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EX-31.2 - EXHIBIT 31.2 - Wright Investors Service Holdings, Inc.ex31_2.htm
EX-31.1 - EXHIBIT 31.1 - Wright Investors Service Holdings, Inc.ex31_1.htm


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-K/ A
(Amendment No. 1)

(Mark One)
x
ANNUAL REPORT UNDER SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2011

o
TRANSITION REPORT UNDER SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ________ to _______

Commission file Number: 000-50587
 
NATIONAL PATENT DEVELOPMENT CORPORATION
(Exact Name of Registrant as Specified in Its Charter)
 
Delaware
 
13-4005439
(State or Other Jurisdiction of
Incorporation or Organization)
 
(IRS Employer Identification Number)
 
 
100 South Bedford Road, Suite 2R, Mount Kisco,   NY 10549
 
 
(Address of Principal Executive Offices, including Zip Code)
 
 
 
(914) 242-5700
 
 
(Registrant’s telephone number, including area code)
 
 
Securities registered pursuant to Section 12(b) of the Act:
 
None
     
Securities registered pursuant to Section 12(g) of the Act:
 
Common Stock, $0.01 Par Value
   
(Title of Class)
 
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
Yes o     No x
 
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act.
Yes o     No x
 
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 x     No o
 
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
Yes o     No o
 
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. x

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.  See definitions of “large accelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
 
Large accelerated filer
o
Accelerated filer
o
Non-accelerated filer
(Do not check if a smaller reporting company)
o
Smaller reporting company
x
 
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes x     No o
 
The aggregate market value of the registrant’s common stock held by non-affiliates of the registrant, computed by reference to the price at which the common stock was last sold, or the average bid and asked price of such common stock, as of the last business day of the registrant’s most recently completed second quarter, is $15,293,000.
 
As of April 5, 2012, 17,586,344 shares of the registrant’s common stock were outstanding.
 


 
 

 
 
EXPLANATORY NOTE
 
National Patent Development Corporation (the “Company”) is filing this Amendment No. 1 on Form 10-K/A (this “Form 10-K/A”) pursuant to General Instruction G(3) to Form 10-K , which amends and supplements our  Annual Report on Form 10-K for the fiscal year ended December 31, 2011, which was filed with the Securities and Exchange Commission (the “SEC”) on March 2, 2012 (the “2011 Form 10-K”).    This Form 10-K/A provides the information required to be disclosed in Part III, Items 10 through 14 and updates the information contained in Part IV, Item 15.  As a result of this amendment, the Company is filing as exhibits to this Form 10-K/A the certifications required under Section 302 of the Sarbanes-Oxley Act of 2002.  Because no financial statements are contained within this Form 10-K/A, the Company is not including certifications pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.  The cover page of this amendment has also been revised to provide the number of outstanding shares of Company common stock as of April 5, 2012.  
 
Except for the amendments described above, this Form 10-K/A does not modify or update the disclosures in, or exhibits to, the 2011 Form 10-K.
 
 
 
 
 
 
 
 

 

TABLE OF CONTENTS

 
Page
    
 
 
PART III
   
Directors, Executive Officers and Corporate Governance                                                                                                                              
 1
Executive Compensation                                                                                                                              
 4
 
 
Related Stockholder Matters                                                                                                                              
8
Certain Relationships and Related Transactions, and Director Independence                                                                                                                              
10
Principal Accounting Fees and Services                                                                                                                              
12
   
PART IV
   
Exhibits and Financial Statement Schedules                                                                                                                              
12
   
SIGNATURES                                                                                                                                                
13

 
 
 
 
 
 
 

 
 
PART III


ITEM 10.              DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
 
Directors
 
 Set forth below are the names of, and certain biographical information regarding, the directors of the Company. The Board of Directors currently consists of three directors.  
 
Harvey P. Eisen, 69, has served as Chairman of the Board of Directors and Chief Executive Officer of the Company since June 2007 and also served as its President since July 2007. Mr. Eisen has served as a director of the Company since 2004 and served as a director of Five Star Products from November 2007 until its sale by the Company in January 2010. Mr. Eisen has served as Chairman and Managing Member of Bedford Oak Advisors, LLC, an investment partnership (“Bedford Oak”), since 1998. Prior thereto, Mr. Eisen served as Senior Vice President of Travelers, Inc. and of Primerica, each a financial services company, prior to its merger with Travelers in 1993. Mr. Eisen has over 30 years of asset management experience, is often consulted by the national media for his views on all phases of the investment marketplace, and is frequently quoted in The Wall Street Journal, The New York Times, PensionWorld, U.S. News & World Report, Financial World and Business Week, among other publications. Mr. Eisen also has appeared and currently appears regularly on such television networks as CNN and CNBC. Mr. Eisen is a trustee of the University of Missouri Business School, where he established the first accredited course on the Warren Buffet Principles of Investing. He is also a trustee for Johns Hopkins University. Mr. Eisen has also been a director of GP Strategies Corporation (“GP Strategies”) since 2002 and has been Chairman of the Board of Directors of GP Strategies since April 2005. For many years, he was a trustee of Rippowam Cisqua School in Bedford, New York and the Northern Westchester Hospital.
 
Mr. Eisen is qualified to serve on our Board of Directors and brings valuable insight to our Board of Directors as a result of his broad range of business skills and his financial literacy and expertise and executive and management leadership skills. Mr. Eisen honed these skills and expertise during his long and successful business career as Chairman and Managing Member of Bedford Oak,   a Senior Vice President of Travelers and Primerica, as well as his service on other public company and institutional boards.
 
Scott N. Greenberg, 55, has been a director of the Company since 2004.  Mr. Greenberg was Chief Financial Officer of the Company from 2004 to July 2007.  Mr. Greenberg has been the Chief Executive Officer of GP Strategies since April 2005 and a director since 1987.  From 2001 until February of 2006 he was President of GP Strategies, Chief Financial Officer from 2001 until 2005, Executive Vice President and Chief Financial Officer from 1998 to 2001, Vice President and Chief Financial Officer from 1989 to 1998, and Vice President, Finance from 1985 to 1989.  He was a director of GSE Systems, Inc. from 1999 to 2008, was a director of Five Star Products from 1998 to 2003 and a director of Valera Pharmaceuticals, Inc. until January 2005.

Mr. Greenberg is qualified to serve on our Board of Directors because he possesses and brings valuable insight to our Board of Directors as a result of his broad range of business skills and experiences, financial literacy and expertise. Mr. Greenberg honed these skills and expertise during his long and successful business career, in which he served as a chief financial officer for over 20 years, as well as his service on other public company boards.

 
1

 
 
Lawrence G. Schafran, 73, has served as a director and chairman of the audit committee of the Company since 2006. He has been a Managing Director of Providence Capital, Inc., an investment and advisory firm, since 2003. Mr. Schafran also serves as a director of SecureAlert, Inc., a manufacturer and distributor of a GPS-based, two-way communications bracelet/anklet worn by parolees, probationers and bailees, Mr. Schafran also served as a director of Electro-Energy, Inc., which engages in the research and development of battery technologies, from 2006 until 2009, and PubliCard, Inc., which was a smartcard technology company, from 1986 to 2005. Mr. Schafran also served as a trustee, chairman, interim chief executive officer and president and as co-liquidating trustee (from 1999 through 2003) of Banyan Strategic Realty Trust, an equity REIT that was traded on the Nasdaq National Market.
 
Mr. Schafran is qualified to serve on our Board of Directors because of his extensive business skills and experiences and his financial literacy and expertise.  Mr. Schafran also possesses a broad range of experiences and skill garnered from the various leadership positions and from his service on other public company boards and committees.

Executive Officers Who Are Not a Director
 
Set forth below is the name of, and certain biographical information regarding executive officers of the Company who do not serve as directors of the Company.
 
Ira J. Sobotko, 55, has served as Vice President, Finance, Secretary and Treasurer of the Company since July 2007, and is its principal financial officer and principal accounting officer. His title was changed from Vice President, Finance, Secretary and Treasurer to Vice President and Chief Financial Officer, Secretary and Treasurer in 2008. Mr. Sobotko served as Senior Vice President, Finance, Secretary and Treasurer of Five Star Products and its principal financial officer from July 2007 until its sale by the Company in January 2010. From April 2007 to July 2007, Mr. Sobotko served as Vice President, Finance of the Company. From September 2005 through March 2007, Mr. Sobotko served as a financial consultant to various publicly traded companies, including the Company and Five Star Products and emerging technologies companies. From January 2004 through May 2005, Mr. Sobotko served as Vice President and Chief Financial Officer of Campusfood.com, a web-based network of restaurants for students and local communities. From August 2000 to January 2004, Mr. Sobotko served as Executive Vice President, Finance at Arrowsight, Inc., a web-based application service provider where Mr. Sobotko has also served as a director since November 2001.

Thomas J. Hayes, 33 was appointed by the Board of Directors of the Company as the Chief Operating Officer of the Company in February 2011. Mr. Hayes is also a Managing Director of Bedford Oak. Mr. Hayes brings over a decade of managerial leadership in the fields of international distribution, marketing, business strategy and transaction structuring to the processes of security analysis and capital allocation. Prior to joining Bedford Oak, Mr. Hayes managed a leading distributorship for Herbalife International, Inc (NYSE: HLF). Over a period of thirteen years, Mr. Hayes independently developed a sales organization of several thousand agents throughout Asia, Europe and the Americas. Mr. Hayes received his Bachelor of Arts degree from Columbia University.
 
 
2

 
 
Corporate Governance
 
General
 
The Company is committed to establishing sound principles of corporate governance which promote honest, responsible and ethical business practices. The Company’s Board of Directors and Nominating and Corporate Governance Committee actively review and evaluate the Company’s corporate governance practices. This review includes comparing the Board’s current governance policies and practices with those suggested by corporate governance authorities as well as the practices of other public companies. The Board of Directors has adopted those corporate governance policies and practices that its evaluation suggests are the most appropriate for the Company.
 
Audit Committee
 
Our Audit Committee is currently composed of Lawrence G. Schafran and Scott N. Greenberg. The Board of Directors affirmatively determined that Mr. Schafran is independent, in accordance with The Nasdaq Stock Market (“Nasdaq”) independence criteria and for purposes of Section 10A(m)(3) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). The Board of Directors has determined that Mr. Greenberg is not independent. See Item 13. “Certain Relationships and Related Transactions, and Director Independence.”
 
The Board of Directors determined that each of Messrs. Schafran and Greenberg is able to read and understand financial statements and that each of Messrs. Schafran and Greenberg has accounting or related financial management expertise in accordance with the applicable rules of Nasdaq. The Board of Directors also determined that each of Messrs. Schafran and Greenberg, who serve as the Audit Committee financial experts, has the accounting or related financial management expertise necessary to be considered a “financial expert” under SEC rules.
 
The Audit Committee is responsible for maintaining free and open communications among itself, the independent registered public accounting firm and Company management. The Audit Committee assists the Board of Directors in fulfilling its oversight responsibility to the stockholders, potential stockholders, the investment community and others relating to the integrity of the Company’s financial statements and the financial reporting process, the Company’s compliance with legal and regulatory requirements, the independent registered public accounting firm’s qualifications and independence, the Company’s systems of internal accounting and financial controls, the annual independent audit of the Company’s financial statements, and the performance of the Company’s internal audit function and the independent registered public accounting firm.

 
Section 16(a) Beneficial Ownership Reporting Compliance
 
Section 16(a) of the Exchange Act requires the Company’s executive officers and directors to file reports regarding ownership of the Company’s common stock with the SEC, and to furnish the Company with copies of all such reports. Based on a review of these filings, the Company believes that with respect to the most recently concluded fiscal year, all such reports were timely filed.
 
 
3

 
 
Code of Ethics
 
The Company has adopted a Code of Ethics for its principal executive officer, senior financial officers, including the principal financial officer and the principal accounting officer, and persons performing similar functions for its subsidiaries. If the Company makes any substantive amendment to the Code of Ethics or grants any waiver from a provision of the Code of Ethics for said executive officers, the Company will disclose the nature of such amendment or waiver in a filing on Form 8-K. The Code of Ethics was filed as Exhibit 14.1 to the Company’s Form 10-K for the year ended December 31, 2004 filed with the SEC on April 15, 2005 and is incorporated by reference herein. The Company will also provide a copy of such Code of Ethics to any person, without charge, upon written request made to the Company’s Secretary at the following address: National Patent Development Corporation, Attn: Secretary, 100 South Bedford Road, Suite 2R, Mount Kisco, New York 10549.


ITEM 11.              EXECUTIVE COMPENSATION
 
The Company has elected to use the Smaller Reporting Company rules issued by the SEC regarding the disclosure of executive compensation.  Under these rules, the Company provides a Summary Compensation Table covering 2011 and 2010 compensation for the individual who served as principal executive officer in 2011 and for two individuals who are the most highly-compensated executive officers other than the individual who served as principal executive officer (to whom we refer collectively as our “named executive officers”) and Outstanding Equity Awards at Year-End Table and certain narrative disclosures.
 
 
SUMMARY COMPENSATION TABLE
 
The table below summarizes the total compensation paid to or earned by each of the Company’s named executive officers for the fiscal years ended December 31, 2011 and 2010.
 
Name and Principal
Position
Year
Salary
 
Bonus
 
Option
Awards
(1)
All Other
Compensation
(2)
Total
 
   
($)
($)
($)
($)
($)
 
Harvey P. Eisen, Chairman
of the Board and Chief
Executive Officer
(Principal Executive
2011
150,000 0   0 150,000  
Officer)
2010
149,038 500,000 133,250 0 782,288  
 
Ira J. Sobotko, Vice
President, Chief Financial
Officer, Treasurer and
Secretary (Principal  
Financial and Accounting
2011
200,000 0 0 16,306 216,306  
Officer) (2)
2010
200,000 0 0 15,558 215,558  
               
               

(1)
The amounts in this column reflect the dollar amount recognized as expense for financial statement reporting purposes, calculated in accordance with FASB ASC Topic 718.  A discussion of the assumptions used in calculating these values with respect to awards related to Company common stock may be found in Note 10 to our audited financial statements in the Form 10-K for the fiscal year ended December 31, 2011.
 

(2)
For Mr. Sobotko, the amount reflected under “All Other Compensation” is comprised of:
 
 
·
$879 and $573 for 2011 and 2010, respectively, for life insurance premiums;
 
 
·
$5,827 and $5,385 for 2011 and 2010, respectively, for 401(K) Company matching contributions; and
 
 
·
$9,600 for 2011 and 2010 for auto expense allowance.

 
4

 
 
OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END
 
The following table provides information concerning the holdings of unexercised and unvested options to purchase shares of common stock of the Company for each of the named executive officers at December 31, 2011.
 
Name
Number of
Shares of
Common
Stock
Underlying
Unexercised
Options which
are
Exercisable
Number of
Shares of
Common
Stock
Underlying
Unexercised
Options
which are
Unexercisable
Option
Exercise Price
Per Share of
Common
Stock
Option Expiration Date
 
 
(#)
(#)
($)
 
 
Harvey P. Eisen
2,500,000(1)
 83,333
166,667 (2)
$2.45
$1.36
February 28, 2017
April 28, 2020
 
Ira J. Sobotko
 
100,000 (1)
 
-
 
$2.68
 
July 29, 2017
 
(1)
These options were fully vested at December 31, 2011.
 
(2)
These options vest in approximately one-third increments on each of April 28, 2011, April 28, 2012 and April 28, 2013.
 
Overview of Material Compensation Arrangements with Our Named Executive Officers
 
The following is a summary of the material terms of employment and compensation arrangements pursuant to which compensation was paid to our named executive officers for their service with the Company or its subsidiaries for the fiscal year ended December 31, 2011.

Harvey P. Eisen
 
On June 1, 2007, Mr. Eisen, who at such time served, and who continues to serve, as a director of the Company, commenced his service as Chairman of the Board, and President and Chief Executive Officer of the Company. Effective upon the commencement of his service as Chairman of the Board, and President and Chief Executive Officer of the Company, Mr. Eisen began receiving a salary from the Company of $100,000 per annum. Mr. Eisen’s salary was increased to $150,000 per annum, effective January 1, 2010.
 
On March 1, 2007, in connection with its decision to appoint Mr. Eisen to the executive positions described above, our Board of Directors granted to Mr. Eisen options to purchase an aggregate of 2,500,000 shares of Company common stock, pursuant to the Company’s 2003 Incentive Stock Plan (the “2003 Plan”), at an exercise price equal to $2.45 per share, which was the average of the closing bid and ask prices of Company common stock on March 1, 2007. The options vested in approximately one-third increments on each of March 1, 2008, March 1, 2009 and March 1, 2010.
 
On April 28, 2010, our Board of Directors granted to Mr. Eisen for 2010 for his role in the completion of the sale of both the Company’s undeveloped real property located in Pawling, New York and Five Star Products, the latter of which closed in January 2010, (i) a discretionary cash bonus of $500,000 and (ii) an option to purchase 250,000 shares of common stock, of the Company granted under the Company’s 2007 Incentive Stock Plan. The options have an exercise price of $1.36 per share, which was equal to the fair market value on the date of grant, vest over three years, in approximately one-third increments each year, commencing on the first anniversary of the date of grant and have a term of ten years, subject to earlier termination as provided in the form of option agreement.
 

Ira J. Sobotko
 
Mr. Sobotko serves as Vice President, Chief Financial Officer, Secretary and Treasurer of the Company and served as Senior Vice President, Finance, Secretary and Treasurer of Five Star Products until its sale by the Company in January 2010.  Mr. Sobotko receives a salary of $200,000 per annum from the Company.   In addition, pursuant to the terms and conditions of the Stock Option Agreement, dated July 30, 2007, between the Company and Mr. Sobotko (the “Sobotko NPDC Stock Option Agreement”), Mr. Sobotko was granted options to purchase 100,000 shares of Company common stock under the 2003 Plan at an exercise price equal to $2.68 per share, which was the average of the closing bid and ask prices of Company common stock on July 30, 2007.  The options were fully vested at December 31, 2011.
 
 
5

 
 
Termination of Employment and Change in Control Arrangements
 
Potential Payments upon Termination or Change in Control
 
As discussed above, both Mr. Eisen and Mr. Sobotko’s awards granted under the 2003 Plan have vested. As of December 31, 2011, Mr. Eisen had unvested options to purchase 166,667 shares of Company common stock, which options vest over three years, in approximately one-third increments each year, commencing April 28, 2011. All unvested options would fully vest and become immediately exercisable upon an occurrence of a change in control of the Company. See the descriptions of the agreement with the named executive officers above for additional information.



DIRECTOR COMPENSATION
 
Only directors who are not employees of the Company or its subsidiaries are entitled to receive compensation for service as a director. The table below summarizes the total compensation paid to or earned by each director of the Company (who is not also a named executive officer) for the fiscal year ended December 31, 2011. The column “Fees Earned or Paid in Cash” includes common stock of the Company issued in lieu of cash.
 
2011 Director Compensation
 
Name
Fees Earned or
Paid in Cash
Option Awards (2)
All Other
Compensation
Total
 
($)
($)
($)
($)
Lawrence G. Schafran
     42,755 (1)
17,767
0
60,522
Scott N. Greenberg
32,750
17,767
0
50,517


(1)
Mr. Schafran elected to receive 8,148 shares of Company common stock in lieu of $12,505 of his annual director’s fee.
 
(2)
The amounts in this column reflect the dollar amount recognized in fiscal 2011 for financial statement reporting purposes, calculated in accordance with FSB ASC 718.  A discussion of the assumptions used in calculating these values may be found in Note 10 to our audited financial statements in our Annual Report on Form 10-K for the fiscal year ended December 31, 2011.  At December 31, 2011, each of Messrs. Greenberg and Schafran each had 133,333 vested and 66,667 unvested options.
 



  Director Compensation Program
 
For the year ended December 31, 2011 directors who are not employees of the Company or its subsidiaries were entitled to receive:
 
 
 
·
annual director compensation to each member of the Board of Directors of (i) $25,000, paid in quarterly installments of $6,250 (except the Vice Chairman of the Board of Directors who is to receive annual director compensation of $35,000, paid in quarterly installments of $8,750) and (ii) a one-time grant of an option to purchase 100,000 shares of Company common stock .  The option is to have an exercise price of fair market value on the date of grant, vest over three years, in approximately one-third increments each year commencing on the first anniversary of the date of grant and have a term of ten years;
 
 
·
$1,500 in cash for each meeting of the Board of Directors and for each committee meeting attended in person and $750 in cash for each Board of Directors or Board committee meeting attended by means of conference telephone connection;
 
 
·
annual compensation of $5,000, paid in quarterly installments of $1,250, to each member of the Audit Committee (except the Chairman of the Audit Committee who is to receive annual compensation of $10,000), plus $750 in cash for each meeting of the Audit Committee attended in person and $500 in cash for each meeting of the Audit Committee attended by telephone, except that the per meeting attendance fee is reduced to $500 for attendance at any Audit Committee meeting held on the same day as a regular or special meeting of the Board; and
 
 
6

 
 
 
·
annual compensation of $2,500, paid in quarterly installments of $625, to each member of the Compensation Committee and each member of the Nominating and Corporate Governance Committee (except the Chairman of each such Committee, who is to receive annual compensation of $5,000), plus $750 in cash for each meeting of the Nominating and Corporate Governance Committee attended in person and $500 in cash for each meeting of the Nominating and Corporate Governance Committee attended by telephone, except that the per attendance meeting fee is reduced to $500 for attendance at any Nominating and Corporate Governance Committee meeting held on the same day as a regular or special meeting of the Board.

At the option of each director, up to half of the sums designated above as “annual director compensation” may be paid in Company common stock; provided that (1) the option to receive Company common stock is exercisable by notice to the Company at anytime prior to the payment of one or more quarterly payments of the annual compensation, (2) common stock issued in lieu of annual compensation is valued at the average between the closing bid and ask price on the day prior to the date upon which the annual compensation became payable, (3) all right, title and interest in and to common stock issued will vest in the receiving director upon issuance, and (4) payment in common stock will only be available if such payment may be made without registration or other similar actions and in compliance with all relevant laws and regulations.
 
 
 
 
 
 
 
7

 
 
ITEM 12.              SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
 
Security Ownership of Principal Stockholders
 
The following table sets forth the number of shares of common stock beneficially owned as of April 5, 2012 by each person who is known by the Company to own beneficially more than five percent of outstanding Company common stock other than executive officers or directors of the Company, whose beneficial ownership is reflected in the Security Ownership of Directors and Executive Officers table below.  There were 17,586,344 shares of Company common stock outstanding on April 5, 2012.
 
Security Ownership of Principal Stockholders Table
 
Name and Address
of Beneficial Owner
Amount and Nature of Beneficial
Ownership
Percent of Class
Bedford Oak Advisors, LLC
100 South Bedford Road
Mt. Kisco, NY 10549
5,768,031 (1)
32.80%
GAMCO Investors, Inc.
One Corporate Center
Rye, NY 10580
2,405,028 (2)
13.68%
Frost Gamma Investments Trust
4400 Biscayne Blvd.
Miami, FL 33137
1,603,400 (3)
9.12%
Boulderado Group, LLC
101 Federal Street
Suite 1900
Boston, MA 02110
1,134,777 (4)
6.45%
Carl E. Warden
1516 Country Club Drive
Los Altos, CA 94024
922,173 (5)
5.24%
                               
(1)
Based on a Schedule 13D/A filed jointly by Bedford Oak Advisors, LLC (“Bedford Oak”), Bedford Oak Capital, L.P. (“Capital”), Bedford Oak Acorn, L.P. (“Acorn”) and Mr. Eisen with the SEC on January 6, 2012, and updated for other information known to the Company, including various Form 4’s filed jointly by Bedford Oak, Capital and Mr. Eisen with the SEC through April 5, 2012.  Mr. Eisen is deemed to have beneficial ownership of such shares by virtue of his position as managing member of Bedford Oak, the investment manager of Capital and Acorn and certain other private investment partnerships.  Does not include options to purchase 2,666,666 shares of Company common stock exercisable by Mr. Eisen within 60 days of April 5, 2012.  See Security Ownership of Directors and Executive Officers table below.
 
(2)
Based on a Schedule 13D/A filed jointly by Gabelli Funds, LLC, GGCP, Inc., GAMCO Investors, Inc., GAMCO Asset Management, Inc., MJG Associates, Inc., Teton Advisors and Mario J. Gabelli with the SEC on January 26, 2011.
 
(3)
Based on a Schedule 13G filed by Frost Gamma Investments Trust with the SEC on February 10, 2011.

(4)
Based on a Schedule 13G filed jointly by Boulderado Group, LLC, Boulderado Partners, LLC and Alex B. Rozak with the SEC on January 6, 2012.

 (5)
Based on a Schedule 13G filed by Carl Warden with the SEC on May 21, 2007.  Includes 43,500 shares of common stock held by the Carl and Vicki Warden Family Foundation, of which Mr. Warden is the trustee.  Mr. Warden disclaims beneficial ownership of the 43,500 shares of common stock held by the Carl and Vicki Warden Family Foundation.

 
8

 
 
Security Ownership of Directors and Executive Officers
 
The following table sets forth the beneficial ownership of Company outstanding common stock as of April 5, 2012 by each person who is a director or named executive officer of the Company as of such date, naming each such person, and all persons who are directors and executive officers of the Company as of such date, as a group.
 
Security Ownership of Directors and Executive Officers Table
 
 Name
Amount and Nature of Beneficial
Ownership
Percent of Class
Harvey P. Eisen
8,434,698
 (1)
41.65%
Scott N. Greenberg
192,202
(2) (3)
1.08%
Lawrence G. Schafran
210,758
 (3)
1.19%
Ira J. Sobotko
100,625
         (4)
*
Thomas J. Hayes
16,667
                      (5)
*
Directors and executive officers as a group
(5 persons) (6)
8,954,950
 
43.25%
                                     
* The number of shares owned is less than one percent of the outstanding shares.
 
(1)
Includes 5,347,000 shares of Company common stock beneficially owned by Bedford Oak, Capital and Acorn.  Mr. Eisen is deemed to have beneficial ownership of such shares by virtue of his position as managing member of Bedford Oak, the investment manager of Capital and Acorn.  See footnote 1 to Principal Stockholders table above.  Also includes 421,031 shares of Company common stock owned by Mr. Eisen individually and 2,666,666 shares of Company common stock issuable upon the exercise of options that are exercisable by Mr. Eisen within 60 days of April 5, 2012.
 
(2)
Includes 4,000 shares of Company common stock held by members of Mr. Greenberg’s family, and 5,867 shares of Company common stock allocated to Mr. Greenberg’s account pursuant to the provisions of the GP Strategies Retirement Savings Plan.  Mr. Greenberg disclaims beneficial ownership of the 4,000 shares of Company common stock held by members of his family. 

 
(3)
Includes 166,666 shares of Company common stock issuable to each of Messrs. Greenberg, and Schafran upon the exercise of options, all of which are exercisable by Messrs. Greenberg and Schafran within 60 days of April 5, 2012.
 
(4)
Includes 625 shares of Company common stock owned by Mr. Sobotko individually, and 100,000 shares of Company common stock issuable to Mr. Sobotko upon the exercise of options, all of which are currently exercisable.
 
 
(5)
Includes 16,667 shares of Company common stock issuable to Mr. Hayes upon the exercise of options, all of which are exercisable by Mr. Hayes within 60 days of April 5, 2012.

(6)
Includes Messrs. Greenberg and Schafran, each of whom is currently a director of the Company, Mr. Eisen, who is currently a director and a named executive offer of the Company, and Mr. Sobotko and Mr. Hayes who are currently named executive officers of the Company.

 
9

 
 
Equity Compensation Plan Information
 
The following table provides information as of December 31, 2011 with respect to shares of Company common stock that may be issued under existing equity compensation plans.
 
 Plan category
Number of securities
to be issued upon
exercise of
outstanding options,
warrants and rights
(a)
Weighted-average
exercise price of
outstanding options,
warrants and rights
 
(b)
Number of securities
remaining
available for future
issuance
under equity
compensation
plans (excluding
securities
reflected in column (a))
(c)
Equity compensation
plans approved by
security holders (1)
3,300,000
$2.29
7,700,000
Equity compensation
plans not approved by
security holders
Total
3,300,000
$2.29
7,700,000 
 
(1)
Consists of: (i) the 2003 Stock Plan, as amended, which was originally adopted by the Board of Directors and approved by the sole stockholder of the Company on November 3, 2003 and the amendment thereto, which was approved by the Board of Directors of the Company on March 1, 2007 and by the stockholders of the Company on December 20, 2007; and (ii) the 2007 Incentive Stock Plan, which was approved by the Board of Directors on July 30, 2007 and by the stockholders of the Company on December 20, 2007.


ITEM 13.              CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
 
Loan From Bedford Oak
 
On November 12, 2004, the Company entered into an agreement to borrow approximately $1,022,000 from Bedford Oak Partners, which is controlled by Harvey P. Eisen, Chairman, Chief Executive Officer and a director of the Company, and approximately $568,000 from Jerome I. Feldman, who was at the time Chairman and Chief Executive Officer of the Company (and who is no longer involved with the Company), which was utilized to exercise an option held by the Company to purchase 2,068,966 Series B Convertible Preferred shares of Valera Pharmaceuticals, Inc. (Valera), for an aggregate price of $1,590,000 (the “Valera Agreement”). The loans bore interest at 6% per annum, matured on October 31, 2009, and were secured by all shares of Valera owned by the Company. On January 20, 2005, the Company prepaid the loans, including all accrued interest of $10,217 and $5,682 for Bedford Oak Partners and Mr. Feldman, respectively. As further consideration for making these loans, Bedford Oak Partners and Mr. Feldman became entitled to a portion of the consideration received by the Company on the sale of certain Valera shares.

Effective April 18, 2007, all of the outstanding common stock of Valera was acquired by Indevus Pharmaceuticals, Inc. (“Indevus” and the “Indevus Transaction”). At the effective date of the Indevus Transaction, each share of Valera common stock outstanding immediately prior to the effective time was exchanged for 1.1337 shares of Indevus common stock and certain contingent rights to receive additional Indevus common stock based upon the receipt by Indevus of FDA approval for three products under development by Valera at the time of the Indevus Transaction (the “Contingent Rights”). The November 12, 2004 agreement also provided for Bedford Oak Partners and Mr. Feldman to participate in 50% of the profits earned on 19.51% of shares of Indevus common stock received by the Company upon conversion of the Contingent Rights, if any, at such time as such shares are sold by the Company.
  
From June 25, 2007 through and including September 12, 2007, the Company sold, in a series of brokers’ transactions, all of its 2,639,482 shares of Indevus common stock received at the time of the Indevus Transaction and shares which the Company received in 2007 as a result of Indevus receiving FDA approval of one of the products subject to the Contingent Rights in open market transactions for an aggregate of approximately $17,598,000, net of commissions and brokerage fees. Pursuant to the Valera Agreement, Bedford Oak Partners and Mr. Feldman received an aggregate of approximately $922,000 of the proceeds of these sales.

 
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As a result of the consummation of the merger between Indevus and Endo Pharmaceuticals Inc. in 2009, the Company has a contingent right to receive from Endo certain cash payments. The two related parties would receive the following portions of the Company’s cash payments upon the occurrence of the following events: (i) $303,000 upon FDA approval of Octreotide implant for the treatment for acromegaly on or before April 18, 2012 (Octreotide Approval), and (ii) $202,000 upon FDA approval of Aveed™. The Aveed™ amount would only be payable to the Company and therefore the related parties if there were Octreotide Approval.

On November 11, 2011, Endo announced that it had decided to terminate the development of its Octreotide implant for the treatment of acromegaly. The decision was made by Endo after conducting an in-depth review of their research and development activities, including an analysis of research and development priorities, focus and available resources for current and future projects and the commercial potential for the product. Therefore the Company does not anticipate receiving any contingent cash consideration, since the Aveed™ contingent consideration was contingent upon receiving Octreotide approval.


Other Transactions with Bedford Oak

Effective June 1, 2010, the Company relocated its headquarters to the offices of Bedford Oak in Mount Kisco, New York. The Company is subleasing a portion of the space and has access to various administrative support services on a month-to-month basis at the rate of approximately $19,700 per month. General and administrative expenses for the years ended December 31, 2011 and 2010 includes $236,000 and $138,000, respectively, related to the sublease arrangement.

On February 24, 2011, Thomas J. Hayes was appointed Chief Operating Officer of the Company.  Mr. Hayes is also a Managing Director of Bedford Oak.

See the narrative disclosure following the Summary Compensation Table and the Outstanding Equity Awards at Fiscal Year-End Table in “Item 11. Executive Compensation” for summaries of the compensation arrangements and agreements in which the Company and its executive officers and directors are participants.
 


Director Independence
 
Since the adoption of the Sarbanes-Oxley Act in July 2002, there has been growing public and regulatory focus on the independence of directors. The Company is not subject to the listing requirements of any securities exchange, including Nasdaq, because the Company’s common stock is traded on the over-the-counter bulletin board. However, in July 2007, the Board of Directors adopted the standards for independence for Nasdaq-listed companies, and the independence determinations that follow are based upon the criteria established by Nasdaq for determining director independence and upon the criteria established by Nasdaq and the SEC for determining Audit Committee member independence.
 
The Board of Directors determines the independence of its members through a broad consideration of all relevant facts and circumstances, including an assessment of the materiality of any relationship between the Company and a director. In making each of these independence determinations, the Board of Directors considered and broadly assessed, from the standpoint of materiality and independence, all of the information provided by each director in response to detailed inquiries concerning his independence and any direct or indirect business, family, employment, transactional or other relationship or affiliation of such director with the Company.
 
Using the objective and subjective independence criteria enumerated in the Nasdaq marketplace rules listing requirements and SEC rules, the Board of Directors has reviewed all relationships between each director and the Company and, based on this review, the Board of Directors has affirmatively determined that, in accordance with Nasdaq independence criteria, (i) Mr. Schafran is independent, (ii) Messrs. Eisen and and Greenberg are not independent.
 
 
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ITEM 14.              PRINCIPAL ACCOUNTING FEES AND SERVICES
 
The fees billed for services rendered for 2011 and 2010 by EisnerAmper LLP, were as follows:
 
   
2011
   
2010
 
             
Audit Fees (1)
 
$
107,000
   
$
95,000
 
Audit-Related Fees
   
-
     
-
 
Tax Fees
   
-
     
-
 
All Other Fees (2)
   
70,000
     
--
 
                 
Total
 
$
177,000
   
$
95,000
 
                                   

(1)
Audit fees consisted principally of fees for the audit of the annual financial statements and reviews of the condensed consolidated financial statements included in the Company’s quarterly reports on Form 10-Q and review of registration statements.
 
(2)
In 2011, includes All Other Fees related to due diligence work performed on potential acquisitions.
 
Policy on Pre-Approval of Services Provided by Independent Auditor
 
Pursuant to the requirements of the Sarbanes-Oxley Act of 2002, the terms of the engagement of EisnerAmper LLP are subject to specific pre-approval policies.  In 2011 and 2010, all audit services and other services to be performed by EisnerAmper LLP require pre-approval by the Audit Committee in accordance with pre-approval policies established by the Board of Directors.  The procedures require that all proposed engagements of EisnerAmper LLP for services of any kind be directed to the Audit Committee prior to the beginning of any service.
 
All services provided by the independent registered public accounting firm for 2011 and 2010 were approved in advance by the Audit Committee of the Board of Directors.

PART IV

ITEM 15.              EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
 
See accompanying Index to Exhibits.
 
 
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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.
 
 
NATIONAL PATENT DEVELOPMENT
CORPORATION
 
     
Date:  April 25, 2012
By:
/s/ IRA J. SOBOTKO
 
   
Name: 
Ira J. Sobotko
 
   
Title:
Vice President, Chief Financial Officer,
Secretary and Treasurer
(Principal Financial and Accounting Officer)
 
 
 
 
 
 
 
 
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INDEX TO EXHIBITS

Number
 
Description
     
31.1
*
Certification of Principal Executive Officer
31.2
*
Certification of Principal Financial Officer
                        
*
Filed herewith
 
 
 
 
 
 
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