Unassociated Document

On March 25, 2010, management of C2 Global Technologies Inc. (“C2” or the “Company”), in consultation with the Audit Committee of the Board, concluded that revenue recognition under US GAAP had been applied in error to patent licensing revenue that was reported in the Company’s consolidated financial statements for the fiscal quarters ending June 30 and September 30, 2009. The facts surrounding this determination are detailed below.

In June 2009, the Company entered into a patent licensing agreement with an independent third party in Korea. In connection with this agreement, the Company recognized the initial revenue and associated costs in the fiscal quarter ended June 30, 2009. Although C2 and the third party had negotiated the license price and terms, and persuasive evidence of an arrangement existed in the form of a signed contract, which constituted delivery of the license, collectability of the associated revenue was not sufficiently assured to warrant such recognition. Further, for the quarter ended September 30, 2009 C2’s management determined that the collectability of the revenue was doubtful, and recorded an allowance for doubtful accounts for the full amount of the revenue, net of the associated costs.

As a consequence, patent licensing revenue was overstated by $950,000 for the quarter and six months ended June 30, 2009 and the nine months ended September 30, 2009, and associated patent licensing costs were overstated by $585,000 for the same periods. As a consequence of recording an allowance in the quarter ended September 30, operating income and net income were overstated by $365,000 in the quarter ended June 30, 2009 and understated by the same amount in the quarter ended September 30, 2009. The impact on the unaudited condensed consolidated financial statements for the periods ended June 30 and September 30, 2009 is set out below.

In March 2010, during the audit of the Company’s consolidated financial statements for the year ended December 31, 2009, the Company determined that it had erred in reporting its investments pursuant to partnership, joint venture and limited liability company agreements (collectively, “Joint Ventures”), and the associated revenue and costs, in the quarters ended June 30 and September 30, 2009, all related to its 75%-owned subsidiary Counsel RB Capital LLC (“Counsel RB”).

Counsel RB’s asset liquidation transactions are generally conducted through two different formats, as described below. US GAAP requires that they be reported separately in the consolidated financial statements as follows:

(1) Revenue from transactions that Counsel RB conducts directly is reported as Asset Liquidation revenue, and the associated direct costs are reported as Asset Liquidation costs. At the balance sheet date, any unsold assets are reported as Inventory, any outstanding accounts receivable are included in the Company’s Accounts Receivable, and any associated liabilities are included in the Company’s Accrued Liabilities. Although all inventory is expected to be sold in less than one year, real estate inventory is not recorded as a current asset.

(2) Transactions that involve Counsel RB acting jointly with one or more additional purchasers via Joint Ventures require that the Joint Ventures be accounted for using the equity method of accounting wherein Counsel RB’s proportionate share of the net income (loss) be reported as Earnings (Loss) of Equity Accounted Asset Liquidation Investments. Although all of Counsel RB’s investments in Joint Ventures are expected to be sold in less than one year, they are reported on the balance sheet as non-current Asset Liquidation Investments.

In the quarters ended June 30 and September 30, 2009, the Company recorded its proportionate share of the revenue and costs associated with its investments in Joint Ventures as Asset Liquidation Revenue and Asset Liquidation costs. At June 30 and September 30, 2009, the Company recorded its proportionate share of the Joint Ventures as allocations to accounts receivable, inventory, other current assets, accounts payable and accrued liabilities, and debt payable to third parties. All inventory was recorded as a current asset. The impact on the unaudited condensed consolidated financial statements for the periods ended June 30 and September 30, 2009 is set out below.

Effect of the restatements on the consolidated balance sheets (in thousands of $US):

	Previously reported on Form 10-Q			Patent licensing restatement			Counsel RB restatement			As restated
		$			$			$			$
As at June 30, 2009
Accounts receivable		1,977			(552	)		(893	)		532
Inventory – current		4,009			—			(1,615	)		2,394
Other current assets		47			—			(6	)		41
Total current assets		6,259			(552	)		(2,514	)		3,193

Inventory – non-current		—			—			919			919
Asset liquidation investments		—			—			1,325			1,325
Total assets		10,233			(552	)		(270	)		9,411

Accounts payable and accrued liabilities		1,376			(187	)		(63	)		1,126
Debt payable to third parties		2,569			—			(207	)		2,362
Total liabilities		5,380			(187	)		(270	)		4,923

Accumulated deficit		(270,253	)		(365	)		—			(270,618	)
Total equity		4,853			(365	)		—			4,488

Total liabilities and stockholders’ equity		10,233			(552	)		(270	)		9,411

	Previously reported on Form 10-Q			Patent licensing restatement		Counsel RB restatement			As restated
		$		$		$			$
As at September 30, 2009
Accounts receivable		1,779			—		(912	)		867
Inventory – current		4,828			—		(1,648	)		3,180
Total current assets		7,242			—		(2,560	)		4,682

Inventory – non-current		—			—		928			928
Asset liquidation investments		—			—		1,358			1,358
Total assets		10,789			—		(274	)		10,515

Accounts payable and accrued liabilities		1,247			—		(68	)		1,179
Debt payable to third parties		3,028			—		(206	)		2,822
Total liabilities		5,977			—		(274	)		5,703

Accumulated deficit		(270,374	)		—		—			(270,374	)
Total equity		4,812			—		—			4,812

Total liabilities and stockholders’ equity		10,789			—		(274	)		10,515

Effect of the restatements on the consolidated statements of operations (in thousands of $US):

	Previously reported on Form 10-Q		Patent licensing restatement			Counsel RB restatement			As restated
	$		$			$			$
For the three months ended June 30, 2009
Patent licensing revenue		950		(950	)		—			—
Asset liquidation revenue		3,102		—			(3,067	)		35
Total revenue		4,052		(950	)		(3,067	)		35

Patent licensing expense		586		(585	)		—			1
Asset liquidation expense		2,675		—			(2,675	)		—
Total operating costs and expenses		3,969		(585	)		(2,675	)		709

Earnings of asset liquidation investments		—		—			392			392

Operating income (loss)		83		(365	)		—			(282	)

Income (loss) from continuing operations		106		(365	)		—			(259	)

Net income (loss)		112		(365	)		—			(253	)

Earnings (loss) per share from continuing operations
Common shares	$	0.01							$	(0.01	)
Preferred shares	$	0.20								N/A

Earnings (loss) per share
Common shares	$	0.01							$	(0.01	)
Preferred shares	$	0.20								N/A

	$			$			$			$
For the six months ended June 30, 2009
Patent licensing revenue		950			(950	)		—			—
Asset liquidation revenue		3,102			—			(3,067	)		35
Total revenue		4,052			(950	)		(3,067	)		35

Patent licensing expense		587			(585	)		—			2
Asset liquidation expense		2,675			—			(2,675	)		—
Total operating costs and expenses		4,357			(585	)		(2,675	)		1,097

Earnings of asset liquidation investments		—			—			392			392

Operating loss		(305	)		(365	)		—			(670	)

Loss from continuing operations		(273	)		(365	)		—			(638	)

Net loss		(230	)		(365	)		—			(595	)

Loss per share from continuing operations
Common shares	$	(0.01	)							$	(0.03	)
Preferred shares		N/A									N/A

Loss per share
Common shares	$	(0.01	)							$	(0.03	)
Preferred shares		N/A									N/A

	Previously reported on Form 10-Q			Patent licensing restatement			Counsel RB restatement			As restated
	$			$			$			$
For the three months ended September 30, 2009
Patent licensing revenue		—			—			—			—
Asset liquidation revenue		1,948			—			(79	)		1,869
Total revenue		1,948			—			(79	)		1,869

Patent licensing expense		11			8			—			19
Asset liquidation expense		917			—			(28	)		889
Selling, general and administrative expense		966			(373	)		—			593
Total operating costs and expenses		1,894			(365	)		(28	)		1,501

Earnings of asset liquidation investments		—			—			51			51

Operating income		54			365			—			419

Income (loss) from continuing operations		(57	)		365			—			308

Net income (loss)		(121	)		365			—			244

Earnings (loss) per share from continuing operations
Common shares	$	(0.01	)							$	0.01
Preferred shares		N/A								$	0.54

Earnings (loss) per share
Common shares	$	(0.01	)							$	0.01
Preferred shares		N/A								$	0.43

	$			$			$			$
For the nine months ended September 30, 2009
Patent licensing revenue		950			(950	)		—			—
Asset liquidation revenue		5,050			—			(3,146	)		1,904
Total revenue		6,000			(950	)		(3,146	)		1,904

Patent licensing expense		598			(577	)		—			21
Asset liquidation expense		3,592			—			(2,703	)		889
Selling, general and administrative expense		2,061			(373	)		—			1,688
Total operating costs and expenses		6,251			(950	)		(2,703	)		2,598

Earnings of asset liquidation investments		—			—			443			443

Operating loss		(251	)		—			—			(251	)

Loss from continuing operations		(330	)		—			—			(330	)

Net loss		(351	)		—			—			(351	)

Loss per share from continuing operations
Common shares	$	(0.02	)							$	(0.02	)
Preferred shares		N/A									N/A

Loss per share
Common shares	$	(0.02	)							$	(0.02	)
Preferred shares		N/A									N/A

The Company’s management and Audit Committee of the Board discussed the matters disclosed in this Form 8-K with the Company’s independent registered chartered accountants. The quarterly results reported in the Company’s audited consolidated financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2009, which the Company expects to file on or around March 31, 2010, will be restated to reflect the correct application of US GAAP in each affected quarter.

Therefore, until the Company has filed its Annual Report on Form 10-K for the year ended December 31, 2009, investors and other users of the Company’s SEC filings are cautioned not to rely on the Company’s financial statements for the fiscal quarters ended June 30, 2009 and September 30, 2009, to the extent they are affected by the matters described above.

0-17973		59-2291344
(Commission File No.)		(I.R.S. Employer Identification No.)

Exhibit No.	Title

99.1	Press release dated March 26, 2010.

	C2 Global Technologies Inc.


Date: March 26, 2010	By:	/s/ Stephen A. Weintraub
		Name:	Stephen A. Weintraub
		Title:	Chief Financial Officer and Corporate Secretary