Filing Date: 2011-11-14 Form Type: 10-Q Description: Quarterly report
v2.3.0.15
Document and Entity Information
9 Months Ended
Sep. 30, 2011
Nov. 11, 2011
Entity Registrant NameMACE SECURITY INTERNATIONAL INC 
Entity Central Index Key0000912607 
Current Fiscal Year End Date--12-31 
Entity Filer CategorySmaller Reporting Company 
Trading Symbolmace 
Entity Common Stock, Shares Outstanding 58,946,441
Document Type10-Q 
Amendment Flagfalse 
Document Period End DateSep. 30, 2011
Document Fiscal Period FocusQ3 
Document Fiscal Year Focus2011 
v2.3.0.15
Consolidated Balance Sheets (USD $)
In Thousands
Sep. 30, 2011
Dec. 31, 2010
ASSETS  
Cash and cash equivalents$ 7,285$ 2,564
Accounts receivable, less allowance for doubtful accounts of $456 and $562 in 2011 and 2010, respectively1,8752,119
Inventories, net2,9623,273
Prepaid expenses and other current assets1,3491,790
Assets held for sale4,4516,330
Total current assets17,92216,076
Property and equipment:  
Buildings and leasehold improvements537703
Machinery and equipment3,3593,237
Furniture and fixtures459459
Total property and equipment4,3554,399
Accumulated depreciation and amortization(2,966)(2,754)
Total property and equipment, net1,3891,645
Goodwill2,8051,982
Other intangible assets, net of accumulated amortization of $1,686 and $1,552 in 2011 and 2010, respectively2,0631,767
Other assets1,5111,554
Total assets25,69023,024
LIABILITIES AND STOCKHOLDERS' EQUITY  
Current portion of long-term debt and capital lease obligations - See Note 139281,378
Accounts payable1,8602,168
Income taxes payable169199
Deferred revenue284324
Accrued expenses and other current liabilities2,6342,905
Liabilities related to assets held for sale1,1222,081
Total current liabilities6,9979,055
Long-term debt, net of current portion1943
Capital lease obligations, net of current portion3970
Other liabilities3460
Commitments and contingencies - See Note 7  
Stockholders' equity:  
Preferred stock, $.01 par value: authorized shares -10,000,000; issued and outstanding shares-none00
Common stock, $.01 par value: authorized shares-100,000,000; issued and outstanding shares of 58,946,441 at September 30, 2011 and 15,735,725 at December 31, 2010589157
Additional paid-in capital102,31393,912
Accumulated deficit(84,596)(80,196)
Total stockholders' equity before treasury stock18,30613,873
Less treasury stock at cost, 18,332 shares at September 30, 2011 and December 31, 2010(17)(17)
Total stockholders' equity18,28913,856
Total liabilities and stockholders' equity$ 25,690$ 23,024
v2.3.0.15
Consolidated Balance Sheets [Parenthetical] (USD $)
In Thousands, except Share data
Sep. 30, 2011
Dec. 31, 2010
Allowance for doubtful accounts (in dollars)$ 456$ 562
Accumulated amortization, Other intangible assets (in dollars)$ 1,686$ 1,552
Preferred stock, par value (in dollars per share)$ 0.01$ 0.01
Preferred stock, shares authorized10,000,00010,000,000
Preferred stock, shares issued00
Preferred stock, shares outstanding00
Common stock, par value (in dollars per share)$ 0.01$ 0.01
Common stock, shares authorised100,000,000100,000,000
Common stock, shares issued58,946,44115,735,725
Common stock, shares outstanding58,946,44115,735,725
Treasury stock, shares18,33218,332
v2.3.0.15
Consolidated Statements of Operations (USD $)
In Thousands, except Share data
3 Months Ended9 Months Ended
Sep. 30, 2011
Sep. 30, 2010
Sep. 30, 2011
Sep. 30, 2010
Revenues$ 3,514$ 4,727$ 10,575$ 13,347
Cost of revenues2,4153,2677,0059,377
Gross profit1,0991,4603,5703,970
Selling, general, and administrative expenses2,7912,1737,0207,235
Arbitration award010004,600
Depreciation and amortization135135389446
Asset impairment charges35035225
Operating loss(1,862)(948)(3,874)(8,536)
Interest expense, net(101)(12)(304)(34)
Other income0107
Gain on valuation of derivative740740
Loss from continuing operations before income taxes(1,889)(959)(4,104)(8,563)
Income tax (benefit) expense(20)15065
Loss from continuing operations(1,869)(974)(4,104)(8,628)
Loss from discontinued operations, net of tax of $0 in 2011 and 2010(261)(3,932)(296)(7,980)
Net loss$ (2,130)$ (4,906)$ (4,400)$ (16,608)
Per share of common stock (basic and diluted):    
Loss from continuing operations (in dollars per share)$ (0.04)$ (0.06)$ (0.17)$ (0.55)
Loss from discontinued operations$ (0.01)$ (0.25)$ (0.01)$ (0.50)
Net loss (in dollars per share)$ (0.05)$ (0.31)$ (0.18)$ (1.05)
Weighted average shares outstanding:    
Basic and diluted (in shares)43,571,69815,735,72525,116,34515,794,343
v2.3.0.15
Consolidated Statements of Operations [Parenthetical] (USD $)
In Thousands
3 Months Ended9 Months Ended
Sep. 30, 2011
Sep. 30, 2010
Sep. 30, 2011
Sep. 30, 2010
Tax effect of discontinued operation$ 0$ 0$ 0$ 0
v2.3.0.15
Consolidated Statement of Stockholders' Equity (USD $)
In Thousands, except Share data
Common Stock [Member]
Additional Paid-In Capital [Member]
Accumulated Deficit [Member]
Treasury Stock [Member]
Total
Balance at Dec. 31, 2010$ 157$ 93,912$ (80,196)$ (17)$ 13,856
Balance (in shares) at Dec. 31, 201015,735,725    
Common shares issued for cash4327,793008,225
Common shares issued for cash (in shares)43,210,716    
Stock-based compensation and issuance of warrants (see notes 6 and 12)0920092
Derivative liability reclass to equity051600516
Net loss00(4,400)0(4,400)
Balance at Sep. 30, 2011$ 589$ 102,313$ (84,596)$ (17)$ 18,289
Balance (in shares) at Sep. 30, 201158,946,441    
v2.3.0.15
Consolidated Statements of Cash Flows (USD $)
In Thousands
9 Months Ended
Sep. 30, 2011
Sep. 30, 2010
Operating activities:  
Net loss$ (4,400)$ (16,608)
Loss from discontinued operations, net of tax(296)(7,980)
Loss from continuing operations(4,104)(8,628)
Adjustments to reconcile loss from continuing operations to net cash used in operating activities:  
Depreciation and amortization389446
Goodwill and asset impairment charges35225
Stock-based compensation (see Note 6)4547
Gain on valuation of derivative(74)0
Amortization of discount on debt1200
Provision for losses on receivables113296
Loss on short-term investments02
Changes in operating assets and liabilities, net of acquisition:  
Accounts receivable184(659)
Inventories311130
Prepaid expenses and other assets4768
Accounts payable(378)(196)
Deferred revenue(6)14
Accrued expenses464,189
Income taxes payable(29)(28)
Net cash used in operating activities-continuing operations(2,872)(4,154)
Net cash used in operating activities-discontinued operations(28)(1,263)
Net cash used in operating activities(2,900)(5,417)
Investing activities:  
Acquisition of businesses, net of cash acquired(1,178)0
Purchase of property and equipment(106)(332)
Sale of short-term investments0334
Payments for intangibles(10)(2)
Net cash used in investing activities-continuing operations(1,294)0
Net cash provided by investing activities-discontinued operations9221,786
Net cash (used in) provided by investing activities(372)1,786
Financing activities:  
Proceeds from long-term debt1,40093
Payments on long-term debt and capital lease obligations(1,464)(100)
Purchase and retirement of treasury stock, net0(179)
Proceeds from issuance of common stock8,2250
Net cash provided by (used in) financing activities-continuing operations8,161(186)
Net cash used in financing activities-discontinued operations(168)(339)
Net cash provided by (used in) financing activities7,993(525)
Net increase (decrease) in cash and cash equivalents4,721(4,156)
Cash and cash equivalents at beginning of period2,5648,289
Cash and cash equivalents at end of period$ 7,285$ 4,133
v2.3.0.15
Description of Business and Basis of Presentation
9 Months Ended
Sep. 30, 2011
Accounting Policies [Abstract] 
Business Description and Basis of Presentation [Text Block]
1.
Description of Business and Basis of Presentation
 
The accompanying consolidated financial statements include accounts of Mace Security International, Inc. and its wholly owned subsidiaries (collectively, the “Company” or “Mace”). All significant intercompany transactions have been eliminated in consolidation.
 
The Company currently operates in one business segment, the Security Segment, which consists of three operating or reporting units: Mace Personal Defense, Inc., which sells consumer safety and personal defense products; Mace Security Products, Inc., which sells electronic surveillance equipment and products; and Mace CSSS, Inc. (“Mace CS”), which provides wholesale security monitoring services. The Company entered the wholesale security monitoring business with its acquisition of Central Station Security Systems, Inc. (“CSSS”) on April 30, 2009. See Note 4. Business Acquisitions and Divestitures.
 
The Company had a Digital Media Marketing Segment which conducted a digital media marketing and e-commerce business. The Company discontinued the digital media marketing business and sold the e-commerce business of the segment, Linkstar Corporation, on November 22, 2010. See Note 4. Business Acquisitions and Divestitures. The Company also had a Car Wash Segment which provided complete car care services (including car wash, detailing, lube, and minor repairs). As of September 30, 2011, there were only three remaining car washes, all of which were located in Texas.
 
The assets and liabilities of our remaining car wash operations are classified as assets held for sale and liabilities related to assets held for sale in the balance sheet and the results of operations for the car washes and the discontinued Digital Media Marketing Segment are reflected as discontinued operations in the statements of operations and the statements of cash flows. The statement of operations and the statement of cash flows for the prior year have been restated to reflect the discontinued operations in accordance with accounting principles generally accepted in the United States (“GAAP”). See Note 5. Discontinued Operations and Assets Held for Sale.
v2.3.0.15
New Accounting Standards
9 Months Ended
Sep. 30, 2011
Accounting Changes and Error Corrections [Abstract] 
Accounting Changes and Error Corrections [Text Block]
2.   New Accounting Standards
 
In October 2009, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2009-13,  Revenue Recognition (Topic 605): Multiple-Deliverable Revenue Arrangements - a consensus of the FASB Emerging Issues Task Force, which amends the criteria for when to evaluate individual delivered items in a multiple deliverable arrangement and how to allocate consideration received. This ASU is effective for fiscal years beginning on or after June 15, 2010, which means January 1, 2011 for the Company. The Company has evaluated the impact of adopting the guidance and has determined it did not have an impact on the Company’s consolidated financial statements as of and for the nine months ended September 30, 2011.
 
In June 2011, the FASB issued an ASU which eliminates the option to report other comprehensive income and its components in the statement of stockholders’ equity. It requires an entity to present total comprehensive income, which includes the components of net income and the components of other comprehensive income, either in a single continuous statement or in two separate but consecutive statements. This pronouncement is effective for financial statements issued for fiscal years, and interim periods within those years, beginning after December 15, 2011. The Company believes the adoption of this pronouncement will not have a material impact on its consolidated financial statements.
 
In September 2011, the FASB issued new guidelines that are now part of Accounting Standards Codification (“ASC”) 350: Intangibles – Goodwill and Other. The new guidance is effective for fiscal years beginning after December 15, 2011, with early adoption permitted. The guidance will permit an entity to first assess qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount as a basis for determining whether it is necessary to perform the two-step goodwill impairment test. Because the objective of this new guidance is to simplify how entities test for goodwill impairment, it will not have a material impact on our financial statements.
v2.3.0.15
Other Intangible Assets
9 Months Ended
Sep. 30, 2011
Goodwill and Intangible Assets Disclosure [Abstract] 
Intangible Assets Disclosure [Text Block]
3.   Other Intangible Assets
 
The following table reflects the components of intangible assets, excluding goodwill and other intangibles classified as assets held for sale (in thousands):
 
   
September 30, 2011
    
December 31, 2010
  
   
Gross 
Carrying
Amount
    
Accumulated
Amortization
    
Gross 
Carrying
Amount
    
Accumulated
Amortization
  
   
(in thousands)
  
Amortized intangible assets:
                        
Non-compete agreements
   $ 168     $ 124     $ 148     $ 115  
Customer and product lists
     2,803       1,500       2,417       1,398  
Patent costs and trademarks
     130       62       97       39  
Total amortized intangible assets
     3,101       1,686       2,662       1,552  
Non-amortized intangible assets:
                                
Trademarks - Security Segment
     648       -       657       -  
Total non-amortized intangible assets
     648       -       657       -  
Total other intangible assets
   $ 3,749     $ 1,686     $ 3,319     $ 1,552  
 
The following sets forth the estimated amortization expense on intangible assets for the fiscal years ending December 31 (in thousands):
 
2011
   $ 180  
2012
   $ 174  
2013
   $ 166  
2014
   $ 119  
2015
   $ 92  
 
Amortization expense of other intangible assets, net of discontinued operations, was approximately $48,000 and $55,000 for the three months ended September 30, 2011 and 2010, respectively, and $133,000 and $219,000 for the nine months ended September 30, 2011 and 2010, respectively.  The weighted average useful life of amortizing intangible assets was 10.7 years as of September 30, 2011.
v2.3.0.15
Business Acquisitions and Divestitures
9 Months Ended
Sep. 30, 2011
Business Combinations [Abstract] 
Business Combination Disclosure [Text Block]
4.   Business Acquisitions and Divestitures
 
Acquisitions
 
On March 31, 2011, the Company completed the purchase of all of the outstanding common stock of The Command Center Inc. (“TCCI”) from TCCI’s stockholders. Total consideration was approximately $1.36 million, consisting of approximately $1.23 million in cash and the assumption of approximately $135,000 of liabilities. TCCI’s operations have been combined with the operations of Mace CS in Anaheim, California. TCCI was formerly located in Corona, California. TCCI has approximately 70 security dealer clients and approximately 22,500 end-user accounts.  Mace CS, combined with TCCI, services over 64,700 end-user accounts through 490 security dealer clients. TCCI’s primary assets were accounts receivable, equipment, customer contracts, and its business methods. The acquisition of TCCI provides growth to the Company’s wholesale monitoring services division and expands the ability to market its security products through cross-marketing of the Company’s surveillance equipment products to Mace CS’s dealer base as well as offering the Company’s current customers monitoring services. The fair value of the identifiable assets acquired and liabilities assumed in TCCI as of the acquisition date include: (i) $60,000 for accounts receivable; (ii) $3,000 for prepaid expenses and other assets; (iii) $42,000 for fixed assets and capital leased assets; (iv) the assumption of $135,000 of liabilities; and (v) the remainder, or approximately $1.26 million, allocated to goodwill and other intangible assets. Within the $1.26 million of acquired intangible assets, $823,000 was assigned to goodwill, which is not subject to amortization expense. The amount assigned to goodwill was deemed appropriate based on several factors, including: (i) multiples paid by market participants for businesses in the security monitoring business; (ii) levels of TCCI’s current and future projected cash flows; and (iii) the Company’s strategic business plan, which includes cross-marketing the Company’s surveillance equipment products to TCCI’s and Mace CS’s dealer base as well as offering monitoring services to the Company’s current customers, thus potentially increasing the value of its existing business segment. The remaining intangible assets were assigned to customer contracts and relationships for $385,000, tradename for $28,500, and a non-compete agreement for $20,500. Customer relationships, tradename, and the non-compete agreement were assigned a life of fifteen, five and three years, respectively.
 
On May 5, 2011 and July 8, 2011, the Company amended the Stock Purchase Agreement dated April 7, 2009 for the purchase of all the common stock of CSSS, Inc., which the Company had entered into with the former stockholders of CSSS, Inc.  Under the May 5, 2011 amendment: (i) the date for the payment to the former stockholders of a $500,000 general holdback of the purchase price was extended from May 1, 2011 to July 1, 2011; (ii) a purchase price holdback relating to a service contract for telephone lines was reduced from $300,000 to $250,000 and the holdback, as reduced, is to be paid to the former stockholders by July 10, 2015, if no legal proceeding has been initiated to collect any amounts owed on the service contract by July 6, 2015; (iii) a purchase price holdback relating to a contract for long distance telephone lines was reduced from $200,000 to $150,000 and the holdback, as reduced, is to be paid to the former stockholders by January 15, 2013, if no legal proceeding has been initiated to collect any amounts owed on the contract for long distance telephone lines by January 12, 2013; and (iv) the $100,000 of reduced holdbacks to be paid to the former stockholders, with $50,000, paid on May 13, 2011 and $50,000 paid on July 15, 2011.  The amendment also provided for payment of interest at the rate of 2% per annum on the holdback amounts.
 
Under the July 8, 2011 amendment: (i) the date for the payment to the former stockholders of a $500,000 general holdback of the purchase price was extended further from July 1, 2011 to August 15, 2011; and (ii) $50,000 of reduced contingent liability holdbacks were paid to the former stockholders, $25,000 on July 18, 2011 and $25,000 on August 5, 2011. The $500,000 general holdback payment was made on August 15, 2011 as required under the July 8, 2011 amendment.
 
Divestitures
 
On March 10, 2010, the Company sold one of its Lubbock, Texas car washes for cash consideration of $750,000.  Cash proceeds of $733,000 were received, net of closing costs.  The sale resulted in a net loss of approximately $1,000.
 
On June 2, 2010, the Company completed the sale of one of its Lubbock, Texas car washes for a total sale price of $650,000.  The net book value of this car wash site was approximately $428,000.  The cash proceeds of the sale were $641,000, net of closing costs.  The sale resulted in a gain of approximately $211,000.
 
On June 1, 2010, the Company entered into an agreement of sale for a car wash in Arlington, Texas for a sale price of $2.1 million; the agreement expired without the sale being consummated. The current book value of this car wash is approximately $2.0 million with outstanding debt of approximately $589,000. The expired agreement of sale was amended several times to allow the buyer additional time to secure financing and close the transaction.  The buyer has requested that the agreement be reinstated with a further extension of the closing date.  The Company has not reinstated the agreement because the buyer has not been able to demonstrate that he has obtained financing for the purchase price.  As part of the various amendments, the buyer released to the Company $100,000 of escrow deposits.
 
On July 26, 2010, the Company completed the sale of one of its Arlington, Texas car washes for a sale price of $625,000.  The cash proceeds of the sale were $413,000, net of paying off existing debt of $195,000 and certain closing costs.  The sale resulted in a net gain of approximately $13,000.
 
On November 22, 2010, the Company, through its subsidiaries, Linkstar Interactive Inc. and Linkstar Corporation (the “Subsidiaries”), entered into a Stock Purchase Agreement with Silverback Network, Inc. (the “Purchaser”) for the sale of the e-commerce division of its Digital Media Marketing Segment, Linkstar Corporation, for a sale price of $1.1 million. Under the terms of the Stock Purchase Agreement, the Purchaser paid a purchase price of $1.1 million for the stock of Linkstar Corporation, $990,000 of which was received at closing with ten percent (10%) of the purchase price, or $110,000, placed into escrow. The escrow funds were released to the Company in May 2011 at the six month anniversary of the sale as provided for under the Stock Purchase Agreement. Costs at closing were approximately $40,000, consisting of broker commissions. As a result of the sale, the Company’s cash increased by approximately $950,000. The sale resulted in a loss of approximately $191,000.
 
On December 27, 2010, the Company completed the sale of an oil lubrication facility and self-serve car wash in Arlington, Texas for a sale price of $350,000.  The book value of this facility was approximately $335,000, with outstanding debt of approximately $54,000. The sale resulted in a net gain of approximately $8,000.
On March 8, 2011, the Company completed the sale of the remaining car wash it owned in Lubbock, Texas for a sale price of $1.7 million.  The net book value of this car wash was approximately $1.7 million.  The cash proceeds of the sale were approximately $300,000, net of payment of the related mortgage for $670,000, a payment of $675,000 towards the $1.35 million promissory note with Merlin Partners, LP (“Merlin”), and closing costs. See Note 12. Related Party Transactions, for additional information and terms regarding the debt instrument with Merlin.  The sale resulted in a net loss of approximately $54,000 after customary closing costs and broker commissions.
 
 
 
 
 
v2.3.0.15
Discontinued Operations and Assets Held for Sale
9 Months Ended
Sep. 30, 2011
Discontinued Operations and Disposal Groups [Abstract] 
Disposal Groups, Including Discontinued Operations, Disclosure [Text Block]
5.   Discontinued Operations and Assets Held for Sale
 
The Company reviews the carrying value of its long-lived assets held and used, and its assets to be disposed of, for possible impairment when events and circumstances warrant such a review.  We also follow the applicable guidance in determining when to reclass assets to be disposed of to assets and related liabilities held for sale as well as when an operation disposed of or to be disposed of is classified as a discontinued operation in the statements of operations and the statements of cash flows.
 
As of September 30, 2011, the assets of the Company’s former Car Wash Segment consisted of three car washes. The sale of a Lubbock, Texas car wash that was under an agreement of sale at December 31, 2010 was completed on March 8, 2011.  On November 22, 2010, the Company sold the e-commerce division of its Digital Media Marketing Segment, Linkstar Corporation. Additionally, during the quarter ended September 30, 2010, the Company made a decision to sell its warehouse located in Farmers Branch, Texas (the “Texas warehouse”) and has listed the warehouse with a real estate broker. On August 31, 2011 the Company entered into a Commercial Contract, which was subsequently amended on October 19, 2011 and November 7, 2011, to sell the warehouse for $1,830,000. Although, the sale of the warehouse is anticipated to close on December 15, 2011, no assurance can be given that this transaction will be consummated.
 
The results for the car wash operations and the discontinued Digital Media Marketing Segment’s operations have been classified as discontinued operations in the statements of operations and the statements of cash flows.  These classifications are based on the remaining car washes, the remaining component of the Digital Media Marketing business, Promopath, as well as the Texas warehouse, all currently being marketed and ready for sale or under an agreement of sale.  The Company’s Board of Directors is committed to a plan to dispose of the remaining car washes, the remaining component of the Digital Media Marketing business, and the Texas warehouse within the next twelve months.  The statement of operations and the statement of cash flows for the prior year have been restated to reflect the discontinued operations in accordance with GAAP.
 
Revenues from discontinued operations were $773,000 and $2.2 million for the three months ended September 30, 2011 and 2010, respectively, and $2.4 million and $9.7 million for the nine months ended September 30, 2011 and 2010, respectively.  Operating loss from discontinued operations was $284,000 for the three months ended September 30, 2011, including asset impairment charges of $261,000, and $4.0 million for the three months ended September 30, 2010, including asset impairment charges of $3.7 million. Operating loss from discontinued operations was $356,000 for the nine months ended September 30, 2011, including asset impairment charges of $261,000, and $8.3 million for the nine months ended September 30, 2010, including asset impairment charges of $7.2 million.
 
Assets and liabilities held for sale were comprised of the following (in thousands):
 
   
As of September 30, 2011
  
   
Car Washes
    
Digital Media
Marketing
    
Security
Segment
Texas
Warehouse
    
Total
  
                         
Assets held for sale:                                
Inventory
   $ 109     $ -     $ -     $ 109  
Other current assets
     -       28       -       28  
Property, plant and equipment, net
     2,563       3       1,743       4,309  
Intangible assets
     5       -       -       5  
Total assets
   $ 2,677     $ 31     $ 1,743     $ 4,451  
                                 
Liabilities related to assets held for sale:
                                
Other current liabilities
   $ -     $ 24     $ -     $ 24  
Current portion of long-term debt
     501       -       509       1,010  
Long-term debt, net of current portion
     88       -       -       88  
Total liabilities
   $ 589     $ 24     $ 509     $ 1,122  
 
 
 
   
As of December 31, 2010
  
   
Car Washes
                    
   
Dallas and
Fort Worth,
Texas
    
Lubbock,
Texas
    
Digital Media
Marketing
    
Security
Segment
Texas
Warehouse
    
Total
  
                               
Assets held for sale:                                        
Inventory
   $ 117     $ 5     $ -     $ -     $ 122  
Other current assets
     -       -       58       -       58  
Property, plant and equipment, net
     2,820       1,707       3       1,615       6,145  
Intangible assets
     5       -       -       -       5  
Total assets
   $ 2,942     $ 1,712     $ 61     $ 1,615     $ 6,330  
                                         
Liabilities related to assets held for sale:
                                        
Other current liabilities
   $ -     $ -     $ 103     $ -     $ 103  
Current portion of long-term debt
     615       172       -       58       845  
Long-term debt, net of current portion
     114       524       -       495       1,133  
Total liabilities
   $ 729     $ 696     $ 103     $ 553     $ 2,081  
v2.3.0.15
Stock-Based Compensation
9 Months Ended
Sep. 30, 2011
Disclosure Of Compensation Related Costs, Share-Based Payments [Abstract] 
Shareholders' Equity and Share-based Payments [Text Block]
6.   Stock-Based Compensation
 
The Company has two stock-based employee compensation plans.  The Company recognizes compensation expense for all share-based awards on a straight-line basis over the life of the instruments, based upon the grant date fair value of the equity or liability instruments issued. Total stock compensation expense was approximately $5,000 and $26,000 ($0 and $3,000 in discontinued operations) for the three months ended September 30, 2011 and 2010, respectively, and $45,000 and $47,000 ($0 and $13,000 in discontinued operations) for the nine months ended September 30, 2011 and 2010, respectively.
 
Expected term: The Company’s expected life is based on the period the options are expected to remain outstanding. The Company estimated this amount based on historical experience of similar awards, giving consideration to the contractual terms of the awards, vesting requirements and expectations of future behavior.
 
Risk-free interest rate: The Company uses the risk-free interest rate of a U.S. Treasury Note with a similar term on the date of the grant.
 
Volatility: The Company calculates the volatility of the stock price based on historical value and corresponding volatility of the Company’s stock price over the prior five years to correspond with the Company’s focus on the Security Segment.
 
Dividend yield: The Company uses a 0% expected dividend yield, as the Company has not paid dividends to date and does not anticipate declaring dividends in the near future.
 
During the nine months ended September 30, 2011, the Company did not issue any stock options.  As of September 30, 2011, total unrecognized stock-based compensation expense was $24,000, which has a weighted average period to be recognized of approximately 0.7 years.
 
The Black-Scholes option valuation model was developed for use in estimating the fair value of traded options which have no vesting restrictions and are fully transferable. In addition, option valuation models require the input of highly subjective assumptions, including the expected stock price volatility. Because the Company’s employee stock options have characteristics significantly different from those of traded options, and because changes in the subjective input assumptions can materially affect the fair value estimate, in management’s opinion, the existing models do not necessarily provide a reliable single measure of the fair value of its employee stock options.
v2.3.0.15
Commitments and Contingencies
9 Months Ended
Sep. 30, 2011
Commitments and Contingencies Disclosure [Abstract] 
Commitments and Contingencies Disclosure [Text Block]
7.   Commitments and Contingencies
 
The Company and its former Chief Executive Officer, Louis D. Paolino, Jr., have settled the various legal actions they had filed against each other.  The settlement was entered into on October 26, 2010.  As part of the settlement, the Company paid Mr. Paolino $2,300,000 on November 1, 2010 and $2,310,000 on December 29, 2010. With Mace’s final payment under the Settlement Agreement, all legal actions between Mr. Paolino and the Company were dismissed with prejudice and mutual releases between the Company and Mr. Paolino became effective. As previously disclosed in the Company's filings under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), an arbitration panel of the American Arbitration Association awarded Mr. Paolino the sum of $4,148,912 on May 4, 2010 as damages and a supplemental award of $738,835 for legal fees in connection with various claims filed by Mr. Paolino in connection with his termination as the Company’s Chief Executive Officer on May 20, 2008 (the “Arbitration Awards”).  The Arbitration Awards were confirmed on October 8, 2010 by the Court of Common Pleas of Philadelphia County.  As of the quarter ended March 31, 2010, the Company recorded an accrual of $4,500,000 for the payment of the Arbitration Awards, and increased the accrual to $4,600,000 in the quarter ended June 30, 2010. The Court also ruled that Mr. Paolino had until December 8, 2010 to exercise 1,769,682 stock options which were cancelled by the Company upon Mr. Paolino's termination.  These stock options were not exercised by Mr. Paolino by December 8, 2010 and accordingly expired and became null and void.
 
During January 2008, the United States Environmental Protection Agency (the “EPA”) conducted a site investigation at the Company’s Bennington, Vermont location and the building within which the facility is located.  The Company leases 33,476 square feet of the building from Vermont Mill Properties, Inc. (“Vermont Mill”).  The site investigation was focused on whether hazardous substances were being improperly stored.  After the site investigation, the EPA notified the Company and the building owner, Benmont Mill Properties, Inc. (“Benmont”), that remediation of certain hazardous wastes was required.  Vermont Mill and Benmont are both owned and controlled by Jon Goodrich, the former President of Mace Personal Defense, Inc., the Company’s defense spray division.  The EPA, the Company, and the building owner entered into an Administrative Consent Order under which the hazardous materials and waste were remediated. All remediation required by the Administrative Consent Order was completed within the time allowed by the EPA and a final report regarding the remediation was submitted to the EPA in October 2008, as required by the Administrative Consent Order.  On September 29, 2009, the EPA accepted the final report. On February 23, 2010, the EPA issued the Company an invoice for $240,096 representing the total of the EPA's oversight costs that the Company and Benmont were obligated to pay under the Administrative Consent Order.  On April 8, 2010, the Company negotiated a reduction in the oversight cost reimbursement and, on April 13, 2010, the Company paid a negotiated amount of $216,086 to the EPA.  During the quarter ended September 30, 2010, Benmont reimbursed the Company 15% of the amount paid to the EPA, or $32,413.  Total costs relating to the remediation of approximately $786,000 were recorded through the quarter ended December 31, 2009, and included disposal costs of the waste materials, as well as expenses incurred to engage environmental engineers and legal counsel and reimbursement of the EPA’s costs.
 
On November 16, 2010, the United States Attorney for the District of Vermont (the “U.S. Attorney”) filed a one count indictment charging Mace Security International, Inc. and Jon Goodrich with a felony of storing hazardous waste without a permit under 42 U.S.C. Section 6928(d)(2)(A) at the Company’s Bennington, Vermont location. Mr. Goodrich was the President of Mace Personal Defense, Inc., the Company's defense spray division located in Bennington, Vermont. The Company has resolved the indictment against the Company, through a Plea Agreement entered into between the Company's subsidiary, Mace Personal Defense, Inc., and the U.S. Attorney.  The Plea Agreement, which was accepted by the Federal District Court for Vermont on May 26, 2011, provided: (i) that Mace Personal Defense, Inc. was guilty of one count of violating 42 U.S.C. § 6928(d)(2)(A) (Storage of Hazardous Waste Without a Permit); (ii) that Mace Personal Defense, Inc. was fined $100,000 (the "Fine") and a court assessment of $400, the Fine to be paid $34,000 on sentencing, and two additional installments of $33,000 each, at six months and twelve months from January 4, 2011; (iii) that the Company is to guarantee the payment of the Fine; and (iv) the United States not to prosecute Mace Personal Defense, Inc. (excluding the guilty plea) or the Company for any criminal offenses known to the United States Attorney's Office of Vermont as of the date of signing of the Plea Agreement committed by the Company or Mace Personal Defense, Inc. in the District of Vermont relative to the storage, shipment, handling or disposal of hazardous waste, including any associated recordkeeping or reporting offenses. The Company recorded an accrual of $100,000 at December 31, 2010 as a result of its agreement to pay the Fine. As required by the Plea Agreement, the Company has paid the first two installments of the Fine, totaling $67,000 through July 1, 2011. The final payment of $33,000 is due on January 5, 2012. In addition, the Company incurred legal expenses of $49,000 and $53,000 in the nine months ended September 30, 2011 and 2010, respectively, relating to this matter.
 
The indictment charging Jon Goodrich with a felony of storing hazardous waste without a permit under 42 U.S.C. § 6928(d)(2)(A) at the Company’s Bennington, Vermont location has not been resolved to date and is currently proceeding to trial.  The Company has to date advanced Mr. Goodrich the cost of his defense under the provisions of Article 6 of the Company's ByLaws.  The advancements through September 30, 2011 were $68,802, which is included in the legal expense amounts disclosed above.  The Corporation may be able to recover the advancements if it is determined that Mr. Goodrich was not entitled to indemnity under Article 6 of the ByLaws.  Mr. Goodrich will not be entitled to indemnification if it is determined that Mr. Goodrich had reasonable cause to believe that his conduct was not lawful or if Mr. Goodrich did not act in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the Company.  The Company will monitor the results of the case and depending on its outcome could seek to recover the advances.
 
The Company is a party to various other legal proceedings related to its ordinary business activities.  In the opinion of the Company’s management, none of these proceedings are material in relation to the Company’s results of operations, liquidity, cash flows, or financial condition.
v2.3.0.15
Use of Estimates
9 Months Ended
Sep. 30, 2011
Use Of Estimates [Abstract] 
Use Of Estimates Disclosure [Text Block]
8.   Use of Estimates
 
The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses, as well as the disclosure of contingent assets and liabilities at the date of its consolidated financial statements.  The Company bases its estimates on historical experience, actuarial valuations and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources.  Some of those judgments can be subjective and complex and, consequently, actual results may differ from these estimates under different assumptions or conditions.  The Company must make these estimates and assumptions because certain information is dependent on future events and cannot be calculated with a high degree of precision from the data currently available.  Such estimates include the Company's estimates of reserves, such as the allowance for doubtful accounts, sales returns, warranty allowances, inventory valuation allowances, insurance losses and loss reserves, valuation of long-lived assets, estimates of realization of income tax net operating loss carryforwards, computation of stock-based compensation, as well as valuation calculations such as the Company’s goodwill impairment calculations and derivative liability calculations.
v2.3.0.15
Income Taxes
9 Months Ended
Sep. 30, 2011
Income Tax Disclosure [Abstract] 
Income Tax Disclosure [Text Block]
 9.  Income Taxes
 
The Company recorded income tax (benefit) expense of $(20,000) and $15,000 from continuing operations in the three months ended September 30, 2011 and 2010 and $0 and $65,000 in the nine months ended September 30, 2011 and 2010, respectively.  Income tax expense reflects the recording of state income taxes. The effective tax rates are approximately 0% and 0.8% for the nine months ended September 30, 2011 and 2010, respectively.  The effective rate differs from the federal statutory rate for each year, primarily due to state and local income taxes, non-deductible costs related to intangibles, fixed asset adjustments and changes to the valuation allowance.  It is management’s belief that it is unlikely that the net deferred tax asset will be realized and, as a result, it has been fully reserved.  Additionally, the Company recorded no income tax expense related to discontinued operations for either of the nine months ended September 30, 2011 and 2010.
 
The Company follows the appropriate accounting guidance which prescribes a model for the recognition and measurement of a tax position taken or expected to be taken in a tax return, and provides guidance on recognition, classification, interest and penalties, disclosure and transition.  At September 30, 2011, the Company did not have any significant unrecognized tax benefits. The total amount of interest and penalties recognized in the statements of operations for the nine months ended September 30, 2011 and 2010 is insignificant and when incurred is reported as interest expense.
v2.3.0.15
Asset Impairment Charges
9 Months Ended
Sep. 30, 2011
Goodwill and Intangible Assets Disclosure [Abstract] 
Asset Impairment Charges [Text Block]
10.  Asset Impairment Charges
 
Management periodically reviews the carrying value of our long-lived assets held and used, and assets to be disposed of, for possible impairment when events and circumstances warrant such a review. Assets classified as held for sale are measured at the lower of carrying value or fair value, net of costs to sell.
 
Continuing Operations
 
Due to continuing challenges in our Mace Security Products, Inc. reporting unit, we performed certain impairment testing of our remaining intangible assets, specifically, the value assigned to customer lists, product lists, and trademarks as of September 30, 2011, June 30, 2010, and December 31, 2010. We recorded an additional impairment charge of $15,000 to trademarks as of September 30, 2011; $74,000 to customer lists, $81,000 to product lists, and $70,000 for trademarks as of June 30, 2010; and impairment charges of $260,000 at December 31, 2010 relating to trademarks, all principally related to our consumer direct electronic surveillance operations and our high end digital and machine vision cameras and professional imaging component operation. On August 31, 2011, the Company entered into a Commercial Contract, which was subsequently amended on October 19, 2011 and November 7, 2011, to sell its Farmers Branch, Texas warehouse for $1,830,000 with an anticipated closing date of December 15, 2011. The net book value of the warehouse is approximately $1,725,000 with closing costs and broker commissions estimated at $125,000. Accordingly, we recorded an impairment charge of $20,000 relating to this facility as of September 30, 2011.
 
 
Discontinued Operations
 
During the quarter ended December 31, 2009, we wrote down three Arlington, Texas car wash sites for a total of $1.2 million, including a $200,000 write down of a car wash site for which the Company entered into an agreement of sale on January 27, 2010 for a sale price below its net book value; and a $37,000 write down related to a Lubbock, Texas car wash sold on March 10, 2010. In April 2010, we reduced the sale price of a Lubbock, Texas car wash location based on recent offers of $1.7 million for this location and our decision to negotiate a sale of this site at this price, which was below the net book value of $1.85 million.  Accordingly, we recorded an impairment charge of $150,000 related to this site at March 31, 2010. Also, in October 2010, we accepted an offer to purchase our Arlington, Texas oil lubrication and self serve car wash facility for a sale price of $340,000, which was below the site’s net book value. Accordingly, we recorded an impairment charge of $53,000 related to this site as of September 30, 2010. Finally, in September 2011, we re-evaluated the market value of one of our remaining car wash sites in Arlington, Texas and a site in Fort Worth, Texas with a business broker. Based on our evaluation, we determined that the estimated future proceeds from these sites were below their net book values by $200,000 and $61,000, respectively. Accordingly, we recorded impairment charges of $261,000 related to these two sites at September 30, 2011.
 
Prior to the disposition of our Digital Media Marketing Segment in the fourth quarter of 2010, we conducted our annual assessment of goodwill for impairment for this reporting unit as of June 30 of each year.  We updated our forecasted cash flows of these reporting units during the second quarter of each year.  These updates considered current economic conditions and trends, estimated future operating results for the launch of new products as well as non-product revenue growth, and anticipated future economic and regulatory conditions.  Based on the results of our assessment of goodwill impairment at June 30, 2009 and June 30, 2010, the net book value of our Digital Media Marketing Segment reporting unit exceeded its fair value at both measurement dates.  With the noted potential impairment at June 30, 2009 and June 30, 2010, we performed the second step of the impairment test to determine the implied fair value of goodwill.  The resulting implied goodwill was $5.9 million at June 30, 2009 and $2.8 million at June 30, 2010, which was less than the recorded value of goodwill at these respective dates. Accordingly, we recorded impairments to write down goodwill of this reporting unit by $1.0 million and $3.1 million at June 30, 2009 and June 30, 2010, respectively. Additionally, during our June 30, 2010 review of intangible assets, we determined that trademarks within our Digital Media Marketing Segment were also impaired by $275,000. Finally, as noted in Note 5. Discontinued Operations and Assets Held for Sale, we entered into an agreement of sale on November 11, 2010 to sell the e-commerce division of our Digital Media Marketing Segment, Linkstar, for a sale price of $1.1 million. Accordingly, an impairment loss of $3.6 million was recorded as of September 30, 2010 and included in the results from discontinued operations in the consolidated statements of operations. The $3.6 million impairment charge included a write-off of the remaining goodwill of the Digital Media Marketing Segment of $2.8 million and $800,000 related to other intangible assets, including software, trademarks, and non-compete agreements. With the closing of the sale of the e-commerce division of our Digital Media Marketing Segment on November 22, 2010, a final loss of $191,000 on disposal was recorded in the fourth quarter of 2010.
 
v2.3.0.15
Goodwill
9 Months Ended
Sep. 30, 2011
Goodwill and Intangible Assets Disclosure [Abstract] 
Goodwill Disclosure [Text Block]
 
11. Goodwill
 
In assessing goodwill for impairment, we first compare the fair value of our final reporting unit containing goodwill, our wholesale monitoring business, with its net book value. We estimate the fair value of the reporting unit using discounted expected future cash flows, supported by the results of various market approach valuation models. If the fair value of the reporting unit exceeds its net book value, goodwill is not impaired, and no further testing is necessary. If the net book value of this reporting unit exceeds its fair value, we perform a second test to measure the amount of impairment loss, if any. To measure the amount of any impairment loss, we determine the implied fair value of goodwill in the same manner as if our reporting unit was being acquired in a business combination. Specifically, we allocate the fair value of the reporting unit to all of the assets and liabilities of that unit, including any unrecognized intangible assets, in a hypothetical calculation that would yield the implied fair value of goodwill. If the implied fair value of goodwill is less than the goodwill recorded on our balance sheet, we record an impairment charge for the difference.
 
We performed extensive valuation analyses, utilizing both income and market approaches, in our goodwill assessment process. The following describes the valuation methodologies used to derive the fair value of the reporting units:
 
 
 
 
·
Income Approach: To determine fair value, we discounted the expected cash flows of the reporting unit. The discount rate used represents the estimated weighted average cost of capital, which reflects the overall level of inherent risk involved in our reporting units and the rate of return an outside investor would expect to earn. To estimate cash flows beyond the final year of our model, we used a terminal value approach. Under this approach, we used estimated operating income before interest, taxes, depreciation and amortization in the final year of our model, adjusted to estimate a normalized cash flow, applied a perpetuity growth assumption and discounted by a perpetuity discount factor to determine the terminal value. We incorporated the present value of the resulting terminal value into our estimate of fair value.
 
 
·
Market-Based Approach: To corroborate the results of the income approach described above, we estimated the fair value of our reporting unit using several market-based approaches, including the value that we derive based on our consolidated stock price as described above. We also used the guideline company method, which focuses on comparing our risk profile and growth prospects to select reasonably similar guidelines of publicly traded companies.
 
The determination of the fair value of the reporting unit requires us to make significant estimates and assumptions that affect the reporting unit’s expected future cash flows. These estimates and assumptions primarily include, but are not limited to, the discount rate, terminal growth rates, operating income before depreciation and amortization and capital expenditures forecasts. Due to the inherent uncertainty involved in making these estimates, actual results could differ from those estimates. In addition, changes in underlying assumptions would have a significant impact on either the fair value of the reporting units or the goodwill impairment charge.
 
The allocation of the fair value of the reporting unit to individual assets and liabilities within the reporting unit also requires us to make significant estimates and assumptions. The allocation requires several analyses to determine fair value of assets and liabilities including, among others, customer relationships, non-competition agreements and current replacement costs for certain property, plant and equipment.
 
We conduct our annual assessment of goodwill for impairment for our wholesale security monitoring business reporting unit as of April 30 of each year. This is our remaining business reporting unit with recorded goodwill. With respect to our assessment of goodwill impairment for our wholesale security monitoring business as of April 30, 2011, we determined that there was no impairment in that the fair value for this reporting unit exceeded its net book value by approximately $1.0 million or 22%. Our wholesale security monitoring business has recorded goodwill of $2.8 million at April 30, 2011. The determination of the fair value of this reporting unit requires us to make significant estimates and assumptions that affect the reporting unit’s expected future cash flows. These estimates and assumptions primarily include, but are not limited to, expected future revenues and expense levels, the discount rate, terminal growth rates, operating income before depreciation and amortization and capital expenditures forecasts. We periodically update our forecasted cash flows of the wholesale security monitoring reporting unit considering current economic conditions and trends, estimated future operating results, our views of growth rates, anticipated future economic and relevant regulatory conditions.  The key or most significant assumption is our estimate of future recurring revenues. If monthly recurring revenue from security monitoring services within this reporting unit were to be adversely affected by the ongoing economic climate or by other events and we were unable to adjust operating costs to compensate for such revenue loss, this reporting unit would be adversely affected, which would negatively impact the fair value of this business. Based on the Company’s April 30, 2011 assessment, a hypothetical reduction in the annual recurring revenue growth rate from a range of 4% to 5% to an annual recurring revenue growth rate of 1% to 2%, without a corresponding decrease in operating expenses, would result in the fair value for this reporting unit exceeding its net book value at April 30, 2011 by approximately $50,000.  Additional events or circumstances that could have a negative effect on estimated fair value of this reporting unit include, but are not limited to, a loss of customers due to competition, pressure from our customers to reduce pricing, the purchase of our dealer customers by third parties who choose to obtain monitoring services elsewhere, the current adverse financial and economic conditions on revenues and costs, inability to continue to employ a competent workforce at current rates of pay, changes in government regulations, accelerating costs beyond management’s control, and management’s inability to control and manage payroll and other operating costs.
 
 
The changes in the carrying amount of goodwill for the year ended December 31, 2010 and the nine months ended September 30, 2011 are as follows (in thousands):
 
   
Digital Media
Marketing
Segment
    
Security
Monitoring
Services
Reporting
Unit
    
Total
  
Balance at December 31, 2009
   $ 5,887     $ 1,982     $ 7,869  
Impairment loss
     (5,887 )     -       (5,887 )
Balance at December 31, 2010
   $ -     $ 1,982     $ 1,982  
Acquisition of TCCI
     -       823       823  
Balance at September 30, 2011
   $ -     $ 2,805     $ 2,805  
v2.3.0.15
Related Party Transactions
9 Months Ended
Sep. 30, 2011
Related Party Transactions [Abstract] 
Related Party Transactions Disclosure [Text Block]
12.  Related Party Transactions
 
The Company’s Security Segment leases manufacturing and office space under a lease between Vermont Mill and the Company.  The lease, as extended, expires on November 14, 2011.  Vermont Mill is controlled by Jon E. Goodrich, a former director and employee of the Company. The original lease was entered into in November 1999 for a five year term. In November 2004, the Company exercised an option to continue the lease through November 2009 at a rate of $10,576 per month. The Company amended the lease in 2008 to occupy additional space for an additional $200 per month. In September 2009, the Company and Vermont Mill extended the term of the lease to November 14, 2010 at a monthly rate of $10,776 per month and modified the square footage rented to 33,476 square feet. The Company entered into a Lease Extension Agreement on December 20, 2010 to extend the lease through November 14, 2011 at a monthly rate of $11,315 and to provide an option to further extend the lease to May 14, 2012 at the same monthly rate. The Company exercised its option to extend the lease until May 14, 2012.  Rent expense under this lease was $33,900 and $32,300 for the three months ended September 30, 2011 and 2010 and $102,000 and $97,000 for the nine months ended September 30, 2011 and 2010, respectively.
 
The Company funded a portion of the settlement payment to Mr. Paolino by borrowing $1.35 million from Merlin Partners, LP (“Merlin”) on December 28, 2010. Merlin is a fund managed by Ancora Advisors, LLC, an entity within the Ancora Group.  Richard A. Barone, Chairman of the Company's Board of Directors, is the Chairman and controlling person of the Ancora Group. Denis J. Amato, a Company Director, is the Chief Investment Officer of Ancora Advisors, LLC. The loan, which had an original maturity date of March 28, 2011, was extended to August 15, 2011.  The loan was payable in two installments of $675,000, with each installment payable upon the closing of each of two car washes that were under agreements of sale at December 31, 2010.  The Company made a payment of $675,000 to Merlin upon the sale of the Lubbock, Texas car wash on March 8, 2011. On August 8, 2011 the Company paid the remaining balance from the proceeds generated by the Company's Rights Offering. The loan's interest rate was 12% per annum and was secured by a second lien on a Dallas, Texas area car wash, a Lubbock, Texas car wash and a security interest in the tradename “Mace”.  As part of the consideration for the financing, Merlin was granted a Common Stock Purchase Warrant to purchase up to 314,715 shares of the Company’s common stock at an exercise price of $0.20 per share, expiring December 28, 2015.  The warrant contains anti-dilution provisions providing that Merlin will receive additional warrants exercisable into 2% of any common stock of the Company issued by the Company through December 28, 2011. On August 2, 2011, after the conclusion of the Company’s Rights Offering, a warrant for 847,452 shares was issued to Merlin under the anti-dilution provision. The exercise price of the original warrant and the newly issued warrant will be adjusted lower, if necessary, to equal the stock issuance price of any stock issued through December 28, 2011 at a price below $0.20. The initial warrants were accounted for under the equity method with the Black-Scholes fair value of the warrant of $63,274 recorded as a discount to the $1.35 million Merlin loan and as additional paid-in capital. The discount was charged to interest expense over the original three month maturity period of the loan with an offsetting credit to the loan balance.
 
Ancora Securities, Inc. ("Ancora") was the Placement Agent and Dealer Manager of the Rights Offering pursuant to the Placement Agent and Dealer Manager Agreement dated March 25, 2011 executed between Ancora and the Company.  Richard A. Barone, Chairman of the Company’s Board of Directors, is a controlling owner of Ancora.  Denis J. Amato, a director of the Company, is the Chief Investment Officer of Ancora.
 
The Rights Offering was completed on August 1, 2011. A total of 22,372,616 shares of common stock were purchased in the Rights Offering. Of the 22,372,616 shares of common stock purchased, 16,305,144 were purchased under the basic subscription right and 6,067,472 were purchased through the oversubscription privilege. Net proceeds from the Rights Offering were approximately $4.3 million after expenses of approximately $167,000.  The Rights Offering was made pursuant to a Registration Statement filed with the Securities and Exchange Commission (the “SEC”), as declared effective June 29, 2011 (the “Registration Statement”), and under a Prospectus dated June 30, 2011, (the “Prospectus”).  The Rights Offering granted the Company's stockholders the right to purchase three shares of common stock for each share of common stock owned on the record date of June 27, 2011 at an exercise price of $0.20 per share. The 22,372,616 shares issued under the Rights Offering were registered under the Securities Act. Additionally, shares registered in the Registration Statement but not sold in the Rights Offering (the “Available Stock”) were offered for sale by the Company during the period commencing on August 2, 2011, and concluding on August 15, 2011. The Company sold 838,100 shares of the offered Available Stock generating additional proceeds of $167,620.
 
Additionally, on August 2, 2011, Merlin and two assignees (the “Purchasers”) purchased 20 million shares of the Company's common stock at a price of $0.20 per share (the "Additional Stock").  The sale of Additional Stock resulted in net proceeds to the Company of $3.75 million. The Purchasers of the Additional Stock were paid a fee of $250,000 in connection with the purchase under the Securities Purchase Agreement.  The Additional Stock was registered for resale by the Purchasers of the Additional Stock under the Securities Act. The Additional Stock was purchased under the terms of a Securities Purchase Agreement dated March 25, 2011 (the "Securities Purchase Agreement") with Merlin.
 
On March 30, 2011, the Company borrowed $1.4 million with an interest rate of 6% per annum from Merlin to fund the acquisition of TCCI, a wholesale security monitoring company. The loan is secured by a security interest in the “Mace” name, a pledge of the stock of the Mace CSSS, Inc. (the “Company’s wholesale monitoring subsidiary) and a security interest in the assets of Mace CSSS, Inc.  The loan is due March 30, 2013; however, Merlin has the right to call the loan commencing on September 27, 2011, forty trading days after the completion of the Company’s Rights Offering and Merlin's purchase of the Additional Stock (the "Call Trigger Event"). Merlin's right to call the loan expires on March 27, 2012, six months from September 27, 2011.  If Merlin does not call the loan by March 27, 2012, the maturity date of the loan becomes extended to March 30, 2016 with Merlin continuing its right to convert the loan into common stock through March 30, 2016, the new maturity date.  The conversion right is at a per share price of $0.21 which is equal to the ten day average closing sales price of the common stock, starting with September 14, 2011, the trading day which is 30 trading days after the Call Trigger Event. In accordance with ASC 815, “Derivatives and Hedging,” the Company determined that the conversion feature of the Debenture met the criteria of an embedded derivative, and therefore the conversion feature of this Debenture needed to be bifurcated and accounted for as a derivative.  The conversion option is marked-to-market each reporting period, with future changes in fair value reported in earnings. The fair value of the embedded conversion was estimated at $590,000 at the date of issuance of the debenture and again at June 30, 2011 using the Monte Carlo model with the following assumptions: risk free interest rate: 0.16%; expected life of the option to convert of 4.7 years; and volatility: 48%. With the Call Trigger Event occurring and the conversion price and number of conversion shares known, the fair value of the conversion option was estimated at $516,000 at September 30, 2011 using the Black-Scholes valuation model. Accordingly, for the three and nine months ended September 30, 2011, the Company recorded a gain on valuation of derivative of $74,000 to reflect the reduction in the market value of the derivative. Additionally, with the debenture conversion price and number of conversion shares to be issued upon a conversion known, the initial bifurcated derivative no longer meets the criteria to be recorded as a derivative liability. Accordingly, the $516,000 conversion option at September 30, 2011 was reclassified from a liability to stockholder’s equity.
 
As compensation for the $1.4 million loan, Merlin received a five year warrant exercisable into 157,357 shares of common stock at an exercise price of $0.20 per share.  The warrant contains an anti-dilution provision that provides that the Company will issue Merlin a warrant equal to 1% percent of any shares issued by the Company for one year after the date the warrant was issued.  Any new warrant issued will be exercisable at $0.20 cents per share.  On August 2, 2011, after the completion of the Company’s Rights Offering, a warrant for 423,726 shares was issued to Merlin under the anti-dilution provision. The conversion features of the loan and the warrant may result in additional dilution to stockholders.  The initial warrants were accounted for under the equity method with the Black-Scholes fair value of the warrant of $47,420 recorded as a discount to the $1.4 million Merlin loan and as additional paid-in capital. The discount is being charged to interest expense over the 24 month maturity period of the loan with an offsetting credit to the loan balance.
 
v2.3.0.15
Long-Term Debt, Notes Payable and Capital Lease Obligations
9 Months Ended
Sep. 30, 2011
Debt Disclosure [Abstract] 
Debt Disclosure [Text Block]
13.  Long-Term Debt, Notes Payable and Capital Lease Obligations
 
At September 30, 2011, the Company had borrowings, including capital lease obligations, and borrowings related to discontinued operations, of approximately $2.1 million, including $1.1 million of long-term debt included in liabilities related to assets held for sale, which is reported as current as it is due or expected to be repaid in less than twelve months from September 30, 2011.
 
We had two letters of credit outstanding at September 30, 2011 totaling $149,392 as collateral relating to workers’ compensation insurance policies. We maintain a $500,000 revolving credit facility to provide financing for additional electronic surveillance product inventory purchases and for commercial letters of credit.  There was one commercial letter of credit outstanding for inventory purchases under the revolving credit facility at September 30, 2011 for $30,501.
 
Our most significant borrowings at September 30, 2011 included secured notes payable to JP Morgan Chase Bank, N.A. (“Chase”) and a $1.4 million debenture note with Merlin. The $1.4 million debenture note with Merlin, which is classified as a current liability and recorded at $821,000 at September 30, 2011, exclude a conversion option and the value of warrants related to the debenture, which are both classified in stockholders’ equity. The debenture note is secured by a security interest in the “Mace” name, a pledge of the stock of Mace CSSS, Inc. and a security interest in the assets of Mace CSSS, Inc. See Note 12. Related Party Transactions for additional information and terms regarding the debt instruments with Merlin.  The secured notes payable to Chase, in the amount of $1.1 million, the majority of which is classified as current liabilities in current portion of long-term debt or liabilities related to assets held for sale at September 30, 2011, are secured by an Arlington, Texas car wash site and the Company’s Farmers Branch, Texas warehouse building.  The Chase agreements contain affirmative and negative covenants, including covenants relating to the maintenance of certain levels of tangible net worth, the maintenance of certain levels of unencumbered cash and marketable securities, limitations on capital spending and certain financial reporting requirements. The Chase agreements are our only debt agreements that contain an expressed prohibition on incurring additional debt for borrowed money without the approval of the lender.  As of September 30, 2011, our warehouse and office facility in Farmers Branch, Texas and a car wash were encumbered by mortgages.
 
The Chase term loan agreement also limits capital expenditures annually to $1.0 million, requires the Company to provide Chase with an Annual Report on Form 10-K and audited financial statements within 120 days of the Company’s fiscal year end and a Quarterly Report on Form 10-Q within 60 days after the end of each fiscal quarter, and requires the maintenance of a minimum total unencumbered cash and marketable securities balance of $1.5 million. We were in compliance with these covenants as of September 30, 2011.
 
If we default on any of the Chase covenants and are not able to obtain amendments or waivers, Chase debt totaling $1.1 million at September 30, 2011 could become due and payable on demand and Chase could foreclose on the assets pledged in support of the relevant indebtedness.
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Accrued Expenses and Other Current Liabilities
9 Months Ended
Sep. 30, 2011
Payables and Accruals [Abstract] 
Accounts Payable, Accrued Liabilities, and Other Liabilities Disclosure, Current [Text Block]
14.  Accrued Expenses and Other Current Liabilities
 
Accrued expenses and other current liabilities consist of the following (in thousands):
 
   
September 30,
2011
    
December 31,
2010
  
 
      
Accrued compensation
   $ 714     $ 235  
Accrued acquisition consideration
     49        951  
Other
     1,871       1,719  
    $ 2,634     $ 2,905  
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Earnings Per Share
9 Months Ended
Sep. 30, 2011
Earnings Per Share [Abstract] 
Earnings Per Share [Text Block]
15.  Earnings Per Share
 
The following table sets forth the computation of basic and diluted loss per share (in thousands, except share and per share data):
   
Three Months Ended 
September 30,
    
Nine Months Ended 
September 30,
  
   
2011
    
2010
    
2011
    
2010
  
Numerator:
                        
                                 
Net loss
   $ (2,130 )   $ (4,906 )   $ (4,400 )   $ (16,608 )
Denominator:
                                
Denominator for basic earnings per share-weighted-average shares
     43,571,698       15,735,725       25,116,345       15,794,343  
Dilutive effect of options and warrants
     -       -       -       -  
Denominator for diluted earnings per share- weighted-average shares
     43,571,698       15,735,725       25,116,345       15,794,343  
Basic and diluted loss per share
   $ (0.05 )   $ (0.31 )   $ (0.18 )   $ (1.05 )
 
The effect of options and warrants for the periods in which we incurred a net loss has been excluded as it would be anti-dilutive.  The options and warrants excluded totaled 488,402 and 11,412 for the three months ended September 30, 2011 and 2010, respectively, and 264,406 and 4,727 for the nine months ended September 30, 2011 and 2010, respectively. Additionally, the potential dilutive effect of the conversion option related to the convertible debenture note with Merlin of 6,666,667 shares has been excluded from the above earnings per share calculations as they would be anti-dilutive.
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Equity
9 Months Ended
Sep. 30, 2011
Stockholders Equity Note [Abstract] 
Stockholders' Equity Note Disclosure [Text Block]
16.  Equity
 
On August 13, 2007, the Company’s Board of Directors approved a share repurchase program to allow the Company to repurchase up to $2.0 million of its shares of common stock.  Purchases will be made in the open market, if and when management determines to effect purchases.  Management may elect not to make purchases or to make purchases totaling less than $2.0 million in value. Through September 30, 2011, the Company had purchased 747,860 shares of common stock on the open market, at a total cost of approximately $774,000, with 18,332 shares included in treasury stock at September 30, 2011.
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Subsequent Events
9 Months Ended
Sep. 30, 2011
Subsequent Events [Abstract] 
Subsequent Events [Text Block]
17.  Subsequent Events
 
On October 21, 2011, the Company completed the sale of certain assets and liabilities related to its Industrial Vision Source (“IVS”) division for approximately $517,000 in cash paid at closing and a possible further payment of $100,000 consideration if certain revenue levels are achieved by the buyer in the first 90 days following the sale from the customer list which was part of the assets sold.  The Industrial Vision Source division sold high-end digital and machine vision cameras and professional imaging components. The Company expects to recognize a gain on the sale of this operation.
 
On November 9, 2011, the Company entered into an agreement of sale for an Arlington, Texas car wash a for sale price of $2.1 million. The net book value of this car wash is approximately $2.0 million with outstanding debt of approximately $589,000. The transaction is subject to customary closing conditions, including a thirty day due diligence and financing contingency period with closing required within seventy five days from the execution date of the Agreement. No assurance can be given that this transaction will be consummated.