.7
 
Promissory Note between Counsel RB Capital LLC and Greystone & Co. Holdings LLC, dated as of May 28, 2009. (9)
     
10.8
 
Loan and Security Agreement between Israel Discount Bank of New York (as Agent) and Counsel RB Capital LLC, dated as of June 2, 2009. (9)
     
10.9
 
Sixth Amendment to Loan Agreement between C2 Global Technologies Inc. and Counsel Corporation dated January 26, 2004, dated as of May 5, 2009. (9)
 
 
43

 
 
Exhibit Number
 
Title of Exhibit
     
10.10
 
Promissory Note for $2,590,989.63 dated May 5, 2009 between C2 Global Technologies Inc. and Counsel Corporation. (9)
     
10.11
 
Promissory Note for $90,000.00 dated June 30, 2009 between C2 Global Technologies Inc. and Counsel Corporation. (9)
     
10.12
 
Promissory Note for $128,712.86 dated June 30, 2009 between C2 Global Technologies Inc. and Counsel Corporation. (9)
     
10.13
 
Promissory Note for $200,000.00 dated September 30, 2009 between C2 Global Technologies Inc. and Counsel Corporation. (10)
     
10.14
 
Promissory Note for $90,000.00 dated September 30, 2009 between C2 Global Technologies Inc. and Counsel Corporation. (10)
     
10.15
 
Promissory Note for $87,806.64 dated September 30, 2009 between C2 Global Technologies Inc. and Counsel Corporation. (10)
     
10.16
 
Promissory Note for $320,000.00 dated December 31, 2009 between C2 Global Technologies Inc. and Counsel Corporation. (13)
     
10.17
 
Promissory Note for $90,000.00 dated December 31, 2009 between C2 Global Technologies Inc. and Counsel Corporation. (13)
     
10.18
 
Promissory Note for $129,950.17 dated December 31, 2009 between C2 Global Technologies Inc. and Counsel Corporation. (13)
     
10.19
 
Promissory Note for $620,540.88 dated March 31, 2010 between C2 Global Technologies Inc. and Counsel Corporation. (14)
     
10.20
 
Promissory Note for $90,000.00 dated March 31, 2010 between C2 Global Technologies Inc. and Counsel Corporation. (14)
     
10.21
 
Promissory Note for $207,036.21 dated March 31, 2010 between C2 Global Technologies Inc. and Counsel Corporation. (14)
     
10.22
 
Promissory Note for $341,978.44 dated June 30, 2010 between C2 Global Technologies Inc. and Counsel Corporation. (15)
     
10.23
 
Promissory Note for $90,000.00 dated June 30, 2010 between C2 Global Technologies Inc. and Counsel Corporation. (15)
     
10.24
 
Promissory Note for $26,781.64 dated June 30, 2010 between C2 Global Technologies Inc. and Counsel Corporation. (15)
     
10.25
 
LLC Interest Purchase Agreement between C2 Global Technologies Inc. and Kind Chin Associates, LLC, dated as of December 10, 2010. (16)
     
10.26
 
LLC Interest Purchase Agreement between C2 Global Technologies Inc. and Forsons Equity, LLC, dated as of December 10, 2010. (16)
     
10.27*
 
Employment Agreement between C2 Global Technologies Inc. and Jonathan Reich, dated as of January 19, 2011. (12)
     
10.28*
 
Employment Agreement between C2 Global Technologies Inc. and Adam Reich, dated as of January 19, 2011. (12)

 
44

 

Exhibit Number
 
Title of Exhibit
     
10.29*
 
Form of Option Grant for Options Granted Under 2010 Non-Qualified Stock Option Plan. (included herewith)
     
10.30
 
Share Purchase Agreement between Counsel RB Capital Inc. and Werklund Capital Corporation, dated as of March 15, 2011. (17)
     
14
 
C2 Global Technologies Inc. Code of Conduct. (6)
   
 
21
 
List of subsidiaries. (filed herewith)
     
31.1
 
Certification of the CEO pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith)
     
31.2
 
Certification of the CFO pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith)
     
32.1
 
Certification pursuant to 18 U.S.C. 1350 as adopted pursuant to Section 906 of the Sarbanes Oxley Act of 2002 (filed herewith)
     
32.2
 
Certification pursuant to 18 U.S. C. 1350 as adopted pursuant to Section 906 of the Sarbanes Oxley Act of 2002 (filed herewith)

*      Indicates a management contract or compensatory plan required to be filed as an exhibit.

(1) Incorporated by reference to our Quarterly Report on Form 10-QSB for the quarter ended June 30, 1996, file number 0-17973.

(2) Incorporated by reference to our Quarterly Report on Form 10-Q for the period ended September 30, 1998, file number 0-17973.

(3) Incorporated by reference to our Definitive Proxy Statement for the October 7, 1997 annual stockholder meeting.

(4) Incorporated by reference to our Definitive Proxy Statement for the September 7, 2001 annual stockholder meeting.

(5) Incorporated by reference to our Definitive Proxy Statement for the November 26, 2003 annual stockholder meeting.
 
(6) Incorporated by reference to our Annual Report on Form 10-K for the year ended December 31, 2003.

(7) Incorporated by reference to our Current Report on Form 8-K filed on January 6, 2005.

(8) Incorporated by reference to our Annual Report on Form 10-K for the period ended December 31, 2008.

(9) Incorporated by reference to our Quarterly Report on Form 10-Q for the period ended June 30, 2009.

(10) Incorporated by reference to our Quarterly Report on Form 10-Q for the period ended September 30, 2009.

(11) Incorporated by reference to our Definitive Schedule 14C Information Statement filed on December 23, 2010.

(12) Incorporated by reference to our Current Report on Form 8-K filed on January 24, 2011.

(13) Incorporated by reference to our Annual Report on Form 10-K for the period ended December 31, 2009.

(14) Incorporated by reference to our Quarterly Report on Form 10-Q for the period ended March 31, 2010.

(15) Incorporated by reference to our Quarterly Report on Form 10-Q for the period ended June 30, 2010.
 
 
45

 
 
 
(16) Incorporated by reference to our Current Report on Form 8-K filed on December 14, 2010.

 
(17) Incorporated by reference to our Current Report on Form 8-K filed on March 18, 2011.

 (c) Financial Statement Schedules

The following Schedules are included in our Financial Statements:
 
Separate Financial Statements of 50 Percent-or-Less-Owned Persons
8600 North 87th Street, LLC
Twinsburg Joint Venture
9214-6463, L.P./9210-6463 S.E.C.
 
 
46

 

SIGNATURES

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

   
COUNSEL RB CAPITAL INC.
   
(Registrant)
     
Dated: March 31, 2011
 
By: 
/s/ Allan C. Silber
   
Allan C. Silber, Chairman of the Board and President
   
Principal Executive Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

Signature
 
Title
 
Date
         
/s/ Allan C. Silber
 
Chairman of the Board of Directors and President
 
March 31, 2011
Allan C. Silber
 
Principal Executive Officer
   
         
/s/Jonathan S. Reich
 
Co-Chief Executive Officer
 
March 31, 2011
Jonathan S. Reich
       
         
/s/Adam M. Reich
 
Co-Chief Executive Officer
 
March 31, 2011
Adam M. Reich
       
         
/s/Stephen A. Weintraub
 
Executive Vice President, Chief Financial Officer and
Corporate Secretary
 
March 31, 2011
Stephen A. Weintraub
 
Principal Financial Officer
   
         
/s/ Catherine A. Moran
 
Vice President of Accounting and Controller
 
March 31, 2011
Catherine A. Moran
       
         
/s/ Hal B. Heaton
 
Director
 
March 31, 2011
Hal B. Heaton
       
         
/s/ Samuel L. Shimer
 
Director
 
March 31, 2011
Samuel L. Shimer
       
         
/s/ Henry Y. L. Toh
 
Director
 
March 31, 2011
Henry Y.L. Toh
       
         
/s/ David L. Turock
 
Director
 
March 31, 2011
David L. Turock
       

 
47

 
 
INDEX OF FINANCIAL STATEMENTS & SUPPLEMENTAL SCHEDULE
 
Title of Document
 
 
Page
Report of Independent Registered Chartered Accountants
F-2
Consolidated Balance Sheets as of December 31, 2010 and 2009
F-3
Consolidated Statements of Operations for the years ended December 31, 2010, 2009 and 2008
F-4
Consolidated Statement of Changes in Stockholders’ Equity for the years ended December 31, 2010, 2009 and 2008
F-5
Consolidated Statements of Cash Flows for the years ended December 31, 2010, 2009 and 2008
F-6
Notes to Consolidated Financial Statements
F-8
Schedule of Valuation and Qualifying Accounts
S-1
Separate Financial Statements of 50 Percent-or-Less-Owned Persons
S-2
 
 
F-1

 
 
Report of Independent Registered Chartered Accountants
  
To the Board of Directors and Stockholders of
Counsel RB Capital Inc. (formerly C2 Global Technologies Inc.)
Toronto, Ontario, Canada
 
We have audited the accompanying consolidated balance sheets of Counsel RB Capital Inc. (formerly C2 Global Technologies Inc.) and subsidiaries (the “Company”) as of December 31, 2010 and 2009, and the related consolidated statements of operations, changes in stockholders' equity, and cash flows for each of the three years in the period ended December 31, 2010.  Our audits also included the financial statement schedule listed in the Index at Item 15.  These financial statements and the financial statement schedule are the responsibility of the Company's management.  Our responsibility is to express an opinion on the financial statements and financial statement schedule based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States).  Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement.  The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting.  Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the Company’s internal control over financial reporting.  Accordingly, we express no such opinion.  An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation.  We believe that our audits provide a reasonable basis for our opinion.

In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of Counsel RB Capital Inc. and subsidiaries as of December 31, 2010 and 2009, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2010, in conformity with accounting principles generally accepted in the United States of America.  Also, in our opinion, such financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein.

/s/ Deloitte & Touche LLP
 
Independent Registered Chartered Accountants
Licensed Public Accountants
Toronto, Canada
March 31, 2011
 
 
F-2

 

 
COUNSEL RB CAPITAL INC. AND SUBSIDIARIES
(FORMERLY C2 GLOBAL TECHNOLOGIES INC.)
CONSOLIDATED BALANCE SHEETS
as of December 31, 2010 and 2009
(In thousands of $US, except share and per share amounts)

 
 
2010
   
2009
 
             
ASSETS
           
Current assets:
           
Cash
  $ 2,608     $ 93  
Amounts receivable (net of allowance for doubtful accounts of $168; 2009 - $0)
    203       1,653  
Receivable from a related party
    392        
Deposits
    771       300  
Inventory – equipment
    2,594       442  
Other current assets
    63       110  
Deferred income tax assets
    2,228       729  
Total current assets
    8,859       3,327  
Other assets:
               
Inventory – real estate
    1,573       1,396  
Asset liquidation investments
    3,548       3,943  
Investments
    2,706       2,788  
Goodwill
          173  
Total assets
  $ 16,686