-----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, LxOKhAXaYkivooWwgtoi6rZZkdeDKiOhKmdSDrO8RQ0Q0jdvCHM5UOJ/jQiCT+hq ItCX8OPwo4Lr6hx0PslyfQ== 0000082788-96-000005.txt : 19960813 0000082788-96-000005.hdr.sgml : 19960813 ACCESSION NUMBER: 0000082788-96-000005 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19960630 FILED AS OF DATE: 19960812 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: 96608063 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 June 30, 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 August 1, 1996 was 5,301,887. REFAC TECHNOLOGY DEVELOPMENT CORPORATION INDEX Page Part I. Financial Information Condensed Consolidated Balance Sheets June 30, 1996 (unaudited) and December 31, 1995 3 Condensed Consolidated Statements of Operations Six and Three Months Ended June 30, 1996 and 1995 (unaudited) 4 Condensed Consolidated Statements of Cash Flows Six Months Ended June 30, 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 9 Page 2 REFAC TECHNOLOGY DEVELOPMENT CORPORATION CONDENSED CONSOLIDATED BALANCE SHEETS
JUNE 30 DEC. 31 ASSETS 1996 1995 Current Assets (UNAUDITED) * Cash and cash equivalents $1,474,970 $ 893,744 Marketable securities 6,423,125 5,276,302 Investments being held to maturity 6,213,499 5,245,365 Accounts receivable 1,109,317 1,290,704 Prepaid expenses 19,498 14,272 Total current assets 15,240,409 12,720,387 Property and equipment, net 142,229 151,165 Securities acquired in association with licensing activities 20,030,525 21,551,772 Investments being held to maturity 1,358,310 1,766,993 Other assets 1,339,002 1,162,114 $38,110,475 $37,352,431 LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities Accounts payable $50,407 $232,924 Accrued expenses 449,760 397,907 Amounts payable under service agreements 310,070 356,110 Income taxes payable 425,550 464,889 Total current liabilities 1,235,787 1,451,830 Deferred income taxes 6,200,543 6,816,020 Minority interest 32,050 0 Stockholder's Equity Common stock, $.10 par value 530,189 529,989 Additional paid in capital 8,875,274 8,870,724 Retained earnings 9,268,906 6,700,644 Unrealized gain on securities acquired in association with licensing activites, net of taxes 11,744,718 12,713,389 Cumulative translation adjustment 223,008 269,835 Total stockholders' equity 30,642,095 29,084,581 $38,110,475 $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)
Six months ended Three months ended June 30, June 30, 1996 1995 1996 1995 Revenues $1,893,066 $1,978,437 $1,133,978 $997,728 Service revenues Gains on securities acquired in association with licensing activities 2,497,710 152,968 898,352 0 Dividends from securities acquired in association with licensing activities 303,240 0 151,620 0 Sales 160,665 86,254 40,813 45,289 Total revenues 4,854,681 2,217,659 2,224,763 1,043,017 Costs and Expenses Service expenses 467,596 440,050 299,588 170,901 Selling, general and administrative expenses 914,356 794,397 468,708 406,728 Cost of goods sold 114,092 63,951 48,932 36,886 Total operating expenses 1,496,044 1,298,398 817,228 614,515 Operating income 3,358,637 919,261 1,407,535 428,502 Other Income and Expenses Gain on marketable securities transactions 9,280 5,243 1,367 1,195 Net change in unrealized (losses) gains on marketable securities (148,030) 158,227 (37,681) 76,314 Dividend and interest income 486,012 560,915 286,762 347,243 Gains (losses) from foreign currency transactions 668 (1,223) 519 50,984 Income before provision for taxes on income and minority interest 3,706,567 1,642,423 1,658,502 904,238 Provision for taxes on income 1,157,695 541,694 527,542 316,743 Income before minority interest 2,548,872 1,100,729 1,130,960 587,495 Minority interest 12,798 0 7,472 0 Net Income $2,561,670 $1,100,729 $1,138,432 $587,495 Earnings per common share Net income $0.48 $0.21 $0.21 $0.11 Weighted average number of shares outstanding 5,301,887 5,323,878 5,301,887 5,310,584 See accompanying notes to the condensed consolidated financial statements Page 4
REFAC TECHNOLOGY DEVELOPMENT CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
Six months ended June 30, 1996 1995 Cash Flows from Operating Activities Net income $2,568,262 $1,100,729 Adjustments to reconcile net income to net cash provided by (used in) operating activities Depreciation and amortization 51,360 55,512 Amortization of discount on U.S. Treasury Bills (14,331) (144,232) Net gain on sales of securities acquired in association with licensing activities (2,497,710) 0 Net gain on sales of securities (9,280) (5,243) Net change in unrealized loss (gain) on marketable securities 148,030 (158,227) Deferred income taxes (85,976) 48,761 (Increase) decrease in assets: Accounts receivable 181,387 (108,107) Prepaid expenses (5,226) 228,617 Proceeds from sale of marketable securities 1,115,282 777,983 Purchase of marketable securities (2,410,839) (1,290,615) Other assets (199,840) 42,309 Increase (decrease) in liabilities: Accounts payable and accrued expenses (130,664) (4,296) Amounts payable under service agreements (46,040) (213,598) Income taxes payable (39,339) 248,801 Net cash (used in) provided by operating activities (1,374,924) 578,394 Cash Flows from Investing Activities Proceeds from sales of securities acquired in association with licensing activities 2,550,902 173,386 Proceeds from maturity of investments being held to maturity 680,585 9,881,687 Purchase of investments being held to maturity (1,220,381) (14,874,751) Additions to property and equipment (12,879) (16,631) Net cash provided by (used in) investing activities 1,998,227 (4,836,309) Cash Flows from Financing Activities Acquisition and retirement of common stock 0 (238,221) Proceeds from exercise of stock options 4,750 0 Net cash provided by (used in) financing activities 4,750 (238,221) Effect of exchange rate changes on cash (46,827) (7,409) Net increase (decrease) in cash and cash equivalents 581,226 (4,503,545) Cash and cash equivalents at the beginning of period 893,744 5,641,885 Cash and cash equivalents at the end of period $1,474,970 $1,138,340 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 June 30, 1996 and December 31, 1995, and the results of its operations and its cash flows for the three and six month interim periods 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 six months and quarter ended June 30, 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 June 30, 1996 consisted of 332,842 shares of Three-Five Systems, Inc. (which trades on the New York Stock Exchange under the symbol TFS), 399,000 shares of KeyCorp (which trades on the NYSE under the symbol KEY) and 30,750 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 Condition and Results of Operations Results of Operations Revenues Total operating revenues increased $2,637,000 for the six months ended June 30, 1996 as compared to the corresponding period in 1995, and $1,182,000 for the second quarter of 1996 versus the same period in the prior year. Service revenue accounted for 39% and 89% of operating revenues for the six months ended June 30, 1996 and 1995, respectively. Investment income (gains and dividends) from securities acquired in association with licensing activities accounted for 58% and 7% of operating revenues for the six months ended June 30, 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 3% and 4% of total revenues for the first six months of 1996 and 1995, respectively, is principally related to sales of products 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. At June 30, 1996, the Company owned approximately 87% of ART. Service revenues decreased $85,000 for the six months ended June 30, 1996 from the corresponding period in 1995, and increased $136,000 for the second quarter of 1996 versus the same period in the prior year. The decrease in the six month period resulted from a decrease of recurring revenues from established licensing relationships. The increase in the second quarter resulted from a license agreement which was completed in May. Recurring service revenues from established licensing relationships, represented 84% of service revenues for the six month ended June 30, 1996, as compared to 87% in the same period of 1995. Service expenses represents payments to REFAC clients 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, administration 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 increased from 22% in the six month period of 1995 to 25% in the corresponding period of the current year. The increase in this ratio is attributable to an increase in patent expenses and legal fees relating to non-recurring licensing revenue which generally bears a higher rate of service expenses than recurring licensing revenue. REFAC TECHNOLOGY DEVELOPMENT CORPORATION Management's Discussion and Analysis of Financial Conditions and Results of Operations (Continued) Selling, general, and administrative expenses increased $120,000 for the six-month period of 1996 versus the 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 $178,000 for the first six months of 1996. For the six months ended June 30, 1996 the Company had losses on its marketable securities of $139,000 consisting of realized gains of $9,000 and unrealized losses of $148,000 as compared to realized gains of $5,000 and unrealized gains of $158,000 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. Dividend and interest income decreased by $75,000 for the six months ended June 30, 1996 from the corresponding period in 1995, primarily as a result of fluctuations in interest rates. Dividend and interest income consist of investment income from the Company's portfolio of marketable securities. The Company's income from licensing and 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 June 30, 1996, included cash and cash equivalents of approximately $1,475,000 and publicly-traded securities and U.S. Treasury Bills and Notes having a market value of approximately $13,995,000. In addition, the Company's long-term investment portfolio had a market value of approximately $20,031,000 at June 30, 1996. On June 30, 1996, the Company had no long-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 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 August 12, 1996 /s/Eugene M. Lang E. M. Lang, Chairman and Chief Executive Officer August 12, 1996 /s/Robert Rescigno Robert Rescigno, Controller and Principal Accounting and Financial 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, 1995 is incorporated herein by reference. EX-27 2 ARTICLE 5 FIN. DATA SCHEDULE FOR 2ND QTR. 10-Q
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