-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Gfurm+mm0nzGeJGmJM9d73Tbee9sm/VK6c3L30RrdP+LOcXGFmNWd+lrOEIrrdMV BuLf7fQUDR6x26VcqOK2JQ== 0000893220-96-000795.txt : 19960619 0000893220-96-000795.hdr.sgml : 19960619 ACCESSION NUMBER: 0000893220-96-000795 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19960331 FILED AS OF DATE: 19960514 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: PATLEX CORP CENTRAL INDEX KEY: 0000076057 STANDARD INDUSTRIAL CLASSIFICATION: 6794 IRS NUMBER: 231883421 STATE OF INCORPORATION: PA FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: 10QSB SEC ACT: 1934 Act SEC FILE NUMBER: 000-09111 FILM NUMBER: 96564056 BUSINESS ADDRESS: STREET 1: 250 COTORRO CT CITY: LAS CRUCES STATE: NM ZIP: 88005 BUSINESS PHONE: 5055244050 MAIL ADDRESS: STREET 1: 250 COTORRO COURT CITY: LAS CRUCES STATE: NM ZIP: 88005 FORMER COMPANY: FORMER CONFORMED NAME: PANELRAMA CORP DATE OF NAME CHANGE: 19800513 10QSB 1 FORM 10-QSB PATLEX CORPORATION 1 U.S. SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-QSB (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, 1996 ( ) 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 0-9111 ---------------------- PATLEX CORPORATION ----------------------------------------------------------------------- (EXACT NAME OF SMALL BUSINESS ISSUER AS SPECIFIED IN ITS CHARTER) PENNSYLVANIA 23-1883421 --------------------------------- ------------------------------------- (State or other jurisdiction (IRS Employer Identification No.) of incorporation or organization) 250 Cotorro Court, Las Cruces, New Mexico 88005 ----------------------------------------------- (Address of principal Executive Offices) (505) 524-4050 ----------------------------------------------- (Issuer's telephone number) Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(3) of the Exchange Act during the past 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 --- --- The number of common shares outstanding as of April 2, 1996 was 2,529,049 Transitional Small Business Disclosure Form (Check one): Yes No X --- --- 2 PATLEX CORPORATION TABLE OF CONTENTS
PAGE PART I FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS Balance Sheets as of March 31, 1996 and June 30, 1995 ..................................... 3 Statements of Earnings for the Nine Months and Three Months Ended March 31, 1996 and 1995 ......................... 4 Statements of Cash Flows for the Periods Ended March 31, 1996 and 1995 ............................... 5 Statements of Stockholders Equity ............................. 6 Notes to Financial Statements ................................. 7 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS .......................... 8 PART II OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS ........................... 10 ITEM 2. CHANGES IN SECURITIES ....................... 11 ITEM 3. DEFAULTS UPON SENIOR SECURITIES ............................. 11 ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY-HOLDERS .................... 11 ITEM 5. OTHER INFORMATION ........................... 11 ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K ............................... 11 SIGNATURES ................................................................ 12
2 3 PATLEX CORPORATION BALANCE SHEETS (DOLLARS IN THOUSANDS)
MARCH 31, JUNE 30, 1996 1995 --------- ------- UNAUDITED ASSETS CURRENT ASSETS: Cash and cash equivalents $ 6,280 $ 3,703 Accounts and notes receivable, net of allowance for doubtful accounts of $200 167 916 Prepaid expenses 118 25 ------- ------- Total current assets 6,565 4,644 Property and equipment, net 381 391 Investment in patents, less accumulated amortization 14,438 15,771 ------- ------- Total assets $21,384 $20,806 ======= ======= LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES: Accounts payable, accrued expenses and other current liabilities $ 639 $ 369 Current portion of long-term debt 27 1,044 Due to other laser patents interest holders 1,470 1,612 Income taxes payable 626 237 ------- ------- Total current liabilities 2,762 3,262 Note payable to bank 224 243 Deferred income taxes 3,839 4,172 ------- ------- Total liabilities 6,825 7,677 ------- ------- STOCKHOLDERS' EQUITY: Preferred stock, $.10 par value. Authorized 1,000,000 shares; no shares issued or outstanding -- -- Common stock, $.10 par value. Authorized 10,000,000 shares; issued and outstanding, 2,527,049 shares at March 31 1996 and 1,000 shares at June 30, 1995 253 -- Capital in excess of par vlaue 12,876 13,129 Retained earnings 1,430 -- ------- ------- Total stockholders' equity 14,559 13,129 ------- ------- Total liabilities and stockholders' equity $21,384 $20,806 ======= =======
See accompanying notes 3 4 PATLEX CORPORATION STATEMENT OF EARNINGS (UNAUDITED) (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
THREE MONTHS NINE MONTHS ENDED ENDED MARCH 31, MARCH 31, ---------------------- --------------------- 1996 1995 1996 1995 ---- ---- ---- ---- Revenue: Laser patents royalties $ 1,810 $ 1,454 $ 5,473 $ 4,352 ------- ------- ------- ------- Costs and expenses: General and administrative 554 266 1,409 745 Amortization of patents 444 444 1,333 1,498 Depreciation 7 7 18 17 ------- ------- ------- ------- Total costs and expenses 1,005 717 2,760 2,260 ------- ------- ------- ------- Operating income 805 737 2,713 2,092 ------- ------- ------- ------- Other income (deductions): Interest income 82 31 205 94 Interest expense (28) (52) (86) (153) Other, net 4 4 11 13 ------- ------- ------- ------- Total other income (deductions), net 58 (17) 130 (46) ------- ------- ------- ------- Earnings before income taxes 863 720 2,843 2,046 Provision for income taxes (465) (315) (1,413) (903) ------- ------- ------- ------- Net earnings $ 398 $ 405 $ 1,430 $ 1,143 ======= ======= ======= ======= Net earnings per common share $ 0.14 $ 0.16 $ 0.69 $ 0.45 ======= ======= ======= ======= Weighted average number of common shares and common shares equivalents outstanding (In Thousands) 2,908 2,524 2,062 2,524 ======= ======= ======= =======
See accompanying notes 4 5 PATLEX CORPORATION STATEMENTS OF CASH FLOWS (UNAUDITED) (DOLLARS IN THOUSANDS)
NINE MONTHS NINE MONTHS ENDED ENDED MARCH 31, MARCH 31, 1996 1995 ----------- ----------- CASH FLOWS FROM OPERATING ACTIVITIES: Net earnings from operations $ 1,430 $ 1,143 Adjustments to reconcile net earnings to net cash proviced by operations: Depreciation 18 17 Amortization 1,333 1,498 Note discount 14 27 Change in operating assets and liabilities: Decrease in receivables, net of decrease in due to other laser patents interest holders 607 1,542 Increase in prepaid expenses (93) 40 Increase in all other current liabilities 270 20 Increase in income taxes payable 389 38 Decrease in deferred income taxes (333) (378) ------- ------- Net cash provided by operating activities 3,635 3,947 ------- ------- CASH FLOWS FROM INVESTING ACTIVITIES: Purchase of equipment (8) (12) ------- ------- CASH FLOWS FROM FINANCING ACTIVITIES: Repayment of debt (1,050) (1,050) Dividends paid to parent corporation ------ (2,500) ------- ------- Net cash used in financing activities (1,050) (3,550) ------- ------- Net increase in cash 2,577 385 Cash, beginning of period 3,703 1,700 ------- ------- Cash, end of period $ 6,280 $ 2,085 ======= ======= Supplemental cash flow information: Interest paid $ 74 $ 163 ======= ======= Income taxes paid $ 1,362 $ 1,190 ======= =======
See accompanying notes 5 6 PATLEX CORPORATION STATEMENTS OF STOCKHOLDERS' EQUITY Years ended June 30, 1994 and 1995 and nine months ended March 31, 1995 (Dollars in Thousands)
Common Stock Capital ----------------------- In excess of Retained Shares Amount Par Value Earnings Total --------- --------- --------- --------- --------- Balance, June 30, 1994 1,000 $ ------ $ 13,929 $ ------ 13,929 Net earnings ------ ------ ------ 1,700 1,700 Dividends paid ------ ------ (800) (1,700) (2,500) --------- --------- --------- --------- --------- Balance, June 30, 1995 1,000 $ ------ $ 13,129 $ ------ 13,129 Common stock distributed in connection with spin-off 2,523,388 $ 252 (252) ------ ------ Exercise of stock options 2,661 1 (1) ------ -------- Net earnings ------ ------ ------ 1,430 1,430 --------- --------- --------- --------- --------- Balance, Mar. 31, 1996 2,527,049 $ 253 $ 12,876 $ 1,430 $ 14,559 ========= ========= ========= ========= =========
See accompanying notes 6 7 PATLEX CORPORATION NOTES TO FINANCIAL STATEMENTS (UNAUDITED) PART I FINANCIAL STATEMENTS NOTE 1. BASIS OF PRESENTATION The accompanying interim financial statements reflect all adjustments which are, in the opinion of management, necessary for a fair statement of the results for the interim periods presented. Such adjustments consist solely of normal recurring accruals. Results for the interim periods are not necessarily indicative of results for a full year. On September 27, 1995, AutoFinance Group, Inc., a California corporation ("AFG"), as the then sole shareholder of Patlex Corporation (the "Company"), effected the distribution (the "Distribution") of 95.01% of the outstanding shares of the Company's Common Stock, par value $.10 per share (the "Common Stock"), to the holders of shares of common stock, no par value, of AFG. On September 27, 1995, AFG merged with and into Key Auto Inc. ("Key Auto"), an Ohio corporation and a wholly owned subsidiary of KeyCorp. Key Auto, as the successor to AFG, retained the 4.99% of the outstanding shares of the Company's Common Stock which were not distributed in the Distribution. As a consequence of the Distribution, the Company is an independent, public company. On February 7, 1996, the Company entered into a definitive merger agreement to acquire Database Technologies, Inc. of Pompano Beach, Florida ("DBT"). The merger is intended to be a tax-free reorganization in which the shareholders of DBT would receive a number of shares of Patlex Common Stock equal to 67% of the number of common shares in addition to one-half the number of Patlex options outstanding following the merger. Based on the current number of Patlex shares and options outstanding, DBT shareholders would hold approximately 66.8% of the shares outstanding after the merger. Database Technologies specializes in providing on-line access to data for law enforcement, insurance and other investigative industries. Consummation of the transaction is conditioned on, among other things, receipt of the necessary shareholder and regulatory approvals and filings with the Securities and Exchange Commission. 7 8 PART I FINANCIAL STATEMENTS (CONTINUED) NOTE 2. DIVIDENDS During the nine month period ending March 31, 1995, dividends totaling $2,500,000 or $2,500 per share were declared and paid to AFG. No dividends were declared or paid during the nine month period ended March 31, 1996. NOTE 3. NET EARNINGS PER SHARE Net earnings per share of common stock for the current year periods presented is computed by dividing net income for the period by the weighted average number of common shares outstanding during the period plus common stock equivalent shares issuable upon exercise of stock options using the treasury stock method. Pro forma net earnings per share for prior year periods presented is computed by giving effect to the number of shares of the Company's common stock which would have been outstanding had the distribution occurred one year earlier with no change in the number of shares outstanding occurring since that date. ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS LASER LICENSING ACTIVITY The Company has agreements with companies which represent a cross-section of the laser industry, including users and manufacturers. Under these agreements, approximately 142 licensees are paying royalties on a quarterly basis to the Company. The Company believes the majority of the commercial laser manufacturers making, using or selling infringing lasers in the United States have been licensed. CHANGE IN FINANCIAL CONDITION AND RESULTS OF OPERATIONS As of March 31, 1996, the Company had $6,280,000 in cash and cash equivalents as compared to $3,703,000 at June 30, 1995, an increase of $2,577,000. Net working capital increased to $3,803,000 as of March 31, 1996 from $1,382,000 as of June 30, 1995. Total assets increased by $578,000 from $20,806,000 to $21,384,000. Total liabilities decreased by $852,000 from $7,677,000 to $6,825,000 due primarily to the payment of short term debt. QUARTER ENDED MARCH 31, 1996 COMPARED TO THE QUARTER ENDED MARCH 31, 1995 Revenues from laser patent royalties increased to $1,810,000 from $1,454,000, an increase of $356,000 or 24% for the quarter ended March 31, 1996 as compared to the quarter ended March 31, 1995 The increase is primarily attributable to higher royalty revenues reported by several industrial laser manufacturers and the signing of a new licensee in the quarter, including approximately $89,000 for past infringement. 8 9 PART I FINANCIAL STATEMENTS (CONTINUED) ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS (CONTINUED) QUARTER ENDED MARCH 31, 1996 COMPARED TO THE QUARTER ENDED MARCH 31, 1995 (CONTINUED) General and Administrative expenses for the quarter ended March 31, 1996 increased to $554,000 from $266,000 for the quarter ended March 31, 1995, an increase of $288,000. The increase is primarily due to costs associated with the proposed DBT Merger as described herein (see Part I, Note 1 to Financial Statements). Net earnings for the quarter ended March 31, 1996 were $398,000 as compared to $405,000 for the corresponding quarter of the previous year, a decrease of $7,000 or 2%. The decrease in earnings is primarily attributable to expenses related to the DBT Merger in the amount of approximately $219,000. The provision for income taxes increased to $465,000 from $315,000 due to the non-deductibility of expenses for tax purposes for costs associated with the proposed DBT Merger and higher pretax earnings. NINE MONTHS ENDED MARCH 31, 1996 COMPARED TO THE NINE MONTHS ENDED MARCH 31, 1995 Revenues from laser patent royalties increased to $5,473,000 from $4,352,000, an increase of $1,121,000 or 26% for the nine months ended March 31, 1996 as compared to the nine months ended March 31, 1995. The increase is attributable to higher royalty revenues reported by the laser industry as a whole and the signing of three new licensees, which accounted for approximately $600,000 of the increase. General and Administrative expenses for the nine months ended March 31, 1996 increased to $1,409,000 from $745,000 for the nine months ended March 31, 1995, an increase of $664,000. The increase is primarily due to costs associated with the proposed DBT Merger as described herein (see Part I, Note 1 to Financial Statements) and spin-off costs associated with the AFG/KeyCorp transaction. These two non-recurring expenses totaled $527,000. Net earnings for the nine months ended March 31, 1996 were $1,430,000 as compared to $1,143,000 for the corresponding nine month period of the previous year, an increase of $287,000 or 25%. The increase is primarily attributable to higher royalties, as discussed above and a decrease of the patent amortization expense in the amount of $165,000, which is attributed to the expiration of the Optically Pumped Laser Patent in October 1994. The provision for income taxes increased to $1,413,000 from $903,000 or $510,000 due to higher pretax earnings and the non-deductibility of expenses associated with the proposed merger. 9 10 PART II OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS Due to the nature of the Company's business, especially its involvement in the enforcement of patent rights, the Company is frequently involved in litigation with alleged infringers of the Laser Patents. The Company regards all such lawsuits as occurring in the ordinary course of business. Furthermore, as a result of the involvement of the United States Patent and Trademark Office in granting and denying patent applications and in conducting re-examinations of patents, the Company has in the past been required to prosecute appeals of United States Patent and Trademark Office rulings adverse to the Company's interest to the United States District Court. No such appeals are pending at this time and the Company does not anticipate such appeals will be necessary in the future with regard to the Laser Patents. In connection with suits filed against alleged patent infringers to enforce a patent, defendants often file counterclaims seeking payment by the plaintiffs of any damages suffered by the defendants on account of the lawsuit and reimbursement by the plaintiffs of the defendant's costs and attorney's fees. While such counterclaims have been filed against the Company, to date the Company has not incurred liability with regard to such counterclaims. The Company may also be required to file suits to enforce collection and compliance under its patent license agreements with its current licensees. In July 1989, the Company instituted a civil action in the United States District Court, District of New Jersey, against JEC Lasers, Inc. ("JEC Lasers"). JEC Lasers was granted a license containing terms more favorable than terms in licenses granted by the Company to other licensees. The Company's complaint requested the court to declare the license agreement to be non-transferable, based on JEC Lasers' historical financial condition and insolvency, and enjoin the licensee from transferring the license agreement to another laser manufacturer. A trial was held in April 1994. The court ruled that JEC Lasers is not barred from transferring the license agreement as part of a business combination. A judgment embodying the court's ruling was entered in August 1994 which the Company appealed. The Court of Appeals affirmed the lower court's ruling. In November 1994, REFAC Financial Corporation ("REFAC") instituted a civil action in the United States District Court, Eastern District of Pennsylvania, alleging that Patlex improperly calculated the royalties due REFAC. The manner in which the royalty due REFAC are calculated has been consistent for more than six years. Patlex believes that the royalties due REFAC have been properly calculated and the REFAC's claim is both without merit and 10 11 PATLEX CORPORATION PART II OTHER INFORMATION (CONTINUED) ITEM 1. LEGAL PROCEEDINGS (CONTINUED) time-barred. On February 28, 1996, a special verdict adverse to Patlex was returned. No judgment has been entered on the verdict and Patlex's motion for judgment as a matter of law is pending. The amount of any judgment against Patlex in this action will be less than $225,000. Patlex intends to appeal any adverse judgment. ITEM 2. CHANGES IN SECURITIES In connection with the KeyCorp/AFG Merger and the Distribution of the Company's Common Stock, AFG shareholders of record on September 27, 1995 were entitled to receive one share of Patlex Common Stock for every eight shares of the AFG Common Stock owned on such date. As a result of the Distribution, 95.01% of the Company's Common Stock was distributed to AFG shareholders and 4.99% was retained by Key Auto as the surviving corporation in the merger. The effective date of the Distribution was September 27, 1995. As of April 2, 1996, a total of 2,529,049 common shares of Patlex Common Stock were outstanding. ITEM 3. DEFAULTS UPON SENIOR SECURITIES None to report. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY-HOLDERS None to report. ITEM 5. OTHER INFORMATION None to report. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits 27.1 Financial Data Schedule (b) Reports on Form 8-K Current Report on Form 8-K dated March 27, 1996 11 12 PATLEX CORPORATION SIGNATURES In accordance with the requirements of the Exchange Act, the Registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. PATLEX CORPORATION (Registrant) Date: May 14, 1996 By: /s/ Frank Borman --------------- ------------------ Frank Borman Chairman and CEO Date: May 14, 1996 By: /s/ Richard Laitinen --------------- ---------------------- Richard Laitinen Treasurer and CFO 12 EX-27.1 2 FINANCIAL DATA SCHEDULE - 9 MOS
5 1,000 U.S. DOLLARS 9-MOS JUN-30-1996 JUL-01-1995 MAR-31-1996 1 6,280 0 367 200 0 6,565 480 99 21,384 2,762 0 0 0 253 14,306 21,384 5,473 5,473 2,760 2,760 (216) 0 86 2,843 1,413 1,430 0 0 0 1,430 .69 .69
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