UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 13D
UNDER THE SECURITIES EXCHANGE ACT OF 1934
(Amendment No. 2)*
Barnwell Industries, Inc.
(Name of Issuer)
Common Stock, par value $0.50 per share
(Title of Class of Securities)
068221100
(CUSIP Number)
Ned L. Sherwood
4731 North Highway A1A, Suite 213
Vero Beach, FL 32963
(772) 226-7923
(Name, Address and Telephone Number of Person Authorized to Receive Notices and Communications)
May 14, 2014
(Date of Event Which Requires Filing of This Statement)
If the filing person has previously filed a statement on Schedule 13G to report the acquisition that is the subject of this Schedule 13D, and is filing this schedule because of §§240.13d-1(e), 240.13d-1(f) or 240.13d-1(g), check the following box ¨
Note: Schedules filed in paper format shall include a signed original and five copies of the schedule, including all exhibits. See §240.13d-7 for other parties to whom copies are to be sent.
* | The remainder of this cover page shall be filled out for a reporting persons initial filing on this form with respect to the subject class of securities, and for any subsequent amendment containing information which would alter disclosures provided in a prior cover page. |
The information required on the remainder of this cover page shall not be deemed to be filed for the purpose of Section 18 of the Securities Exchange Act of 1934 (Act) or otherwise subject to the liabilities of that section of the Act but shall be subject to all other provisions of the Act (however, see the Notes).
(Continued on following pages)
CUSIP No. 068221100 | SCHEDULE 13D | Page 2 of 6 Pages |
1 | NAME OF REPORTING PERSONS
Ned L. Sherwood | |||||
2 | CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) ¨ (b) ¨ | |||||
3 | SEC USE ONLY
| |||||
4 | SOURCE OF FUNDS
OO | |||||
5 | CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) OR 2(e) ¨ | |||||
6 | CITIZENSHIP OR PLACE OF ORGANIZATION
United States of America | |||||
NUMBER OF SHARES BENEFICIALLY OWNED BY EACH REPORTING PERSON WITH
|
7 | SOLE VOTING POWER
0 | ||||
8 | SHARED VOTING POWER
899,622.138* | |||||
9 | SOLE DISPOSITIVE POWER
0 | |||||
10 | SHARED DISPOSITIVE POWER
899,622.138* | |||||
11 |
AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
899,622.138* | |||||
12 | CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES ¨ | |||||
13 | PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
10.9%** | |||||
14 | TYPE OF REPORTING PERSON
IN |
* | Includes (i) 661,584.138 common shares held by MRMP-Managers LLC, of which Ned L. Sherwood is the Chief Investment Officer and (ii) 238,038 common shares held by the Ned L. Sherwood Revocable Trust, of which Ned. L. Sherwood is the beneficiary and trustee. Ned. L. Sherwood disclaims beneficial ownership of such common shares except to the extent of his pecuniary interest therein. |
** | All percentages reported herein are calculated based upon an aggregate of 8,277,160 shares of common stock outstanding as of May 8, 2014, as reported on the Issuers Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2014. |
CUSIP No. 068221100 | SCHEDULE 13D | Page 3 of 6 Pages |
1 | NAME OF REPORTING PERSONS
MRMP-Managers LLC | |||||
2 | CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) ¨ (b) ¨ | |||||
3 | SEC USE ONLY
| |||||
4 | SOURCE OF FUNDS
OO | |||||
5 | CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) OR 2(e) ¨ | |||||
6 | CITIZENSHIP OR PLACE OF ORGANIZATION
Delaware | |||||
NUMBER OF SHARES BENEFICIALLY OWNED BY EACH REPORTING PERSON WITH
|
7 | SOLE VOTING POWER
0 | ||||
8 | SHARED VOTING POWER
661,584.138 | |||||
9 | SOLE DISPOSITIVE POWER
0 | |||||
10 | SHARED DISPOSITIVE POWER
661,584.138 | |||||
11 |
AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
661,584.138 | |||||
12 | CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES ¨ | |||||
13 | PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
8.0%** | |||||
14 | TYPE OF REPORTING PERSON
OO |
** | All percentages reported herein are calculated based upon an aggregate of 8,277,160 shares of common stock outstanding as of May 8, 2014, as reported on the Issuers Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2014. |
This Amendment No. 2 to Schedule 13D (this Amendment No. 2) relates to the common stock, par value $0.50 per share (the Shares), of Barnwell Industries, Inc., a Delaware corporation (the Issuer) and amends the Schedule 13D filed on June 11, 2013, as amended by Amendment No. 1 thereto filed with the SEC on December 17, 2013 (the Original Schedule 13D and, together with this Amendment No. 2, the Schedule 13D). Capitalized terms used and not defined in this Amendment No. 2 have the meanings set forth in the Original Schedule 13D. This Amendment No. 2 is being filed by Ned L. Sherwood (Sherwood) and MRMP-Managers LLC, a Delaware limited liability company (MRMP and together with Sherwood, the Reporting Persons).
This Amendment No. 2 is being filed to amend Item 4 and Item 7 of the Schedule 13D as follows:
Item 4 | Purpose of Transaction |
Item 4 of the Schedule 13D is amended by adding thereto the following:
On May 14, 2014, Sherwood delivered a letter to the Issuer, a copy of which is attached hereto as Exhibit 6 and is incorporated by reference in this Item 4 in its entirety.
Item 7 | Material to be Filed as Exhibits |
Item 7 of the Schedule 13D is amended by adding thereto the following:
Exhibit 6: | Letter to the Issuer, dated May 14, 2014 |
SIGNATURES
After reasonable inquiry and to the best of my knowledge and belief, I certify that the information set forth in this statement is true, complete and correct.
May 14, 2014 | Ned L. Sherwood | |||||
By: | /s/ Ned L. Sherwood | |||||
Name: | Ned L. Sherwood | |||||
May 14, 2014 | MRMP-Managers LLC | |||||
By: | /s/ Ned L. Sherwood | |||||
Name: | Ned L. Sherwood | |||||
Title: | Chief Investment Officer |
Exhibit 6
Ned L. Sherwood
4731 North Highway A1A
Suite 213
Vero Beach, FL 32963
Tel: (772) 226-7923
Fax: (772) 231-0207
May 14, 2014
The Board of Directors
Barnwell Industries
1100 Alakea Street, Suite 2900
Honolulu, HI 96813
To the Board:
It has been almost five months since my last letter to you in which I chronicled horrendous operating results at Barnwell Industries and what I believe is the Boards gross negligence in failing to take constructive actions to stem the Companys steep decline.
Since such letter, the independent directors did consent to having a conference call with me in early March. On this call, I discussed my concerns with Barnwells current and past performance and suggested actions that I believe would clearly improve the Companys performance and benefit all shareholders. Shockingly, only one of the independent Board members actively participated (Ahron Haspel), and in response to my question about the excessive compensation paid to Morton Kinzler, Alex Kinzler, and Russell Gifford, Mr. Haspel stated that as Chair of the Compensation Committee, he did not think the management should be blamed for the poor performance because the Hawaiian real estate and Canadian gas industries have been problematic. Obviously, Mr. Haspels comment (remarkably the only substantive comment by any of the seven independent Board members during our approximately one hour
call!) is not constructive. I have proposed actions that could be taken to benefit the shareholders and Barnwells performance, notwithstanding difficult industry conditions.
I heard nothing on that March call that gave me any confidence that the so-called independent Board members are engaged, let alone that the Company has any strategy to build shareholder value. Furthermore, my request for certain corporate books and records last year was rejected despite my legal rights under Delaware corporate law.
Based on the results of the March 3, 2014 corporate election, it is clear to me that the unaffiliated Barnwell shareholders are fed up with the ineptitude of Barnwells management and Board. Only 4,740,108 votes were cast for Morton Kinzler, of which I believe approximately 3.8 million votes may have come from management and close affiliates. Therefore, I believe Morton may have received less than 1 million votes from independent shareholders versus 1,760,988 votes in opposition. The independent shareholders voted by nearly 2 to 1 margin to remove him from the Board!
Over the past year, I have learned a great deal about Morton and the Companys relationship with Dr. Joseph Magaro (1,263,060 shares or 15.3% held) and Dr. David Sudarsky (727,600 shares or 8.8% held) (the Doctors). These two Doctors have held their Barnwell shares since the 1980s and, therefore, like all long-term Barnwell common shareholders, have essentially seen no value appreciation for almost 35 years! Nonetheless, they both continue to support Morton and the family management team!
I believe the reason that the Doctors continue to support Morton and the poorly performing management team is that unlike all other common shareholders, Dr. Sudarsky and Dr. Magaro own 11.875% and 11.03% respectively of working interests in some of Barnwells most successful oil and gas properties. Therefore, while all other Barnwell shareholders suffer with no dividends and no stock price appreciation, the Doctors have reaped millions over the years from their working interests in Barnwell properties and they have tacitly allowed Morton, Alex, and Russell to reap benefits in salary and perks from the Company in spite of the Companys horrendous performance.
The following table clearly shows why the Doctors continue to support the Kinzlers.
Doctors Income from Barnwell Managed Projects |
Barnwell Dividends To Common Shareholders | |||
2013 |
$1,409,000 | $0.00 | ||
2012 |
$1,062,000 | $0.00 | ||
2011 |
$1,838,000 | $0.00 | ||
2010 |
$2,323,805 | $0.00 | ||
2009 |
$1,566,387 | $0.00 | ||
Total |
$8,199,192 | $0.00 |
It is clear to me that Morton Kinzler has managed over the years to retain effective control of Barnwell through his relationship with Doctors Sudarsky and Magaro, and the extension of various personal benefits to them at the expense of other shareholders, such as the exclusive opportunity to participate in various Barnwell managed projects described above and extension of various professional services. Effectively, Mr. Kinzler has been buying Doctors Sudarskys
and Magaros vote with Barnwells resources. In fact, at one point in the past, Barnwell even co-signed on a loan for Dr. Magaros benefit relating to the oil wells.
In addition, it has come to my attention that Mr. Kinzlers control over Dr. Sudarskys shares included in recent years an actual power of attorney for the benefit of Mr. Kinzler that allowed him to vote Dr. Sudarskys Barnwell shares. I am puzzled as to how Mr. Kinzler has failed to make any recent disclosure regarding such power of attorney, as it would clearly require immediate disclosure on his part under federal securities law. Obviously, many independent shareholders (including me) have purchased Barnwell shares without knowing this material item. Even more troubling, it has come to my attention that in recent years Mr. Kinzler managed to work his close relationship with Dr. Sudarsky to rewrite his 1998 will and replace it with a new will in 2010 that now makes Mr. Kinzler Dr. Sudarskys estates executor and possible head of Dr. Sudarskys newly established charitable foundation. Dr. Sudarskys recent passing now positions Mr. Kinzler to take absolute control over the 8.8% Barnwell interest that belongs to the Sudarsky estate. I believe this would have a dramatic and immediate effect on the value of Barnwell, as it would further entrench the incumbent Kinzler Board and management team.
I believe Mr. Kinzlers actions show an absolute disregard to disclosure and fiduciary obligations he owes to all Barnwell shareholders. I hereby demand that he immediately provide full disclosure to shareholders about his relationship with the Sudarsky estate and the extent to which he controls the estates stake in Barnwell and the extent (if any) to which he influences Dr. Magaro, such that shareholders can determine their next steps. I believe that
Barnwells Board (which contains six so-called lawyers who should understand securities laws) immediately put Morton Kinzler on administrative leave without pay pending a complete investigation by the Independent Directors. I demand that the investigation determine what Alexander Kinzler and Russell Gifford also knew about Mortons undisclosed influence on the Doctors.
Obviously, the Board should not let this tacit alliance among the two Doctors and the Kinzlers continue. The Board has a fiduciary duty to ALL shareholders, and the grossly negligent oversight by the Board has led to a massive shift of shareholder wealth directly to the Kinzler family. I would be supportive of any shareholder-led effort to hold the Kinzlers and the Board personally accountable.
I plan to continue to attempt to take actions in order to stem Barnwells decline and stop the looting of the Company by the Kinzlers and Barnwells inattentive Board. I encourage all shareholders to continue to express their dissatisfaction with Barnwells performance.
Lastly, I suggest that all shareholders read the April 20, 2014 article written by Alan Yonan, Jr. in the Honolulu Star Advertiser. In this article, Alan Yonan summarizes the 2013 compensation at Hawaiis publicly traded companies. He writes Barnwell Industries, Inc., the states smallest listed company, paid its CEO the most in relation to the firms market capitalization. CEO Morton Kinzler received $805,580 last year an amount equal to 3.1 percent of the companys market cap of $26 million. Kinzler was compensated at a rate significantly higher than the rest of the CEOs, who received on average an amount equal to 0.25 percent of market cap.
Hopefully, the independent Directors of Barnwell read the local newspaper. If the Board were to cut Mortons salary to that of the average Hawaii CEO, Morton would be paid $62,500, not the nearly $900,000 he currently receives. However, given that he has not been active in the business for years, I believe the appropriate remuneration should be $0, and shareholders should demand monetary restitution.
As in my past letters, I encourage the independent Board members to act in the best interests of all shareholders. I have made suggestions that I am certain would benefit all Barnwell shareholders. Board actions are long overdue. Given my recent findings, it would be clear gross negligence (words I hope the six lawyers understand) not to take strong measures immediately.
Sincerely,
/s/ Ned L. Sherwood