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Investments
 12 Months Ended
Dec. 31, 2011
Investments  
Investments

3.                                      Investments

 

Marketable Securities

 

The following is a summary of marketable securities classified as available-for-sale securities:

 

 

 

December 31, 2011

 

December 25, 2010

 

 

 

Cost

 

Fair Value

 

Cost

 

Fair Value

 

Equity securities

 

$

1,015,800

 

$

1,043,800

 

$

161,000

 

$

161,000

 

 

The Company’s unrealized gains and losses for marketable securities classified as available-for-sale securities in accumulated other comprehensive income are as follows:

 

Year-ended

 

Unrealized
Gains

 

Unrealized
Losses

 

Net Unrealized
Gains / (Losses)

 

December 31, 2011

 

$

32,900

 

$

(4,900

)

$

28,000

 

December 25, 2010

 

—

 

—

 

—

 

 

The Company’s realized gains and losses recognized on sales of available-for-sale marketable securities are as follows:

 

Year-ended

 

Realized
Gains

 

Realized
(Losses)

 

Net Realized
Gains (Losses)

 

December 31, 2011

 

$

58,600

 

$

(600

)

$

58,000

 

December 25, 2010

 

$

94,100

 

$

(144,600

)

$

(50,500

)

 

Amounts reclassified out of accumulated other comprehensive income into earnings is determined by using the average cost of the security when sold.

 

Long-term Investments

 

The Company’s long-term investments, net of allowance, consist of:

 

 

 

December 31, 2011

 

December 25, 2010

 

Tomsten, Inc.

 

$

2,492,900

 

$

1,973,800

 

BridgeFunds, LLC

 

1,324,500

 

2,000,000

 

 

 

$

3,817,400

 

$

3,973,800

 

 

Tomsten, Inc.

 

The Company has an investment in Tomsten, the parent company of “Archiver’s” retail chain.  Archiver’s is a retail concept created to help people preserve and enjoy their photographs.  The Company has invested a total of $8.5 million in the purchase of common stock of Tomsten (including $1.0 million invested in June 2011 pursuant to a Rights Offering by Tomsten).  The Company’s investment currently represents 22.0% of the outstanding common stock of Tomsten (which represents an increase from 18.3% prior to the Company’s participation in the Rights Offering in June 2011.).  The Company applies the equity method of accounting to this investment.  The Company also provides management services to Tomsten, and the Company’s Chairman and Chief Executive Officer serves on Tomsten’s board of directors.

 

In 2011 and 2010, the Company recorded $515,800 and $259,100, respectively, for its pro-rata share of Tomsten’s losses in the statement of operations on the line item captioned Loss from Equity Investments.  As of December 31, 2011, $0.3 million of the Company’s investment with a current carrying cost of $2.5 million is attributable to goodwill.  The amount of goodwill was determined by calculating the difference between the Company’s net investment in Tomsten less its pro rata share of Tomsten’s net worth.

 

BridgeFunds, LLC

 

In October 2004, the Company made a commitment to lend $2.0 million to BridgeFunds Limited at an annual rate of 12% pursuant to several senior subordinated promissory notes, and the commitment was fully funded by May 2006.  BridgeFunds Limited advances funds to claimants involved in civil litigation to cover litigation expenses.  In addition, the Company received a warrant to purchase approximately 257,000 shares of BridgeFunds at $1 per share, which expired unexercised in October 2011.  In August 2007, in connection with raising capital, BridgeFunds Limited completed a restructuring where all assets and liabilities, including the warrant, were assigned to and assumed by BridgeFunds, LLC (“BridgeFunds”).

 

During 2009, the board of BridgeFunds decided to cease advancing funds to new claimants and place its portfolio of receivables in run-off, thereby allowing equity holders the opportunity to receive distributions after collection of receivables and the payment in full to all debt holders, including the Company’s notes.  Entry by BridgeFunds into transactions contemplated by these actions necessitated consent by its debt holders.  In October 2009, the Company entered into a modification agreement with BridgeFunds, LLC, whereby the maturity date of all of the outstanding promissory notes was changed to September 30, 2010, the annual rate of interest on the notes was increased to 15% and monthly prepayments of the principal of such notes in an amount equal to Available Cash Flow (as defined within the agreements governing the notes) is required.  In October 2010 and July 2011, the Company entered into amendments to the agreements governing the notes that extended the maturity date on the notes to June 30, 2011 and June 30, 2012, respectively.  During 2010 and 2011, the Company received $60,400 and $28,300, respectively, in payments of interest and did not receive any payments of principal on the notes.  The Company stopped accruing interest on this investment as of September 30, 2010.  The Company has deemed this investment to be impaired, and in evaluating the investment for impairment has determined that its present value of expected future cash flows, discounted at the effective interest rate on the notes of 15%, is less than the recorded investment in the notes.  In developing its estimate of expected future cash flows, the Company used certain information obtained from BridgeFunds concerning existing liabilities, claimant cases outstanding and historical default rates on claimant advances, and made certain assumptions regarding the timing of case settlements, the payment of future liabilities and future default rates.  The Company recognized $883,100 in impairment charges during 2011 and established a corresponding valuation allowance accordingly.  As of December 31, 2011, the $1.3 million net investment balance inclusive of $0.2 million of related interest receivable is classified as long-term based on expected payments from Available Cash Flow.