UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q [X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the quarter ended June 30, 1995 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 or other jurisdiction of	 	(I.R.S. Employer incorporation or organization)	 	Identification No.) 9 West 57th Street, New York, NY			 	10019 (Address of principal executive offices) 		(Zip code) (212) 826-8500 (Registrant's telephone number, including area code) 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 Number of shares outstanding of each of issuer's classes of common stock as of August 11, 1995: Common Stock 	26,953,957 shares Class B Capital 	250,000 shares NATIONAL PATENT DEVELOPMENT CORPORATION AND SUBSIDIARIES TABLE OF CONTENTS 		Page No. Part I.	Financial Information 			Consolidated Condensed Balance Sheets - 				June 30, 1995 and December 31, 1994 	1 			Consolidated Condensed Statements of Operations - 				Three Months and Six Months Ended June 30, 				1995 and 1994	 3 			Consolidated Condensed Statements of Cash Flows - 				Six Months Ended June 30, 1995 and 1994 	4 			Notes to Consolidated Condensed Financial 				Statements 	6 			Management's Discussion and Analysis of Financial 				Condition and Results of Operations 	8 			Qualification Relating to Financial Information 12 Part II.	Other Information 	13 				Signatures 	14 PART I. FINANCIAL INFORMATION 	 NATIONAL PATENT DEVELOPMENT CORPORATION AND SUBSIDIARIES CONSOLIDATED CONDENSED BALANCE SHEETS (in thousands) 	June 30, 	December 31, 	1995 	1994 ASSETS	 (unaudited) 	* Current assets Cash and cash equivalents 	 $ 11,810 	$ 10,075 Accounts and other receivables 	44,663 	52,487 Inventories 	19,488 	20,642 Costs and estimated earnings in excess of billings on uncompleted contracts	 11,137 	15,237 Prepaid expenses and other current assets 	4,509 	6,770 Total current assets	 91,607 	105,211 Investments and advances 	15,418 	11,600 Property, plant and equipment, at cost	 32,159 	37,423 Less accumulated depreciation 	(20,978) 	(22,843) 	11,181 	14,580 Intangible assets, net of amortization	 33,175 	37,025 Investment in financed assets 	 	684 Other assets 4,080 	6,446 	$155,461 $175,546 * The Consolidated Condensed Balance Sheet as of December 31, 1994 has been summarized from the Company's audited Consolidated Balance Sheet as of that date. See accompanying notes to the consolidated condensed financial statements. NATIONAL PATENT DEVELOPMENT CORPORATION AND SUBSIDIARIES CONSOLIDATED CONDENSED BALANCE SHEETS (Continued) (in thousands) 	June 30, 	December 31, 	 1995 	1994 LIABILITIES AND STOCKHOLDERS' EQUITY 	(unaudited)	 * Current liabilities Current maturities of long-term debt and notes payable 	$ 6,926 	$ 14,279 Short-term borrowings 	25,759 	31,060 Accounts payable and accrued expenses 	21,943 	27,958 Billings in excess of costs and estimated earnings on uncompleted contracts 	6,018 	6,091 Total current liabilities 60,646 	79,388 Long-term debt less current maturities 	17,355 	17,513 Minority interests and other 	9,419 	11,970 Common stock issued subject to repurchase obligation 	1,522 	1,510 Stockholders' equity Common stock 	267 	241 Class B capital stock	 2 	2 Capital in excess of par value 	122,576 	119,856 Deficit 	(54,246) 	(53,151) Net unrealized loss on available-for-sale securities 	(2,080) 	(1,783) Total stockholders' equity 	66,519 	65,165 	$155,461 	$175,546 * The Consolidated Condensed Balance Sheet as of December 31, 1994 has been summarized from the Company's audited Consolidated Balance sheet as of that date. See accompanying notes to the consolidated condensed financial statements. NATIONAL PATENT DEVELOPMENT CORPORATION AND SUBSIDIARIES CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS (Unaudited) (in thousands, except per share data) 		Three months 		Six months 			ended June 30, 	1995 	1994 	1995 	1994 Revenues Sales	 $ 48,416 	$ 51,430 	$ 94,968 $ 95,960 Investment and other income (expense), net 	812 	(1,258) 678 	(2,010) 	 49,228 	 50,172 	95,646 	 93,950 Costs and expenses Cost of goods sold 	40,584 	41,916 	79,866 	78,434 Selling, general & administrative	 7,387 	9,034 	14,549 	16,899 Interest 	1,435 	1,418 	2,433 	2,900 	 49,406 	52,368 	96,848 	98,233 Minority interests 	(204) 	 (36) 	(504) 	 (104) Gain on sale of stock of a subsidiary			 2,567 Gain on issuance of stock by a subsidiary	 	229 		229 Income (loss) before income taxes, discontinued operation and extraordinary item 	(382) 	(2,003) 	861 	(4,158) Income tax expense 	(528) 	(52) 	(825) 	(118) Income (loss) before discontinued operation and extraordinary item 	(910) (2,055	 36 	(4,276) Discontinued operation Loss from discontinued operation 	(412) (288) 	(1,139) 	(527) Loss before extraordinary item (1,322) (2,343) 	(1,103) 	(4,803) Extraordinary item Extinguishment of debt (220) 8 	 Net loss 	$(1,542) 	$(2,343) 	$(1,095) 	$(4,803) Loss per share Loss before discontinued operation and extraordinary item 	$ (.03) $ (.10) 	$ 	$ (.22) Discontinued operation 	(.02) 	(.02) 	(.04) 	(.03) Extraordinary item (.01) Net loss per share $ (.06) 	$ (.12) 	$ (.04)	 $ (.25) Dividends per share 	none 	none 	none 	none See accompanying notes to the consolidated condensed financial statements. NATIONAL PATENT DEVELOPMENT CORPORATION AND SUBSIDIARIES CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (Unaudited) (in thousands) 		Six months 		 ended June 30, 	 1995 	1994 Cash flows from operations: Net loss 	$(1,095) 	$(4,803) Adjustments to reconcile net income to net cash used for operating activities: Provision for discontinued operation	 1,100 Depreciation and amortization 	2,573 	2,152 Gains from early extinguishment of debt	 (8) Gain on sale of stock of a subsidiary 	(2,567) Changes in other operating items	 277 	(7,634) Net cash provided by (used for) operations 	280 	(10,285) Cash flows from investing activities: Proceeds from sale of stock of a subsidiary 	5,000 Additions to property, plant & equipment (1,803) 	(1,734) Additions to intangible assets, net 	(679) 	(239) Reduction of (additions to) investments and other assets, net 	(172) 	2,332 Net cash provided by investing activities 	2,346 	359 Cash flows from financing activities: Net proceeds from short-term borrowings 	2,330 	8,085 Proceeds from issuance of long-term debt 	4,910 	3,163 Reduction of long-term debt (8,131) 	(2,011) Exercise of common stock options and warrants 		100 Proceeds from issuance of common stock		 88 Net cash (used for) provided by financing activities 	(891) 	9,425 Net increase (decrease) in cash and cash equivalents 	1,735 	(501) Cash and cash equivalents at the beginning of the periods 10,075 	10,976 Cash and cash equivalents at the end of the periods 	$11,810 	$10,475 NATIONAL PATENT DEVELOPMENT CORPORATION AND SUBSIDIARIES CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (Continued) (Unaudited) (in thousands) 		Six months ended June 30, 1995 	1994 Supplemental disclosures of cash flow information: Cash paid during the periods for: Interest $ 2,589 	$ 2,135 Income taxes 	$ 479 	$ 261 See accompanying notes to the consolidated condensed financial statements. NATIONAL PATENT DEVELOPMENT CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (Unaudited) 1.	Inventories 	Inventories are valued at the lower of cost or market, principally using the first-in, first-out (FIFO) method. Inventories consisting of material, labor, and overhead are classified as follows (in thousands): June 30, 		December 31, 		1995 		1994 Raw materials 	$ 1,539 		$ 1,973 Work in process 	465 		462 Finished goods 	17,484 		15,557 Land held for resale	 		2,650 		$19,488 		$20,642 2.	Long-term debt 	Long-term debt consists of the following (in thousands): 		 June 30,		 December 31, 		 1995 		1994 8% Swiss bonds 	$ 113 		$ 2,999 8% Swiss bonds due 2000 	2,340 Swiss convertible bonds 	2,014 		10,157 New 5% convertible bonds 	2,129 		2,129 12% Subordinated debentures 	6,783 		6,783 Other 		10,902 		 9,145 		 24,281 		31,213 Less current maturities 6,926 		13,700 		$17,355 		$17,513 	On June 28, 1995, the Company's Exchange Offer for certain issues of its outstanding indebtedness expired. The Company accepted for exchange Swiss Francs ("SFr.") 1,299,000 of its 8% Swiss Bonds due March 1, 1995, SFr. 1,120,000 of its Convertible Swiss Bonds due March 7, 1995, SFr. 945,000 of its 5.75% Convertible Bonds due May 9, 1995, SFr. 795,000 of its 5.625% Convertible Bonds due March 18, 1996, and $1,212,000 of its 7% Dual Currency Bonds due March 18, 1996. In exchange for the forgoing bonds, the Company issued, an aggregate of SFr. 3,604,000 of new 8% Swiss Bonds, due June 28, 2000 (the "New 8% Bonds") and paid $2,873,000 in cash. The New 8% Bonds were valued at $ 2,340,000(after an original issue discount of 25%). The principal and interest on the New 8% Bonds are payable either in cash or in shares of common stock of the Company, at the option of the Company. The Company reduced its long-term debt due in 1995 and 1996 by $4,824,000 and realized a loss of $220,000 on the Exchange Offer. NATIONAL PATENT DEVELOPMENT CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (Continued) (Unaudited) 3.	Term loan 	On April 7, 1995, the Company entered into a $5,000,000 Term Loan Agreement, of which the Company received approximately $4,900,000 after closing fees. The Term Loan is payable in sixteen consecutive quarterly installments, commencing on June 30, 1996. The first fifteen installments will be $250,000 and the last installment shall be $1,250,000. The Company has used a portion of the proceeds in July 1995 to repay and refinance its Swiss denominated long-term debt due in 1995 and 1996. The Term Loan is secured by certain assets of the Company and requires the Company to meet certain financial covenants. 4.	Revolving agreement 	On April 7, 1995, General Physics Corporation (GP), the Company's 51% owned subsidiary, entered into a new $20,000,000 secured revolving credit agreement with a commercial bank, and terminated its previous credit agreement. Borrowings under the new credit agreement bear interest at the prime rate or at a rate which is 1.75% over LIBOR, whichever rate is elected by GP. The new credit agreement is secured by the accounts receivable of GP and certain of its subsidiaries, and contains certain covenants which, among other things, limit the amount and nature of certain expenditures by GP, and requires GP to maintain certain financial ratios. NATIONAL PATENT DEVELOPMENT CORPORATION AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS 	The Company incurred income (loss) before income taxes, discontinued operation and extraordinary item of $(382,000) and $861,000 for the quarter and six months ended June 30, 1995, as compared with a loss of $(2,003,000) and ($4,158,000) for the corresponding periods of 1994. The improvement in the Company's results before discontinued operation and extraordinary item is due to several factors. The improved operating results were primarily the result of the $2,567,000 gain recognized by the Company on the sale of 1,666,667 shares of the Company's GTS Duratek, Inc. (Duratek) common stock in January 1995. As a result of the transaction, the Company's ownership fell below 50% and commencing in January 1995, the Company has accounted for its investment in Duratek on the equity basis. Included in investment and other income(expense), net for the quarter and six months ended June 30, 1995, is $78,000 and $(991,000), respectively, of foreign currency transaction gains (losses), compared to losses of $(1,115,000) and $(2,012,000) for the corresponding periods of 1994. The Physical Science Group achieved increased operating profits in 1995. In addition, for the quarter and six months ended June 30, 1995, the Company also achieved reduced interest expense at the corporate level, as a result of reduced long-term debt. 	Foreign currency valuation fluctuations may adversely affect the results of operations and financial condition of the Company. At June 30, 1995, 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 its Swiss franc obligations. On June 30, 1995, the value of the Swiss franc to the U.S. dollar was approximately 1.1485 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. At June 30, 1995, the Company had approximately SFr. 4,698,000 of Swiss denominated debt outstanding, of which approximately SFr. 4,298,000 represents principal amount outstanding and approximately SFr. 400,000 represents interest accrued thereon. NATIONAL PATENT DEVELOPMENT CORPORATION AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued) Sales 	For the quarter ended June 30, 1995, consolidated sales decreased by $3,014,000 to $48,416,000 from the $51,430,000 recorded in the corresponding quarter of 1994. For the six months ended June 30, 1995, consolidated sales decreased by $992,000 to $94,968,000 from $95,960,000 recorded for the six months ended June 30, 1994. The decreased sales during the periods were the result of reduced sales in the Distribution Group, partially offset by increased sales within the Physical Science and Optical Plastics Group. The decreased sales within the Distribution Group was the result of the loss of a significant customer. The increased sales within the Physical Science Group were the result of consolidating the sales of General Physics Corporation (GP) since September 1994, partially offset by Duratek being accounted for on the equity basis since January 1995. Gross margin 	Consolidated gross margin of $7,832,000, or 16%, for the quarter ended June 30, 1995, decreased by $1,682,000 when compared to the consolidated gross margin of $9,514,000, or 18%, for the quarter ended June 30, 1994. For the six months ended June 30, 1995, consolidated gross margin of $15,102,000 or 16% of consolidated sales decreased by $2,424,000 when compared to $17,526,000 or 18% of consolidated sales earned in the six months ended June 30, 1994. The decreased gross margin in 1995 was principally the result of decreased gross margin achieved by the Distribution and Physical Science Groups. The decreased gross margin within the Physical Science Group is primarily due to the Company's ownership in Duratek falling below 50% in January 1995, and the Company accounting for the results of Duratek on the equity basis from that time, partially offset by GP being included in the consolidated results since September 1994. The reduced gross margin percentage is the result of continued pressure from customers within certain areas of GP's business to reduce costs. The reduced gross margin in the Distribution Group was the result of reduced sales. NATIONAL PATENT DEVELOPMENT CORPORATION AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued) Selling, general and administrative expenses 	For the quarter and six months ended June 30, 1995, selling, general and administrative expenses (SG&A) of $7,387,000 and $14,549,000 were $1,647,000 and $2,350,000 lower than the $9,034,000 and $16,899,000 of SG&A expenses incurred during the quarter and six months ended June 30, 1994. The decrease in SG&A for the quarter and six months ended June 30, 1995, was principally the result of Duratek being accounted for on the equity method since January 1995. Interest expense 	For the quarter and six months ended June 30, 1995, interest expense was $1,435,000 and $2,433,000, compared to $1,418,000 and $2,900,000 for the second quarter and six months ended June 30, 1994. The decreased interest expense for the six months ended June 30, 1995, was the result of reduced long-term debt. Investment and other income (expense), net 	Investment and other income (expense), net of $812,000 and $678,000 for the quarter and six months ended June 30, 1995 increased by $2,070,000 and $2,688,000, respectively, as compared to $(1,258,000) and $(2,010,000) for the corresponding periods of 1994. The change was principally due to two factors; $78,000 and $(991,000) of foreign currency transaction gains (losses) recognized during the quarter and six months ended June 30, 1995, compared to losses of $(1,115,000) and $(2,012,000) for the corresponding periods of 1994, and a loss of $312,000 and $595,000 realized in the quarter and six months ended June 30, 1995, respectively, on the share of losses of 20% to 50% owned affiliates, compared to $1,050,000 and $1,820,000 losses realized in the quarter and six months ended June 30, 1994, respectively, primarily due to the results of Interferon Sciences, Inc. (ISI) being accounted for on the equity basis. For the quarter and six months ended June 30, 1995, the Company's share of ISI's loss was $320,000 and $655,000, as compared to $900,000 and $1,620,000, for the corresponding periods of 1994. In addition, the Company achieved increased investment income in 1995 due to increased cash balances and higher short-term interest rates. NATIONAL PATENT DEVELOPMENT CORPORATION AND SUBSIDIARIES LIQUIDITY AND CAPITAL RESOURCES 	At June 30, 1995, the Company had cash and cash equivalents totaling $11,810,000. A liability of approximately $2,873,000, which was included in "Accounts payable and accrued expenses" on the Consolidated Condensed Balance Sheet, relating to the Exchange Offer (See Note 2 to the Consolidated Condensed Financial Statements) was paid in July 1995. GP, SGLG and American Drug Company had cash and, cash equivalents of $1,818,000 at March 31, 1995. The minority interests of these two 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 purpose of the parent. MXL Industries, Inc., a 100% owned subsidiary, had cash and cash equivalents totaling $1,061,000, which was not available to the Company due to restrictions within MXL's line of credit agreement. In addition, GP under its revolving credit agreement (See Note 4 to the Consolidated Condensed Financial Statements) can loan up to $2,000,000 to the Company at the prime rate of interest. 	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 and 1996, which totaled approximately $713,000 and $1,415,000, respectively at June 30, 1995. In order for the Company to meet its long-term cash needs, which include the repayment of approximately $6,783,000 of 12% Subordinated debentures scheduled to mature in 1997, 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 12% Subordinated debentures in 1997. NATIONAL PATENT DEVELOPMENT CORPORATION AND SUBSIDIARIES 	 QUALIFICATION RELATING TO FINANCIAL INFORMATION June 30, 1995 	The financial information included herein is unaudited. In addition, the financial information does not include all disclosures required under generally accepted accounting principles because certain note information included in the Company's Annual Report has been omitted; however, such information reflects all adjustments (consisting solely of normal recurring adjustments) which are, in the opinion of management, necessary to a fair statement of the results for the interim periods. The results for the 1995 interim period are not necessarily indicative of results to be expected for the entire year. NATIONAL PATENT DEVELOPMENT CORPORATION AND SUBSIDIARIES PART II. OTHER INFORMATION Item 6.	EXHIBITS AND REPORTS ON FORM 8-K 	a.	Exhibits 	 (i) Exhibit 27 - Financial Data Schedule 	b.	Reports on Form 8-K 		There were no reports filed on Form 8-K for the period ended June 30, 1995. NATIONAL PATENT DEVELOPMENT CORPORATION AND SUBSIDIARIES June 30, 1995 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed in its behalf by the undersigned thereunto duly authorized. 			NATIONAL PATENT DEVELOPMENT 		 	CORPORATION DATE: August 11, 1995	 BY: Scott N. Greenberg 				 			Vice President and 			 	Chief Financial Officer DATE: August 11, 1995	 BY: Jerome I. Feldman 			 			President and Chief 			 	Executive Officer