Wright Investors Service Holdings, Inc. 10-Q

Item 1. Financial Statements. WRIGHT INVESTORS' SERVICE HOLDINGS, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (in thousands, except per share amounts) September 30, December 31, 2023 2022 (unaudited) Assets Current assets Cash and cash equivalents $ 178 $ 90 Investments in U.S. Treasury Bills 3,384 4,130 Prepaid expenses and other current assets 30 100 Income tax receivable - 73 Total current assets 3,592 4,393 Other assets 8 8 Total assets $ 3,600 $ 4,401 Liabilities and stockholders’ equity Current liabilities Accounts payable and accrued expenses $ 78 $ 112 Total current liabilities 78 112 Total liabilities $ 78 $ 112 Stockholders’ equity Preferred stock, par value $ 0.01 per share, authorized 10,000,000 shares; none issued - - Common stock, par value $ 0.01 per share, authorized 30,000,000 shares; Issued 21,628,680 and 21,343,680 as of September 30, 2023 and December 31, 2022, respectively; Outstanding 20,620,711 and 20,335,711 at September 30, 2023 and December 31, 2022, respectively; 0 and 285,000 shares issuable as of September 30, 2023 and December 31, 2022, respectively 216 213 Additional paid-in capital 34,392 34,395 Accumulated deficit ( 29,397 ) ( 28,604 ) Accumulated other comprehensive income 58 32 Treasury stock, at cost ( 1,007,969 shares at September 30, 2023 and December 31, 2022) ( 1,747 ) ( 1,747 ) Total stockholders' equity 3,522 4,289 Total liabilities and stockholders’ equity $ 3,600 $ 4,401 See accompanying notes to condensed consolidated financial statements. 1 Table of Contents WRIGHT INVESTORS' SERVICE HOLDINGS, INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited) (in thousands, except per share amounts) Three Months Ended September 30, Nine Months Ended September 30, 2023 2022 2023 2022 Expenses Compensation and benefits $ 108 $ 110 $ 339 $ 340 Other operating 165 167 559 579 273 277 898 919 Loss from operations ( 273 ) ( 277 ) ( 898 ) ( 919 ) Interest and other income, net 76 15 105 18 Loss from operations before income taxes ( 197 ) ( 262 ) ( 793 ) ( 901 ) Net loss $ ( 197 ) $ ( 262 ) $ ( 793 ) $ ( 901 ) Basic and diluted weighted average common shares outstanding 20,620,711 20,495,711 20,620,711 20,469,581 Basic and diluted loss per share $ ( 0.01 ) $ ( 0.01 ) $ ( 0.04 ) $ ( 0.04 ) See accompanying notes to condensed consolidated financial statements. 2 Table of Contents WRIGHT INVESTORS' SERVICE HOLDINGS, INC. CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS (unaudited) (in thousands) Three Months Ended September 30, Nine Months Ended September 30, 2023 2022 2023 2022 Net loss $ ( 197 ) $ ( 262 ) $ ( 793 ) $ ( 901 ) Unrealized (loss) gain on available for sale securities ( 31 ) 4 26 4 Comprehensive loss $ ( 228 ) $ ( 258 ) $ ( 767 ) $ ( 897 ) See accompanying notes to condensed consolidated financial statements. 3 Table of Contents WRIGHT INVESTORS' SERVICE HOLDINGS, INC. CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2023 and 2022 (UNAUDITED) (in thousands, except per share data) Accumulated Total Additional other Treasury stock- Common stock (Issued) paid -in Accumulated comprehensive stock, at Holders shares amount capital deficit income cost Equity Balance at December 31, 2021 21,025,748 $ 210 $ 34,316 $ ( 27,397 ) $ - $ ( 1,699 ) $ 5,430 Net loss - - - ( 314 ) - - ( 314 ) Equity based compensation expense 100,000 1 1 - - - 2 Stock based compensation expense to directors - - 20 - - 20 Balance at March 31, 2022 21,125,748 $ 211 $ 34,337 $ ( 27,711 ) $ - $ ( 1,699 ) $ 5,138 Net loss - - - ( 325 ) - - ( 325 ) Purchase of Treasury Stock - - - - - ( 48 ) ( 48 ) Stock based compensation expense to directors 217,932 2 18 - - - 20 Balance at June 30, 2022 21,343,680 $ 213 $ 34,355 $ ( 28,036 ) $ - $ ( 1,747 ) $ 4,785 Net loss - - - ( 262 ) - - ( 262 ) Other Comprehensive Income - - - - 4 - 4 Stock based compensation expense to directors - - 20 - - - 20 Balance at September 30, 2022 21,343,680 $ 213 $ 34,375 $ ( 28,298 ) $ 4 $ ( 1,747 ) $ 4,547 Balance at December 31, 2022 21,343,680 $ 213 $ 34,395 $ ( 28,604 ) $ 32 $ ( 1,747 ) $ 4,289 Net loss - - - ( 314 ) - - ( 314 ) Stock based compensation expense to directors 285,000 3 ( 3 ) - - - - Other Comprehensive Income - - - - 35 - 35 Balance at March 31, 2023 21,628,680 $ 216 $ 34,392 $ ( 28,918 ) $ 67 $ ( 1,747 ) $ 4,010 Net loss - - - ( 282 ) - - ( 282 ) Other Comprehensive Income - - - - 22 - 22 Balance at June 30, 2023 21,628,680 $ 216 $ 34,392 $ ( 29,200 ) $ 89 $ ( 1,747 ) $ 3,750 Net loss - - - ( 197 ) - - ( 197 ) Other Comprehensive Loss - - - - ( 31 ) - ( 31 ) Balance at September 30, 2023 21,628,680 $ 216 $ 34,392 $ ( 29,397 ) $ 58 $ ( 1,747 ) $ 3,522 See accompanying notes to condensed consolidated financial statements. 4 Table of Contents WRIGHT INVESTORS' SERVICE HOLDINGS, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited) (in thousands) Nine Months Ended September 30, 2023 2022 Cash flows from operating activities Net loss $ ( 793 ) $ ( 901 ) Adjustments to reconcile net loss to net cash used in operating activities: Equity based compensation, including vesting of stock to directors - 62 Changes in other operating items: Income tax receivable 73 - Prepaid expenses and other current assets 70 12 Accounts payable and accrued expenses ( 34 ) ( 36 ) Net cash used in operating activities ( 684 ) ( 863 ) Cash flows from investing activities Proceeds from redemptions (purchases) of U.S. Treasury Bills 772 ( 2,417 ) Net cash provided by (used in) investing activities 772 ( 2,417 ) Cash flows from financing activities Purchase of Treasury Stock - ( 48 ) Net cash used in financing activities - ( 48 ) Net increase (decrease) in cash and cash equivalents 88 ( 3,328 ) Cash and cash equivalents at the beginning of the period 90 5,396 Cash and cash equivalents at the end of the period $ 178 $ 2,068 Supplemental disclosures of cash flow information Cash refunded during the period for income taxes $ ( 73 ) $ - Unrealized gain on available for sale securities $ 26 $ 4 See accompanying notes to condensed consolidated financial statements. 5 Table of Contents WRIGHT INVESTORS’ SERVICE HOLDINGS, INC. Notes to Condensed Consolidated Financial Statements Three months ended September 30, 2023 and 2022 (unaudited) 1. Basis of presentation and description of activities Basis of presentation The accompanying interim financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America for interim financial information and with the instructions to Form 10-Q and Article 8 of Regulation S-X. The information and note disclosures normally included in complete financial statements have been condensed or omitted pursuant to such rules and regulations. The Condensed Consolidated Balance Sheet as of December 31, 2022 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, 2022 as presented in our Annual Report on Form 10-K. In the opinion of management, this interim information includes all material adjustments, which are of a normal and recurring nature, necessary for a fair presentation. The results for the 2023 interim period are not necessarily indicative of results to be expected for the entire year. Description of activities Wright Investors’ Service Holdings, Inc. (the “Company”) has nominal operations and nominal assets aside from its cash and cash equivalents and investments in U.S. Treasury Bills, and is therefore considered a shell company, as defined in U.S. securities laws and regulations. The Company is not engaged in the business of investing, reinvesting, or trading in securities, and it does not hold itself out as being engaged in those activities. The Company intends to evaluate and explore all available strategic options. The Company will continue to work to maximize stockholder value. Such strategic options may include acquisition of an investment advisory business, acquisition of a financial services business, creating partnerships or joint ventures for those or other businesses and investing in other businesses that provide attractive opportunities for growth. The directors will also consider alternatives for distributing some or all of the Company’s cash and cash equivalents and investments in U.S. Treasury Bills . Until such time as a decision is made as to how the liquid assets of the Company are so deployed, the Company intends to invest its liquid assets in high-grade, short- term investments (such as cash and cash equivalents and Investment in U.S. Treasury Bills) consistent with the preservation of principal, maintenance of liquidity and avoidance of speculation. The Company may be classified as an inadvertent investment company if the Company acquires investment securities in excess of 40% of the Company’s total assets (exclusive of government securities). As of September 30, 2023, the Company is not considered an inadvertent investment company. 2. Per share data Loss per share for the three months ended September 30, 2023 and 2022, respectively, is calculated based on 20,620,711 and 20,495,711 weighted average outstanding shares of common stock, including weighted average issuable shares of 160,000 at September 30, 2022. Loss per share for the nine months ended September 30, 2023 and 2022, respectively, is calculated based on 20,620,711 and 20,469,581 weighted average outstanding shares of common stock, including weighted average 152,276 shares which are issuable at September 30, 2022. 6 Table of Contents 3. Investment valuation The Company carries its investments at fair value. Fair value is an estimate of the exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants (i.e., the exit price at the measurement date). Fair value measurements are not adjusted for transaction costs. A fair value hierarchy provides for prioritizing inputs to valuation techniques used to measure fair value into three levels: Level 1 Unadjusted quoted prices in active markets for identical assets or liabilities. Level 2 Inputs other than quoted market prices that are observable, either directly or indirectly, and reasonably available. Observable inputs reflect the assumptions market participants would use in pricing the asset or liability and are developed based on market data obtained from sources independent of the Company. Level 3 Unobservable inputs. Unobservable inputs reflect the assumptions that the Company develops based on available information about what market participants would use in valuing the asset or liability. An asset or liability's level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. Availability of observable inputs can vary and is affected by a variety of factors. The Company uses judgment in determining fair value of assets and liabilities and Level 3 assets and liabilities involve greater judgment than Level 1 or Level 2 assets or liabilities. As of September 30, 2023 and December 31, 2022, the Company held $ 3,384,000 and $ 4,130,000 , respectively, in U.S. government debt securities. U.S. government securities are valued using a model that incorporates market observable data, such as reported sales of similar securities, broker quotes, yields, bids, offers, and reference data. Certain securities are valued principally using dealer quotations. Money market funds are valued at the closing price reported by the fund sponsor from an actively traded exchange. U.S. government debt securities are categorized in Level 2 of the fair value hierarchy, depending on the inputs used and market activity levels for specific securities. The U.S. government debt securities, which have maturities of three months or less at time of purchase , are reported as Cash and cash equivalents, and those with longer maturities are reported as investments, on the condensed consolidated balance sheets as of September 30, 2023 and December 31, 2022. Short-term investments in marketable securities have a stated maturity of twelve months or less from the balance sheet date. These securities are considered as available for sale and are reported at fair value. Unrealized gains and losses would be recorded net of tax as a component of Accumulated other comprehensive income within stockholders' equity. Declines in market value from the original cost deemed to be "other-than-temporary" are charged to Interest and other income, net, in the period in which the loss occurs. The Company considers both the duration for which a decline in value has occurred and the extent of the decline in its determination of whether a decline in value has been “other than temporary.” Realized gains and losses are calculated based on the specific identification method and are included in Interest and other income, net, in the condensed consolidated statement of operations. The following table presents the Company’s financial instruments at fair value (in thousands): Fair Value Measurements as of September 30, 2023 9/30/2023 Quoted Prices in Active Markets for Identical Assets (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) Investments in U.S. Treasury bills $ 3,384 - $ 3,384 - Total $ 3,384 $ - $ 3,384 $ - 7 Table of Contents Fair Value Measurements as of December 31, 2022 12/31/2022 Quoted Prices in Active Markets for Identical Assets (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) Investments in U.S. Treasury bills $ 4,130 - $ 4,130 - Total $ 4,130 $ - $ 4,130 $ - Investments in debt securities as of September 30, 2023 are summarized by type below (in thousands). Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Fair Value U.S. Treasury bills $ 3,326 $ 58 $ - $ 3,384 Total $ 3,326 $ 58 $ - $ 3,384 All investments in debt securities are due in one year or less as of September 30, 2023. Changes in the accumulated other comprehensive income balance, net of income taxes, relates solely to net unrealized gain on available-for-sale securities for the nine-month ended September 30, 2023 is as follows: Balance at December 31, 2022 $ 32 Amounts reclassified from accumulated other Comprehensive income to interest income and other income ( 16 ) 16 Net current-period other comprehensive income 42 Balance at September 30, 2023 $ 58 Investments in debt securities as of December 31, 2022 are summarized by type below (in thousands). Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Fair Value U.S. Treasury bills $ 4,098 $ 32 $ - $ 4,130 Total $ 4,098 $ 32 $ - $ 4,130 8 Table of Contents The Company may be exposed to credit losses through its available-for-sale investments. An available-for-sale security is impaired when its fair value declines below its amortized cost basis. Unrealized losses resulting from the amortized cost basis of any available-for-sale debt security exceeding its fair value are evaluated for identification of credit losses. When evaluating the investments for impairment at each reporting period, the Company reviews factors such as the extent of the unrealized loss, historical losses, current and future economic market conditions, and financial condition of the issuer. As of September 30, 2023, the Company has not recognized an allowance for expected credit losses related to its available-for-sale securities as the Company has not identified any unrealized losses for these investments attributable to credit factors. 4. Income taxes No tax benefit has been recorded in relation to the pre-tax loss for the three and nine months ended September 30, 2023 and 2022, due to a full valuation allowance to offset any deferred tax asset related to net operating loss carry forwards attributable to the losses. 5. 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. The Board of Directors authorized the Company to repurchase up to 5,000,000 outstanding shares of common stock from time to time either in open market or privately negotiated transactions. On April 5, 2022, in accordance with the Board of Directors’ prior authorization, the Company purchased 192,750 shares of its common stock in a privately negotiated transaction at a price of $ 0.25 per share for an amount of approximately $ 48 ,000. The Company did not repurchase any common stock during three and nine months ended September 30, 2023 and 2022. At September 30, 2023 and 2022, the Company had repurchased 2,234,721 shares of its common stock and a total of 2,765,279 of the authorized shares, remained available for repurchase as of September 30, 2023. On March 9, 2023, there were 285,000 shares of Company common stock issued to the independent directors of the Company, for payment of quarterly directors’ fees due to them for services in 2022, which were classified as issuable at December 31, 2022. As of September 30, 2022, there were 160,000 shares of Company common stock to be issued to the independent directors of the Company, in payment of quarterly directors’ fees due to them for services in the second and third quarters of 2022. The shares were issued on March 9, 2023. The equity compensation awards were issued pursuant to the exemption from the registration requirements of Section 5 of the Securities Act of 1933 (“1933 Act”) provided by Section 4(a)(2) of the 1933 Act. In March 2023, the Company amended its Directors’ Compensation Program for Directors who are not employees of the Company to provide that effective January 1, 2023 and as long as the Company remains a shell company (i) the issuance of any annual stock compensation for Directors serving as a member of the Board or a committee of the Board shall be terminated, and (ii) the payment of any cash compensation for attendance in person or by telephone of meetings of the Board or committees of the Board shall be terminated. 6. Incentive stock plans and stock-based compensation Stock awards On February 13, 2019, 100,000 stock awards were issued to a newly appointed director of the Company. The stock awards vest equally, annually, over 3 years. The stock awards are valued based on the closing price of $ 0.42 of the Company’s common stock on February 13, 2019. At September 30, 2023, all shares had vested and were issued. There was no compensation expense recorded for the three months ended September 30, 2023 and 2022, respectively, related to stock awards. The Company recorded compensation expense of zero and approximately $ 1,750 for each of the nine months ended September 30, 2023 and 2022, respectively, related to those stock awards. There was no unrecognized compensation expense related to these unvested stock awards at September 30, 2023. 9 Table of Contents