-----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, MX2xs2TPC07VWuhRMvJAiVjTVqF4MFVDx2PZjVYripVttrOHftnD15RXuk23fmIb CDLoGaxH+7965l92fZLW8Q== 0000082788-96-000004.txt : 19960518 0000082788-96-000004.hdr.sgml : 19960518 ACCESSION NUMBER: 0000082788-96-000004 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19960331 FILED AS OF DATE: 19960516 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: 96568132 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, 1996 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, 1996 was 5,301,887. REFAC TECHNOLOGY DEVELOPMENT CORPORATION INDEX Page Part I. Financial Information Condensed Consolidated Balance Sheets March 31, 1996 and December 31, 1995 3 Condensed Consolidated Statements of Operations Three Months Ended March 31, 1996 and 1995 (unaudited) 4 Condensed Consolidated Statements of Cash Flows Three Months Ended March 31, 1996 and 1995 (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 1996 1995 Current Assets (UNAUDITED) * Cash and cash equivalents $1,487,761 $893,744 Marketable securities 5,533,032 5,276,302 Investments being held to maturity 4,797,001 5,245,365 Accounts receivable 1,134,881 1,290,704 Prepaid expenses and other 68,438 14,272 Total current assets 13,021,113 12,720,387 Property and equipment, net 106,646 151,165 Securities acquired in association with licensing activities 21,299,831 21,551,772 Investments being held to maturity 3,188,996 1,766,993 Other assets 1,340,761 1,162,114 $38,957,347 $37,352,431 LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities Accounts payable 30,161 232,924 Accrued expenses 375,561 397,907 Amounts payable under service agreements 351,751 356,110 Income taxes payable 1,178,311 464,889 Total current liabilities 1,935,784 1,451,830 Deferred income taxes 6,644,370 6,816,020 Minority interest 39,522 0 Stockholders' Equity Common stock, $.10 par value 530,189 529,989 Additional paid in capital 8,875,274 8,870,724 Retained earnings 8,123,882 6,700,644 Unrealized gain on securities acquired in association with licensing activities, net of taxes 12,572,546 12,713,389 Cumulative translation adjustment 235,780 269,835 Total stockholders' equity 30,337,671 29,084,581 $38,957,347 $37,352,431 *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, 1996 1995 Revenues Service revenues $759,088 $980,709 Gains on securities acquired in association with licensing activities 1,599,358 152,968 Dividends from securities acquired in association with licensing activities 151,620 0 Sales 119,852 40,943 Total revenues 2,629,918 1,174,620 Costs and Expenses Service expenses 168,008 269,127 Selling, general and administrative expenses 445,648 387,669 Cost of goods sold 65,160 27,065 Total operating expenses 678,816 683,861 Operating income 1,951,102 490,759 Other income and expenses Gain on marketable securities transactions 7,913 4,048 Net change in unrealized (losses) gains on marketable securities (110,349) 81,913 Dividend and interest income 199,250 213,672 Gains (losses) from foreign currency transactions 149 (52,207) Income before provision for taxes on income and minority interest 2,048,065 738,185 Provision for taxes on income 630,153 224,951 Income before minority interest 1,417,912 513,234 Minority interest 5,326 0 Net income $1,423,238 $513,234 Earnings per common share Net income $0.27 $0.10 Weighted average number of shares outstanding 5,301,887 5,337,320 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, 1996 1995 Cash Flows From Operating Activities Net income $1,423,238 $513,234 Adjustments to reconcile net income to net cash (used in) provided by operating activities Depreciation and amortization 25,774 19,589 Accretion of premium (discount) on U.S. Treasury Bills 375 (73,283) Net gain on sale of securities (1,607,271) (157,016) Net change in unrealized loss (gain) on marketable securities 110,349 (81,913) Deferred income taxes (73,607) 23,950 (Increase) decrease in assets: Accounts receivable 155,823 (42,540) Prepaid expenses and other (54,166) (201,869) Proceeds from sale of marketable securities 470,485 337,603 Purchase of marketable securities (853,428) (345,924) Other assets (105,762) 21,134 Increase (decrease) in liabilities: Accounts payable and accrued expenses (225,109) (45,641) Amounts payable under service agreements (4,359) (184,298) Income taxes payable 713,422 0 Net cash used in operating activities (24,236) (216,974) Cash Flows From Investing Activities Proceeds from sales of securities acquired in association with licensing activities 1,637,889 173,386 Proceeds from maturity of investments being held to maturity 230,585 4,430,000 Purchase of investments being held to maturity (1,199,594) (9,269,087) Additions to property and equipment (21,332) 0 Net cash provided by (used in) investing activities 647,558 (4,665,701) Cash Flows From Financing Activities Proceeds from exercise of stock options 4,750 0 Acquisition and retirement of common stock 0 (142,500) Net cash provided by (used in) financing activities 4,750 (142,500) 0 Effect of exchange rate changes on cash (34,055) 30,160 Net increase (decrease) in cash and cash equivalents 594,017 (4,995,015) Cash and cash equivalents at beginning of period 893,744 5,641,885 Cash and cash equivalents at end of period $1,487,761 $646,870 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, 1996 and December 31, 1995, 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, 1995, which is incorporated herein by reference. 2. The results of operations for the quarter ended March 31, 1996 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. 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, 1996 consisted of 332,842 shares of Three-Five Systems, Inc. (which trades on the New York Stock Exchange under the symbol TFS) and 399,000 shares of KeyCorp (which trades on the NYSE under the symbol KEY) and 49,750 shares of Patlex Corporation (which trades on the NASDAQ under the symbol PTLX). Page 6 REFAC TECHNOLOGY DEVELOPMENT CORPORATION Management's Discussion and Analysis of Financial Conditions and Results of Operations Results of Operations Total operating revenues increased $1,455,000 for the three months ended March 31, 1996 as compared to the corresponding period in 1995. Service revenue accounted for 29% and 83% of operating revenues for the three months ended March 31, 1996 and 1995, respectively. Investment income (gains and dividends) from securities acquired in association with licensing activities accounted for 67% and 13% of operating revenues for the three months ended March 31, 1996 and 1995, respectively. The increase in investment income from securities acquired in association with licensing activities is principally due to the increase in revenues from shares sold in the current period versus the corresponding period of 1995. 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. The increase in sales, which totalled 4% of total revenues in the first three months of 1996 and 1995, is principally related to sales of product by Advanced Resin Technology, Inc. ("ART"). In December 1995, the Company acquired a controlling interest in ART, a manufacturer of a patented line of thermoplastic polyurethane hot melt adhesives and elastomers. Service revenues decrease $222,000 for the three months ended March 31, 1996 from the corresponding period in 1995. The changes largely resulted from a decrease of non-recurring revenues which are recognized upon the completion of new, single-payment license agreements. Recurring service revenues from established licensing relationships, which represented 100% of service revenues for the three months ended March 31, 1996, as compared to 87% in the same period of 1995, have remained relatively stable as compared to the corresponding period in 1995. 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 27% in the three month period of 1995 to 22% in the corresponding period of the current year. The decrease in this ratio is attributable to a decrease in non-recurring recurring licensing revenue. Selling, general and administrative expenses increased $58,000 for the three month period of 1996 versus comparable period of 1995. this increase is principally due to the recent acquisition of an 87% interest in ART. The selling, general and administrative expenses of ART totalled approximately $91,000 for the first quarter of 1996. Page 7 REFAC TECHNOLOGY DEVELOPMENT CORPORATION Management's Discussion and Analysis of Financial Condition and Results of Operation (Continued) For the three months ended MArch 31, 1996, the Company had losses on its marketable securities of $102,000 consisting of realized gains of $8,000 and unrealized losses of $110,000 as compared to realized gains of $4,000 and unrealized gains of $82,000 for the corresponding period of 1995. 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. Dividends and interest income decrease by $14,000 for the three months ended March 31, 1996 from the corresponding period in 1995. Dividend and interest income consist of investment income from the Company's portfolio of marketable securities. The year-to-date decrease in dividends and interest income relates to the amount of income producing assets owned by the Company at March 31, of the respective years. 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 The Company's liquidity position at March 31, 1996, included cash and cash equivalents of approximately $1,488,000 and publicly-traded securities and U.S. Treasury Bills and Notes having a market value of over $13,519,000. In addition the Company's long-term investment portfolio had a market value of approximately $21,300,000 at March 31, 1996. On March 31, 1996, the Company had no lon-term debt. Other than the commitment under the lease for its principal office, 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 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 15, 1996 Eugene M. Lang E.M. Lang, Chairman and Chief Executive Officer May 15, 1996 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, 1995 is incorporated herein by reference. Page 10 EX-27 2 ARTICLE 5 FIN. DATA SCHEDULE FOR 1ST QTR. 10-Q
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