-----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, OGdKSvzCPEA/i7hj+FzXHgvjc4UUGxfEY1y/iv1zS+Xa4wb+hvRnac2pdV53MFm9 nvpdDf5RqKLZruD9JJiqfA== 0000082788-97-000005.txt : 19970514 0000082788-97-000005.hdr.sgml : 19970514 ACCESSION NUMBER: 0000082788-97-000005 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19970331 FILED AS OF DATE: 19970513 SROS: AMEX FILER: COMPANY DATA: COMPANY CONFORMED NAME: REFAC TECHNOLOGY DEVELOPMENT CORP CENTRAL INDEX KEY: 0000082788 STANDARD INDUSTRIAL CLASSIFICATION: PATENT OWNERS & LESSORS [6794] IRS NUMBER: 131681234 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-12776 FILM NUMBER: 97602966 BUSINESS ADDRESS: STREET 1: 122 EAST 42ND ST STE 4000 CITY: NEW YORK STATE: NY ZIP: 10168 BUSINESS PHONE: 2126874741 MAIL ADDRESS: STREET 2: 122 EAST 42ND ST STE 4000 CITY: NEW YORK STATE: NY ZIP: 10168 FORMER COMPANY: FORMER CONFORMED NAME: RESOURCES & FACILITIES CORP DATE OF NAME CHANGE: 19740509 FORMER COMPANY: FORMER CONFORMED NAME: REFAC INC DATE OF NAME CHANGE: 19720628 10-Q 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Quarter Ended March 31, 1997 Commission File Number 0-7704 REFAC TECHNOLOGY DEVELOPMENT CORPORATION (Exact name of registrant as specified in its charter) Delaware 13-1681234 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 122 East 42nd Street, New York, New York 10168 (Address of principal executive offices)(Zip Code) Registrant's telephone number, including area code: (2l2) 687-4741 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 The number of shares outstanding of the Registrant's Common Stock, par value $.10 per share, as of May 1, 1997 was 3,629,387. Page 1 REFAC TECHNOLOGY DEVELOPMENT CORPORATION INDEX Page Part I. Financial Information Condensed Consolidated Balance Sheets March 31, 1997 (unaudited) and December 31, 1996 3 Condensed Consolidated Statements of Operations Three Months Ended March 31, 1997 and 1996 (unaudited) 4 Condensed Consolidated Statements of Cash Flows Three Months Ended March 31, 1997 and 1996 (unaudited) 5 Notes to Condensed Consolidated Financial Statements 6 Management's Discussion and Analysis of Financial Conditions and Results of Operations 7-8 Part II. Other Information 8 Page 2 REFAC TECHNOLOGY DEVELOPMENT CORPORATION CONDENSED CONSOLIDATED BALANCE SHEETS
MAR. 31 DEC.31 ASSETS 1997 1996 Current Assets (UNAUDITED) * Cash and cash equivalents $1,131,895 $15,412,077 Marketable securities 0 2,298,298 Royalties receivable 1,005,570 785,204 Accounts receivable, net 73,021 78,156 Prepaid expenses 82,365 70,369 Total current assets 2,292,851 18,644,104 Property and equipment, net 164,151 159,403 Securities acquired in association with licensing activities 21,497,413 22,891,653 Other assets 1,492,465 1,974,418 $25,446,880 $43,669,578 LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities Accounts payable $123,794 $125,578 Accrued expenses 326,240 435,959 Amounts payable under license agreements 205,430 268,235 Dividends payable 0 2,700,943 Income taxes payable 178,474 131,988 Total current liabilities 833,938 3,662,703 Deferred income taxes 6,684,125 7,125,217 Other liabilities-deferred compensation 445,058 445,058 Minority interest 5,417 17,301 Stockholders' Equity Common stock, $.10 par value 540,440 540,189 Additional paid-in-capital 9,259,128 9,251,182 Retained earnings 9,538,976 8,699,265 Unrealized gain on securities acquired in association with licensing activities, net of taxes 12,819,963 13,735,650 Cumulative translation adjustment 194,697 193,013 Treasury stock, at cost (14,874,862) 0 $25,446,880 $43,669,578 *Derived from audited financial statements See accompanying notes to the condensed consolidated financial statements Page 3
REFAC TECHNOLOGY DEVELOPMENT CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
Three months ended Mar. 31 1997 1996 Revenues Service revenues $873,225 $759,088 Gains on securities acquired in association with licensing activities 724,573 1,599,358 Dividends from securities acquired in association with licensing activities 157,080 151,620 Sales 44,140 119,852 Total revenues 1,799,018 2,629,918 Cost and Expenses Service expenses 185,872 168,008 Selling, general and administrative expenses 540,052 445,648 Cost of goods sold 38,195 65,160 Total operating expenses 764,119 678,816 Operating income 1,034,899 1,951,102 Other income and expenses Gain on marketable securities transactions 19,264 7,913 Net change in unrealized (losses) gains on marketable securities 0 (110,349) Dividend and interest income 99,288 199,250 Gains (losses) from foreign currency transactions 10,638 149 Income before provision for taxes on income and minority interest 1,164,089 2,048,065 Provision for taxes on income 336,262 630,153 Income before minority interest 827,827 1,417,912 Minority interest in subsidiary loss 11,884 5,326 Net income $839,711 $1,423,238 Earnings per common share $0.22 $0.27 Weighted average number of shares outstanding 3,745,220 5,301,887 See accompanying notes to the condensed consolidated financial statements Page 4
REFAC TECHNOLOGY DEVELOPMENT CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
Three months ended Mar. 31 1997 1996 Cash Flows from Operating Activities Net income $839,711 $1,423,238 Adjustment to reconcile net income to net cash provided by (used in) operating activities: Depreciation and amortization 29,403 25,774 Accretion of premium on U.S. Treasury Bills 0 375 Net gain on sale of securities (724,520) (1,607,271) Net change in unrealized loss (gain) on marketable securities (26,379) 110,349 Deferred income taxes 33,603 (73,607) (Increase) decrease in assets: Royalties receivable (220,366) 149,729 Accounts receivable 5,135 6,094 Prepaid expenses (11,996) (54,166) Proceeds from sales of marketable securities 2,324,677 470,485 Purchase of marketable securities 0 (853,428) Other assets 474,659 (105,762) Increase (decrease) in liabilities: Accounts payable and accrued expenses (123,387) (225,109) Amounts payable under service agreements (62,805) (4,359) Income taxes payable 46,486 713,422 Net cash provided by (used in) operating activities 2,584,221 (24,236) Cash Flows from Investing Activities Proceeds from sales of securities acquired in association with licensing activities 731,356 1,637,899 Proceeds from maturity of investments being held to maturity 0 230,585 Purchase of investments being held to maturity 0 (1,199,594) Additions to property and equipment (26,857) (21,332) Net cash provided by investing activities 704,499 647,558 Cash Flows from Financing Activities Proceeds from exercise of stock options 5,219 4,750 Proceeds from short-term borrowings 815,828 0 Repayment of short-term borrowings (815,828) 0 Dividends paid (2,700,943) 0 Acquisition of treasury stock (14,874,862) 0 Net cash (used in) provided by financing activities (17,570,586) 4,750 Effect of exchange rate changes on cash 1,684 (34,055) Net (decrease) increase in cash and cash equivalents (14,280,182) 594,017 Cash and cash equivalents at beginning of period 15,412,077 893,744 Cash and cash equivalents at end of period $1,131,895 $1,487,761 See accompanying notes to the condensed consolidated financial statements Page 5
REFAC TECHNOLOGY DEVELOPMENT CORPORATION Notes to Condensed Consolidated Financial Statements 1. In the opinion of management, the accompanying unaudited condensed consolidated financial statements contain all adjustments (all of which were normal recurring adjustments) necessary to present fairly the consolidated financial position of REFAC Technology Development Corporation (the "Company") at March 31, 1997 and December 31, 1996, and the results of its operations and its cash flows for the three month interim period presented. The accounting policies followed by the Company are set forth in Note l to the Company's consolidated financial statements in the Company's Annual Report on Form 10-K for the year ended December 31, 1996, which is incorporated herein by reference. 2. The results of operations for the quarter ended March 31, 1997 are not necessarily indicative of the results to be expected for the full year. 3. In accordance with SFAS No. 115, the Company categorizes and accounts for its investment holdings as follows: Trading securities are securities bought and held for the purpose of selling them in the near term. Unrealized gains and losses are included in current period earnings. Held to maturity securities are measured at amortized cost. This categorization is permitted only if the Company has the positive intent and ability to hold these securities to maturity. Available for sale securities are securities which do not qualify as either held to maturity or trading securities. Unrealized gains and losses are reported as a separate component of stockholders' equity, net of applicable deferred income taxes on such unrealized gains and losses at current income tax rates. The Company's investments in securities acquired in association with licensing activities fall into this category. Page 6 REFAC TECHNOLOGY DEVELOPMENT CORPORATION Management's Discussion and Analysis of Financial Condition and Results of Operations Results of Operations Total operating revenues decreased by $831,000 for the three months ended March 31, 1997 as compared to the corresponding period in 1996. Service revenues accounted for 49% and 29% of operating revenues for the three months ended March 31, 1997 and 1996, respectively. Income (realized gains on sales and dividend income) from licensing related securities accounted for 49% and 67% of operating revenues for the three months ended March 31, 1997 and 1996, respectively. The decrease in gains from licensing related securities is principally due to the decrease in the number of shares sold in the current period versus the corresponding period of 1996. The Company intends from time to time to sell some of such securities. Service revenues increased by $114,000 for the three months ended March 31, 1997 from the corresponding period in 1996. This change largely resulted from an increase in non-recurring license revenues. Service revenues consisted of recurring service revenues (89%) and non-recurring service revenues (11%) for the three months ended March 31, 1997. Service expenses represents payments to licensors under contractually stipulated terms, and hence tend to increase or decrease as a function of service revenues. Also included in service expenses are various other costs directly related to the development, maintenance, and enforcement of patent and licensing programs, notably legal and other external professional fees, and costs associated with patent research, upkeep and amortization. Service expenses as a percentage of service revenues decreased from 22% in the three month period of 1996 to 21% in the corresponding period of the current year. Selling, general, and administrative expenses increased $94,000 for the three month period of 1997 versus the comparable period of 1996, primarily due to increased compensation and additional staff members. Additionally, the increase is due to public relation fees and the timing of, and recognition of certain corporate expenses. For the three months ended March 31, 1997 the Company had realized gains on its marketable securities of $19,000 as compared to realized gains of $8,000 and unrealized losses of $110,000 for the corresponding period of 1996. The loss in 1996 was principally attributable to the adverse impact that rising interest rates had on the value of the Company's investment in preferred stocks and governmental agency bonds. Page 7 REFAC TECHNOLOGY DEVELOPMENT CORPORATION Management's Discussion and Analysis of Financial Condition and Results of Operations (Continued) Dividend and interest income decreased by $100,000 for the three months ended March 31, 1997 from the corresponding period in 1996. The year-to-date decrease in dividends and interest income relates to a reduction in the value of marketable securities owned by the company at during the quarter ended March 31, 1997 versus the corresponding period of 1996. The Company's income from technology transfer operations has not in the past been materially affected by inflation. Likewise, while currency fluctuations can influence service revenues, the diversity of foreign income sources tends to offset individual changes in currency valuations. Liquidity and Capital Resources On January 6, 1997 the Company completed the purchase of 1,775,000 shares of common stock from Eugene M. Lang, its Chairman and former Chief Executive Officer, and the Eugene M. Lang Foundation at $8.25 per share or an aggregate of $14,643,750, and paid a $.50 per share dividend to shareholders of record as of December 23, 1996. These two transactions reduced the cash, cash equivalents and marketable securities from $17,710,000 to $1,132,000. In addition, the Company's long-term investment portfolio had a market value of approximately $21,500,000 at March 31, 1997. On March 31, 1997, the Company had no long-term debt. Other than the commitment under the lease for its principal office, and the commitment for office and lab facilities of Advanced Resin Technology, Inc., and Mr. Lang's retirement agreement (which has been provided for), the Company has no significant commitments. The Company believes its liquidity position is more than adequate to meet all current and projected financial needs. Part II. Other Information Item 1. Legal Proceedings Patlex - The Company's judgement for $205,609 against Patlex Corporation was affirmed by the United States Court of Appeals. Item 6. Exhibit and Reports on Form 8-K (a) See exhibit index attached hereto. (b) Reports on Form 8-K filed during the quarter: None Page 8 Signatures Pursuant to the requirements of Section 13 or 15 (d) of the Securities Exchange Act of 1934, the Company has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. REFAC Technology Development Corporation May 13, 1997 /s/Robert L. Tuchman Robert L. Tuchman, President and Chief Executive Officer May 13, 1997 /s/Robert Rescigno Robert Rescigno, Treasurer and Chief Accounting Officer EXHIBIT INDEX Exhibit Page No. No. 28 Note 1 to the Company's Consolidated financial statements contained in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1996 is incorporated herein by reference. Page 10 EX-27 2 ARTICLE 5 FIN. DATA SCHEDULE FOR 1ST QTR. 10-Q
5 1 DEC-31-1997 JAN-01-1997 MAR-31-1997 3-MOS 1131895 21497413 1089452 10861 41607 2292851 348071 183920 25446880 833938 0 0 0 540440 16937902 25446880 873225 1799018 185872 764119 (129190) 0 0 1164089 336262 827827 0 0 0 839711 .22 .22 -----END PRIVACY-ENHANCED MESSAGE-----