Document_And_Entity_Informatio
Document And Entity Information | 9 Months Ended | |
Sep. 30, 2013 | Nov. 14, 2013 | |
Document and Entity Information [Abstract] | ' | ' |
Entity Registrant Name | 'PAULSON CAPITAL CORP | ' |
Document Type | '10-Q | ' |
Current Fiscal Year End Date | '--12-31 | ' |
Entity Common Stock, Shares Outstanding | ' | 6,093,258 |
Amendment Flag | 'false | ' |
Entity Central Index Key | '0000704159 | ' |
Entity Current Reporting Status | 'Yes | ' |
Entity Voluntary Filers | 'No | ' |
Entity Filer Category | 'Smaller Reporting Company | ' |
Entity Well-known Seasoned Issuer | 'No | ' |
Document Period End Date | 30-Sep-13 | ' |
Document Fiscal Year Focus | '2013 | ' |
Document Fiscal Period Focus | 'Q3 | ' |
Consolidated_Balance_Sheets_Un
Consolidated Balance Sheets (Unaudited) (USD $) | Sep. 30, 2013 | Dec. 31, 2012 |
Assets | ' | ' |
Cash | $1,776,834 | $337,136 |
Receivable from clearing organization | 1,037,948 | 2,252,965 |
Notes and other receivables, net of allowances for doubtful accounts of $882,168 and $847,796 | 1,374,752 | 210,536 |
Income taxes receivable | 67,406 | 43,834 |
Trading and investment securities owned, at fair value | 9,405,514 | 8,500,488 |
Underwriter warrants, at fair value | 1,069,000 | 1,548,000 |
Prepaid and deferred expenses | 384,969 | 437,440 |
Furniture and equipment, at cost, net of accumulated depreciation and amortization of $70,055 and $155,519 | 94,856 | 9,644 |
Total Assets | 15,211,279 | 13,340,043 |
Liabilities and Shareholders' Equity | ' | ' |
Accounts payable and accrued liabilities | 381,650 | 302,252 |
Payable to clearing organization | 344 | 74,062 |
Compensation, employee benefits and payroll taxes | 597,882 | 84,885 |
Deferred revenue | ' | 59,523 |
Advance from related party | 1,521,781 | ' |
Total Liabilities | 2,501,657 | 520,722 |
Commitments and Contingencies | ' | ' |
Shareholders' Equity | ' | ' |
Preferred stock, no par value; 500,000 shares authorized; none issued | ' | ' |
Common stock, no par value; 10,000,000 shares authorized; shares issued and outstanding: 5,766,985 and 5,766,985 | 2,163,711 | 2,163,711 |
Retained earnings | 9,088,322 | 10,655,610 |
Total Shareholders' Equity | 11,252,033 | 12,819,321 |
Noncontrolling interest in consolidated entities | 1,457,589 | ' |
Total Equity | 12,709,622 | 12,819,321 |
Total Liabilities and Shareholders' Equity | $15,211,279 | $13,340,043 |
Consolidated_Balance_Sheets_Un1
Consolidated Balance Sheets (Unaudited) (Parentheticals) (USD $) | Sep. 30, 2013 | Dec. 31, 2012 |
Allowances for doubtful accounts (in Dollars) | $882,168 | $847,796 |
Accumulated depreciation and amortization (in Dollars) | $70,055 | $155,519 |
Preferred stock, shares authorized (in Shares) | 500,000 | 500,000 |
Preferred stock, shares issued (in Shares) | 0 | 0 |
Preferred stock, par value (in Dollars per share) | $0 | $0 |
Common stock, par value (in Dollars per share) | $0 | $0 |
Common stock, shares authorized (in Shares) | 10,000,000 | 10,000,000 |
Common stock, shares issued (in Shares) | 5,766,985 | 5,766,985 |
Common stock, shares outstanding (in Shares) | 5,766,985 | 5,766,985 |
Consolidated_Statements_of_Ope
Consolidated Statements of Operations (unaudited) (USD $) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2013 | Sep. 30, 2012 | Sep. 30, 2013 | Sep. 30, 2012 | |
Revenues | ' | ' | ' | ' |
Commissions | $804,500 | $67,963 | $1,438,806 | $3,724,988 |
Corporate Finance | 390,868 | 22,199 | 741,983 | 69,663 |
Investment income (loss) | -62,857 | 141,205 | -1,081,558 | -438,416 |
Trading income (loss) | 2,276,144 | -132,220 | 2,581,922 | 810,625 |
Interest and dividends | 8,594 | 399,941 | 23,129 | 560,656 |
Loss on asset disposition | ' | ' | -9,256 | -702 |
Gain (loss) on sale of assets | ' | -23,471 | ' | 1,596,185 |
Other | -9,258 | 44,753 | 59,760 | 139,738 |
3,407,991 | 520,370 | 3,754,786 | 6,462,737 | |
Expenses | ' | ' | ' | ' |
Commissions and salaries | 1,471,401 | 278,687 | 2,988,720 | 4,367,736 |
Underwriting expenses | 83,299 | 4,500 | 152,168 | 42,214 |
Rent and utilities | 89,087 | 39,885 | 218,873 | 254,892 |
Communication and quotation services | 30,084 | 48,713 | 86,710 | 265,953 |
Professional fees | 200,665 | 160,577 | 813,446 | 590,507 |
Travel and entertainment | 17,425 | 3,897 | 38,884 | 49,724 |
Advertising and promotion | 509 | 185 | 509 | 9,308 |
Settlement expense | 50,000 | 73,917 | 206,000 | 73,917 |
Clearing expenses | 18,845 | 10,329 | 56,119 | 174,525 |
Bad debt expense | 21,628 | ' | 45,717 | 232,129 |
Depreciation and amortization | 7,140 | 406 | 10,577 | 4,963 |
Licenses, taxes and insurance | 152,765 | 170,249 | 509,482 | 436,593 |
Interest | 493 | ' | 22,274 | ' |
Other | 57,413 | 57,556 | 215,007 | 307,364 |
2,200,754 | 848,901 | 5,364,486 | 6,809,825 | |
Income (loss) before income taxes | 1,207,237 | -328,531 | -1,609,700 | -347,088 |
Income tax expense: | ' | ' | ' | ' |
Current | 0 | 0 | 0 | 0 |
Deferred | 0 | 0 | 0 | 0 |
0 | 0 | 0 | 0 | |
Net income (loss) | 1,207,237 | -328,531 | -1,609,700 | -347,088 |
Loss attributable to non-controlling interests | -40,239 | ' | -42,412 | ' |
Net income (loss) attributable to Paulson Capital Corp. common stockholders | $1,247,476 | ($328,531) | ($1,567,288) | ($347,088) |
Basic net income (loss) per share (in Dollars per share) | $0.22 | ($0.06) | ($0.27) | ($0.06) |
Diluted net income (loss) per share (in Dollars per share) | $0.07 | ($0.06) | ($0.27) | ($0.06) |
Shares used in per share calculations: | ' | ' | ' | ' |
Basic (in Shares) | 5,766,985 | 5,766,985 | 5,766,985 | 5,767,288 |
Diluted (in Shares) | 19,019,390 | 5,766,985 | 5,766,985 | 5,767,288 |
Consolidated_Statements_of_Cas
Consolidated Statements of Cash Flows (unaudited) (USD $) | 9 Months Ended | |
Sep. 30, 2013 | Sep. 30, 2012 | |
Cash flows from operating activities: | ' | ' |
Net loss | ($1,609,700) | ($347,088) |
Adjustments to reconcile net loss to net cash flows provided by operating activities: | ' | ' |
Receipt of underwriter warrants | -141,000 | ' |
Unrealized depreciation/expiration of underwriter warrants | 620,000 | 51,000 |
Receipt of securities from investing activities | ' | -439,000 |
Depreciation and amortization | 10,577 | 4,963 |
Bad debt expense | 45,717 | 232,129 |
Loss on asset disposition | 9,256 | 702 |
Gain on sale of assets | ' | -1,596,185 |
Change in assets and liabilities: | ' | ' |
Receivables from/payable to clearing organization, net | 1,141,299 | 1,773,896 |
Notes and other receivables | -1,209,933 | -429,081 |
Income taxes receivable | -23,572 | -34,250 |
Trading and investment securities owned | -905,026 | 677,001 |
Prepaid and deferred expenses | 52,471 | 57,098 |
Deferred revenue | -59,523 | -72,924 |
Accounts payable, accrued liabilities and compensation payables | 614,176 | -312,654 |
Trading securities sold, not yet purchased | ' | -356,705 |
Net cash used in operating activities | -1,455,258 | -791,098 |
Cash flows from investing activities: | ' | ' |
Additions to furniture and equipment | -105,044 | -800 |
Proceeds from sale of fixed assets | ' | 250 |
Proceeds from sale of assets | ' | 1,245,375 |
Net cash provided by (used in) investing activities | -105,044 | 1,244,825 |
Cash flows from financing activities: | ' | ' |
Proceeds from related party advance | 1,500,000 | ' |
Proceeds from issuance of preferred stock in consolidated entity | 1,500,000 | ' |
Dividends paid to common shareholders | ' | -288,349 |
Payments to retire common stock | ' | -1,250 |
Net cash provided by (used in) financing activities | 3,000,000 | -289,599 |
Increase in cash | 1,439,698 | 164,128 |
Cash: | ' | ' |
Beginning of period | 337,136 | 292,002 |
End of period | 1,776,834 | 456,130 |
Supplemental cash flow information: | ' | ' |
Cash (paid) received during the period for income taxes, net | 7,000 | -26,000 |
Receivable from sale of assets | ' | $384,400 |
Note_1_Basis_of_Presentation
Note 1 - Basis of Presentation | 9 Months Ended |
Sep. 30, 2013 | |
Disclosure Text Block [Abstract] | ' |
Basis of Presentation and Significant Accounting Policies [Text Block] | ' |
Note 1. Basis of Presentation | |
The financial information for Paulson Capital Corp. and its majority-owned subsidiary, Paulson Investment Company, and its wholly owned subsidiary Paulson Capital Properties, LLC, included herein as of September 30, 2013 and December 31, 2012 and for the three- and nine-month periods ended September 30, 2013 and 2012 is unaudited; however, such information reflects all adjustments, consisting only of normal recurring adjustments, which, in the opinion of management, are necessary for a fair presentation of the financial position, results of operations and cash flows for the interim periods. The financial information as of December 31, 2012 is derived from the audited consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2012. The interim consolidated financial statements should be read in conjunction with the consolidated financial statements and the notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2012. The results of operations for the interim periods presented are not necessarily indicative of the results to be expected for the full year. |
Note_2_Earnings_Per_Share
Note 2 - Earnings Per Share | 9 Months Ended | ||||||||||||||||
Sep. 30, 2013 | |||||||||||||||||
Earnings Per Share [Abstract] | ' | ||||||||||||||||
Earnings Per Share [Text Block] | ' | ||||||||||||||||
Note 2. Earnings Per Share | |||||||||||||||||
We computed basic earnings per common share using net income (loss) available to common stockholders and the weighted average number of common shares outstanding during the period. We computed diluted earnings per common share using net income available to common stockholders and the weighted average number of common shares outstanding plus potentially dilutive common shares outstanding during the period. | |||||||||||||||||
Potentially dilutive common shares from employee incentive plans are determined by applying the treasury stock method to the assumed exercise of outstanding stock options. Potentially dilutive common shares are determined by applying the if-converted method. | |||||||||||||||||
In the third quarter of 2013 we included 13,235,547 contingently issuable common shares in the calculation of diluted earnings per common share that were held in escrow pending the results of our 2013 Annual Shareholders Meeting and subsequent closing of a financing transaction. The contingently issuable common shares are described below in Note 8 where under a proposed financing the Company will issue the Onvestors a Unit consisting of (i) shares of Common Stock; (ii) shares of Series A Preferred Stock; (iii) a Class A Warrant; and (iv) a Class B Warrant. | |||||||||||||||||
Following is a reconciliation of our shares used for our basic net income (loss) per share and our diluted net income (loss) per share: | |||||||||||||||||
Three Months Ended | Nine Months Ended | ||||||||||||||||
September 30, | September 30, | ||||||||||||||||
2013 | 2012 | 2013 | 2012 | ||||||||||||||
Shares used for basic net income (loss) per share | 5,766,985 | 5,766,985 | 5,766,985 | 5,767,288 | |||||||||||||
Effect of dilutive stock options | 16,858 | — | — | — | |||||||||||||
Effect of contingently issuable common shares | 13,235,547 | — | — | — | |||||||||||||
Shares used for diluted net income (loss) per share | 19,019,390 | 5,766,985 | 5,766,985 | 5,767,288 | |||||||||||||
Stock options not included in diluted net income (loss) per share because their effect would have been antidilutive | — | 218,500 | 216,000 | 312,250 | |||||||||||||
Note_3_Fair_Value_Measurements
Note 3 - Fair Value Measurements | 9 Months Ended | ||||||||||||||||||
Sep. 30, 2013 | |||||||||||||||||||
Fair Value Disclosures [Abstract] | ' | ||||||||||||||||||
Fair Value Disclosures [Text Block] | ' | ||||||||||||||||||
Note 3. Fair Value Measurements | |||||||||||||||||||
Various inputs are used in determining the fair value of our assets and liabilities carried at fair value and are summarized into three broad categories: | |||||||||||||||||||
● | Level 1 – unadjusted quoted prices in active markets for identical securities; | ||||||||||||||||||
● | Level 2 – other significant observable inputs, including quoted prices for similar securities, interest rates, prepayment speeds, credit risk, etc.; and | ||||||||||||||||||
● | Level 3 – significant unobservable inputs, including our own assumptions in determining fair value. | ||||||||||||||||||
The inputs or methodology used for valuing securities is not necessarily an indication of the risk associated with investing in those securities. | |||||||||||||||||||
Following are the disclosures related to our financial assets and liabilities (in thousands): | |||||||||||||||||||
30-Sep-13 | 31-Dec-12 | ||||||||||||||||||
Fair Value | Input Level | Fair Value | Input Level | ||||||||||||||||
Trading and investment securities owned: | |||||||||||||||||||
Corporate equities, marketable | $ | 5,016 | Level 1 | $ | 3,463 | Level 1 | |||||||||||||
Corporate equities, not readily marketable | 4,332 | Level 3 | 4,878 | Level 3 | |||||||||||||||
Corporate options/warrants, marketable | 58 | Level 1 | 159 | Level 1 | |||||||||||||||
Underwriter warrants | 1,069 | Level 3 | 1,548 | Level 3 | |||||||||||||||
Trading securities sold, not yet purchased: | |||||||||||||||||||
Corporate equities, marketable | - | Level 1 | - | Level 1 | |||||||||||||||
Following is a summary of activity related to our Level 3 financial assets and liabilities (in thousands): | |||||||||||||||||||
Underwriter Warrants | Not Readily Marketable Investment Securities | ||||||||||||||||||
Balance, December 31, 2012 | $ | 1,548 | $ | 4,878 | |||||||||||||||
Fair value of underwriter warrants received included as a component of corporate finance income | 141 | - | |||||||||||||||||
Investment in privately-held company | - | 100 | |||||||||||||||||
Net unrealized loss, included as a component of investment income related to securities held | (506 | ) | (646 | ) | |||||||||||||||
Underwriter warrants exercised or expired included as a component of investment income | (114 | ) | - | ||||||||||||||||
Balance, September 30, 2013 | $ | 1,069 | $ | 4,332 | |||||||||||||||
Underwriter Warrants | Not Readily Marketable Investment Securities | ||||||||||||||||||
Balance, December 31, 2011 | $ | 1,395 | $ | 3,857 | |||||||||||||||
Fair value of underwriter warrants received included as a component of corporate finance income | - | - | |||||||||||||||||
Investment in privately-held company | - | 439 | |||||||||||||||||
Net unrealized gain (loss), included as a component of investment loss related to securities held | (51 | ) | (380 | ) | |||||||||||||||
Balance, September 30, 2012 | $ | 1,344 | $ | 3,916 | |||||||||||||||
Valuation of Marketable Trading and Investment Securities Owned | |||||||||||||||||||
The fair value of marketable trading and investment securities owned is determined based on quoted market prices. Securities traded on a national exchange are stated at the last reported sales price on the day of valuation; other securities traded in the over-the-counter market and listed securities for which no sale was reported on that date are stated at the last quoted bid price. | |||||||||||||||||||
Valuation of Not Readily Marketable Investment Securities | |||||||||||||||||||
Securities not readily marketable include investment securities (a) for which there is no market on a securities exchange or no independent publicly quoted market, (b) that cannot be publicly offered or sold unless registration has been effected under the Securities Act of 1933, or (c) that cannot be offered or sold because of other arrangements, restrictions or conditions applicable to the securities or to us. The fair value of not readily marketable securities is estimated by management using available information including the following: quoted market prices of similar securities (i.e., unrestricted shares of the same company); price of recent known trades of the same or similar securities; the cost of the security, if recently purchased, adjusted for changes in the financial condition of the issuer; all other information available from review of available documents related to the issuer or discussions with management of the issuer. Significant unobservable inputs include the discount rate for lack of liquidity, and the volatility index of comparable companies. Changes to these unobservable inputs would cause the fair value to fluctuate substantially. | |||||||||||||||||||
Valuation of Underwriter Warrants | |||||||||||||||||||
We estimate the fair value of our underwriter warrants using the Black-Scholes Option Pricing Model. The warrants generally have a five-year expiration date and vest immediately. The warrants are generally subject to a restriction period of six months to one-year in which we cannot exercise the warrants. The Black-Scholes model requires us to use five inputs including: stock price, risk free rate, exercise price, time remaining on the warrant and price volatility. After stock price, the most influential factor in this model is price volatility, which we calculate for each company’s warrants based on each company’s own historical closing stock prices as well as an index of historical prices for comparable companies. When we initially receive a new underwriter warrant from an initial public offering, its calculated volatility factor is entirely based on the volatility of an index of comparable companies, since there is no price history for a new publicly traded company. As each underwriter warrant approaches its expiration date, its volatility factor is derived primarily from the historical prices of its underlying common stock. Private company underwriter warrant valuations use the volatility index of comparable public companies. There is no assurance that we will ultimately be able to exercise any of our warrants in a way that will realize the value that we attribute to them in our financial statements based on this model. | |||||||||||||||||||
Valuation of Trading Securities Sold, Not Yet Purchased | |||||||||||||||||||
As a securities broker-dealer, we are engaged in various securities trading and brokerage activities as principal. In the normal course of business, we sometimes sell securities that we do not currently own and will therefore be obligated to purchase such securities at a future date. This obligation is recorded on our balance sheet at the fair value based on quoted market prices of the related securities and will result in a trading loss on the securities if the fair value increases and a trading gain if the fair value decreases between the balance sheet date and the purchase date. | |||||||||||||||||||
There were no changes to our valuation methods or techniques during the first nine-month periods of 2013 or 2012. | |||||||||||||||||||
The following table is a quantitative disclosure about the significant unobservable inputs (Level 3) that were used in determining fair value at September 30, 2013: | |||||||||||||||||||
Quantitative Information about Level 3 Fair Value Measurements | |||||||||||||||||||
Fair Value at | Valuation Technique | Unobservable Input | Range | Weighted Average | |||||||||||||||
30-Sep-13 | |||||||||||||||||||
Minimum | Maximum | ||||||||||||||||||
Investments in privately-held companies | $ | 4,332 | Income approach; Market approach; Asset approach | Discount rate for lack of liquidity | 20 | % | 20 | % | 20 | % | |||||||||
Underwriter warrants | 1,069 | Black-Scholes Option Pricing Model | Volatility index of comparable companies | 61.2 | % | 92.6 | % | 78.4 | % | ||||||||||
$ | 5,401 | ||||||||||||||||||
Note_4_Stockholders_Equity
Note 4 - Stockholders Equity | 9 Months Ended |
Sep. 30, 2013 | |
Stockholders' Equity Note [Abstract] | ' |
Stockholders' Equity Note Disclosure [Text Block] | ' |
Note 4. Stockholders' Equity | |
Comprehensive Income | |
The Company did not have any transactions that generated comprehensive income during the first nine months of 2013 or during the fiscal year ended December 31, 2012. | |
Repurchase of Common Stock | |
There were no common shares repurchased during the first nine months of 2013. | |
In the first quarter of 2012, we repurchased 1,000 shares of our common stock for $1,250, or $1.25 per share, pursuant to our stock repurchase program previously approved by our Board of Directors, after which 68,011 shares remain available for repurchase. This repurchase plan does not have an expiration date. | |
Common Share Dividends | |
In March 2012, the Board of Directors approved a special cash dividend of $0.05 per common share payable April 16, 2012 to shareholders of record April 4, 2012. Dividends payable in the amount of $288,349 were recorded in the first quarter of fiscal 2012 and paid during the second quarter of fiscal 2012. | |
In December 2012, the Board of Directors approved a second special cash dividend of $0.15 per common share payable December 28, 2012 to shareholders of record December 14, 2012. Dividends of $865,048 were paid in the fourth quarter of fiscal 2012. | |
No dividends were declared or paid during the first nine months of 2013. | |
Common Shares in Escrow | |
As described in Note 8, the Company issued and placed 287,773 shares of common stock in escrow on July 25, 2013. These shares are not considered officially outstanding until they are released from the escrow. |
Note_5_New_Accounting_Guidance
Note 5 - New Accounting Guidance | 9 Months Ended |
Sep. 30, 2013 | |
New Accounting Pronouncements and Changes in Accounting Principles [Abstract] | ' |
New Accounting Pronouncements and Changes in Accounting Principles [Text Block] | ' |
Note 5. New Accounting Guidance | |
Management has reviewed the new accounting guidance and determined that there is not a material impact on our financial statements. |
Note_6_Change_in_Preferred_Sto
Note 6. Change in Preferred Stock Designation | 9 Months Ended |
Sep. 30, 2013 | |
Change In Preferred Stock Designation [Abstract] | ' |
Change In Preferred Stock Designation [Text Block] | ' |
Note 6. Change in Preferred Stock Designation | |
On June 19, 2013, the Company’s Board of Directors authorized the creation of Series A Preferred Stock. On July 18, 2013, the Company filed a Certificate of Designation of Preference, Rights and Limitations of Series A Convertible Preferred Stock with the Secretary of State of Oregon. |
Note_7_Restructure_of_Paulson_
Note 7 - Restructure of Paulson Investment Company, Inc. | 9 Months Ended |
Sep. 30, 2013 | |
Investments Schedule [Abstract] | ' |
Investment [Text Block] | ' |
Note 7. Restructure of Paulson Investment Company, Inc. | |
The Company is in the process of restructuring the business involving the broker-dealer license held by the Company’s subsidiary, Paulson Investment Company, Inc. (“PIC”). Subject to approval by the Financial Industry Regulatory Authority (FINRA), the restructuring is contemplated to result in PIC being ultimately owned entirely by management of PIC and outside investors. | |
In January 2013, PIC received a $1,500,000 loan from an outside investor pursuant to a convertible promissory note bearing 5% simple interest. The note is convertible, subject to FINRA approval, into preferred stock of PIC. The holders of the preferred shares will have no liquidation or other rights in the cash, receivables, inventories (including underwriter warrants), and certain prepaid assets, furniture and equipment (“Legacy Assets”) that existed when the convertible promissory note was executed, and will not participate in any future gains or losses derived from those assets. The noteholder has agreed that the note would stop accruing interest after April 30, 2013. | |
During the nine-month period ended September 30, 2013, PIC received a $1,500,000 investment in PIC for which the investor (the “Investor”) received a 15.79% liquidation preference in the non-Legacy Assets. As of September 30, 2013, the Company held a 100% ownership interest in the Legacy Assets of PIC, and an 84.21% ownership interest in the non-Legacy Assets of PIC. The non-controlling interest in PIC represents the equity interest in the subsidiary that is not attributable, either directly or indirectly, to the Company and is reported as equity of the Company, separate from the Company’s controlling interest. Revenues, expenses, gains losses, net income or loss is reported in the consolidated financial statements at the consolidated amounts, which include the amounts attributable to both the controlling and non-controlling interests. |
Note_8_Proposed_Corporate_Reor
Note 8. Proposed Corporate Reorganization | 9 Months Ended |
Sep. 30, 2013 | |
Restructuring and Related Activities [Abstract] | ' |
Restructuring and Related Activities Disclosure [Text Block] | ' |
Note 8. Proposed Corporate Reorganization | |
The Board of Directors of the Company has determined that a change of direction is in the best interest of shareholders. Therefore, it has proposed a series of related transactions to execute a corporate reorganization. Among these transactions are as follows: | |
a) Proposed Financing | |
On July 25, 2013, the Company entered into a series of agreements intended to secure investment in the Company of $5,250,000 (the "Investment") from DKR Ventures, LLC, a Delaware limited liability company, and Hudson Bay Master Fund Ltd., a Cayman Islands limited partnership (collectively, the “Investors”), in a private placement transaction (the “Proposed Financing”) intended to be exempt from registration under the Securities Act of 1933, as amended, subject to satisfaction of certain conditions including approval of the transaction by the Company's shareholders at a shareholders meeting scheduled for November 8, 2013. The investment and 287,773 shares of common stock have been placed in escrow and will be returned to the Investors and the Company, respectively, if the transaction does not close. | |
Under the agreements, the Company will issue the Investors a Unit consisting of (i) 287,773 shares of common stock; (ii) 500,000 shares of Series A Preferred Stock; (iii) a Class A Warrant; and (iv) a Class B Warrant. Each share of Series A Preferred Stock has a stated value of $0.806974 and a conversion ratio of 2.305640603 per share of Common Stock, subject to adjustment. Each share of Series B Preferred Stock will be convertible into one share of Common Stock and have a stated value of $0.35 per share and a conversion ratio equal to one share of Common Stock for each share of Series B Preferred Stock outstanding, equal to a purchase price of $0.35 per share of Common Stock, subject to adjustment. The Class A Warrant is exercisable for up to 7,500,000 shares of Series B Preferred Stock at a per share exercise price of $0.80, subject to adjustment, beginning on the date that is six months following the date of issuance and ending on the date that is five years thereafter. The Class B Warrant is exercisable for up to 13,559,407 shares of Series B Preferred Stock. The purchase price of one share of Common Stock underlying the Class B Warrant is deemed to be $0.35, subject to adjustment, without any payment of consideration by the Holder upon exercise. The Class B Warrant is exercisable beginning on the date that is six months following the date of issuance and ending on the date that is two years thereafter. | |
b) Creation of Liquidating Trust | |
In connection with the Proposed Financing, the Company’s Board of Directors approved a plan to create a liquidating trust to benefit the shareholders of Common Stock of record as of October 11, 2013. Shareholders of record (“Legacy Shareholders”) will be given a non-transferable beneficial interest in the trust in proportion to their pro-rata ownership interest in the Company’s Common Stock. The trust will hold the majority of the assets currently held by PIC primarily consisting of underwriter warrants, trading and investment securities, and cash and accounts receivable. It is expected the assets in the trust will be liquidated and distributed to the Legacy Shareholders over time. | |
c) Proposed Changes to the Articles of Incorporation | |
At the 2013 Shareholders Meeting, the Company has proposed to change the Company’s state of incorporation to Delaware from Oregon. | |
The Company has also proposed the amendment and restatement of the Company’s Articles of Incorporation to increase the authorized capital stock from 10,000,000 shares of common stock, no par value per share, and 500,000 shares of preferred stock, no par value, to 90,000,000 shares of Common Stock, par value $0.0001 per share, and 30,000,000 shares of “Blank Check” Preferred Stock, par value $0.0001 per share. | |
d) Proposed Reverse Stock Split of Common Stock | |
The Company has sought, subject to shareholder approval at the 2013 Annual Meeting of Shareholders (the "2013 Shareholders Meeting"), the authority to effect a reverse stock of its common stock. The authority would permit, but not require, the Board of Directors to effect a reverse stock split of the issued and outstanding Common Stock at any time prior to 18 months from the date of approval by a ratio of not less than one-for-two and not more than one-for-ten, with the exact ratio to be set within this range at the sole discretion of the Board of Directors. |
Note_9_Subsequent_Events
Note 9. Subsequent Events | 9 Months Ended | |
Sep. 30, 2013 | ||
Subsequent Events [Abstract] | ' | |
Subsequent Events [Text Block] | ' | |
Note 9. Subsequent Events | ||
a) | On October 7, 2013, PIC issued a Promissory Note and received consideration of $700,000 cash. The Note bears interest at the rate of 5% and is due on July 1, 2014. It is convertible into 11.6% of the equity of PIC upon the earlier (i) all necessary FINRA and NASDAQ approvals and (ii) July 1, 2014. | |
b) | On October 1, 2013, PIC entered into a 2-year lease for new office space in Novato, California with an average base rent of $5,540 per month. | |
c) | On October 1, 2013, 5,000 stock options were exercised at a price of $1.13 per share for gross proceeds of $5,650. On October 7, 2013, 33,500 stock options were exercised at a price of $1.13 per share for gross proceeds of $37,855. | |
Note_2_Earnings_Per_Share_Tabl
Note 2 - Earnings Per Share (Tables) | 9 Months Ended | ||||||||||||||||
Sep. 30, 2013 | |||||||||||||||||
Earnings Per Share [Abstract] | ' | ||||||||||||||||
Schedule of Earnings Per Share, Basic and Diluted [Table Text Block] | ' | ||||||||||||||||
Three Months Ended | Nine Months Ended | ||||||||||||||||
September 30, | September 30, | ||||||||||||||||
2013 | 2012 | 2013 | 2012 | ||||||||||||||
Shares used for basic net income (loss) per share | 5,766,985 | 5,766,985 | 5,766,985 | 5,767,288 | |||||||||||||
Effect of dilutive stock options | 16,858 | — | — | — | |||||||||||||
Effect of contingently issuable common shares | 13,235,547 | — | — | — | |||||||||||||
Shares used for diluted net income (loss) per share | 19,019,390 | 5,766,985 | 5,766,985 | 5,767,288 | |||||||||||||
Stock options not included in diluted net income (loss) per share because their effect would have been antidilutive | — | 218,500 | 216,000 | 312,250 |
Note_3_Fair_Value_Measurements1
Note 3 - Fair Value Measurements (Tables) | 9 Months Ended | ||||||||||||||||||
Sep. 30, 2013 | |||||||||||||||||||
Fair Value Disclosures [Abstract] | ' | ||||||||||||||||||
Fair Value Measurements, Recurring and Nonrecurring, Valuation Techniques [Table Text Block] | ' | ||||||||||||||||||
30-Sep-13 | 31-Dec-12 | ||||||||||||||||||
Fair Value | Input Level | Fair Value | Input Level | ||||||||||||||||
Trading and investment securities owned: | |||||||||||||||||||
Corporate equities, marketable | $ | 5,016 | Level 1 | $ | 3,463 | Level 1 | |||||||||||||
Corporate equities, not readily marketable | 4,332 | Level 3 | 4,878 | Level 3 | |||||||||||||||
Corporate options/warrants, marketable | 58 | Level 1 | 159 | Level 1 | |||||||||||||||
Underwriter warrants | 1,069 | Level 3 | 1,548 | Level 3 | |||||||||||||||
Trading securities sold, not yet purchased: | |||||||||||||||||||
Corporate equities, marketable | - | Level 1 | - | Level 1 | |||||||||||||||
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation [Table Text Block] | ' | ||||||||||||||||||
Underwriter Warrants | Not Readily Marketable Investment Securities | ||||||||||||||||||
Balance, December 31, 2012 | $ | 1,548 | $ | 4,878 | |||||||||||||||
Fair value of underwriter warrants received included as a component of corporate finance income | 141 | - | |||||||||||||||||
Investment in privately-held company | - | 100 | |||||||||||||||||
Net unrealized loss, included as a component of investment income related to securities held | (506 | ) | (646 | ) | |||||||||||||||
Underwriter warrants exercised or expired included as a component of investment income | (114 | ) | - | ||||||||||||||||
Balance, September 30, 2013 | $ | 1,069 | $ | 4,332 | |||||||||||||||
Underwriter Warrants | Not Readily Marketable Investment Securities | ||||||||||||||||||
Balance, December 31, 2011 | $ | 1,395 | $ | 3,857 | |||||||||||||||
Fair value of underwriter warrants received included as a component of corporate finance income | - | - | |||||||||||||||||
Investment in privately-held company | - | 439 | |||||||||||||||||
Net unrealized gain (loss), included as a component of investment loss related to securities held | (51 | ) | (380 | ) | |||||||||||||||
Balance, September 30, 2012 | $ | 1,344 | $ | 3,916 | |||||||||||||||
Fair Value Inputs, Assets, Quantitative Information [Table Text Block] | ' | ||||||||||||||||||
Quantitative Information about Level 3 Fair Value Measurements | |||||||||||||||||||
Fair Value at | Valuation Technique | Unobservable Input | Range | Weighted Average | |||||||||||||||
30-Sep-13 | |||||||||||||||||||
Minimum | Maximum | ||||||||||||||||||
Investments in privately-held companies | $ | 4,332 | Income approach; Market approach; Asset approach | Discount rate for lack of liquidity | 20 | % | 20 | % | 20 | % | |||||||||
Underwriter warrants | 1,069 | Black-Scholes Option Pricing Model | Volatility index of comparable companies | 61.2 | % | 92.6 | % | 78.4 | % | ||||||||||
$ | 5,401 |
Note_2_Earnings_Per_Share_Deta
Note 2 - Earnings Per Share (Details) | 3 Months Ended |
Sep. 30, 2013 | |
Earnings Per Share [Abstract] | ' |
Incremental Common Shares Attributable to Dilutive Effect of Contingently Issuable Shares | 13,235,547 |
Note_2_Earnings_Per_Share_Deta1
Note 2 - Earnings Per Share (Details) - Earnings Per Share, Basic And Diluted (USD $) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2013 | Sep. 30, 2012 | Sep. 30, 2013 | Sep. 30, 2012 | |
Earnings Per Share, Basic And Diluted [Abstract] | ' | ' | ' | ' |
Shares used for basic net income (loss) per share | 5,766,985 | 5,766,985 | 5,766,985 | 5,767,288 |
Effect of dilutive stock options (in Dollars) | $16,858 | ' | ' | ' |
Effect of contingently issuable common shares | 13,235,547 | ' | ' | ' |
Shares used for diluted net income (loss) per share | 19,019,390 | 5,766,985 | 5,766,985 | 5,767,288 |
Stock options not included in diluted net income (loss) per share because their effect would have been antidilutive | ' | 218,500 | 216,000 | 312,250 |
Note_3_Fair_Value_Measurements2
Note 3 - Fair Value Measurements (Details) | 9 Months Ended |
Sep. 30, 2013 | |
Note 3 - Fair Value Measurements (Details) [Line Items] | ' |
Underwriter Warrants Expiration Term | '5 years |
Minimum [Member] | ' |
Note 3 - Fair Value Measurements (Details) [Line Items] | ' |
Warrant Exercise Restriction Period | '6 months |
Maximum [Member] | ' |
Note 3 - Fair Value Measurements (Details) [Line Items] | ' |
Warrant Exercise Restriction Period | '1 year |
Note_3_Fair_Value_Measurements3
Note 3 - Fair Value Measurements (Details) - Disclosures Related to Financial Assets and Liabilities (USD $) | Sep. 30, 2013 | Dec. 31, 2012 |
Trading and investment securities owned: | ' | ' |
Underwriter warrants | $1,069,000 | $1,548,000 |
Fair Value, Inputs, Level 1 [Member] | ' | ' |
Trading and investment securities owned: | ' | ' |
Corporate equities, marketable | 5,016,000 | 3,463,000 |
Corporate options/warrants, marketable | 58,000 | 159,000 |
Fair Value, Inputs, Level 3 [Member] | ' | ' |
Trading and investment securities owned: | ' | ' |
Corporate equities, not readily marketable | 4,332,000 | 4,878,000 |
Underwriter warrants | $1,069,000 | $1,548,000 |
Note_3_Fair_Value_Measurements4
Note 3 - Fair Value Measurements (Details) - Summary of Activity Related to Level 3 Financial Assets and Liabilities (USD $) | Sep. 30, 2013 | Dec. 31, 2012 | Sep. 30, 2013 | Sep. 30, 2012 | Sep. 30, 2013 | Sep. 30, 2012 |
Underwriter Warrants [Member] | Underwriter Warrants [Member] | Not Readily Marketable Investment Securities [Member] | Not Readily Marketable Investment Securities [Member] | |||
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items] | ' | ' | ' | ' | ' | ' |
Balance, | $1,069,000 | $1,548,000 | $1,548,000 | $1,395,000 | $4,878,000 | $3,857,000 |
Fair value of underwriter warrants received included as a component of corporate finance income | ' | ' | 141,000 | ' | ' | ' |
Investment in privately-held company | ' | ' | ' | ' | 100,000 | 439,000 |
Net unrealized gain (loss), included as a component of investment | ' | ' | -506,000 | -51,000 | -646,000 | -380,000 |
Underwriter warrants exercised or expired included as a component of investment income | ' | ' | -114,000 | ' | ' | ' |
Balance, | $1,069,000 | $1,548,000 | $1,069,000 | $1,344,000 | $4,332,000 | $3,916,000 |
Note_3_Fair_Value_Measurements5
Note 3 - Fair Value Measurements (Details) - Quantitative Information about Level 3 Fair Value Measurements (USD $) | 9 Months Ended |
Sep. 30, 2013 | |
Fair Value Inputs, Assets, Quantitative Information [Line Items] | ' |
Fair Value (in Dollars) | $5,401 |
Investments in Privately-Held Companies [Member] | ' |
Fair Value Inputs, Assets, Quantitative Information [Line Items] | ' |
Fair Value (in Dollars) | 4,332 |
Valuation Technique | 'Income approach; Market approach; Asset approach |
Unobservable Input | 'Discount rate for lack of liquidity |
Weighted Average | 20.00% |
Investments in Privately-Held Companies [Member] | Minimum [Member] | ' |
Fair Value Inputs, Assets, Quantitative Information [Line Items] | ' |
Range | 20.00% |
Investments in Privately-Held Companies [Member] | Maximum [Member] | ' |
Fair Value Inputs, Assets, Quantitative Information [Line Items] | ' |
Range | 20.00% |
Underwriter Warrants [Member] | ' |
Fair Value Inputs, Assets, Quantitative Information [Line Items] | ' |
Fair Value (in Dollars) | $1,069 |
Valuation Technique | 'Black-Scholes Option Pricing Model |
Unobservable Input | 'Volatility index of comparable companies |
Weighted Average | 78.40% |
Underwriter Warrants [Member] | Minimum [Member] | ' |
Fair Value Inputs, Assets, Quantitative Information [Line Items] | ' |
Range | 61.20% |
Underwriter Warrants [Member] | Maximum [Member] | ' |
Fair Value Inputs, Assets, Quantitative Information [Line Items] | ' |
Range | 92.60% |
Note_4_Stockholders_Equity_Det
Note 4 - Stockholders Equity (Details) (USD $) | 1 Months Ended | 3 Months Ended | 9 Months Ended | |||
Dec. 31, 2012 | Mar. 31, 2012 | Dec. 31, 2012 | Mar. 31, 2012 | Sep. 30, 2013 | Jul. 25, 2013 | |
Stockholders' Equity Note [Abstract] | ' | ' | ' | ' | ' | ' |
Stock Repurchased During Period, Shares (in Shares) | ' | ' | ' | 1,000 | 0 | ' |
Stock Repurchased During Period, Value | ' | ' | ' | $1,250 | ' | ' |
Stock Repurchased During Period Per Share Amount (in Dollars per share) | ' | ' | ' | $1.25 | ' | ' |
Stock Repurchase Program, Remaining Number of Shares Authorized to be Repurchased (in Shares) | ' | 68,011 | ' | 68,011 | ' | ' |
Common Stock, Dividends, Per Share, Declared (in Dollars per share) | $0.15 | $0.05 | ' | ' | ' | ' |
Payments of Dividends | ' | ' | 865,048 | 288,349 | ' | ' |
Escrow Deposit, Shares (in Dollars) | ' | ' | ' | ' | ' | $287,773 |
Note_7_Restructure_of_Paulson_1
Note 7 - Restructure of Paulson Investment Company, Inc. (Details) (USD $) | 1 Months Ended | |
Jan. 31, 2013 | Sep. 30, 2013 | |
Note 7 - Restructure of Paulson Investment Company, Inc. (Details) [Line Items] | ' | ' |
Proceeds from Loans (in Dollars) | $1,500,000 | ' |
Debt Instrument, Interest Rate, Stated Percentage | 5.00% | ' |
Investments (in Dollars) | ' | $1,500,000 |
Legacy Assets of PIC [Member] | ' | ' |
Note 7 - Restructure of Paulson Investment Company, Inc. (Details) [Line Items] | ' | ' |
Equity Method Investment, Ownership Percentage | ' | 100.00% |
Non-Legacy Assets of PIC [Member] | ' | ' |
Note 7 - Restructure of Paulson Investment Company, Inc. (Details) [Line Items] | ' | ' |
Equity Method Investment, Ownership Percentage | ' | 84.21% |
Note_8_Proposed_Corporate_Reor1
Note 8. Proposed Corporate Reorganization (Details) (USD $) | 1 Months Ended | ||
Jul. 25, 2013 | Sep. 30, 2013 | Dec. 31, 2012 | |
Note 8. Proposed Corporate Reorganization (Details) [Line Items] | ' | ' | ' |
Proceeds from Issuance of Private Placement (in Dollars) | $5,250,000 | ' | ' |
Escrow Deposit, Shares (in Dollars) | $287,773 | ' | ' |
Common Stock, Shares Authorized | 90,000,000 | 10,000,000 | 10,000,000 |
Preferred Stock, Shares Authorized | 500,000 | 500,000 | 500,000 |
Common Stock, Par or Stated Value Per Share (in Dollars per share) | $0.00 | $0 | $0 |
Preferred Stock, Par or Stated Value Per Share (in Dollars per share) | ' | $0 | $0 |
Common Stock [Member] | ' | ' | ' |
Note 8. Proposed Corporate Reorganization (Details) [Line Items] | ' | ' | ' |
Class of Warrant or Right, Number of Securities Called by Warrants or Rights | 287,773 | ' | ' |
Preferred Stock [Member] | ' | ' | ' |
Note 8. Proposed Corporate Reorganization (Details) [Line Items] | ' | ' | ' |
Class of Warrant or Right, Number of Securities Called by Warrants or Rights | 500,000 | ' | ' |
Series A Preferred Stock [Member] | ' | ' | ' |
Note 8. Proposed Corporate Reorganization (Details) [Line Items] | ' | ' | ' |
Preferred Stock Stated Value (in Dollars per share) | $0.81 | ' | ' |
Conversion Ratio | 2.305640603 | ' | ' |
Convertible Preferred Stock, Shares Issued upon Conversion | 7,500,000 | ' | ' |
Series B Preferred Stock [Member] | ' | ' | ' |
Note 8. Proposed Corporate Reorganization (Details) [Line Items] | ' | ' | ' |
Preferred Stock Stated Value (in Dollars per share) | $0.35 | ' | ' |
Convertible Preferred Stock, Shares Issued upon Conversion | 13,559,407 | ' | ' |
No Par Common Stock [Member] | ' | ' | ' |
Note 8. Proposed Corporate Reorganization (Details) [Line Items] | ' | ' | ' |
Common Stock, Shares Authorized | 10,000,000 | ' | ' |
Blank Check Preferred Stock [Member] | ' | ' | ' |
Note 8. Proposed Corporate Reorganization (Details) [Line Items] | ' | ' | ' |
Preferred Stock, Shares Authorized | 30,000,000 | ' | ' |
Preferred Stock, Par or Stated Value Per Share (in Dollars per share) | $0.00 | ' | ' |
Minimum [Member] | ' | ' | ' |
Note 8. Proposed Corporate Reorganization (Details) [Line Items] | ' | ' | ' |
Stockholders' Equity Note, Stock Split | 'one-for-two | ' | ' |
Maximum [Member] | ' | ' | ' |
Note 8. Proposed Corporate Reorganization (Details) [Line Items] | ' | ' | ' |
Stockholders' Equity Note, Stock Split | 'one-for-ten | ' | ' |
Note_9_Subsequent_Events_Detai
Note 9. Subsequent Events (Details) (USD $) | Jan. 31, 2013 | Oct. 07, 2013 | Oct. 02, 2013 | Oct. 07, 2013 | Oct. 02, 2013 |
Subsequent Event [Member] | Subsequent Event [Member] | Subsequent Event [Member] | Subsequent Event [Member] | ||
PIC [Member] | Office Building [Member] | ||||
Note 9. Subsequent Events (Details) [Line Items] | ' | ' | ' | ' | ' |
Debt Instrument, Face Amount | ' | $700,000 | ' | ' | ' |
Debt Instrument, Interest Rate, Stated Percentage | 5.00% | 5.00% | ' | ' | ' |
Debt Instrument, Convertible, Conversion to Equity | ' | 11.60% | ' | ' | ' |
Lessee Leasing Arrangements, Operating Leases, Term of Contract | ' | ' | '2 years | ' | ' |
Operating Leases, Rent Expense | ' | ' | 5,540 | ' | ' |
Stock Issued During Period, Value, Stock Options Exercised | ' | ' | ' | 33,500 | 5,000 |
Share-based Compensation Arrangements by Share-based Payment Award, Options, Exercises in Period, Weighted Average Exercise Price (in Dollars per share) | ' | ' | ' | $1.13 | $1.13 |
Employee Service Share-based Compensation, Cash Received from Exercise of Stock Options | ' | ' | ' | $37,855 | $5,650 |