REFAC Technology Development Corporation is a leader in technology transfer
 and licensing, product design and development and trademark licensing and
 consulting.  Our expertise is our ability to transform the earning potential
 of intellectual property rights into revenue-bearing values for our clients,
 business partners and shareholders.
 
 Contents:
     1   Financial Highlights
     3   Letter to Stockholders from the Chairman & CEO
     4   New Ways of Creating Value
     6   Human Factors ... New Ways of Solving Problems
     9   Selective Licensing ... New Ways of Extending Value
     10  Technology Management ... Solid Core for Building Value
     12  Management Discussion and Analysis
     15  Consolidated Balance Sheets
     16  Consolidated Statements of Operations
     17  Consolidated Statements of Cash Flows
     18  Consolidated Statements of Cash Flows
     19  Notes to the Financial Statements
   
 
 
 <PAGE>
 
 Selected Financial Information
 
 
 Fiscal Years Ended December 31,        1997         1996         1995
 Total revenue                      $11,484,441   $9,199,033  $4,528,042
 Operating income                     7,427,189    5,396,627   2,105,348
 Net income                           5,191,469    4,699,564   2,344,460
 Earnings per common share - diluted       1.36          .88         .44
 Total assets                        37,141,493   43,294,578  37,352,431
 Shareholders' equity                22,622,508   32,044,299  29,084,581
     
 
 Financial highlights graphs detailing total revenue, net income and earnings
 per common share.
 
 <PAGE>
 In left hand margin photo of Robert L. Tuchman, Chairman & CEO
 
 Dear Stockholder:
 
 Last year, I set as our primary objective a program of significant, long-term
 growth while remaining profitable and enhancing the value of your shares.  By
 any measure, 1997 was an exciting year of growth and transition for our
 Company.  We posted record earnings while expanding our core business
 capabilities through the acquisition of Human Factors Industrial Design, Inc.
 (Human Factors) last November and by the formation of our Selective Licensing
 & Promotion, Ltd. (Selective Licensing) subsidiary early this year.  REFAC
 today is a multi-dimensional company with core competencies in technology
 transfer and licensing, product design and engineering, and trademark
 licensing and promotion.  
 
 Individually, each of these business entities has the potential to generate
 significant revenue for the Company in years to come.  In tandem, they
 uniquely offer exciting and dynamic synergies for creating new sources of
 growth, profit and shareholder value.  We are committed to making these new
 synergies work as we continue to grow the Company.
 
 Financial Results
 Consolidated net income for the year ended December 31, 1997, was $5,191,000,
 or $1.36 per share, compared with $4,700,000, or $0.88 per share in 1996. 
 Consolidated gross revenues were $11,484,000, up 25% percent from $9,194,000. 
 
 We achieved record earnings despite a 1997 operating loss of $307,000 after
 taxes, or $0.08 per share, on our hot melt adhesive manufacturing operations
 and an additional loss of $341,000 after taxes, or $0.09 per share, when we
 decided to cease such operations at the end of the year.  The increase in
1997
 revenues and net income was attributable to an increase in gains on the sale
 of licensing related securities.  However, at year end, the value of REFAC's
 licensing related securities was $22,800,000 compared to $22,900,000 at the
 end of 1996.
 Significant Accomplishments
 The acquisition of Human Factors last year was a major step in our program to
 expand REFAC's core business.  As one of the nation's premier industrial
 design and engineering firms, Human Factors adds impressively to REFAC's
 roster of clients, professional abilities and creative talent.  Their product
 design and engineering expertise will add immediate value to our technology
 licensing  business, while our entrepreneurial expertise will expand their
 revenue-making potential.
 
 The establishment of Selective Licensing in January was another important
step
 in becoming a full-service company for all facets of intellectual property
 development and management.  Its President, Arlene Scanlan, brings us 20
years
 of successful experience in specialized brand and character licensing and
 promotion.
 
 In our core technology licensing and transfer business, we continued to make
 progress in all of our major ventures.  Towards the end of the year, we
formed
 REFAC Biochemics Corporation and assigned to it our Exclusive License
 Agreement covering United States Patent No. 5,409,903 for eliminating the
 H. pylori bacteria without the use of antibiotics. We have reached agreement
 in principle with a hospital to sponsor a clinical study for this
 pharmaceutical composition, which we have named "Pyloricide ".  We expect
that
 the Investigative New Drug Application will be submitted to the Food and Drug
 Administration during the second quarter so that the clinical trials may
 proceed during the second half of the year.  If the early stages of the
 clinical trial confirm the efficacy of the Pyloricide medication, its
 significant revenue potential should enable us to attract a major
 pharmaceutical company to complete the clinical trials and bring this drug to
 market.
 
 In May, Microsoft became our fourth licensee under United States Patent No.
 5,167,011 awarded to Dr. W. Curtiss Priest for his system of managing
 electronic communications.  An arbitration judgement on the financial aspects
 of this agreement is due in the last quarter of 1998.
 
 In December, we settled our patent infringement suit with Hayes Microcomputer
 Products regarding the data compression technology covered under United
States
 Patent No. 4,876,541 (the "Storer Patent").  Patent litigation continues
 against the remaining defendant, Zoom Telephonics, Inc., with a jury trial
 expected to begin at mid-year.
 
 In February, 1998, we successfully completed a non-exclusive license for our
 patented thermoplastic polyurethane hot-melt adhesive technology to Key
 Polymer Corporation.  With this agreement in place, our Advanced Resin
 Technology subsidiary ceased its manufacturing activities in order to
 concentrate its efforts on research and development.  
 The Year Ahead
 During 1998, our principal objectives are to continue to grow and broaden our
 business and to maintain our level of profitability.  The addition of Human
 Factors and Selective Licensing has opened many new opportunities for
 fulfilling this task.  We are a much larger, more talented company than we
 were a year ago.  
 
 Our primary challenge in the coming year is to assimilate these new companies
 into REFAC and to jointly pursue the new opportunities they represent.  In
 particular, Human Factors, with REFAC's assistance, will allocate a
 significant portion of its time and resources to selectively develop products
 and product lines on a royalty basis.  In doing so, we will forego some
 current fee income in exchange for the long-term "equity" potential that we
 can derive from such products. 
 
 We are investing in state-of-the-art computer equipment and networking for
 Human Factors and in an internal communication system for all of the REFAC
 companies.  We also remain committed to improving the quality and depth of
our
 technology licensing staff.  Toward that end, Raymond A. Cardonne, Jr.,
joined
 REFAC in December as Vice President with responsibility for the licensing and
 commercialization of technology properties.   Ray brings engineering and
 business development expertise to REFAC and will make significant
 contributions not only to our technology licensing programs but also to our
 new ventures.
 
 REFAC is strongly positioned to build its position as an industry leader and
 the company of choice for clients seeking to commercialize or extract value
 from their intellectual properties and to bring new or improved products to
 market.  We will continue to leverage our experience and resources in the
 years ahead through internal growth and further strategic alliances and
 acquisitions.
 Sincerely Yours, 
 Robert L. Tuchman
 Chairman and CEO 
 
 
 
 
 NEW WAYS OF CREATING VALUE
 
 Photo of Robert L. Tuchman Chairman & CEO, REFAC, Arlene J. Scanlan
President,
 Selective Licensing & Promotion, Ltd. and Douglas M. Spranger President of
 Human Factors Industrial Design, Inc.
 REFAC's three core business units combine to form a powerful mix of expertise
 for transforming latent potential into commercial value in the global
 marketplace.  Clients of any one of our businesses will now have access to
the
 complete range of capabilities that REFAC offers.  As a result, the range of
 lucrative entrepreneurial opportunities available to us has been
significantly
 expanded.
 
 REFAC's core technology licensing and transfer clients and partners can now
 utilize the product design and engineering expertise of Human Factors to
 nurture and enhance their properties.  They can also consult with or retain
 Selective Licensing regarding programs to extend and promote their valuable
 brands and trademarks or to audit existing licensing agreements.
 
 Human Factors is now able to offer its traditional clients a full complement
 of trademark and technology licensing services, as well as reduced-risk
 partnering options for bringing new products to market.  Human Factors can
 also approach new clients with specific, turnkey proposals for extending
 trademark brand value as consultants or equity participants.
 
 Selective Licensing is uniquely positioned to approach trademark licensing
 clients with the full power of product design behind them.  As part of REFAC,
 Selective Licensing can not only recommend creative licensing strategies, but
 can also offer the development of innovative products specially designed to
 capture and reflect the integrity and essence of its clients' trademarks.  
 <PAGE>
 New Synergies
 
 
 Synergy charts: Graphic depiction of the three logos with core competencies
 merging to form new capabilities/opportunities beyond the abilities of any
one
 entity.  Overlapping ovals for each business connected to the synergies, etc. 
 
 
 SYNERGY OPPORTUNITIES
 
  
 Technology & trademark licensing
 strategies.
  
 Product design & engineering
 partnering.
  
  Technology/Product development
 service.
 
 Technology/Product development
 partnering.
  
 Technology/Product manufacturing
 contracts.
 
 Brand extension strategy service.
  
 Brand extension design, licensing &
           promotion partnering.
 
 Patent, license & trademark
 protection. <PAGE>
                                 
 
 REFAC logo
 
 Technology licensing & transfer
 services.
 Commercialization
 strategies and
 implementation.
 Technology
 assessment and
 consulting
 Technology patent/licensing
 protection.
 Litigation support
 
 HUMAN FACTORS Logo
 
 Product invention and patent
 development.
 Industrial design
 Applied human factors research
 Mechanical engineering
 Prototypes and production liaison
 Product development consulting
           
 
 SELECTIVE LICENSING & PROMOTION, LTD. Logo
 
 Trademark licensing services.
 Trademark consulting
 Trademark
 promotions.
 Royalty
 verification &
 contract
 administration.
 
 <PAGE>
 
 
 
  
 HUMAN FACTORS ... NEW WAYS TO SOLVE PROBLEMS 
 
 Quote in left hand margin - "Human Factors' innovative work on our ReflexTM
 stapler played a major role in helping our company grow from $9 million in
 sales to over $30 million." - Rick Newhauser, CEO, Richard-Allen Medical
 
 Eleven pictures of products that Human Factors has designed in the past
 including the Langer CRS (counter rotation system), Coleman NorthStar
Lantern,
 Surgical skin stapler, Jeep Boombox radio, various medical instruments, new
 wiring design for Eagle Electric Corporation, OXO Salad spinner, Sony
 speakers, Colgate tooth brush.  
 
   Human Factors Industrial Design offers a full range of research, design and
  engineering expertise to create innovative products that attract customers,
  are easy to use and outperform the competition.  We successfully integrate
  the disciplines of applied human factors, design and engineering to produce
  inventive solutions to complex problems.  
 
   Observation & Analysis:  Two basic ingredients of our methodology are
  formal observation of user behavior and applied consumer research.  These
  insights guide the design team to create products that visually and
  functionally excite the user.
 
 
   Human Factors/Ergonomics: Our goal is to optimize the relationship between
  people and products.  Each product presents a unique set of challenges.
 
  Design and Engineering: The design process is not complete until production
 units are ready to ship.  Human Factors routinely assists clients through
 every phase of the development process, from conceptual sketches through to
 final engineering and documentation.
  
   Implementation: Armed with powerful CAD/CAE tools, and a fully equipped
  model and machine shop, Human Factors can fast-track the development cycle.
 
  Results:  Our clients measure the results of our work in terms of new
 business, higher profits and increased market share.
 
 In right hand margin Client Quotes: - [With photo of salad spinner]
 "Human Factors not only solved the range of complex technical problems in
 record time but gave us an elegant design solution."
               Alex Lee, Vice President/Managing Director, OXO International
 
 Page 8
 Picture of Human Factors Industrial Design Management Group - Top Row from
 Left to Right: Paul J. Mulhauser Vice President, Bert D. Heinzelman,
Executive
 Vice President, Werner R. Kamuf, Controller 
 Bottom Row from Left to Right - Douglas M. Spranger, President, Robert L.
 Tuchman, President & CEO, REFAC
  
 Picture of Honeywell Process Manager. Below picture the following quote"I
 commend your staff's efforts to 'do whatever it takes' to get the job done on
 time."
          Pete Walton, Principal Development Engineer, Honeywell, Inc.
 
 DOUG SPRANGER QUOTE:
 "Our merger with REFAC allows us to offer clients new approaches for creating
 products with irresistible appeal, function and integrity."
 
 
 HUMAN FACTORS -- NEW WAYS TO PROVIDE VALUE
 Historically, the product design business has been conducted primarily on a
 fee for service basis.  As part of the REFAC group, Human Factors will
 continue to provide innovative product design and engineering services to its
 growing roster of blue-chip clients on its traditional fee basis, but will
 also selectively invest its "intellectual capital" in qualified projects on
 a royalty basis.
 
 Based on past successes, our strategy is to establish a valuable royalty
 stream of recurring income by allocating a portion of our staff time to
 proprietary projects.  This approach requires sacrificing current fee income
 on product design services in anticipation of creating a much greater royalty
 stream of income over the life of the developed product.
 
 As part of REFAC, Human Factors is able to provide its clients with a
complete
 range of solutions for achieving their objectives and creating value. With
 REFAC's assistance, Human Factors can now offer smaller clients expertise in
 licensing their products and technologies worldwide, as well as
 commercialization strategies and assistance in their implementation.  Larger
 clients may be interested in creative opportunities for extending their brand
 and trademark exposure in strategic markets through new product ventures
 and/or trademark licensing agreements.
 
 Photo of St. Jude Medical Intra-Aortic Medical Pump
 
 
 SELECTIVE LICENSING ... NEW WAYS TO EXTEND VALUE
 Established early in 1998 as an 81% owned subsidiary, Selective Licensing &
 Promotion, Ltd., is the first trademark agency that can offer clients
in-house
 design capability as well as royalty administration and verification
services. 
 Headed by 20-year industry expert Arlene J. Scanlan, who owns the remaining
 19%,  Selective Licensing was launched with two revenue-generating properties
 under license -- the "Psycho Chihuahua" and "Class of 2000" trademarks -- and
 a consultant arrangement with Ben & Jerry's Ice Cream.  
 
 Unlike other trademark licensing agencies, Selective Licensing can draw on
the
 in-house expertise of HFID to creatively design quality products that align
 with the trademark owner's specific licensing interests and then find
 licensees that are capable of bringing those products to market.  This
differs
 from the traditional structure in which the licensing agent seeks a
 manufacturer that has interest in using the mark on its products and then
 relies upon the manufacturer to design the licensed product.
 
 REFAC will provide funding to build Selective Licensing into a world-class
 agency and to support the organization with synergies from Human Factors and
 REFAC's core technology licensing business.  Scanlan and her professional
 staff will target major corporate brands with creative approaches to
trademark
 licensing while offering royalty verification services as part of Selective
 Licensing's service package. 
 
 PHOTO & QUOTE/ARLENE SCANLAN:
 "The only limit to what Selective Licensing can achieve  as part of the REFAC
 family is the extent of our own imaginations."
 
 Trademark graphics of Class of 2000, Psycho Chihuahua and Ben & Jerry's Ice
 Cream. 
 <PAGE>
 SOLID CORE FOR CREATING VALUE
 Our core business of international licensing and technology transfer is the
 foundation that we will continue to build upon in the years ahead.  Since
 1952, we have been turning the potential value of regionally marketed,
 partially developed or unutilized technologies into revenue-bearing license
 agreements and/or viable enterprises.  In patent infringement situations, we
 have been successful in gaining industry respect for the patents of our
 clients, as well as fair compensation for the use of their inventions.
 
 One of the abiding strengths of our business is the diversity and long-term
 potential of our licensing programs.  For example, the Heli-Coil  and Dodge 
 industrial fasteners, which we first licensed in 1952, continue to provide us
 with recurring royalty income.  So does our Gough-Econ materials handling
 technology, first licensed in 1964. 
 
 We think that our thermoplastic polyurethane hot melt adhesive technology can
 achieve the same longevity.   Having completed one non-exclusive agreement
 with Key Polymer Corporation, we will seek additional licensing agreements
 with other adhesive manufacturers and focus more efforts on research and
 development to refine and broaden this valuable technology.  Our strategy is
 to provide more than just a license under the patents.  Future agreements
will
 include the use of our trade secrets - - - such as specific product
 formulations - - -  trademarks and ongoing research and technical support
 services.
 
 Licensing programs for Dr. Priest's patent relating to the storage, retrieval
 and communication of electronic data began generating revenue for REFAC in
 1995, and we will continue to seek new agreements to augment the ones
 negotiated with Microsoft, Corporation,  Novell, Inc., General Magic, Inc.,
 and QualComm, Inc. 
 
 Picture of Gough-Econ material handling equipment, Dodge inserts, and Heli-
 Coil inserts
 
 Picture of laser, representing the Gould laser patent, and Computer
renderings
 of H.pylori bacteria-the leading cause of ulcers. Reprinted with the
 permission of Dr. Barry J. Marshall.
  
 If REFAC Biochemic Corporation's planned clinical trial for the patented
 Pyloricide  pharmaceutical composition validates the Polak-Kappas patent
(U.S.
 Patent No. 5,409,903), this technology will become an important contributor
 to mankind's battle against the H. pylori bacteria, the leading cause of
 ulcers.  Also thought to be the trigger for most stomach cancers,  H. pylori
 is one of the world's most common infectious agents.  Nearly 40 percent of
the
 U.S. population is infected and half of them develop at least one ulcer
during
 their lifetime.  Our technology represents a relatively simple, inexpensive
 and potentially efficacious means of eliminating H. pylori without the use of
 antibiotics and without side-effects. If the trials confirm the efficacy of
 the compound in humans, this technology will become a significant contributor
 to REFAC's income for many years to come.
 
 Prospective clients sometimes come to us with the belief that their patents
 are being infringed by one or more companies.  Although patent enforcement is
 very costly and uncertain at best, we undertake licensing responsibilities in
 this category only if we conclude that there is substantial merit in the
 client's patent position, that there is a strong basis for concluding that
 infringement exists and that substantial economic value is involved.  When
 successful, these technologies can contribute significantly to our revenues
 for many years.
 
 Our only pending patent litigation relates to the Storer Patent which
concerns
 the international standard for data compression in data modems known as V.42
 bis.   This case is scheduled to go to jury trial in June, 1998 and it is
 probable that the outcome will be appealed with a final result not expected
 until 1999 at the earliest.
 
 Picture of Hot-melt adhesives.
 
 Quote in the right hand column - One of the abiding strengths of our business
 is the diversity and long-term potential of our licensing programs.
 
               MANAGEMENT'S DISCUSSION AND ANALYSIS

Results of Operations

     Total operating revenues were $11,484,000 in 1997 as compared to
$9,199,000 in 1996 and $4,528,000 in 1995.  The increase, in each year, is
due, predominately, to the sale of licensing related securities. Royalties
accounted for 29%, 38% and 88% of operating revenues in 1997, 1996 and 1995,
respectively.  Income (realized gains on sales and dividend income) from
license related securities accounted for 66%, 59% and 9% of operating revenues
in 1997, 1996 and 1995, respectively.  The Company intends from time to time
to sell some of such securities.  See Note 1B to the Consolidated Financial
Statements for additional details concerning such securities.
     
     Royalties consist of recurring royalty payments and income from non-
recurring non-exclusive licenses (which are one-time payments) lasting the
life of the underlying patent. Royalties decreased $207,000 or 6% in 1997, and
$451,000 or 11% in 1996, as compared to each of the previous years.  The
revenues from non-recurring agreements vary from period to period depending
upon the nature of the licensing programs pursued for various technologies in
a particular year and the timing of successful completion of licensing
agreements.  During 1997, 1996 and 1995, non-recurring licensing revenues
amounted to $307,000, $310,000 and $593,000, respectively.  The Company
anticipates that non-recurring revenues will continue to be a material
component of royalties in the future.  Recurring revenues from established
relationships decreased by $210,000 in 1997 versus 1996 or 7%. 

     Service expenses consist principally of amounts paid to licensors at
contractually stipulated percentages of the Company's specific patent and
product revenues.  Other costs included in service expenses relate to the
investigation, marketing, administration, enforcement, maintenance and
prosecution of patent and license rights and related licenses which are
generally borne by the Company or shared with clients in an agreed-upon
manner.  Service expenses for 1997 represented 23% of service revenues,
compared with 26% and 21% in 1996 and 1995, respectively.  The improvement in
this ratio is attributable to the decrease in legal and patent related costs
versus the prior year.

     Selling, general and administrative expenses increased in 1997 by
$281,000 or 11% and in 1996 by $1,186,000 or 80% as compared to each of the
previous years.  The increase in 1997 was attributable to an increase in
salaries and related payroll taxes and employee benefits and recruitment,
depreciation and amortization expense relating to increased equipment usage
and the amortization associated with the Company's purchase of Human Factors
Industrial Design, Inc., the write-down of assets at the Company's majority
owned subsidiary (Advanced Resin Technology, Inc.) due to the ceased
manufacturing operations, an increase in professional fees, and general office
overhead, partially offset by a decrease in charitable contributions and
deferred compensation and benefits payable to the former Chairman.  The
increase in 1996 was attributable to the contributions and deferred
compensation mentioned above and the acquisition of a controlling interest in
Advanced Resin.
     
Other Income and Expenses

     In 1997, the Company had realized gains on its marketable securities of
$67,000 as compared to losses on marketable securities of $13,000 in 1996,
consisting of realized gains of $13,000 and unrealized losses of $26,000 and
net gains in 1995 of $244,000. 

     The dividend and interest income produced by the Company's marketable
securities has decreased in 1997 by $799,000 and by $1,000 in 1996 as compared
to each of the previous years.  The decrease in 1997 was attributable to the
stock repurchased by the Company on January 6, 1997.
     
     The Company's income tax provision of $2,607,000 in 1997 reflected an
effective tax rate of 34%, compared with rates of 28% and 32% in the two
previous years.  The effective tax rate of 34% is equals the Federal statutory
income tax rate.  

     The Company's income from technology transfer operations has not in the
past been materially affected by inflation.  Likewise, while currency
fluctuations can influence service revenues, the diversity of foreign income
sources tends to offset individual changes in currency valuations.

Liquidity and Capital Resources
     
     Cash, cash equivalents, and marketable securities decreased $12,340,000
from $17,710,000 at December 31, 1996, to $5,371,000 at December 31, 1997. 
The decrease is accounted for by the stock repurchase that it completed on
January 6, 1997.  On that date the Company purchased 1,775,000 shares of
common stock from Eugene M. Lang, its former Chairman, and the Eugene M. Lang
Foundation at $8.25 per share or an aggregate of $14,643,750, and paid a $.50
per share dividend to shareholders of record as of December 23, 1996.  On
January 5, 1998, the Company completed the purchase of Human Factors
Industrial Design, Inc. by issuing 107,374 shares of Treasury Stock and by
paying off the note due of $4,074,000 (see Note 4C to the accompanying
consolidated financial statements for the pro forma balance sheet after these
payments).
     
     In January of 1997 (declared in December 1996) December  1995 and
December 1994, the Company paid a cash dividend of approximately $2,700,000,
or $0.50 per share.  In November of 1997, the Company announced that it will
no longer pay annual dividends and will use its earnings to fund continuing
growth. 

     In November 1997, the Company acquired 100% of Human Factors Industrial
Design, Inc. ("HFID"). The Company is committed to investing up to $1,000,000
in HFID.  In December 1997, the Company formed a new 92% owned subsidiary,
REFAC Biochemics Corporation to exploit the Company's H. pylori technology. 
The Company has committed to invest in a clinic trial to prove the efficacy of
the compound.  In January 1998, the company formed a new 81% owned subsidiary,
Selective Licensing & Promotion, Ltd.  The Company has committed to invest up
to $1,000,000 over the next three years in this new venture.  Additionally the
Company has commitments under the premises leases (see Note 5 to the
accompanying Consolidated Financial Statements), and Mr. Lang's agreement
(which has been provided for), thereafter the Company has no other significant
commitments.  The Company believes its liquidity position is more than
adequate to meet all current and projected financial needs.

     Effective January 1, 1994, the Company adopted the provision of Statements
of Financial Accounting Standards No. 115 that required all securities to be
recorded at market value.  The unrealized (loss)/gain from current marketable
securities is included in the Statement of Operations for 1996 and 1995.  The
unrealized gain from securities acquired in association with license related
securities is included as a separate component of Stockholders' Equity on the
Consolidated Balance Sheet.  See Note 1B to the Consolidated Financial
Statements for additional details.

Impact of New Accounting Standards

     Financial Accounting Standard No. 123 ("SFAS") "Accounting for Stock Based
Compensation",  issued in 1995, introduces a method of accounting for employee
stock-based compensation plans based upon the fair value of the awards on the
date they are granted.  Under the fair value based method, public companies
estimate the fair value of stock options using a pricing model, such as the
Black-Scholes model, which requires inputs such as the expected volatility of
the stock price and an estimate of the dividend yield over the option's expected
life.  The SFAS, however, does not require the use of this method.  Entities
that continue to measure expense related to stock option plans under the
existing method Accounting Principles Board ("APB") No. 25 are required to
disclose pro forma net income and earnings per share, as if the fair value
method had been used.  Certain additional disclosures are also required.  The
Company will continue to record employee stock-based compensation based upon APB
No.25, but disclosed the pro forma net income, earnings per share and other
information as of the effective date of SFAS No. 123 for the years ended
December 31, 1997 and 1996.

<TABLE>
CONSOLIDATED BALANCE SHEETS
REFAC TECHNOLOGY DEVELOPMENT CORPORATION SUBSIDIARIES
DECEMBER 31, 
<CAPTION>
                                                  1997           1996
ASSETS 
<S>                                               <C>             <C>
Current Assets:
  Cash and cash equivalents (Note 1F)          $2,867,563     $15,412,077
  Marketable securities (Notes 1B, 1c and 2)    2,503,000       2,298,298
  Royalties receivable                            662,976         759,897
  Accounts receivable, net of allowance for 
    doubtful accounts of $40,000 in 1997 and 
    $10,000 in 1996                               814,599         103,463
  Prepaid expenses                                 55,069          70,369
      Total current assets                      6,903,207      18,644,104

  Property and equipment, net of accumulated
    depreciation of $251,000 in 1997 and 
    $172,000 in 1996                              445,866         159,403
  License-related securities (Notes 1B, 1C 
    and 2)                                     22,777,247      22,891,653
  Investments being held to maturity 
    (Notes 1B and 2)                            1,229,028            -
  Other assets (Note 3)                           712,731       1,462,091
  Goodwill, net of accumulated amortization of 
    $28,000 in 1997 and $10,000 in 1996 
    (Notes 1I, 9 and 10)                        5,073,414         137,327
                                              $37,141,493     $43,294,578

Liabilities and Stockholders' Equity
Current Liabilities:
  Notes payable - former Human Factors 
    shareholders (Note 10)                     $5,309,564            -
  Accounts payable                                126,446         125,578
  Accrued expenses                                548,165         435,959
  Amounts payable under service agreements        234,993         268,235
  Deferred revenue                                103,235            -
  Dividend payable                                   -          2,700,943     
  Income taxes payable                            258,508         131,988
    Total current liabilities                   6,580,911       3,662,703
  Deferred income taxes (Notes 1B, 1D, 2 and 4) 7,493,016       7,125,217
  Other liabilities - deferred compensation 
    (Note 6D)                                     445,058         445,058
  Minority interest (Note 9)                         -             17,301
  Commitments and Contingencies (Note 6)
  Stockholders' Equity (Note 5)
    6% noncumulative preferred stock, $100 par 
    value; redeemable at $105; authorized - 5,000
    shares; none issued
  Serial preferred stock, $5 par value; authorized-
    100,000 shares, none issued
  Common stock, $.10 par value; authorized-
    20,000,000 shares; issued and outstanding
    5,413,387 in 1997 and 5,401,887 in 1996       541,340         540,189
  Additional paid-in-capital                    9,440,573       9,251,182
  Retained earnings                            13,890,734       8,699,265
  Unrealized gain on license-related securities,
    net of taxes (Note 2)                      13,752,459      13,735,650
  Cumulative translation adjustment               198,362         193,013
  Treasury stock, at cost (1,763,000 shares
    at December 31, 1997)                     (14,774,300)           -
  Receivable from issuance of common stock
    and warrants                                 (426,660)       (375,000)
  Total stockholders' equity                   22,622,508      32,044,299
                                              $37,141,493     $43,294,578

<FN>
The accompanying notes are an integral part of the consolidated financial
statements.
Page 15
</TABLE>   


<TABLE>
CONSOLIDATED STATEMENTS OF OPERATIONS
REFAC TECHNOLOGY DEVELOPMENT CORPORATION AND SUBSIDIARIES
YEAR ENDED DECEMBER 31, 
<CAPTION>
                                             1997        1996       1995
<S>                                          <C>          <C>        <C>
Revenues
  Royalties (Notes 1G, and 8)            $3,320,403   $3,527,540  $3,978,121
  Service fees                              185,546         -           -
  Realized gains on license-related 
    securities (Note 2)                   6,935,851    4,805,485     255,781
  Dividend income from license-related
    securities                              628,320      596,980     143,640
  Sales                                     414,321      269,028     150,500
    Total revenues                       11,484,441    9,199,033   4,528,042

Costs and Expenses
  Service expenses                        1,424,333    1,247,250   1,037,483
  Selling, general and administrative
    expenses (Notes 6A, 6D and 7)         2,305,956    2,346,201   1,273,058
  Cost of goods sold                        326,963      208,955     112,153
    Total operating expenses              4,057,252    3,802,406   2,422,694
  Operating income                        7,427,189    5,396,627   2,105,348

Other Income and Expenses
  Realized gains on marketable securities
    transactions (Note 2)                    67,145       13,056      86,493
  Net change in unrealized gains (losses)
    on marketable securities                   -         (26,379)    157,525
  Dividends and interest income             275,712    1,074,752   1,075,961
  Gains (losses) from foreign currency
    transactions                             10,879       14,402        (567)
    Income before provision for taxes on 
      income and minority interest        7,780,925    6,472,458   3,424,760
  Provision for taxes on income (Note 4)  2,606,757    1,800,441   1,080,300
    Income before minority interest       5,174,168    4,672,017   2,344,460
  Minority interest (Note 9)                 17,301       27,547        -
Net Income                               $5,191,469   $4,699,564  $2,344,460

  Basic earnings per share (Note 1E)          $1.42        $0.89       $0.44
  Diluted earnings per share (Note 1E)        $1.36        $0.88       $0.44
Dividend per common share                       -          $0.50       $0.50

<FN>
The accompanying notes are an integral part of the consolidated financial 
statements.
Page 16
</TABLE>
    
<TABLE>
CONSOLIDATED STATEMENTS OF CHANGED IN STOCKHOLDERS' EQUITY
REFAC TECHNOLOGY DEVELOPMENT CORPORATION AND SUBSIDIARIES
YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995

                                                              Unrealized                                               Receivable  
                                                               Gains on                                                 from 
                                      Additional                License-     Cumulative                                Issuance
                     Common Stock       Paid-in    Retained   Securities    Translation         Treasury Stock       Stock and 
                    Shares    Amount    Capital     Earnings   Net of Taxes  Adjustment        Shares      Amount      Warrants    
<S>                  <C>       <C>        <C>         <C>          <C>          <C>              <C>          <C>         <C>  
Balance, December
  31, 1994         5,337,987  $533,799 $9,131,939  $7,006,127  $11,300,883    $261,873            0           $0            $0  
Net income                                          2,344,460
Dividend - $.50                                    (2,649,943)
Shares issued on 
 exercise of stock 
 options               5,000       500     11,375
Issuance of compensatory
 stock options                             10,908
Acquisition and 
 retirement of common
 stock               (43,100)    (4,310) (283,498)
Change in unrealized 
 gains on license-
 related securities                                              1,412,506
Translation adjustments                                                          7,962
Balance, December
  31, 1995         5,299,878    529,989  8,870,727  6,700,644   12,713,389     269,835            0            0             0
Net income                                          4,699,564
Dividend - $.50                                    (2,700,943)
Shares issued on 
 exercise of stock
 options             102,000     10,200    369,550                                                                    (375,000)
Issuance of compensatory
 stock options                              10,908
Change in unrealized 
 gains on license-
 related securities                                              1,022,261
Translation adjustments                                                        (76,822)
Balance, December 
 31, 1996          5,401,887    540,189  9,251,182  8,699,265   13,735,650     193,013            0            0      (375,000)
Net income                                          5,191,469
Purchase of Treasury
 stock                                                                                    1,775,000  (14,874,862)
Shares issued on exercise
 of stock options and 
 warrants             11,500      1,151    128,264                                                                     (51,666)
Issuance of compensatory
 stock options                              10,908
Issuance of stock for 
 Human Factors acquisition                  50,219                                           12,000      100,562
Change in unrealized gains
 on license-related
 securities                                                         16,809
Translation adjustments                                                          5,349
Balance, Decmber 
 31, 1997          5,413,813   $541,340 $9,440,573 $13,890,734 $13,752,459    $198,362    1,763,000 $(14,774,300)    $(426,666)

<FN>
The accompanying notes are an integral part of the consolidated financial 
statements.
Page 17
</TABLE>
                    

<TABLE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
REFAC TECHNOLOGY DEVELOPMENT CORPORATION AND SUBSIDIARIES
YEAR ENDED DECEMBER 31,
<CAPTION>
                                              1997         1996        1995
<S>                                           <C>          <C>         <C>
Cash Flows from Operating Activities
  Net income                              $5,191,469   $4,699,564  $2,344,460 
Adjustments to reconcile net income to net 
  cash (used in) provided by operating
  activities
    Depreciation and amortization            141,237      114,414      87,540
    Net gain on sale of securities        (7,002,996)  (4,818,541)   (342,274)
    Deferred compensation                       -         445,058        -
    Deferred income taxes                    241,364      (51,821)     94,650
    Write-down of long-term assets           450,105         -           -
    Other                                    (30,206)     (49,589)   (395,952)
    (Increase) decrease in assets, net of 
      assets acquired:
      Accounts receivable and other prepaid
        assets                               311,886      371,247    (391,272)
      Proceeds from sale of marketable
        securities                         2,391,822    8,554,284   1,109,048
      Purchase of marketable securities   (2,503,000)  (5,654,888) (3,652,081)
      Other assets                           450,395     (543,918)    (67,645)
    Increase (decreae) in liabilities,
      net of liabilities acquired:
    Accounts payable, accrued expenses 
      and ddeferred revenue                  (65,446)     (69,294)     17,519
    Amounts payable under service agreements (33,242)     (87,875)   (250,011)
    Income taxes payable                    (122,651)    (332,901)    694,894
Net cash (used in) provided by operating
  activities                                (579,263)   2,575,740    (751,124)

Cash Flows from Investing Activities
  Proceeds form sales of license-related 
    securities                             6,959,260    5,014,528     173,386
  Proceeds from maturity of investments
    being held to maturity                      -       8,298,616  17,811,403
  Purchase of investments being held to 
    maturity                                (856,138)  (1,220,381)(19,124,195)
  Acquisition of Human Factors, net of 
    cash acquired                           (428,143)        -           -
  Acquisition of Advanced Resin
    Technology, Inc.                            -            -       (147,131)
  Additions to patents and trademarks           -         (44,898)    (43,898)
  Additions to property and equipment        (88,254)     (60,747)    (20,552)
Net cash provided by (used in) investing 
  activities                               5,586,725   11,987,118  (1,350,987)

Cash Flows from Financing Activities
  Repayment of loan                          (59,674)        -           -
  Dividends paid                          (2,700,943)        -     (2,649,943)
  Proceeds from exercise of stock options
    and purchase of warrants                  77,755        4,750      11,875
  Acquisition and retirement of common stock    -            -       (287,808)
  Acquisition of treasury stock          (14,874,862)        -           -
Net cash (used in) provided by financing
  activities                             (17,557,724)       4,750  (2,925,876)
  Effect of exchange rate changes on cash      5,748      (49,275)     (7,962)
Net (decrease) increase in cash and cash 
  equivalents                            (12,544,514)  14,518,333  (5,035,949)
Cash and cash equivalents at beginning
  of period                               15,412,077      893,744   5,641,885
Cash and cash equivalents at end of period 2,867,563   15,412,077     605,936
Income taxes paid                          2,408,000    2,189,000   1,030,000

<FN>
For supplemental disclosure of non-cash investing and financing activities, see
Notes 1F, 7, 9 and 10 to the consolidated financial statements.
For supplemental disclosure of acquisitions, see Notes 9 and 10 to the 
consolidated financial statements.
The accompanying notes are an integral part of the consolidated financial 
statements.
Page 18
</TABLE>


REFAC Technology Development Corporation and Subsidiaries
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1997 and 1996 
                                         



 NOTE 1 - BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 
 REFAC Technology Development Corporation (the "Company"), a Delaware
 corporation organized in 1952, is engaged directly and through certain of its
 subsidiaries in the business of  licensing intellectual property rights and
 product design and development.
 
 A.     Principles of Consolidation
 The accompanying consolidated financial statements include the accounts of  the
 Company and all of its majority-owned subsidiaries.  All intercompany balances
 and transactions have been eliminated.
 
            B.         Marketable Securities, License-Related Securities and
Investments Held to
            Maturity
 
 In accordance with Statement of Financial Accounting Standards ("SFAS") No.
 115, the Company categorized and accounts for its investment holdings as
 follows: 
 
            Trading securities are securities bought and held for the
       purpose of selling them in the near term.  Unrealized gains and
       losses are included in current period earnings. 
 
            Held to maturity securities are recorded at amortized cost. 
       This categorization is used only if the Company has the positive
       intent and ability to hold these securities to maturity. 
 
            Available for sale securities are securities which do not
       qualify as either held to maturity or trading securities. 
       Unrealized gains and losses are reported as a separate component
       of stockholders' equity, net of applicable deferred income taxes
       on such unrealized gains and losses at current income tax rates. 
       The Company's investment in license-related securities falls
       into this category.  
 
 C. Derivatives
 
  The Company purchased put and wrote call options to hedge against a market
 flucuations in its holdings of KeyCorp common stock.  The Company records these
 derivative financial instruments at fair value and reports them as "available
 for sale securities".
 
 D.  Income Taxes
 
 The Company records income taxes under the provisions of Statement of Financial
 Accounting Standards No. 109, "Accounting for Income Taxes".  Deferred income
 taxes arise from temporary differences resulting from income and expense items
 reported in different periods, and differences in the basis of assets and
 liabilities for financial reporting and income tax purposes.   
 
 It is the policy of the Company to accrue appropriate U.S. income taxes on
 income of foreign subsidiaries which is intended to be remitted to the parent
 company in the near future.   In 1997, the Company initiated the liquidation
 of its wholly-owned Swiss subsidiary and repatriated $736,000, net of taxes of
 $170,700.   At December 31, 1997, the remaining unremitted income of foreign
 subsidiaries was not significant, and the liquidation will be substantially
 completed in 1998.
 
 E.  Earnings Per Share
 
 The following table reconciles the numerators and denominators of the basic and
 diluted earnings per share computations pursuant to SFAS No. 128, "Earnings Per
 Share".
 
 
 
 For the years ended December 31,
                                         1997          1996         1995
 Basic shares                          3,661,983    5,305,997    5,310,975
 Dilution: Stock Options and Warrants    166,564       29,037       36,458
 Diluted Shares                        3,828,547    5,335,034    5,347,433
 
 Income available to common 
   shareholders                       $5,191,469   $4,699,564   $2,344,460
 
 Basic earnings per share                  $1.42        $0.89        $0.44
 Diluted earnings per share                $1.36        $0.88        $0.44
 
 F.  Consolidated Statement of Cash Flows
 
 For purposes of the statement of cash flows, the Company considers all highly
 liquid investments and debt instruments purchased with an original maturity of
 three months or less to be cash equivalents.  At December 31, 1997 and 1996
 cash and cash equivalents consisted of money market funds and cash on deposit
 of $2,868,000 and $623,000, respectively including $55,000 and $359,000 held
 in foreign currencies.  At December 31, 1996, cash and cash equivalents
 included $14,789,000 in U.S. Treasury Bills which matured in January 1997. 
 
 G.  Revenue Recognition
 
 Royalty and service revenue is recognized as the revenue is earned.  Non-
 recurring lump sum payments that represent settlements of patent infringement
 claims are recognized when the settlements occur and collectibility is
 reasonably assured.
 
 H.  Using Estimates in Financial Statements
 
 In preparing financial statements in conformity with generally accepted
 accounting principles, management is required to make estimates and assumptions
 that affect the reported amounts of assets and liabilities and the disclosure
 of contingent assets and liabilities at the date of the financial statements
 as well as revenues and expenses during the reporting period.  Actual results
 could differ from those estimates.
 
 I.  Intangibles
 
 Patents are amortized on a straight-line basis over their statutory life or
 expected useful life, whichever is shorter.  Goodwill is amortized on a
 straight-line basis over 15 years.
 
 The carrying value of the long-lived assets are reviewed if the facts and
 circumstances suggest that such assets may be permanently impaired, in
 accordance with SFAS No. 121, "Impairment of Long-Lived Assets and Long-Lived
 Assets to be Disposed of".  Such review is based upon the undiscounted expected
 future operating cash flows derived from such businesses and, in the event such
 result is less than the carrying value of the long-lived assets, including
 goodwill, the carrying value of such assets would be reduced to an amount that
 reflects the expected future benefit.  During 1997, the Company wrote down
 $128,000 of goodwill originally recorded in connection with its acquisition of
 Advanced Resin Technology, Inc. (see Note 9).
 
 J. Property and Equipment
 
  Property and equipment is stated at cost, less accumulated depreciation. 
 Depreciation is provided for on a straight-line basis with estimated usefule
 lives ranging from 3 to 7 years.
 
 K.  Reclassifications
 
 Certain reclassifications have been made to the 1996 and 1995 financial
 statements to conform them to the current presentation.
 
 L.  Accounting Pronouncements Affecting Future Reporting
 
 In June 1997, SFAS No. 130, "Reporting Comprehensive Income," was issued.  SFAS
 No. 130 establishes standards for reporting and display of comprehensive income
 and its components in a full set of general purpose financial statements.  SFAS
 No. 130 requires that a company (a) classify items of other comprehensive
 income by their nature in a financial statement and (b) display the accumulated
 balance of other comprehensive income separately from retained earnings and
 additional paid in capital in the equity section of the balance sheet.  SFAS
 No. 130 is effective for fiscal years beginning after December 15, 1997. 
 Reclassification of financial statements for earlier periods provided for
 comparative purposes is required.  The Company's unrealized gains or losses,
 net of taxes, on its licensing related securities, (including related
 derivative instruments) will be reported as an element of comprehensive income.
 
 In June 1997, SFAS No. 131, "Disclosures about Segments of an Enterprise and
 Related Information," was issued.  SFAS No. 131 establishes standards for the
 way that public companies report selected information about operating segments
 in annual financial statements and requires that those companies report
 selected information about segments in interim financial reports issued to
 shareholders.  It also establishes standards for related disclosures about
 products and services, geographic areas, and major customers.  SFAS No. 131 is
 effective for financial statements for periods beginning after December 15,
 1997.  The Company has not determined the effect, if any, SFAS No. 131 will
 have on the disclosures in its consolidated financial statement. 
 
 NOTE 2 - MARKETABLE SECURITIES, LICENSE-RELATED SECURITIES AND INVESTMENTS HELD
 TO MATURITY
 
 Trading marketable securities at December 31, 1997 and 1996 are summarized as
follows:
 
 
 Marketable Securities  
                                    Market                   Carrying
December 31, 1997                   Value         Cost         Value
 U.S. Treasury Notes              $2,503,000   $2,503,000    $2,503,000
 
December 31, 1996
 U.S. Treasury Bills and Notes    $1,538,872   $1,538,872    $1,538,872
 Preferred stocks                    588,256      581,440       588,256
 Corporate bonds                     171,170      168,612       171,170
                                  $2,298,298   $2,288,924    $2,298,298
 
 
 Securities held to maturity at December 31, 1997 consisted of U.S. Treasury
 Notes maturing in 1999 with an amortized cost of $1,229,028.  Such amortized
 cost approximated the market value.  There were no securities categorized as
 held to maturity at December 31, 1996. 
 
 License-related securities are as follows:
                         Fair                   Carrying        Unrealized 
 December 31, 1997       Value         Cost        Value         Gain/(Loss)
 KeyCorp (NYSE-KEY)   $24,784,375   $1,940,188   $24,784,375    $22,844,187
 KeyCorp Put Options 
   (Note 1C)              582,873    1,548,000       582,873       (965,127)
 KeyCorp Call Options 
   (Note 1C)           (2,590,001)  (1,548,000)   (2,590,001)    (1,042,001)
                      $22,777,247   $1,940,188   $22,777,247    $20,837,059

 December 31, 1996
 DBT Online, Inc.
   (NASDAQ-DBTO)         $261,800       $6,790      $261,800       $255,010
 KeyCorp (NYSE-KEY)    18,877,000    2,073,229    18,887,000     16,813,771
 Three-Five Systems, Inc.
   (NYSE-TFS)           3,742,853         -        3,742,853      3,742,853
                      $22,891,653   $2,080,019   $22,891,653    $20,811,634
 
 
 In 1998, there was a 2-for-1 stock split of KeyCorp's common stock.  All
 references to the number of KeyCorp shares in the Notes to the Consolidated
 financial Statements have been adjusted to reflect such stock split.
 
 At December 31, 1997 the Company held 700,000 shares of KeyCorp common stock
 and put and call options covering 600,000 of such shares (options for 50,000
 shares expiring at each quarter end over the next three years).  At December
 31, 1996 the Company held 8,800 shares of DBT Online, Inc., 748,000 shares of
 KeyCorp and 290,707 shares of Three-Five Systems, Inc.
   
 The realized gains and losses, accounted for on a first-in first-out basis, for
the
 years ended December 31, 1997, 1996 and 1995 are summarized as follows:
 
 
Marketable Securities
                                          1997         1996        1995
Realized gains                          $85,994      $136,801    $106,367
Realized losses                         (18,849)     (123,745)    (19,874)
                                        $67,145       $13,056     $86,493

License-related Securities
 
Realized gains in:                        1997         1996        1995
Three-Five Systems, Inc.             $5,205,195      $500,353    $176,199
KeyCorp                               1,437,929       985,623        -
DBT Online, Inc.                        292,727     3,319,509        -
AutoFinance Group, Inc.                    -             -         79,582
                                     $6,935,851    $4,805,485    $255,781
 
 Derivatives
 
 The Company owns 700,000 shares of KeyCorp common stock (NYSE-KEY) which, as
 of December 31, 1997 had a market value of $24,784,375.  In order to minimize
 the Company's exposure to a decline in the value of KeyCorp, on September 12,
 1997, the Company entered into thirteen (13) individual derivative contracts
 with Union Bank of Switzerland ("UBS") providing for both put options and call
 options, which are exercisable only on the indicated expiration date.  The "put
 options" give the Company the right to sell the KeyCorp stock covered by the
 option to UBS at the agreed upon option price even if the market price is lower
 on the settlement date.   The written call options give UBS the right to
 require the Company to sell the KeyCorp common stock covered by the option at
 the agreed upon option price even if the market price is higher on the
 settlement date.  If the price is between the put and call option prices on the
 settlement date both options lapse.  At the first contract expiration date of
 December 31, 1997, UBS exercised its option and the Company realized a gain of
 $1,437,929 on the sale of 48,000 shares.  The schedule below details the
                                                                          
expiration dates and the pricing for each of the remaining contracts.     
                                  Put Option             Call Option
                             Strike                   Strike
 Expiration   Number of       Price     Aggregate     Price         Aggregate
  Date          Shares    Per Share       (1)        Per Share        (1)
 03/31/98       50,000    $27.42615    $1,371,308     $33.1855     $1,659,275
 06/30/98       50,000    $27.42615    $1,371,308     $33.8865     $1,694,325
 09/30/98       50,000    $27.42615    $1,371,308     $34.4350     $1,721,750
 12/31/98       50,000    $27.42615    $1,371,308     $35.0140     $1,750,700
 03/31/99       50,000    $27.42615    $1,371,308     $35.3490     $1,767,450
 06/30/99       50,000    $27.42615    $1,371,308     $35.9585     $1,797,925
 09/30/99       50,000    $27.42615    $1,371,308     $36.5680     $1,828,400
 12/31/99       50,000    $27.42615    $1,371,308     $37.1775     $1,858,875
 03/31/00       50,000    $27.42615    $1,371,308     $37.4825     $1,874,125
 06/30/00       50,000    $27.42615    $1,371,308     $38.0920     $1,904,600
 09/30/00       50,000    $27.42615    $1,371,308     $38.7015     $1,935,075
 12/31/00       50,000    $27.42615    $1,371,308     $39.3720     $1,968,600
 
 
 (1) Number of shares multiplied by the option strike price.
 
 NOTE 3 - OTHER ASSETS
                                     
 Other assets consist of:
                                                        1997         1996
Notes receivable, net                                 $416,519     $930,692
Patents and trademarks, net of accumulated
    amortization of $129,000 in 1997 and
    $94,000 in 1996                                    263,278      274,938
Deferred charges, net of accumulated
 amortization of $174,000 in 1997 and $155,000
 in 1996                                                11,052      253,409
Other                                                   21,882        3,052
                                                      $712,731   $1,462,091
 
 
 NOTE 4 - INCOME TAXES
 
   The provisions for taxes on income for the years ended December 31, 1997,
  1996 and 1995 are as follows:
 
                                     1997          1996           1995
Federal
    Current                       $2,337,754    $1,934,460      $902,909
    Deferred                         202,812      (181,846)      124,791
State and local                       33,533        15,466         2,028
Foreign taxes                         32,658        32,361        50,572
                                  $2,606,757    $1,800,441    $1,080,300
 
   
   The provision for taxes on income for the years ended December 31, 1997,
  1996 and 1995 differed from the amount computed by applying the statutory
  Federal income tax rate of 34% as follows:
  
                                      1997         1996           1995
Statutory rate                         34%          34%            34%
Dividend received exclusion            (2%)         (4%)           (2%)
Other                                   2%          (2%)            -
Provision for taxes on income          34%          28%            32%
 
 
 The tax effects of temporary differences which gave rise to deferred tax assets
and
 liabilities as of December 31, 1997 and 1996 are as follows:
 
 
 Assets                                               1997          1996
Deferred rent and compensation/retirement           $235,957      $233,680
Write-down of long term investments and other, net   137,002        93,660
KeyCorp put and call options basis differences       682,423          -
                                                  $1,055,382      $327,340
Liabilities
KeyCorp/AFG common stock basis difference          8,424,398    $6,419,133
License-related securities common stock basis difference -       1,033,424
Cash to accrual basis adjustment for Human Factors    24,000          -
                                                  $8,548,398    $7,452,557
Net Liability                                     $7,493,016    $7,125,217
 
NOTE 5 - STOCKHOLDERS' EQUITY
 
 A.    Stock Repurchase Program
 
 On March 23, 1995, the Board of Directors authorized management to repurchase
 and retire up to 250,000 shares of the Company's common stock from time to time
 in the open market or in negotiated transactions at prevailing market prices. 
 The Company repurchased and retired 43,100 shares at an average price of $6.68
 per share during 1995.  On December 7, 1995 the Company terminated this
 repurchase plan.
 
 B.    Stock Option Plans
 
 In October 1995 the SFAS No. 123, "Accounting for Stock-Based Compensation". 
 This new standard defines a fair value based method of accounting for an
 employee stock option or similar equity instrument.  This statement gives
 entities a choice of recognizing related compensation expense by adopting the
 new fair value method or continuing to measure compensation using the intrinsic
 value approach under Accounting Principles Board (APB) Opinion No. 25, the
 former standard.  If the former standard for measurement is elected,  SFAS No.
 123 requires supplemental disclosure to show the effects of using the new
 measurement criteria.  This statement is effective for the year ended December
 31, 1996.  The Company intends to continue using the measurement prescribed by
 APB opinion No. 25, and accordingly, this pronouncement will not affect the
 Company's financial position or results of operations. 
 
 In May 1990, shareholders approved the 1990 Stock Option and Incentive Plan
 (the "1990 Plan") which authorizes the issuance of up to 300,000 shares of
 common stock.  The Board of Directors of the Company has adopted, subject to
 shareholder approval, an amendment to increase the number of shares reserved
 for issuance under the 1990 Plan by 100,000.  The 1990 Plan authorizes the
 issuance of various incentives to employees (including officers and directors
 who are employees), including stock options, stock appreciation rights, and
 restricted performance stock awards.  The 1990 Plan allows for the stock option
 committee to determine type, shares and terms of the grants, which may be made
 at any time through March 14, 2000. 
 
 In addition to the 1990 Plan outlined above, the Company has also granted stock
 options to the directors. In 1990, stock options to purchase 42,500 shares of
 common stock were granted and in 1996 stock options to purchase 50,000 shares
 were granted at an exercise price of $5.9125.  By March, 1998 all of the
 options granted in 1990 have been exercised by the directors.  On April 7,
 1997, the Company sold a warrant to Palisades Capital Securities, L.L.C. for
 a price of $103,320 to purchase 200,000 shares of common stock at $8.25 per
 share.  On November 25, 1997, the Company issued non-qualified stock options
 to eleven employees of Human Factors to purchase an aggregate of 165,000 
 shares of common stock. 
  
 The table below summarizes 1990 plan option activity:
 
 
                              Weighted-           Weighted-           Weighted-
                               average             average             average 
                               exercise           exercise            exercise
                        1997    price      1996     price     1995      price
Outstanding at beginning
 of year               332,500   6.79    261,625     4.84    263,500    4.77
Options granted        220,000  13.34    185,000     7.82      3,125    6.23
Options exercised      (11,500)  2.27   (102,000)    3.67     (5,000)   2.38
Options canceled          -              (12,125)    6.65       -
Outstanding at end of 
  year                 541,000   9.55    332,500     6.79    261,625    4.84
Exercisable at end of 
  year                 341,000   6.97     97,500     4.13    204,625    3.97
 

 The following table summarizes option data of December 31, 1997:

                                Weighted
                 Number         average      Weighted   Number         Weighted
   Range         outstanding    remaining    average    exercisable    average
   of exercise   as of          contractual  exercise   as of          exercise
   prices        Dec. 31, 1997  life         price      Dec. 31, 1997  price

   $2.19-$8.99   236,000        2.1          $5.93      236,000        $5.93
   $9.13-$14.13  305,000        9.4          $12.35     105,000        $9.30
                 541,000                                341,000

 The exercise prices of all options granted (qualified and non-qualified) during
 1997 are at fair value of common stock at date of grant.  The fair value of
 each option grant is estimated on the date of the grant using the Black-Scholes
 option-pricing model with the following weighted-average assumptions used for
 grants in 1997, 1996 and 1995, respectively: dividend yields of 0, 7.8 and
 7.0 percent; expected volatility of 60, 20 and 20 percent; risk-free interest
 rate of 5.9, 6.6 and 5.8 percent; and expected lives of 10, 7 and 8 years.  The
 weighted-average fair value of options granted was $9.97, $2.56 and $2.37 for
 the years ended December 31, 1997, 1996 and 1995 respectively.
 
 The pro forma amounts are indicated below:
 
 
Year Ended December 31,                 1997        1996        1995
Net income
    As reported                     $5,191,469  $4,699,564  $2,344,460
    Pro forma                       $5,098,270  $4,450,316  $2,343,466
  
Diluted Earnings per share
    As reported                          $1.36       $0.89       $0.44
    Pro forma                            $1.33       $0.84       $0.44
 
 
 C.  Stock Repurchase Agreement
 
 On January 6, 1997, pursuant to a December 13, 1996 stock repurchase
 agreement, the Company purchased 1,775,000 shares of its common stock from
 Eugene M. Lang and the Eugene M. Lang Foundation for $8.25 per share or an
 aggregate purchase price of $14,643,750.  The purchase was at a premium to
 the then market price, which is not considered additional compensation by
 the Company, and was funded with cash and proceeds of sales of marketable
 securities.  These shares are being held by the Company as Treasury Stock.
 
 NOTE 6 - COMMITMENTS AND CONTINGENT LIABILITIES
 
 A.    Commitments
 
  The Company has leases for (i) office space in New York City for its
 corporate headquarters and technology licensing operations through 2004,
 (ii) a laboratory in Lawrence, Massachusetts for its Advanced Resin
 subsidiary through 1998, and (iii) executive offices and facilities in New
 York City for its Human Factors Industrial Design, Inc. ("Human Factors")
 subsidiary through 2003.  In addition, Human Factors rents space in the same
 building under a lease that expires in October, 1998 and additional space on
 a month-to-month basis.  The Company also has a lease for office space for
 its REFAC Financial Corporation subsidiary in Las Vegas, Nevada which is
 terminable on a 30 day notice.  The aggregate minimum future rental payments
 under the leases total $2,305,000; minimum payments required for each of the
 next five years are as follows: $349,000 in 1998; $355,000 in 1999; $359,000
 in 2000; $363,000 in 2001; and $380,000 in 2002.  The Company currently
 subleases a portion of its New York City office space under subleases that
 are terminable on six months notice.  The expected future rental payments
 under the subleases total $405,000; expected payments for each of the next
 five years are as follows:  $57,000 in 1998; $57,000 in 1999; $59,000 in
 2000; $63,000 in 2001; and $67,000 in 2002.  In accordance with SFAS No. 13,
 rent expense is charged to operations at an average of the lease payments
 over the life of the lease.  The amounts cited exclude potential escalation
 for maintenance and tax increases.  Rent expense, net, was approximately
 $189,000, $172,000 and $153,000 for the years ended December 31, 1997, 1996
 and 1995, respectively.  
 
 B.    Employment Agreement
 
  In December, 1996, the Company's employment agreement with its President
 and Chief Executive Officer was amended and restated through December 31,
 2001.  The agreement provides for minimum annual compensation and bonus as
 determined by the Board of Directors and the added title and
 responsibilities of Chief Executive Officer.  The officer was also granted
 options to purchase 100,000 shares of common stock pursuant to the Company's
 Stock Option Plan.  In 1996, the officer exercised previously granted
 options to purchase 100,000 shares of common stock.  In connection with such
 exercise, the Company provided the officer with a loan of $375,000, bearing
 interest at the Long-Term Applicable Federal Rate and maturing December 13,
 2006.  The Company determined that there was no compensation charge related
 to the grant of the options or extending of the loan.
 
 C.  Contingent Liabilities
 
  In the ordinary course of its patent licensing and enforcement
 activities, the Company becomes engaged in the prosecution of infringement
 actions against various companies.  Such actions are initiated only after
 the Company satisfies itself that (a) the claims of the patent have
 substantial merit and (b) there are specific grounds for asserting
 infringement.  Such litigation often induces various defenses including,
 among others, challenging the validity of the patents and seeking
 reimbursement from the Company for the legal costs of defense.  Such
 reactions are conventional aspects of the conduct of the Company's patent
 licensing and enforcement activities.  The Company from time to time has
 been the target of several such actions.  At December 31, 1997, there were
 no pending claims against the Company related to its patent licensing
 business.
 
 D. Deferred Compensation/Post-Retirement Benefits
 
  On December 13, 1996, the Company entered into a retirement agreement
 with its Chairman and Chief Executive Officer, Eugene M. Lang, under which
 he relinquished his title and responsibilities as Chief Executive Officer on
 January 6, 1997 and as Chairman on June 30, 1997.  For a period of three
 years commencing July 1, 1997, Mr. Lang has agreed to act as a consultant to
 the Company and to remain on the Company's Board of Directors.  The
 retirement agreement also provides for an annuity of $100,000 per annum
 during his life, medical and health benefits for him and his spouse during
 their lives, and office facilities, equipment and personnel support for two
 years following his consulting services.  In 1996, the Company expensed
 $445,058 for such retirement benefits, which represents the present value of
 the expected payments, following the consultancy period, based upon his
 estimated life expectancy.  
 
 NOTE 7 - RELATED PARTY TRANSACTIONS
 
  In connection with Mr. Lang's retirement and in recognition of his years
 of valued service to the Corporation, the Board of Directors authorized
 contributions aggregating $500,000 to several charitable organizations
 selected by Mr. Lang.  Included among these were contributions totaling
 $50,000 to a charitable organization with which Mr. Lang is affiliated. 
 During 1995, the Company made charitable contributions of $62,000 to
 institutions and charitable organizations with which an officer and certain
 directors of the Company were affiliated.  The 1996 and 1995 charitable
 contributions were in the form of shares of Three-Five Systems, Inc. common
 stock owned by the Company.  
 
 NOTE 8 - SEGMENTS AND CONCENTRATIONS
 
  During the period covered by these financial statements, the Company
 operated principally in one industry segment which is international
 licensing and technology transfer. With the purchase of Human Factors on
 November 25, 1997, the Company is now also engaged in industrial design and
 engineering.  Only one month of Human Factors revenue is included in the
 Company's 1997 income, and which the Company does view as significant to its
 1997 results.  In 1998, revenue from Human Factors is expected to be a
 material component of the Company's revenues.
 
   Foreign source revenues of domestic operations amounted to:
                               1997         1996           1995
Europe                       $681,977     $855,800     $1,242,106
Asia                          233,691      250,014        475,366
                             $915,668   $1,105,814     $1,717,472
 
 Revenues from entities utilizing the Company's licensed technology that
 comprise more than 10% of service revenues are summarized below:
 
 Percentage of Service Revenues
                               1997         1996         1995
Largest entity                  57%          55%          48%
Second largest entity           10%          12%          14%
 
 
 NOTE 9 - ADVANCED RESIN TECHNOLOGY, INC.
 
 On December 29, 1995, the Company acquired a 92% interest in the common stock
 of Advanced Resin Technology, Inc. ("Advanced Resin"), which manufactured hot-
 melt polyurethane adhesives and elastomers under a license from the Company. 
 The acquisition was accounted for as a purchase, and resulted in the recording
 of $158,000 of goodwill.  On February 6, 1998, Advanced Resin ceased such
 manufacturing activities so that it could concentrate its efforts on the
 research and development of this technology.  As a result, in the fourth
 quarter of 1997, the Company incurred an after-tax loss on such ceased
 operations of approximately $341,000, which included a write-off of the
 unamortized goodwill and other assets and the accrual of certain expenses.
 
 NOTE 10 - HUMAN FACTORS INDUSTRIAL DESIGN, INC. ACQUISITION
 
 On November 25, 1997, the Company completed the purchase of the outstanding
 stock of Human Factors Industrial Design, Inc. ("Human Factors") for
 $6,000,000, of which $4,500,000 was payable in cash and $1,500,000 in Company
 stock (valued at $12.565 per share).  The Company paid 10% of the purchase
 price at closing, which included 12,000 shares of the Company's common stock
 and the balance in January, 1998 which included 107,374 shares of the Company's
 common stock.  The excess of the aggregate purchase price over the net tangible
 assets acquired was allocated to goodwill and is being amortized over fifteen
 years.  The operating results of Human Factors have been included in the
 Company's consolidated financial statements since the date of acquisition.  The
 Company may also be required to make a contingent purchase price payment to the
 former Human Factors shareholders if certain earnings targets, as defined in
 the purchase agreement, are met.  The Company also has entered into employment
 agreements with each of the Human Factors shareholders providing for annual
 base salaries, performance based incentive bonuses and the grant of stock
 options.
 
 NOTE 11-SUBSEQUENT EVENTS
 
 On January 21, 1998, the Company formed Selective Licensing & Promotion, Ltd.
 ("Selective Licensing"), a trademark licensing and consultancy agency for brand
 and character licensing, with Ms. Arlene J. Scanlan.  The Company and Ms.
 Scanlan own 81% and 19%, respectively of the outstanding capital stock of
 Selective Licensing.  The Company has entered into a five year employment
 agreement with Ms. Scanlan to serve as the President and Chief Executive
 Officer of Selective Licensing that provides for an annual base salary,
 performance based incentive bonuses and the grant of stock options.  In
 addition, the Company has committed to make up to $1 million in financing
 available to Selective Licensing over the next three years.
                                 
 NOTE 12 - Selected Quarterly Financial Data (Unaudited)
                                                         1997
                  First Quarter  Second Quarter  Third Quarter  Fourth Quarter
Total revenues     $1,799,018       $2,599,660     $3,844,529     $3,241,234
Operating income   $1,034,899       $1,646,810     $3,032,549     $1,712,931
Net income           $839,711       $1,317,081     $2,177,837     $  856,840
Net income per 
  common share     $      .22       $      .35     $      .57     $      .23
                                                                               
            
                                       1996
                 First Quarter   Second Quarter  Third Quarter  Fourth Quarter
Total revenues    $2,629,918       $2,224,763     $1,560,623     $2,783,729
Operating income  $1,951,102       $1,407,535     $  980,350     $1,057,640
Net income        $1,423,238       $1,138,432     $  890,350     $1,247,544
Net income per 
  common share    $      .27       $      .21     $      .17     $      .23
 
 
 Market Price of Common Stock
                                             1997               1996
                                         High  -  Low        High - Low
First Quarter                           7 1/4  - 5  5/8     6 1/2 - 5 5/8
Second Quarter                        13 15/16 - 6 5/16     8 3/4 - 5 1/2
Third Quarter                           11 7/8 - 9 5/8      7 5/8 - 6 5/8
Fourth Quarter                          16 1/8 - 10         7 1/8 - 5 3/4
 
 
 
 The Company's common stock is listed on the American 
 Stock Exchange under the symbol REF.
 There were 830 stockholders of record as of March 20, 1998.
 
 Report of Independent Certified Public Accountants
 
 
 To the Stockholders and Board of Directors
    REFAC Technology Development Corporation
 
 
 We have audited the accompanying consolidated balance sheets of REFAC
Technology Development Corporation and Subsidiaries as of December 31, 1997 and 
1996, and the related consolidated statements of operations, changes in 
stockholders' equity and cash flows for each of the three years in the period 
ended December 31, 1997.  These financial statements are the responsibility of 
the Company's management.  Our responsibility is to express an opinion on these 
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 financial statements referred to above present fairly, in
all material respects, the consolidated financial position of REFAC Technology
Development Corporation and Subsidiaries at December 31, 1997 and 1996 and the 
results of their consolidated operations and their consolidated cash flows for 
each of the three years in the period ended December 31, 1997, in conformity 
with generally accepted accounting principles.
 
 
 Grant Thornton LLP

 New York, New York
 February 6, 1998 


 Inside back cover
 Directors
 
 Neil R. Austrian
 President
 National Football League
 
 Robin L. Farkas
 Private Investor
 
 Mark N. Kaplan
 Partner
 Skadden, Arps, Slate, Meagher & Flom LLP
 
 Eugene M. Lang
 Chairman Emeritus and Consultant
 REFAC Technology Development Corporation
 
 Herbert W. Leonard
 President
 Hamilton Associates
 
 Douglas M. Spranger
 President and Chief Executive Officer
 Human Factors Industrial Design, Inc.
 
 Robert L. Tuchman
 President, Chief Executive
 and General Counsel
 REFAC Technology Development Corporation
 
 Ira T. Wender
 Of Counsel
 Patterson, Belnap, Webb & Tyler LLP
 
 Officers
 
 Robert L. Tuchman
 President, Chief Executive Officer
 and General Counsel
 
 Raymond A. Cardonne, Jr.
 Vice President
 
 Robert Rescigno
 Secretary, Treasurer and Controller
 
 Counsel
 
 Skadden, Arps, Slate, Meagher & Flom LLP
 New York, New York
 
 Independent Auditors
 
 Grant Thornton LLP
 New York, New York
 
 Transfer Agent
 
 ChaseMellon Shareholder Services
 Ridgefield Park, New Jersey
 
 Statements about the Company's future expectations and all other statements in
this Annual Report other than historical facts are "forward-looking statements"
within the meaning of Section 27A of the Securities Act of 1933, Section 21E of 
the Securities Exchange Act of 1934, and as that term is defined in the Private 
Securities Litigation Reform Act of 1995.  The Company intends that such forward
looking statements are subject to the safe harbors created thereby.  Since these
statements involve risks and uncertainties and are subject to change at any 
time, the Company's actual results could differ materially from expected or 
inferred results.