Quarterly report pursuant to Section 13 or 15(d)

Joint Development Agreement With CO2 Solution

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Joint Development Agreement With CO2 Solution
9 Months Ended
Sep. 30, 2011
Joint Development Agreement With CO2 Solution [Abstract]  
Joint Development Agreement With CO2 Solution

4. Joint Development Agreement with CO2 Solution

On December 15, 2009, we entered into an exclusive joint development agreement with CO2 Solution, a company based in Quebec City, Quebec, Canada, whose shares are publicly traded in Canada on the TSX Venture Exchange. Under the agreement, we obtained a research license to CO2 Solution's intellectual property and agreed to conduct research and development activities jointly with CO2Solution with the goal of advancing the development of carbon capture technology. We also purchased 10,000,000 common shares (approximately 16.6% of total common shares outstanding) of CO2 Solution in a private placement subject to a four-month statutory resale restriction, which expired on April 15, 2010. In February of 2010, our Chief Executive Officer was appointed to the board of directors of CO2 Solution.

The original joint development agreement with CO2 Solution expired in January 2011, and at that time, we extended our joint development agreement with CO2 Solution on essentially the same terms as the original agreement. The extended agreement will now expire on the later of September 30, 2012 or six months after the expiration of any third party collaborations.

We concluded that through September 30, 2011, we did not have the ability to exercise significant influence over CO2 Solution's operating and financial policies. We consider our investment in CO2 Solution common shares as an investment in a marketable security that is available for sale, and carry it at fair value in non-current marketable securities, with changes in fair value recognized in accumulated other comprehensive income (loss). We have estimated the fair value of common shares using the fair value as of September 30, 2011, as determined by trading on the TSX Venture Exchange. Accordingly, we have classified our investment in CO2 Solution as a level 1 investment as discussed in Note 6.

At December 31, 2010, the estimated fair value of our investment in CO2 Solution common stock was $1.7 million and the unrealized gain was $334,000. At September 30, 2011, the estimated fair value of our investment in CO2 Solution common stock was $2.0 million and the unrealized gain of $0.7 million with a related tax expense of $0.3 million recorded in accumulated other comprehensive income (loss). The unrealized loss for the three months ended September 30, 2011 was $0.1 million with a related tax benefit of $27,000 and was recorded in accumulated other comprehensive income (loss) on the condensed consolidated balance sheet.