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FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year Ended December 31, 1994
OR
[ ] 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 1-7234
NATIONAL PATENT DEVELOPMENT CORPORATION
(Exact name of Registrant as specified in its charter)
Delaware 13-1926739
(State of Incorporation) (I.R.S. Employer
Identification No.)
9 West 57th Street, New York, NY 10019
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code:(212) 826-8500
Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class Name of each exchange on which registered
Common Stock, $.01 Par Value American Stock Exchange, Inc.
Pacific Stock Exchange, Inc.
Securities registered pursuant to Section 12(g) of the Act:
None
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
Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K is not contained herein,
and will not be contained, to the best of Registrant's knowledge,
in definitive proxy or information statements incorporated by
reference in Part III of this Form 10-K or any amendment to this
Form 10-K. //
As of March 21, 1995, the aggregate market value of the
outstanding shares of the Registrant's Common Stock, par value
$.01 per share, held by non-affiliates was approximately
$45,327,419 based on the closing price of the Common Stock on the
American Stock Exchange on March 21, 1995. None of the Class B
Capital Stock, par value $.01 per share, was held by
non-affiliates.
Indicate the number of shares outstanding of each of the
Registrant's classes of common stock, as of the most recent
practicable date.
Class Outstanding at March 21, 1995
Common Stock,
par value $.01 per share 25,734,591 shares
Class B Capital Stock,
par value $.01 per share 250,000 shares
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Registrant's definitive Proxy Statement for its
1994 Annual Meeting of Stockholders is incorporated by reference
into Part III hereof.
TABLE OF CONTENTS
Page
PART I
Item 1. Business
(a) General Development of Business 1
(b) Financial Information About
Industry Segments 2
(c) Narrative Description of Business 2
(d) Financial Information About Foreign
and Domestic Operations and Export
Sales 23
Item 2. Properties 23
Item 3. Legal Proceedings 23
Item 4. Submission of Matters to a Vote of
Security Holders 23
PART II
Item 5. Market for the Registrant's Common
Equity and Related Stockholder
Matters 24
Item 6. Selected Financial Data 25
Item 7. Management's Discussion and Analysis of
Financial Condition and Results of
Operations 26
Item 8. Financial Statements and Supplementary
Data 36
Item 9. Changes in and Disagreements with
Accountants on Accounting and
Financial Disclosure 76
PART III
Item 10. Directors and Executive Officers
of the Registrant 76
Item 11. Executive Compensation 76
Item 12. Security Ownership of Certain
Beneficial Owners and Management 76
Item 13. Certain Relationships and Related
Transactions 76
PART IV
Item 14. Exhibits, Financial Statement Schedules,
and Reports on Form 8-K 76
PART I
Item 1. Business
(a) General Development of Business
National Patent Development Corporation (the "Company"),
incorporated in Delaware in 1959, is primarily a holding company,
which is a legal entity separate and distinct from its various
operating subsidiaries. The Company's operations consist of
three operating business segments: Physical Science,
Distribution and Optical Plastics. The Company also has an
investment in one company in the health care industry and an
investment in one company in the environmental technology and
consulting area. In addition, the Company owns approximately 54%
of the outstanding shares of common stock in a company that
distributes generic pharmaceutical products in Russia.
The Company's Physical Science Group consists of (i)SGLG,
Inc. (formerly, GPS Technologies, Inc.) ("SGLG"), an
approximately 92% owned subsidiary and (ii) General Physics
Corporation ("General Physics"), an approximately 51% owned
subsidiary.
General Physics provides a wide range of personnel
training, engineering, environmental and technical support
services to commercial nuclear and fossil power utilities, the
United States Departments of Defense ("DOD") and Energy (the
"DOE"), Fortune 500 companies and other commercial and
governmental customers. SGLG is a holding company that has a 35%
interest in GSE Systems, Inc., a software simulator company and
in addition owns a small finance subsidiary.
The Company's Distribution Group, incorporated under the
name Five Star Group, Inc. ("Five Star"), is engaged in the
wholesale distribution of home decorating, hardware and finishing
products.
The Company's Optical Plastics Group, through its wholly
owned subsidiary MXL Industries, Inc. ("MXL") manufactures molded
and coated optical products, such as shields and face masks and
non-optical plastic products.
In addition, the Company has a division, Hydro Med Sciences
("HMS"), involved in the manufacture of medical devices, drugs
and cosmetic polymer products.
The Company's investment in the health care industry
currently consists of approximately 31% investment in Interferon
Sciences, Inc. ("ISI"). ISI is a biopharmaceutical company
engaged in the manufacture and sale of ALFERON N Injection, the
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only product approved by the United States Food and Drug
Administration ("FDA") that is based upon a natural source,
multi-species alpha interferon ("Natural Alpha Interferon").
ALFERON N Injection is approved for the treatment of certain
types of genital warts. ISI also is developing its existing
injectable, topical, and/or oral formulations of Natural Alpha
Interferon for the potential treatment of HIV, hepatitis C,
hepatitis B, multiple sclerosis, cancers, and other indications.
The Company currently owns approximately 40% of the
currently outstanding shares of common stock of GTS Duratek,
Inc.("Duratek"). Duratek's operations consist of two operating
groups: (1) "Technology Group" (formerly Environmental Services)
is engaged in converting radioactive, hazardous and mixed (both
radioactive and hazardous) waste to glass, using in-furnace
vitrification processes, and removing radioactive and/or
hazardous contaminants from waste water and other liquids using
filtration and ion exchange processes, and (2) "Services Group"
(formerly Consulting and Staff Augmentation) engaged in
consulting, engineering, training and staff augmentation
services. Duratek provides services and technologies for various
utility, industrial, governmental and commercial clients.
The Company owns approximately 54% of the outstanding common
stock of American Drug Company ("ADC"), which was organized in
1993, as a wholly-owned subsidiary of the Company to initiate
marketing activities for American generic pharmaceutical and
medical pharmaceutical in Russia and the Commonwealth of
Independent states (the "CIS"). ADC's subsidiary, NPD Trading
(USA) Inc. provides consulting services to Western businesses in
Russia and Eastern Europe. ADC intends to make sales of American-
made generic pharmaceutical and health care products for sale
under its own label in Russia and the CIS.
In December 1994, the Company decided to sell its Eastern
Electronics Manufacturing Corporation subsidiary ("Eastern"),
which was the only company in the electronics group. As a result
of this decision, the Company has reflected Eastern as a
discontinued operation.
(b) Financial Information About Industry Segments
Certain financial information about business segments
classes of similar products or services) is included in Note 17
of Notes to Consolidated Financial Statements.
(c) Narrative Description of Business
2
PHYSICAL SCIENCE GROUP
GENERAL PHYSICS CORPORATION
General
General Physics Corporation ("General Physics") provides a
wide range of personnel training, engineering, environmental and
technical support services to commercial nuclear and fossil power
utilities, the United States Departments of Defense ("DOD") and
Energy (the "DOE"), Fortune 500 companies and other commercial
and governmental customers. General Physics believes it is a
leader in the field of developing training materials, conducting
training programs and providing support services to operators,
technical staff and management personnel.
In January 1994, General Physics acquired substantially all
of the operating businesses of Cygna Energy Services("CES"),
other than its non-nuclear seismic engineering business. CES
provides design engineering, seismic engineering, materials
management and safety analysis services to the commercial nuclear
power industry and to the DOE.
On August 31, l994, General Physics acquired substantially
all of the assets and operations of SGLG, Inc. (formerly GPS
Technologies) and certain of its subsidiaries (together the "GPST
Businesses") for approximately $34 million, consisting of $10
million cash, 3,500,000 shares of General Physics common stock,
warrants to acquire up to 1,000,000 shares of General Physics
common stock at $6.00 per share, warrants to acquire up to
475,664 shares of General Physics common stock at $7.00 per
share, and General Physics' 6% ten year senior subordinated
debentures in the aggregate principal amount of $15 million. The
senior subordinated debentures require payment of interest only
on a quarterly basis for the first five years, quarterly
installments of $525,000 principal plus interest for the next
five years and the balance of $4.3 million at maturity. The fair
value of the senior subordinated debentures was estimated to be
$10.7 million at the date of the acquisition.
The Company which owned approximately 92% of the GPST
Businesses and 28% of General Physics prior to the transaction,
owned approximately 54% of the outstanding shares of General
Physics after the acquisition.
General Physics is organized into four groups: Training and
Technology, Engineering and Applied Sciences, Federal Systems and
Department of Energy. General Physics performance is
significantly affected by the timing of performance on contracts.
Results of operations are not seasonal, since contracts are
performed throughout the year.
3
While General Physics continues to provide services to the
DOE and DOD and the commercial nuclear power industry, it is
unsure what effect cutbacks will have on future results. In
response to these factors, General Physics has begun to focus its
marketing resources on expanding management and technical
training services to the manufacturing and process industries,
and specialized engineering services to Federal agencies. During
the latter part of 1994 General Physics experienced growth in
these areas and anticipates future growth to come from these
areas. In addition, General Physics continues to take steps to
reduce costs by eliminating positions and implementing other cost
cutting activities.
The following table sets forth the approximate pro forma
revenue attributable to the categories of services provided by
General Physics for the year ended December 31, 1994 assuming 12
months revenue for each of SGLG and General Physics.
(in thousands)
Training and Technology Services $ 46,466
DOD Services 18,078
DOE Services 18,805
Engineering Services 31,781
Total Revenue $115,130
General Physics currently provides services to more than 410
clients, including eight of the largest electric power companies
in the United States and four prime contractors serving the DOE.
During 1994, no customer accounted for more than 10% of General
Physics revenue. Prior to October, 1988, when it started its DOE
services business, General Physics derived virtually all of its
revenue from contracts with nuclear utilities.
TRAINING AND TECHNOLOGY GROUP
The Training and Technology Group focuses on training and
human performance improvement needs of commercial nuclear
utilities, Fortune 500 and other commercial companies, and
government customers, providing technical training and other
technical services to customers that design, operate, and
maintain equipment and facilities. This Group analyzes the
human, organizational and technical issues confronting its
customers and recommends solutions to improve performance.
DOE SERVICES GROUP
The DOE has overall responsibility for the nation's nuclear
weapons complex. The operation of United States Government
nuclear weapons production and waste processing facilities
4
recently has, like the commercial nuclear power industry, come
under increasingly intense public scrutiny. The DOE has since the
late 1980's focused its attention upon the safe production of
nuclear weapons and, in particular, the cleanup of serious
pollution problems at active and inactive weapons plants in more
than 30 states. As a result, the DOE has begun a research and
cleanup program that it estimates could cost $200 billion or more
over the next 30 years. General Physics organized its DOE
services group in order to take advantage of the United States
Government's increased focus on environmental, health and safety
matters at DOE facilities (and the DOE's resulting desire to
improve personnel training and support services to a level
consistent with that of the commercial nuclear power industry).
The DOE typically does not itself perform many of the tasks
relating to nuclear weapons production and waste processing at
these facilities; rather, it awards large, multi-year, cost-plus-
award-fee prime contracts to companies such as Westinghouse,
Martin Marietta and EG & G. These prime contractors, in turn,
enter into a large number of contracts with firms such as General
Physics to provide a wide variety of services in support of
nuclear weapons production and waste processing facilities. The
Group at the DOE's Savannah River site, a 300-square mile nuclear
weapons production and waste processing site near Aiken, South
Carolina predominantly provides professional services in such
areas as the development and upgrade of detailed operating and
maintenance procedures, training program design, development and
accreditation assistance, maintenance engineering, technical
support and quality assurance and various other engineering and
operations support services. General Physics also has staff
augmentation contracts at many of the DOE's research laboratories
including Los Alamos National Laboratory, Princeton Plasma
Physics Laboratory, Lawrence Livermore National Laboratory, and
Brookhaven National Laboratory for similar services.
ENGINEERING AND APPLIED SCIENCES GROUP
The Engineering and Applied Sciences Group provides
engineering services to the Government, utilities and
petrochemical industries. Multi-discipline capabilities include
environmental, mechanical, structural, chemical, electrical, and
systems engineering, augmented with nondestructive examination,
industrial chemistry, and computer aided design/drafting
technical services. Specialized engineering expertise is
recognized nationally in areas of mechanical integrity programs
(including design, analysis, inspection and safety of capital
intensive and inherently hazardous facilities and systems) and
electric power generation (including operations, maintenance and
performance engineering).
FEDERAL SYSTEMS GROUP (FSG)
GPS Technologies, Inc. Federal Systems Group, a wholly-owned
5
subsidiary, provides technical services to a variety of commands
within the Department of the Navy and other Federal Government
agencies. These services include program management support,
multi-media/video production, technical training, quality
assurance and independent verification and validation of weapon
systems, weapon systems life cycle support and full spectrum
integrated logistics support. Major customers include: NAVAIR,
NAVSEA, Naval Research, Development, Test and Evaluation
Laboratories, and related Naval commands. Additionally, this
Group provides services to several non-DOD agencies of the
Federal Government, including the Internal Revenue Service, the
Office of Personnel Management and the DOE, and to several
commercial clients including Electronic Data Systems Corp. and
Trane Air Conditioning.
CONTRACTS
General Physics is currently performing under approximately
700 contracts. General Physics' contracts with its clients
provide for charges on a time-and-materials basis, a fixed-price
basis or a cost-plus-fixed-fee basis. General Physics'
subcontracts with the Government have predominantly been cost-
plus-fixed-fee contracts and time-and-materials contracts. As
with all United States Government contractors, General Physics is
required to comply with the Federal Acquisition Regulations and
the Government Cost Accounting Standards with respect to all of
the services provided to the United States Government and
agencies thereof. These Regulations and Standards govern the
procurement of goods and services by the United States Government
and the nature of costs that can be charged with respect to such
goods and services. General Physics does not believe that
complying with these Regulations and Standards places it in any
competitive disadvantage. In addition, all such contracts are
subject to audit by a designated government audit agency, which
in most cases is the Defense Contract Audit Agency (the DCAA).
Although these contracts are subject to audit, General Physics
anticipates no material cost disallowances. The DCAA has audited
the General Physics contracts through 1989 without any material
disallowances. The following table illustrates the percentage of
total pro forma revenue attributable to each type of contract for
the year ended December 31, 1994 assuming 12 months for each of
SGLG and General Physics.
6
Percentage of Total Revenue
Year Ended December 31,
1994
Time-and Materials 37%
Fixed-Price 39%
Cost-plus-Fixed-Fee 24%
100%
CUSTOMERS
General Physics provides services to more than 410
customers, including several of the largest companies in the
United States. Significant customers include commercial nuclear
utilities, the Department of the Navy, the Department of the Air
Force, the Department of the Army, major automotive
manufacturers, major defense contractors, and other United States
Government agencies. Revenue from the United States Government
accounted for approximately 48% of the pro forma revenue of the
Company for 1994 assuming 12 months for each of SGLG and General
Physics. However, such revenue was derived from many separate
contracts and subcontracts with a variety of Government agencies
and contractors that are regarded by General Physics as separate
customers. In 1994 no other customer accounted for more than 10%
of General Physics revenue.
COMPETITION
The principal competitive factors in General Physics markets
are the experience and capability of technical personnel,
performance, reputation and price. A significant factor
determining the business available to General Physics and its
competitors is the ability of customers to use their own
personnel to perform services provided by General Physics and its
competitors. Another factor affecting the competitive environment
is the small, specialty companies located at or near particular
customer facilities which are dedicated solely to servicing the
technical needs of those particular facilities. In the DOE
services industry, competition comes from a number of companies,
including defense contractors, architect-engineering firms,
smaller independent service companies such as the Company and
small and disadvantaged businesses under Section 8(a) of the
Small Business Administration Act. Competition in the industries
served by the Federal Systems Group is strong and comes from
large defense contractors and other service corporations, many of
which have significantly greater resources than General Physics
as well as competition from small and disadvantaged businesses,
which receive certain preferential treatment in the awarding of
government contracts.
7
PERSONNEL
As of March 1, 1995, General Physics employed 1312 persons.
Many of General Physics' employees perform multiple functions
depending upon changes in the mix of demand for the services
provided by General Physics. None of General Physics' employees
is represented by a labor union. General Physics generally has
not entered into employment agreements with its employees, but
has employment agreements with certain officers. General Physics
believes its relations with its employees are good.
BACKLOG
As of December 31, 1994, General Physics' backlog for
services under signed contracts and subcontracts was
approximately $64,844,000 consisting of approximately $22,278,000
respectively, for the Training and Technology Group,
approximately $6,613,000, for the DOE Group, approximately
$25,392,000, for the Engineering and Applied Sciences Group and
approximately $10,561,000, for the Federal Systems Group.
General Physics anticipates that most of its backlog as of
December 31, 1994 will be recognized as revenue during 1995;
however, the rate at which services are performed under certain
contracts, and thus the rate at which backlog will be recognized,
is at the discretion of the client, and most contracts are, as
mentioned above, subject to termination by the client upon
written notice.
ENVIRONMENTAL STATUTES AND REGULATIONS
General Physics provides environmental engineering services
to its clients, including the development and management of site
environmental remediation plans. Due to the increasingly strict
requirements imposed by Federal, state and local environmental
laws and regulations (including without limitation, the Clean
Water Act, the Clean Air Act, Superfund, the Resource
Conservation and Recovery Act and the Occupational Safety and
Health Act), General Physics' opportunities to provide such
services may increase.
General Physics activities in connection with providing
environmental engineering services may also subject General
Physics itself to such Federal, state and local environmental
laws and regulations. Although General Physics subcontracts most
remediation construction activities and all removal and off-site
disposal and treatment of hazardous substances, General Physics
could still be held liable for clean-up or violations of such
laws as an "operator" or otherwise under such Federal, state and
local environmental laws and regulations with respect to a site
8
where it has provided environmental engineering and support
services. General Physics believes, however, that it is in
compliance in all material respects with such environmental laws
and regulations.
DISTRIBUTION GROUP
FIVE STAR GROUP, INC.
The Distribution Group, incorporated under the name Five
Star Group, Inc. ("Five Star"), is engaged in the wholesale
distribution of home decorating, hardware and finishing products.
Five Star has two strategically located warehouses and office
locations, with approximately 380,000 square feet of space in New
Jersey and Connecticut, which enables Five Star to service the
market from Maine to Virginia.
Five Star is the largest distributor in the U.S. of paint
sundry items, interior and exterior stains, brushes, rollers and
caulking compounds and offers products from leading manufacturers
such as Olympic, Cabot, Thompson, Dap, 3-M, Minwax and Rustoleum.
Five Star distributes its products to retail dealers which
include discount chains, lumber yards, "do-it-yourself" centers,
hardware stores and paint suppliers principally in the northeast
region. It carries an extensive inventory of the products it
distributes and provides delivery generally within 48 to 72 hours
from the placement of an order.
The primary working capital investment for Five Star is
inventory. Inventory levels will vary throughout the year
reflecting the seasonal nature of the business. Five Star's
strongest sales are typically in March through October because of
strong seasonal consumer demand for its products. As a result,
inventory levels tend to peak in the spring and reach their
lowest levels in late fall.
The largest customer accounted for approximately 13% of Five
Star's sales in 1994 and its 10 largest customers accounted for
approximately 27% of such sales. No other customer accounted for
in excess of 10% of Five Star's sales in 1994. All such
customers are unaffiliated companies and neither Five Star nor
the Company has a long-term contractual relationship with any of
them.
Competition within the industry is intense. There are much
larger national companies commonly associated with national
franchises such as Servistar and True Value as well as smaller
regional distributors all of whom offer similar products and
services. Additionally, in some instances manufacturers will
bypass the distributor and choose to sell and ship their products
directly to the retail outlet. The principal means of
competition for Five Star are its strategically placed
9
distribution centers and its extensive inventory of quality name
brand products. Five Star will continue to focus its efforts on
supplying its products to its customers at a competitive price
and on a timely, and consistent basis. In the future, Five Star
will attempt to acquire complementary distributors and to expand
the distribution of its line of private-label products sold under
the "Five Star" name.
OPTICAL PLASTICS GROUP
The Optical Plastics Group is engaged in the manufacture of
molded and coated optical products, such as shields and face
masks and non-optical plastic products through the Company's
wholly owned subsidiary MXL Industries, Inc. ("MXL").
MXL is a state-of-the-art injection molder and precision
coater of large optical products such as shields and face masks
and non-optical plastics. MXL believes that the principal
strengths of its business are its state-of-the-art injection
molding equipment, advanced production technology, high quality
standards, and on time deliveries. Through its Woodland Mold and
Tool Division, MXL also designs and engineers state-of-the-art
injection molding tools as well as providing a commodity custom
molding shop.
As the market for optical injection molding, tooling and
coating is focused, MXL believes that the combination of its
proprietary "Anti-Fog" coating, precise processing of the "Anti-
Scratch" coatings, and precise molding and proprietary grinding
and polishing methods for its injection tools will enable it to
increase its sales in the future and to expand into related
products.
MXL uses only polycarbonate resin to manufacture shields,
face masks and lenses for over 55 clients in the safety,
recreation and military industries. For its manufacturing work
as a subcontractor in the military industry, MXL is required to
comply with various federal regulations including Military
Specifications and Federal Acquisition Regulations for military
end use applications.
MXL is dependent upon one client which accounts for
approximately 38% of MXL's total sales and another client which
accounts for approximately 14% of MXL's total sales. Over the
last several years, MXL has implemented a variety of programs
designed to reduce its overhead expenses, enhance its processing
capabilities, improve operating efficiency and expand the range
of services offered to its customers.
The Company's sales and marketing effort concentrates on
industry trade shows. In addition, the Company employs one
marketing and sales executive and one sales engineer.
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HYDRO MED SCIENCES
Hydro Med Sciences ("HMS") is a division of the Company
involved in the manufacture of medical devices, drugs and
cosmetic polymer products. HMS was established to investigate
potential uses of a unique group of polymers called HydronR in
applications other than the soft contact lens area. These
polymers, which absorb water without dissolving, are excellent
candidates for biomedical applications.
HMS has been involved in the development of human and
veterinary drugs, as well as medical and dental devices since the
early 1970's. HMS developed the Syncro-Mate BR implant which is
presently manufactured by HMS and sold in the United States by
Sanofi Animal Health, Inc., and is used for the synchronized
breeding of bovine heifers. This product was the first veterinary
drug implant to be approved by the FDA.
HMS also commercially manufactures a solvent soluble, water
insoluble HydronR polymer for use in a series of cosmetic
products, such as hand and body lotions, facial, whole body and
fragile eye moisturizers and sunscreens.
HMS also has been collaborating with The Population Council
on the development of an implant for humans capable of delivering
luteinizing hormone releasing hormone (LHRH) at controlled
therapeutic levels for one to two years. This implant is
currently in Phase I clinical trials for the treatment of
prostatic cancer. The purpose of this study is to determine
appropriate dose and elicit any unexpected adverse reactions.
THE COMPANY'S INVESTMENTS
GTS DURATEK, INC.
GENERAL
GTS DURATEK INC. ("Duratek") was incorporated in the State
of Delaware in December 1982. At December 31, 1994, Duratek was
an approximately 61% controlled subsidiary of the Company.
However, as of March 1 1995, the Company owned approximately 40%
of the outstanding shares of common stock of Duratek.
Duratek's operations consist of two operating groups: (i)
"Technology Group" engaged in converting radioactive, hazardous
and mixed (both radioactive and hazardous waste to glass, using
in-furnace vitrification processes, and removing radioactive
and/or hazardous contaminants from waste water and other liquids
using filtration and ion exchange processes and (2) "Services
Group" (formerly Consulting and Staff Augmentation)engaged in
consulting, engineering, training, and staff augmentation
services. Duratek provides services and technologies for various
11
utility, industrial, governmental, and commercial clients.
On January 24, 1995, the Company sold 1,666,667 shares of
its Duratek common stock at a price of $3.00 per share to The
Carlyle Group ("Carlyle") in connection with a $16 million
financing by Duratek with Carlyle, a Washington, D.C. based
private merchant bank. In addition, the Company granted Carlyle
an option to purchase up to an additional 500,000 shares of the
Company's Duratek common stock over the next year at $3.75 per
share (the "Carlyle Transaction").
Duratek received $16 million from Carlyle in exchange for
160,000 shares of newly issued 8% cumulative convertible
preferred stock (convertible into 5,333,333 shares of Duratek
common stock at $3.00 per share). Duratek granted Carlyle an
option to purchase up to 1,250,000 shares of newly issued Duratek
common stock from Duratek over the next four years.
As of March 1, 1995, the Company owned 3,534,972 shares of
Duratek common stock (approximately 40% of the currently
outstanding shares of common stock). Assuming, (i) Carlyle
converted all of its cumulative convertible preferred stock into
Duratek common stock and exercised its option to purchase
additional shares of Duratek common stock from each of Duratek
and National Patent and (ii) National Patent employees exercised
their options to purchase an aggregate of 497,750 shares of
Duratek common stock, the Company would own 2,537,222 shares of
Duratek common stock (approximately 16.5% of the then outstanding
shares of common stock).
TECHNOLOGY GROUP
During 1991 and 1992, Duratek and The Catholic University of
America's Vitreous State Laboratory (VSL) jointly conducted
bench-scale vitrification research with the U.S. Department of
Energy ("DOE") waste simulants and actual DOE radioactive and
mixed waste samples. This led to the l992 award of a $3.4
million DOE-funded contract to conduct a minimum additive waste
stabilization (MAWS) demonstration, which enabled the Company to
significantly advance the development of its vitrification
technology. The MAWS project integrated soil washing, water
purification, and in-furnace vitrification to reduce waste volume
and then convert the reduced waste to a durable, leach-resistant
form (glass) for long-term storage or burial.
During the first half of l993, Duratek designed, built and
operated a l00 kilogram-per-day pilot-scale melter at the VSL to
gather test data while building a similar 300 kilogram-per-day
unit at the DOE's Fernald Environmental Management Project (FEMP)
for the MAWS demonstration. These melters were designated
DuraMelter 100 and 300, respectively.
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Duratek engineers and operators started up the DuraMelter
300 at the FEMP in September 1993 and began conducting continuous
melt campaigns with nonradioactive waste stimulants. In August
1994, following approximately one year of nonradioactive test
melts, the Company operators processed about 7,000 gallons of
FEMP wastes consisting of soil wash concentrates , contaminated
with uranium, thorium and other heavy metals, blended with
magnesium-fluoride sludge from Pit #5. Duratek thus became the
first company to successfully complete a continuous vitrification
run with low-level radioactive waste at a DOE site.
The MAWS success led to a $1.2 million DOE-funded contract
for Duratek and the VSL to characterize and catalog the physical
and chemical properties of nationwide DOE waste streams. The
data gathered will be the basis for a compositional envelope: a
sophisticated computerized model which will be used to determine
which waste streams can be blended in a vitrification process to
achieve the MAWS goals of substantial waste volume reduction and
long-term waste form stability.
Near the end of l993, Duratek won a $13.9 million, three-
year contract in competition with companies providing traditional
waste stabilization methods- to stabilize 700,000 gallons of
uranium-contaminated sludge at the DOE's Savannah River Site.
Duratek is designing and building its first commercial-scale
melter, a DuraMelter 5,000 for the project.
In 1994, Duratek won a DOE-funded contract worth
approximately $2 million to design, build and test a high-
temperature melter and "gem" matching ( a device which converts
the molten glass discharge stream into droplets) for Fernald
Environmental Restoration Management Company's (FERMCO) CRU4
project.
SERVICES GROUP
The Services Group provides technical personnel to support
nuclear power plant outages and operation and DOE environmental
restoration projects. The group has retained its major
customers: Duke Power Company, Vermont Yankee Nuclear Power
"Corporation, New York Power Authority, Tennessee Valley
Authority, GPU Nuclear Corporation, PECO Energy Company (formerly
Philadelphia Electric Company), and FERMCO.
Through efforts to expand its higher margin professional
services business, the Services Group has increased its
consulting and training sales.
The Services Group has also aligned its services to support
and complement the Technology Group's environmental restoration
business. These include environmental safety and health
consulting and training, hazardous materials training, quality
13
assurance/quality control and radiological controls. Waste
melter operator trainees are often recruited from the Services
Group Field Work Force.
INTERFERON SCIENCES, INC.
Interferon Sciences, Inc. ("ISI"), which was incorporated in
Delaware in May 1980, commenced operations in January 1981, by
obtaining from the Company, assets relating to its programs in
human alpha (leukocyte) interferon, recombinant DNA, and
hybridoma technology.
ISI is a biopharmaceutical company engaged in the
manufacture and sale of ALFERON N Injection, the only product
approved by the United States Food and Drug Administration
("FDA") that is based upon a natural source, multi-species alpha
interferon ("Natural Alpha Interferon"). ALFERON N Injection is
approved for the treatment of certain types of genital warts. ISI
also is developing its existing injectable, topical, and/or oral
formulations of Natural Alpha Interferon for the potential
treatment of HIV, hepatitis C, hepatitis B, multiple sclerosis,
cancers, and other indications. Interferons occur naturally in
the body, in essence nature's own medicine. Interferons are a
group of proteins produced and secreted by cells to combat
diseases.
Currently, various alpha interferon products, approved for
17 different medical uses in over 60 countries, are, as a group,
one of the largest selling of all biopharmaceuticals with
estimated 1994 sales approaching $2 billion. The majority of
these sales consisted of sales of alpha interferon produced from
genetically engineered cells (recombinant alpha interferon).
ALFERON N Injection is approved for sale in the United
States for the intralesional treatment of adults with refractory
(resistant to other treatment) or recurring external genital
warts. ALFERON N Injection is marketed and distributed in the
United States exclusively by Purdue Pharma L.P. through its
affiliate, The Purdue Frederick Company (collectively,
"Purdue"). Submissions for regulatory approval to sell ALFERON N
Injection for the treatment of genital warts have been filed in
Austria, Canada, Hong Kong, Israel, Mexico, Singapore and the
United Kingdom. Regulatory approval to sell ALFERON N Injection
was recently obtained in Mexico.
Additional products under development by ISI include ALFERON
N Gel and ALFERON LDO. ALFERON N Gel is a topical interferon
preparation which ISI believes has potential in the treatment of
cervical dysplasia, recurrent genital herpes, other viral
diseases, and cancers. ALFERON LDO is a low dose oral liquid
alpha interferon formulation which ISI believes has potential for
treating certain symptoms of patients infected with the HIV virus
14
and treating other viral diseases.
CLINICAL TRIALS SUMMARY
In an effort to obtain approval to market Natural Alpha
Interferon for additional indications in the United States and
around the world, ISI is focusing its research program on
conducting and planning various clinical trials for new
indications.
The table appearing below summarizes the data concerning
clinical trials of ALFERON N Injection, ALFERON N Gel, and
ALFERON LDO being conducted or proposed to be conducted.
15
PRODUCT POTENTIAL APPLICATION/ STATUS OF CLINICAL TRIAL(1) SPONSOR
INDICATIONS
ALFERON N HIV infected patients:
Injection
Asymptomatic Initial Phase 1 completed Walter
Reed(2)
Asymptomatic/Symptomatic Phase 2/3 in final stages of ISI
planning
Comparison of side effects in Phase 1 completed Purdue
healthy subjects with
recombinant alpha interferon
Hepatitis C Three multi-center Phase 2 ISI(3)
in progress
Kaposi's sarcoma Phase 2 in progress ISI
(in AID's patients)
Small cell lung cancer Phase 2 to commence shortly Investi-
gator(5)
Multiple Sclerosis Phase 2 being planned ISI
Hepatitis B Phase 2 proposed (4)
ALFERON N Cervical dysplasia Phase 2 completed ISI
Gel
Cervical dysplasia Phase 2 to commence shortly Investi-
(in HIV-infected patients) igator(5)
16
Mucocutaneous herpes in Phase 2 proposed (4)
immunocompromised patients
Recurrent genital herpes Phase 2 proposed (4)
ALFERON HIV-infected patients Initial Phase 2 completed ISI
LDO
HIV-infected patients Phase 2 in final stages of NIAID
planning
(1) Generally, clinical trials for pharmaceutical products are conducted in three
phases. In Phase 1, studies are conducted to determine safety and tolerance. In Phase
2, studies are conducted to gain preliminary evidence as to the efficacy of the
product as well as additional safety data. In Phase 3, studies are conducted to
provide sufficient data to establish safety and statistical proof of efficacy in a
specific dose. Phase 3 is the final stage of such clinical studies prior to the
submission of an application for approval of a new drug or licensure of a biological
product or for new uses of a previously-approved product.
(2) Partially funded by Purdue.
(3) Previously funded by Purdue; currently funded by ISI.
(4) The sponsor and the timing of this trial will be dependent upon future funding.
(5) Investigator-sponsored IND.
17
In March 1995, ISI entered into an amendment of the 1994
Purdue Amendments (the "1995 Purdue Amendment") pursuant to which
ISI obtained an option, exercisable until June 30, 1995, (the
"Option") to reacquire the marketing and distribution rights from
Purdue and Mundipharma. The 1995 Amendment provides for (i) the
payment of $3 million in cash upon exercise of the option and
(ii) the issuance of 2.5 million shares of Common Stock. Eighteen
months from the date of exercise of the Option by ISI (the
"Valuation Date"), the 2.5 million shares of Common Stock must
have a value of at least $9 million, which value will be
calculated using the average of the closing bid and asked prices
of the Common Stock as quoted by NASDAQ National Market System
for the ten trading days ending two days prior to the Valuation
Date. In the event of a shortfall, ISI has agreed to issue a
note, for such shortfall, if any, which will bear interest at the
prime rate, and will become due and payable 24 months from the
Valuation Date. ISI agrees that the 2.5 million shares of Common
Stock will be registered and freely tradeable 18 months from the
date of exercise of the ISI option. The 1995 Purdue Amendment, if
exercised, would replace in its entirety the royalty obligations
and the Repurchase Option contained in the 1994 Amendments with
Purdue and Mundipharma.
OTHER MARKETING AND DISTRIBUTION ARRANGEMENTS
In February 1994, ISI entered into an exclusive distribution
agreement for ALFERON N Injection in Mexico with Andromaco, a
privately-held pharmaceutical company headquartered in Mexico
City which specializes in oncology and immunology products.
Under the agreement, Andromaco applied for and recently obtained
approval from the Mexican regulatory authorities to sell ALFERON
N Injection in Mexico. As part of the agreement, Andromaco also
agreed to sponsor clinical research with ALFERON N Injection in
Mexico. The agreement also establishes performance milestones for
the maintenance of exclusive distribution rights by Andromaco in
Mexico. In addition, ISI has a buy-out option to reacquire the
marketing and distribution rights in Mexico under certain terms
and conditions.
On February 7, 1995 ISI concluded an agreement with Fujimoto
Diagnostics, Inc. ("Fujimoto") of Osaka, Japan, for the
commercialization of ALFERON N Injection in Japan (the "Fujimoto
Agreement"). Fujimoto is affiliated with Fujimoto Pharmaceutical
Company, a 60-year old company with facilities in Central Japan.
The Fujimoto Agreement grants Fujimoto exclusive rights to
develop, distribute and sell ALFERON N Injection and ALFERON N
Gel in Japan. Pursuant to the terms of the Fujimoto Agreement,
Fujimoto agreed to fund and conduct all preclinical and clinical
studies required for regulatory approval in Japan. For the
injectable product, ALFERON N Injection, Fujimoto will initially
focus on its use for the treatment of patients infected with the
hepatitis C virus. ISI will supply Fujimoto with ALFERON N
18
Injection and will also manufacture and supply Fujimoto with
ALFERON N Gel. The first indication to be developed for ALFERON N
Gel has not yet been finalized. Fujimoto will also purchase
certain quantities of ALFERON N Injection and ALFERON N Gel at
agreed-upon prices during the preclinical and clinical phases. In
connection with the Fujimoto Agreement, Fujimoto purchased
$1,500,000 of Common Stock and agreed to purchase an additional
$500,000 of Common Stock on February 6, 1996, based on the then
current market price.
Although ISI has exclusive marketing and distribution
agreements with Purdue, Mundipharma, Andromaco and Fujimoto and
has the right to sell ALFERON N Injection in the Returned
Territories, no sales of ALFERON N Injection can be made in
Canada, or the Returned Territories until such product is
approved for sale in these countries. Submissions for regulatory
approval to sell ALFERON N Injection for treatment of genital
warts have been filed in Canada, Austria, Hong Kong, Israel, and
the United Kingdom and has been obtained in Mexico. There can be
no assurance, however, that any such approval will be granted.
AMERICAN DRUG COMPANY
American Drug Company ("ADC") was organized in 1993, as a
wholly-owned subsidiary of the Company to initiate marketing
activities for American generic pharmaceutical and medical
products in Russia and the Commonwealth of Independent States
(the "CIS"). The Company's predecessor, NPD Trading (USA), Inc.
("NPD Trading"), was formed in January 1990 as a wholly-owned
subsidiary of the Company to provide consulting services to
Western businesses in Russia and Eastern Europe.
In August 1994, the Company entered into a Transfer and
Distribution Agreement (the "Distribution Agreement") with ADC
whereby the Company transferred to ADC, (the "Distribution")
immediately prior to the closing of the Distribution, all of its
interest in NPD Trading and in two newly-formed, 50% owned joint
ventures, in exchange for (i) the issuance by ADC of 6,990,990
shares of Common Stock to the Company (ii) the issuance of
approximately 6,017,775 shares of Common Stock to the Company's
stockholders and (iii) the issuance of 6,017,775 warrants to be
distributed to the Company's stockholders. Each warrant is
exercisable for a period of two years commencing on August 5,
1994, at an exercise price per share of $1.00, subject to ADC's
right to cancel unexercised warrants under certain circumstances.
Upon the consummation of this reorganization, NPD Trading became
a wholly-owned subsidiary of ADC.
The Distribution was at the rate of one share plus one
warrant to purchase one share of common stock at an exercise
price of $1.00, expiring August 5, 1996, for every four
outstanding shares of Common Stock of the Company. Upon
19
completion of the Distribution, ADC became a separate public
company.
ADC's diverse activities to date have focused on developing,
and assisting Western businesses to develop, trade, manufacturing
and investment opportunities in Russia, the Czech and Slovak
Republics and, to a lesser extent, other countries of the CIS and
Eastern Europe. ADC intends to make sales of American-made
generic pharmaceutical and health care products for sale under
its own label in Russia and the CIS.
In 1993, ADC initiated activities aimed at the export of
American-made generic pharmaceutical (prescription drugs and
over-the-counter personal care products) and other medical
products and equipment to Russia and the CIS. Among the products
anticipated to be sold by ADC are antibiotic ointments, pain
relief medication, vitamins, bandages, prescription injectable
anti-cancer drugs, antibiotics and other prescription drugs. ADC
has launched marketing operations with major Russian hospitals,
individual Russian pharmacies, and other hospitals and clinics
throughout the CIS, as well as with distributors in the region.
ADC has initiated these operations in order to enable consumers
to benefit from the superior quality and low cost of American-
made generic drug and medical products in markets in which ADC
believes demand for such products to be high and availability
limited. ADC intends to register, market and sell a wide variety
of products under its own label and to develop a distribution of
its products throughout the CIS. In October 1994, ADC's "Shiny"
brand baking soda toothpaste with fluoride and its "Aurora"
feminine maxi pads and mini shields received medical
certification by health authorities in Russia.
ADC believes that contracting for the supply of its products
enables it to avoid significant capital expenditures and the time
and expense associated with the U.S. Food and Drug Administration
(the "FDA") approval process. ADC has entered into some supply
agreements with chemical and pharmaceutical manufacturers to date
and is currently in negotiations with several others. The terms
of each of these agreements may vary, but generally provide for
the supply to ADC of approximately five or six generic
pharmaceutical products, in a variety of potency levels, for
marketing and resale under the ADC label in Russia and other
states which formerly comprised the Soviet Union. The agreements
generally carry a ten-year term with options to renew for
successive one-year periods. They prohibit price increases on
products supplied to ADC during the first year of the agreement
unless a substantial increase in the price of raw materials
occurs. The agreements also provide that ADC will pay all
foreign registration fees and labeling costs and that the
supplier will undertake the labeling and packaging of all
products sold to ADC in accordance with federal regulations. In
addition, the supplier represents that products will be
20
manufactured in accordance with the good manufacturing practices
established by the FDA and that it will name ADC as an additional
insured on product liability policies providing sufficient
coverage.
In its four years of operation, ADC has provided through its
subsidiary, NPD Trading, a broad range of business services to a
significant number of American and Western corporations. ADC's
employees have backgrounds in diverse disciplines, such as
medicine, law, engineering, physics and international economics,
which appropriately meet the industrial makeup of ADC's clients.
ADC is able to provide the contacts necessary for interested
clients to locate a venture partner and to establish viable
financing. Recognizing that successful conclusion of project
negotiations in this region often depends upon financing, ADC
works closely with the U.S. Exim-Bank, OPIC, the World Bank and
its affiliates, including the European Bank for Reconstruction
and Development, as well as private commercial banks.
Additionally, ADC advises its clients with respect to new
commercial, tax, currency and other laws of Eastern Europe, as
well as U.S. foreign government regulations and policies which
directly affect business operations.
RESEARCH AND DEVELOPMENT
For the year ended December 31, 1994, NPDC incurred $431,000
as research and development costs.
EMPLOYEES
At December 31, 1994, the Company and its subsidiaries
employed 2,368 persons, including 16 in the Company's
headquarters, 1,840 in the Physical Science Group, 340 in the
Distribution Group, 74 in the Optical Plastics Group and 51 at
Eastern Electronics, which is a discontinued operation. Of these,
4 persons were engaged in research and development. The Company
considers its employee relations to be satisfactory.
21
EXECUTIVE OFFICERS
The following table sets forth the names of the principal
executive officers of the Company as of March 21, 1995 and their
positions with the Company. The principal business experience of
the executive officers for the last five years is also described
below.
Name Age Position
Jerome I. Feldman 66 President, Chief Executive
Officer and a Director since
1959
Martin M. Pollak 67 Executive Vice President,
Treasurer and a Director since
1959
Scott N. Greenberg 38 Vice President, Chief
Financial Officer since 1989,
and a Director since 1987
Lawrence M. Gordon 41 General Counsel since 1986,
Vice President since 1991
Robert A. Feinberg 32 Vice President Corporate
Development, since January
1995
Jerome I. Feldman is a founder, and since 1959 has been
President, Chief Executive Officer and a director of the Company.
Martin M. Pollak is a founder, and since 1959 has been
Executive Vice President, Treasurer and a director of the
Company.
Scott N. Greenberg has been Vice President, Chief Financial
Officer of the Company since 1989 and a Director since 1987.
Lawrence M. Gordon is Vice President, General Counsel of the
Company. Mr. Gordon has been General Counsel of the Company
since 1986 and Vice President since 1991.
Robert A. Feinberg is Vice President, Corporate Development
of the Company since January 1995. From July 1990 to January
1995, Mr. Feinberg was an Assistant United States Attorney in the
Criminal Division of the United States Attorney's Office for the
Eastern District of New York. From October 1988 to June 1990, Mr.
Feinberg was an associate with the law firm of Debevoise &
Plimpton in New York City.
22
PATENTS AND LICENSES
The operating businesses of NPDC are not materially
dependent upon patents, or patent and know-how licenses. The
know-how and expertise gained with respect to the manufacture and
sale of its products, acquired as a result of its license and
ownership of patents, are of greater importance to its future
ability to manufacture and sell such products than are the
patents themselves.
(d) Financial Information about Foreign and Domestic
operations and Export Sales. The Company has no material Foreign
Operations or Export Sales.
ITEM 2. PROPERTIES
The following information describes the material physical
properties owned or leased by the Company and its subsidiaries.
The Company leases approximately 10,000 square feet of space
for its New York City principal executive offices. The Company's
Physical Science Group leases (i) approximately 78,000 square
feet of an office building in Columbia, Maryland and (ii)
approximately 275,000 square feet of office space at various
other locations throughout the United States and (iii) 37 branch
offices of General Physics occupy approximately 197,000 square
feet of this space.
The Distribution Group leases 219,000 square feet in New
Jersey and 112,000 square feet in Connecticut. The Optical
Plastics Group owns 33,000 square feet of office space in
Lancaster, PA and 12,594 square feet of office space in Westmont,
IL.
The facilities owned or leased by NPDC are considered to be
suitable and adequate for their intended uses and are considered
to be well maintained and in good condition.
ITEM 3. LEGAL PROCEEDINGS
The Company is not a party to any legal proceedings the
outcome of which is believed by management to have a reasonable
likelihood of having any material effect upon the Company's
business, results of operations, or financial condition.
Item 4. Submission of Matters to a Vote of Security Holders
No matters were submitted to a vote of security holders
during the fourth quarter of the fiscal year covered by this
report.
23
PART II
Item 5. Market for the Registrant's Common Equity and Related
Stockholder Matters
The Company's Common Stock, $.01 par value, is traded
on the American Stock Exchange, Inc. and the Pacific Stock
Exchange, Inc. The following tables present its high and low
market prices for the last two years.
Quarter High Low
1994 First 4 7/8 3 7/8
Second 3 15/16 2 11/16
Third 3 3/8 2 5/8
Fourth 2 13/16 1 1/2
1993 First 3 5/8 2 1/2
Second 4 1/4 2 1/2
Third 3 3/4 2 7/8
Fourth 5 3/4 3 7/16
The number of shareholders of record of the Common Stock as
of March 21, 1995 was 5,275. On March 21, 1995, the closing
price of the Common Stock on the American Stock Exchange was
1 13/16. In March 1989, the Company decided to discontinue
payment of its quarterly dividend because the Board of Directors
believed that the resources available for the quarterly dividend
would be better invested in operations and the reduction of long-
term debt.
24
NATIONAL PATENT DEVELOPMENT CORPORATION AND SUBSIDIARIES
Item 6. Selected Financial Data
Operating Data (in thousands, except per share data)
Years ended December 31, 1994 1993 1992 1991 1990
Revenues $202,966 $189,225 $196,506 $254,452 $286,639
Sales 204,774 185,846 189,797 251,782 286,219
Gross margin 32,559 26,974 29,211 35,792 42,087
Research and development costs 431 2,847 4,645 4,651 7,892
Interest expense 6,458 8,199 10,866 15,438 20,261
Income (loss) before discontinued
operations and extraordinary
items (11,397) (6,849) (11,578) 1,456 (33,304)
Net income (loss) (13,971) (5,977) (11,943) 2,645 (32,738)
Earnings (loss) per share
Income (loss) before discontinued
operations and extraordinary
items $ (.52) $ (.40) $ (.73) $ .10 $ (2.91)
Net income (loss) (.64) (.35) (.76) .17 (2.86)
Cash dividends declared per share
Balance Sheet Data
December 31, 1994 1993 1992 1991
Cash, cash equivalents, restricted
cash and marketable securities $ 10,075 $ 10,976 $ 23,674 $ 35,968 $ 16,722
Short-term borrowings 31,060 21,390 28,977 26,317 62,144
Working capital 25,823 33,224 44,877 55,560 25,316
Total assets 175,546 166,057 192,649 214,041 269,564
Long-term debt 31,213 40,858 61,441 70,787 91,888
Stockholders' equity 65,165 67,438 63,823 72,405 55,416
25
Item 7. Management's Discussion and Analysis of
Financial Condition and Results of Operations
RESULTS OF OPERATIONS
Overview
During 1994 the Company continued its overall plan of debt
reduction, as well as the strengthening of its operating
companies. As a result of an Exchange Offer as well as several
other repurchases from various bondholders throughout the year,
(See Note 10 to Notes to Consolidated Financial Statements) the
Company was able to significantly reduce its Swiss Debt by
approximately $6,716,000. In addition, in the first quarter of
1995, the Company repurchased an additional SFr. 8,386,000 of
Swiss Debt. At March 24, 1995 the Company had approximately
$3,700,000 of Swiss Debt due in 1995 and approximately $3,300,000
of Swiss Debt due in 1996. The continuing reduction of the
Company's long-term debt has resulted in reduced interest expense
at the Corporate level. In September 1994, the Company
strengthened one of its core operating companies when General
Physics Corporation (GP) acquired substantially all the assets of
SGLG, Inc. (formerly GPS Technologies, Inc) (See Note 2 to
Consolidated Financial Statements).
In 1994, the loss before income taxes, discontinued operation and
extraordinary item was $10,648,000, as compared to a loss of
$7,424,000 in 1993. The increase in the loss is due to several
factors. Investment and other income (expense), net, decreased
from $3,379,000 in 1993 to a loss of $1,808,000 in 1994. The
$5,187,000 reduction is due to a foreign currency transaction
loss of $2,124,000 realized in 1994 as compared to a net foreign
currency transaction gain of $901,000 realized in 1993, related
to the Company's decision not to hedge its Swiss denominated
debt, as well as increased losses incurred on investments in 20%
to 50% owned subsidiaries due to increased losses attributable to
the Company's 36% investment in Interferon Sciences, Inc. (ISI).
The loss recognized in 1994 relating to ISI was $4,409,000,
compared to $1,599,000 in 1993. In 1993, an additional
$2,074,000 of ISI's loss was included in the Company's
consolidated results of operations through September 1993, when
the Company's investment in ISI fell below 50%. The increased
loss incurred on investments in 20% to 50% subsidiaries was
partially offset by gains realized on the sale of certain
investments. In addition, in 1993 the Company realized a
$3,975,000 gain from the transfer in an Exchange Offer of a
portion of the Company's holdings of shares of ISI and GTS
Duratek, Inc.'s (Duratek) common stock and an additional
$1,353,000 on the issuance of common stock and common stock
26
warrants by Duratek, relating to its acquisition of an option to
acquire certain technologies relating to the vitrification of
certain medical wastes. The above losses were partially offset
by increased operating profits at the Optical Plastics and
Physical Science Groups due to increased sales and gross margin
percentage and dollars within both groups. The Optical Plastics
Group, which is MXL Industries, Inc. (MXL), the Company's
injection molding and coating subsidiary, experienced increased
operating profits due to both increased sales and gross margin
percentage. The Physical Science Group was comprised of GP and
Duratek. GP provides engineering, environmental, training,
analytical and technical support services to the commercial power
industries, the US government and industry in general. Duratek
provides cleanup and vitrification of radioactive or contaminated
waste streams, as well as services to various utilities, the
government and commercial clients. The Distribution Group, which
is the Five Star Group, Inc. (Five Star), the Company's
distributor of home decorating, hardware and finishing products,
had reduced operating profits as a result of costs incurred to
close its Long Island, New York warehouse and consolidate its
sales volume into Five Star's New Jersey facility.
In 1993, the loss before income taxes, discontinued operation and
extraordinary item was $7,424,000, as compared to a loss of
$11,151,000 in 1992. The decrease in the loss in 1993 is due to
several factors. As a result of the Exchange Offer discussed
above, the Company realized a $3,795,000 gain from the transfer
of a portion of the Company's holdings of shares of ISI and
Duratek common stock. In addition, the Company realized a gain
of $1,353,000 on the issuance of common stock and common stock
warrants by Duratek. The Health Care Group experienced reduced
operating losses in 1993. The Health Care Group, which was
comprised of the results of ISI, experienced reduced operating
losses in 1993 as a result of ISI being accounted for on the
equity basis commencing in the third quarter of 1993. The above
improvements in 1993 were partially offset by reduced operating
profits at the Distribution and Physical Science Groups, in
addition to a foreign currency transaction gain of $901,000
realized in 1993 as compared to a net foreign currency
transaction gain of $3,362,000 realized in 1992, relating to the
Company's decision not to hedge its Swiss denominated debt. The
Distribution Group had reduced operating profits as a result of
reduced gross margin percentages and increased operating costs.
The Physical Science Group had reduced operating profits as a
result of losses incurred by Duratek due to reduced revenues and
gross margin percentages achieved. The Optical Plastics Group
had a marginal decrease in operating profits.
27
Sales
Consolidated sales from continuing operations decreased by
$3,951,000 in 1993 to $185,846,000 and increased by $18,928,000
in 1994 to $204,774,000. In 1994, the Company achieved increased
sales in the Physical Science, Distribution and Optical Plastics
Groups. In 1993 the reduced sales were the result of reduced
sales in the Physical Science and Health Care Groups, partially
offset by increased sales achieved by the Distribution Group.
The Physical Science Group's sales decreased from $109,303,000 in
1992 to $102,977,000 in 1993 and increased to $118,421,000 in
1994. The increased sales of $15,444,000 in 1994 were the result
of consolidating the sales of GP since September 1, 1994 (See
Note 2 to the consolidated Financial Statements). In addition,
Duratek also achieved increased sales as a result of work
performed under a three year contract to construct a
vitrification facility for the conversion of mixed waste into
stable glass. The reduced sales of $6,326,000 in 1993 were
primarily attributable to reduced sales achieved by Duratek as a
result of reduced revenues generated by its consulting and staff
augmentation business, as a result of a reduced demand for
services provided to nuclear utilities. In addition, Duratek's
sales decreased as a result of reduced revenues achieved by the
environmental services business due to delays in the award of
certain technology contracts by the Department of Energy.
The Distribution Group sales increased from $68,450,000 in 1992
to $74,109,000 in 1993 and to $75,551,000 in 1994. The increase
of $1,442,000 in 1994 was due to the continued growth of the
hardware business. The increase of $5,659,000, or 8% in 1993 was
due to reduced competition in one of Five Star's geographic
regions, as well as continued growth in the hardware business,
which was introduced in 1992.
The Health Care Group sales decreased from $4,042,000 in 1992 to
zero in 1993 and 1994. The reduction in sales in 1993 was due to
ISI not having any sales of its product, ALFERONR N Injection, in
1993. As a result of the Exchange Offer, through which the
Company's interest in ISI fell below 50%, ISI is currently being
accounted for on the equity basis. In 1994, the results of ISI
were recorded on the equity basis, and therefore, its sales were
not included with those of the Company.
The Optical Plastics Group sales decreased from $7,862,000 in
1992 to $7,817,000 in 1993 and increased to $9,290,000 in 1994.
The increased sales in 1994 was the result of increased orders
from MXL's largest customer, due to increased worldwide demand
for its product.
28
Gross margin
Consolidated gross margin was $29,211,000 or 15% of net sales in
1992, $26,974,000 or 14% in 1993 and $32,559,000 or 16% in 1994.
The increased gross margin of $5,585,000 in 1994 occurred
primarily within the Optical Plastics and Physical Science
Groups. In 1993, the decrease in gross margin of $2,237,000
occurred within the Health Care, Distribution and Physical
Science Groups.
The Physical Science Group gross margin decreased from
$13,728,000 or 13% of net sales in 1992 to $12,941,000, or 13%
in 1993 and increased to $16,670,000 or 14% in 1994. In 1994,
the increased gross margin was attributable to both GP and
Duratek. GP realized increased gross margin due to higher
revenues, reduced overhead and higher direct labor utilization.
Duratek realized increased gross margin in 1994 as a result of
increased sales as well as higher margins achieved on both
technology and services contracts. In 1993, the reduced gross
margin was primarily attributable to reduced gross margins
achieved by Duratek as a result of reduced sales as well as a
decrease in the gross margin percentage achieved within Duratek's
consulting and staff augmentation business because of increasing
competitive pressures within the industry. The reduced gross
margin achieved by Duratek was partially offset by SGLG, which
generated increased gross margins as a result of an improved mix
of services during 1993.
The Distribution Group gross margin decreased from $12,355,000 or
18% of sales in 1992 to $11,718,000 or 16% in 1993 and increased
to $11,785,000 or 16% in 1994. In 1994, the increased gross
margin was due to increased sales. The gross margin in 1994 was
affected by increased warehousing costs incurred as a result of
the decision to close Five Star's New York facility and to
consolidate its operations into the New Jersey facility. The
increased warehousing costs were partially offset by increased
margins achieved due to changes in merchandising practices. In
1995, the Group has started taking steps to reduce its
warehousing costs through the implementation of advanced
warehouse management systems. In 1993, the reduced gross margin
was the result of the reduced gross margin percentage achieved in
1993. The reduced gross margin percentage in 1993 was the result
of a change in the product mix as well as competitive price
pressures within the industry.
The Health Care Group gross margin decreased from $358,000 or 9%
of net sales in 1992 to $(699,000) in 1993. The negative gross
margin in 1993 was the result of facility costs incurred by ISI,
notwithstanding the suspension of production, and lack of sales
of ALFERONR N Injection during 1993. As a result of the Exchange
29
Offer in 1993, through which the Company's interest in ISI fell
below 50%, ISI is currently being accounted for on the equity
basis.
The Optical Plastics Group gross margin decreased from $2,740,000
or 35% of net sales in 1992 to $2,642,000 or 34% of net sales in
1993 and increased to $3,635,000 or 39% of net sales in 1994.
The small decrease in gross margin in 1993 was the result of
marginally reduced sales and gross margin percentage. In 1994,
the increased gross margin was the result of increased sales as
well as an improved mix of products.
Investment and other income (expense), net
Investment and other income (expense) was $6,709,000 in 1992,
$3,379,000 in 1993 and $(1,808,000) in 1994, respectively. In
1994, the $5,187,000 reduction in Investment and other income
(expense), net was due to two factors. The Company realized a
foreign currency transaction loss of $2,124,000 in 1994, as
compared to a net foreign currency transaction gain of $901,000
realized in 1993, related to the Company's decision not to hedge
its Swiss denominated debt. In addition, the Company recognized
increased losses on their investments in 20% to 50% owned
subsidiaries as a result of the Company's share of ISI's loss,
which was $4,409,000, being included in Investment and other
income (expense), net for the year ended December 31, 1994. In
1993, the results of ISI were consolidated with the Company for
the first nine months of the year, until the Company's ownership
fell below 50%. The results of operations for ISI have been
accounted for on the equity method since the fourth quarter of
1993, and the Company recognized a $1,599,000 loss in 1993
related to its equity investment in ISI. The above losses were
partially offset by increased gains realized on the sale of
certain investments in 1994. In 1993, the decrease in Investment
and other income (expense), net, was primarily attributable to a
net foreign currency transaction gain of $901,000 in 1993 as
compared to a gain of $3,362,000 in 1992. In addition, in 1993
the Company realized reduced revenues relating to interest
income, and in the equity in earnings of 20% to 50% owned
subsidiaries as compared to 1992. These decreases were partially
offset by reserves taken and losses realized by the Company on
certain assets and investments in 1992. The reserves were taken
in 1992 due primarily to reduced values and impairments relating
to long-term investments and related assets accounted for on the
cost basis. The Company evaluates its long-term investments at
least annually. An investment is written down or written off if
it is judged to have sustained a decline in value which is other
than temporary. In 1992, the estimated residual value of a 19%
interest in, and advances to, a vendor and distributor of pay
telephones totaling $175,000, which was based upon estimated
30
proceeds on liquidation of telephone equipment, was written off
since it was determined that such sales could not be consummated.
Additionally, in 1992, the Company fully reserved its investment
of $305,000 in a medical blood center company. The blood center
company ceased operations in 1992 as its major investor, a large
financial institution, decided to no longer provide financing and
working capital. In prior years, the blood center company
received substantial funding for its centers and the financial
institution provided working capital and equity financing. In
1992, a number of other relatively small investments were written
off or written down because the Company's periodic evaluations
indicated declines in value which were judged to be other than
temporary.
At December 31, 1994, there was an aggregate of SFr. 15,963,000
of Swiss denominated indebtedness outstanding, of which SFr.
14,084,000 represents principal amount outstanding and SFr.
1,879,000 represents interest accrued thereon. Foreign currency
valuation fluctuations may adversely affect the results of
operations and financial condition of the Company. In order to
protect itself against currency valuation fluctuations, the
Company has at times swapped or hedged a portion of its obliga-
tions denominated in Swiss Francs. At December 31, 1994, the
Company had not hedged its Swiss Franc obligations. If the value
of the Swiss Franc to the U.S. Dollar increases, the Company will
recognize transaction losses on the portion of its Swiss Franc
obligations which are not hedged. On December 31, 1994, the
value of the Swiss Franc to the U.S. Dollar was 1.308 to 1.
There can be no assurance that the Company will be able to swap
or hedge obligations denominated in foreign currencies at prices
acceptable to the Company or at all. The Company will continue
to review this policy on a continuing basis. As of March 24,
1995 the Company had reduced the aggregate principal amount
outstanding to SFr. 5,749,000.
Selling, general, and administrative expenses
Selling, general and administrative expenses (SG&A) decreased
from $34,352,000 in 1992 to $34,255,000 in 1993 and increased to
$34,301,000 in 1994. In 1994, the marginal increase was
primarily the result of increased general and administrative
expenses incurred by the Distribution Group, primarily as a
result of costs associated with the closing of Five Star's New
York warehouse and the consolidation of the New York sales and
operations into the New Jersey facility, as well as increased
depreciation and amortization expense. Five Star has taken steps
in 1995 to reduce their overall level of general & administrative
costs. American Drug Company (ADC) also incurred increased SG&A
as a result of increased consulting expenses and costs related to
the opening and staffing of the Moscow office. ADC is the
31
Company's 54% owned subsidiary which exports American made
generic and prescription drugs and over-the-counter healthcare
products in both Russia and the Commonwealth of Independent
States. The increased general & administrative costs at Five
Star and ADC were partially mitigated by ISI being accounted for
on the equity basis since the third quarter of 1993 and reduced
costs incurred at the corporate level. In 1993, the decrease in
SG&A was primarily attributable to ISI being accounted for on the
equity basis during the third quarter of 1993, as a result of the
Exchange Offer discussed above, in which the Company's interest
in ISI fell below 50%. The reduced SG&A within the Health Care
Group in 1993 was partially offset by increased SG&A incurred by
the Distribution and Physical Science Groups. The increased SG&A
at The Physical Science Group was due to increased operating
costs and the increased SG&A at the Distribution Group was the
result of the large increase in sales which led to increased
selling expenses, as well as additional costs incurred by Five
Star to support the growth in sales. The Optical Plastics Group
had a marginal increase in SG&A in 1993.
Research and development costs
The Company's research and development activities are conducted
both internally and under various types of arrangements at
outside facilities. Research and development costs, which were
primarily attributable to ISI, were $4,645,000, $2,847,000 and
$431,000 for 1992, 1993 and 1994, respectively. In 1993, the
reduced research and development costs were the result of the
Company's ownership in ISI falling below 50% in the third quarter
of 1993. Due to the Exchange Offer discussed above the Company
began accounting for ISI on the equity method from that time.
Interest expense
Interest expense aggregated $10,866,000 in 1992, $8,199,000 in
1993 and $6,458,000 in 1994. The reduced interest expense in
1993 and the further reduction in 1994, was the result of the
Company's continuing successful effort to reduce its interest
expense at the corporate level due to reduced interest on the
Company's Swiss Debt obligations due to the Exchange Offers in
1993 and 1994, as well as the Company's practice of repurchasing
Swiss Debt from time to time.
Income taxes and accounting developments
Income tax expense (benefit) from operations for 1992, 1993 and
1994 was $427,000, $(575,000) and $749,000, respectively.
In 1994, the Company recorded an income tax expense of $749,000.
The current income tax provision of $283,000 represents the
32
estimated taxes payable by the Company for the year ended
December 31, 1994. The deferred income tax provision of $466,000
represents the deferred taxes of GP, the Company's 51% owned
subsidiary.
In 1993, the Company recorded an income tax benefit of
$1,043,000, of which $973,000 relates to Federal income taxes, in
continuing operations as a result of the income tax expense
allocated to the extraordinary gain recognized on the early
extinguishment of debt under the provisions of FASB No. 109.
In 1992, the Company's loss before income taxes from operations
exceeded its gains from extraordinary items: therefore, pursuant
to accounting policies of the Company then in effect under APB
No. 11, "Accounting for Income Taxes", no income tax expense
applicable to such extraordinary gains was recognized. The
income tax expense for 1992 of $427,000 represents state and
local income taxes.
As of December 31, 1994, the Company has approximately
$23,920,000 of consolidated net operating losses available for
Federal income tax purposes.
Effective January 1, 1994, the Company adopted Statement of
Financial Accounting Standards No. 115, "Accounting for Certain
Investments in Debt and Equity Securities". There was no
material effect on the Company's financial condition or results
of operations as a result of the adoption of this principle.
Liquidity and capital resources
At December 31, 1994, the Company had cash and cash equivalents
totaling $10,075,000. GP, SGLG, ADC and Duratek had cash and
cash equivalents of $412,000 at December 31, 1994. The minority
interests of these companies are owned by the general public, and
therefore, the assets of these subsidiaries have been dedicated
to the operations of these companies and may not be readily
available for the general corporate purposes of the parent. At
March 24, 1995 the Company had cash, cash equivalents and
marketable securities totaling $10,000,000, of which the
Company's publicly held subsidiaries, GP, SGLG, and ADC had cash,
cash equivalents and marketable securities totaling $66,000. In
addition, MXL had cash, cash equivalents and marketable
securities totaling $1,153,000, which is not available to the
Company due to restrictions within MXL's Line of credit agreement
(See Note 8 to the Consolidated Financial Statements).
33
The Company has sufficient cash, cash equivalents and marketable
securities and borrowing availability under existing and
potential lines of credit to satisfy its cash requirements for
its Swiss Franc denominated indebtedness due in 1995, which
totaled approximately $3,700,000 at March 24, 1995. As
of April 3, 1995, the Company had not yet paid approximately
$3,000,000 of such indebtedness which was due in March 1995
(See Note 10(a) to the Consolidated Financial Statements).
In order for the Company to meet its long-term cash needs,
which include the repayment of approximately $3,300,000 of
Dual Currency and Swiss Franc denominated indebtedness
scheduled to mature in 1996, the Company must obtain
additional funds from among various sources. The
Company has historically reduced its long-term debt through
the issuance of equity securities in exchange for long-term debt.
In addition to its ability to issue equity securities,
the Company believes that it has sufficient marketable
long-term investments, as well as the ability to obtain
additional funds from its operating subsidiaries and the
potential to enter into new credit arrangements. The Company
reasonably believes that it will be able to accomplish some
or all of the above transactions in order to fund the scheduled
repayment of the Company's long-term Swiss debt in 1996.
For the year ended December 31, 1994, the Company's working
capital decreased by $7,401,000 to $25,823,000, reflecting the
effect of increased current maturities of long-term debt and
short-term borrowings, partially offset by increased current
assets related to GP. Consolidated cash and cash equivalents
decreased by $901,000 to $10,075,000 at December 31, 1994.
The decrease in cash and cash equivalents of $901,000 in 1994
primarily resulted from the effect of cash used, in operations of
$4,918,000 and investing activities of $4,696,000, partially
offset by cash provided by financing activities of $8,713,000.
Cash used in operations was primarily required to fund the
operating loss for the year. The cash used in investing
activities was for increases in investments in property, plant
and equipment and intangible assets, partially offset by cash
provided from the sale of certain assets and businesses of a
subsidiary. Financing activities consisted primarily of
repayments and reductions in short-term borrowings and repayments
of long-term debt, offset by proceeds from short-term borrowings
and long-term debt. At December 31, 1994, the Company at the
parent company level had substantially exhausted its ability to
borrow funds from its subsidiaries under their respective line of
credit arrangements.
The Company's principal manufacturing facilities were constructed
subsequent to 1976 and management does not anticipate having to
replace major facilities in the near term. As of December 31,
34
1994, the Company has not contractually committed itself for any
other new major capital expenditures.
35
Item 8. Financial Statements and Supplementary Data
Page
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Independent Auditors' Report 37
Financial Statements:
Consolidated Balance Sheets - December 31, 1994
and 1993 38
Consolidated Statements of Operations - Years ended
December 31, 1994, 1993, and 1992 40
Consolidated Statements of Changes in Stockholders'
Equity - Years ended December 31, 1994, 1993,
and 1992 41
Consolidated Statements of Cash Flows - Years ended
December 31, 1994, 1993, and 1992 43
Notes to Consolidated Financial Statements 46
SUPPLEMENTARY DATA (Unaudited)
Selected Quarterly Financial Data 75
36
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Stockholders
National Patent Development Corporation:
We have audited the consolidated financial statements of National
Patent Development Corporation and subsidiaries as listed in the
accompanying index. These consolidated financial statements are
the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated
financial statements based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to
above present fairly, in all material respects, the financial
position of National Patent Development Corporation and
subsidiaries at December 31, 1994 and 1993, and the results of
their operations and their cash flows for each of the years in
the three-year period ended December 31, 1994, in conformity with
generally accepted accounting principles.
As discussed in Note 19, the Company has adopted SFAS 115,
"Accounting for Certain Investments in Debt and Equity
Securities," as of January 1, 1994.
KPMG Peat Marwick LLP
New York, New York
April 3, 1995
37
NATIONAL PATENT DEVELOPMENT CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands)
December 31, 1994 1993
Assets
Current assets
Cash and cash equivalents $ 10,075 $ 10,976
Accounts and other receivables (of which
$15,152 and $7,694 are from government
contracts) less allowance for doubtful
accounts of $2,092 and $1,689 52,487 36,285
Inventories 20,642 22,605
Costs and estimated earnings in excess of
billings on uncompleted contracts, of which
$6,897 and $2,913 relates to government
contracts 15,237 13,081
Prepaid expenses and other current assets 6,770 4,160
Total current assets 105,211 87,107
Investments and advances 11,600 28,303
Property, plant and equipment, at cost 37,423 33,873
Less accumulated depreciation and
amortization (22,843) (20,035)
14,580 13,838
Intangible assets, net of accumulated
amortization of $26,970 and $24,691
Goodwill 35,986 25,463
Patents, licenses and deferred charges 1,039 4,641
37,025 30,104
Investment in financed assets 684 2,797
Other assets 6,446 3,908
$175,546 $166,057
38
NATIONAL PATENT DEVELOPMENT CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (Continued)
(in thousands, except shares and par value per share)
December 31, 1994 1993
Liabilities and Stockholders' Equity
Current liabilities
Current maturities of long-term debt $ 14,279 $ 6,750
Short-term borrowings 31,060 21,390
Accounts payable and accrued expenses 27,958 20,256
Billings in excess of costs and estimated
earnings on uncompleted contracts 6,091 5,487
Total current liabilities 79,388 53,883
Long-term debt less current maturities 17,513 36,638
Notes payable for financed assets 579
Minority interests 11,970 3,277
Commitments and contingencies
Common stock issued subject to
repurchase obligation 1,510 4,242
Stockholders' equity
Preferred stock, authorized 10,000,000
shares, par value $.01 per share, none
issued
Common stock, authorized 40,000,000
and 30,000,000 shares, par value
$.01 per share, issued 24,140,757
and 19,023,357 shares (of which 22,645
shares are held in treasury) 241 190
Class B capital stock, authorized 2,800,000
shares, par value $.01 per share, issued
and outstanding 250,000 shares 2 2
Capital in excess of par value 119,856 106,274
Deficit (53,151) (39,028)
Net unrealized loss on
available-for-sale securities (1,783)
Total stockholders' equity 65,165 67,438
$175,546 $166,057
See accompanying notes to consolidated financial statements.
39
NATIONAL PATENT DEVELOPMENT CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
Years ended December 31, 1994 1993 1992
Revenues
Sales $204,774 $185,846 $189,797
Investment and other income
(expense), net (including
interest income of $360,
$875 and $1,275) (1,808) 3,379 6,709
202,966 189,225 196,506
Costs and expenses
Cost of goods sold 172,215 158,872 160,586
Selling, general and
administrative 34,301 34,255 34,352
Research and development 431 2,847 4,645
Interest 6,458 8,199 10,866
213,405 204,173 210,449
Gain on disposition of stock of
a subsidiary and an affiliate 3,795
Gain on issuance of stock by a
subsidiary 1,353
Minority interests (209) 2,376 2,792
Loss before income taxes,
discontinued operation
and extraordinary item (10,648) (7,424) (11,151)
Income tax expense (benefit) 749 (575) 427
Loss before discontinued operation
and extraordinary item (11,397) (6,849) (11,578)
Discontinued operation
Loss from discontinued operation (2,574) (947) (2,027)
Loss before extraordinary item (13,971) (7,796) (13,605)
Extraordinary item
Early extinguishment of debt,
net of income tax in 1993 1,819 1,662
Net loss $ (13,971) $ (5,977) $(11,943)
Loss per share
Loss before discontinued
operation and extraordinary
item $ (.52) $ (.40) $ (.73)
Discontinued operation (.12) (.06) (.13)
Extraordinary item .11 .10
Net loss per share $ (.64) $ (.35) $ (.76)
See accompanying notes to consolidated financial statements.
40
NATIONAL PATENT DEVELOPMENT CORPORATION AND SUBSIDIARIES
Consolidated Statements of Changes in Stockholders' Equity
Years ended December 31, 1994, 1993, and 1992
(in thousands, except shares, par value per share and per share amounts)
Net
unrealized
Class B Capital in
Common capital excess
stock stock of par for-sales stock holders'
($.01 Par)($.01 Par) value Deficit securities at cost equity
Balance at December 31, 1991 $ 151 $ 2 $ 94,828 $(21,108) $ (1,468) $72,405
Exercise of stock options
and warrants 2 280 282
Issuances of treasury stock
(102,772 common shares) (1,074) 1,468 394
Net loss (11,943) (11,943)
Conversion of 12% Debentures 1 164 165
Issuance of stock in
connection with Swiss Bonds 2 911 913
Effect of exercise of
warrants to purchase the
stock of a subsidiary 674 674
Shares issuable in
settlement of debt 186 186
Issuance and sale of
common stock 3 744 747
Balance at December 31, 1992 159 2 96,713 (33,051) 63,823
Exercise of stock options
and warrants 2 410 412
Net loss (5,977) (5,977)
Conversion of 12% Debentures 82 82
Issuance of stock
in connection with
Swiss Bonds 26 8,694 8,720
Issuance and sale of
common stock 3 375 378
41
NATIONAL PATENT DEVELOPMENT CORPORATION AND SUBSIDIARIES
Consolidated Statements of Changes in Stockholders' Equity (Continued)
Years ended December 31, 1994, 1993, and 1992
(in thousands, except shares, par value per share and per share amounts)
Net
unrealized
Class B Capital in
Common capital excess available- Treasury stock-
stock stock of par for-sales stock holders'
($.01 Par)($.01 Par) value Deficit securities at cost equity
Balance at December 31, 1993 190 2 106,274 (39,028) 67,438
Implementation of SFAS 115 1,157 1,157
Exercise of stock options
and warrants 1 98 99
Issuance of stock in
connection with
Swiss Bonds 42 9,953 9,995
Transfer from common stock issued
subject to repurchase obligation 5 2,727 2,732
Conversion of 12% Debentures 35 35
Distribution of shares in
a subsidiary (152) (152)
Issuance and sale of
common stock 3 769 772
Net unrealized loss on
available-for-sales securities (2,940) (2,940)
Net loss (13,971) (13,971)
Balance at December 31, 1994 $ 241 $ 2 $119,856 $(53,151) $(1,783) $65,165
See accompanying notes to consolidated financial statements.
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