IWSH 10-Q Quarterly Report March 31, 2011 | Alphaminr
Wright Investors Service Holdings, Inc.
ALPHAMINR

IWSH 10-Q Quarter ended March 31, 2011

Balance Sheet
Cash Flow
Income Statement
WRIGHT INVESTORS SERVICE HOLDINGS, INC.
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PROXIES
DEF 14A
Filed on Sept. 23, 2019
10-Q 1 s5611010q.htm FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2011 s5611010q.htm
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-Q
(Mark One)

x
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2011
or
o
TRANSITION REPORT PURSUANT TO 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)
(I.R.S. Employer
Identification No.)

100 South Bedford Road, Suite 2R, Mount Kisco , NY
10549
(Address of principal executive offices)
(Zip code)

(914) 242-5700
(Registrant’s telephone number, including area code)
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 (§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 o No o
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
As of May 6, 2011, there were 17,579,629 shares of the registrant’s common stock, $0.01 par value, outstanding.
NATIONAL PATENT DEVELOPMENT CORPORATION AND SUBSIDIARIES

TABLE OF CONTENTS
Part I.  Financial Information
Page No.
1
2
3
4
5
6
15
20
20
Part II. Other Information
20
21
22

PART I. FINANCIAL INFORMATION


CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(in thousands, except per share data)

Three Months Ended
March 31,
2011
2010
General and administrative  expenses
$
(491
)
$
(1,434
)
Operating loss
(491
)
(1,434
)
Investment and other income, net
16
9
Loss from continuing operations before income taxes
(475
)
(1,425
)
Income tax (expense) benefit - current
(2
)
485
Loss from continuing operations
(477
)
(940
)
Loss from discontinued operations
(151
)
(544
)
Net loss
$
(628
)
$
(1,484
)
Basic and diluted net loss per share:
Continuing operations
$
(0.03
)
$
(0.05
)
Discontinued operations
(0.01
)
(0.03
)
Net loss
$
(0. 04
)
$
(0. 08
)
See accompanying notes to condensed consolidated financial statements.
1
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(Unaudited)
(in thousands)

Three Months Ended
March 31,
2011
2010
Net loss
$
(628
)
$
(1,484
)
Other comprehensive gain, before tax:
Reclassification of loss on interest rate swap to loss from discontinued operations
-
803
Comprehensive loss before tax
(628
)
(681
)
Reclassification of deferred tax benefit related to interest rate swap to loss from discontinued operations
-
(321
)
Comprehensive loss
$
(628
)
$
(1,002
)

See accompanying notes to condensed consolidated financial statements.
2
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)

March 31,
December 31,
2011
2010
(unaudited)
Assets
Current assets
Cash and cash equivalents
$
27,920
$
28,074
Refundable and prepaid income tax
759
755
Prepaid expenses and other current assets
108
377
Total current assets
28,787
29,206
Property, plant and equipment, net
5
6
Investment in undeveloped land
355
355
Other assets
375
375
Total assets
$
29,522
$
29,942
Liabilities and stockholders’ equity
Current liabilities
Income taxes payable
$
460
$
434
Accounts payable and accrued expenses
412
255
Total current liabilities
872
689
Commitments and contingencies
Stockholders’ equity
Common stock
181
181
Additional paid-in capital
29,852
29,827
Retained earnings (deficit)
(24
)
604
Treasury stock, at cost
(1,359
)
(1,359
)
Total stockholders’ equity
28,650
29,253
Total liabilities and stockholders’ equity
$
29,522
$
29,942

See accompanying notes to condensed consolidated financial statements.
3
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)

Three Months Ended
March 31,
2011
2010
Cash flows from operations:
Net loss
$
(628
)
$
(1,484
)
Adjustments to reconcile net loss to
net cash used in operating activities:
Depreciation
1
4
Loss on interest rate swap
-
803
Expenses paid in common stock
3
8
Deferred income taxes
-
346
Stock based compensation expense
22
138
Gain on sale of Five Star
-
(2,405
)
Changes in other operating items:
Refundable and prepaid income tax
(4
)
(874
)
Income tax payable
26
(530
)
Prepaid expenses and other current assets
(31
)
59
Accounts payable and accrued expenses
157
(245
)
Net cash used in operations
(454
)
(4,180
)
Cash flows from investing activities:
Cash held in escrow
300
(900
)
Net proceeds from sale of Five Star, net of $1, cash of discontinued operations
-
27,513
(a)
Net cash provided by investing activities
300
26,613
Cash flows from financing activities:
Proceeds from short-term borrowings
-
285
Repayment of short-term borrowings
-
(14,804
)
Net cash used in financing activities
-
(14, 519
)
Net increase (decrease) in cash and cash equivalents
(154
)
7,914
Cash and cash equivalents at beginning of period
28,074
23,068
(b)
Cash and cash equivalents at end of period
$
27,920
$
30,982
(a) Includes $14,804 used to repay short-term borrowings simultaneously with closing of sale and
$1,344 withheld by the buyer to pay severance and bank fees and $900 cash held in escrow
(b) Includes $62 included in assets held for sale
Supplemental disclosures of cash flow information:
Cash paid  during the period for:
Interest
$
$
31
Income taxes
6
1,073

See accompanying notes to condensed consolidated financial statements.
4
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY
THREE MONTHS ENDED MARCH 31, 2011
(Unaudited)
(in thousands, except shares)

Common
Stock
Additional
paid-in
Retained
earnings
Treasury
stock, at
Total
Stock-
holders’
Shares
Amount
capital
(deficit)
cost
equity
Balance at December 31, 2010
18,140,660 $ 181 $ 29,827 $ 604 $ (1,359 ) $ 29,253
Net loss
(628 ) (628 )
Stock based compensation expense
22 22
Issuance of common stock to directors
1,954 3 3
Other
(98 )
Balance at March 31, 2011
18,142,516 $ 181 $ 29,852 $ (24 ) $ (1,359 ) $ 28,650
See accompanying notes to condensed consolidated financial statements.
5
Notes to Condensed Consolidated Financial Statements
Three Months Ended March 31, 2011 and 2010
(Unaudited)
1.            Basis of presentation and description of business
Basis of presentation
The accompanying Condensed Consolidated Balance Sheet as of March 31, 2011 and the Condensed Consolidated Statements of Operations and Cash Flows for the three months ended March 31, 2011 and 2010 have not been audited, but have been prepared in conformity with accounting principles generally accepted in the United States for interim financial information and with the instructions to Form 10-Q and Article 8 of Regulation S-X.  The Condensed Consolidated Balance Sheet as of December 31, 2010 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, 2010 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 other than adjustments related to the sale of Five Star Group, Inc., necessary for a fair presentation. The results for the 2011 interim period are not necessarily indicative of results to be expected for the entire year.
Description of business
On January 15, 2010, after approval of its stockholders on January 14, 2010, National Patent Development Corporation (the “Company” or “National Patent”) completed the sale to The  Merit Group, Inc. (“Merit”) of all of the issued and outstanding stock of National Patent’s wholly-owned subsidiary, Five Star Products, Inc., the holding company and sole stockholder of  Five Star Group, Inc.,  for cash pursuant to the terms and subject to the conditions of an agreement dated as of November 24, 2009 (see Note 2).   As used herein, references to “Five Star” refer to Five Star Products Inc. or Five Star Group Inc., or both, as the context requires.
Upon the consummation of the sale, the Company became a “shell company”, as defined in Rule 12b-2 of the Securities Exchange Act of 1934, as amended.
Prior to consummation of the Five Star sale, the Company’s Board of Directors believed that, although the Company was not engaged primarily in the business of investing, reinvesting or trading in securities, and did not hold itself out as being primarily engaged in those activities, the Company could, upon consummation of the Five Star sale, fall within the technical definition of “investment company” under Section 3(a)(1) of the Investment Company Act of 1940, as amended (the “Investment Company Act”).  Subsequent to the Five Star sale, the Company’s Board of Directors has re-evaluated the characterization and valuation of its assets for purposes of the applicable definitions of the Investment Company Act and has concluded that the Company does not fall within the technical definition of “investment company” because the “investment securities” it holds constitute less than 40% of its total assets (exclusive of government securities and cash and certain cash equivalents).  Accordingly, the Company was not required to take any affirmative steps, including developing or acquiring interests in one or more operating businesses prior to January 15, 2011, in order to avoid becoming an “investment company” for purposes of the Investment Company Act.  However, the Company is actively continuing its efforts to acquire interests in one or more operating businesses on terms that the Company’s Board of Directors determines to be in the best interest of the Company and its stockholders.
Until such time as the liquid assets of the Company are so deployed into operating businesses, National Patent intends to continue to invest such assets in high-grade, short-term investments (such as cash equivalents) consistent with the preservation of principal, maintenance of liquidity and avoidance of speculation.

2.            Discontinued Operations
On January 15, 2010 (the “Closing Date”), the Company completed the sale to Merit of all of the issued and outstanding stock of Five Star for cash pursuant to an agreement, dated November 24, 2009 (the “Five Star Stock Purchase Agreement”).
The Five Star Stock Purchase Agreement provided for an aggregate purchase price (the “Purchase Price”) for the stock of $33,124,000, subject to certain adjustments to reflect (i) (A) changes in the outstanding balance of Five Star’s revolving indebtedness under its loan agreement with Bank of America (the “Revolving Indebtedness”) from the amount outstanding at March 31, 2009 compared to the amount outstanding on the Closing Date (the “Cash Flow Adjustment”) and (B) increases dollar for dollar if Five Star had positive net results, as defined, from March 31, 2009 to the Closing Date, or decreases if it had negative net results, as defined, during such period (the “Net Results Adjustment”) and (ii) a potential downward adjustment based on the value of certain designated inventory held by Five Star, less the value received for such inventory after the Closing Date (the “Inventory Adjustment”), to the extent such Inventory Adjustment post-closing exceeded $400,000 but was equal to or less than $1,000,000.
6
NATIONAL PATENT DEVELOPMENT CORPORATION AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
Three Months Ended March 31, 2011 and 2010
(Unaudited)
At the Closing Date (i) the Cash Flow Adjustment reduced the Purchase Price by $5,611,000, (ii) $15,178,000 of the Purchase Price was used to repay the Revolving Indebtedness (including related fees and expenses of $374,000); (iii) $900,000 of the Purchase Price was placed in escrow - $300,000 of which was held by the Escrow Agent to provide for indemnity payments which National Patent may be required to pay to Merit (the “Indemnity Escrow Deposit”) (included in prepaid expenses and other current assets in the accompanying consolidated balance sheet as of December 31, 2010) and $600,000 of which was held by the Escrow Agent to provide for payment of the Inventory Adjustment (the “Inventory Escrow Deposit”); and (iv) $970,000 of the Purchase Price was retained by Merit to fund severance payments to employees of Five Star.  The $10,465,000 balance of the Purchase Price was remitted to National Patent at the Closing Date. Additionally, the Purchase Price was subject to post-closing adjustments as a result of the Net Results Adjustment and the Inventory Adjustment as discussed above.
The proceeds of the Five Star sale were reduced by $927,000 of transaction costs.   In addition, the proceeds may be reduced by costs relating to the satisfaction of certain obligations under state environmental laws in New Jersey and Connecticut, if any, and the payment of amounts to indemnify Merit as provided in the Five Star Stock Purchase Agreement, if any.
In February, 2010, the Company notified Merit that the Purchase Price should be increased by approximately $188,000 based on the Company’s calculation of the Net Results Adjustment.  On March 1, 2010, Merit notified the Company that based on Merit’s calculation of the Net Results Adjustment, the Purchase Price should be reduced by approximately $3,400,000.  The Company did not agree with Merit’s calculation.  Pursuant to the Five Star Stock Purchase Agreement, the dispute could have been submitted to binding arbitration by either Merit or the Company.

On May 14, 2010, the Company and Merit entered into a Settlement Agreement and Mutual Release (the “Settlement Agreement”).  Pursuant to the Settlement Agreement, the parties mutually released and discharged each other (the “Releases”) from and against any and all claims or potential claims and/or causes of action in connection with the Stock Purchase Agreement and the Sale including, but not limited to, any and all such claims and/or causes of actions relating to the Cash Flow Adjustment, the Net Results Adjustment, the Inventory Adjustment or the Inventory Escrow Deposit, but excluding obligations and agreements by and among the parties identified as exclusions in the Settlement Agreement.
In consideration of the Releases, the parties agreed that the Purchase Price would be reduced by an aggregate of $1,050,000, which reduction was effected as follows: (i) the Inventory Escrow Deposit was released to Merit by the Escrow Agent, and (ii) the Company paid to Merit, by wire transfer, the amount of $450,000. The Indemnity Escrow Deposit of $300,000 was released to the Company in January 2011.
The gain on the sale of Five Star, after giving effect to the Settlement Agreement, amounted to $2,405,000 and is included in Loss from discontinued operations in the Consolidated Condensed Statement of Operations for the three months ended March 31, 2010.

During the quarter ended March 31, 2011, The Company recorded an additional $26,000 of interest expense related to Five Star’s current Internal Revenue Service examination (see Note 9) and $125,000 for estimated costs related to certain end of lease obligations at Five Star’s East Hanover, New Jersey warehouse and certain environmental compliance issues at Five Star’s Newington Connecticut warehouse (see Note 10).

7
NATIONAL PATENT DEVELOPMENT CORPORATION AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
Three Months Ended March 31, 2011 and 2010
(Unaudited)
Five Star’s assets sold and liabilities assumed, and gain on sale which has been reduced for estimated potential rent and other expenses which may be incurred, discussed above were as follows (in thousands):
Assets sold:
Cash and cash equivalents
$
1
Accounts and other receivables, less allowance for doubtful accounts of $407
8,370
Inventories – finished goods
19,611
Prepaid expenses and other current assets
807
Property, plant and equipment, net
676
Intangible assets, net
465
Other assets
45
Total assets sold
29,975
Liabilities assumed:
Accounts payable and accrued expenses
6,041
Liability related to interest rate swap
803
Total liabilities assumed
6,844
Net assets sold
23,131
Selling price, as adjusted
26,463
Legal fees and other transaction costs
(927
)
Gain on sale of Five Star
$
2,405
Five Star’s results of operations for the three months ended March 31, 2010 have been accounted for as a discontinued operation in the accompanying condensed consolidated statements of operations.
8
NATIONAL PATENT DEVELOPMENT CORPORATION AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
Three Months Ended March 31, 2011 and 2010
(Unaudited)
For the three months ended March 31, 2011 and 2010 the components of loss from discontinued operations were as follows (in thousands):
Three Months Ended
March 31,
2011
2010
Five Star
Sales
$
-
$
2,635
Cost of sales
-
2,294
Gross margin
341
Selling, general and administrative expenses
125
423
Severance payments
-
1,062
Fees and expenses related to repayment of debt
-
374
Loss on interest rate swap
-
803
Operating loss
(125
)
(2,321
)
Interest expense
(26
)
(100
)
Other expense
-
(53
)
Loss from operations before items shown below
(151
)
(2,474
)
Gain on sale of Five Star
-
2,405
Loss before income tax expense
(151
)
(69
)
Income tax  expense, including deferred tax expense of $346 in 2010
-
(475
)
Loss from discontinued operations
$
(151
)
$
(544
)
9
NATIONAL PATENT DEVELOPMENT CORPORATION AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
Three Months Ended March 31, 2011 and 2010
(Unaudited)
3.            Per share data

Loss per share for the three months ended March 31, 2011 and 2010 respectively, is calculated based on 17,577,000 and 17,564,000 weighted average outstanding shares of common stock.
At March 31, 2011 and 2010, the Company has outstanding options to purchase 3,300,000 and 3,450,000 shares of Company common stock, which were not included in the diluted computation, as their effect would be anti-dilutive.
4.           Capital Stock
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.
On December 15, 2006, the Board of Directors authorized the Company to repurchase up to 2,000,000 shares, or approximately 11%, of its outstanding shares of common stock from time to time either in open market or privately negotiated transactions. On August 13, 2008, the Company’s Board of Directors authorized an increase of 2,000,000 common shares to be repurchased, and on March 29, 2011 the Company’s Board of Directors authorized an increase of an additional 1,000,000 shares to be repurchased. At March 31, 2011, the Company had repurchased 1,791,821 shares of its common stock and a total of 3,208,179 shares remained available for repurchase, which amount includes the additional 1,000,000  shares of common stock authorized.  There were no common stock repurchases made by or on behalf of the Company during the quarter ended March 31, 2011.
10
NATIONAL PATENT DEVELOPMENT CORPORATION AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
Three Months Ended March 31, 2011 and 2010
(Unaudited)
5.           Incentive stock plans and stock based compensation
The Company has a stock-based compensation plan for employees and non-employee members of its Board of Directors. The plan provides for discretionary grants of stock options, restricted shares, and other stock-based awards. The Company’s plan is administered by the Compensation Committee of the Board of Directors, which consists solely of non-employee directors.
Information with respect to the Company’s outstanding stock options for the three months ended March 31, 2011 is as follows:
Stock
Options
Weighted
Average
Exercise
Price
Weighted
Average
Contractual
Term
Aggregate
Intrinsic
Value
Options outstanding at January 1, 2011
3,250,000
$
2.31
6.9
$
0
*
Granted
50,000
$
1.50
10.0
$
0
*
Options outstanding  at March 31, 2011
3,300,000
$
2.29
6.7
$
63,000
*
Options exercisable at March 31, 2011
2,800,000
$
2.46
5.9
$
0
*

*
The intrinsic value of a stock option is the amount by which the market value of the underlying stock exceeds the exercise price of the option.
In February 2011, the Company granted 50,000 options to its Chief Operating Officer.  The options were issued at an exercise price equal to market value at the date of the grant.  The weighted average grant-date fair value of the options was $0.57, which was estimated on the date of grant using the Black-Scholes option pricing model using the following assumptions:

Dividend yield
0
%
Expected volatility
46.91
%
Risk-free interest rate
1.72
%
Expected life (in years)
4

Compensation expense related to option grants amounted to $22,000 and $138,000 for the quarters ended March, 2011 and 2010, respectively. As of March 31, 2011, there was $187,000 of total unrecognized compensation cost related to non-vested options. This cost is expected to be recognized over the remaining vesting periods of the options, which on a weighted-average basis is approximately 2.1 years.

6.            Accumulated other comprehensive loss
Effective June 30, 2008, Five Star entered into an interest rate swap to manage exposures resulting from fluctuations in interest rates on its short-term borrowings with Bank of America, which was designated as a cash flow hedge.  Cumulative losses on the hedge were included in accumulated other comprehensive loss net of related tax benefit. Any ineffective portion of the hedge was recognized in earnings. Under the interest rate swap arrangement, effective June 30, 2008 and until June 30, 2011, Five Star was to pay a fixed interest rate of 3.62% to Bank of America on notional principal of $20,000,000.  In return, Bank of America was to pay to Five Star a floating rate, namely, LIBOR, on the same notional principal amount.   Changes in the fair value of the interest rate swap were recognized in other comprehensive income.
In connection with the sale of Five Star, the outstanding balance of the bank loan of $14,804,000, including accrued interest, was fully repaid to Bank of America from the sale proceeds (see Note 2). Accordingly, the $803,000 unrecognized loss on the interest rate swap together with the $321,000 related tax benefit was reclassified from accumulated other comprehensive loss to loss from discontinued operations during the quarter ended March 31, 2010.
11
NATIONAL PATENT DEVELOPMENT CORPORATION AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
Three Months Ended March 31, 2011 and 2010
(Unaudited)
7.            Contingent rights
Effective April 18, 2007 (the “Indevus Effective Time”), all of the outstanding common stock of Valera Pharmaceuticals, Inc. (“Valera”), a Delaware corporation in which the Company had owned 2,070,670 shares of common stock at such time, was acquired by Indevus Pharmaceuticals, Inc. (“Indevus”), a biopharmaceutical company engaging in the acquisition, development, and commercialization of products to treat urological, gynecological, and men’s health conditions.  The transaction was effected pursuant to the terms and conditions of an Agreement and Plan of Merger, dated as of December 11, 2006 (the “Valera Merger Agreement”). As a result of the transaction, the 2,070,670 shares of Valera common stock held by the Company immediately preceding the Indevus Effective Time were converted into an aggregate of 2,347,518 shares of Indevus common stock as of the Indevus Effective Time.  These shares of Indevus common stock were sold by the Company in 2007.
Following the Indevus Effective Time and prior to March 23, 2009, the Company was entitled to two additional contingent tranches of shares of Indevus common stock (the “Contingent Rights”), to the extent of the achievement of certain milestones with respect to specific product candidates, namely FDA approval of certain drug applications.

On March 23, 2009, Indevus filed a Current Report on Form 8-K with the SEC announcing the completion of an Agreement and Plan of Merger with Endo Pharmaceuticals Holdings Inc., a Delaware corporation (“Endo”), and BTB Purchaser Inc., a Delaware corporation and wholly-owned subsidiary of Endo, pursuant to which Endo acquired all of the issued and outstanding shares of the common stock of Indevus (the “Endo Merger”). As a result of the Endo Merger, the Contingent Rights were converted into the right to receive $4.50 per Indevus share of common stock that such former Valera shareholder would have received if FDA approval of the Octreotide implant for the treatment for acromegaly is achieved on or before April 18, 2012 (Octreotide Approval), plus contractual rights to receive up to an additional $3.00 per Indevus share of common stock that such former Valera shareholder would have received in contingent cash consideration payments upon the approval of the  Aveed TM product. The Aveed TM amount would only be payable to former Valera shareholders if there were Octreotide Approval.  The cash payments upon Octreotide Approval would be approximately $3,100,000 and if Aveed TM is approved by the FDA, an additional approximately $2,100,000 would be received by the Company.  The Company will recognize an additional gain on the date that the above approvals are achieved.  Two parties related to the Company at the time of the original transaction in which the Company received the Contingent Rights (one of which continues to be a related party) would be entitled to receive a portion of any such cash payments received by the Company (see Note 8 (a)).  In February 2010, Endo filed a current report on Form 8-K with the SEC in which it disclosed that it recorded a non-cash impairment charge due to heightened regulatory uncertainties related to its Aveed TM product, and reduced the corresponding liability for contingent payment due to former Indevus shareholders recorded on its balance sheet due to the decreased probability that Endo will be obligated to make the contingent consideration payments related to Aveed TM .  The Company monitors Endo for progress in achieving the milestones related to the Contingent Rights.

8.            Related Party Transactions

a)
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, which was utilized to exercise an option held by the Company to purchase Series B Convertible Preferred shares of Valera (see Note 7).  In January 2005, the Company prepaid the loans and all accrued interest in full. 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.  As a result of the acquisition of Valera by Indevus, this obligation related to the sale of Indevus shares by the Company. The November 12, 2004 agreement also provides 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.
12
NATIONAL PATENT DEVELOPMENT CORPORATION AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
Three Months Ended March 31, 2011 and 2010
(Unaudited)
As a result of the consummation of the merger between Indevus and Endo 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 and (ii) $202,000 upon FDA approval of Aveed TM . The Aveed TM amount would only be payable to the Company and therefore the related parties if there were Octreotide Approval.

b)
In March 2010, the Company paid Bedford Oak Advisors, LLC, an entity controlled by Mr. Eisen, an aggregate of $150,000 for consulting services rendered through February 28, 2010 by two individuals (together, the “Consultants”), each of whom served as consultants to Bedford Oak Advisors, LLC.  Such consulting services included advice on investment company matters and related issues, the evaluation of potential acquisition and business development opportunities for the Company and capital raises and other financings undertaken by the Company (the “Consulting Services”).

As of March 1, 2010, the Consultants terminated their services with Bedford Oak Advisors, LLC and were retained by the Company to provide the Consulting Services to the Company on a month-to-month basis at a rate of $35,000 per month payable to one individual and $25,000 per month payable to the other individual.  The respective agreements with the Consultants expired on June 30, 2010.  However, the Company or either Consultant had the right to terminate the agreement at any time upon thirty days prior written notice to the other party.  The agreement with the individual at the rate of $35,000 per month was terminated by the Company as of May 15, 2010 and the agreement with the individual at the rate of $25,000 per month was terminated by the Company as of June 30, 2010. Total expenses incurred by the Company from March 1, 2010 though termination of the services provided by the Consultants are $187,000.

c)
Effective June 1, 2010, the Company relocated its headquarters to the offices of Bedford Oak Advisors, LLC 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 three months ended March 31, 2011 includes $59,000 related to the sublease arrangement.

d)
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 Advisors, LLC.

9.           Income taxes
For the three months ended March 31, 2011, the income tax expense related to continuing operations was approximately $ 2,000, representing minimum state taxes. For the three months ended March 31, 2010, the income tax benefit related to continuing operations was approximately $485,000. This represents a potential recovery of Federal income tax paid in respect of 2009, as result of a net operating loss carryback attributable to the loss from continuing operations in the three months ended March 31, 2010.
Five Star is currently undergoing an income tax examination by the Internal Revenue Service for income tax filings for the years ended December 31, 2007 and 2008 and is being challenged with respect to the timing of certain tax deductions.  As a result, the Company has a liability for uncertain tax positions as of March 31, 2011 of approximately $680,000 to cover the potential federal and state tax deficiencies, interest and penalties.  Of such amount, approximately $531,000 related to additional tax was charged to income tax expense in 2010, approximately $94,000 related to interest was charged to interest expense (of which $26,000 and $68,000 were expensed in 2011 and 2010, respectively) and approximately $55,000 related to penalties was charged to other expense within loss from discontinued operations in 2010. The Company intends to vigorously defend its position with the Internal Revenue Service.

For the three months ended March 31, 2010, income tax expense charged to discontinued operations was due to the tax referred to above and the write-off of the deferred tax asset at December 31, 2009 attributable to the reversal of deductible temporary differences related to assets and liabilities held for sale at such date.
13
NATIONAL PATENT DEVELOPMENT CORPORATION AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
Three Months Ended March 31, 2011 and 2010
(Unaudited)
10.           Contingency
(a)
The Company has guaranteed the lease for Five Star’s New Jersey warehouse, totaling approximately $1,825,000 per year.  On January 15, 2010, the Company completed the sale to Merit of all the issued and outstanding stock of Five Star.  Merit extended the New Jersey warehouse lease, which originally expired in September 2010 through March 2011 at which time the lease expired.  The Company is currently in discussions with Merit and the landlord as to its share of the end of lease costs.  Under the terms of the Five Star Stock purchase Agreement, Merit is responsible for the first $25,000 of repairs and end of lease costs, and the Company is responsible for 75% of the remaining costs.  The Company has accrued approximately $85,000 for its estimated share of the costs, which is included in Loss from discontinued operations in the Condensed Consolidated Statement of Operations for the quarter ended March 31, 2011.
In connection with the sale of Five Star, he Company is responsible for all activities necessary to achieve compliance with the Connecticut Transfer Act, including receipt of approval from the Connecticut Department of Environmental Protection (“CTDEP’) and implementation of a remediation plan, if required, with respect to environmental obligations related to Five Star’s Connecticut warehouse. For the quarter ended March 31, 2011, the Company has accrued an additional $40,000 for estimated costs associated with completing the Connecticut Transfer Act process with the CTDEP.  Such amount is included in loss from discontinued operations. The Company has satisfied its remediation and environmental obligations with the New Jersey Department of Environmental Protection.

(b)
In connection with its land investment, the Company has certain ownership interests in several dams and related reservoirs located in the State of Connecticut.  Under relevant Connecticut law, the Company is responsible for maintaining the safety of these dams.  The Company has been notified by certain landowners adjoining one of the reservoirs that the water level in the reservoir has decreased; allegedly causing harm to such landowners.  While the Company is currently investigating the cause of the decline in the water level, it does not presently know the cause of the decrease in water level.  Further, the Company cannot presently determine the extent of its legal liability, if any, with respect to the landowners.  The Company has not received any claims with respect to any of the other reservoirs.  The Company cannot reasonably estimate at this time the costs which may be incurred with respect to this matter in the future, however the Company has no reason to believe that such costs could be material.  No amounts have been provided for this matter in the accompanying financial statements.
14
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, 2010 filed by the Company with the Securities and Exchange Commission (the “SEC”) on March 4, 2011.
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 January 15, 2010, we completed the Five Star sale, in which we sold to Merit all of the issued and outstanding shares of Five Star for cash pursuant to the terms and subject to the conditions of the Five Star Stock Purchase Agreement (see Note 2 to the Condensed Consolidated Financial Statements).
Five Star’s results of operations for the first quarter of 2010 have been accounted for as a discontinued operation in the condensed consolidated statements of operations (see Note 2 to the Condensed Consolidated Financial Statements).
15
Five Star Sale
The Five Star Stock Purchase Agreement provided for an aggregate purchase price (the “Purchase Price”) for the Five Star Stock of $33,124,000, subject to certain adjustments to reflect (i) (A) dollar for dollar decreases in the event that Five Star’s outstanding revolving indebtedness under its loan agreement with Bank of America (the “Revolving Indebtedness”) decreased from the amount outstanding at March 31, 2009 compared to the amount outstanding on the date of the closing of the Five Star Sale (the “Closing Date”) or increases if such indebtedness increased (excluding increases or decreases due to income tax payments or refunds) (the “Cash Flow Adjustment”) and (B) increases dollar for dollar if Five Star had positive net results from March 31, 2009 to the Closing Date, or decreases if it had negative net results (the “Net Results Adjustment”) and (ii) a potential downward adjustment based on the value of certain designated inventory held by Five Star Group, less the value received for such inventory after the Closing Date (the “Inventory Adjustment”), to the extent such Inventory Adjustment post-closing exceeded $400,000 but was equal to or less than $1,000,000.
At the closing of the Five Star Sale (the “Five Star Closing”), (i) the Cash Flow Adjustment reduced the Purchase Price by $5,611,000, (ii) $15,178,000 of the Purchase Price was used to repay the Revolving Indebtedness (including related fees and expenses); (iii) $900,000 of the Purchase Price was placed in escrow - $300,000 of which is held by the Escrow Agent to provide for indemnity payments which we may be required to pay to Merit as described below (the “Indemnity Escrow Deposit”) and $600,000 of which is held by the Escrow Agent to provide for payment of Inventory Adjustments (the “Inventory Escrow Deposit”), and (iv) $970,000 of the Purchase Price was retained by Merit to fund severance payments to employees of Five Star.  $10,465,000 of the Purchase Price was remitted to the Company at the Five Star Closing.
The Purchase Price was subject to post-closing adjustments as a result of the Net Results Adjustment and the Inventory Adjustment. In February, 2010, the Company notified Merit that the Purchase Price should be increased by approximately $188,000 based on the Company’s calculation of the Net Results Adjustment.  On March 1, 2010, Merit notified the Company that based on their calculation of the Net Results Adjustment, the Purchase Price should be reduced by approximately $3,400,000.   The Company did not agree with Merit’s calculation.  Pursuant to the Five Star Stock Purchase Agreement, the dispute could have been submitted to binding arbitration by either Merit or the Company.
On May 14, 2010, the Company and Merit entered into a Settlement Agreement and Mutual Release dated May 14, 2010 (the “Settlement Agreement”).  A copy of the Settlement Agreement was included as an exhibit to the Company’s Current Report on Form 8-K filed with the SEC on May 17, 2010.
Pursuant to the Settlement Agreement, the parties mutually released and discharged each other (the “Releases”) from and against any and all claims or potential claims and/or causes of action in connection with the Stock Purchase Agreement and the Sale including, but not limited to, any and all such claims and/or causes of actions relating to the Cash Flow Adjustment, the Net Results Calculation, the Inventory Adjustment or the Inventory Escrow Deposit, but excluding obligations and agreements by and among the parties identified as exclusions in the Settlement Agreement.
In consideration of the Releases, the parties agreed that the Purchase Price would be reduced by an aggregate of $1,050,000, which reduction was effected as follows: (i) the Inventory Escrow Deposit was released to Merit by the Escrow Agent, and (ii) the Company paid to Merit, by wire transfer, the amount of $450,000.  To effect the release of the Inventory Escrow, on May 14, 2010, the parties mutually executed and delivered joint written instructions to the Escrow Agent instructing the Escrow Agent to promptly disburse the Inventory Escrow Deposit as follows: (a) $600,000 to Merit, and (b) all interest and earnings attributable to the Inventory Escrow Deposit to the Company. The Indemnity Escrow Deposit held by the Escrow Agent pursuant to the terms of the Escrow Agreement was released to the Company in January 2011.
The Company reflected the Settlement Agreement in the gain on the sale of Five Star which is included in Loss from discontinued operations in its Consolidated Statement of Operations for the quarter ended March 31, 2010.

The proceeds of the Five Star Sale were also reduced by transaction costs and taxes.  The proceeds may also be reduced by costs, if any, relating to the satisfaction of certain obligations under state environmental laws in New Jersey and Connecticut, as well as the post-closing adjustments due Merit pursuant to the Five Star Stock Purchase Agreement, as well as the payment of amounts to indemnify Merit as provided in the Five Star Stock Purchase Agreement.
16
Upon the consummation of the Five Star Sale, 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.  See Form 10-K “Item 1. Business – Nature of Our Business Following the Five Star Sale”, and “Item 1A. Risk Factors”.
Our Board of Directors is considering strategic uses for the Five Star 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 Five Star 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.  We have not distributed, and do not anticipate distributing, the proceeds of the Five Star Sale to our stockholders.
Prior to consummation of the Five Star sale, the Company’s Board of Directors believed that, although the Company was not engaged primarily in the business of investing, reinvesting or trading in securities, and did not hold itself out as being primarily engaged in those activities, the Company could, upon consummation of the Five Star sale, fall within the technical definition of “investment company” under Section 3(a)(1) of the Investment Company Act of 1940, as amended (the “Investment Company Act”).  The Company’s Board of Directors has re-evaluated the characterization and valuation of its assets for purposes of the applicable definitions of the Investment Company Act and has concluded that the Company does not fall within the technical definition of “investment company” because the “investment securities” it holds constitute less than 40% of its total assets (exclusive of government securities and cash and certain cash equivalents).  Accordingly, the Company was not required to take any affirmative steps, including developing or acquiring interests in one or more operating businesses prior to January 15, 2011, in order to avoid becoming an “investment company” for purposes of the Investment Company Act.  However, the Company is actively continuing its efforts to acquire interests in one or more operating businesses on terms that the Company’s Board of Directors determines to be in the best interest of the Company and its stockholders.  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.  The goal of our investment strategy is to develop or acquire businesses in order to generate value for our stockholders.  We cannot assure that we will successfully develop, or identify a suitable acquisition opportunity of, an operating business or businesses.

Other Assets
The Company owns certain non-strategic assets, including an investment in MXL Operations Inc. (MXL), certain contingent stock rights in products under development by Endo and interests in land and flowage rights in undeveloped property in Killingly, Connecticut.  The Company has a 19.9% interest in MXL carried at its cost of $275,000.

On March 23, 2009, Indevus filed a Current Report on Form 8-K with the SEC announcing the completion of an Agreement and Plan of Merger with Endo Pharmaceuticals Holdings Inc., a Delaware corporation (“Endo”), and BTB Purchaser Inc., a Delaware corporation and wholly-owned subsidiary of Endo, pursuant to which Endo acquired all of the issued and outstanding shares of the common stock of Indevus (the “Endo Merger”). Notwithstanding the consummation of such transaction, the Company retains rights to receive certain cash payments based on FDA approval of certain drug applications. If FDA approval of the Octreotide implant for the treatment for acromegaly is achieved on or before April 18, 2012, the Company would receive approximately $3,100,000 and if Aveed TM is approved by the FDA, an additional approximately $2,100,000 would be received by the Company.   The Aveed TM amount would only be payable to the Company and former Valera shareholders if there were Octreotide Approval.  In February 2010, Endo filed a current report on Form 8-K with the SEC in which it disclosed that it recorded a non-cash impairment charge due to heightened regulatory uncertainties related to its Aveed TM product, and reduced the corresponding liability for contingent payment due to former Indevus shareholders recorded on its balance sheet due to the decreased probability that Endo will be obligated to make the contingent consideration payments related to Aveed TM. See Note 7 to the Condensed Consolidated Financial Statements.
17
The Company monitors Endo for progress in achieving the milestones related to the Contingent Rights.

Results of Operations
Three months ended March 31, 2011 compared to the three months ended March 31, 2010
As a result of the sale of Five Star by the Company pursuant to the Five Star Stock Purchase Agreement dated November 24, 2009, the results for Five Star have been treated as a discontinued operation. On January 15, 2010, the Company completed the sale of all the issued and outstanding stock of Five Star.
For the three months ended March 31, 2011, the Company had a loss from continuing operations before income taxes of $475,000 compared to a loss from continuing operations before income taxes of $1,425,000 for the three months ended March 31, 2010.  The reduced loss is the result of reduced general and administrative expenses (“G&A”) of $943,000.
General and administrative expenses
For the three months ended March 31, 2011, G&A  was $491,000 as compared to $1,434,000 for the three months ended March 31, 2010.  The decreased G&A at the corporate level was primarily due to the following (in thousands):
Increase
(decrease)
Consulting services and professional fees incurred in 2010 related to the evaluation of potential acquisition and
business development opportunities for the Company (terminated in June 2010)
$
(210
)
Discrete  bonus granted by the Board of Directors in 2010 to the Chairman, Chief Executive Officer and
President of the Company for his specific role in the completion of the sale of both the Company’s undeveloped
real property located in Pawling, New York and Five Star
(500
)
Reduction in compensation expense related to option grants
(117
)
Reduced personnel costs
(57
)
Reduced professional fees
(67
)
Increased office expense
40
Other
(32
)
$
(943
)
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Income taxes
For the three months ended March 31, 2011, the Company recognized income tax expense of $2,000 from continuing operations, which represents minimum state taxes. For the three months ended March 31, 2010 the Company recognized an income tax benefit of $485,000 from continuing operations, which represents the expected recovery of Federal income taxes paid in 2009 from the carry back of operating losses from continuing operations incurred during the period.
Five Star is currently undergoing an income tax examination by the Internal Revenue Service for income tax filings for the years ended December 31, 2007 and 2008.  Five Star is being challenged with regard to the timing of certain tax deductions.  Even though the open issues under audit relate solely to the timing of deductions (not to the underlying appropriateness of those deductions), the Company has a liability for uncertain tax positions as of March 31, 2011 for approximately $680,000 to cover the potential costs, including interest and penalties associated with deductions at issue.  If the Company is not able to successfully defend its position, the resultant effect could be an increase to income tax expense for the year ended December 31, 2007, a decrease to income tax expense for the years ended December 31, 2008 and 2009, and an increase of the Company’s net operating loss carryforward for the year ended December 31, 2010.

The increase in the liability for uncertain tax positions was treated as a discrete item. The tax effect of discrete items are reflected in the periods in which they occur and not reflected in the estimated annual effective tax rate which is used for interim period tax provisions. The Company intends to vigorously defend its position with the Internal Revenue Service.


Financial condition
Liquidity and Capital Resources

At March 31, 2011, the Company had cash and cash equivalents totaling $27,920,000, which it intends to use to acquire interests in one or more operating businesses and to fund the Company’s general and administrative expenses.

Contractual Obligations and Commitments
The Company has guaranteed the lease for Five Star’s New Jersey warehouse, totaling approximately $1,825,000 per year.  On January 15, 2010, the Company completed the sale to Merit of all the issued and outstanding stock of Five Star.  Merit extended the New Jersey warehouse lease, which originally expired in September 2010 through March 2011.  The Company is currently in discussions with Merit and the landlord as to its share of the end of lease costs.  Under the terms of the Five Star Stock purchase Agreement, Merit is responsible for the first $25,000 of repairs and end of lease costs, and the Company is responsible for 75% of the remaining costs.  The Company has accrued approximately $85,000 for its estimated share of the costs, which is included in Loss from discontinued operations in the Condensed Consolidated Statement of Operations for the quarter ended March 31, 2011.

In connection with the sale of Five Star, he Company is responsible for all activities necessary to achieve compliance with the Connecticut Transfer Act, including receipt of approval from the Connecticut Department of Environmental Protection (“CTDEP’) and implementation of a remediation plan, if required, with respect to environmental obligations related to Five Star’s Connecticut warehouse. For the quarter ended March 31, 2011, the Company has accrued an additional $40,000 for estimated costs associated with completing the Connecticut Transfer Act process with the CTDEP.  Such amount is included in loss from discontinued operations. The Company has satisfied its remediation and environmental obligations with the New Jersey Department of Environmental Protection.

19
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, 2011 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
On January 18, 2011, the Company issued without registration under the Securities Act of 1933, as amended (the “Securities Act”), 1,954 shares of Company common stock to its director Lawrence G. Schafran in payment of his  quarterly directors fees. The aggregate value of the 1,954 shares of Company common stock issued to Mr. Schafran was approximately $3,125 on the date of issuance.  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. Schafran is an accredited investor, (ii) the Company did not engage in any general solicitation or advertising in connection with the issuance, and (iii) Mr. Schafran received restricted securities.
Purchases of Equity Securities
On December 15, 2006, the Board of Directors authorized the Company to repurchase up to 2,000,000 shares, or approximately 11%, of its outstanding shares of common stock from time to time either in open market or privately negotiated transactions. On August 13, 2008, the Company’s Board of Directors authorized an increase of 2,000,000 common shares to be repurchased, and on March 29, 2011 the Company’s Board of Directors authorized an increase of an additional 1,000,000 shares to be repurchased. At March 31, 2011, the Company had repurchased 1,791,821 shares of its common stock and, a total of 3,208,179 shares remained available for repurchase, which amount includes the additional 1,000,000 shares of common stock authorized.   There were no common stock repurchases made by or on behalf of the Company during the quarter ended March 31, 2011.
20
Item 6. Exhibits.
Exhibit No.
Description
31.1
*
Certification of principal executive officer of the Company, pursuant to Securities Exchange Act Rule 13a-14(a)
31.2
*
Certification of principal financial officer of the Company, pursuant to Securities Exchange Act Rule 13a-14(a)
32.1
*
Certifications pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of The Sarbanes-Oxley Act of 2002, signed by the principal executive officer of the Company and the principal financial officer of the Company

*Filed herewith

21

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

NATIONAL PATENT DEVELOPMENT CORPORATION
Date: May 9, 2011
/s/ HARVEY P. EISEN
Name: Harvey P. Eisen
Title: Chairman of the Board and Chief Executive Officer
Date: May 9, 2011
/s/ IRA J. SOBOTKO
Name: Ira J. Sobotko
Title: Vice President, Chief Financial Officer



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TABLE OF CONTENTS