Nature of Business, Loss of Customers, Resulting Events, and Managements Plans

12 Months Ended

Dec. 31, 2011

Nature of Business, Loss of Customers, Resulting Events, and Management's Plans [Abstract]

Nature of Business, Loss of Customers, Resulting Events, and Management's Plans

1. Nature of Business, Loss of Customers, Resulting Events, and Management’s Plans

Prior to August 2001, the Company, incorporated in Delaware and founded in 1976, had been operating as a multi-national full-service promotional marketing company, specializing in the design and development of high-impact promotional products and sales promotions. The majority of the Company’s revenue was derived from the sale of products to consumer products and services companies seeking to promote their brand names and corporate identities and build brand loyalty. The major client of the Company was McDonald’s Corporation (“McDonald’s”), for whom the Company’s Simon Marketing subsidiary designed and implemented marketing promotions, which included premiums, games, sweepstakes, events, contests, coupon offers, sports marketing, licensing, and promotional retail items. Net sales to McDonald’s and Philip Morris, another significant former client, accounted for 78% and 8%, respectively, of total net sales in 2001.

On August 21, 2001, the Company was notified by McDonald’s that they were terminating their approximately 25-year relationship with Simon Marketing as a result of the arrest of Jerome P. Jacobson (“Mr. Jacobson”), a former employee of Simon Marketing who subsequently pled guilty to embezzling winning game pieces from McDonald’s promotional games administered by Simon Marketing. No other Company employee was found to have any knowledge of or complicity in his illegal scheme. Simon Marketing was identified in the criminal indictment of Mr. Jacobson, along with McDonald’s, as an innocent victim of Mr. Jacobson’s fraudulent scheme. Further, on August 23, 2001, the Company was notified that its second largest customer, Philip Morris, was also ending its approximately nine-year relationship with the Company. As a result of the above events, the Company no longer has an on-going promotions business.

Since August 2001, the Company has concentrated its efforts on reducing its costs and settling numerous claims, contractual obligations, and pending litigation. 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. In essence, the Company discontinued its promotions business and changed the nature of its operation to focus on its pending litigation and winding down its contracted obligations. 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. As of December 31, 2011, the Company had reduced its workforce to 4 employees from 136 employees as of December 31, 2001.

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. With no revenues from operations, the Company closely monitors and controls its expenditure within a reasonably predictable range. Cash used by continuing operating activities was $1.9 million and $2.3 million in the years ended December 31, 2011 and 2010, respectively. The Company incurred losses within its continuing operations in 2011 and continues to incur losses in 2012 for the general and administrative expenses incurred to manage the affairs of the Company. By utilizing cash available at December 31, 2011, to maintain its scaled back operations, management believes it has sufficient capital resources and liquidity to operate the Company for at least one year.