e10vq

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q


þ		QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2010


o		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number: 0-21878

SIMON WORLDWIDE, INC.

(Exact name of registrant as specified in its charter)


DELAWARE (State or other jurisdiction of incorporation or organization)		04-3081657 (I.R.S. Employer Identification No.)

5200 WEST CENTURY BOULEVARD, LOS ANGELES, CALIFORNIA 90045
(Address of principal executive offices)

(310) 417-4660
(Registrant’s telephone number, including area code)

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

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

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):


Large accelerated filer o	Accelerated filer o	Non-accelerated filer o	Smaller reporting company þ
		(Do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act): Yes o No þ

At August 13, 2010, 50,611,879 shares of the registrant’s common stock were outstanding.

PART I — FINANCIAL INFORMATION


Item 1.		Condensed Financial Statements

SIMON WORLDWIDE, INC.

CONSOLIDATED BALANCE SHEETS

(Unaudited)

(in thousands, except share data)


	June 30,			December 31,
	2010			2009
ASSETS
Current assets:
Cash and cash equivalents	$	12,295		$	14,567
Prepaid expenses and other current assets		85			155
Assets from discontinued operations to be disposed of — current (Note 4)		251			198

Total current assets		12,631			14,920
Investments		137			137
Other assets		21			24
Assets from discontinued operations to be disposed of — non-current (Note 4)		309			362

Total non-current assets		467			523

	$	13,098		$	15,443


LIABILITIES AND STOCKHOLDERS’ EQUITY

Current liabilities:
Accounts payable	$	114		$	56
Accrued expenses and other current liabilities		134			152
Liabilities from discontinued operations — current (Note 4)		560			560

Total current liabilities		808			768

Stockholders’ equity:
Common stock, $.01 par value; 100,000,000 shares authorized; 50,611,879 shares issued and outstanding net of 4,002,070 treasury shares at par value at June 30, 2010, and 54,201,080 shares issued and outstanding net of 412,869 treasury shares at par value at December 31, 2009		506			542
Additional paid-in capital		152,083			153,303
Accumulated deficit		(140,299	)		(139,171	)
Accumulated other comprehensive income		—			1

Total stockholders’ equity		12,290			14,675

	$	13,098		$	15,443

See the accompanying Notes to Condensed Consolidated Financial Statements.

SIMON WORLDWIDE, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

(in thousands, except per share data)


	For the three months						For the six months
	ended June 30,						ended June 30,
	2010			2009			2010			2009
Revenue	$	—		$	—		$	—		$	—
General and administrative expenses		490			519			1,081			971

Operating loss from continuing operations		(490	)		(519	)		(1,081	)		(971	)
Interest income		13			34			31			92
Gain on settlement		—			7			—			7
Investment income (impairment)		2			(1	)		2			(2	)
Equity in Yucaipa AEC earnings		—			—			—			8

Loss from continuing operations before income taxes		(475	)		(479	)		(1,048	)		(866	)
Income tax provision		—			—			—			—

Net loss from continuing operations		(475	)		(479	)		(1,048	)		(866	)
Income (loss) from discontinued operations, net of tax (Note 4)		(65	)		13			(80	)		(81	)

Net loss	$	(540	)	$	(466	)	$	(1,128	)	$	(947	)


Loss per share from continuing operations available to common stockholders:
Loss per common share – basic and diluted	$	(0.01	)	$	(0.01	)	$	(0.02	)	$	(0.02	)

Weighted average shares outstanding – basic and diluted		51,637			54,201			52,912			54,201


Income (loss) per share from discontinued operations:
Income (loss) per common share – basic and diluted	$	—		$	—		$	—		$	—

Weighted average shares outstanding – basic and diluted		51,637			54,201			52,912			54,201


Net loss available to common stockholders:
Loss per common share – basic and diluted	$	(0.01	)	$	(0.01	)	$	(0.02	)	$	(0.02	)

Weighted average shares outstanding – basic and diluted		51,637			54,201			52,912			54,201

See the accompanying Notes to Condensed Consolidated Financial Statements.

SIMON WORLDWIDE, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(in thousands)


	For the six months
	ended June 30,
	2010			2009
Cash flows from operating activities:
Net loss	$	(1,128	)	$	(947	)
Loss from discontinued operations		(80	)		(81	)

Loss from continuing operations		(1,048	)		(866	)

Adjustments to reconcile net loss to net cash used in operating activities:
Equity in Yucaipa AEC earnings		—			(8	)
Gain on settlement		—			(7	)
Charge for impaired investment		1			2
Cash (used in) provided by discontinued operations		(26	)		32
Cash transferred to discontinued operations		(54	)		(113	)
Increase (decrease) in cash from changes in working capital items:
Prepaid expenses and other current assets		70			431
Accounts payable		58			(24	)
Accrued expenses and other current liabilities		(17	)		(114	)

Net cash used in operating activities		(1,016	)		(667	)

Cash flows from financing activities:
Payment to reacquire common stock		(1,256	)		—


Net decrease in cash and cash equivalents		(2,272	)		(667	)
Cash and cash equivalents, beginning of period		14,567			16,576

Cash and cash equivalents, end of period	$	12,295		$	15,909


Supplemental disclosure of cash flow information:
Cash paid during the period for:
Income taxes	$	4		$	76

See the accompanying Notes to Condensed Consolidated Financial Statements.

SIMON WORLDWIDE, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1. Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have been prepared by Simon Worldwide, Inc. (the “Company”) pursuant to the rules and regulations of the Securities and Exchange Commission regarding interim financial reporting. Accordingly, they do not include all of the information and footnotes in accordance with accounting principles generally accepted in the United States of America for complete financial statements and should be read in conjunction with the consolidated financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2009.

In the opinion of management, the accompanying unaudited condensed consolidated financial statements contain all adjustments, consisting only of those considered necessary for fair presentation of the Company’s financial position, results of operations, and cash flows at the dates and for the periods presented.

Prior to August 2001, the Company was a multi-national, full service promotional marketing company. In August 2001, McDonald’s Corporation (“McDonald’s”), the Company’s principal customer, terminated its 25-year relationship with the Company as a result of the embezzlement by a former Company employee of winning game pieces from McDonald’s promotional games administered by the Company. Other customers also terminated their relationships with the Company, resulting in the Company no longer having a business. By April 2002, the Company had effectively eliminated a majority of its ongoing promotions business operations and was in the process of disposing of its assets and settling its liabilities related to the promotions business and defending and pursuing litigation with respect thereto. As a result of these efforts, the Company has been able to resolve a significant number of outstanding liabilities that existed in August 2001 or arose subsequent to that date. During the second quarter of 2002, the discontinued activities of the Company, consisting of revenues, operating costs, certain general and administrative costs and certain assets and liabilities associated with the Company’s promotions business, were classified as discontinued operations for financial reporting purposes.

The Company had one stock-based compensation plan at June 30, 2010, and December 31, 2009. See Note 3.

At June 30, 2010 and December 31, 2009, the Company had a passive investment in a limited liability company controlled by an affiliate. See Note 5.

The operating results for the six months ended June 30, 2010, are not necessarily indicative of the results to be expected for the full year.

RECENTLY ISSUED ACCOUNTING STANDARDS

In February 2010, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2010-09, an amendment of FASB Accounting Standards Codification^TM (“ASC”) Topic 855 “Subsequent Events.” Although Securities and Exchange Commission (“SEC”) filers are still required to evaluate subsequent events through the date their financial statements are issued, ASU No. 2010-09 removes the requirement that SEC filers disclose in their financial statements the date through which subsequent events have been evaluated. The standard is effective upon issuance for filings after February 24, 2010. The adoption of ASU No. 2010-09 by the Company did not have a material effect on the Company’s consolidated statements of financial position or results of operations.

In January 2010, the FASB issued ASU No. 2010-06, “Fair Value Measurements and Disclosures (Topic 820): Improving Disclosures about Fair Value Measurements.” ASU 2010-06 amends Topic 820 by requiring new disclosures regarding significant transfers in and out of Levels 1 and 2 of the fair value hierarchy as well as disclosure of certain activity in Level 3 measurements. ASU 2010-06 also clarifies disclosures regarding the required level of disaggregation for each class of assets and liabilities and disclosures regarding inputs and valuation techniques. The new disclosures and clarifications of existing disclosures are effective for interim and annual reporting periods beginning after December 15, 2009, except for the disclosures of certain activity in Level 3 fair value measurements which are effective for fiscal years beginning after December 15, 2010, and for interim periods within those fiscal years. The adoption of the new disclosures and clarifications of existing disclosures effective for interim and annual reporting periods beginning after December 15, 2009, did not have a

material effect on the Company’s consolidated statements of financial position of results of operations. The Company does not expect the remaining provisions of ASU 2010-06 to have a material effect on the Company’s consolidated statements of financial position or results of operations when they become effective on January 1, 2011.

In June 2009, the FASB issued ASU No. 2009-01, “Topic 105—Generally Accepted Accounting Principles—amendments based on—Statement of Financial Accounting Standards No. 168—The FASB Accounting Standards Codification^TM and the Hierarchy of Generally Accepted Accounting Principles,” which establishes the FASB ASC as the single source of authoritative accounting principles recognized by the FASB to be applied by nongovernmental entities in the preparation of financial statements in conformity with Generally Accepted Accounting Principles (“GAAP”). Rules and interpretive releases of the SEC are also sources of authoritative GAAP for SEC registrants. The ASC was effective for the Company on July 1, 2009, and its adoption did not have a material effect on the Company’s consolidated statements of financial position or results of operations.

2. Absence of Operating Business; Going Concern

As a result of the loss of its customers, the Company no longer has any operating business. Since August 2001, the Company has concentrated its efforts on reducing its costs and settling numerous claims, contractual obligations, and pending litigation. As a result of these efforts, the Company has been able to resolve a significant number of outstanding liabilities that existed at December 31, 2001, or arose subsequent to that date. At June 30, 2010, the Company had reduced its workforce to 4 employees from 136 employees at December 31, 2001. The Company is currently managed by the Chief Executive Officer and principal financial officer, Greg Mays, together with an acting general counsel.

At June 30, 2010 and December 31, 2009, the Company had stockholders’ equity of $12.3 million and $14.7 million, respectively. For the six months ended June 30, 2010 and 2009 the Company had a net loss from continuing operations of $1.0 million and $.9 million, respectively. The Company continues to incur losses in 2010 within its continuing operations for the general and administrative expenses being incurred to manage the affairs of the Company and resolve outstanding legal matters. By utilizing cash received pursuant to the settlement with McDonald’s in 2004, $2.1 million received from Yucaipa AEC in July 2008 and March 2009 (see Note 5), and $1.75 million received in August 2008 in settlement of the Company’s lawsuit against PricewaterhouseCoopers LLC, management believes it has sufficient capital resources and liquidity to operate the Company for the foreseeable future. However, as a result of significant losses from operations, a lack of any operating revenue and a potential liquidation in connection with the Recapitalization Agreement described below, the Company’s independent registered public accounting firm has expressed substantial doubt about the Company’s ability to continue as a going concern. The accompanying condensed consolidated financial statements do not include any adjustments that might result from the outcome of these uncertainties.

The Board of Directors continues to consider various alternative courses of action for the Company, including possibly acquiring or combining with one or more operating businesses. The Board of Directors has reviewed and analyzed a number of proposed transactions and will continue to do so until it can determine a course of action going forward to best benefit all shareholders. The Company cannot predict when the Board of Directors will have developed a proposed course of action or whether any such course of action will be successful. Management believes it has sufficient capital resources and liquidity to operate the Company for the foreseeable future.

In connection with the Recapitalization Agreement described below, and in the event that the Company does not consummate a business combination by the later of (i) December 31, 2010 or (ii) December 31, 2011 in the event that a letter of intent, an agreement in principle or a definitive agreement to complete a business combination will have been executed on or prior to December 31, 2010 but the business combination was not consummated prior to such time, and no qualified offer has been previously consummated, the officers of the Company will take all such action necessary to dissolve and liquidate the Company as soon as reasonably practicable.

Notwithstanding the foregoing, the Company will not be required to be dissolved and liquidated if Overseas Toys, L. P. (“Overseas Toys”), the Company’s largest shareholder, and/or any affiliate thereof shall have made a qualified offer no earlier than one hundred and twenty (120) days and at least sixty (60) days prior to the termination date and shall have consummated such qualified offer by having purchased all shares of stock properly and timely tendered and not withdrawn pursuant to the terms of the qualified offer.

On June 11, 2008, the Company entered into an Exchange and Recapitalization Agreement (the “Recapitalization Agreement”) with Overseas Toys, the holder of all the outstanding shares of preferred stock of the Company, pursuant to which all the outstanding preferred stock would be converted into shares of common stock representing 70% of the shares of

common stock outstanding immediately following the conversion. The Recapitalization Agreement was negotiated on the Company’s behalf by the Special Committee of disinterested directors which, based in part upon the opinion of the Special Committee’s financial advisor, determined that the transaction was fair to the holders of common stock from a financial point of view. At a special meeting held on September 18, 2008, the stockholders of the Company approved amendments to the Company’s certificate of incorporation proposed in order to effect a recapitalization of the Company pursuant to the terms of the Recapitalization Agreement.

In the exchange, the Company issued 37,940,756 shares of common stock with a fair value of $15.2 million in exchange for 34,717 shares of preferred stock (representing all outstanding preferred shares) with a carrying value of $34.7 million and related accrued dividends of approximately $147,000. The Company recorded $19.7 million to retained earnings in September 2008 representing the excess of carrying value of the preferred stock received over the fair market value of the common shares issued as such difference essentially represented a return to the Company.

The Company has federal net operating loss carryforwards (“NOLs”) of approximately $68.9 million and state NOLs of approximately $39.5 million that may, subject to applicable tax rules, be used to reduce certain income tax obligations in the future. Based on a review of the Company’s NOLs by its outside tax advisors, the Company does not anticipate that the recapitalization will materially or adversely impact the Company’s ability to use its NOLs.

3. Stock Plan

1993 Omnibus Stock Plan

Under its 1993 Omnibus Stock Plan, as amended (the “Omnibus Plan”), which terminated in May 2003 except for options outstanding at that time, the Company reserved up to 3,000,000 shares of its common stock for issuance pursuant to the grant of incentive stock options, nonqualified stock options, or restricted stock. The Omnibus Plan is administered by the Compensation Committee of the Board of Directors. Subject to the provisions of the Omnibus Plan, the Compensation Committee had the authority to select the optionees or restricted stock recipients and determine the terms of the options or restricted stock granted, including: (i) the number of shares; (ii) the exercise period (which may not exceed ten years); (iii) the exercise or purchase price (which in the case of an incentive stock option cannot be less than the market price of the common stock on the date of grant); (iv) the type and duration of options or restrictions, limitations on transfer, and other restrictions; and (v) the time, manner, and form of payment.

Generally, an option is not transferable by the option holder except by will or by the laws of descent and distribution. Also, and in general, no incentive stock option may be exercised more than 60 days following termination of employment. However, in the event that termination is due to death or disability, the option is exercisable for a maximum of 180 days after such termination.

Options granted under this plan generally became exercisable in three equal installments commencing on the first anniversary of the date of grant. Options granted during 2003 became exercisable in two equal installments commencing on the first anniversary of the date of grant. No further options may be granted under the Omnibus Plan.

There were no stock options granted during the six months ended June 30, 2010 or 2009.

The following summarizes the status of the Company’s stock options as of June 30, 2010, and changes for the six months then ended:


				Weighted
				Exercise
	Shares			Price

Outstanding at the beginning of period		65,000		$	0.92
Granted		—			—
Exercised		—			—
Expired or forfeited		(5,000	)		8.81

Outstanding at end of period		60,000			0.26


Options exercisable at end of period		60,000		$	0.26


Options available for future grant		—


Weighted average fair value of options granted during period	Not applicable

The following table summarizes information about stock options outstanding at June 30, 2010:


				Options Outstanding								Options Exercisable
						Weighted
						Average
Range of						Remaining		Weighted		Aggregate				Weighted		Aggregate
Exercise				Number		Contractual		Average		Intrinsic		Number		Average		Intrinsic
Prices				Outstanding		Life		Price		Value		Exercisable		Price		Value
$0.01	—	$	1.00		55,000		2.85	$	0.10	$	5,500		55,000	$	0.10	$	5,500
$1.01	—	$	2.00		5,000		0.74		2.00		—		5,000		2.00		—

$0.01	—	$	2.00		60,000		2.68	$	0.26				60,000	$	0.26

The aggregate intrinsic value in the preceding table represents the total pretax intrinsic value, based on the Company’s closing stock price of $.20 on June 30, 2010.

4. Discontinued Operations

By April 2002, the Company had effectively eliminated a majority of its on-going promotions business operations. Accordingly, the discontinued activities of the Company have been classified as discontinued operations in the accompanying condensed consolidated financial statements. If necessary, the Company includes sufficient cash within its discontinued operations to ensure assets from discontinued operations to be disposed of cover liabilities from discontinued operations. Management believes it has sufficient capital resources and liquidity to operate the Company for the foreseeable future. Assets and liabilities related to discontinued operations at June 30, 2010, and December 31, 2009, as disclosed in the accompanying condensed consolidated financial statements, consist of the following (in thousands):


	June 30,		December 31,
	2010		2009
Assets:
Cash and cash equivalents	$	251	$	198

Total current assets		251		198
Other assets		309		362

Assets from discontinued operations to be disposed of	$	560	$	560


Liabilities:
Accrued expenses and other current liabilities	$	560	$	560

Total current liabilities		560		560

Liabilities from discontinued operations	$	560	$	560

Net income from discontinued operations for the three and six months ended June 30, 2010 and 2009, as disclosed in the accompanying condensed consolidated financial statements, consists of the following (in thousands):


	For the three months						For the six months
	ended June 30,						ended June 30,
	2010			2009			2010			2009
Net sales	$	—		$	—		$	—		$	—
Cost of sales		—			—			—			—

Gross profit		—			—			—			—

General and administrative expenses		65			20			80			114
Gain on settlement		—			(33	)		—			(33	)

Operating income (loss)		(65	)		13			(80	)		(81	)

Income tax provision		—			—			—			—

Net income (loss) from discontinued operations	$	(65	)	$	13		$	(80	)	$	(81	)

5. Long-term Investments

YUCAIPA AEC ASSOCIATES

At June 30, 2010, the Company held an investment in Yucaipa AEC Associates, LLC (“Yucaipa AEC”), a limited liability company that is controlled by Yucaipa AEC. In the past, Yucaipa AEC, in turn, primarily held an equity investment in the Source Interlink Companies (“Source”) a direct-to-retail magazine distribution and fulfillment company in North America, a provider of magazine information and front-end management services principally for retailers and a publisher of approximately 75 magazine titles, which was received upon the merger of Alliance Entertainment Companies (“Alliance”) with Source. Yucaipa AEC held this investment in Source until April 28, 2009, when Source filed a pre-packaged Plan of Reorganization under Chapter 11 of the U.S. Bankruptcy Code. Alliance is a home entertainment product distribution, fulfillment, and infrastructure company providing both brick-and-mortar and e-commerce home entertainment retailers with complete business-to-business solutions. At December 31, 2001, the Company’s investment in Yucaipa AEC had a carrying value of $10.0 million which was accounted for under the cost method. In June 2002, certain events occurred which

indicated an impairment and the Company recorded a pre-tax non-cash charge of $10.0 million to write down this investment in June 2002.

In March 2004, the Emerging Issues Task Force (“EITF”) of the FASB, issued EITF 03-16 (ASC 272-10), “Accounting for Investments in Limited Liability Companies,” which required the Company to change its method of accounting for its investment in Yucaipa AEC from the cost method to the equity method for periods ending after July 1, 2004.

On February 28, 2005, Alliance merged with Source. Inasmuch as Source was a publicly traded company, the Company’s pro rata investment in Yucaipa AEC, which held the shares in Source, was equal to the number of Source shares indirectly held by the Company multiplied by the stock price of Source, which did not reflect any discount for illiquidity. Accordingly, on February 28, 2005, the date of closing of the merger to reflect its share of the gain upon receipt of the Source shares by Yucaipa AEC, the Company recorded an unrealized gain to accumulated other comprehensive income of $11.3 million, which did not reflect any discount for illiquidity. As the Company’s investment in Yucaipa AEC was accounted for under the equity method, the Company adjusted its investment based on its pro rata share of the earnings and losses of Yucaipa AEC. In addition, the Company recognized its share in the other comprehensive income (loss) of Yucaipa AEC on the basis of changes in the fair value of Source through an adjustment in the unrealized gains and losses in the accumulated other comprehensive income component of the stockholders’ equity. There were adjustments during 2008 and 2007 which reduced the recorded value of the Company’s investment in Yucaipa AEC totaling $2.7 million and $5.2 million, respectively. There were additional adjustments totaling $.1 million during the three months ended March 31, 2009, which increased the recorded value of the Company’s investment in Yucaipa AEC to $.2 million. Subsequently, on April 28, 2009, Source filed a pre-packaged Plan of Reorganization under Chapter 11 of the U.S. Bankruptcy Code and the Company lost its equity in Source in connection with the bankruptcy. Accordingly, the Company reduced the value of its Source investment to $0 as of March 31, 2009. The Company has no power to dispose of or liquidate its holding in Yucaipa AEC which power is held by Yucaipa AEC.

During 2008, the Company received $1.75 million from Yucaipa AEC in connection with a December 2007 sale of one of its holdings. The Company also collected approximately $350,000 in March 2009 related to this transaction. Accordingly, the Company’s total gain related to the sale of this holding was $2.1 million which was included in the Company’s consolidated statement of operations during 2008.

There were no adjustments recorded in the Company’s consolidated statement of operations for equity in the earnings of Yucaipa AEC during the three months ended June 30, 2010 and 2009, respectively. In addition, there was $0 and approximately $8,000 recorded in the Company’s consolidated statement of operations for equity in the earnings of Yucaipa AEC during the six months ended June 30, 2010 and 2009, respectively. The Company’s remaining investment in Yucaipa AEC of approximately $10,000, and a separate investment in a technology related company of approximately $127,000, are included in the investments line item on the balance sheet.

OTHER INVESTMENTS

In the past, with its excess cash, the Company had made strategic and venture investments in a portfolio of privately held companies. These investments are in technology and internet related companies that are at varying stages of development, and are intended to provide the Company with an expanded technology and internet presence, to enhance the Company’s position at the leading edge of e-business, and to provide venture investment returns. These companies in which the Company has invested are subject to all the risks inherent in technology and the internet. In addition, these companies are subject to the valuation volatility associated with the investment community and capital markets. The carrying value of the Company’s investments in these companies is subject to the aforementioned risks. Periodically, the Company performs a review of the carrying value of all its investments in these companies.

At June 30, 2010, and December 31, 2009, the carrying values of other investments were approximately $17,000 and $19,000, respectively. These are presented as part of other assets in the consolidated balance sheets.

During the three and six months ended June 30, 2010, the Company recorded investment income of approximately $3,000 net of an investment impairment of approximately $1,000. The Company records an investment impairment when the estimated future undiscounted cash flows from its investments are less than the recorded value of the related investments and the Company believes the decline in fair value is other-than-temporary.

During the three and six months ended June 30, 2009, the Company recorded investment impairments of approximately $1,000 and approximately $2,000, respectively, to adjust the recorded value of its other investments to the estimated future

undiscounted cash flows the Company expects from such investments due to management’s determination that the decline in fair value of certain investments below their cost bases were other-than-temporary.

Of approximately $17,000 carrying value of other investments at June 30, 2010, and in accordance with the fair value hierarchy contained in Statement of Financial Accounting Standard No. 157 (ASC 820-10), “Fair Value Measurements,” approximately $13,000 was valued using quoted prices in active markets for identical assets or liabilities (Level 1) and approximately $4,000 was valued using significant unobservable inputs (Level 3) such as current results, trends and future prospects, capital market conditions, and other economic factors. While the Company will continue to periodically evaluate its investments, there can be no assurance that its investment strategy will be successful, and thus the Company might not ever realize any benefits from its portfolio of investments.

6. Earnings Per Share

The Company calculates its earnings per share in accordance with ASC 260-10, “Earnings Per Share.” There were 51,637,365 and 54,201,080 weighted average shares outstanding for the three months ended June 30, 2010 and 2009, respectively. There were 52,912,140 and 54,201,080 weighted average shares outstanding for the six months ended June 30, 2010 and 2009, respectively. In addition, there were 60,000 and 65,000 shares related to stock options exercisable for the three months ended June 30, 2010 and 2009, respectively, and 62,486 and 76,436 shares related to stock options exercisable for the six months ended June 30, 2010 and 2009, respectively, that were not included in the computation of diluted earnings per share because to do so would have been antidilutive as the Company has a loss from continuing operations for each period presented.

On April 26, 2010, the Company purchased 3,589,201 shares of its outstanding common stock from Everest Special Situations Fund L.P., formerly the Company’s second largest shareholder, for $1,256,220. The shares are held by the Company as treasury stock resulting in 50,611,879 shares outstanding as of June 30, 2010, which affected the earnings per share calculation for the three and six months ended June 30, 2010.

7. Note Receivable

In February 2001, the Company sold its Corporate Promotions Group (“CPG”) business to Cyrk, Inc. (“Cyrk”), formerly known as Rockridge Partners, Inc., for $8 million cash, the assumption of $3.7 million of debt, and a note in the amount of $2.3 million. Cyrk also assumed certain liabilities of the CPG business. Subsequently, in connection with the settlement of a controversy between the parties, Cyrk supplied a $500,000 letter of credit to partially secure its performance of the liabilities it assumed of the CPG business and the balance due on the $2.3 million note was forgiven. The $2.3 million note was subject to reinstatement in the event of default by Cyrk under the liabilities it assumed of the CPG business.

One of the obligations assumed by Cyrk was to Winthrop Resources Corporation (“Winthrop”). As a condition to Cyrk assuming this obligation, however, the Company was required to provide a $4.2 million letter of credit as collateral for Winthrop in case Cyrk did not perform the assumed obligation. Because the Company remained secondarily liable under the Winthrop lease restructuring, recognizing a liability at inception for the fair value of the obligation was not required under the provisions of FASB Interpretation 45 (ASC 460-10), “Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others—an interpretation of FASB Statements No. 5 [ASC 450-20], 57 [ASC 850-10], and 107 [ASC 825-10] and rescission of FASB Interpretation No. 34.” However, in the fourth quarter of 2003, Cyrk informed the Company that it was continuing to suffer substantial financial difficulties and that it might not be able to continue to discharge its obligations to Winthrop which were secured by the Company’s letter of credit. As a result of the foregoing, and in accordance with the provisions of FASB Statement No. 5 (ASC 450-20), “Accounting for Contingencies,” the Company recorded a charge in 2003 of $2.8 million to other expense with respect to the liability arising from the Winthrop lease. Such liability was revised downward to $2.5 million during 2004 and to $1.6 million during 2005 based on the reduction in the Winthrop liability. The available amount under this letter of credit reduced over time as the underlying obligation to Winthrop reduced. As of September 30, 2005, the available amount under the letter of credit was $2.1 million which was secured, in part, by $1.6 million of restricted cash of the Company. The Company’s letter of credit was also secured, in part, by the aforesaid $500,000 letter of credit provided by Cyrk for the benefit of the Company.

In December 2005, the Company received notification that Winthrop drew down the $1.6 million balance of the Company’s letter of credit due to Cyrk’s default on its obligations to Winthrop. An equal amount of the Company’s restricted cash was drawn down by the Company’s bank which had issued the letter of credit. Upon default by Cyrk and if such default was not cured within 15 days after receipt of written notice of default from the Company, Cyrk’s $2.3 million subordinated note payable to the Company, which was forgiven by the Company in 2003, was subject to reinstatement. After evaluating its

alternatives in December 2005 and providing written notice to Cyrk in January 2006, such $2.3 million subordinated note payable was reinstated in January 2006 pursuant to a Settlement Agreement and Mutual General Release with Cyrk as explained in the following paragraph.

On January 31, 2006, the Company and Cyrk entered into a Settlement Agreement and Mutual General Release pursuant to which: (1) Cyrk agreed to pay $1.6 million to the Company, of which $435,000 was paid on or before March 1, 2006 and the balance was payable, pursuant to a subordinated note (the “New Subordinated Note”), in forty-one (41) approximately equal consecutive monthly installments beginning April 1, 2006; (ii) Cyrk entered into a Confession of Judgment in Washington State Court for all amounts owing to the Company under the New Subordinated Note and the $2.3 million note (the “Old Subordinated Note”); (iii) Cyrk’s parent company agreed to subordinate approximately $4.3 million of Cyrk debt to the debt owed to the Company by Cyrk; and (iv) Cyrk and the Company entered into mutual releases of all claims except those arising under the Settlement Agreement, the New Subordinated Note or the Confession Judgment. So long as Cyrk did not default on the New Subordinated Note or in the event of payment in full, the Company agreed not to enter the Confession of Judgment relating to the Old Subordinated Note in court. Cyrk’s obligations under the New Subordinated Note and the Old Subordinated Note are subordinated to Cyrk’s obligations to the financial institution which is Cyrk’s senior lender, which obligations are secured by, among other things, substantially all of Cyrk’s assets. Through August 31, 2008, the Company collected $1.3 million from Cyrk under the New Subordinated Note. Cyrk did not make a timely payment on September 1, 2008, and has made no payments since. As a result, the Company filed the Confession of Judgment in the state of Washington on November 14, 2008, and is in the process of attempting to execute on the judgment. During the three months ended June 30, 2009, the Company collected approximately $33,000 on the judgment which was recorded a gain on settlement within its discontinued operations. There is no assurance that the Company will be successful in further enforcing the Confession of Judgment and collecting any additional payments.

At June 30, 2010 and December 31, 2009, an allowance was recorded for the balance of the New Subordinated Note totaling $0.3 million as collectibility is not reasonably assured based on the Company’s experience of prior arrangements with Cyrk including the default of the Winthrop obligation and settlement of controversy noted above, and Cyrk has not made any payments since September 1, 2008.

8. Redeemable Preferred Stock

In November 1999, Overseas Toys, an affiliate of Yucaipa, a Los Angeles, California based investment firm, invested $25 million into the Company in exchange for preferred stock and a warrant to purchase additional preferred stock. Under the terms of the investment, the Company issued 25,000 shares of a newly authorized senior cumulative participating convertible preferred stock (“preferred stock”) to Yucaipa for $25 million. Yucaipa was entitled, at their option, to convert each share of preferred stock into common stock equal to the sum of $1,000 per share plus all accrued and unpaid dividends, divided by $8.25.

Yucaipa had voting rights equivalent to the number of shares of common stock into which their preferred stock was convertible on the relevant record date and had the right to appoint a total of three directors to the Company’s seven-member Board of Directors and to designate the Chairman of the Board. Also, Yucaipa was entitled to receive an annual dividend equal to 4%, paid quarterly, of the base liquidation preference of $1,000 per share outstanding, payable in cash or in-kind at the Company’s option.

In the event of liquidation, dissolution or winding up of the affairs of the Company, Yucaipa, as holder of the preferred stock, would have been entitled to receive the redemption price of $1,000 per share plus all accrued dividends plus: (1) (a) 7.5% of the amount that the Company’s retained earnings exceeds $75 million less (b) the aggregate amount of any cash dividends paid on common stock which were not in excess of the amount of dividends paid on the preferred stock, divided by (2) the total number of preferred shares outstanding as of such date (the “adjusted liquidation preference”), before any payment was made to other stockholders. The preferred stock was subject to a mandatory offer of redemption if a change in control of the Company occurs.

See Note 2 for information regarding the Recapitalization Agreement, which was subsequently approved by shareholders on September 18, 2008, pursuant to which the preferred stock was converted to common stock.

9. Subsequent Events

The Company performed an evaluation of subsequent events and noted no additional events that required disclosure.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following is a discussion of the financial condition and results of operations of the Company for the three and six months ended June 30, 2010, as compared to the same periods in the previous year. This discussion should be read in conjunction with the condensed consolidated financial statements of the Company and related Notes included elsewhere in this Form 10-Q.

Forward-Looking Statements and Associated Risks

From time to time, the Company may provide forward-looking information such as forecasts of expected future performance or statements about the Company’s plans and objectives, including certain information provided below. These forward-looking statements are based largely on the Company’s expectations and are subject to a number of risks and uncertainties, certain of which are beyond the Company’s control. The Company wishes to caution readers that actual results may differ materially from those expressed in any forward-looking statements made by, or on behalf of, the Company including, without limitation, as a result of factors described in Item 1A. Risk Factors included in the Company’s December 31, 2009, Form 10-K for Purposes of the “Safe Harbor” Provisions of the Private Securities Litigation Reform Act of 1995.

General

Prior to August 2001, the Company was a multi-national, full service promotional marketing company. In August 2001, McDonald’s, the Company’s principal customer, terminated its 25-year relationship with the Company as a result of the embezzlement by a former Company employee of winning game pieces from McDonald’s promotional games administered by the Company. Other customers also terminated their relationships with the Company, resulting in the Company no longer having a business. By April 2002, the Company had effectively eliminated a majority of its ongoing promotions business operations and was in the process of disposing of its assets and settling its liabilities related to the promotions business and defending and pursuing related litigation. During the second quarter of 2002, the discontinued activities of the Company, consisting of revenues, operating costs, general and administrative costs, and certain assets and liabilities associated with the Company’s promotions business, were classified as discontinued operations for financial reporting purposes.

Outlook

As a result of significant losses from operations, a lack of any operating revenue and a potential liquidation in connection with the Recapitalization Agreement, described under “Liquidity and Capital Resources,” the Company’s independent registered public accounting firm has expressed substantial doubt about the Company’s ability to continue as a going concern. The accompanying condensed consolidated financial statements do not include any adjustments that might result from the outcome of these uncertainties. The Company has taken significant actions and will continue to take further action to reduce its cost structure. The Board of Directors of the Company continues to consider various alternative courses of action for the Company going forward, including possibly acquiring or combining with one or more operating businesses. The Board of Directors has reviewed and analyzed a number of proposed transactions and will continue to do so until it can determine a course of action going forward to best benefit all shareholders. The Company cannot predict when the Board of Directors will have developed a proposed course of action or whether any such course of action will be successful. Management believes it has sufficient capital resources and liquidity to operate the Company for the foreseeable future.

In connection with the Recapitalization Agreement described under “Liquidity and Capital Resources,” and in the event that the Company does not consummate a business combination by the later of (i) December 31, 2010, or (ii) December 31, 2011, in the event that a letter of intent, an agreement in principle or a definitive agreement to complete a business combination will have been executed on or prior to December 31, 2010, but the business combination was not consummated prior to such time, and no qualified offer have been previously consummated, the officers of the Company will take all such action necessary to dissolve and liquidate the Company as soon as reasonably practicable.

Notwithstanding the foregoing, the Company will not be required to be dissolved and liquidated if Overseas Toys, the Company’s largest shareholder, and/or any affiliate thereof shall have made a qualified offer no earlier than one hundred and twenty (120) days and at least sixty (60) days prior to the termination date and shall have consummated such qualified offer by having purchased all shares of stock properly and timely tendered and not withdrawn pursuant to the terms of the qualified offer.

RESULTS OF CONTINUING AND DISCONTINUED OPERATIONS

The discontinued activities of the Company have been classified as discontinued operations in the accompanying condensed consolidated financial statements. Continuing operations represent the costs required to maintain the Company’s current corporate infrastructure that will enable the Board of Directors to pursue various alternative courses of action going forward. These costs primarily consist of the salaries and benefits of executive management and corporate finance staff, professional fees, Board of Director fees, and space and facility costs. The Company’s continuing operations and discontinued operations will be discussed separately, based on the respective financial results contained in the accompanying condensed consolidated financial statements and related notes.

RESULTS OF CONTINUING OPERATIONS

Three Months Ended June 30, 2010, Compared to Three Months Ended June 30, 2009

The Company generated no sales or gross profits during the three months ended June 30, 2010 and 2009.

General and administrative expenses totaled $.5 million during the three months ended June 30, 2010 and 2009, as continuing operations remained substantially similar from period to period.

Interest income totaled approximately $13,000 during the three months ended June 30, 2010, compared to approximately $34,000 during the same period in the prior year. The decrease is primarily due to a reduction in interest rates and average cash balances from the three months ended June 30, 2009.

During the three months ended June 30, 2009, the Company recorded a gain on settlement of approximately $7,000 related to the settlement of a contingent loss liability on terms more favorable than the amount that was originally recorded by the Company.

The Company recorded net nominal investment income during the three months ended June 30, 2010, compared to a nominal investment impairment during the three months ended June 30, 2009, to adjust the recorded value of its investments accounted for under the cost method, which does not include the Company’s investment in Yucaipa AEC, to the estimated future undiscounted cash flows the Company expects from such investments.

Six Months Ended June 30, 2010, Compared to Six Months Ended June 30, 2009

The Company generated no sales or gross profits during the six months ended June 30, 2010 and 2009.

General and administrative expenses totaled $1.1 million during the six months ended June 30, 2010, compared to $1.0 million during the same period in the prior year. The increase was primarily due to legal costs including those associated with considering alternative courses of action for the Company going forward, including possibly acquiring or combining with one or more operating businesses.

Interest income totaled approximately $31,000 during the six months ended June 30, 2010, compared to $.1 million during the same period in the prior year. The decrease is primarily due to a reduction in interest rates and average cash balances from the six months ended June 30, 2009.

During the six months ended June 30, 2009, the Company recorded a gain on settlement of approximately $7,000 related to the settlement of a contingent loss liability on terms more favorable than the amount that was originally recorded by the Company.

The Company recorded net nominal investment income during the six months ended June 30, 2010, compared to a nominal investment impairment during the six months ended June 30, 2009, to adjust the recorded value of its investments accounted

for under the cost method, which does not include the Company’s investment in Yucaipa AEC, to the estimated future undiscounted cash flows the Company expects from such investments.

There was approximately $8,000 recorded to the Company’s consolidated statement of operations for equity in the earnings of Yucaipa AEC for the six months ended June 30, 2009.

RESULTS OF DISCONTINUED OPERATIONS

Three Months Ended June 30, 2010, Compared to Three Months Ended June 30, 2009

The Company generated no sales or gross profits during the three months ended June 30, 2010 and 2009.

The Company recorded general and administrative expenses of approximately $65,000 and approximately $20,000 during the three months ended June 30, 2010 and 2009, respectively, which primarily consisted of adjustments to the recorded value of a cash surrender value related asset.

Gain on settlements totaled approximately $33,000 during the three months ended June 30, 2009, due to amounts collected related to the New Subordinated Note with Cyrk.

Six Months Ended June 30, 2010, Compared to Six Months Ended June 30, 2009

The Company generated no sales or gross profits during the three months ended June 30, 2010 and 2009.

The Company recorded general and administrative expenses of approximately $80,000 and $.1 million during the six months ended June 30, 2010 and 2009, respectively, which primarily consisted of adjustments to the recorded value of a cash surrender value related asset.

Gain on settlements totaled approximately $33,000 during the six months ended June 30, 2009, due to amounts collected related to the New Subordinated Note with Cyrk.

LIQUIDITY AND CAPITAL RESOURCES

The matters discussed in the section “Absence of Operating Business; Going Concern” in Note 2 of the “Notes to Condensed Consolidated Financial Statements” have had and will continue to have a substantial adverse impact on the Company’s cash position. As a result of significant losses from operations, a lack of any operating revenue and a potential liquidation in connection with the Recapitalization Agreement described below, the Company’s independent registered public accounting firm has expressed substantial doubt about the Company’s ability to continue as a going concern. The accompanying condensed consolidated financial statements do not include any adjustments that might result from the outcome of these uncertainties.

The Company continues to incur operating losses in 2010 within its continuing operations for the general and administrative expenses incurred to manage the affairs of the Company and resolve outstanding legal matters. Inasmuch as the Company no longer generates operating income and is unable to borrow funds, the source of current and future working capital is expected to be cash on hand and the recovery of certain long-term investments. By utilizing cash received pursuant to the settlement with McDonald’s in 2004, $2.1 million received from Yucaipa AEC in July 2008 and March 2009 (see Note 5 of the “Notes to Condensed Consolidated Financial Statements”), and $1.75 million received in August 2008 in settlement of the Company’s lawsuit against PricewaterhouseCoopers LLC, management believes it has sufficient capital resources and liquidity to operate the Company for the foreseeable future. However, as a result of significant losses from operations, a lack of any operating revenue and a potential liquidation in connection with the Recapitalization Agreement described below, the Company’s independent registered public accounting firm has expressed substantial doubt about the Company’s ability to continue as a going concern. The accompanying condensed consolidated financial statements do not include any adjustments that might result from the outcome of these uncertainties.

The Board of Directors of the Company continues to consider various alternative courses of action for the Company, including possibly acquiring or combining with one or more operating businesses. The Board of Directors has reviewed and analyzed a number of proposed transactions and will continue to do so until it can determine a course of action going forward to best benefit all shareholders. The Company cannot predict when the Board of Directors will have developed a proposed course of action or whether any such course of action will be successful.

On June 11, 2008, the Company entered into an Exchange and Recapitalization Agreement with Overseas Toys, the holder of all the outstanding shares of preferred stock of the Company, pursuant to which all the outstanding preferred stock would be converted into shares of common stock representing 70% of the shares of common stock outstanding immediately following the conversion. The Recapitalization Agreement was negotiated on the Company’s behalf by the Special Committee of disinterested directors which, based in part upon the opinion of the Special Committee’s financial advisor, determined that the transaction was fair to the holders of common stock from a financial point of view. At a special meeting held on September 18, 2008, the stockholders of the Company approved amendments to the Company’s certificate of incorporation proposed in order to effect a recapitalization of the Company pursuant to the terms of the Recapitalization Agreement.

Continuing Operations

Working capital from continuing operations was $12.1 million and $14.5 million at June 30, 2010, and December 31, 2009, respectively.

Net cash used in operating activities from continuing operations during the six months ended June 30, 2010, totaled $.9 million primarily due to a loss from continuing operations of $1.0 million partially offset by a net change in working capital items. Net cash used in operating activities from continuing operations during the six months ended June 30, 2009, totaled $.6 million primarily due to a loss from continuing operations of $.9 million partially offset by a net change in working capital items.

There were no investing activities from continuing operations during the six months ended June 30, 2010 and 2009.

There were cash outflows from financing activities of $1.3 million during the six months ended June 30, 2010, as the Company purchased 3,589,201 shares of its outstanding common stock from Everest Special Situations Fund L.P., formerly the Company’s second largest shareholder, for $1,256,220, on April 26, 2010. The shares are held by the Company as treasury stock.

Discontinued Operations

Working capital from discontinued operations was a deficit of $.3 million and $.4 million at June 30, 2010, and December 31, 2009, respectively.

There was approximately $.1 million net cash used in operating activities of discontinued operations during the six months ended June 30, 2010 and 2009, primarily due to a loss from discontinued operations.

There were no investing activities from discontinued operations during the six months ended June 30, 2010 and 2009. In addition, there were no financing activities from discontinued operations during the six months ended June 30, 2010 and 2009.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The disclosure required by this Item is not material to the Company because the Company does not currently have any exposure to market rate sensitive instruments, as defined in this Item.

ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

As of June 30, 2010, the Company evaluated the effectiveness and design and operation of its disclosure controls and procedures. The Company’s disclosure controls and procedures are the controls and other procedures that the Company designed to ensure that it records, processes, summarizes, and reports in a timely manner the information that it must disclose in reports that the Company files with or submits to the Securities and Exchange Commission. Greg Mays, the principal executive and principal financial officer of the Company, reviewed and participated in this evaluation. Based on this evaluation, the principal executive and principal financial officer of the Company concluded that the Company’s disclosure controls and procedures were effective.

Changes in Internal Control Over Financial Reporting

Since the date of the evaluation noted above, there have not been any significant changes in the Company’s internal controls or in other factors that could significantly affect those controls.

ITEM 4T. CONTROLS AND PROCEDURES

Not applicable.

PART II — OTHER INFORMATION

Item 1. Legal Proceedings

Not applicable.

Item 1A. Risk Factors

Not applicable.

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

Not applicable.

Item 3. Defaults Upon Senior Securities

Not applicable.

Item 4. (Removed and Reserved)

Item 5. Other Information

None.

Item 6. Exhibits


Exhibit
Number		Description
2.1(4)		Securities Purchase Agreement dated September 1, 1999, between the Registrant and Overseas Toys, L.P.

2.2(6)		Purchase Agreement between the Company and Rockridge Partners, Inc., dated January 20, 2001, as amended by Amendment No. 1 to the Purchase Agreement, dated February 15, 2001

2.3(7)		March 12, 2002, Letter Agreement between Cyrk and Simon, as amended by Letter Agreement dated as of March 22, 2002

2.4(7)		Mutual Release Agreement between Cyrk and Simon

2.5(8)		Letter Agreement Between Cyrk and Simon, dated December 20, 2002

2.6(10)		Settlement Agreement and Mutual General Release between Cyrk and Simon dated January 31, 2006

2.7(10)		Subordinated Promissory Note in the principal amount of $1,410,000 from Cyrk to Simon dated January 31, 2006

3.1(11)		Restated Certificate of Incorporation of the Registrant

3.2(10)		Amended and Restated By-laws of the Registrant, effective March 27, 2006

3.3(5)		Certificate of Designation for Series A Senior Cumulative Participating Convertible Preferred Stock

4.1(1)		Specimen certificate representing Common Stock

10.1(2)(3)		1993 Omnibus Stock Plan, as amended

10.10(5)		Registration Rights Agreement between the Company and Overseas Toys, L.P.

10.18(6)		Subordinated Promissory Note by Rockridge Partners, Inc. in favor of the Company dated February 15, 2001


Exhibit
Number		Description
10.28(9)		February 7, 2003, letter agreement with Greg Mays regarding 2002 and 2003 compensation

10.29(9)		May 30, 2003, Executive Services Agreements with Joseph Bartlett, Allan Brown, Gregory Mays, and Terrence Wallock

10.30(10)		May 3, 2004, Amendment No. 1 to Executive Services Agreements with Messrs. Bartlett and Brown, (replaces previously filed copies of these amendments)

10.31(10)		March 27, 2006, Amendment No. 2 to Wallock Executive Services Agreement

10.32(10)		March 27, 2006, New Executive Services Agreement with Mr. Mays

31		Certifications pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934 (the “Exchange Act”), filed herewith

32		Certifications pursuant to 18 U.S.C. Section 1350, as adopted pursuant to section 906 of the Sarbanes- Oxley Act of 2002, filed herewith

Footnotes:


(1)		Filed as an exhibit to the Registrant’s Registration Statement on Form S-1 (Registration No. 33-63118) or an amendment thereto and incorporated herein by reference.

(2)		Management contract or compensatory plan or arrangement.

(3)		Filed as an exhibit to the Annual Report on Form 10-K for the year ended December 31, 1994, and incorporated herein by reference.

(4)		Filed as an exhibit to the Registrant’s Report on Form 8-K dated September 1, 1999, and incorporated herein by reference.

(5)		Filed as an exhibit to the Annual Report on Form 10-K for the year ended December 31, 1999, and incorporated herein by reference.

(6)		Filed as an exhibit to the Registrant’s Report on Form 8-K dated February 15, 2001, and incorporated herein by reference.

(7)		Filed as an exhibit to the Registrant’s original Report on Form 10-K for the year ended December 31, 2001, filed on March 29, 2002, and incorporated herein by reference.

(8)		Filed as an exhibit to the Registrant’s Report on Form 10-K/A for the year ended December 31, 2001, filed on April 18, 2003, and incorporated herein by reference.

(9)		Filed as an exhibit to the Registrant’s Report on Form 10-K for the year ended December 31, 2002, filed on July 29, 2003, and incorporated herein by reference.

(10)		Filed as an exhibit to the Registrant’s Report on Form 10-K for the year ended December 31, 2005, filed on March 31, 2006, and incorporated herein by reference.

(11)		Filed as an exhibit to the Registrant’s Report on Form 10-Q for the quarter ended December 31, 2008, filed on November 13, 2008, and incorporated herein by reference.


Date: August 13, 2010	SIMON WORLDWIDE, INC.
	/s/ Greg Mays
	Greg Mays
	Chief Executive Officer and Chief Financial Officer (duly authorized signatory)

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		Page
Description		Number
PART I — FINANCIAL INFORMATION

Item 1. Condensed Financial Statements

Unaudited Consolidated Balance Sheets — June 30, 2010 and December 31, 2009		3

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

Unaudited Consolidated Statements of Comprehensive Loss — For the three and six months ended June 30, 2010 and 2009		5

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

Notes to Unaudited Condensed Consolidated Financial Statements		7

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations		15

Item 3. Quantitative and Qualitative Disclosures About Market Risk		18

Item 4. Controls and Procedures		19

Item 4T. Controls and Procedures		19

PART II — OTHER INFORMATION

Item 1. Legal Proceedings		20

Item 1A. Risk Factors		20

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds		20

Item 3. Defaults Upon Senior Securities		20

Item 4. (Removed and Reserved)		20

Item 5. Other Information		20

Item 6. Exhibits		20

SIGNATURE		22

EX-31
EX-32