10-Q 1 b332074_10q.txt FORM 10Q SECURITIES AND EXCHANGE COMMISSION Washington, D. C. 20549 FORM 10-Q QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarter period ended March 31, 2004 Commission file number 1-467 WILSHIRE ENTERPRISES, INC. ------------------------------------------------------ (Exact name of registrant as specified in its charter) Delaware 84-0513668 ------------------------------- ------------------- (State or other jurisdiction of (IRS Employer incorporation or organization) Identification No.) 921 Bergen Avenue - Jersey City, New Jersey 07306-4204 ------------------------------------------- ---------- (Address of principal executive offices) (Zip Code) (201) 420-2796 -------------- -------------------------------------------------------------------------------- Former name, former address and former fiscal year, if changed since last report. 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 __ Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Act). Yes No X --- --- Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of May 13, 2004. Common Stock $1 Par Value ----- 7,802,831 WILSHIRE ENTERPRISES, INC INDEX

Page No. -------- Part I 1. Financial Information Financial Information: 1 Condensed Consolidated Balance Sheets - March 31, 2004 (Unaudited) and December 31, 2003 Unaudited Condensed Consolidated Statements of Income - 2 Three months ended March 31, 2004 and 2003 Unaudited Condensed Consolidated Statement of Cash Flows - 3 Three months ended March 31, 2004 and 2003 Notes to Unaudited Condensed Consolidated Financial Statements 4 2. Management's Discussion and Analysis 10 of Financial Condition and Results of Operations 3. Quantitative and Qualitative Disclosure About Market Risk 15 4. Controls and Procedures 16 Part II Other Information 6. Exhibits and Reports on Form 8-K 17

WILSHIRE ENTERPRISES, INC. CONSOLIDATED BALANCE SHEETS

March 31, December 31, 2004 2003 (Unaudited) ---------------- ----------------- ASSETS CURRENT ASSETS Cash and cash equivalents $11,489,000 $ 7,763,000 Restricted cash 184,000 327,000 Marketable securities, available-for-sale, at fair value 2,070,000 1,996,000 Accounts receivable net of allowance of $65,000 in 2004 and 2003, respectively 1,357,000 1,802,000 Prepaid expenses and other current assets 2,057,000 1,870,000 ---------------- ----------------- Total current assets 17,157,000 13,758,000 ---------------- ----------------- NONCURRENT ASSETS Mortgage notes receivable 1,850,000 2,504,000 Other noncurrent 865,000 860,000 PROPERTY AND EQUIPMENT Oil and gas properties - Held for sale 143,298,000 143,601,000 Real estate properties 54,414,000 54,162,000 Real estate properties - Held for sale 9,456,000 17,907,000 ---------------- ----------------- 207,168,000 215,670,000 Less: Accumulated depreciation and amortization 15,246,000 14,721,000 Accumulated depreciation, depletion and amortization- Property held for sale 117,207,000 119,074,000 ---------------- ----------------- 74,715,000 81,875,000 ---------------- ----------------- TOTAL ASSETS $ 94,587,000 $98,997,000 ================ ================= LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES Current portion of long-term debt $ 737,000 $ 3,645,000 Accounts payable 1,921,000 1,894,000 Income taxes payable 1,134,000 154,000 Deferred income taxes 10,522,000 10,489,000 Accrued liabilities 1,721,000 800,000 Deferred income 570,000 419,000 Current liabilities associated with discontinued operations 1,771,000 3,520,000 ---------------- ----------------- Total current liabilities 18,376,000 20,921,000 NONCURRENT LIABILITIES Long-term debt, less current portion 47,247,000 47,719,000 Deferred income taxes 1,402,000 1,058,000 Deferred income 655,000 725,000 Other Long-term liabilities 224,000 227,000 Non current liabilities associated with discontinued operations - 3,820,000 ---------------- ----------------- Total liabilities 67,904,000 74,470,000 ---------------- ----------------- COMMITMENTS AND CONTINGENCIES SHAREHOLDERS' EQUITY Preferred stock, $1 par value, 1,000,000 shares authorized; none issued and outstanding in 2004 and 2003 - - Common stock, $1 par value, 15,000,000 shares authorized; issued 10,013,544 shares in 2004 and 2003 10,014,000 10,014,000 Capital in excess of par value 9,029,000 9,029,000 Treasury stock 2,210,713 and 2,210,713 shares at March 31, 2004 and December 31,2003, respectively, at cost (10,355,000) (10,355,000) Retained earnings 19,866,000 17,267,000 Accumulated other comprehensive loss (1,871,000) (1,428,000) ---------------- ----------------- Total shareholders' equity 26,683,000 24,527,000 ---------------- ----------------- TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 94,587,000 $ 98,997,000 ================ =================

The accompanying notes to consolidated financial statements are an integral part of these financial statements. 1 WILSHIRE ENTERPRISES, INC. UNAUDITED CONSOLIDATED STATEMENTS OF INCOME For the three months ended March 31, 2004 and 2003

March 31, March 31, 2004 2003 ---------------------- -------------------- Revenues Real estate $ 3,037,000 $ 2,926,000 ---------------------- -------------------- Total revenues 3,037,000 2,926,000 ---------------------- -------------------- Cost and Expenses Real estate operating expenses 1,763,000 1,672,000 Depreciation and amortization 542,000 763,000 General and administrative 329,000 274,000 ---------------------- -------------------- Total costs and expenses 2,634,000 2,709,000 ---------------------- -------------------- Income from Operations 403,000 217,000 Other Income Dividend and interest income 194,000 224,000 Gain on sale of securities - 261,000 Other Income (expense) 53,000 126,000 Insurance Proceeds - 1,000,000 Interest Expense (763,000) (1,442,000) ---------------------- -------------------- Income (loss) before provision for income taxes (113,000) 386,000 Provision (Benefit) for Income Taxes (54,000) (100,000) ---------------------- -------------------- Net Income (loss) from Continuing Operations (59,000) 486,000 Discontinued Operations - Real Estate, Net of Taxes Loss from operations (121,000) (119,000) Gain from sales 3,036,000 -- Discontinued Operations - Oil & Gas, Net of Taxes (257,000) 646,000 ---------------------- -------------------- Net Income $ 2,599,000 $ 1,013,000 ====================== ==================== Basic earnings per share: Earnings (loss) from continuing operations $ (0.01) $ 0.06 Earnings from discontinued operations 0.34 0.07 ---------------------- -------------------- Net earnings applicable to common stockholders $ 0.33 $ 0.13 ====================== ==================== Diluted earnings per share: Earnings (loss) from continuing operations $ (0.01) $ 0.06 Earnings from discontinued operations 0.34 0.07 ---------------------- -------------------- Net earnings applicable to common stockholders $ 0.33 $ 0.13 ====================== ====================

The accompanying notes to consolidated financial statements are an integral part of these financial statements. 2 WILSHIRE ENTERPRISES, INC. UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS

For the Three Months Ended March 31, March 31, 2004 2003 -------------- ------------- CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 2,599,000 $ 1,013,000 Adjustments to reconcile net income to net cash provided by operating activities - Depreciation, depletion and amortization 1,342,000 1,544,000 Deferred income tax provision (benefit) 344,000 1,311,000 Increase (Decrease) in deferred income 43,000 (230,000) Gain on sales of real estate assets (4,897,000) - Gain on sales of marketable securities - (261,000) Changes in operating assets and liabilities - Decrease (Increase) in accounts receivable 445,000 (891,000) Increase in income taxes receivable (312,000) (1,077,000) Decrease (Increase) in prepaid expenses and other current assets 125,000 (410,000) Increase (Decrease) in other liabilities (8,000) 470,000 Increase (Decrease) in accounts payable, accrued liabilities and taxes payable 1,784,000 (888,000) -------------- ------------- Net cash provided by operating activities 1,465,000 581,000 -------------- ------------- CASH FLOWS FROM INVESTING ACTIVITIES: Net Capital expenditures - real estate (340,000) (3,633,000) Proceeds (Capital expenditures) - oil & gas 146,000 (646,000) Proceeds from sales and redemptions of marketable securities - 781,000 Proceeds from sales of real estate properties 10,909,000 - Proceeds on mortgage notes receivable 654,000 151,000 Decrease in restricted cash 143,000 - -------------- ------------- Net cash provided by (used in) investing activities 11,512,000 (3,347,000) -------------- ------------- CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from issuance of debt - 35,471,000 Principal payments of long-term debt (8,767,000) (34,368,000) Financing Costs - (398,000) -------------- ------------- Net cash used in financing activities (8,767,000) 705,000 -------------- ------------- EFFECT OF EXCHANGE RATE CHANGES ON CASH (484,000) 438,000 -------------- ------------- Net increase (decrease) in cash and cash equivalents 3,726,000 (1,623,000) CASH AND CASH EQUIVALENTS, beginning of year 7,763 ,000 4,164,000 -------------- ------------- CASH AND CASH EQUIVALENTS, end of period $ 11,489,000 $2,541,000 ============== ============= SUPPLEMENTAL DISCLOSURES TO THE STATEMENTS OF CASH FLOWS: Cash paid during the year for - Interest $ 756,000 $1,744,000 ============== ============= Income taxes, net $ 76,000 $ 160,000 ============== =============

The accompanying notes to consolidated financial statements are an integral part of these financial statements 3 WILSHIRE ENTERPRISES, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS March 31, 2004 1. FINANCIAL STATEMENTS The unaudited condensed consolidated financial statements included herein have been prepared by the Registrant, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States have been condensed or omitted pursuant to such rules and regulations, although the Registrant believes that the disclosures are adequate to make the information presented not misleading. It is suggested that these unaudited condensed consolidated financial statements be read in conjunction with the financial statements and the notes thereto included in the Company's latest annual report on Form 10-K. This condensed financial information reflects, in the opinion of management, all adjustments necessary to present fairly the results for the interim periods. Net income for the first quarter in 2003 as previously reported has been reduced by $109,000 to record the under-accrual of certain General and Administrative expenses. This correction, resulted in an adjustment to net income for the first quarter of 2003 from $1,122,000 or $0.14 per share as originally reported, to $1,013,000 or $0.13 per share. In July 2003 the Company committed to the sale of its oil and gas operations. The financial statements have been adjusted to reflect the oil and gas operations as "Discontinued Operations" in 2003 and 2004. In April 2004 the Company sold its oil and gas operations for $28.3 million in gross proceeds, of which $600,000 has been placed in escrow to allow for any potential post closing adjustments relating to its U.S. operations. As the sale was effective as of March 1, 2004, the financial statements as presented only reflect oil and gas operations for the first two months of 2004, compared to a full three months of operations in 2003. Pursuant to Statement of Financial Accounting Standard No. 144 (SFAS 144), the Company is required to reflect the gain on the sale of real estate properties plus the properties' year to date revenue, operating expenses and related interest expense as "Discontinued Operations". On March 31, 2004, the Company consummated the sale of eleven real estate properties in Jersey City, New Jersey for a net book gain after taxes of approximately $3.0 million. This transaction, less related mortgage debt, increased the Company's capital resources by approximately $5.3 million. In addition, properties currently under contract for sale are presented as "Real estate properties - Held for sale" on the Balance Sheet and the related property operations are shown as Discontinued on the statement of income. Basis of Presentation Certain amounts in the 2003 consolidated financial statements have been reclassified to conform to the 2004 presentation. Accounting for Stock-Based Compensation In December 2002, the Financial Accounting Standards Board (FASB) issued Statement No. 148 to amend alternative methods of transition for a voluntary change to the fair value based method of accounting for stock-based employee compensation. In addition, Statement No. 148 amends the disclosures in both annual and interim financial statements about the method of accounting for stock-based employee compensation and the effect of the method used on reported results. However, the Company has continued to account for options in accordance with the provision of APB Opinion No. 25, "Accounting for Stock Issues to Employees" and related interpretations. Accordingly, no compensation expense has been recognized for stock option plans. 4 The following tables sets forth the Company's pro forma information for its common stockholders for the three months ended March 31, 2004 and 2003 (in thousands except earnings per share data):

For Three Months Ended March 31, 2004 2003 ---------------- --------------- Net income as reported $2,599 $1,013 Add: Stock option expense included in net income (loss) - - Less: Stock option expense determined under fair value recognition method for all awards (5) (15) ------------- ------------ Pro forma net income $2,594 $998 ============= ============ Net income per share as reported: Basic Earnings per share: Earnings per share from continuing operations $ (0.01) $ 0.06 Earnings per share from discontinued operations 0.34 0.07 ------------- ------------ Net earnings applicable to common shareholders $ 0.33 $ 0.13 ============= ============ Diluted Earnings per share: Earnings per share from continuing operations $ (0.01) $ 0.06 Earnings per share from discontinued operations 0.34 0.07 ------------- ------------ Net earnings applicable to common shareholders $ 0.33 $ 0.13 ============= ============ Pro forma net income per share: Basic Earnings per share: Earnings per share from continuing operations $(0.01) $ 0.06 Earnings per share from discontinued operations 0.34 0.07 ------------- ------------ Net earnings applicable to common shareholders $0.33 $ 0.13 ============= ============ Diluted Earnings per share: Earnings per share from continuing operations $(0.01) $0.06 Earnings per share from discontinued operations 0.33 0.07 ------------- ------------ Net earnings applicable to common shareholders $0.32 $0.13 ============= ============

The fair value was estimated using the Black-Scholes option-pricing model based on the weighted average market price at grant date of $3.32 in 2002 and $3.51 in 2003 and the following weighted average assumptions; risk-free interest rate of 3.87% for 2002 and 3.00% for 2003, volatility of 33.1% for 2002 and 2003, no dividend yield for 2002 or 2003, and an expected option life of 5 years. There were no options issued in the three months ended March 31, 2004. Oil and Gas Properties The Company follows the accounting policy, generally known in the oil and gas industry as "full cost accounting". Under full cost accounting, the Company capitalizes all costs, including interest costs, relating to the exploration for and development of its mineral resources. Under this method, all costs incurred in the United States and Canada are accumulated in separate cost centers and are amortized using the gross revenue method based on total future estimated recoverable oil and gas reserves. In July 2003 the Company committed to the sale of its oil and gas properties. These properties were sold in April 2004, with an effective sale date of March 1, 2004. 5 2. SEGMENT INFORMATION For the first two months of 2004 the Company was engaged in the exploration of oil and gas, both in its own name and through several wholly-owned subsidiaries, on the North American continent. In July 2003 the Company committed to the sale of its oil and gas operations and consummated the sale, effective March 1, 2004 in April 2004. The financial statements have been adjusted to present oil and gas operations as "Discontinued Operations" in 2003 and 2004. The Company also conducts real estate operations throughout the United States, owning apartment complexes as well as commercial and retail properties. 6 Oil and Gas The Company conducted its oil and gas operations in the United States and Canada. Oil and gas operations in the United States were located in Arkansas, California, Kansas, Nebraska, New Mexico, Ohio, Oklahoma, Pennsylvania, Texas and Wyoming. In Canada, the Company conducted oil and gas operations in the Provinces of Alberta, British Columbia and Saskatchewan. In July 2003 the Company committed to the sale of its oil and gas properties. This sale was completed in April 2004 when the Company finalized the sale of its United States and Canadian oil and gas properties, effective March 1, 2004. Real Estate The Company's real estate operations are conducted in the states of Arizona, Texas, Florida, Georgia and New Jersey. The Company's properties consist of apartment complexes as well as commercial and retail properties. During the first quarter of 2004 the Company sold eleven real estate properties. The gains from these sales as well as the revenue, operating expenses and mortgage interest expense have been reflected as Discontinued Operations - Real Estate as required by FAS 144. In addition, the operations of real estate properties currently under contract for sale are also reflected in Discontinued Operations and as Real Estate Properties - Held for Sale. Corporate The Company holds investments in certain marketable securities, which are classified as available for sale. From time to time, the Company buys and sells securities in the open market. Over the years, the Company has decreased its holding in marketable securities and focused its resources in the oil and gas and real estate divisions. The following segment data is presented based on the Company's internal management reporting system-

FOR THE THREE MONTHS ENDED MARCH 31, --------------------------------------------- 2004 2003 (Unaudited) (Unaudited) -------------- -------------- Revenues- Oil and gas - United States $ 937,000 $ 1,253,000 Oil and gas - Canada 970,000 1,260,000 Real estate 3,669,000 3,637,000 -------------- -------------- $ 5,576,000 $ 6,150,000 -------------- -------------- Income (loss) from operations and reconciliation to income before provision for income taxes- Oil and gas - United States (a) $ (854,000) $ 21,000 Oil and gas - Canada (a) 385,000 555,000 Real estate 305,000 452,000 Corporate (208,000) (74,000) -------------- -------------- Income from operations (372,000) 954,000 Other income 5,145,000 1,632,000 Interest expense (851,000) (1,627,000) -------------- -------------- Income before provision for income taxes $ 3,922,000 $ 959,000 -------------- -------------- Identifiable assets- Oil and Gas Properties - United States $ 15,337,000 $14,418,000 Oil and Gas Properties - Canada 14,073,000 20,041,000 Real estate properties 51,738,000 59,482,000 Corporate 13,439,000 17,007,000 -------------- -------------- $ 94,587,000 $110,948,000 -------------- --------------

(a) Represents revenues less all operating costs, including depreciation, depletion and amortization. 7 3. COMPREHENSIVE INCOME Comprehensive income for the three months ended March 31, 2004 and 2003 is as follows:

2004 2003 (Unaudited) (Unaudited) ----------------- ----------------- Net income $2,599,000 $1,013,000 ----------------- ----------------- Other comprehensive income net of taxes Foreign currency translation adjustments (484,000) 438,000 Change in unrealized gain on marketable securities 41,000 196,000 ----------------- ----------------- Other comprehensive (loss) income (443,000) 634,000 ----------------- ----------------- Comprehensive income $2,156,000 $1,691,000 ================= =================

Changes in the components of Accumulated Other Comprehensive Income (Loss) for the year 2003 and for the three months ended March 31, 2004 are as follows-

Unrealized Gains Cumulative Accumulated (Losses) on Foreign Currency Other Available-for-Sale Translation Comprehensive Securities Adjustment Income (Loss) ----------------- ---------------- ------------- BALANCE, December 31, 2002 $ 653,000 $(3,742,000) $(3,089,000) Change for the year 2003 (545,000) 2,206,000 1,661,000 ----------------- ---------------- ------------- BALANCE, December 31, 2003 108,000 (1,536,000) (1,428,000) Change for the three months 41,000 (484,000) (443,000) ----------------- ---------------- ------------- BALANCE, March 31, 2004 $149,000 $(2,020,000) $(1,871,000) ================= ================ =============

4. EARNINGS PER SHARE The following table sets forth the computation of basic and diluted earnings per share-

Three Months Ended March 31 ------------------------------------------ 2004 2003 ---- ---- Numerator- Net (loss)income from continuing operations $ (59,000) $ 481,000 Net income from discontinued operations 2,658,000 532,000 ------------- -------------- Net Income $ 2,599,000 $ 1,013,000 ============= ============== Denominator- Weighted average common shares outstanding - Basic 7,802,831 7,809,834 Incremental shares from assumed conversions of stock options 184,396 37,461 ------------- -------------- Weighted average common shares outstanding - Diluted 7,987,227 7,847,295 ============= ============== Basic earnings per share: Earnings(loss)per share from continuing operations $ (0.01) $ 0.06 Earnings per share form discontinued operations 0.34 0.07 ------------- -------------- Net earnings applicable to common shareholders $ 0.33 $ 0.13 ============= ============== Diluted earnings per share: Earnings (loss) per share from continuing operations $ ( 0.01) $ 0.06 Earnings per share form discontinued operations 0.34 0.07 ------------- -------------- Net earnings applicable to common shareholders $ 0.33 $ 0.13 ============= ==============

5. OTHER INCOME Other income for 2003 includes $1,000,000 received as the beneficiary of life insurance policies on the life of the Company's former Chairman and President who had been serving as its Senior Consultant up to his death on January 7, 2003. The receipt of these funds are nontaxable to the Company. 8 6. INTEREST EXPENSE During the first quarter of 2003 the Company was able to refinance and modify the majority of its mortgage notes payable reducing its overall effective interest rate from 7.36% to 6.10% and extending its maturity and terms. During the next ten years, the Company's interest expense related to its current debt should decrease approximately $600,000 annually. 7. COMMITMENTS AND CONTINGENCIES In June 1996 the Company's Board of Directors adopted the Stockholder Protection Rights Plan (the Rights Plan). The Rights Plan provides for issuance of one Right for each share of common stock outstanding as of July 6, 1996. The Rights are separable from and exercisable upon the occurrence of certain triggering events involving the acquisition of at least 15% (or, in the case of certain existing stockholders, 25%) of the Company's common stock by an individual or group, as defined in the Rights Plan (an Acquiring Person) and may be redeemed by the Board of Directors at a redemption price of $0.01 per Right at any time prior to the announcement by the Company that a person or group has become an Acquiring Person. On and after the tenth day following such triggering events, each Right would entitle the holder (other than the Acquiring Person) to purchase $50 in market value of the Company's Common Stock for $25. In addition, if there is a business combination between the Company and an Acquiring Person, or in certain other circumstances, each Right (if not previously exercised) would entitle the holder (other than the Acquiring Person) to purchase $50 in market value of the common stock of the Acquiring Person for $25. As of March 31, 2004 and 2003, 7,802,831 and 7,809,834, respectively, of Rights were outstanding. Each Right entitles the holder to purchase, for an exercise price of $25, one one-hundredth of a share of Series A Participating Preferred Stock. Each one one-hundredth share of Series A Participating Preferred Stock is designed to have economic terms similar to those of one share of common stock but will have one one-hundredth of a vote. Because the Rights are only exercisable under certain conditions, none of which were in effect as of March 31, 2004 and 2003, the outstanding Rights are not considered in the computation of basic and diluted earnings per share. The Company does not have significant lease commitments or post retirement benefits. 8. INCOME TAXES On January 7, 2003 the Company's former Chairman and President who had been serving as its Senior Consultant, passed away. The Company was the beneficiary of $1,000,000 of life insurance proceeds in the first quarter of 2003 that are not taxable income. 9. SUBSEQUENT EVENT In April 2004 the Company consummated the sale of its U.S. and Canadian oil and gas operations for $28.3 million in gross proceeds of which $600,000 has been placed in escrow to allow for any potential post closing adjustments relating to its U.S. operations. As the sales were effective as of March 1, 2004, the financial statements, as presented, only reflect oil and gas operations for the first two months of 2004 compared to a full three months of operations in 2003. In addition, the net carrying value of the assets sold have been adjusted to reflect the proceeds received. A corresponding charge of $564,000 to Discontinued Operations - Oil & Gas, Net of Taxes was recorded for the quarter ended 2004 to record the excess carrying value as of March 31, 2004 as a result of the negative change in the Cumulative Foreign Currency Translation Adjustment, additional closing costs and a subsequent purchase price adjustment from the original estimated sales price. On April 30, 2004 the Company sold for $1,240,000 a 22 unit residential property in Perth Amboy, New Jersey and realized a net book gain after taxes of approximately $524,000. A mortgage of $332,000 was extinguished with the sale. 9 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion addresses material changes in the Company's results of operations for the three month period ended March 31, 2004, compared to the three month period ended March 31, 2003, and its financial condition since December 31, 2003. It is presumed that readers have read or have access to Wilshire's 2003 Annual Report on Form 10-K which includes disclosures regarding critical accounting policies as part of Management's Discussion and Analysis of Financial Condition and Results of Operations. Overview Net earnings for the three months ended March 31 increased from $1,013,000 or $0.13 per share for 2003 to $2,599,000 or $0.33 per share in 2004. Operations are shown as continuing and discontinued as a result of the Company's announced plans to sell its oil and gas operations in July 2003 which was consummated in April, 2004 as well as having to reflect the net income from properties held for sale and the gain from the sale of real estate properties sold in the period as discontinued operations. On April 8, 2004 the Company announced that it had consummated the sale of its Canadian oil and gas business to Addison Energy Inc., a wholly owned subsidiary of Exco Resources, Inc. for $15 million in gross proceeds. On April 23, 2004 the Company announced that it had consummated the sale of its United States oil and gas business to Crow Creek Energy LLC, a Tulsa, Oklahoma based privately held portfolio company of Natural Gas Partners of Dallas, Texas, for $13.3 million in gross proceeds of which $600,000 has been placed in escrow to allow for any potential post closing adjustments. In March 2004 the Company consummated the sale of eleven real estate properties for gross proceeds of $11 million and a net book gain, after taxes, of approximately $3.0 million. Results of Operations Three Months Ended March 31, 2004 ("2004") Compared with Three Months Ended March 31, 2003 ("2003") Continuing Operations: Revenue increased from $2,926,000 in 2003 to $3,037,000 in 2004, an increase of $111,000 or 3.8%. Occupancy rates have been static from period to period. The increase for the quarter is primarily due to a higher reimbursement of real estate tax expense applicable to the Company's triple net leased hotel and conference facility. The Company has been impacted in both comparative years by low mortgage rates which have made the purchase of residences attractive to persons who might otherwise have rented apartments in the Company's properties. Further, the Company did not add new rental properties during 2004 and 2003. Real Estate operating expenses increased from $1,672,000 in 2003 to $1,763,000 in 2004, an increase of $91,000 or 5.4%. The majority of the increase was due to higher real estate tax expense applicable to the Company's hotel and conference facility that was reimbursed. 10 Depreciation and amortization decreased from $763,000 in 2003 to $542,000 in 2004. The decrease is primarily attributed to the reduction of amortization expense in the amount of $221,000 associated with the write-off of unamortized mortgage costs applicable to the $31.5 million of debt that was refinanced during the first quarter of 2003. General and administrative expenses increased from $274,000 in 2003 to $329,000 in 2004. This increase was primarily due to higher corporate insurance expenses and legal and accounting fees. Income from operations increased from $217,000 in 2003 to $403,000 in 2004. This increase was primarily due the reduction of amortization expense previously noted offset by higher general and administrative expense. Other income decreased from $1,611,000 in 2003 to $247,000 in 2004. This decrease includes $1,000,000 received by the Company in 2003 as a beneficiary of life insurance policies on the life of the Company's former Chairman and President Siggi B. Wilzig, who had been serving as its Senior Consultant up to his death on January 7, 2003. The receipt of these funds were not taxable to the Company. In addition, the Company sold marketable securities and recognized gains of $261,000 in 2003. No marketable securities were sold in the comparable period in 2004. Interest expense decreased from $1,442,000 in 2003 to $763,000 in 2004. Interest expense in 2003 includes a one time prepayment penalty of $469,000 to secure the refinancing of certain real estate properties. This refinancing of the mortgage notes payable reduced the effective rate paid by the Company from 7.36% to 6.10% and extended its maturity and terms. During the next ten years, the Company's annual interest expense related to its current debt should decrease by approximately $600,000 as a result of this refinancing. In addition, the Company paid down approximately $1.2 million of mortgage debt during 2004. Net income from Continuing Operation's decreased from $486,000 in 2003 to a loss of $59,000 in 2004. Earnings per share from continuing operations decreased from $0.06 in 2003 to a loss of $0.01 in 2004. This decrease is primarily due to the decrease in other income reduced by increased income from operations as previously discussed. Discontinued Operations: Real Estate Discontinued Operations - Real Estate, Net of Taxes reflects the gain from the sale of the eleven real estate properties sold in 2004 of $3,036,000, offset in part by a $121,000 net loss from the operation of such properties and other properties held for sale. The net loss from operations of such properties and other properties held for sale in 2003 was $119,000. Oil and Gas Discontinued Operations - Oil and Gas, Net of Taxes reflects a net loss of $257,000 in 2004 compared to a profit of $646,000 in 2003. As the Company's sale of its oil and gas assets was effective March 1, 2004, the current periods operations, net of taxes, only reflect revenues less production expenses for two months and operating expenses for three months or $207,000 compared to a full three months of operations in 2003 or $646,000. The net profit, net of taxes, in 2004 has been reduced by a charge of $564,000 to record the excess carrying value as of March 31, 2004 as a result of the negative change in the Cumulative Foreign Currency Translation Adjustment, additional closing costs and a subsequent purchase price adjustment from the original estimated sales price. 11 Liquidity and Capital Resources At March 31, 2004 the Company had approximately $2.1 million in marketable securities at market value, compared to $2.0 million at December 31, 2003. The Company had $2.5 million in short-term debt on March 31, 2004 compared to $7.0 million on December 31, 2003. For purposes of this calculation, included in current assets are properties held for sale since it is contemplated that these properties will be sold within one year and the liabilities associated with these sales are classified as current. The current ratio was 2.9 to 1 at March 31, 2004 compared to 2.3 to 1 at December 31, 2003. The Company's working capital was approximately $34.3 million at March 31, 2004, an increase of $2.8 million from $31.5 million on December 31, 2003. Management considers these amounts adequate for the Company's current business. In April 2004, with an effective date of March 1, 2004, the Company closed the sale of its oil and gas operations in the United States and Canada and will either reinvest the net proceeds in its ongoing real estate business or otherwise utilize the proceeds in a manner designed to maximize shareholder value. In the meantime, the Company continues to explore real estate acquisitions as they arise. The timing of any such acquisitions will depend on, among other things, economic conditions and the favorable evaluation of specific opportunities presented to the Company. During the first quarter, the Company realized proceeds of $11 million from the sale of a real estate property generating an after tax gain of approximately $3.0 million. Net cash provided by operating activities increased from $581,000 in 2003 to $1,468,000 in 2004. The increase of $887,000 is mainly due to an increase in net income and to increases in accounts payable and decreases in accounts receivable and prepaid expenses offset by the gain on sale of real estate assets. Net cash (used in) provided by investing activities increased from $(3,347,000) in 2003 to $11,512,000 in 2004. This increase is due mainly from the sale of real estate assets in the first quarter of 2004. Net cash used in financing activities decreased from $705,000 in 2003 to $(8,770,000) in 2004. This decrease principally relates to the payment of long-term debt associated with the 11 real estate properties sold. The Company believes it has adequate capital resources to fund operations for the foreseeable future. Critical Accounting Policies The Company's discussion and analysis of its financial condition and results of operations are based upon unaudited consolidated financial statements prepared in conformity with accounting principles generally accepted in the United States of America. The preparation of these financial statements requires the Company to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses. The Company bases its estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. In July 2002, the FASB issued SFAS No. 146, "Accounting for Costs Associated with Exit or Disposal Activities" (effective January 1, 2003). SFAS No. 146 replaces current accounting literature and requires the recognition of costs associated with exit or disposal activities when they are incurred rather than at the date of a commitment to an exit or disposal plan. The adoption of this pronouncement in 2003 resulted in a financial statement charge, net of taxes, of approximately $44,000 as of March 31, 2003 and $200,000 as of March 31, 2004. 12 Impairment of Property and Equipment In October 2001, the FASB issued SFAS 144, "Accounting for the Impairment or Disposal of Long-Lived Assets", which addresses financial accounting and reporting for the impairment or disposal of long-lived assets. This standard harmonizes the accounting for impaired assets and resolves some of the implementation issues as originally described in SFAS 121. SFAS 144, among other things, will require the Company to classify the operations and cash flow of properties to be disposed of as discontinued operations. The Company adopted this pronouncement on January 1, 2002. This adoption impacted how the Company reported its results of operations and financial position as of March 31, 2004 and 2003. On a periodic basis, management assesses whether there are any indicators that the value of the real estate properties may be impaired. A property's value is considered impaired if management's estimate of the aggregate future cash flows (undiscounted and without interest charges) to be generated by the property are less than the carrying value of the property. To the extent impairment has occurred, the loss shall be measured as the excess of the carrying amount of the property over the fair value of the property. Management does not believe at March 31, 2004 that the value of any of its rental properties is impaired. Revenue Recognition Revenue from oil and gas properties is recognized at the time these products are delivered to third party purchasers. Revenue from real estate properties is recognized during the period in which the premises are occupied and rent is due from tenant. Rental revenue is recognized on a straight-line basis over the term of the lease. The excess of rents recognized over amounts contractually due pursuant to the underlying leases are included in accounts receivable. An allowance for uncollectible accounts is maintained based on the Company's estimate of the inability of its joint interest partners in the oil and gas division and its tenants in the real estate division to make required payments. Foreign Operations The assets and liabilities of the Company's Canadian subsidiary have been translated at quarter-end exchange rates. The related revenues and expenses have been translated at average annual exchange rates. The aggregate effect of translation gains and losses are reflected as a component of "Accumulated other comprehensive income (loss)" until the sale or liquidation of the underlying foreign investment. As a result of the sale of its Canadian oil and gas assets in April 2004, the Company intends to dissolve its Canadian subsidiary and remit all prior years' earning to the U. S. The Company has provided approximately $1.2 million of Federal income taxes that will result from the receipt of such funds. Accounting for Stock-Based Compensation The Company has adopted the disclosure-only provisions of Statement of Financial Accounting Standards No. 123, "Accounting for Stock-Based Compensation" (SFAS 123). 13 Oil and Gas Properties On April 8, 2004 the Company announced that it had consummated the sale of its Canadian oil and gas business effective March 1, 2004 to Addison Energy, Inc., a wholly owned subsidiary of Exco Resources, Inc. for $15 million in gross proceeds. On April 23, 2004 the Company announced that, effective March 1, 2004, it had consummated the sale of its United States oil and gas business to Crow Creek Energy, LLC, a Tulsa, Oklahoma based privately held portfolio company of Natural Gas Partners of Dallas, Texas, for $13.3 million in gross proceeds (before potential post closing adjustments). 14 Forward-Looking Statements This Report on Form 10-Q for the quarter ended March 31, 2004 contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. All statements included herein other than statements of historical fact are forward-looking statements. Although the Company believes that the underlying assumptions and expectations reflected in such forward-looking statements are reasonable, it can give no assurance that such expectations will prove to be correct. The Company's business and prospects are subject to a number of risks which could cause actual results to differ materially from those reflected in such forward-looking statements, including uncertainties inherent in any attempt to sell a portion or all of the business at an acceptable price, environmental risks relating to the Company's real estate properties, competition, the substantial capital expenditures required to fund the Company's real estate operations, market and economic changes in areas where the Company holds real estate properties, interest rate fluctuations, government regulation, and the ability of the Company to implement its business strategy. Item 3 - Qualitative and Quantative Disclosure About Market Risk The Company has investments in domestic equity securities for which the Company has exposure to the risk of market loss. The Company is exposed to changes in interest rates from its floating rate debt arrangements. At March 31, 2004, the Company had $49,727,000 of debt outstanding of which $48,316,000 bears interest at fixed rates. The interest rate on the Company's revolving credit lines, under which $1,411,000 was outstanding at March 31, 2004 and related entirely to its Canadian revolving demand loan, is at prime for U.S. borrowings and prime plus .25% for its Canadian revolving demand loan which was paid off on April 8, 2004 with the sale of the Canadian oil and gas assets. The Company had no floating rate debt outstanding under its $2 million U. S. credit line as of March 31, 2004. SUMMARY OF INDEBTNESS Long-term debt as of March 31, 2004 and December 31, 2003 consists of the following -

2004 2003 (Unaudited) --------------- -------------------- Mortgage notes payable $48,316,000 $53,824,000 Note payable - 2,700,000 Revolving demand loan 1,411,000 1,970,000 --------------- -------------------- Total 49,727,000 58,494,000 Less-Current portion 2,480,000 6,989,000 --------------- -------------------- Long term portion $47,247,000 $51,505,000 =============== ====================

The aggregate maturities of the long-term debt in each of the five years subsequent to March 31, 2004 and thereafter are - 2004 $ 2,480,000 2005 728,000 2006 775,000 2007 824,000 2008 871,000 Thereafter 44,049,000 ------------------ $49,727,000 ================== 15 Item 4- Controls and Procedures (a) Disclosure controls and procedures. As of the end of the Company's most recently completed fiscal quarter covered by this report, the Company carried out an evaluation, with the participation of the Company's management, including the Company's Chief Executive Officer and Chief Financial Officer, of the effectiveness of the Company's disclosure controls and procedures pursuant to Securities Exchange Act Rule 13a-15. Based upon that evaluation, the Company's Chief Executive Officer and Chief Financial Officer concluded that the Company's disclosure controls and procedures are effective in ensuring that information required to be disclosed by the Company in the reports that it files or submits under the Securities Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC's rules and forms. (b) Changes in internal controls over financial reporting. There have been no changes in the company's internal control over financial reporting that occurred during the Company's last fiscal quarter to which this report relates that have materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting. 16 PART II - OTHER INFORMATION Item 6 - Exhibits and Reports on Form 8-K Exhibit 31.1 Certification of Chief Executive Officer Pursuant to Section 302 of Sarbanes-Oxley Act Exhibit 31.2 Certification of Chief Financial Officer Pursuant to Section 302 of Sarbanes-Oxley Act Exhibit 32.1 Certification of Chief Executive Officer Pursuant to Section 906 of Sarbanes-Oxley Act Exhibit 32.2 Certification of Chief Financial Officer Pursuant to Section 906 of Sarbanes-Oxley Act The Company has filed the following Form 8-K for the quarter ended March 31, 2004.

Date of Report (Date of Earliest Event) Filing Dates Subject ------------------------ ------------ ------- March 17, 2004 March 17, 2004 Item 9 - Press release announcing the Company's definitive agreement to sell its United States oil and gas business. March 30, 2004 March 31, 2004 Item 9 - Press release announcing the Company's results of its fiscal 2003 fourth quarter and full year operations. March 31, 2004 April 15, 2004 Item 2- The Company reported the completion of the sale of 11 real estate properties in Jersey City, New Jersey. April 8, 2004 April 8, 2004 Item 9 - Press release announcing the Company's sale of its Canadian oil and gas business. April 23, 2004 April 26, 2004 Item 9- Press release announcing the Company's sale of its U. S. oil and gas business. April 29, 2004 April 29, 2004 Item 9- Press release announcing the employment of a new executive officer.

17 S I G N A T U R E S Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. WILSHIRE ENTERPRISES, INC. -------------------------- Registrant) Date: May 17, 2004 /s/ S. Wilzig Izak ------------------ By: S. Wilzig Izak Chairman of the Board and Chief Executive Officer /s/ Philip G. Kupperman ----------------------- By: Philip G. Kupperman President and Chief Financial Officer