10-Q October 1995
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended October 31, 1995
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
Commission file number 1-8696
COMPETITIVE TECHNOLOGIES, INC.
(Exact name of registrant as specified in its charter)
Delaware 36-2664428
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
1465 Post Road East,
P.O. Box 901
Westport, Connecticut 06881-0901
(Address of principal executive (Zip Code)
offices)
Registrant's telephone number, including area code: (203) 255-6044
N/A
Former name, former address and former fiscal year, if
changed since last report
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 .
Common Stock outstanding as of December 1, 1995 5,815,365 shares
Exhibit Index on sequentially numbered page 16 of 28.
Page 1 of 28 sequentially numbered pages
COMPETITIVE TECHNOLOGIES, INC. AND SUBSIDIARIES
INDEX
PART I. FINANCIAL INFORMATION Page No.
Item 1. Condensed Financial Statements
A. Financial Statements
Consolidated Balance Sheets at
October 31, 1995 and July 31, 1995 3
Consolidated Statements of Operations for the
three months ended October 31, 1995 and 1994 4
Consolidated Statement of Changes in
Shareholders' Interest for the three
months ended October 31, 1995 5
Consolidated Statements of Cash Flows for the
three months ended October 31, 1995 and 1994 6-7
Notes to Consolidated Financial Statements 8-10
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of
Operations 11-15
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
Signatures 16
PART I. FINANCIAL INFORMATION
COMPETITIVE TECHNOLOGIES, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
October 31, and July 31, 1995
(Unaudited)
October 31, July 31,
1995 1995
ASSETS
Current assets:
Cash and cash equivalents $ 604,424 $ 336,098
Short-term investments, at market 4,346,159 4,621,045
Receivables, including $61,327 and $34,768
receivable from related parties in
October and July 1995, respectively 219,344 490,324
Prepaid expenses and other current assets 127,368 128,429
Total current assets 5,297,295 5,575,896
Property and equipment, net 137,405 133,833
Investments 520,626 489,786
Directors' escrow account 325,000 325,000
Other assets 213,241 244,427
TOTAL ASSETS $ 6,493,567 $ 6,768,942
LIABILITIES AND SHAREHOLDERS' INTEREST
Current liabilities:
Accounts payable, including $1,959 and
$4,219 payable to related parties
in October and July 1995, respectively $ 55,415 $ 126,606
Accrued liabilities 279,249 352,812
Total current liabilities 334,664 479,418
Commitments and contingencies -- --
Shareholders' interest:
5% preferred stock, $25 par value 60,675 60,675
Common stock, $.01 par value 58,403 58,353
Capital in excess of par value 24,438,843 24,410,143
25,000 shares of treasury stock, at cost (174,713) (174,713)
Net unrealized holding gains on
available-for-sale securities 23,601 8,764
Accumulated deficit (18,247,906) (18,073,698)
Total shareholders' interest 6,158,903 6,289,524
TOTAL LIABILITIES AND SHAREHOLDERS'
INTEREST $ 6,493,567 $ 6,768,942
See accompanying notes
PART I. FINANCIAL INFORMATION (Continued)
COMPETITIVE TECHNOLOGIES, INC. AND SUBSIDIARIES
Consolidated Statements of Operations
for the three months ended October 31, 1995 and 1994
(Unaudited)
1995 1994
Revenues:
Retained royalties $ 201,450 $ 89,905
Revenues under service contracts
and grants, including $37,106,
and $63,419 from related parties in
1995 and 1994, respectively 117,779 132,053
319,229 221,958
Costs of technology management
services, of which $1,627 and $1,309
were paid to related parties in 1995
and 1994, respectively 174,059 152,127
General and administration expenses,
of which $25,591 and $15,049
were paid to related parties in 1995
and 1994, respectively 398,781 275,885
572,840 428,012
Operating loss (253,611) (206,054)
Interest income 54,896 18,584
Income (losses) related to equity
method affiliates 30,841 (7,535)
Other income (expense), net 666 3,510
Loss from continuing operations before
income taxes and minority interest (167,208) (191,495)
Provision for income taxes 7,000 5,609
Loss from continuing operations before
minority interest (174,208) (197,104)
Minority interest in losses of
subsidiaries -- 7,000
Loss from continuing operations (174,208) (190,104)
Income from operations of
discontinued operation -- 59,139
Net loss $ (174,208) (130,965)
Net income (loss) per share
(primary and fully diluted):
Continuing operations $ (0.03) $ (0.03)
Operations of discontinued operation -- 0.01
Net loss $ (0.03) $ (0.02)
Weighted average number of common and
common equivalent shares outstanding
(primary and fully diluted) 5,813,952 5,798,776
See accompanying notes
PART I. FINANCIAL INFORMATION (Continued)
COMPETITIVE TECHNOLOGIES, INC. AND SUBSIDIARIES
Consolidated Statements of Changes in Shareholders' Interest
For the three months ended October 31, 1995
(Unaudited)
<TABLE>
<CAPTION>
Net
unrealized
holding
Preferred Stock gains (losses)
Shares Common Stock Capital in on available-
issued and Shares excess of Treasury Stock for-sale Accumulated
outstanding Amount issued Amount par value Shares held Amount securities Deficit
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance - July 31, 1995 2,427 $60,675 5,835,365 $58,353 $24,410,143 (25,000) $(174,713) $ 8,764 $(18,073,698)
Exercise of common
stock warrants. . . . 5,000 50 28,700
Net change in unrealized
holding gains on
available-for-sale
securities . . . . . 14,837
Net loss . . . . . . (174,208)
Balance - October 31, 1995 2,427 $60,675 5,840,365 $58,403 $24,438,843 (25,000) $(174,713) $ 23,601 $(18,247,906)
</TABLE>
See accompanying notes
PART I. FINANCIAL INFORMATION (Continued)
COMPETITIVE TECHNOLOGIES, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
for the three months ended October 31, 1995 and 1994
(Unaudited)
1995 1994
Cash flow from operating activities:
Loss from continuing operations $ (174,208) $ (190,104)
Noncash items included in loss
from continuing operations:
Depreciation and amortization 47,456 47,892
(Income) losses related to equity
method affiliates (30,841) 7,535
Minority interest -- (7,000)
Accrual for issuance of directors'
stock (7,500) 6,667
Accrual for stock retirement plan 22,500 18,750
Other noncash items 4,466 11,443
Other 15,476 22,312
Net changes in various operating
accounts (see schedule) 89,163 168,393
Net cash flow (used in) from operating
activities (33,488) 85,888
Cash flow from investing activities:
Purchases of property and equipment, net (17,607) (65,559)
Proceeds from sales of short-term
investments 290,671 32,245
Net cash flow from (used in) investing
activities 273,064 (33,314)
Cash flow from financing activities:
Proceeds from issuance of common stock, net 28,750 --
Net cash flow from financing activities 28,750 --
Net increase in cash and cash
equivalents 268,326 52,574
Cash and cash equivalents, beginning
of period 336,098 877,010
Cash and cash equivalents, end of period $ 604,424 $ 929,584
See accompanying notes
PART I. FINANCIAL INFORMATION (Continued)
COMPETITIVE TECHNOLOGIES, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
for the three months ended October 31, 1995 and 1994
(Unaudited)
1995 1994
Schedule of net changes in various
operating accounts:
Receivables $ 270,980 $ 203,283
Prepaid expenses and other current assets (16,649) (16,761)
Accounts payable (71,191) (14,095)
Accrued liabilities (93,977) (4,034)
Net changes in various operating accounts $ 89,163 $ 168,393
Supplemental cash flow information:
Cash paid for income taxes $ 17,298 $ 5,899
Schedule of noncash investing activities:
Investments in affiliates and subsidiaries $ -- $ (205,325)
Stock held by affiliates considered
treasury stock $ -- $ 96,362
Schedule of noncash financing activities:
Stock issued for investments in affiliates
and subsidiaries $ -- $ 205,325
Stock held by affiliates considered
treasury stock $ -- $ (96,362)
See accompanying notes
PART I. FINANCIAL INFORMATION (Continued)
COMPETITIVE TECHNOLOGIES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Unaudited)
1. Interim Financial Statements
Interim financial information presented in the accompanying
financial statements and notes hereto is unaudited.
The year end balance sheet data was derived from audited
financial statements but does not include all disclosures required by
generally accepted accounting principles.
In the opinion of management, all adjustments which are necessary
to present the financial statements fairly in conformity with
generally accepted accounting principles, consisting only of normal
recurring adjustments, have been made.
Certain amounts have been reclassified to conform with the
presentation in the financial statements for 1995.
The interim financial statements and notes thereto as well as the
accompanying Management's Discussion and Analysis of Financial
Condition and Results of Operations should be read in conjunction with
the Company's Annual Report on Form 10-K for the year ended July 31,
1995.
2. CTI - Intercorporate Licensing, Inc.
In August, 1995, Competitive Technologies, Inc. ("CTI") formed
a wholly-owned subsidiary and purchased 2,000 shares of CTI-
Intercorporate Licensing, Inc. ("CTI-ILI") common stock for $100,000
in cash to provide licensing and technology management services to
corporations. CTI expects CTI-ILI to require additional cash of
approximately $250,000 to fund its first year of operations. CTI
expects to provide that cash in exchange for additional equity in CTI-
ILI. CTI accounts for CTI-ILI as a consolidated subsidiary and CTI-
ILI's results of operations since August 1, 1995, are included in the
consolidated results of operations.
3. Short-term Investments
As of October 31, 1995 the components of the Company's available-
for-sale securities are as follows (in thousands):
Gross Gross
Unrealized Unrealized
Aggregate Holding Holding Amortized Maturity
Security Type Fair Value Gains Losses Cost Basis Grouping
U.S. Treasury Within
Bills $ 1,093 $23 -- $ 1,071 1 year
Other U.S.
government Within
debt 3,176 -- -- 3,176 1 year
securities
Mortgaged backed Present
securities 77 1 -- 76 through
2018
Total $ 4,346 $24 -- $ 4,323
For the quarter ended October 31, 1995 proceeds from the sale of
available-for-sale securities were $290,671 which resulted in gross
realized gains of $948. Cost is based on specific identification in
computing realized gains.
4. Receivables
Receivables comprise:
October 31, July 31,
1995 1995
Royalties $ 39,787 $275,690
Government contracts 31,682 103,574
Other 147,875 111,060
$219,344 $490,324
5. Accrued Liabilities
Accrued liabilities were:
October 31, July 31,
1995 1995
Accrued compensation $ 126,020 $ 115,010
Other 153,229 237,802
$ 279,249 $ 352,812
6. Contingencies
In November 1991, a suit was filed in Connecticut against CTI, its
wholly-owned subsidiary, Genetic Technology Management, Inc. ("GTM"),
its majority-owned subsidiary, University Optical Products Co.
("UOP"), and several current and former directors on behalf of the 59
limited partners of Optical Associates, Limited Partnership ("OALP").
The complaint alleges, among other things, that the January 1989 sale
of UOP's assets to Unilens Corp. USA ("Unilens") violated the
partnership agreement and that OALP is entitled to the full proceeds
of the sale to Unilens. The complaint claims, among other things,
money damages and treble and punitive damages in an unspecified amount
and attorneys' fees. The Company believes that the asserted claims
are without merit and intends to defend vigorously the action
instituted by plaintiffs. Through October 31, 1995, the Company had
received aggregate cash proceeds of approximately $1,011,000 from the
January 1989 sale of UOP's assets to Unilens. As cash proceeds were
received, the Company paid a 4% commission to OALP, its joint venture
partner. The defendants' motion for summary judgment was denied. It
is expected that the case will be tried during the second half of
fiscal 1996.
PART I. FINANCIAL INFORMATION (Continued)
Management's Discussion and Analysis of
Financial Condition and Results of Operations
Financial Condition and Liquidity
Cash and cash equivalents of $604,424 at October 31, 1995 are
$268,326 higher than cash and cash equivalents of $336,098 at July
31, 1995. Operating activities used $33,488, investing activities
provided $273,064 and financing activities provided $28,750.
Competitive Technologies, Inc. ("CTI") and its majority owned
subsidiaries' ("the Company") loss from continuing operations of
$174,208 for the three months ended October 31, 1995 included the
following noncash items: depreciation and amortization of
approximately $47,000, income related to equity method affiliates
of approximately $31,000, and accruals of approximately $15,000.
In general, changes in various operating accounts result from
changes in the timing and amounts of cash flows before and after
the end of the period.
Proceeds from sales of short-term investments are principally
from the Company's sales of U.S. government debt securities and
principal redemptions by obligors of mortgage backed securities.
In August, 1995, CTI formed a wholly-owned subsidiary and
purchased 2,000 shares of CTI-Intercorporate Licensing, Inc. ("CTI-
ILI") common stock for $100,000 in cash to provide licensing and
technology management services to corporations. CTI expects CTI-ILI
to require additional cash of approximately $250,000 to fund its
first year of operations. CTI expects to provide that cash in
exchange for additional equity in CTI-ILI. CTI accounts for CTI-
ILI as a consolidated subsidiary and CTI-ILI's results of opera-
tions since August 1, 1995, are included in the consolidated
results of operations.
The Company received $28,750 in August, 1995, from the
exercise of a warrant granted in August, 1990, to purchase 5,000
shares of common stock at $5.75 per share.
The Company carries liability insurance and casualty insurance
for owned or leased tangible assets. It does not carry key person
life insurance. There are no legal restrictions on payments of
dividends by CTI.
At October 31, 1995, the Company had no outstanding commit-
ments for capital expenditures.
The Company is currently pursuing additional university and
corporate technology management opportunities. If and when these
opportunities are consummated, the Company expects to commit
capital resources to fund their acquisition or start-up operations.
The Company does not believe that inflation had a significant
impact on its operations during 1995 or 1994 or that it will have
a significant impact on operations during the next twelve-month
operating period.
Vector Vision, Inc. ("VVI"), CTI's 51.5% owned subsidiary,
continues to seek additional financing to support its continuing
development. Without additional outside financing, VVI's develop-
ment activities will not be able to continue. The Company is not
obligated to provide additional funding to VVI.
With more than $4,950,000 in cash, cash equivalents and short-
term investments at October 31, 1995, the Company anticipates that
currently available funds will be sufficient to finance cash needs
over the next two to five years for its current operating activi-
ties as well as for expansion of its technology management business
operations, including related investments in start-up companies.
This anticipation is based upon the Company's current expectations.
However, expansion of the Company's services and related invest-
ments in start-up companies (with resulting increases in operating
expenses) are subject to many factors which are outside the
Company's control and to presently unanticipated opportunities that
may arise in the future. Accordingly, there can be no assurance
that the Company's current expectations regarding the sufficiency
of currently available funds will prove to be accurate.
Results of Operations - Three Months Ended October 31, 1995 vs.
Reclassified Three Months Ended October 31, 1994
The results of operations for the three months ended October
31, 1994 presented in the accompanying condensed financial
statements have been reclassified to present UCI's results of
operations as a discontinued operation. See Note 16 to Consolidat-
ed Financial Statements in the Company's Annual Report on Form 10-K
for the year ended July 31, 1995. In addition, operating expenses
have been reclassified to conform with the presentation in the
Consolidated Financial Statements in the Company's Annual Report on
Form 10-K for the year ended July 31, 1995.
Consolidated revenues for the quarter ended October 31, 1995,
were $97,271 (44%) higher than for the quarter ended October 31,
1994. Retained royalties were $111,545 (124%) higher than in the
first quarter of fiscal 1995 principally because of up-front
license fees for a plasma display energy recovery technology.
Revenues under service contracts were $109,995 in the first quarter
of fiscal 1996, $27,082 (33%) higher than in the first quarter of
fiscal 1995. CTI's contract with the Department of the Air Force
which began in February, 1995, generated $47,000 in contract
revenues in the first quarter of fiscal 1996. In addition,
revenues from other service contracts, some of which were nonrecur-
ring, were lower than in the first quarter of fiscal 1995. Grant
revenues in the first quarter of fiscal 1996 were the $7,784
remaining from the grant in support of VVI's
development activities. Grant revenues in the first
quarter of fiscal 1995 included approximately $36,000 on Competi-
tive Technologies of PA, Inc.'s ("CTI-PA") grant and $13,000 from
the grant to VVI. In consideration of their grant funding, CTI-PA
and VVI are obligated to repay up to three times total grant funds
received (see Notes 2 and 3 to Consolidated Financial Statements in
the Company's Annual Report on Form 10-K for the year ended July
31, 1995). The Company has not applied for grants to support any
of its operations during fiscal 1996.
Costs of technology management services were $21,932 (14%)
higher in the first quarter of fiscal 1996 than in the first
quarter of fiscal 1995. Costs related to retained royalties were
$32,000 higher in 1996 than in 1995. The increase in these costs
resulted from higher domestic and foreign patent expenses associat-
ed with the University Science, Engineering and Technology, Inc.
("USET") portfolio and additional expenses related to intercorpo-
rate licensing services (see Note 4 to Consolidated Financial
Statements in the Company's Annual Report on Form 10-K for the year
ended July 31, 1995). These costs include domestic and foreign
patent prosecution, maintenance and litigation expenses. The
Company expects costs related to retained royalties to continue to
increase during fiscal 1996 as it expands its technology management
services to corporations and universities. Costs related to
service contracts (including direct charges for subcontractors'
services and employees' salaries, benefits and overheads for
services provided in connection with the related contracts)
increased $31,000 (36%) compared with the first quarter of fiscal
1995. CTI's contract with the Department of the Air Force is
responsible for an increase of $47,000 which was partially offset
by reductions in costs because certain service contracts in the
fiscal 1995 quarter were nonrecurring. Costs related to grant
revenues decreased in proportion to the reduction in grant
revenues.
General and administration expenses were $122,896 (45%) higher
in the quarter ended October 31, 1995. Approximately $50,000 of
this increase is directly related to additional personnel and
related expenses of establishing CTI-Intercorporate Licensing, Inc.
operations in Cleveland, Ohio. The remainder reflects additional
personnel and higher shareholder relations and other operating
expenses supporting the Company's ongoing operations. The Company
plans certain additional increases in staffing to further expand
its senior technology management team to service its corporate and
university clients in fiscal 1996.
The net effect of the increases in operating revenues and
expenses was to increase the Company's operating loss by $47,557
(23%).
Interest income increased $36,312 (195%) primarily due to
higher average invested balances in fiscal 1996.
In the quarter ended October 31, 1995, net income related to
equity method affiliates included UPAT Services, Inc.'s ("USI") 20%
equity in the net income of USET Acquisition Partners, L.P. ("UAP")
($32,000), CTI's equity in the net loss of Knowledge Solutions,
Inc. ("KSI") ($19,000) and CTI's equity in the net income of Equine
Biodiagnostics, Inc. ($18,000). At October 31, 1995, CTI owned
35.9% of the outstanding common stock of KSI and has no further
obligation to provide additional funding to KSI. CTI's
investment in KSI has been reduced to zero and therefore CTI will
record no further equity in the losses of KSI. In the quarter
ended October 31, 1994, losses related to equity method affiliates
included CTI's equity in the loss of KSI ($23,000) and USI's 20%
equity in the net income of UAP ($15,000).
Minority interest in the losses of subsidiaries in the quarter
ended October 31, 1994 of $7,000 was VVI's minority shareholders'
interest in its losses. Unless VVI obtains additional external
equity financing, no further losses may be charged to VVI's
minority interest.
The Company has net operating loss carryforwards for Federal
income tax purposes. Provision was made in each quarter for
estimated state income taxes.
The Company's $59,139 income from operations of discontinued
operation in the quarter ended October 31, 1994 reflects CTI's
equity in University Communications, Inc.'s ("UCI") net results for
that quarter.
In October, 1995, the Financial Accounting Standards Board
issued Statement No. 123, "Accounting for Stock-Based Compensation"
which requires adoption for years beginning after December 15,
1995. This Statement allows companies either (a) to continue
accounting for employee stock-based compensation under Accounting
Principles Board Opinion No. 25 and disclose the pro forma effects
that fair value accounting would have on net income and earnings
per share or (b) to adopt the new fair value accounting rules for
recognizing employee stock-based compensation expense. In
addition, the Statement requires companies to adopt fair value
accounting for stock options or other equity instruments issued to
nonemployee providers of goods and services. The Company will
adopt this Statement on August 1, 1996. The Company has not yet
determined which alternative accounting it will adopt.
Results of Operations - Three Months Ended October 31, 1995 vs.
Three Months Ended July 31, 1995
Consolidated revenues for the quarter ended October 31, 1995
were $332,078 (51%) lower than for the quarter ended July 31, 1995.
Historically, retained royalties in the first fiscal quarter are
lower than in the fourth quarter because of licensees who report
semiannually. Retained royalties were $122,956 (38%) lower than in
the fourth quarter of fiscal 1995. Revenues under service
contracts were $192,782 (64%) lower in the first quarter of fiscal
1996, of which $162,000 was due to lower revenues from CTI's
contract with the Department of the Air Force. More than 60% of
that contract had been completed by July 31, 1995, and CTI expects
quarterly revenues from that contract to be nearer to the first
quarter level for the remaining quarters of 1996. Other contracts
and grants have also generated lower revenues than in the fourth
quarter of fiscal 1995.
Costs of technology management services were $197,695 (53%)
lower for the quarter ended October 31, 1995 than for the quarter
ended July 31, 1995. CTI's cost reimbursement contract with the
Department of the Air Force accounted for $162,000 of this
reduction. Other cost reductions in the first quarter were related
to lower revenues for other contracts and grants. Intercorporate
licensing activities increased these costs slightly in the first
quarter and are expected to increase them more significantly in
future quarters as the Company continues to expand its operations
in this sector.
For the quarter ended October 31, 1995 the Company's general
and administration expenses were $134,566 (51%) higher than for the
quarter ended July 31, 1995. Approximately $39,000 of this
increase was because Company personnel provided less service under
the Air Force contract and consequently spent more time on general
and administrative activities for the Company. Approximately
$50,000 of this increase was directly related to expenses of
establishing CTI-Intercorporate Licensing, Inc. operations in
Cleveland, Ohio. The Company plans additional increases in
staffing to further expand its senior technology management team to
service its corporate and university clients in fiscal 1996. In
addition, a substantial portion of the expenses related to the
Company's annual audit, preparation and filing of its Form 10-K and
proxy statement with the Securities and Exchange Commission, and
printing of its annual report to shareholders are incurred each
year in the first quarter.
The net effect of the reduction in costs of technology
management services and increases in general and administration
expenses was a reduction of $63,129 (10%) in total operating
expenses compared to the fourth quarter of fiscal 1995.
Partially offsetting the increase in the Company's operating
loss between these two quarters were significantly lower ($50,000)
legal expenses in connection with the suit discussed in Note 6 to
the accompanying financial statements and increased ($64,927)
income related to equity method affiliates.
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K Page
A) Exhibits
3.1 By-laws of the registrant as amended to date. 18-27
11.1 Schedule of computation of earnings per share
for the three months ended October 31,
1995 and 1994. 28
27.1 Financial Data Schedule (EDGAR only).
27.2 Restated Financial Data Schedules (EDGAR only).
B) Reports on Form 8-K
No reports on Form 8-K were filed during the quarter.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by
the undersigned thereunto duly authorized.
Date: December 13, 1995 By: Frank R. McPike, Jr.
Frank R. McPike, Jr.
Vice President, Finance,
Treasurer, Chief Financial
Officer and Authorized Signer
Exhibit 11.1
COMPETITIVE TECHNOLOGIES, INC.
Schedule of Computation of Earnings Per Share
(Unaudited)
Quarter
ended October 31,
1995 1994
Loss from continuing operations $ (174,208) $ (190,104)
Net income from discontinued operations -- 59,139
Net loss applicable to common stock $ (174,208) $ (130,965)
Common and common equivalent shares -
primary:
Weighted average common shares
outstanding 5,813,952 5,798,776
Adjustments for assumed exercise of
stock options 5,255* 86,266*
Adjustments for assumed exercise of
stock warrants -- 144,706*
Weighted average number of common and
common equivalent shares outstanding 5,819,207 6,029,748
Common and common equivalent shares -
fully diluted:
Weighted average common shares
outstanding 5,813,952 5,798,776
Adjustments for assumed exercise of
stock options 14,924* 92,972*
Adjustments for assumed exercise of
stock warrants -- 155,955*
Weighted average number of common and
common equivalent shares outstanding 5,828,876 6,047,703
Loss from continuing operations
per share of common stock:
Primary and fully diluted $ (0.03) $ (0.03)
Net income from discontinued
operations per share of common stock:
Primary and fully diluted -- 0.01
Net loss per share of common stock:
Primary and fully diluted $ (0.03) $ (0.02)
* Anti-dilutive.
These calculations are submitted in accordance with Regulation S-K
item 601 (b) (11) which differs from the requirements of paragraph
40 of Accounting Principles Board Opinion No. 15 because they
produce an anti-dilutive result.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
Financial Data Schedule for Form 10-Q for October 31, 1995
</LEGEND>
<CIK> 0000102198
<NAME> COMPETITIVE TECHNOLOGIES, INC.
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUL-31-1996
<PERIOD-END> OCT-31-1995
<CASH> 604,424
<SECURITIES> 4,346,159
<RECEIVABLES> 219,344
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 5,297,295
<PP&E> 364,221
<DEPRECIATION> 226,816
<TOTAL-ASSETS> 6,493,567
<CURRENT-LIABILITIES> 334,664
<BONDS> 0
<COMMON> 58,403
0
60,675
<OTHER-SE> 6,039,825
<TOTAL-LIABILITY-AND-EQUITY> 6,493,567
<SALES> 0
<TOTAL-REVENUES> 319,229
<CGS> 0
<TOTAL-COSTS> 572,840
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (167,208)
<INCOME-TAX> 7,000
<INCOME-CONTINUING> (174,208)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (174,208)
<EPS-PRIMARY> (0.03)
<EPS-DILUTED> (0.03)
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
Restated Financial Data Schedules for January 31, 1995, April 30, 1995 and July
31, 1995 - to correct accumulated depreciation and interest expense amounts
incorrectly reported as negative numbers and to correct general and
administration expenses previously reported incorrectly.
</LEGEND>
<RESTATED>
<CIK> 0000102198
<NAME> COMPETITIVE TECHNOLOGIES, INC.
<S> <C> <C> <C>
<PERIOD-TYPE> 6-MOS 9-MOS YEAR
<FISCAL-YEAR-END> JUL-31-1995 JUL-31-1995 JUL-31-1995
<PERIOD-END> JAN-31-1995 APR-30-1995 JUL-31-1995
<CASH> 1,422,137 3,939,754 336,098
<SECURITIES> 1,210,349 1,208,165 4,621,045
<RECEIVABLES> 979,623 452,870 490,324
<ALLOWANCES> 0 0 0
<INVENTORY> 0 0 0
<CURRENT-ASSETS> 3,944,966 5,738,137 5,575,896
<PP&E> 1,540,130 335,952 346,614
<DEPRECIATION> 746,153 214,795 212,781
<TOTAL-ASSETS> 6,463,436 6,928,415 6,768,942
<CURRENT-LIABILITIES> 1,821,393 619,261 479,418
<BONDS> 0 0 0
<COMMON> 58,243 58,243 58,353
0 0 0
60,675 60,675 60,675
<OTHER-SE> 3,901,250 6,190,236 6,170,496
<TOTAL-LIABILITY-AND-EQUITY> 6,463,436 6,928,415 6,768,942
<SALES> 0 0 0
<TOTAL-REVENUES> 3,079,383 1,051,888 1,703,195
<CGS> 0 0 0
<TOTAL-COSTS> 297,701 712,209 1,120,483
<OTHER-EXPENSES> 0 0 0
<LOSS-PROVISION> 0 0 0
<INTEREST-EXPENSE> 17,261 0 0
<INCOME-PRETAX> (188,870) (662,428) (642,988)
<INCOME-TAX> 24,609 14,673 21,373
<INCOME-CONTINUING> (292,322) (653,989) (641,249)
<DISCONTINUED> 0 2,633,973 2,633,973
<EXTRAORDINARY> 0 0 0
<CHANGES> 0 0 0
<NET-INCOME> (292,322) 1,979,984 1,992,724
<EPS-PRIMARY> (0.05) 0.34 0.34
<EPS-DILUTED> (0.05) 0.34 0.34
</TABLE>
Exhibit 3.1
UNOFFICIAL BY-LAWS
OF
COMPETITIVE TECHNOLOGIES, INC.
As Amended to date
ARTICLE I
MEETING OF SHAREHOLDERS
SECTION 1.01. Annual Meetings. The annual meeting of
shareholders for the election of Directors and for the transaction
of such other proper business, notice of which is given in the
notice of the meeting, shall be held commencing in 1976 on such day
in December of each year and at such time and place, within or
without the State of Delaware, as shall be designated by the Board
of Directors and set forth in the notice of such meeting.
SECTION 1.02. Special Meetings. Special meetings of the
shareholders may be called at any time by the Chairman of the Board
of Directors or by the President of the Corporation or by the Board
of Directors. Special meetings shall be held at such place within
or without the State of Delaware and at such hour as may be
designated in the notice of such meeting and the business
transacted shall be confined to the object stated in the notice of
the meeting.
SECTION 1.03. Notice of Shareholders' Meetings. The notice
of all meetings of shareholders shall be in writing and shall state
the place, date and hour of the meeting. The notice of an annual
meeting shall state that the meeting is called for the election of
the Directors to be elected at such meeting and for the transaction
of such other business as is stated in the notice of the meeting.
The notice of a special meeting shall state the purpose or purposes
for which the meeting is called and shall also indicate that it is
being issued by or at the direction of the person or persons
calling the meeting.
A copy of the notice of each meeting of shareholders shall be
given, personally or by mail, not less than ten days nor more than
fifty days before the date of the meeting, to each shareholder
entitled to vote at such meeting at his record address or at such
other address as he may have furnished by request in writing to the
Secretary of the Corporation. If a meeting is adjourned to another
time or place, and, if any announcement of the adjourned time or
place is made at the meeting, it shall not be necessary to give
notice of the adjourned meeting unless the adjournment is for more
than thirty days or the Directors, after adjournment, fix a new
record date for the adjourned meeting.
Notice of a meeting need not be given to any shareholder who
submits a signed waiver of notice, in person or by proxy, whether
before or after the meeting. The attendance of a shareholder at a
meeting, in person or by proxy, without protesting prior to the
conclusion of the meeting the lack of notice of such meeting shall
constitute a waiver of notice of the meeting.
SECTION 1.04. Quorum at Shareholders' Meetings: Vote
Required. At any meeting of the shareholders the holders of a
majority of the outstanding shares entitled to vote thereat shall
constitute a quorum. If there shall be less than a quorum at any
meeting of the shareholders a majority of those present in person
or by proxy may adjourn the meeting.
Directors shall be elected by a plurality of the votes cast at
a meeting of shareholders by the holders of shares entitled to vote
in the election. Whenever any corporate action, other than the
election of Directors, is to be taken by vote of the shareholders,
it shall, except as otherwise required by the General Corporation
Law, be authorized by a majority of the votes cast at a meeting of
shareholders by the holders of shares entitled to vote thereon.
SECTION 1.05. Inspectors at Shareholders' Meetings. The
Board of Directors, in advance of any shareholders meeting, may
appoint one or more inspectors to act at the meeting or any
adjournment thereof. If inspectors are not so appointed, the
person presiding at the shareholders' meeting may, and on the
request of any shareholder entitled to vote thereat shall, appoint
one or more inspectors. In case any person appointed fails to
appear or act, the vacancy may be filled by appointment made by the
Board of Directors in advance of the meeting or at the meeting by
the person presiding thereat. Each inspector, before entering upon
the discharge of his duties, shall take and sign an oath faithfully
to execute the duties of inspector at such meeting with strict
impartiality and according to the best of his ability.
The inspectors shall determine the number of shares
outstanding and the voting power of each, the shares represented at
the meeting, the existence of a quorum, the validity and effect of
proxies, and shall receive votes, ballots or consents, hear and
determine all challenges and questions arising in connection with
the right to vote, count and tabulate all votes, ballots or
consents, determine the result, and do such acts as are proper to
conduct the election or vote with fairness to all shareholders. On
request of the person presiding at the meeting or any shareholder
entitled to vote thereat, the inspectors shall make a report in
writing of any challenge, question or matter determined by them and
execute of certificate of any fact found by them. Any report or
certificate made by them shall be prima facie evidence of the facts
stated and of the vote as certified by them.
ARTICLE II
DIRECTORS
SECTION 2.01. Qualifications and Number; Vacancies. A
Director need not be a shareholder, a citizen of the United States,
or a resident of the State of Delaware. The number of Directors
constituting the entire Board is hereby fixed at such number as may
be specified by resolution of the Board of Directors adopted by the
same vote which is necessary under Article VII hereof to amend
these by-laws. The number of Directors may be increased or
decreased by amendment of these by-laws duly adopted by either the
shareholders or the vote of a majority of the entire Board of
Directors, provided that the number of Directors constituting the
entire Board shall not be less than three. No decrease shall
shorten the term of any incumbent Director. Any Director may be
removed for cause by the shareholders.
Vacancies and newly created directorships resulting from any
increase in the authorized number of directors may be filled by a
majority of the directors then in office, through less than a
quorum, or by a sole remaining director.
SECTION 2.02. Term. Each director shall hold office until
the next annual meeting of shareholders and until his successor has
been elected and qualified.
SECTION 2.03. Place and Time of Meetings of the Board.
Regular and special meetings of the Board shall be held at such
places (within or without the State of Delaware) and at such times
as may be fixed by the Board or upon call of the President of the
Corporation or of the executive committee or of any two Directors,
provided that the Board of Directors shall hold at least four
meetings a year.
SECTION 2.04. Quorum and Manner of Acting. A majority of the
entire Board of Directors shall constitute a quorum for the
transaction of business, but if there shall be less than a quorum
at any meeting of the Board, a majority of those present (or if
only one be present, then that one) may adjourn the meeting from
time to time and the meeting may be held as adjourned without
further notice. At all meetings of Directors, a quorum being
present, all matters shall be decided by the vote of a majority of
the Directors present at the time of the vote.
SECTION 2.05. Remuneration of Directors. In addition to
reimbursement for his reasonable expenses incurred in attending
meetings or otherwise in connection with his attention to the
affairs of the Corporation, each Director as such, and as a member
of any committee of the Board, shall be entitled to receive such
remuneration as may be fixed from time to time by the Board.
SECTION 2.06. Notice of Meetings of the Board. Regular
meetings of the Board may be held without notice if the time and
place of such meetings are fixed by the Board. All regular
meetings of the Board, the time and place of which have not been
fixed by the Board, and all special meetings of the Board shall be
held upon twenty-four hours' notice to the Directors given by
letter or telegraph. No notice need specify the purpose of the
meeting. Any requirement of notice shall be effectively waived by
any Director who signs a waiver of notice before or after the
meeting or who attends the meeting without protesting (prior
thereto or at its commencement) the lack of notice to him.
SECTION 2.07. Executive Committee and Other Committees. The
Board of Directors, by resolution adopted by a majority of the
entire Board, may designate from among its members an Executive
Committee and other committees to serve at the pleasure of the
Board. Each committee shall consist of three or more Directors.
During the intervals between the meetings of the Board, the
Executive Committee shall have all of the authority of the Board of
Directors. Each other committee shall be empowered to perform such
functions as may, by resolution, be delegated to it by the Board.
The Board of Directors may designate one or more Directors as
alternate members of any such committee, who may replace any absent
member or members at any meetings of such committee. Vacancies in
any committee, whether caused by resignation or by increase in the
number of members constituting said committee, shall be filled by
a majority of the entire Board of Directors. The Executive
Committee may fix its own quorum. In the absence or
disqualification of any member of any such committee, the member or
members thereof present at any meeting and not disqualified from
voting whether or not he or they constitute a quorum, may
unanimously appoint another member of the Board of Directors to act
at the meeting in place of any such absent or disqualified member.
SECTION 2.08. Action Without Meeting. Any action required or
permitted to be taken at any meeting of the Board of Directors, or
of any committee thereof, may be taken without a meeting, if prior
to such action a written consent thereto is signed by all members
of the board, or of such committee as the case may be, and such
written consent is filed with the minutes of proceedings of the
board or committee.
ARTICLE III
OFFICERS
SECTION 3.01. Officers. The Board of Directors, at its first
meeting held after the annual meeting of shareholders in each year
shall elect a Chairman of the Board, Chairman of the Executive
Committee, a President, one or more Vice Presidents, a Secretary
and a Treasurer and may, in its discretion, also appoint from time
to time such other officers or agents as it may deem proper. The
Chairman of the Board, Chairman of the Executive Committee and the
President shall be elected from among the members of the Board of
Directors.
Any two or more offices may be held by the same person.
Unless otherwise provided in the resolution of election or
appointment or in the employment agreement with an officer, each
officer shall hold office until the meeting of the Board of
Directors following the next annual meeting of shareholders and
until his successor has been elected and qualified; provided,
however, that the Board of Directors may, unless otherwise provided
in such resolution or agreement, remove any officer for cause or
without cause at any time.
SECTION 3.02. Chairman of the Board. The Chairman shall, if
present, preside at all meetings of the shareholders and Board of
Directors. The Chairman shall do and perform all other acts and
duties which may be assigned to him from time to time by the Board
of Directors.
SECTION 3.03. Chairman of Executive Committee. The Chairman
of the Executive Committee shall, if present, preside at all
meetings of the Executive Committee and shall do and perform all
other acts and duties which may be assigned to him from time to
time by the Board of Directors.
SECTION 3.04. President. In the absence of the Chairman of
the Board or his inability to act, the President shall preside at
all meetings of the shareholders and of the Board of Directors.
The President shall do and perform all other acts and duties which
may be assigned to him from time to time by the Board of Directors
or the Chairman of the Board.
SECTION 3.04A. Vice Presidents. The Vice Presidents shall do
and perform such acts and duties as may be assigned to them from
time to time by the Board of Directors, the Chairman of the Board
or the President.
SECTION 3.04B. Designations of CEO and COO. The Board of
Directors shall from time to time designate the persons, whether by
name or title, who shall be the Chief Executive Officer ("CEO") and
Chief Operating Officer ("COO") of the Corporation. The CEO shall
have general supervision of the affairs of the Corporation subject
to the control of the Board of Directors. Both the CEO and the COO
shall have the power on behalf of the Corporation to execute and
deliver all contracts, instruments, conveyances or documents and to
affix the corporate seal thereto."
SECTION 3.05. Secretary. The Secretary shall keep minutes of
the proceedings taken and the resolutions adopted at all meetings
of the shareholders and the Board of Directors, and shall give due
notice of the meetings of the shareholders and the Board of
Directors. He shall have charge of the seal and all books and
papers of the Corporation, and shall perform all duties incident to
his office. In case of the absence or disability of the Secretary,
his duties and powers may be exercised by such person as may be
appointed by the Board of Directors or the Executive Committee.
SECTION 3.06. Treasurer. The Treasurer shall receive all the
monies belonging to the Corporation, and shall forthwith deposit
the same to the credit of the Corporation in such financial
institution as may be selected by the Board of Directors or the
Executive Committee. He shall keep books of account and vouchers
for all monies disbursed. He shall also perform such other duties
as may be prescribed by the Board of Directors or Executive
Committee or the President and in case of the absence or disability
of Treasurer, his duties and powers may be exercised by such person
as may be appointed by the Board of Directors or Executive
Committee.
ARTICLE IV
INDEMNIFICATION
SECTION 4.01. Indemnification. (a) The Corporation shall
indemnify any person who was or is a party or is threatened to be
made a party to any threatened, pending or completed action, suit
or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the
Corporation) by reason of the fact that he is or was a director,
officer, employee or agent of the Corporation, or is or was serving
at the request of the Corporation as a director, officer, employee
or agent of another corporation, partnership, joint venture, trust
or other enterprise, against expenses (including attorneys' fees),
judgments, fines and amounts paid in settlement actually and
reasonably incurred by him in connection with such action, suit or
proceeding if he acted in good faith and in a manner he reasonably
believed to be in or not opposed to the best interests of the
Corporation, and, with respect to any criminal action or
proceeding, had no reasonable cause to believe his conduct was
unlawful. The termination of any action, suit or proceeding by
judgment, order, settlement, conviction, or upon a plea of nolo
contendere or its equivalent, shall not, of itself, create a
presumption that the person did not act in good faith and in a
manner which he reasonably believed to be in or not opposed to the
best interests of the Corporation, and, with respect to any
criminal action or proceeding, had reasonable cause to believe that
his conduct was unlawful.
(b) The Corporation shall indemnify any person who was or is
a party or is threatened to be made a party to any threatened,
pending or completed action or suit by or in the right of the
Corporation to procure a judgment in its favor by reason of the
fact that he is or was a director, officer, employee or agent of
the Corporation, or is or was serving at the request of the
Corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise
against expenses (including attorneys' fees) actually and
reasonably incurred by him in connection with the defense or
settlement of such action or suit if he acted in good faith and in
a manner he reasonably believed to be in or not opposed to the best
interests of the Corporation and except that no indemnification
shall be made in respect of any claim, issue or matter as to which
such person shall have been adjudged to be liable for negligence or
misconduct in the performance of his duty to the Corporation unless
and only to the extent that the Court of Chancery of Delaware or
the court in which such action or suit was brought shall determine
upon application that, despite the adjudication of liability but in
view of all the circumstances of the case, such person is fairly
and reasonably entitled to indemnity for such expenses which such
Court of Chancery or such other court shall deem proper.
(c) To the extent that a director, officer, employee or agent
of the Corporation has been successful on the merits or otherwise
in defense of any action, suit or proceeding referred to in
subsections (a) and (b), or in defense of any claim, issue or
matter therein, he shall be indemnified against expenses (including
attorneys' fees) actually and reasonably incurred by him in
connection therewith.
(d) Any indemnification under subsections (a) and (b) (unless
ordered by a court) shall be made by the Corporation only as
authorized in the specific case upon a determination that
indemnification of the director, officer, employee or agent is
proper in the circumstances because he has met the applicable
standard of conduct set forth in subsections (a) and (b). Such
determination shall be made (1) by the Board of Directors by a
majority vote of a quorum consisting of directors who were not
parties to such action, suit or proceeding, or (2) if such a quorum
is not obtainable, or, even if obtainable a quorum of disinterested
directors so directs, by independent legal counsel in a written
option, or (3) by the stockholders.
(e) Expenses incurred in defending a civil or criminal
action, suit or proceeding may be paid by the Corporation in
advance of the final disposition of such action, suit or proceeding
as authorized by the Board of Directors in the manner provided in
subsection (d) upon receipt of an undertaking by or on behalf of
the director, officer, employee or agent to repay such amount
unless it shall ultimately be determined that he is entitled to be
indemnified by the Corporation as authorized in this Article IV.
(f) The indemnification provided by this Article IV shall not
be deemed exclusive of any other rights to which those indemnified
may be entitled under any by-law, agreement, vote of stockholders
or disinterested directors or otherwise, both as to action in his
official capacity and as to action in another capacity while
holding such office, and shall continue as to a person who has
ceased to be a director, officer, employee or agent and shall inure
to the benefit of the heirs, executors and administrators of such
a person.
(g) The Board of Directors may authorize, by a vote of a
majority of the full Board, the Corporation to purchase and
maintain insurance on behalf of any person who is or was a
director, officer, employee or agent of the Corporation, or is or
was serving at the request of the Corporation as a director,
officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise against any liability
asserted against him and incurred by him in any such capacity, or
arising out of his status as such, whether or not the Corporation
would have the power to indemnify him against such liability under
the provisions of this Article IV.
ARTICLE V
CAPITAL STOCK
SECTION 5.01. Share Certificates. Each certificate
representing shares of the Corporation shall be in such form as may
be approved by the Board of Directors and, when issued, shall
contain upon the face or back thereof the statements prescribed by
the General Corporation Law and by any other applicable provision
of law. Each such certificate shall be signed by the Chairman or
President or a Vice President and by the Secretary or Treasurer or
an Assistant Secretary or Assistant Treasurer. The signatures of
said officers upon a certificate may be facsimile if the
certificate is countersigned by a transfer agent or registered by
a registrar other than the Corporation itself or its employee. In
case any officer who has signed or whose facsimile signature has
been placed upon a certificate shall have ceased to be such officer
before such certificate is issued, it may be issued by the
Corporation with the same effect as if he were such officer at the
date of issue.
SECTION 5.02. Lost, Destroyed or Stolen Certificates. No
certificate representing shares shall be issued in place of any
certificate alleged to have been lost, destroyed or stolen, except
on production of evidence of such loss, destruction or theft and on
delivery to the Corporation, if the Board of Directors shall so
require, of a bond of indemnity in such amount, upon such terms and
secured by such surety as the Board of Directors may in its
discretion require.
SECTION 5.03. Transfer of Shares. The shares of stock of the
Corporation shall be transferable or assignable on the books of the
Corporation only by the person to whom they have been issued or his
legal representative, in person or by attorney, and only upon
surrender of the certificate or certificates representing such
shares properly assigned. The person in whose name shares of stock
shall stand on the record of shareholders of the Corporation shall
be deemed the owner thereof for all purposes as regards the
Corporation.
SECTION 5.04. Record Dates. For the purpose of determining
the shareholders entitled to notice of or to vote at any meeting of
shareholders or any adjournment thereof, or to express consent to
corporate action in writing without a meeting, or entitled to
receive payment of any dividend or other distribution or allotment
of any rights, or entitled to exercise any rights in respect of any
change, conversion or exchange of stock or for the purpose of any
other action, the Board may fix, in advance, a date as the record
date for any such determination of shareholders. Such date shall
not be more than sixty nor less than ten days before the date of
such meeting, nor more than sixty days prior to any other action.
ARTICLE VI
MISCELLANEOUS
SECTION 6.01. Signing of Instruments. All checks, drafts,
notes, acceptances, bills of exchange, and orders for the payment
of money shall be signed in such manner and by such person or
persons as may be authorized from time to time by the Board of
Directors or the Executive Committee or by the by-laws.
SECTION 6.02. Corporate Seal. The seal of the Corporation
shall be in such form and shall have such content as the Board of
Directors shall from time to time determine.
ARTICLE VII
AMENDMENTS OF BY-LAWS
SECTION 7.01. Amendments. These by-laws may be altered,
amended or repealed at any meeting, by vote of a majority of the
Board of Directors, provided that notices of the proposed
amendments shall have been sent by mail to all the Directors not
less than three days before the meeting at which they are to be
acted upon, or at any regular meeting of the Directors, by the
unanimous vote of all the Directors present.
