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 April 30, 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 June 1, 1995 5,812,161 shares
Exhibit Index on sequentially numbered page 19 of 21.
Page 1 of 21 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
April 30, 1995 and July 31, 1994 3
Consolidated Statements of Operations for the
three months ended April 30, 1995 and 1994 4
Consolidated Statements of Operations for the nine
months ended April 30, 1995 and 1994 5
Consolidated Statement of Changes in
Shareholders' Interest for the nine
months ended April 30, 1995 6
Consolidated Statements of Cash Flows for the
nine months ended April 30, 1995 and 1994 7-8
Notes to Consolidated Financial Statements 9-12
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of
Operations 13-18
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 19
Item 6. Exhibits and Reports on Form 8-K 19
Signatures 20
PART I. FINANCIAL INFORMATION
COMPETITIVE TECHNOLOGIES, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
April 30, 1995 and July 31, 1994
(Unaudited)
April 30, July 31,
ASSETS 1995 1994
Current assets:
Cash and cash equivalents $ 3,939,754 $ 877,010
Short-term investments, at market, April
30, 1995; at cost, July 31, 1994 1,208,165 1,232,341
Receivables, including $97,729 and $46,074
receivable from related parties
in April and July, respectively 452,870 348,666
Notes receivable -- 313,992
Prepaid expenses and other current assets 137,348 128,640
Total current assets 5,738,137 2,900,649
Property and equipment, net 121,157 79,679
Investments in affiliates 267,561 215,056
Net assets of discontinued operation -- 536,961
Excess of purchase price over net assets
acquired, net of accumulated amortization
of $141,399 and $94,266, in April and July
respectively 172,832 219,965
Directors' escrow account 325,000 325,000
Other assets 303,728 199,556
TOTAL ASSETS $ 6,928,415 $ 4,476,866
LIABILITIES AND SHAREHOLDERS' INTEREST
Current liabilities:
Accounts payable, including $19,450 and $7,781
payable to related parties in April
and July, respectively $ 176,280 75,350
Accrued liabilities 442,981 251,741
Total current liabilities 619,261 327,091
Commitments and contingencies -- --
Shareholders' interest:
5% preferred stock, $25 par value 60,675 60,675
Common stock, $.01 par value 58,243 57,918
Capital in excess of par value 24,344,621 24,097,604
Less: treasury stock at cost: 12,208 shares (96,362) --
Net unrealized holding gains on available-
for-sale securities 28,415 --
Accumulated deficit (18,086,438) (20,066,422)
Total shareholders' interest 6,309,154 4,149,775
TOTAL LIABILITIES AND SHAREHOLDERS' INTEREST $ 6,928,415 $ 4,476,866
See accompanying notes
PART I. FINANCIAL INFORMATION (Continued)
COMPETITIVE TECHNOLOGIES, INC. AND SUBSIDIARIES
Consolidated Statements of Operations
for the three months ended April 30, 1995 and 1994
(Unaudited)
1995 1994
Revenues:
Retained royalties $ 132,473 $ 133,382
Revenues under service contracts, including
$43,808 and $44,887 from related parties
in 1995 and 1994, respectively 362,908 59,687
Grant revenues -- 34,019
495,381 227,088
General and administration expenses,
including costs of technology management
business of which $31,950 and $27,939 were
paid to related parties in 1995 and 1994,
respectively 744,594 475,567
Research and development expenses 32,057 --
776,651 475,567
Operating loss (281,270) (248,479)
Interest income 52,386 27,287
(Losses) income related to equity
method affiliates (31,596) 16,019
Other, net 568 4,494
Loss from continuing operations before
income taxes and minority interest (259,912) (200,679)
Provision for income taxes 6,064 (484)
Loss from continuing operations
before minority interest (265,976) (200,195)
Minority interest in losses of
subsidiary 13,212 --
Loss from continuing operations (252,764) (200,195)
(Loss) income from operations of
discontinued operation (9,435) 2,859
Net gain on disposal of discontinued
operation 2,534,505 --
Net income (loss) $ 2,272,306 $ (197,336)
Net income (loss) per share (primary and
fully diluted):
Continuing operations $ (0.04) $ (0.03)
Operations of discontinued operation -- --
Net gain on disposal of discontinued operations 0.43 --
Net income (loss) per share of common stock $ 0.39 $ (0.03)
Weighted average number of common and
common equivalent shares outstanding
(primary and fully diluted): 5,829,176 5,785,232
See accompanying notes
COMPETITIVE TECHNOLOGIES, INC. AND SUBSIDIARIES
Consolidated Statements of Operations
for the nine months ended April 30, 1995 and 1994
(Unaudited)
1995 1994
Revenues:
Retained royalties $ 471,837 $ 490,045
Revenues under service contracts, including
$156,654 and $121,482 from related parties
in 1995 and 1994, respectively 519,380 136,282
Grant revenues 60,671 34,019
1,051,888 660,346
General and administration expenses,
including costs of technology management
business of which $85,203 and $59,700 were
paid to related parties in 1995 and 1994,
respectively 1,697,068 1,472,380
Research and development expenses 66,942 --
1,764,010 1,472,380
Operating loss (712,122) (812,034)
Interest income 90,439 82,489
(Losses) income related to equity
method affiliates (69,434) 27,139
Other, net 28,689 42,906
Loss from continuing operations before
income taxes and minority interest (662,428) (659,500)
Provision for income taxes 14,673 10,116
Loss from continuing operations
before minority interest (677,101) (669,616)
Minority interest in losses of
subsidiary 23,112 --
Loss from continuing operations (653,989) (669,616)
Income (loss) from operations of
discontinued operation 99,468 (20,440)
Net gain on disposal of discontinued
operations 2,534,505 221,852
Net income (loss) $ 1,979,984 $ (468,204)
Net income (loss) per share (primary and
fully diluted):
Continuing operations $ (0.11) $ (0.12)
Operations of discontinued operation 0.02 --
Net gain on disposal of discontinued operations 0.43 0.04
Net income (loss) per share of common stock $ 0.34 $ (0.08)
Weighted average number of common and
common equivalent shares outstanding
(primary and fully diluted): 5,879,787 5,732,627
See accompanying notes
COMPETITIVE TECHNOLOGIES, INC. AND SUBSIDIARIES
Consolidated Statement of Changes in Shareholders' Interest
For the nine months ended April 30, 1995
(Unaudited)
<TABLE>
<CAPTION>
Net
Unrealized
holding
Preferred Stock gains on
Shares Common Stock Capital in Treasury stock available-
issued and Shares excess of Shares for-sale Accumulated
outstanding Amount issued Amount par value held Amount Securities Deficit
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance - July 31, 1994. . 2,427 $60,675 5,791,824 $57,918 $24,097,604 -- $ -- $ -- $(20,066,422)
Effect of change in
accounting for available-
for-sale securities. . . 11,154
Stock issued under
Director's Stock
Participation Plan . . . 7,545 75 49,925
Stock issued to Knowledge
Solutions, Inc. in
exchange for 205,325
shares of KSI's Class
A common stock . . . . 25,000 250 197,092
Change in net unrealized
holding gains
on available-for-sale
securities . . . 17,261
Stock held by Knowledge
Solutions, Inc.
considered treasury
stock. . . . . . . (12,208) (96,362)
Net income . . . . . . . 1,979,984
Balance - April 30, 1995 . . 2,427 $60,675 5,824,369 $58,243 $24,344,621 (12,208) $(96,362) $28,415 $(18,086,438)
</TABLE>
See accompanying notes
PART I. FINANCIAL INFORMATION (Continued)
COMPETITIVE TECHNOLOGIES, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
for the nine months ended April 30, 1995 and 1994
(Unaudited)
1995 1994
Cash flow from operating activities:
Net income (loss) $ 1,979,984 $ (468,204)
Continuing operations:
Noncash items included in net loss:
Depreciation and amortization 139,262 128,778
Losses (income) related to equity method
affiliates 69,434 (27,139)
Minority interest in losses of
subsidiaries (23,112) --
Accrual for issuance of directors' stock 38,333 39,167
Accrual for stock retirement plan 56,250 37,500
Other noncash items included in net loss 10,305 15,787
Other (3,773) 17,015
Net changes in various operating
accounts (see schedule) 431,029 195,060
Discontinued operations, net (2,633,973) (201,412)
Net cash flow from operating activities
of continuing operations 63,739 (263,448)
Cash flow from investing activities:
Purchases of property and equipment, net (80,495) (41,660)
Proceeds from sales and redemptions of
short-term investments 1,125,835 98,806
Purchases of marketable securities and
short-term investments (1,047,094) --
Investments in affiliates and subsidiaries (19,800) (360)
Proceeds from disposal of discontinued
operations, net 3,011,559 221,852
Net cash flow from investing activities 2,990,005 278,638
Cash flow from financing activities:
Proceeds from subsidiary's issuance of stock 9,000
Proceeds from issuance of common stock, net -- 524,757
Net cash flow from financing activities 9,000 524,757
Net increase in cash and cash
equivalents 3,062,744 539,947
Cash and cash equivalents at beginning
of period 877,010 1,499,790
Cash and cash equivalents at end of period $ 3,939,754 $ 2,039,737
See accompanying notes
PART I. FINANCIAL INFORMATION (Continued)
COMPETITIVE TECHNOLOGIES, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
for the nine months ended April 30, 1995 and 1994
(Unaudited)
1995 1994
Schedule of net changes in various
operating accounts:
Receivables:
Royalties $ 154,897 $ 60,717
Government contracts 250,269 --
Other (195,378) 134,805
Prepaid expenses and other current assets (10,103) 29,077
Accounts payable 100,930 29,322
Accrued liabilities 118,753 (63,234)
Deferred revenues 11,661 4,373
Net changes in various operating accounts $ 431,029 $ 195,060
Supplemental cash flow information:
Cash paid for:
Income taxes $ 13,099 $ 16,550
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) $ --
Issuance of directors' stock $ 50,000 $ 59,999
See accompanying notes
COMPETITIVE TECHNOLOGIES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
1. Interim Financial Statements
Interim financial information presented in the accompanying
financial statements and notes hereto is unaudited.
As more fully discussed in Note 2, Competitive Technologies, Inc.
("CTI"), formerly University Patents, Inc., sold a controlling interest
in University Communications, Inc. ("UCI") to Barden Companies, Inc.
("Barden") and reduced its holding in UCI to 14.5%. Effective February
15, 1995, CTI began to account for its investment in UCI on the cost
method. Accordingly, UCI has been presented in these financial
statements as a discontinued operation and financial information for
prior periods has been reclassified.
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.
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, 1994.
2. Discontinued Operation - University Communications, Inc.
On February 15, 1995, Barden (to which Barden Communications, Inc.
had assigned its rights and interests) exercised its option to purchase
from CTI additional shares of UCI common stock. Barden paid $3,227,372
($1.375 per share) in cash for 2,347,180 shares held by CTI. In
connection with Barden's purchase, CTI offered to purchase from all UCI
shareholders other than Barden a number of their shares of UCI common
stock to allow all UCI shareholders to participate in the sale to Barden
on a pro rata basis. Pursuant to this offer, CTI purchased 151,096
tendered shares for a total of $207,757 ($1.375 per share) in cash.
CTI's net gain on these transactions was $2,534,505 in the third quarter
of fiscal 1995. Upon completion of these and other transactions, Barden
owned 52.1% and CTI owned 14.5% of the outstanding common stock of UCI.
With a holding of 14.5% and no representation on UCI's board of
directors, CTI no longer exerts significant influence over UCI's
operations. Therefore, effective February 15, 1995, CTI began to
account for its investment in UCI of $159,375 on the cost method. CTI's
consolidated financial statements for all prior periods, which
previously included the financial statements of UCI as a consolidated
subsidiary, have been reclassified to present UCI's net assets and CTI's
equity in UCI's net results of operations as a discontinued operation.
Since UCI previously comprised one of the Company's two segments but
is now presented as a discontinued operation, the Company's reclassified
financial statements reflect a single business segment, technology
management services.
UCI's revenues for the three and nine months ended April 30, 1995,
were $1,282,357 and $3,805,233, respectively, from its computer-based
education services. UCI's revenues for the three and nine months ended
April 30, 1994, were $940,580 and $2,759,941, respectively.
3. Short-term Investments
Effective August 1, 1994 the Company adopted Statement of Financial
Accounting Standards No. 115 "Accounting for Certain Investments in Debt
and Equity Securities." As required by Statement No. 115, prior years'
financial statements have not been restated. The unrealized holding
gain for securities classified as available-for-sale as of August 1,
1994 has been reported as an adjustment of the balance of net unrealized
holding gains on available-for-sale securities in shareholders'
interest.
As of April 30, 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 $ 1,072 $25 -- $ 1,047 1 year
Mortgaged backed Present
securities 136 3 -- 133 through
2018
Total $ 1,208 $28 -- $ 1,180
For the quarter ended April 30, 1995 proceeds from the sale of
available-for-sale securities were $19,434 which resulted in gross
realized gains of $567. For the nine months ended April 30, 1995
proceeds from the sale of available-for-sale securities were $1,125,835
which resulted in gross realized gains of $26,149. In addition,
realized gains on sale of short-term investments classified as cash
equivalents were $2,026 in the nine months ended April 30, 1995. Cost
is based on specific identification in computing realized gains.
4. Receivables
Receivables consist of the following:
April 30, July 31,
1995 1994
Royalties $ 74,369 $229,266
Government contracts 250,269 --
Other 128,232 119,400
$452,870 $348,666
5. Investment in Knowledge Solutions, Inc.
In September, 1994 Competitive Technologies, Inc. made an additional
investment in Knowledge Solutions, Inc. ("KSI") by acquiring 205,325
shares of KSI's Class A common stock in exchange for 25,000 shares of
its common stock valued at $205,325. In addition, Safeguard
Scientifics, Inc. ("SSI"), an unaffiliated company, purchased 200,000
shares of Class A common stock of KSI for $200,000 in cash. SSI also
received warrants to purchase an additional 100,000 shares of Class A
common stock of KSI at $1.00 per share through December 31, 1994, which
warrants expired unexercised, and 133,333 shares of Class A common stock
at $1.50 per share through December 31, 1995. As a result of these and
related transactions, CTI has a 48.8% ownership in KSI.
Effective October, 1994 Competitive Technologies of PA, Inc. ("CTI-
PA"), formerly Competitive Technologies, Inc., the Company's 80%-owned
subsidiary, granted KSI an exclusive ten-year license to its process
model for interactive multimedia training in exchange for royalties on
future sales.
Although KSI received a $75,000 grant to support its development
activities in the early months of 1995, KSI will require additional cash
in June, 1995, to continue to develop and market its multimedia training
products. CTI expects to participate in a restructuring and an
additional round of financing for KSI in the fourth quarter of fiscal
1995.
6. Investment in Equine Biodiagnostics, Inc.
In February, 1995 CTI purchased 250,000 shares of Class A common
stock of Equine Biodiagnostics, Inc. ("EBI") for $25,000 in cash. EBI
was organized by Kentucky Technology Incorporated, a technology
management company wholly-owned by the University of Kentucky, to
provide diagnostic laboratory services for the equine industry. EBI's
initial product is a test for equine protozoal myeloencephalitis, a
neurological disease. At April 30, 1995, CTI owned 37.5% of the
outstanding common stock of EBI and accounts for its investment in EBI
on the equity method. EBI stock is not publicly traded and there is no
quoted market price for its stock.
7. Accrued Liabilities
Accrued liabilities consist of the following:
April 30, July 31,
1995 1994
Accrued compensation $ 134,236 $ 84,453
Accrued subcontractors' fees 144,489 --
Accrued professional fees 45,500 38,740
Other 118,756 128,548
$ 442,981 $ 251,741
8. 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, 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 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. At April 30, 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. The case is scheduled for trial
in late July, 1995.
Management's Discussion and Analysis of
Financial Condition and Results of Operations
Financial Condition and Liquidity
On February 15, 1995, Barden Companies, Inc. ("Barden")
exercised its option to purchase from Competitive Technologies,
Inc. ("CTI") additional shares of UCI common stock. Barden paid
$3,227,372 ($1.375 per share) in cash for 2,347,180 shares held by
CTI. In connection with Barden's purchase, CTI offered to purchase
from all UCI shareholders other than Barden a number of their
shares of UCI common stock to allow all UCI shareholders to
participate in the sale to Barden on a pro rata basis. Pursuant to
this offer, CTI purchased 151,096 tendered shares for a total of
$207,757 ($1.375 per share) in cash. CTI's net gain on these
transactions was $2,534,505 in the third quarter of fiscal 1995.
Upon completion of these and other transactions, Barden owned 52.1%
and CTI owned 14.5% of the outstanding common stock of UCI.
With a holding of 14.5% and no representation on UCI's board
of directors, CTI no longer exerts significant influence over UCI's
operations. Therefore, effective February 15, 1995, CTI began to
account for its investment in UCI of $159,375 on the cost method.
CTI's consolidated financial statements for all prior periods,
which previously included the financial statements of UCI as a
consolidated subsidiary, have been reclassified to present UCI's
net assets and CTI's equity in UCI's net results of operations as
a discontinued operation.
Since UCI previously comprised one of the Company's two
segments but is now presented as a discontinued operation, the
Company's reclassified financial statements reflect a single
business segment, technology management services.
Cash and cash equivalents of $3,939,754 at April 30, 1995 are
$3,062,744 higher than reclassified cash and cash equivalents of
$877,010 at July 31, 1994. Operating activities provided $63,739,
investing activities provided $2,990,005 and financing activities
provided $9,000.
The Company's net loss from continuing operations for the nine
months of $653,989 included the following noncash charges:
depreciation and amortization of approximately $139,000, losses
related to equity method affiliates of approximately $69,000,
minority shareholders' interest in losses of consolidated subsid-
iaries of approximately $23,000 and accruals of approximately
$95,000.
Net changes in various operating accounts amounted to
approximately $431,000 for the nine months ended April 30, 1995.
In general, these result from changes in the timing and amounts of
cash flows before and after the end of the period. In addition,
both receivables and liabilities for services performed under the
government contract described below are new at April 30, 1995 since
the contract began in February, 1995 and there were no similar
government contracts at July 31, 1994.
CTI's sale of its majority holding in UCI, net of purchases,
discussed above provided approximately $3,012,000 in cash.
Proceeds from sales and redemptions of short-term investments, net
of purchases, provided approximately $79,000. The Company used
approximately $80,000 to purchase computer and other equipment for
its continuing operations.
In September, 1994 CTI made an additional investment in
Knowledge Solutions, Inc., ("KSI") by exchanging 25,000 unregis-
tered shares of CTI common stock for 205,325 shares of KSI's Class
A common stock. At April 30, 1995 CTI owned 48.8% of the outstand-
ing common stock of KSI. Of the 25,000 shares of CTI common stock
held by KSI at April 30, 1995, 12,208 shares are classified as
treasury stock to reflect CTI's 48.8% equity in KSI.
Although KSI received a $75,000 grant to support its develop-
ment activities in the early months of 1995, KSI will require
additional cash in June, 1995, to continue to develop and market
its multimedia training products. CTI expects to participate in a
restructuring and an additional round of financing for KSI in the
fourth quarter of fiscal 1995.
In February, 1995 CTI purchased 250,000 shares of Class A
common stock of Equine Biodiagnostics, Inc. ("EBI") for $25,000 in
cash. EBI was organized by Kentucky Technology Incorporated, a
technology management company wholly-owned by the University of
Kentucky, to provide diagnostic laboratory services for the equine
industry. EBI's initial product is a test for equine protozoal
myeloencephalitis, a neurological disease. At April 30, 1995, CTI
owned 37.5% of the outstanding common stock of EBI and accounts for
its investment in EBI on the equity method. EBI stock is not
publicly traded and there is no quoted market price for its stock.
On January 24, 1995, CTI was awarded an approximately $800,000
cost reimbursement contract by the Department of the Air Force to
develop strategic planning and operating tools for agile enterpris-
es. Approximately $400,000 of the contract revenues are expected
to be retained by CTI with the remainder to be paid to subcontrac-
tors for specific tasks. Work on the contract began in February,
1995 and is expected to continue for approximately 15 months. CTI
accounts for the contract under the percentage of completion
method. Through April 30, 1995, CTI had earned and recognized
approximately $291,000 of revenue on this contract of which
approximately $168,000 was payable to subcontractors.
The Company carries liability insurance and casualty insurance
for tangible assets owned or leased by the Company or its subsid-
iaries. It does not carry key person life insurance. There are no
legal restrictions on payments of dividends by the Company.
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 the start-up of their operations.
The Company's adoption of Statement No. 115, "Accounting for
Certain Investments in Debt and Equity Securities," did not have a
material effect on its financial statements.
The Company does not believe that inflation had a significant
impact on its operations during fiscal 1995 or 1994 or that it will
have a significant impact on operations during the next twelve-
month operating period.
With more than $3,000,000 in net cash proceeds from CTI's sale
of shares of UCI common stock to Barden and no outstanding long-
term debt, the Company anticipates that currently available funds
will be sufficient to finance cash needs over the next three to
five years for its current operating activities as well as for
expansion of its technology management services and investments in
start-up companies. This anticipation is based upon the Company's
current expectations. However, expansion of the Company's services
and investments in start-up companies (with resulting increases in
operating expenses) are subject to many factors which are outside
of the Company's control and to presently unanticipated opportuni-
ties 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 - Nine Months Ended April 30, 1995 vs.
Reclassified Nine Months Ended April 30, 1994
The results of operations for the nine months ended April 30,
1994 presented in the accompanying condensed financial statements
have been reclassified to present UCI's results of operations as a
discontinued operation. See discussion above and Note 2 to the
accompanying condensed financial statements.
Consolidated revenues for the nine months ended April 30, 1995
were approximately $392,000 (59%) higher than for the reclassified
nine months ended April 30, 1994. Retained royalties were
approximately $18,000 lower than in the prior year. One-time, up-
front license fees from new licenses in the prior year were higher
than such new license fees in the fiscal 1995 period. Royalties
received in settlement of a license dispute in the fiscal 1995
period were lower than a settlement of prior infringement in the
fiscal 1994 period. Revenues under services contracts were
approximately $383,000 (280%) higher as a result of additional
contracts and services. The Company's contract with the Department
of the Air Force which began in February, 1995, accounted for
approximately $291,000 of the increase. Grant revenues in the
fiscal 1995 period were approximately $61,000, including the
remaining approximately $36,000 on Competitive Technologies of PA,
Inc.'s ("CTI-PA") (formerly Competitive Technologies, Inc.) grant
and $25,000 on a grant to Vector Vision, Inc. ("VVI"), CTI's 51.6%
owned subsidiary.
General and administration expenses, including costs of the
technology management business, increased approximately $225,000
(15%). Fees for subcontractors' services and travel in performance
of services under the Company's contract with the Air Force
accounted for approximately $168,000 and $21,000 of this increase,
respectively. Other increases include increased personnel and
related expenses and legal expenses related to the suit described
in Note 8 to the accompanying condensed financial statements. The
prior year's nine-month period included $50,000 for investment
bankers' fees which have not recurred in the current year's nine-
month period.
Research and development expenses of approximately $67,000 in
the nine months ended April 30, 1995 comprise VVI's expenses for
personnel to develop its video compression software. VVI has been
awarded an additional grant of $50,000 to support its development
activities through the summer of 1995. VVI is seeking additional
equity funding to support its continuing development in its second
year of operations.
The net effect of the increases in operating revenues and
expenses was to reduce the Company's operating loss by approximate-
ly $100,000. Although approximately $27,000 of the improvement is
from increased grant revenues, the remainder reflects the positive
effect of the Company's use of personnel to provide contract
services as part of its strategy to fund current operations while
it develops additional technology management opportunities.
Interest income increased primarily due to interest earned on
the investment of CTI's proceeds from its sale of shares of UCI
common stock to Barden.
In the nine months ended April 30, 1995, net losses related to
equity method affiliates included CTI's 48.8% equity in the loss of
KSI ($112,000) and UPAT Services, Inc.'s ("USI") 20% equity in the
net income of USET Acquisition Partners, L.P. ($43,000). In the
nine months ended April 30, 1994, income related to equity method
affiliates included only USI's 20% equity in the net income of USET
Acquisition Partners, L.P. ($27,000).
Other income, net, includes net gains from redemptions of
short-term investments in both fiscal year periods. The fiscal
1994 period also includes proceeds in excess of the fair value
assigned to the installment obligation receivable from Unilens
Corp. USA ("Unilens"). The Company is currently trying to collect
amounts previously agreed to be paid by Unilens on January 31,
1995. No cash has yet been received in fiscal 1995. Since the
Company carries this receivable at zero value, any collections will
be recorded in the period collected.
The Company has net operating and capital loss carryforwards
for Federal income tax purposes. Therefore no provision has been
made for taxes on the Company's net gain on CTI's sale of shares of
UCI common stock. Provision was made in each period for estimated
state income taxes.
Minority interest in the losses of subsidiary in the nine
months ended April 30, 1995 is VVI's minority shareholders' share
of VVI's net loss in the period. The minority interest in VVI's
losses is limited to the minority's interest in VVI's outstanding
common stock. Unless VVI obtains additional equity financing, no
further losses may be charged to VVI's minority shareholders.
Income (loss) from operations of discontinued operation in
both nine-month periods reflects CTI's equity in UCI's net results
until February 15, 1995. UCI incurred net losses in the fiscal
1994 period and reported net income in the fiscal 1995 period.
Effective February 15, 1995, CTI began accounting for its remaining
14.5% investment in UCI on the cost method. In future periods CTI
will only record dividends it receives from UCI or gains on its
sale of its remaining investment in UCI, if any.
In fiscal 1995, the net gain on disposal of discontinued
operations reported ($2,534,505) is from CTI's sale of shares of
UCI common stock. In fiscal 1994 such gain is from amounts
received from Unilens, net of related expenses.
See Note 8 to the accompanying condensed financial statements
for the current status of the suit filed against the Company, two
subsidiaries and certain current and former directors of the
Company.
The Company does not expect the fiscal 1992 settlement of its
legal suit in connection with Retin-A to have a material effect on
its revenues or financial position unless and until FDA approval is
obtained for use of Retin-A to retard the effects of aging of the
skin and significant sales volume of the compound is achieved.
Results of Operations - Three Months Ended April 30, 1995 vs.
Reclassified Three Months Ended April 30, 1994
The Company's results of operations for the three months ended
April 30, 1994 presented in the accompanying condensed financial
statements have been reclassified to present UCI's results of
operations as a discontinued operation.
Consolidated revenues for the quarter ended April 30, 1995
were $268,293 (118%) higher than for the quarter ended April 30,
1994. Retained royalties were slightly lower than in the prior
year. Royalties received in settlement of a license dispute in the
third quarter of fiscal 1995 were lower than a settlement of prior
infringement in the third quarter of fiscal 1994. Revenues under
service contracts were approximately $303,000 (500%) higher in the
1995 quarter. Approximately $291,000 of this increase is from the
Company's first quarter of its contract with the Department of the
Air Force to develop strategic planning and operating tools for
agile enterprises. No grant revenues were received by the Company
in the third quarter of fiscal 1995. Grant revenues of approxi-
mately $34,000 in the third quarter of fiscal 1994 were received
under a CTI-PA grant.
General and administration expenses, including costs of the
technology management business, increased approximately $269,000
(57%) over the quarter ended April 30, 1994. Fees for subcontrac-
tors' services and travel in performance of services under the
Company's contract with the Air Force contract accounted for
approximately $168,000 and $21,000 of this increase, respectively.
Other increases include increased personnel and related expenses
and legal expenses related to the suit described in Note 8 to the
accompanying condensed financial statements.
Research and development expenses of $32,057 in the quarter
ended April 30, 1995 comprise VVI's expenses for personnel to
develop its video compression software.
Interest income increased approximately $25,000 primarily due
to interest earned on the investment of CTI's proceeds from its
sale of shares of UCI common stock to Barden.
In the quarter ended April 30, 1995 losses related to equity
method affiliates include CTI's 48.8% equity in the loss of KSI
($50,445) and UPAT Services, Inc.'s ("USI") 20% equity in the net
income of USET Acquisition Partners, L.P. ($18,849). In the
quarter ended April 30, 1994 income related to equity method
affiliates comprises USI's 20% equity in the net income of USET
Acquisition Partners, L.P.
Minority interest in the losses of subsidiary in the quarter
ended April 30, 1995 is VVI's minority shareholders' share of VVI's
net loss in the quarter.
In the quarter ended April 30, 1995 the net gain on disposal
of discontinued operations ($2,534,505) is from CTI's sale of
shares of UCI common stock to Barden. Income (loss) from opera-
tions of discontinued operation in the third quarters of fiscal
1995 and 1994 reflects CTI's equity in UCI's net results until
February 15, 1995. The Company's reclassified financial statements
account for UCI on the equity method until February 15, 1995, when
CTI sold its shares of UCI common stock to Barden.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
In respect of the suit filed November 4, 1991 by Bruce
Arbeiter et al. as reported in the second paragraph of Item 3 of
the registrant's Annual Report on Form 10-K for the year ended July
31, 1994 (see Note 8 to the accompanying condensed financial
statements), the defendants' motion for summary judgment was
denied. The case is scheduled for trial in late July, 1995.
As reported in paragraphs 1 and 3 of Item 3 of the regis-
trant's Annual Report on Form 10-K for the year ended July 31,
1994, University Communications, Inc. ("UCI") was a named defendant
in a suit filed August 26, 1988, by Barbara J. Propst and in a
petition filed August 14, 1992 to cancel UCI's NovaNET registra-
tions in the United States Patent and Trademark Office. Although
there have been no material developments in these two UCI cases,
since the registrant has sold the majority of its investment in UCI
and currently accounts for its remaining investment in UCI on the
cost method (see Note 2 to the accompanying condensed financial
statements), the registrant is no longer required to report and
will not report future developments in these two cases.
Item 6. Exhibits and Reports on Form 8-K Page
A) Exhibits
11.1 Schedule of computation of earnings per share
for the three and nine months ended April 30,
1995 and 1994. 21
27.1 Financial Data Schedule (EDGAR only)
B) Reports on Form 8-K
A report on Form 8-K dated April 17, 1995, was filed to report
under Item 5 that Competitive Technologies, Inc. ("CTI") had
purchased 151,096 shares tendered by other shareholders of
University Communications, Inc. ("UCI") for $207,757 in cash which
increased CTI's ownership to 14.5% of UCI.
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: June 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)
<TABLE>
<CAPTION>
Nine months Quarter
ended April 30, ended April 30,
1995 1994 1995 1994
<S> <C> <C> <C> <C>
Loss from continuing operations $ (653,989) $ (669,616) $ (252,764) $ (200,195)
Income (loss) of discontinued
operation 99,468 (20,440) (9,435) 2,859
Net gain on disposal of
discontinued operations 2,534,505 221,852 2,534,505 --
Net income (loss) applicable
to common stock $1,979,984 $ (468,204) $2,272,306 $ (197,336)
Common and common equivalent
shares - primary:
Weighted average common
shares outstanding 5,805,909 5,732,627 5,812,161 5,785,232
Adjustments for assumed
exercise of stock options 63,739 14,929* 17,015 16,781*
Adjustments for assumed
exercise of stock warrants 10,139 4,112* -- 4,570*
Weighted average number
of common and common
equivalent shares
outstanding 5,879,787 5,751,668 5,829,176 5,806,583
Common and common equivalent
shares - fully diluted:
Weighted average common
shares outstanding 5,805,909 5,732,627 5,812,161 5,785,232
Adjustments for
assumed exercise of
stock options 73,251 16,373* 17,015 17,041*
Adjustments for assumed
exercise of
stock warrants 11,652 4,694* -- 4,694*
Weighted average number of
common and common
equivalent shares
outstanding 5,890,812 5,753,694 5,829,176 5,806,967
Loss from continuing
operations per share
of common stock:
Primary and fully diluted $ (0.11) $ (0.12) $ (0.04) $ (0.03)
Income of discontinued
operations per
share of common stock:
Primary and fully diluted 0.02 -- -- --
Net gain on disposal of
discontinued operations
per share of common stock:
Primary and fully diluted 0.43 0.04 0.43 --
Net income (loss) per share of
common stock:
Primary and fully diluted $ 0.34 $ (0.08) $ 0.39 $ (0.03)
</TABLE>
* 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>
FDS for Form 10-Q for April 30, 1995
</LEGEND>
<CIK> 0000102198
<NAME> COMPETITIVE TECHNOLOGIES, INC.
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUL-31-1995
<PERIOD-END> APR-30-1995
<CASH> 3,939,754
<SECURITIES> 1,208,165
<RECEIVABLES> 452,870
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 5,738,137
<PP&E> 335,952
<DEPRECIATION> (214,795)
<TOTAL-ASSETS> 6,928,415
<CURRENT-LIABILITIES> 619,261
<BONDS> 0
<COMMON> 58,243
0
60,675
<OTHER-SE> 6,190,236
<TOTAL-LIABILITY-AND-EQUITY> 6,928,415
<SALES> 0
<TOTAL-REVENUES> 1,051,888
<CGS> 0
<TOTAL-COSTS> 1,764,010
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (662,428)
<INCOME-TAX> 14,673
<INCOME-CONTINUING> (653,989)
<DISCONTINUED> 2,633,973
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,979,984
<EPS-PRIMARY> 0.34
<EPS-DILUTED> 0.34
</TABLE>
