UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

Commission File Number:000-50587

WRIGHT INVESTORS’ SERVICE HOLDINGS, INC.

(Exact Name of Registrant as Specified in its Charter)

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes☒  No☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes☒  No☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or, an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting company”, and “emerging growth company”, in Rule 12b-2 of the Exchange Act.

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes☒  No☐

Securities registered pursuant to Section 12(b) of the Act:           None 

Securities registered pursuant to Section 12(g) of the Act:

As of May 10,October 30, 2019, there were 19,744,32119,839,777 shares of the registrant’s common stock, $0.01 par value, outstanding. 

WRIGHT INVESTORS’ SERVICE HOLDINGS, INC.

TABLE OF CONTENTS

PART I. FINANCIAL INFORMATION

WRIGHT INVESTORS' SERVICE HOLDINGS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(unaudited)

(in thousands, except per share amounts)

See accompanying notes to condensed consolidated financial statements.

WRIGHT INVESTORS' SERVICE HOLDINGS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except per share amounts)

See accompanying notes to condensed consolidated financial statements.

WRIGHT INVESTORS' SERVICE HOLDINGS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited)

(in thousands)

See accompanying notes to condensed consolidated financial statements. 

WRIGHT INVESTORS' SERVICE HOLDINGS, INC.

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY

THREE AND NINE MONTHS ENDED MARCH 31,SEPTEMBER 30, 2019 andAND 2018

(UNAUDITED)

(in thousands, except per share data)

See accompanying notes to condensed consolidated financial statements.

WRIGHT INVESTORS’ SERVICE HOLDINGS, INC.

Notes to Condensed Consolidated Financial Statements

Three and Nine months ended March 31,September 30, 2019 and 2018

(unaudited)

Basis of presentation

The accompanying interim financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America for interim financial information and with the instructions to Form 10-Q and Article 8 of Regulation S-X.  The information and note disclosures normally included in complete financial statements have been condensed or omitted pursuant to such rules and regulations.  The Condensed Consolidated Balance Sheet as of December 31, 2018 has been derived from audited financial statements. These financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto for the year ended December 31, 2018 as presented in our Annual Report on Form 10-K. In the opinion of management, this interim information includes all material adjustments, which are of a normal and recurring nature, necessary for a fair presentation. The results for the 2019 interim period are not necessarily indicative of results to be expected for the entire year.

Description of activities

On July 17, 2018, the Company completed the sale of its primary operating subsidiary The Winthrop Corporation (“Winthrop”), to Khandwala Capital Management, Inc., a company principally owned and controlled by Amit S. Khandwala, the Co-Chief Executive Officer and Chief Investment Officer of Winthrop, prior to the sale, for $6,000,000 in cash as well as $173,000 from Winthrop for repayment of the intercompany balance between the Company and Winthrop (“Sale”). 

Winthrop’s results of operations for the quarterthree and nine months ended March 31,September 30, 2018 have been reclassified as discontinued operations to be consistent with the current period’s presentation.

As a public company after the Sale, we intend to evaluate and explore all available strategic options. We will continue to work to maximize stockholder value. Such strategic options may include acquisition of an investment advisory business, acquisition of a financial services business, creating partnerships or joint ventures for those or other businesses and investing in other businesses that provide attractive opportunities for growth. The directors will also consider alternatives for distributing some or all of its cash and cash equivalents. Until such time as a decision is made as to how the proceeds from the Sale and other liquid assets of the Company are so deployed, we intend to invest the proceeds of the Sale and our other liquid assets in high-grade, short- term investments (such as cash and cash equivalents) consistent with the preservation of principal, maintenance of liquidity and avoidance of speculation.

Currently, the Company has no or nominal operations. As a result, we are a “shell company”, as defined in Rule 405 of the Securities Act of 1933, as amended, or the Securities Act, and Rule 12b-2 of the Securities Exchange Act of 1934, as amended, or the Exchange Act. As a shell company, our stockholders will be unable to utilize Rule 144 of the Securities Act, or Rule 144 to sell “restricted stock” as defined in Rule 144 or otherwise use Rule 144 to sell stock of the Company, and we would be ineligible to utilize registration statements on Form S-3 or Form S-8 for so long as we remain a shell company and for 12 months thereafter. Among other things, as a consequence, the offering, issuance and sale of our securities is likely to be more expensive and time consuming and may make our securities less attractive to investors.

The Company is not engaged in the business of investing, reinvesting, or trading in securities, and we do not hold ourselves out as being engaged in those activities. However, under the Investment Company Act of 1940, as amended (the “Investment Company Act”), a company may fall within the scope of being an “inadvertent investment company” under section 3(a)(1)(C) of such Act if the value of its investment securities (as defined in the Investment Company Act) is more than 40% of its total assets (exclusive of government securities and cash and certain cash equivalents). As of March 31,September 30, 2019, the Company is not considered an inadvertent investment company.

In February 2016, the FASB established ASC Topic 842, Leases (Topic 842), by issuing ASU No. 2016-02, which requires lessees to recognize leases on-balance sheet and disclose key information about leasing arrangements. Topic 842 was subsequently amended by ASU No. 2018-01, Land Easement Practical Expedient for Transition to Topic 842; ASU No. 2018-10, Codification Improvements to Topic 842, Leases; and ASU No. 2018-11, Targeted Improvements. The new standard establishes a right-of-use (ROU) model that requires a lessee to recognize a ROU asset and lease liability on the balance sheet. Leases will be classified as finance or operating, with classification affecting the pattern and classification of expense recognition in the statement of operations. Lease expense is recognized based on an effective interest method for finance leases, and on a straight-line basis over the term of the lease for operating leases. The new guidance is effective for fiscal years, and for interim periods within those fiscal years, beginning after December 15, 2018. The Company adopted this standard on January 1, 2019, which did not have a material impact on the condensed consolidated financial statements.

In January 2017, FASB issued ASU 2017-04, “Intangibles- Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment”, which eliminates the second step of the previous FASB guidance for testing goodwill for impairment and is intended to reduce cost and complexity of goodwill impairment testing. The standard is effective for periods beginning after December 15, 2019 for both interim and annual periods.  Early adoption is permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017.  The Company does not expect the adoption of ASU 2017-04 to have an impact on its consolidated financial statements.

Loss per share for the three months ended March 31,September 30, 2019 and 2018 respectively, is calculated based on 19,647,24319,744,321 and 19,378,00019,570,000 weighted average outstanding shares of common stock. Included in the share number are vested Restricted Stock Units (“RSUs”) of 211,97011,701 for the quarterthree months ended March 31,September 30, 2018. There were no vested Restricted Stock Units for the quarter ended March 31,September 30, 2019.

Loss per share for the nine months ended September 30, 2019 and 2018 respectively, is calculated based on 19,705,490 and 19,475,000 weighted average outstanding shares of common stock. Included in the share number are vested RSUs of 98,367 for the nine months ended September 30, 2018. There were no vested Restricted Stock Units for the nine months ended September 30, 2019.

Options for 550,000 shares of common stock, for the threenine months ended March 31,September 30, 2019 and 2018, respectively, and unvested RSUs for 100,000 shares of common stock for the three and nine months ended September 30, 2019 were not included in the diluted computation as their effect would be anti-dilutive since the Company incurred net losses for both periods.

The Company carries its investments at fair value. Fair value is an estimate of the exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants (i.e., the exit price at the measurement date). Fair value measurements are not adjusted for transaction costs. A fair value hierarchy provides for prioritizing inputs to valuation techniques used to measure fair value into three levels:

An asset or liability's level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. Availability of observable inputs can vary and is affected by a variety of factors. The Company uses judgment in determining fair value of assets and liabilities and Level 3 assets and liabilities involve greater judgment than Level 1 or Level 2 assets or liabilities.

As of March 31,September 30, 2019, and December 31, 2018, the Company had $7,990,000$5,819,000 and $2,980,000, respectively, of investments of in U.S. government debt securities, which it holds as trading securities. U.S. government debt securities are valued using a model that incorporates market observable data, such as reported sales of similar securities, broker quotes, yields, bids, offers, and reference data. Certain securities are valued principally using dealer quotations. U.S. government debt securities are categorized in Level 2 of the fair value hierarchy, depending on the inputs used and market activity levels for specific securities.

In August 2014, the Company entered into a five-year sublease in Greenwich, Connecticut (“Lease”) for 10,000 square feet of office space which expiresexpired on September 30, 2019.The Company adopted ASC 842 – Leases on January 1, 2019 and elected the “package of practical expedients” noted in the transition guidance, which permits the Company not to reassess under the new standard its prior conclusions about lease identification, lease classification and initial direct costs. The lease continuescontinued to be classified as an operating lease. Upon adoption on January 1, 2019, the Company recognized Right of Use Asset (“ROU”) of approximately $173,000 net of deferred rent of approximately $19,000, and an operating lease liability of $192,000, and reversed a deferred rent liability of approximately $19,000, which represented the present value of future lease payments as of January 1, 2019. As of September 30, 2019, the ROU asset was fully amortized and operating lease liability was fully paid upon the expiration of the lease on the same date.

In July 2019, the Company entered into a six-month lease at $3,800 per month for office space in a building located in Mt. Kisco, NY. The lease commenced on September 1, 2019 and will expire on February 29, 2020, after which it can be renewed on a monthly basis. According to ASC 842, this lease is considered a short-term lease. The Company elected to apply the short-term measurement and recognition exemption, and the lease payments will be recognized in net income on a straight-line basis over the lease term.

Lease expense charged to operations related to the facilities aggregated $65,000$61,000 and $14,000$31,000 in the three months ended March 31,September 30, 2019 and March 31,September 30, 2018, respectively. Rent expense allocated to Winthrop in the amount of $54,000$27,000 is included in IncomeLoss from discontinued operations for the quarterthree months ended March 31,September 30, 2018. Lease expense charged to operations related to the facilities aggregated $181,000 and $61,000 in the nine months ended September 30, 2019 and September 30, 2018, respectively. Rent expense allocated to Winthrop in the amount of $112,000 is included in Loss from discontinued operations for the nine months ended September 30, 2018. Cash payment for the operating lease for the threenine months ended March 31,September 30, 2019 aggregated to $65,000. Future minimum rent payment for the lease aggregated approximately $131,000, payable through September 30, 2019. Right of use lease asset and liability are included in the Condensed Consolidated Balance Sheet. At March 31, 2019, the Company reported approximately $111,000 right of use lease asset, net of deferred rent, and $130,000 lease liability.$199,000.

Income tax expense represents minimum state taxes. No tax benefit has been recorded in relation to the pre-tax loss for the three and nine months ended March 31,September 30, 2019 and 2018, due to a full valuation allowance to offset any deferred tax asset related to net operating loss carry forwards attributable to the losses.

The Company’s Board of Directors, without any vote or action by the holders of common stock, is authorized to issue preferred stock from time to time in one or more series and to determine the number of shares and to fix the powers, designations, preferences and relative, participating, optional or other special rights of any series of preferred stock.

The Board of Directors authorized the Company to repurchase up to 5,000,000 outstanding shares of common stock from time to time either in open market or privately negotiated transactions. As of March 31,September 30, 2019, the Company had repurchased 2,041,971 shares of its common stock and a total of 2,958,029 of the authorization shares, remained available for repurchase as of March 31,September 30, 2019. No such shares were repurchased during any of the three and nine months ended September 30, 2019 and 2018.

Common stock options

The Company adopted a stock-based compensation plan for employees and non-employee members of its Board of Directors in November 2003 (the “2003 Plan”), and the National Patent Development Corporation 2007 Incentive Stock Plan in December 2007 (the “2007 NPDC Plan”).  The periods during which additional awards may be granted under the plans have expired and no further awards may be granted under any of these plans after December 20, 2017. As a consequence, any equity compensation awards issued after that time will be on terms determined by the Board of Directors or the Compensation Committee of the Board of Directors and pursuant to exemptions from the registration requirements of the securities laws.

The Company recorded compensation expense of $0 and $100, respectively, for each of the three and nine months ended March 31,September 30, 2019 and 2018, respectively, under these plans.2018. 

The Company issued 100,000 options to a consultant on March 28, 2016 which vest equally over 3 years and are subject to post vesting restrictions for sale for three years with an exercise price of $1.29, which price was equal to the market value at the date of the grant. 

The fair value of the options granted on March 28, 2016 were reduced by an 8% discount for post vesting restrictions.

As of March 31,September 30, 2019, all options were vested and there were outstanding options to acquire 550,000 common shares under the 2007 NPDC Plan, allPlan. All 550,000 options were vested and exercisable, having a weighted average exercise price of $1.35 per share, a weighted average contractual term of 1.75 years and zero aggregate intrinsic value. There were no grants, forfeitures or options exercised during the first, quartersecond and third quarters of 2019.2019 and 2018, respectively.

Restricted stock units

On January 19, 2015 and March 31, 2015, 100,000 restricted stock units (“RSUs”) were issued on each date to two newly appointed directors of the Company.  The RSUs vested equally over 3 years.  The RSUs are valued based on the closing price of the Company’s common stock on January 19, 2015 and March 31, 2015 of $1.70 and $1.85, respectively, less an average discount of 8% for post-vesting restrictions on sale until the three-year anniversary of the grant date, or an average price per share of $1.56 and $1.70, respectively. As of March 31,September 30, 2019, and 2018, the RSU’s were already fully vested and the related 200,000 shares of the Company’s common stock waswere issued during the year ended December 31, 2018.

On February 13, 2019, 100,000 restricted stock units (“RSUs”) were issued to a newly appointed director of the Company. The RSUs vest equally, annually, over 3 years. The RSUs are valued based on the closing price of $0.42 of the Company’s common stock on February 13, 2019, less an average discount of 8% for post-vesting restrictions on sale until the three-year anniversary of the grant date, or an average price per share of $0.39.

The Company recorded compensation expense of $2,000$7,000 and $16,000 for the quartersnine months ended March 31,September 30, 2019 and 2018, respectively, related to these RSUs.The total unrecognized compensation expense related to these unvested RSUs at March 31,September 30, 2019 is $40,000,$31,000, which will be recognized over the remaining vesting period of approximately 2.82.5 years.

The Company has interests in land and certain flowage rights in undeveloped property (the “properties”) primarily located in Killingly, Connecticut. As of December 31, 2018, the properties were shown in the Consolidated Balance Sheet at $0 after recording an impairment loss of $355,000. The properties were deemed to be fully impaired as of MarchDecember 31, 2019.2018.

On September 26, 2014, the Connecticut Department of Energy and Environmental Protection (“DEEP”) issued two Orders requiring the investigation and repair of two dams in which the Company and its subsidiaries have certain ownership interests.  The first Order required that the Company investigate and make specified repairs to the ACME Pond Dam located in Killingly, Connecticut.  The second Order, as subsequently revised by DEEP on October 10, 2014, required that the Company investigate and make specified repairs to the Killingly Pond Dam located in Killingly, Connecticut.  The Company administratively appealed and contested the allegations in both Orders.  On July 27, 2017, the Company entered into a Consent Order with the DEEP relative to Killingly Pond Dam. The Killingly Pond Consent Order requires the Company to continue to perform routine maintenance and administrative procedures consistent with DEEP’s Dam Safety regulations, the cost of which is not material to the Company’s financial position or results of operations.

On July 27, 2018, the Company entered into a Consent Order with the DEEP relative to Acme Pond Dam. The Acme Pond Dam Consent Order requires the Company to investigate and recommend repairs to Acme Pond Dam. Based up on the work performed by the Company’s retained consulting engineering firm, the Company submitted its recommended action planAction Plan (the “action plan”“Action Plan”) for Acme Pond Dam pursuant to the Consent Order on November 30, 2017 and such recommended action plan remains under reviewAction Plan was approved by the DEEP as ofsubmitted on May 23, 2019. The identified work under the current date.Action Plan is ongoing. The estimated cost of work to be performed under the action plan developed by the Company’s retained consulting engineering firmAction Plan was $90,000 and such amount has been recorded as a liabilitywas accrued for at December 31, 2018. Repair work conducted in accordance with the accompanying Consolidated Balance SheetAction Plan during the third quarter of 2019 resulted in expenses of approximately $50,000 and the remaining balance of the accrual decreased to $40,000 as of March 31,2019. It cannot be determined at this time whether such action plan may be ultimately accepted as is, revised or otherwise changed between the Company and the DEEP and, as such, the $90,000 provision currently provided may change based upon a final resolution of this matter.September 30, 2019.  

Cautionary Statement Regarding Forward-Looking Statements

This report contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”).  The Private Securities Litigation Reform Act of 1995 provides a “safe harbor” for forward looking statements. Forward-looking statements are not statements of historical facts, but rather reflect our current expectations concerning future events and results. The words “may,” “will,” “anticipate,” “should,” “would,” “believe,” “contemplate,” “could,” “project,” “predict,” “expect,” “estimate,” “continue,” and “intend,” as well as other similar words and expressions of the future, are intended to identify forward-looking statements.

Factors that may cause actual results to differ from those results expressed or implied, include, but are not limited to, those listed under “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2018 filed by the Company with the Securities and Exchange Commission (the “SEC”) on March 29, 2019.

These forward-looking statements generally relate to our plans, objectives and expectations for future events and include statements about our expectations, beliefs, plans, objectives, intentions, assumptions and other statements that are not historical facts.  These statements are based upon our opinions and estimates as of the date they are made.  Although we believe that the expectations reflected in these forward-looking statements are reasonable, such forward-looking statements are subject to known and unknown risks and uncertainties that may be beyond our control, which could cause actual results, performance and achievements to differ materially from results, performance and achievements projected, expected, expressed or implied by the forward-looking statements.  While we cannot assess the future impact that any of these differences could have on our business, financial condition, results of operations and cash flows or the market price of shares of our common stock, the differences could be significant. You are cautioned not to unduly rely on such forward-looking statements when evaluating the information presented in this report and you are urged to consider all such risks and uncertainties. In light of the uncertainty inherent in such forward-looking statements, you should not consider their inclusion to be a representation that such forward-looking matters will be achieved. 

General Overview

On July 17, 2018, we completed the sale of The Winthrop Corporation (the “Sale”) to Khandwala Capital Management, Inc., a company principally owned and controlled by Amit S. Khandwala, the Co-Chief Executive Officer and Chief Investment Officer of Winthrop, prior to the Sale, for $6,000,000, subject to certain adjustments for intercompany accounts at closing (see Note 1 to the Condensed Consolidated Financial Statements).  

The Winthrop Corporation’s results of operations for the quarterthree and nine months ended March 31,September 30, 2018 have been reclassified as discontinued operations to be consistent with the current period’s presentation.

Upon the consummation of the Sale of The Winthrop Corporation, we became a “shell company”, as defined in Rule 12b-2 of the Exchange Act.  Because we are a shell company, our stockholders are unable to utilize Rule 144 to sell “restricted stock” as defined in Rule 144 or to otherwise use Rule 144 to sell our securities, and we are ineligible to utilize registration statements on Form S-3 or Form S-8 for so long as we remain a shell company and for 12 months thereafter.  As a consequence, among other things, the offering, issuance and sale of our securities is likely to be more expensive and time consuming and may make our securities less attractive to investors.

Our Board of Directors is considering strategic uses for the Sale of The Winthrop Corporation Sale proceeds including, without limitation, using such funds, together with other funds of the Company, to develop or acquire interests in one or more operating businesses.  While we have focused our development or acquisition efforts on sectors in which our management has expertise, we do not wish to limit ourselves to, or to foreclose any opportunities in, any particular industry or sector.  Prior to this use, the Sale of The Winthrop Corporation Sale proceeds have been, and we anticipate will continue to be, invested in high-grade, short-term investments (such as cash and cash equivalents) consistent with the preservation of principal, maintenance of liquidity and avoidance of speculation, until such time as we need to utilize such funds, or any portion thereof, for the purposes described above.   The directors will also consider alternatives for distributing some or all of its cash and cash equivalents to stockholders.

Results of operations

Three months ended March 31,September 30, 2019 compared to the three months ended March 31,September 30, 2018

For the three months ended March 31,September 30, 2019, the Company had a loss from continuing operations before income taxes of $481,000$458,000 compared to a loss from continuing operations of $602,000$484,000 for the three months ended March 31,September 30, 2018.  

The decreased loss before income taxes of $121,000$26,000 was primarily the result of increased Interest and other income of $144,000, mainly as the result of the recovery of an old investment in a private entity that was deemed worthless.

The increased income was accompanied by a decrease in Compensation and benefits of $25,000 due$138,000 and an increase of Interest and other income of $23,000 that was related to the Company having fewer employees as of the quarter ended March 31, 2019investments in comparison to the quarter ended March 31, 2018,U.S. Treasury Bills, partially offset by increased Other operating expenses of $48,000,$135,000 mainly as a consequence of increased rent expense duelegal fees related to the full absorptionreimbursement of rent by the Company subsequentcertain legal expenses to a shareholder for the sale of Winthrop.their shares in the Company, and increased consulting fees.

Compensation and benefits

For the three months ended March 31,September 30, 2019, Compensation and benefits were $152,000$46,000 as compared to $177,000$184,000 for the three months ended March 31,September 30, 2018 as the result of the Company having fewer employees as of the quarterthree months ended on March 31,September 30, 2019 in comparison to the three months ended September 30, 2018 and the decrease of the CEO compensation during the third quarter ended March 31, 2018.of 2019. Effective October 1, 2019, the Company’s Compensation Committee returned Mr. Eisen’s compensation to $300,000 per annum to reflect his duties in exploring strategic alternatives for the Company.

Other operating expenses

For the three months ended March 31,September 30, 2019, Other operating expenses were $475,000$452,000 as compared to $427,000$317,000 for the three months ended March 31,September 30, 2018. The increased operating expenses of $48,000$135,000 were primarily the result of increased rent expense afterlegal fees related to the reimbursement of certain legal expenses to a shareholder for the sale of Winthrop duringtheir shares in the third quarter of 2018,Company, increased consulting fees and general office expense associated with the move to a new office building, partially offset by decreased travel and entertainment expenses and expenses associated with remediation of the reservoirs, partially offset by decreased travel and entertainment expenses.

Income taxes

For the three months ended March 31, 2019 and 2018, the Company recorded income tax expense from operations of $11,000 and $13,000, respectively. Such amounts represent minimum state taxes. No tax benefit has been recorded in relation to the pre-tax loss for the three months ended March 31, 2019 and 2018, due to a full valuation allowance to offset any deferred tax asset related to net operating loss carry forwards attributable to the losses.

reservoirs.

Other Assets

The Company monitors investment in non-strategic assets for impairment by considering current factors, including the economic environment, market conditions, operational performance and other specific factors relating to the business underlying the investment, and records impairments in carrying values when necessary.   

The Company has interests in land and certain flowage rights in undeveloped property (the “properties”) primarily located in Killingly, Connecticut, which are deemed to be fully impaired as of March 31,September 30, 2019 and December 31, 2018.

Nine months ended September 30, 2019 compared to the nine months ended September 30, 2018

For the nine months ended September 30, 2019, the Company had a loss from continuing operations before income taxes of $1,438,000 compared to a loss from continuing operations of $1,476,000 for the nine months ended September 30, 2018.  

The decreased loss before income taxes of $38,000 was the result of a decrease in Compensation and benefits of $230,000 and an increase in Interest and other income of $208,000, that includes the recovery of an old investment in a private entity of $100,000 that was deemed worthless and interest income earned from investments in U.S. Treasury Bills, partially offset by increased Other operating expenses of $400,000, mainly as a consequence of increased rent expense due to the full absorption of rent by the Company and increased consulting fees and increased legal fees related to the reimbursement of certain legal expenses to a shareholder for the sale of their shares in the Company, partially offset by decrease in expenses associated with the remediation of the reservoirs and decrease in travel and entertainment expenses.

Compensation and benefits

For the nine months ended September 30, 2019, Compensation and benefits were $326,000 as compared to $556,000 for the nine months ended September 30, 2018 as the result of the Company having fewer employees and the decrease of the CEO compensation during the third quarter of 2019. Effective October 1, 2019, the Company’s Compensation Committee returned Mr. Eisen’s compensation to $300,000 per annum to reflect his duties in exploring strategic alternatives for the Company.

Other operating expenses

For the nine months ended September 30, 2019, Other operating expenses were $1,344,000 as compared to $944,000 for the nine months ended September 30, 2018. The increased operating expenses of $400,000 mainly as a consequence of increased rent expense due to the full absorption of rent by the Company and increased consulting fees and increased legal fees related to the reimbursement of certain legal expenses to a shareholder for the sale of their shares in the Company, partially offset by decrease in expenses associated with the remediation of the reservoirs and decrease in travel and entertainment expenses.

Income taxes

For the three and nine months ended September 30, 2019, the Company recorded income tax expense from continuing operations of $1,000 and $26,000, respectively. For the three and nine months ended September 30, 2018, the Company recorded an income tax expense of $3,000 and $39,000, respectively. Such amounts represent minimum state taxes. No tax benefit has been recorded in relation to the pre-tax loss for the three and nine months ended September 30, 2019 and 2018, due to a full valuation allowance to offset any deferred tax asset related to net operating loss carry forwards attributable to the loss.

Financial condition

Liquidity and Capital Resources

At March 31,September 30, 2019, the Company had cash and cash equivalents totaling $745,000 and investments of $7,990,000 in U.S. Treasury Bills.$1,999,000.

Cash equivalents represent short-term, highly liquid investments, which are readily convertible to cash and have maturities of three months or less at time of purchase. Please refer to noteNote 5 for valuation on Investments.

The decrease in cash and cash equivalents of $5,418,000$4,164,000 for the quarternine months ended March 31,September 30, 2019 was primarily the result of $433,000$1,335,000 used in operating activities, mainly due to net loss of $1,464, and $4,985,000$2,829,000 used to invest in U.S. Treasury Bills.

The Company believes that its working capital is sufficient to support its operating requirements through JuneSeptember 30, 2020.

Not required.

The Company’s principal executive officer and principal financial officer, with the assistance of other members of the Company’s management, have evaluated the effectiveness of the design and operation of the Company’s disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of the end of the period covered by this quarterly report. Based upon such evaluation, the Company’s principal executive officer and principal financial officer have concluded that the Company’s disclosure controls and procedures are effective as of the end of the period covered by this quarterly report.

The Company’s principal executive officer and principal financial officer have also concluded that there was no change in the Company’s internal control over financial reporting (as such term is defined in Rule 13a-15(f) under the Exchange Act) that occurred during the quarter ended March 31,September 30, 2019 that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

PART II. OTHER INFORMATION

Issuances of Equity Securities

As compensation for his role as a Director of the Company, Dort Cameron III was granted on February 13, 2019 (the "Grant Date") 100,000 Stock Units (" RSU's"), each representing the initial right to receive, on the settlement date(s) one share of common stock, par value $.01 per share, of the Issuer. The 100,000 RSU's shall vest in 1/3 increments of 33,333, on each of the one year, two year anniversary and 33,334 on the three year anniversary of the Grant Date, and shall be subject to a three year transfer or sale restriction until the three year anniversary of the Grant Date. No shares were vested as of March 31, 2019. These shares were issued pursuant to exemptions from registration set forth in Section 4(2) of the Securities Act and Regulation D promulgated thereunder.

This issuance qualified for exemption from registration under the Securities Act because (i) Mr. Cameron is an accredited investor, (ii) the Company did not engage in any general solicitation or advertising in connection with the issuance, and (iii) Mr. Cameron received restricted securities.

Purchases of Equity Securities

The Board of Directors authorized the Company to repurchase up to 5,000,000 outstanding shares of common stock from time to time either in open market or privately negotiated transactions. At March 31,September 30, 2019, the Company had repurchased 2,041,971 shares of its common stock and, a total of 2,958,029 shares remained available for repurchase at March 31,September 30, 2019, pursuant to the 5,000,000 shares repurchase plans. The Company did not repurchase shares of common stock during the quarter ended March 31,September 30, 2019.

As requested by Harvey P. Eisen, effective July 1, 2019, the Company’s Board of Directors voted unanimously to reduce Mr. Eisen’s compensation from an annual amount of $300,000 to an annual amount of $20,000 for the period of July 1, 2019 through September 30, 2019. Effective October 1, 2019, the Company’s Compensation Committee returned Mr. Eisen’s compensation to $300,000 per annum to reflect his duties in exploring strategic alternatives for the Company.

*Filed herewith

**Pursuant to Rule 406T of Regulation S-T, these interactive data files are deemed not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933 or Section 18 of the Securities Act of 1934 and otherwise are not subject to liability.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

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