-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, UGiLp2OLv1KiJmOU/M2DsiYWX2tiAV+nF90/Ed/7YSiTKzPpd2myPykC4FJN8rGq /mttb0bFi6DaPxHXZjRVFQ== 0000082788-95-000002.txt : 19950606 0000082788-95-000002.hdr.sgml : 19950606 ACCESSION NUMBER: 0000082788-95-000002 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19950331 FILED AS OF DATE: 19950605 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: 000-07704 FILM NUMBER: 95544947 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, 1995 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, 1995 was 5,317,987. REFAC TECHNOLOGY DEVELOPMENT CORPORATION INDEX Page Part I. Financial Information Condensed Consolidated Balance Sheets March 31, 1995 and December 31, 1994 3 Condensed Consolidated Statements of Operations Three Months Ended March 31, 1995 and 1994 (unaudited) 4 Condensed Consolidated Statements of Cash Flows Three Months Ended March 31, 1995 and 1994 (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 9 Page 2 REFAC TECHNOLOGY DEVELOPMENT CORPORATION CONDENSED CONSOLIDATED BALANCE SHEETS
MAR. 31 DEC. 31 ASSETS 1995 1994 Current Assets (UNAUDITED) * Cash and cash equivalents $646,870 $5,641,885 Marketable securities 2,680,930 2,591,415 Investments being held to maturity 6,097,806 1,168,698 Accounts receivable 948,909 906,369 Prepaid income taxes and other 26,748 228,617 Total current assets 10,401,263 10,536,984 Property and equipment, net 100,855 109,316 Securities acquired in association with licensing activities 21,187,478 19,431,753 Investments being held to maturity 4,892,436 4,490,436 Other assets 908,715 940,977 $37,490,747 $35,509,466 LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities Accounts payable 23,797 22,542 Accrued expenses 601,022 647,918 Amounts payable under service agreements 427,458 611,756 Total current liabilities 1,052,277 1,282,216 Deferred income taxes 6,569,393 5,992,629 Stockholders' Equity Common stock, $.10 par value 531,799 533,799 Additional paid in capital 8,991,439 9,131,939 Retained earnings 7,519,214 7,006,127 Unrealized gain on securities acquired in association with licensing activities, net of taxes 12,472,955 11,300,883 Cumulative translation adjustment 353,670 261,873 Total stockholders' equity 29,869,077 28,234,621 $37,490,747 $35,509,466 *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, 1995 1994 Revenues Service revenues $980,709 $1,102,624 Gains on securities acquired in association with licensing activities 152,968 1,295,786 Total revenues 1,133,677 2,398,410 Costs and Expenses Service expenses 255,249 383,217 Selling, general and administrative expenses 387,669 383,019 Total operating expenses 642,918 766,236 Operating income 490,759 1,632,174 Other income and expenses Gain on marketable securities transactions 4,048 49,223 Net change in unrealized gains (losses) on marketable securities 81,913 (964,387) Dividend and interest income 213,672 270,408 Loss from foreign currency transactions (52,207) (7,780) Income before provision for taxes on income and cumulative effect of accounting change 738,185 979,638 Provision for taxes on income 224,951 310,487 Income before cumulative effect of accounting change 513,234 669,151 Cumulative effect of change in accounting for marketable securities, net of taxes 0 245,520 Net income $513,234 $914,671 Earnings per common share Income before cumulative effect of accounting change $0.10 $0.13 Cumulative effect of change in accounting for marketable securities 0.00 0.05 Net income $0.10 $0.18 Weighted average number of shares outstanding 5,337,320 5,331,987 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, 1995 1994 Cash Flows From Operating Activities Net income $513,234 $914,671 Adjustments to reconcile net income to net cash (used in) provided by operating activities Cumulative effect of accounting change 0 (245.520) Depreciation and amortization 19,589 16,403 Amortization of discount on U.S. Treasury Bills (73,283) 0 Net gain on sale of securities (157,016) (1,345,009) Net change in unrealized (gain) loss on marketable securities (81,913) 964,387 Deferred income taxes 23,950 (322,473) (Increase) decrease in assets: Accounts receivable (42,540) 83,107 Prepaid income taxes and other (201,869) 0 Proceeds from sale of marketable securities 337,603 1,756,897 Purchase of marketable securities (345,924) (1,646,414) Other assets 21,134 83,530 Increase (decrease) in liabilities: Accounts payable and accrued expenses (45,641) 59,121 Amounts payable under service agreements (184,298) 363,996 Income taxes payable 0 (316,953) Net cash (used in) provided by operating activities (216,974) 365,743 Cash Flows From Investing Activities Proceeds from sales of securities acquired in association with licensing activities 173,386 1,364,529 Proceeds from maturity of investments being held to maturity 4,430,000 0 Purchase of investments being held to maturity (9,269,087) 0 Additions to property and equipment 0 (1,006) Net cash (used in) provided by investing activities (4,665,701) 1,363,523 Cash Flows From Financing Activities Acquisition and retirement of common stock (142,500) 0 Net cash used in financing activities (142,500) 0 Effect of exchange rate changes on cash 30,160 74,850 Net (decrease) increase in cash and cash equivalents(4,995,015) 1,804,116 Cash and cash equivalents at beginning of period 5,641,885 939,818 Cash and cash equivalents at end of period $646,870 $2,743,934 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, 1995 and December 31, 1994, 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, 1994, which is incorporated herein by reference. 2. The results of operations for the quarter ended March 31, 1995 are not necessarily indicative of the results to be expected for the full year. 3. In accordance with SFAS No. 115, which was adopted January 1, 1994, 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. The Company's investment in marketable securities (principally holdings in preferred stocks and government agency bonds) falls into this category. 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. The Company's investments in U.S. Treasury Bills and Notes fall into this category. 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. Such securities at March 31, 1995 consisted of 337,842 shares of Three-Five Systems, Inc. (which trades on the New York Stock Exchange under the symbol TFS) and 798,000 shares of AutoFinance Group, Inc. (which trades on the NASDAQ under the symbol AUFN). These securities are recorded at quoted market value without a discount which might be associated with such large blocks of shares. Page 6 REFAC TECHNOLOGY DEVELOPMENT CORPORATION Management's Discussion and Analysis of Financial Conditions and Results of Operations Results of Operations Total operating revenues decreased $1,265,000 for the three months ended March 31, 1995 as compared to the corresponding period in 1994. Service revenue accounted for 87% and 46% of operating revenues for the three months ended March 31, 1995 and 1994, respectively. Gains on sales of securities acquired in association with licensing activities accounted for 13% and 54% of operating revenues for the three months ended March 31, 1995 and 1994, respectively. The decrease in gains on sales of securities acquired in association with licensing activities is due to a decrease in the number of shares sold in the current period versus the corresponding period of 1994. As deemed in the Company's interest and as future market conditions permit, the Company intends from time to time to sell part of the portfolio of such securities. Service revenues decreased $122,000 for the three months ended March 31, 1995 from the corresponding period in 1994. The change largely resulted from a decline in recurring revenues due to lower sales volume reported by its existing customers. Recurring service revenues from established licensing relationships represented approximately 87% of service revenues for the three months ended March 31, 1995, as compared to 92% in the same period of 1994. Non-recurring service revenue increased $12,000 or approximately 10% from the corresponding period in 1994. Non-recurring service revenue is recognized upon the completion of new, single-payment license agreements, the timing of completing such agreements being dependent upon a number of factors. 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 35% in the three month period of 1994 to 26% in the corresponding period of the current year. The decrease in this ratio is attributable to the percentage increase in recurring service revenues which do not have a corresponding service expense associated with such revenue, relative to the increase in non recurring service revenues which bear a higher rate of service expense than recurring service revenues. Selling, general, and administrative expenses increased $4,700 for the three month period of 1995 versus the comparable period of 1994. This increase includes an increase in compensation costs, and various administrative expenses partially offset by a decrease in professional fees. Page 7 REFAC TECHNOLOGY DEVELOPMENT CORPORATION Management's Discussion and Analysis of Financial Conditions and Results of Operation Other Income and Expenses For the three months ended March 31, 1995 the Company had gains on its marketable securities of $86,000 consisting of realized gains of $4,000 as compared to gains of $49,000 for the corresponding period of 1994 and unrealized gains of $82,000 as compared to unrealized losses of $964,000 for the corresponding period of 1994. The increase was due to the Company's change of investment strategy from investing primarily in preferred stocks to investing primarily in U.S. Government bonds, which has a much more stable market price than preferred stocks. Dividend and interest income decreased by $58,000 for the three months ended March 31, 1995 from the corresponding period in 1994. Dividend and interest income consist of investment income from the Company's portfolio of marketable securities. The year-to-date decline reflects a change in the portfolio strategy, shifting resources from preferred stocks to U.S. Treasury Bills and Notes, which generate less dividends and interest income but are generally subject to less market risk. The technology transfer operations are generally not directly affected by inflation. Liquidity and Capital Resources The Company's liquidity position at March 31, 1995 included cash and cash equivalents of approximately $647,000 and publicly-traded securities and U.S. Treasury Bills and Notes having a market value of over $13,671,000 Additionally, the Company's long-term investment portfolio had a market value of over $21,187,000 at March 31, 1995. This represented an increase of approximately $1,756,000 from the value at December 31, 1994. Approximately $1,172,000 of this difference is reflected as an increase to stockholders' equity. On March 31, 1995, the Company had no non-current debt. Other than the commitment under the headquarters premises lease, the Company has no significant commitments. The Company believes its liquidity position is more than adequate to meet all current and projected financial needs. Swarthmore College offered the Company 20,000 shares of the Company's stock for repurchase. In accordance with the Company's stock repurchase plan, the shares offered by Swarthmore College were repurchased at the then current market price. Eugene M. Lang, Chairman and Chief Executive Officer of the Corporation, and Neil R. Austrian, a Director of the Corporation, are Chairman Emeritus and Chairman of the Board of Managers, respectively, of Swarthmore College. Page 8 Part II. Other Information 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 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 12, 1995 Eugene M. Lang E. M. Lang, Chairman and Chief Executive Officer May 12, 1995 Robert Rescigno Robert Rescigno, Controller and Principal Accounting and Financial Officer Page 9 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, 1994 is incorporated herein by reference. EX-27 2 ARTICLE 5 FIN. DATA SCHEDULE FOR 1ST QTR. 10-Q
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