SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934 [Fee Required]
For the fiscal year ended July 31, 1995.
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934 [No Fee Required]
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
(Address of principal executive (Zip Code)
offices)
Registrant's telephone number, including area code: (203) 255-6044
Securities registered pursuant to Section 12(b) of the Act:
Name of Each Exchange On
Title of Each Class Which Registered
Common Stock ($.01 par value) American Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
Indicated by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securi-
ties 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 .
Exhibit Index on sequentially numbered page 62.
Page 1 of 102 sequentially numbered pages.
Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K is not contained herein, and
will not be contained, to the best of registrant's knowledge, in
definitive proxy or information statements incorporated by reference
in Part III of this Form 10-K or any amendment to this Form 10-K.
[X]
As of October 20, 1995, 5,815,365 shares of the registrant's
common stock were outstanding. The aggregate market value of the
voting stock (disregarding preferred stock, for which there is no
public market) held by nonaffiliates of the registrant, based on the
mean between the high and the low price of the registrant's common
stock on the American Stock Exchange on such date, was approximately
$42,600,000.
DOCUMENTS INCORPORATED BY REFERENCE
Incorporated Document Location in Form 10-K
Registrant's definitive proxy Part III
statement for its 1995 annual
meeting of stockholders
PART I
Item 1. Business
Introduction
Competitive Technologies, Inc. ("the registrant" or "CTI"), a
Delaware Corporation incorporated in 1971 to succeed an Illinois
business corporation incorporated in 1968, is engaged primarily in
providing technology management services to universities, to federal
agencies and laboratories, and to corporations with the goal of
maximizing returns on clients' investments in technology. In
December, 1994, the registrant changed its corporate name from
University Patents, Inc. to Competitive Technologies, Inc.
In February, 1995, the registrant sold a significant portion of
its investment in University Communications, Inc. ("UCI") to Barden
Companies, Inc. As a result of this and related transactions, as more
fully described in Note 16 to Consolidated Financial Statements, the
registrant received approximately $3 million in cash and reduced its
ownership in UCI from 55.1% to 14.5%. The registrant carries its
remaining investment in UCI on the cost method. Accordingly, CTI's
investment in UCI prior to February, 1995 is presented in the
registrant's financial statements as a discontinued operation and
financial information for all prior periods has been reclassified.
In addition, the registrant's financial statements for 1993
reflect its equity in losses of Plasmaco, Inc., a company engaged in
developing, manufacturing and selling AC plasma panels (see page 8 for
a discussion of Plasmaco, Inc.).
The aggregate number of persons employed full-time by the
registrant and its subsidiaries on October 1, 1995 was approximately
18. Substantially all employees are salaried and none is represented
by a labor union. Certain of these employees also perform services
for Knowledge Solutions, Inc. and USET, Inc.
Technology Management Services
Technology transfer services
To Universities
The registrant, its subsidiary, Competitive Technologies of PA,
Inc. ("CTI-PA") and its equity method affiliate, University Science,
Engineering and Technology, Inc. ("USET") provide technical evalua-
tion, patent and market assessment, patent application and prosecu-
tion, licensing, license management and royalty distribution services
under agreements with Lehigh University, former university clients of
the registrant and other research institutions. In negotiating new
agreements with research institutions, the registrant seeks a
collaborative relationship with the research institution in which both
parties share the expenses of the technology transfer process on an
agreed basis. Central to this approach to maximizing return on
investments in technology is assessing the invention's patentability
and marketability as early in the process as possible to focus
investments on inventions with higher potential for success in the
marketplace.
In 1995 and 1994 the registrant derived 94% of its retained
royalty revenues from its share of royalties earned by the USET
portfolio and 6% from royalties earned by the CTI-PA portfolio. In
1993 the registrant derived 95% of its retained royalty revenues from
its share of royalties earned by the USET portfolio and 5% from
royalties earned by the CTI-PA portfolio which was included in
consolidated revenues for only 6 months of 1993. In 1995, 1994 and
1993 the registrant, through its subsidiary, CTI-PA, also earned
approximately $44,000, $39,000 and $25,000 under contracts to provide
technology management and related services to Lehigh University.
(References herein to years are to fiscal years ended July 31, unless
the context otherwise requires.)
As a result of various agreements made between 1988 and 1991 by
the registrant and its wholly-owned subsidiary, UPAT Services, Inc.
("USI"), the registrant manages the operations of USET and its
portfolio of technologies, patents and licenses. USET licenses the
technologies, collects royalties from licensees and distributes those
royalties according to the terms of various related agreements. In
certain instances the registrant or USET has initiated litigation to
enforce its right to royalties. Generally the registrant retains 20%
of royalties received from licensees although individual amounts range
from 4% to 28%. In addition, the registrant shares the same
proportion of patent prosecution and litigation expenses incurred to
maintain this portfolio. The registrant and USET are entitled to
recover certain of their patenting costs from royalties received on
the related technologies before distributing them to the respective
university.
USET is obligated to pay Macmillan, Inc. 90% of its royalties
earned in excess of $400,000 per year for earning years through August
31, 1995, up to an aggregate maximum of $3,750,000 (as specifically
set forth in the purchase agreement from Macmillan, Inc. dated August
20, 1990). Through July 31, 1995, USET had made all contingent
payments due which totaled $625,000. The registrant guarantees USET's
contingent purchase price obligations to Macmillan, Inc. once they
become due. Although contingent purchase price payments may be
required through 1996 because USET may not receive royalties earned
through August 31, 1995 (as defined in the purchase agreement) until
April or May 1996, the registrant expects USET to continue to pay
those earned obligations as they become due.
USI is the general partner and owns 20% of USET Acquisition
Partners, L.P. ("UAP"). UAP owns 100% of the outstanding shares of
USET Holding Co. which owns 100% of the outstanding shares of USET,
its only asset. USET is the operating company whose activities are
described above. The contingent purchase price payments noted above
were agreed in August, 1990 when USET Holding Co. purchased USET from
Macmillan, Inc., successor to the interest Maxwell Communication
Corporation ("Maxwell") acquired from the registrant on June 28, 1988.
The sharing of royalties remaining after distribution of the
university's share was agreed on June 28, 1988 when the registrant
sold its technology management operations to Maxwell while retaining
a 70%, 50% or 10% interest in the revenues and certain patent expenses
related to the portfolio of technologies. The 70% technologies were
seven specifically identified inventions, including gallium aluminum
arsenide semiconductors. The 50% technologies were those which were
or had been licensed or optioned prior to June 28, 1988. The 10%
technologies were those which had never been licensed or optioned on
or before June 28, 1988. The portfolio of technologies managed by
USET excludes Retin-A in which Macmillan, Inc. and the registrant each
retains a 50% interest.
On February 12, 1993, the registrant acquired 80% of the stock
of CTI-PA, previously a wholly-owned subsidiary of Lehigh University
("Lehigh"), in exchange for $750,000 payable in 74,302 unregistered
shares of the registrant's common stock (see Note 2 to Consolidated
Financial Statements). CTI-PA has a contract to manage Lehigh's
technology portfolio through September 30, 1997, subject to certain
conditions. In addition to paying an annual fee for these services,
Lehigh provides CTI-PA office space and the services of five MBA
students. In each year of the contract, CTI-PA retains the first
$100,000 of royalties received under licenses of Lehigh technologies
and 75% of royalties received in excess of $100,000, if any.
The only two technologies that produced at least $100,000 in
retained royalties for the registrant during 1995 and 1994 were
gallium arsenide semiconductors and vitamin B12 assay.
Inventions employing gallium arsenide to improve semiconductor
operating characteristics were developed at the University of
Illinois. U.S. patents have issued from March, 1983 to May, 1989 and
expire from May, 2001 to September, 2006. These inventions are
licensed to Mitsubishi Electric Corporation, NEC Corporation, Phoenix
Photonix, Inc., Polaroid Corporation, Spectra Diode Laboratories, Inc.
and Toshiba Corporation. These inventions are in current use
according to information received from licensees and other sources.
Retained royalties received from the gallium arsenide semiconductor
inventions were approximately $159,000 (20%) and $150,000 (21%) of
total retained royalties in 1995 and 1994, respectively.
The improved assay procedure for diagnosing Vitamin B12
deficiencies was developed at the University of Colorado. U.S.
patents have issued from February, 1980 to May, 1984 and expire from
February, 1997 to May, 2001. These assay procedures are licensed to
Abbott Laboratories, Becton Dickinson and Company, Bio-Rad Laborato-
ries, Inc., Ciba-Corning Diagnostics Corporation, Dade International,
Inc., Diagnostic Products Corporation, ICN Biomedicals, Microgenics
Corporation, Miles, Inc., and Sanofi Diagnostics Pasteur, Inc. On the
basis of information received from licensees and other sources, these
assay procedures are in current use. Retained royalties received from
the Vitamin B12 assay were approximately $288,000 (36%), $260,000
(36%) and $289,000 (44%) of total retained royalties in 1995, 1994 and
1993, respectively.
No other technology contributed 15% or more of retained royalties
during 1995, 1994 or 1993.
The registrant's foreign operations are limited to royalties
received from foreign sources (see Note 6 to Consolidated Financial
Statements).
The registrant is actively pursuing additional university
technology transfer relationships. During 1995 the registrant made
agreements with two additional universities to provide technology
management services to them.
To Federal Agencies and Laboratories
The registrant and its subsidiaries provide technology transfer
and other research services directly or indirectly to Federal agencies
and laboratories. These contracts accounted for approximately
$634,000 (70%) and $121,000 (49%) of revenues earned under service
contracts and grants in 1995 and 1994, respectively.
On January 24, 1995, the registrant 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
enterprises. The registrant expects to retain approximately $400,000
of the contract revenues with the remainder to be paid to subcontrac-
tors for specific contract tasks. Work on the contract began in
February, 1995, and is expected to continue for approximately 15
months. Through July 31, 1995, the registrant had earned and
recognized approximately $500,000 of revenue on this contract of which
approximately $302,000 was paid or payable to subcontractors. The
remaining approximately $300,000 of revenue under this contract is
expected to be earned over the first nine months of fiscal 1996.
Revenues retained by the registrant under this contract contribute to
recovery of some of its personnel and overhead costs.
In addition to the Air Force contract, the registrant and its
subsidiaries provided services indirectly to Federal agencies under
subcontracts to Lehigh University. CTI-PA earned approximately
$106,000 and $114,000 under one of these subcontracts in 1995 and
1994, respectively. This subcontract runs through April 30, 1996,
when it must be renegotiated with Lehigh and the Federal agency.
The registrant expects to submit proposals in the future for
contracts that follow from the current Air Force contract and other
technology and research contracts. However, the registrant's success
in winning such contracts will depend upon many factors outside its
control including continued Federal government funding for such
research, the relative strength of the registrant's proposals compared
with competing proposals, and competing demands for the time and
resources of the registrant and its employees.
To Corporations
The registrant also provides various technical, patent and market
assessment and licensing services to corporations under contracts for
specific projects. These projects have included evaluation of
technologies for patentability, economic and technical feasibility and
commercial potential. Revenues under these contracts were approxi-
mately $29,000 and $18,000 in 1995 and 1994, respectively. The
registrant recently agreed to assist IBM in identifying and commer-
cializing technologies that are outside IBM's core competencies. The
registrant is currently discussing opportunities to assist other
corporations in commercializing shelved technologies. In fiscal 1996
the registrant has established and expects to staff a wholly-owned
subsidiary, CTI-Intercorporate Licensing, Inc., to serve the corporate
market.
Investments in Development-Stage Companies
The registrant generally does not finance research and develop-
ment of technologies. However, in certain instances, the registrant
has been involved in forming companies to exploit specific technolo-
gies it believed were beyond the pure research and development stage.
In 1994 the registrant formed Knowledge Solutions, Inc. ("KSI")
to develop products using a multimedia training process model from
Lehigh University. The registrant participated in three rounds of
financing (see Note 4 to Consolidated Financial Statements) which
generated $465,000 in equity funding for KSI. In addition, KSI
received a $75,000 grant to support its development activities. At
July 31, 1995, the registrant owned 35.9% of KSI's outstanding common
stock. Through July 31, 1995, the registrant had recorded a total of
$171,000 as its equity in the losses of KSI during the development of
KSI's first product. Both the registrant and KSI's other major
shareholder expect KSI to support its continuing operation either from
sales of its product or from contracts to develop other multimedia
training products.
In 1994 the registrant established a majority-owned subsidiary,
Vector Vision, Inc. ("VVI"), to develop and exploit a video compres-
sion technology from Lehigh University. Research and development
expenditures (included in costs of technology management services in
the Consolidated Financial Statements) of approximately $36,000 and
$86,000 were incurred by VVI in 1994 and 1995, respectively. Since
its inception VVI has obtained $72,000 in equity funding and $49,000
in grant funding. VVI is obligated to repay up to three times total
grant funds received (see Note 3 to Consolidated Financial State-
ments). At July 31, 1995, the registrant owned 51.5% of VVI's
outstanding common stock. VVI's minority shareholders are employees
of VVI or CTI-PA. Unless VVI obtains additional equity financing, it
will not be able to continue development of its video compression
technology. CTI-PA is currently exploring alternate possibilities for
commercialization of this technology.
In 1995 the registrant invested in Equine Biodiagnostics, Inc.
("EBI"), a company organized to provide diagnostic laboratory services
for the equine industry. EBI's initial product had already been
tested and was being marketed in EBI's first month of operations. The
registrant recorded equity in EBI's net income of $6,000 in 1995. At
July 31, 1995, the registrant owned 37.5% of EBI's outstanding stock.
In June, 1986, the registrant was instrumental in forming
University Communications, Inc. ("UCI") to commercialize NovaNET, an
interactive education and communication network developed at the
University of Illinois. UCI's revenues have grown to $5,120,000 for
the fiscal year ended July 31, 1995. In February, 1995, the
registrant sold the majority of its shares of UCI common stock to
Barden Companies, Inc. and recorded a $2,534,505 gain on the
disposal. After the sale the registrant continued to own 14.5% of
UCI's outstanding common stock. See note 16 to Consolidated Financial
Statements for further information about UCI's operations and their
effect on the registrant and its financial statements. Although UCI
may use outside sources to fund its new market and system development
activities, its ongoing operations are now self-supporting.
To a lesser extent the registrant was involved in forming and
financing Plasmaco, Inc. ("Plasmaco") in 1987 to develop and
manufacture high resolution, high information content AC plasma
display products. Since its inception, Plasmaco raised a total of
approximately $29 million in debt and equity. The registrant invested
a total of $3,262,000 in Plasmaco equity, of which approximately
$803,000 was paid in cash and the balance in the registrant's common
stock. The registrant recorded its equity in Plasmaco's losses until
the full amount had been written off by July 31, 1993. After a
restructuring of Plasmaco's equity in September, 1994, and the
registrant's sale of part of its investment in Plasmaco, the
registrant owns approximately 1% of Plasmaco's outstanding common
stock and accounts for it under the cost method. Plasmaco is
developing its color AC plasma display.
Special Factors
Losses During Past Fiscal Years. On a consolidated basis the
registrant incurred net losses from continuing operations of $641,000,
$829,000 and $1,447,000 in 1995, 1994 and 1993, respectively. The
registrant's share of net income from UCI's discontinued operations
was $99,000 in 1995 and its share of net losses from UCI's discontin-
ued operations was $11,000 and $450,000 in 1994 and 1993, respective-
ly. The registrant reported a net gain on disposal of discontinued
operations of $2,534,505 on its sale of UCI shares to Barden
Companies, Inc. in 1995 and a net gain of $222,000 and a net loss of
$9,000 on its sale of the assets of its optical products segment to
Unilens in 1994 and 1993, respectively. The registrant's operating
activities used $40,000, $475,000 and $729,000 in 1995, 1994 and 1993,
respectively. The registrant's investing and financing activities
provided $1,795,000 in 1993 and used $501,000 and $148,000 in 1995 and
1994, respectively.
Reliance on and Lack of Control of Licensees. To the extent that
the registrant and CTI-PA share in royalties received from licensees,
the revenues from such licensees are dependent upon the efforts and
expenditures of such licensees. Retained royalties were 47%, 75% and
89% of the registrant's consolidated total revenues in 1995, 1994 and
1993, respectively. The registrant has no control over the efforts
and expenditures of such licensees. In addition, development of new
products by licensees involves high risk since many new technologies
do not become commercially profitable products despite the application
of extensive development efforts by such licensees. Licensees are not
required to advise the registrant of problems which may be encountered
in the attempt to develop commercial products and such information is
usually treated as confidential by such licensees. It may be assumed
that problems will be encountered frequently by licensees and only if
such licensees succeed in resolving those problems will the licenses
generate royalty income in which the registrant can share.
Need for Government Approvals. Commercial exploitation of some
licensed patents may require approval of governmental regulatory
agencies; there is no assurance that such approvals will be granted.
The principal government agency involved is the United States Food and
Drug Administration ("FDA"). FDA's approval process is rigorous, time
consuming and costly, and unless and until approval is obtained by a
licensee of a product requiring such approval, sales of the product
will not be made and the registrant will receive no royalty income
based on sales of the product.
Dependence on Patents. Revenues from patent licensees are
subject to the risk that issued patents will be declared invalid, that
patents will not issue on patent applications, or that new or
alternative technologies will render licensed patents uncommercial.
Risks Pertaining to Contracts with Federal Agencies and
Laboratories. To the extent that the registrant and CTI-PA earn
revenues under contracts and subcontracts from agencies or laborato-
ries of the Federal government, their revenues under such service
contracts are dependent upon continued funding of the related
activities by the Federal government. Revenues under service
contracts or subcontracts from agencies or laboratories of the Federal
government were 37% and 13% of the registrant's consolidated total
revenues in 1995 and 1994, respectively. The registrant has no
control over funding decisions of the Federal government, contract
decisions of the Federal agencies and laboratories or subcontract
decisions of other government contractors. To the extent that
government service contracts must be renewed at least annually, there
can be no assurance that they will be renewed. Although the
registrant and CTI-PA will continue to propose on all such contracts
they deem appropriate to their expertise and experience, there can be
no assurance that they will be successful in obtaining such contracts.
Risks Pertaining to Evaluating and Securing Funding for New
Business and Product Development. The registrant continues to seek
business opportunities which are synergistic with its expertise in
technology management or businesses which have the potential to
generate excess cash flow which can be used by the registrant to build
its business. There can be no assurance that the registrant will
succeed in acquiring or developing such businesses or products or that
they will be profitable. In instances where the registrant invests
its own funds, whether directly, through a subsidiary or a joint
venture or otherwise, in researching, developing, manufacturing or
marketing new products, the registrant incurs the same risks as
licensees with respect to new product development. New products may
need further funding after initial funds are exhausted and if such
funding cannot be obtained, such new products may have to be abandoned
resulting in loss of monies previously invested. There is consider-
able risk that any new product may be rendered obsolete or otherwise
not suitable for commercialization by new or alternative technologies.
Dependence on Key Personnel. The registrant believes that the
growth of its business is dependent upon the knowledge and abilities
of a small number of employees and that the loss of such persons could
have an adverse effect on future activities of the registrant. The
principal key employees are Messrs. George M. Stadler and Frank R.
McPike, Jr. Mr. Stadler, the registrant's president and chief
executive officer, has 21 years of experience in technology management
and commercialization and has been its president since September,
1992. Mr. McPike has been with the registrant for 12 years as chief
financial officer and is responsible for the registrant's financial
and administrative operations.
Competition. Competition in the technology management services
business is vigorous. Several organizations, some of which are well
established and have greater financial resources than the registrant,
provide technology management services.
Discontinued Operations
Computer-based Education Services Segment
On February 15, 1995, Barden Companies, Inc. ("Barden") exercised
its option to purchase from the registrant additional shares of
University Communications, Inc. ("UCI") common stock. Barden paid
$3,227,372 ($1.375 per share) in cash for 2,347,180 shares held by the
registrant. In connection with Barden's purchase, the registrant
offered to purchase from all UCI shareholders other than Barden a
number of their shares of UCI common stock to allow all UCI sharehold-
ers to participate in the sale to Barden on a pro rata basis.
Pursuant to this offer, the registrant purchased 151,096 tendered
shares for a total of $207,757 ($1.375 per share) in cash. The
registrant's net gain on these transactions was $2,534,505 which was
recorded in the third quarter of fiscal 1995. Upon completion of
these and other transactions, Barden owned 52.1% and the registrant
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, the registrant no longer exerts significant influence over
UCI's operations. Therefore, effective February 15, 1995, the
registrant began to account for its investment in UCI of $159,375 on
the cost method. Consolidated financial statements for the registrant
and its subsidiaries for all prior periods, which previously included
UCI as a consolidated subsidiary, have been reclassified to present
UCI's net assets and the registrant's equity in UCI's net results of
operations as a discontinued operation.
UCI previously comprised the computer-based education services
segment in the registrant's consolidated financial statements but is
now presented as a discontinued operation. The registrant's equity
in UCI's net income from operations for the six and one-half months
to February 15, 1995 was $99,000; its equity in UCI's net loss from
operations was $11,000 and $450,000 in 1994 and 1993, respectively.
At various times since UCI's initial funding in June, 1986, the
registrant had invested an aggregate of $1,997,000 in UCI equity.
UCI's revenues from interactive computer-based education services
were $2,764,000, for the six and one-half months ended February 15,
1995 and $3,753,000 and $2,183,000 in 1994 and 1993, respectively.
UCI markets its interactive courseware throughout the United States
to schools and colleges, drop-out prevention programs, correctional
and other institutions aimed at improving teenage and adult literacy.
Optical Products Segment
Prior to January 31, 1989, the registrant was engaged in the
manufacture and sale of bifocal contact lenses through its 89%-owned
subsidiary, University Optical Products Co. ("UOP"). Effective
January 31, 1989, UOP sold the contact lens portion of its optical
products segment for a total of $6 million payable in installments
(see Note 16 to Consolidated Financial Statements), assumption by the
purchaser of certain UOP liabilities and 200,000 warrants to purchase
shares of the common stock of Unilens Optical Corp. ("Unilens
Canada"), the parent of Unilens Corp. USA ("Unilens"), the purchaser.
Unilens Canada guaranteed the obligations of Unilens.
In November, 1989, UOP sold substantially all of its intraocular
lens ("IOL") product line assets to Unilens for $1,056,000 in cash.
The registrant used the $1,056,000 in cash to exercise the warrants
to purchase 200,000 shares of common stock of Unilens Canada and then
exchanged those unregistered shares for registered shares of Unilens
Canada held by Pineridge Capital Corp., then owner of 45% of the
outstanding stock of Unilens Canada. The net effect of these
transactions was that UOP disposed of its IOL assets and the
registrant obtained 153,600 shares of Unilens Canada which it sold
during 1990 for approximately $768,000.
As a result of UOP's sales of both the contact lens and IOL
portions of its operations, the registrant has presented its optical
products segment as a discontinued operation for all periods presented
in the Consolidated Financial Statements. For additional information,
see Items 3 - Legal Proceedings, 6 - Selected Financial Data and Note
16 to Consolidated Financial Statements.
Due to the uncertainty of the timing and amount of future cash
flows, income on Unilens' installment obligation is recorded net of
related expenses as the payments are received. Such amounts were
recorded as gain on discontinued operations until the fair value
assigned to the original obligation was received. Cash received in
excess of the fair value assigned to the original obligation is
recorded as other income from continuing operations. Expenses of
collecting the installment obligation and of legal expenses related
to the suit detailed in Item 3 - Legal Proceedings are recorded as
other expenses from continuing operations.
The registrant has paid 4% commissions on all sales proceeds
received from Unilens since November, 1989, to UOP's joint venture
partner, Optical Associates, Limited Partnership.
The registrant recognized net gain of $222,000 and net loss of
$9,000 on disposal of UOP's discontinued operations in 1994 and 1993,
respectively. The registrant also recorded other expenses from
continuing operations of $132,000 in 1995 and other income from
continuing operations of $38,000 in 1994.
Item 2. Properties
The registrant's principal executive offices occupy approximately
3,500 square feet in Westport, Connecticut under a five-year lease
which expires in August 1996. These offices are part of 17,500 square
feet leased by the registrant. Approximately 14,000 square feet is
sublet by the registrant, including 1,000 square feet leased to USET
at current market rates. The lessor is a partnership consisting of
a director of the registrant and three unrelated individuals (who were
former officers of the registrant). The registrant believes that this
facility is adequate for its current operations.
Item 3. Legal Proceedings
On November 4, 1991 suit was filed in the Superior Court of the
Judicial District of Fairfield, Connecticut, at Bridgeport by Bruce
Arbeiter, Jeffrey A. Bigelow, Jeffrey W. Leiderman, Optical Associates
Limited Partnership ("OALP") and Optical Associates Management Corp.
("OAMC") purportedly on behalf of all the limited partners of OALP,
as plaintiffs, against Genetic Technology Management, Inc. ("GTM"),
University Optical Products Co. ("UOP"), the registrant, Jay Warren
Blaker, L.W. Miles, A. Sidney Alpert, Frank R. McPike, Jr., Michael
Behar, Bruce E. Langton, Arthur M. Lieberman and Harry Van Benschoten,
as defendants. The complaint alleges, among other things, that in
January 1989 the defendants, GTM, UOP and the registrant, sold
substantially all of the assets of OALP to Unilens Corp. USA
("Unilens") and disbursed only 4% of the sales price to OALP, all in
violation of certain agreements, representations and legal obliga-
tions; that OALP is entitled to the full proceeds of the sale to
Unilens; and that by vote of limited partners holding in excess of 80%
of the capital interests of OALP, the limited partners have removed
GTM as the general partner of OALP and replaced GTM with OAMC. The
complaint claims, among other things, money damages (in an amount not
specified in the claim for relief); treble and punitive damages (with
no amounts specified); attorneys fees; an accounting; temporary and
permanent injunctive relief; and judgment holding that OAMC was
legally substituted for GTM as the general partner of OALP. The
management of the registrant believes, based upon all of the facts
available to management, that the claims asserted in the suit are
without merit, and the registrant intends to defend the suit
vigorously. In August 1994 the defendants filed a motion for summary
judgment for dismissal of the case. The motion for summary judgment
was denied. The court has not yet set a date to hear the case.
Item 4. Submission of Matters to a Vote of Security Holders
None
Item 4A. Executive Officers of the Registrant
Principal Occupation and Position
Name Age and Office with Registrant
George M. Stadler 48 President and Chief Executive Officer
and director since December 1993.
Prior thereto President and Chief
Operating Officer since September
1992; President, Competitive Technol-
ogies of PA, Inc. since April 1991;
Managing Partner of VenTex, a joint
venture involving Texas Research and
Technology Foundation and the regis-
trant from November 1989 to April
1991; Chief Venture Officer, Texas Re-
search and Technology Foundation from
January 1989 to April 1991.
Frank R. McPike, Jr. 46 Secretary since August 1989; Treasurer
since July 1988; Vice President, Fi-
nance, since December 1983; Director
since July 1988.
The terms of all officers of the registrant are until the first
meeting of the newly elected Board of Directors following the
forthcoming annual meeting of stockholders of the registrant and until
their respective successors shall have been duly elected and shall
have qualified, subject to employment agreements. Mr. Stadler and Mr.
McPike have employment contracts with the registrant; these contracts
will be described in the registrant's definitive proxy statement.
There is no family relationship between any director or executive
officer of the registrant.
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder
Matters
The registrant's common stock is listed on the American Stock
Exchange. The following table sets forth the high and low sales
prices as reported by the American Stock Exchange for the periods
indicated.
Fiscal Year Ended July 31, 1995 High Low
First Quarter.................... 8 3/4 6
Second Quarter................... 7 1/8 5 3/4
Third Quarter.................... 6 7/8 4 1/2
Fourth Quarter................... 7 5 3/8
Fiscal Year Ended July 31, 1994
First Quarter.................... 8 5/8 6 1/2
Second Quarter................... 7 5 3/4
Third Quarter.................... 7 1/8 5 5/8
Fourth Quarter................... 7 7/8 5 5/8
No cash dividends were declared on the registrant's common stock
during the last two fiscal years.
At October 20, 1995 there were approximately 1,118 holders of
record of the registrant's common stock.
COMPETITIVE TECHNOLOGIES, INC.
Selected Financial Data (1)
Years ended July 31
<TABLE>
<CAPTION>
Item 6. Selected Financial Data
1995 1994 1993 1992 1991
<S> <C> <C> <C> <C> <C>
Retained royalties $ 796,243 $ 717,514 $ 650,651 $ 504,143 $ 450,578
Revenues under service
contracts and grants 906,952 245,264 84,470 -- --
Total revenues $ 1,703,195 $ 962,778 $ 735,121 $ 504,143 $ 450,578
Loss from continuing
operations (2) $ (641,249) $ (828,996) $(1,446,811) $ (690,697) $ (862,041)
Income (loss) from operations
of discontinued operation 99,468 (10,786) (449,724) (476,318) (434,163)
Net gain (loss) on disposal
of discontinued operations 2,534,505 221,852 (9,314) 180,504 --
Net income (loss) $ 1,992,724 $ (617,930) $(1,905,849) $ (986,511) $(1,296,204)
Net (loss) income per share
of common stock:
Continuing operations $ (0.11) $ (0.15) $ (0.27) $ (0.13) $ (0.17)
Operations of discontinued
operation 0.02 -- (0.08) (0.09) (0.09)
Net gain (loss) on disposal
of discontinued operations 0.43 0.04 -- 0.03 --
Net income (loss) $ 0.34 $ (0.11) $ (0.35) $ (0.19) $ (0.26)
Weighted average number of
common and common equivalent
shares outstanding 5,814,826 5,761,610 5,478,082 5,170,041 4,997,622
At year end:
Total assets $ 6,768,942 $ 4,766,745 $ 4,454,778 $ 2,914,518 $ 3,178,933
Shareholders' interest $ 6,289,524 $ 4,149,775 $ 4,133,093 $ 2,486,255 $ 2,797,264
</TABLE>
(1) Should be read in conjunction with Consolidated Financial Statements
and Notes thereto.
(2) Includes net income (losses) related to equity method affiliates of
approximately ($104,000), $20,000, ($1,013,000), ($286,000) and
($1,288,000) in 1995, 1994, 1993, 1992 and 1991, respectively, gain on
issuance of shares by subsidiary of $233,000 and $44,000 in 1993 and
1992, respectively, and gain on reversal of accrued rent liability of
$960,400 in 1991.
(3) Registrant had no long-term obligations at July 31 of any year presented.
(4) No cash dividends were declared or paid in any year presented.
Item 7. 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 University Communications, Inc. ("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 which was recorded in the third quarter
of 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 accounts for
its $159,375 investment in UCI on the cost method. Financial
statements for Competitive Technologies, Inc. and subsidiaries ("the
Company") for all prior periods, which previously included UCI as a
consolidated subsidiary, have been reclassified to present CTI's
interest in 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 $336,098 at July 31, 1995, are
$540,912 lower than at July 31, 1994. Financing activities provided
$13,000 while operating activities used $40,317 and investing
activities used $513,595.
The Company's net loss from continuing operations of $641,249 for
1995 included the following noncash items: depreciation and amortiza-
tion expenses ($186,000), losses related to equity method affiliates
($104,000), minority shareholders' interest in losses of consolidated
subsidiaries ($23,000), accruals ($121,000) and other ($78,000).
Net changes in various operating accounts were $226,000 for 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, at
July 31, 1994, the Company had no receivables or liabilities from
services performed under the government contract described below which
began in February, 1995, or other government contracts.
CTI's sale of its majority holding in UCI, net of purchases and
expenses, discussed above provided approximately $3,012,000 in cash.
Proceeds from sales of short-term investments provided approximately
$2,232,000 and purchases of short-term investments used $5,552,000.
The Company used approximately $106,000 to purchase computer and other
equipment for its continuing operations. In addition, CTI invested
approximately $99,000 in cash in equity of affiliates.
In September, 1994, CTI exchanged 25,000 unregistered shares of
its common stock for 205,325 shares of Class A common stock of
Knowledge Solutions, Inc. ("KSI"). In June, 1995, CTI participated
in a restructuring and additional financing of KSI by reacquiring the
25,000 shares of its common stock, returning the 205,325 shares of
KSI's Class A common stock and purchasing 75,000 shares of KSI's Class
A common stock for $75,000 in cash. In addition to CTI's investment,
Safeguard Scientifics, Inc. ("SSI") has invested $300,000 in cash in
KSI and KSI has received a $75,000 grant to support its development
activities. KSI is expected to complete development of its first
multimedia training product without further funding from CTI or SSI.
KSI is expected to support its continuing operation either from sales
of its product or from contracts to develop other multimedia training
products. CTI's equity in the losses of KSI since its inception in
1994 through July 31, 1995, totals $171,000. At July 31, 1995, CTI
owns 35.9% of KSI's outstanding common stock and accounts for its
investment under the equity method.
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 July 31, 1995, CTI owned 37.5% of the
outstanding common stock of EBI and accounted for its investment in
EBI under the equity method. CTI's equity in the income of EBI in
1995, was $6,000.
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 enterprises.
Approximately $400,000 of the contract revenues are expected to be
retained by CTI with the remainder to be paid to subcontractors for
specific tasks. Work on the contract began in February, 1995, and is
expected to continue for approximately 15 months. CTI recognizes
revenues under this contract in the period the contractual service is
provided and the related revenue is earned. Through July 31, 1995,
CTI had earned and recognized approximately $500,000 of revenue on
this contract of which approximately $302,000 was paid or payable to
subcontractors.
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.
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 July 31, 1995, the Company had no outstanding commitments 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 startup operations.
The Company's adoption of Statement No. 115, "Accounting for
Certain Investments in Debt and Equity Securities," effective August
1, 1994, 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 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 in its second year of operations. Without additional
outside financing, VVI's development 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 July 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 activities
as well as for expansion of its technology management services and
investments in startup companies. This anticipation is based upon the
Company's current expectations. However, expansion of the Company's
services and investments in startup 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 - 1995 vs. 1994
The results of operations for fiscal 1994 presented in the
accompanying financial statements have been reclassified to present
UCI's results of operations as a discontinued operation. See
discussion above and Notes 1 and 16 to Consolidated Financial
Statements.
Consolidated revenues in 1995 were $740,000 higher than in 1994,
an increase of 77%. Retained royalties increased $79,000 (11%). One-
time, up-front license fees from new licenses in 1994 were higher than
in 1995. Royalties received in settlement of a license dispute in
1995 were higher than a settlement of prior infringement in 1994.
Other changes in retained royalties were from increased earned
royalties on some younger technologies, lower earned royalties on some
more mature technologies, and changes in minimum royalties as provided
in the respective license agreements. Royalties from Retin-A in 1995
were approximately the same as in 1994. In both years both the
gallium arsenide and the Vitamin B12 assay technologies generated
retained royalties in excess of $100,000. Licenses for the Vitamin
B12 assay and gallium arsenide extend to the expiration of the
patents, between 1997 and 2001 and between 2001 and 2006, respective-
ly. Retained royalties earned by Competitive Technologies of PA, Inc.
("CTI-PA") were nearly the same in both years.
Revenues under service contracts and grants were $662,000 (270%)
higher in 1995 as a result of additional contracts, services and
grants. CTI's $800,000 contract with the Department of the Air Force
which began in February, 1995, accounted for $500,000 of the increase.
The remaining $300,000 of revenue under this contract is expected to
be earned over at least nine months of fiscal 1996. While revenues
earned under other services contracts also increased in 1995, nearly
all such contracts either must be renewed at least annually or are for
nonrecurring projects. The Company continues to propose on all such
contracts it deems appropriate to its expertise and experience. Grant
revenues in 1995 totaled $85,000 including the remaining approximately
$36,000 on Competitive Technologies of PA, Inc.'s ("CTI-PA") grant and
$49,000 from a 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 State-
ments). The Company has not applied for grants to support any of its
operations during 1996.
Costs of technology management services were $580,000 (107%)
higher than in 1994. Costs related to retained royalties were
$114,000 (42%) lower in 1995 than in 1994. These costs include
domestic and foreign patent prosecution, maintenance and litigation
expenses related to both the USET and CTI-PA portfolios. The Company
carefully evaluates the future revenue potential of each technology
before it incurs substantial patent or enforcement expenses. The
Company expects costs related to retained royalties to increase in
1996 principally as a result of expanding technology management
services to corporations and universities in 1996. 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 $643,000
(320%) compared with 1994. CTI's contract with the Department of the
Air Force is responsible for $501,000 of this increase, including
$302,000 of amounts paid or payable to subcontractors on the project
team and $26,000 of contract related travel expenses. Other increases
related to increased levels of service under CTI-PA's technology
management contract for Lehigh University and other nonrecurring
service contracts. In addition, costs related to grant revenues
increased in proportion to the revenues. The amount of research and
development expenses included in costs of technology management
services was unchanged from 1994.
General and administration expenses were $208,000 lower in 1995
than in 1994. Included in 1994 were investment bankers fees of
$50,000. The remainder of this reduction results from using current
personnel to provide service under various contracts. If the Company
is able to continue servicing contracts with current staff or reduces
personnel costs, such expenses may continue at similar levels.
However the Company plans certain increases in staffing to expand its
technology management services to corporations and universities in
1996 with related increases in general and administration expenses.
The net effect of the increases in operating revenues and
expenses was to reduce the Company's operating loss by $369,000 (37%).
Although $51,000 of the improvement was 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 addition, interest rates have increased slightly
in the two years.
In 1995 net losses related to equity method affiliates included
CTI's equity in the net loss of KSI ($157,000), UPAT Services, Inc.'s
("USI") 20% equity in the net income of USET Acquisition Partners,
L.P. ("UAP") ($47,000) and CTI's equity in the net income of Equine
Biodiagnostics, Inc. ("EBI") ($6,000) for four months of operations.
In 1994 net income related to equity method affiliates included CTI's
equity in the net loss of KSI ($15,000) and USI's equity in the net
income of UAP ($35,000). In fiscal 1994 KSI had less than 2 months
of operations.
Other income (expense), net, includes gross realized gains from
sales of short-term investments of $60,000 and $7,000 in 1995 and
1994, respectively. 1995 also includes $132,000 of legal expenses
incurred in connection with a suit brought against CTI, some of its
subsidiaries and directors which claims that Optical Associates, L.P.
("OALP") is entitled to the entire proceeds from the 1989 sale of the
assets of the discontinued optical products segment (see Note 16 to
Consolidated Financial Statements). CTI believes that the asserted
claims are without merit and intends to defend the action vigorously.
The suit is expected to be tried during fiscal 1996. CTI is unable
to estimate the related legal expenses which may be incurred in 1996.
1994 includes $38,000 proceeds in excess of the fair value assigned
to the installment obligation receivable from Unilens Corp. USA
("Unilens"). Unilens has made no payments in 1995 and CTI is
currently trying to collect amounts Unilens previously agreed to pay
in 1995. Since CTI carries this receivable at zero value, any
collections will be recorded in the period collected.
The Company has substantial net operating loss carryforwards for
Federal and state income tax purposes. CTI utilized capital loss
carryforwards and reduced the related deferred tax valuation allowance
in 1995; therefore no provision has been made for taxes on CTI's sale
of shares of UCI common stock. Provision was made in each year for
estimated state income taxes.
Minority interest in the losses of subsidiaries in both 1995 and
1994 is VVI's minority shareholders' share of VVI's net loss in each
respective year. 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.
In 1995, income from discontinued operations is CTI's equity in
UCI's net income for the six and one-half months ending February 15,
1995. In 1994 and 1993 CTI's equity was in UCI's net loss for the
full years. In the future, CTI will record revenue from its
investment in UCI only for dividends declared by UCI, if any.
In 1995, the $2,534,505 net gain on disposal of discontinued
operations is from CTI's sale of shares of UCI common stock. In 1994
such gain is from amounts received from Unilens, net of related
expenses, on CTI's disposal of the discontinued operations of its
former optical products segment. Due to the uncertainty of the timing
and amount of future cash flows from the installment obligation
received in 1989 as part of the proceeds of the sale to Unilens,
income on installment payments is recorded net of related expenses as
the payments are received (see Note 16 to Consolidated Financial
Statements). The 1994 gain brought CTI's cumulative net gain on this
disposal to the $470,000 loss it had recognized on the disposal in
1990. Cash received in excess of this amount is recorded as other
income from continuing operations. Through July 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 Company does not expect the 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 U.S. 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 - 1994 vs. 1993
The results of operations for fiscal 1994 and 1993 presented in
the accompanying financial statements have been reclassified to
present UCI's results of operations as a discontinued operation. See
discussion above and Notes 1 and 16 to Consolidated Financial
Statements.
Consolidated revenues for 1994 were $228,000 higher than for
1993, an increase of 31%. Retained royalties increased by $67,000 or
10%. This increase includes an increase of $137,000 in royalties from
new licenses and earned royalties on gallium arsenide technologies
which was partially offset by decreases in royalties from other
licensed technologies. Royalties from Retin-A were lower than in 1993
because 1993 included $35,000 from nonrecurring up-front royalty
payments after settlement of the Retin-A litigation. In 1994 both
gallium arsenide and Vitamin B12 assay technologies produced retained
royalties in excess of $100,000. The Vitamin B12 assay is the only
licensed technology that produced annual retained royalties in excess
of $100,000 in 1993. In addition, CTI-PA earned retained royalties
of $46,000 in the full year of 1994 compared with $33,000 in the 10
months of 1993 under its technology management agreement with Lehigh
University.
Revenues under service contracts and grants increased $161,000
or 190% compared to 1993. In 1994 CTI-PA's services to Lehigh
University and its affiliates generated total revenues of $179,000 for
twelve months including $30,000 under the technology management
agreement and $114,000 under an agreement with the Center for Advanced
Technology for Large Structural Systems. In 1993 such services
generated total revenues of $84,000 for six months including $30,000
and $54,000, respectively, under the same or similar agreements. In
1994 CTI and CTI-PA also earned revenues under other service contracts
including ones for technical, patent and market assessment projects.
During 1994 CTI-PA received approximately $34,000 in grant revenues.
Costs of technology management services increased $223,000 (70%)
compared with 1993. Costs related to retained royalties were $40,000
higher in 1994 than in 1993. This increase included higher patent
litigation expenses and CTI-PA's costs for a full year in 1994
compared with only six months in 1993. Costs related to service
contracts in 1994 were $113,000 higher than in 1993. In addition to
$68,000 of increased expenses on CTI-PA's contracts due to a full year
of operations compared with six months in 1993, CTI-PA also incurred
expenses in servicing new subcontracts for technical, patent and
market assessment and other projects. Costs related to grant revenues
increased in 1994 as a result of CTI-PA's grant. In addition, VVI
incurred $36,000 of expenses for equipment and staff in 1994 to
develop its video compression software.
General and administration expenses were $213,000 higher in 1994
than in 1993. In addition to $50,000 for investment bankers fees in
1994, other increases resulted from including a full twelve months of
CTI-PA's operations in 1994 compared with six months in 1993.
In 1993, CTI recorded gains of $232,594 on UCI's issuance of
shares for cash to minority shareholders. These gains represent the
increase in CTI's equity in UCI's net worth resulting from UCI's
issuance of shares to minority shareholders.
Interest income in 1994 was $8,000 (8%) higher than in 1993
reflecting lower interest rates more than offset by higher average
invested balances.
CTI's equity in the net losses of Plasmaco was $1,004,000 in
1993, including the fourth quarter charge of approximately $450,000
to write down its remaining investment in Plasmaco to zero and its
equity in the losses of Plasmaco of approximately $550,000. The
remainder of losses related to equity method affiliates in 1993
related to USI's equity in the loss of UAP.
Minority interest in the losses of subsidiaries in 1993 was
$23,000 in CTI-PA's losses since its acquisition in February, 1993.
The minority's share of CTI-PA's balance sheet at acquisition was
reduced to zero in 1993.
The adoption of Statement of Financial Accounting Standards No.
109 effective August 1, 1993, did not have a material effect on the
Company's financial statements. In 1993 the Company's estimated state
income taxes were charged against estimated tax liabilities of
previous years.
Item 8. Financial Statements and Supplementary Data
Page
Report of Independent Accountants 24
Consolidated Balance Sheets 25-26
Consolidated Statements of Operations 27-28
Consolidated Statements of Changes
in Shareholders' Interest 29
Consolidated Statements of Cash Flows 30-32
Notes to Consolidated Financial Statements 33-48
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholders
of Competitive Technologies, Inc.
We have audited the accompanying consolidated balance sheets of
Competitive Technologies, Inc. and Subsidiaries as of July 31, 1995
and 1994, and the related consolidated statements of operations,
changes in shareholders' interest and cash flows for each of the three
years in the period ended July 31, 1995. These consolidated financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the consolidated
financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts
and disclosures in the consolidated financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide
a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to
above present fairly, in all material respects, the financial position
of Competitive Technologies, Inc. and Subsidiaries as of July 31, 1995
and 1994, and the results of their operations and their cash flows for
each of the three years in the period ended July 31, 1995, in
conformity with generally accepted accounting principles.
S/ Coopers & Lybrand L.L.P.
COOPERS & LYBRAND L.L.P.
September 29, 1995
Stamford, Connecticut
COMPETITIVE TECHNOLOGIES, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
July 31, 1995 and 1994
ASSETS
1995 1994
Current assets:
Cash and cash equivalents $ 336,098 $ 877,010
Short-term investments, at market, July
31, 1995; at cost, July 31, 1994
(market: $1,243,494) 4,621,045 1,232,341
Receivables, including $34,768 and $46,074
receivable from related parties in
1995 and 1994, respectively 490,324 348,666
Receivables from UCI -- 313,992
Prepaid expenses and other current assets 128,429 128,640
Total current assets 5,575,896 2,900,649
Property and equipment, net 133,833 79,679
Investments 489,786 255,148
Net noncurrent assets of discontinued
operation -- 826,840
Directors' escrow account 325,000 325,000
Other assets 244,427 379,429
TOTAL ASSETS $ 6,768,942 $ 4,766,745
See accompanying notes
COMPETITIVE TECHNOLOGIES, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
July 31, 1995 and 1994
(Continued)
1995 1994
LIABILITIES AND SHAREHOLDERS' INTEREST
Current liabilities:
Accounts payable, including $4,219 and
$7,781 payable to related parties
in 1995 and 1994, respectively $ 126,606 $ 75,350
Accrued liabilities 352,812 251,741
Net current liabilities of discontinued
operation -- 289,879
Total current liabilities 479,418 616,970
Commitments and contingencies -- --
Shareholders' interest:
5% preferred stock, $25 par value; 60,675 60,675
35,920 shares authorized; 2,427
issued and outstanding
Common stock, $.01 par value; shares
authorized: 7,964,080 in 1995 and
1994; issued: 5,835,365 in 1995 and
5,791,824 in 1994; outstanding:
5,810,365 in 1995 and 5,791,824
in 1994 58,353 57,918
Capital in excess of par value 24,410,143 24,097,604
25,000 shares of treasury stock, at cost (174,713) --
Net unrealized holding gains on
available-for-sale securities 8,764 --
Accumulated deficit (18,073,698) (20,066,422)
Total shareholders' interest 6,289,524 4,149,775
TOTAL LIABILITIES AND SHAREHOLDERS'
INTEREST $ 6,768,942 $ 4,766,745
See accompanying notes
COMPETITIVE TECHNOLOGIES, INC. AND SUBSIDIARIES
Consolidated Statements of Operations
for the years ended July 31, 1995, 1994 and 1993
1995 1994 1993
Revenues:
Retained royalties $ 796,243 $ 717,514 $ 650,651
Revenues under service contracts
and grants, including $210,937,
$178,976 and $84,470 from
related parties in 1995, 1994
and 1993, respectively 906,952 245,264 84,470
1,703,195 962,778 735,121
Costs of technology management
services, of which $5,557, $6,010
and $26,764 were paid to related
parties in 1995, 1994 and 1993,
respectively 1,120,483 540,884 317,750
General and administration expenses,
of which $106,894, $105,889 and
$29,308 were paid to related
parties in 1995, 1994 and 1993,
respectively 1,211,538 1,420,004 1,206,916
2,332,021 1,960,888 1,524,666
Operating loss (628,826) (998,110) (789,545)
Gain on issuance of shares
by subsidiary -- -- 232,594
Interest income 151,058 108,151 99,948
(Losses) income related to
equity method affiliates (103,520) 20,395 (1,012,583)
Other income (expense), net (61,700) 45,008 --
Loss from continuing operations
before income taxes and
minority interest (642,988) (824,556) (1,469,586)
Provision for income taxes 21,373 18,440 --
Loss from continuing operations
before minority interest (664,361) (842,996) (1,469,586)
Minority interest in losses of
subsidiaries 23,112 14,000 22,775
Loss from continuing operations (641,249) (828,996) (1,446,811)
Income (loss) from operations of
discontinued operation 99,468 (10,786) (449,724)
Net gain (loss) on disposal of
discontinued operations 2,534,505 221,852 (9,314)
Net income (loss) $ 1,992,724 $ (617,930) $(1,905,849)
See accompanying notes
COMPETITIVE TECHNOLOGIES, INC. AND SUBSIDIARIES
Consolidated Statements of Operations
for the years ended July 31, 1995, 1994 and 1993
(Continued)
1995 1994 1993
Net income (loss) per share
(primary and fully diluted):
Continuing operations $ (0.11) $ (0.15) $ (0.27)
Operations of discontinued
operation 0.02 -- (0.08)
Net gain (loss) on disposal of
discontinued operations 0.43 0.04 --
Net income (loss) $ 0.34 $ (0.11) $ (0.35)
Weighted average number of common
and common equivalent shares
outstanding (primary and
fully diluted) 5,814,826 5,761,610 5,478,082
See accompanying notes
COMPETITIVE TECHNOLOGIES, INC. AND SUBSIDIARIES
Consolidated Statements of Changes in Shareholders' Interest
For the years ended July 31, 1995, 1994 and 1993
<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, 1992. 2,427 $60,675 5,236,661 $52,367 $19,915,856 -- $ -- $ -- $(17,542,643)
Stock issued under
Directors' Stock
Participation Plan.. 3,856 39 39,967
Stock issued for
Plasmaco, Inc.
preferred stock..... 100,371 1,004 998,997
Stock issued under
Employees' Common
Stock Retirement
Plan................ 10,244 101 97,324
Stock issued in
private placement... 250,000 2,500 1,662,755
Stock issued for
common stock of
Competitive Techno-
logies of PA, Inc..... 74,302 743 749,257
Net loss................ (1,905,849)
Balance - July 31, 1993 2,427 60,675 5,675,434 56,754 23,464,156 -- -- -- (19,448,492)
Stock issued under
Directors' Stock
Participation Plan.... 9,798 97 59,902
Stock issued in private
placement............. 100,000 1,000 523,757
Stock issued under
Employees' Common Stock
Retirement Plan ...... 6,592 67 49,789
Net loss................ (617,930)
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 as of
August 1, 1994........ 11,154
Stock issued under
Directors' Stock
Participation Plan.... 7,545 75 49,925
Stock issued under
Employees' Common Stock
Retirement Plan........ 10,996 110 65,522
Stock issued to Knowledge
Solutions, Inc. in
exchange for 205,325
shares of KSI's
Class A common stock... 25,000 250 197,092 (12,208) (96,362)
Net change in unrealized
holding gains on
available-for-sale
securities............. (2,390)
Purchase of 25,000
shares of treasury stock
from Knowledge
Solutions, Inc.,
excluding 12,208
considered treasury
stock at issuance...... (12,792) (78,351)
Net income............... 1,992,724
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)
</TABLE>
See accompanying notes
COMPETITIVE TECHNOLOGIES, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
For the years ended July 31, 1995, 1994 and 1993
1995 1994 1993
Cash flow from operating
activities:
Loss from continuing operations $ (641,249) $ (828,996) $(1,446,811)
Noncash items included in loss
from continuing operations:
Depreciation and
amortization 186,013 174,560 132,387
(Income) losses related to
equity method affiliates 103,520 (20,395) 1,012,583
Minority interest (23,112) (14,000) (22,775)
Accrual for issuance of
directors' stock 55,833 54,167 57,506
Accrual for stock retire-
ment plan 65,632 49,861 44,053
Gain on issuance of shares
by subsidiary -- -- (232,594)
Other noncash items (77,941) 28,093 9,393
Other 64,705 81,324 120,837
Net changes in various
operating accounts
(see schedule) 226,282 288 (403,674)
Net cash flow used in
operating activities (40,317) (475,098) (729,095)
Cash flow from investing
activities:
Purchases of property and
equipment, net (106,223) (43,837) (10,476)
Proceeds from sales of short-
term investments 2,231,629 240,493 --
Purchases of short-term
investments (5,551,759) (1,026,067) --
Cash acquired in connection
with investment in subsidiary -- -- 166,660
Investments in affiliates and
subsidiaries (98,800) (89,880) (19,013)
Proceeds from disposal of dis-
continued operations, net 3,011,558 221,852 (9,314)
Net cash flow (used in) from
investing activities (513,595) (697,439) 127,857
See accompanying notes
COMPETITIVE TECHNOLOGIES, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
For the years ended July 31, 1995, 1994 and 1993
(Continued)
1995 1994 1993
Cash flow from financing activities:
Proceeds from subsidiaries'
issuances of stock 13,000 25,000 2,000
Proceeds from issuance of
common stock, net -- 524,757 1,665,255
Net cash flow from financing
activities 13,000 549,757 1,667,255
Net (decrease) increase in cash
and cash equivalents (540,912) (622,780) 1,066,017
Cash and cash equivalents,
beginning of year 877,010 1,499,790 433,773
Cash and cash equivalents, end
of year $ 336,098 $ 877,010 $ 1,499,790
See accompanying notes
COMPETITIVE TECHNOLOGIES, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
For the years ended July 31, 1995, 1994 and 1993
1995 1994 1993
Schedule of net changes in
various operating accounts:
Receivables $ 172,334 $ 36,038 $ (145,914)
Prepaid expenses and other
current assets (70,889) (32,128) (72,828)
Accounts payable 51,256 (5,480) (7,946)
Accrued liabilities 73,581 1,858 (176,986)
Net changes in various operating
accounts $ 226,282 $ 288 $ (403,674)
Supplemental cash flow information:
Cash paid for income taxes $ 15,513 $ 17,254 $ 14,383
Schedule of noncash investing
and financing activities:
Investing activities:
Investments in affiliates
and subsidiaries $ (205,325) $ -- $ 1,750,000
Disposal of investment in
affiliate 205,325 -- --
$ -- $ -- $ 1,750,000
Financing activities:
Stock issued for investments in
affiliates and subsidiaries $ 205,325 $ -- $ 1,750,000
Purchase of treasury stock (174,713) -- --
Issuance of directors' stock 50,000 59,999 40,006
Issuance of stock to retirement
plan 65,632 49,856 97,425
$ 146,244 $ 109,855 $ 1,887,431
See accompanying notes
COMPETITIVE TECHNOLOGIES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Financial Statements and Principles of Consolidation
The consolidated financial statements include the accounts of
Competitive Technologies, Inc. ("CTI") and its majority-owned
subsidiaries ("the Company"). CTI's majority-owned subsidiaries are
Competitive Technologies of PA, Inc. ("CTI-PA"), University Optical
Products Co. ("UOP"), Genetic Technology Management, Inc. ("GTM"),
UPAT Services, Inc. ("USI") and Vector Vision, Inc. ("VVI") (see Notes
2 and 3). Intercompany accounts and transactions have been eliminated
in consolidation.
As more fully discussed in Note 16, CTI sold a controlling
interest in University Communications, Inc. ("UCI") to Barden
Companies, Inc. and reduced its holding in UCI to 14.5%. Effective
February 15, 1995, CTI accounts for its investment in UCI on the cost
method. Accordingly, UCI is presented in these financial statements
as a discontinued operation and financial information for prior
periods has been reclassified. Since UCI previously comprised one of
the Company's two segments, the Company's reclassified financial
statements reflect a single business segment, technology management
services.
Revenues and Expenses
Royalty income, net of amounts due others, is included in income
in the period in which it is earned. Such retained royalties are
earned principally through servicing agreements with various
technology sources, primarily universities, under which the Company
retains an agreed percentage of income derived from license or sale
of technologies. See Note 4 regarding USET Acquisition Partners,
L.P., and USET, Inc.
Revenues under service contracts are recognized for technology
management, licensing and other services in the period the contractual
service is provided and the related revenue is earned.
Grant revenues, which are nonrefundable except under certain
conditions (see Notes 2 and 3), are recognized in the period grant
funds are received.
Expenditures made in connection with evaluating the marketability
of inventions, patenting inventions, licensing patented inventions and
enforcing patents are charged to operations as incurred.
Cash Equivalents
Cash equivalents include only highly liquid investments purchased
with an original maturity of three months or less.
The Company's bank and investment accounts are maintained with
three financial institutions. The Company's policy is to monitor the
financial strength of these institutions on an ongoing basis.
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.
Adoption of Statement No. 115 did not have a material effect on the
Company's financial statements.
Property and Equipment
The costs of depreciable assets are charged to operations on a
straight-line basis over their estimated useful lives (3 to 5 years
for equipment) or the terms of the related lease for leasehold
improvements. The cost and related accumulated depreciation of
property and equipment are removed from the accounts upon retirement
or other disposition; any resulting gain or loss is reflected in
earnings.
Excess of Purchase Price over Net Assets Acquired
Costs in excess of net assets purchased are amortized on a
straight-line basis over their estimated useful lives (5 years). The
Company assesses the recoverability of these amounts at each balance
sheet date by determining that intangible assets can be recovered
through estimated future undiscounted operating income over their
estimated useful lives.
Subsidiaries' Issuances of Shares
The Company recognizes in earnings gains or losses reflecting
increases in the value of its equity in subsidiaries' net worth re-
sulting from subsidiaries' issuances of shares to minority sharehold-
ers.
Income Taxes
Deferred income taxes are recognized for the tax consequences in
future years of differences between the tax bases of assets and
liabilities and their financial reporting amounts at each balance
sheet date based on enacted tax laws and statutory tax rates
applicable to the periods in which the differences are expected to
affect taxable income. Valuation allowances are established when
necessary to reduce deferred tax assets to the amount expected to be
realized. Provision for income taxes is the tax payable for the year
and the change during the year in deferred tax assets and liabilities.
Investment tax credits are accounted for using the flow-through
method.
Reclassification
Certain amounts have been reclassified to conform with the
presentation in the financial statements for 1995.
Net Income (Loss) Per Share
Net income (loss) per share, both primary and fully diluted, is
computed based on the weighted average number of common shares
outstanding and dilutive common share equivalents. In those periods
when a net loss is reported, common share equivalents are anti-
dilutive and therefore they are excluded from the computation. Net
income (loss) applicable to common stock is net income (loss) adjusted
for preferred stock dividends, if any.
2. COMPETITIVE TECHNOLOGIES OF PA, INC.
In February, 1993, CTI acquired 80% of the outstanding stock of
CTI-PA, a wholly-owned technology management subsidiary of Lehigh
University ("Lehigh"), in exchange for $750,000 payable by issuance
of 74,302 unregistered shares of CTI's common stock. Lehigh has no
registration rights with respect to the shares of CTI's common stock.
CTI accounted for the transaction as a purchase and accordingly
CTI-PA's results of operations are included in the consolidated
financial statements for all periods after February 1, 1993. The
excess of the purchase price over the net assets acquired of $314,231
is being amortized over 5 years. Such amortization of $62,844,
$62,844 and $31,422 has been charged to operations in 1995, 1994 and
1993, respectively. Accumulated amortization was $157,110 and $94,266
at July 31, 1995 and 1994, respectively.
In connection with the acquisition, CTI-PA agreed to provide
patent management and technology licensing services to Lehigh for five
years from September 30, 1992, subject to termination after three
years under certain conditions. During the term of the agreement,
Lehigh will pay CTI-PA $30,000 a year for these services and will
provide CTI-PA with office space, tuition remission for specified
individuals and services of Master of Business Administration students
for 40 hours per week at no charge. In addition, in each year of the
agreement CTI-PA retains the first $100,000 of net income from
transferring and licensing technology as defined in the agreement and
75% of such net income in excess of $100,000.
The following unaudited pro forma summary information presents
the consolidated results of operations of the Company as if this
acquisition had occurred on August 1, 1991. The unaudited pro forma
amounts are based on assumptions and estimates the Company believes
are reasonable; however, such amounts do not necessarily represent
results which would have occurred if the acquisition had taken place
on the basis assumed, nor are they indicative of the results of future
combined operations.
For the
year ended
July 31, 1993
Total revenues $ 851,695
Loss from continuing
operations (1,545,259)
Per share loss from
continuing operations $ (.28)
CTI-PA was awarded a grant to support its entrepreneurial
activities from September 1, 1993, through August 31, 1994. In
consideration of the grant funding, CTI-PA has a contingent obligation
to repay up to three times total grant funds received at the rate of
7.5% of CTI-PA's revenues, if any, from transferring rights to
inventions supported by the grant funds. CTI-PA will recognize such
obligations when it recognizes revenues from transferring rights to
such inventions.
3. VECTOR VISION, INC.
In June, 1994, CTI purchased 250,000 shares of Class B common
stock of VVI for $25,000 in cash. VVI was formed in April, 1994, to
develop and exploit a video compression technology. During fiscal
1995 CTI purchased an additional 52,000 shares of Class B common stock
of VVI for $13,000 in cash and sold 29,000 shares of VVI Class B
common stock for $2,900 in cash. CTI recognized no gain or loss on
the sale. At July 31, 1995, CTI owned 51.5% of the outstanding common
stock of VVI. The remaining 48.5% of VVI stock is owned by employees
of the Company. CTI accounts for VVI as a consolidated subsidiary and
VVI's results of operations from its acquisition are included in the
consolidated results of operations.
VVI was awarded a grant to support its development activities
from September 1, 1994, through August 31, 1995. In consideration of
the grant funding, VVI has a contingent obligation to repay up to
three times total grant funds received at rates of 1.5% of VVI's net
sales of supported products or 15% of VVI's revenues from licensing
supported products, if any. VVI will recognize such obligations when
it recognizes revenues from such sales or licenses.
4. INVESTMENTS IN EQUITY METHOD AFFILIATES
USET Acquisition Partners, L.P.
UPAT Services, Inc. ("USI"), a wholly-owned subsidiary of CTI,
is the general partner and holds a 20% limited partnership interest
in USET Acquisition Partners, L.P. ("UAP"). UAP acquired all the
stock of USET, Inc. ("USET") from Macmillan, Inc. ("Macmillan") in
August, 1990, for $1,000,000 in cash and future payments contingent
upon royalties earned by USET as defined in the acquisition agreement.
Contingent payments are calculated at 90% of USET's earned royalties
in excess of $400,000 per year for up to five years or until Macmillan
has received cumulative contingent payments of $3,750,000, whichever
occurs first. Once contingent payments become due, they are 100%
guaranteed by CTI. Cumulative contingent payments of approximately
$625,000 have been made through July 31, 1995. USI accounts for its
investment in UAP using the equity method.
CTI manages USET for UAP. During fiscal 1995, 1994 and 1993, CTI
charged USET $52,490, $84,484 and $102,198, respectively, for
management, legal and administrative services.
At July 31, 1995 and 1994, the following amounts were receivable
from and payable to USET:
1995 1994
Royalties receivable $275,690 $229,266
Other receivables 8,074 56,848
Accounts payable 10,944 26,834
Knowledge Solutions, Inc.
In June, 1994, CTI acquired 50% of the outstanding common stock
of Knowledge Solutions, Inc. ("KSI") for $25,000 in cash. KSI was
formed in June, 1994, to develop and deliver interactive multimedia
training packages. In September, 1994, CTI acquired 205,325 shares
of KSI's Class A common stock in exchange for 25,000 shares of its
common stock valued at $205,325 and incurred $7,983 of costs in
connection with the acquisition. 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 133,333 shares of Class A common
stock at $1.50 per share through December 31, 1995. No warrants have
been exercised as of July 31, 1995.
In June, 1995, CTI reacquired the 25,000 shares of its common
stock from KSI in exchange for the 205,325 shares of KSI Class A
common stock. The 25,000 shares are included in the consolidated
balance sheet as treasury stock at July 31, 1995 at cost ($174,713).
Also in June, 1995, CTI acquired an additional 75,000 shares of KSI's
Class A common stock for $75,000 in cash and SSI purchased 100,000
shares of Class A common stock of KSI for $100,000 in cash.
In June and July of 1995 CTI received 40,000 and 20,000 shares,
respectively, of KSI Class B common stock in exchange for management
and consulting services provided by the Company during fiscal 1995.
The shares were valued at $20,000 and $40,000, respectively. CTI's
ownership of KSI at July 31, 1995, is 35.9%.
Effective October, 1994, CTI-PA granted KSI an exclusive ten-year
license to its process model for interactive multimedia training in
exchange for royalties on future sales.
CTI accounts for its investment in KSI on the equity method.
Although KSI's fiscal year ends on June 30, CTI records its equity in
KSI's losses in each CTI fiscal year from August 1 through the
following July 31. KSI stock is not publicly traded and there is no
quoted market price for its stock.
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 July 31, 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.
Summary Information
Summarized information from the unaudited financial statements
of the Company's equity method affiliates at July 31, 1995 and 1994,
and for the years ended July 31, 1995, 1994 and 1993 follows (in
thousands):
July 31, 1995 UAP KSI EBI Total
(1)
Current assets $ 639 $ 112 $ 99 $ 850
Noncurrent assets 809 22 58 889
Current liabilities 404 16 45 465
Noncurrent liabilities -- -- 43 43
Shareholders' equity 1,042 118 64 1,224
Gross revenues 721 74 93 888
Gross profit 675 -- 69 744
Net income (loss) 219 (391) 16 (156)
Equity in net income (loss) 47 (157) 6 (104)
Company's investments in
equity method affiliates 239 20 31 290
July 31, 1994 UAP KSI Plasmaco Total
(2)
Current assets $ 850 $ 21 $ 572 $1,443
Noncurrent assets 618 -- 3,987 4,605
Current liabilities 585 -- 5,693 6,278
Noncurrent liabilities -- -- 4,509 4,509
Shareholders' equity (deficit) 883 21 (5,643) (4,739)
Gross revenues 695 -- 802 1,497
Gross profit (loss) 585 -- (1,574) (989)
Net income (loss) 175 (29) (3,152) (3,006)
Equity in net income (loss) 35 (15) -- 20
Company's investments
in equity method
affiliates 205 10 -- 215
July 31, 1993 UAP Plasmaco Total
(2)
Gross revenues $ 595 $ 983 $ 1,578
Gross profit (loss) 493 (3,587) (3,094)
Net loss (67) (5,669) (5,736)
Equity in net loss (9) (1,004) (1,013)
(1) KSI's revenues comprise grants received to support its product
development.
(2) CTI's investment in Plasmaco was zero at July 31, 1993, after a
$450,000 writedown in 1993. CTI recognized no equity in the losses
of Plasmaco during fiscal 1994. In fiscal 1995 CTI accounts for its
investment in Plasmaco under the cost method (see Note 5).
At July 31, 1995 and 1994, the Company's investments in equity
method affiliates exceeded its share of their underlying net assets
by approximately $38,000 and $25,000, respectively.
5. INVESTMENTS ACCOUNTED FOR UNDER THE COST METHOD
University Communications, Inc.
Since February 15, 1995, CTI has accounted for its $159,375
investment in University Communications, Inc. under the cost method
(see Note 16).
Plasmaco, Inc.
In various transactions between August, 1989, and February, 1993,
CTI invested a total of $3,262,000 in Plasmaco, Inc. ("Plasmaco")
common and preferred stock. Of this amount, approximately $803,000
was paid in cash and the balance was in exchange for CTI's common
stock. CTI accounted for its investment under the equity method and
as a result of Plasmaco's operating losses, the full amount of the
investment had been written off by July 31, 1993.
In September, 1994, Plasmaco and the holders of its Series A
through D preferred stock, including CTI, entered into an Exchange
Agreement under which all shares of preferred stock were exchanged for
Plasmaco common stock. Simultaneously, Plasmaco's shareholders
authorized a reverse 50-1 common stock split. As a result of these
and other transactions, CTI's voting interest was reduced significant-
ly. At July 31, 1995, CTI's voting interest in Plasmaco is approxi-
mately 1%.
Plasmaco stock is not publicly traded and there is no quoted
market price for its stock.
Innovation Partners International, k.k.
In May, 1994, CTI acquired a 13.3% voting interest in Innovation
Partners International, k.k. ("IPI"), a Japanese corporation which
provides technology transfer, business development and innovation
management services to corporate clients, for approximately $40,000.
IPI stock is not publicly traded and there is no quoted market price
for its stock.
6. FOREIGN ROYALTIES
Retained royalties for 1995, 1994 and 1993, include $108,773,
$107,427 and $55,693, respectively, from foreign sources.
7. RECEIVABLES
Receivables as of July 31, 1995 and 1994 comprise:
1995 1994
Royalties $275,690 $229,266
Government contracts 103,574 --
Other 111,060 119,400
$490,324 $348,666
8. 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 cumulative 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 July 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 $ 1,078 $ 7 -- $ 1,071 1 year
Other U.S.
government debt Within
securities 3,434 -- -- 3,434 1 year
Mortgaged backed Present
securities 109 2 -- 107 through
2018
Total $ 4,621 $ 9 -- $ 4,612
For the year ended July 31, 1995, proceeds from the sale of
available-for-sale securities were $2,231,629 which resulted in gross
realized gains of $59,809. In addition, realized gains on sale of
short-term investments classified as cash equivalents were $2,026 in
the year ended July 31, 1995. Cost is based on specific identifica-
tion in computing realized gains.
During 1994 and 1993, the Company recognized gains of $7,032 and
$28,037, respectively, on sales of short-term investments. Gains were
calculated on a specific identification basis.
9. PROPERTY AND EQUIPMENT
Property, plant and equipment as of July 31, 1995 and 1994
comprise:
1995 1994
Equipment $ 178,518 $ 99,472
Leasehold improvements 168,096 165,129
346,614 264,601
Accumulated depreciation
and amortization (212,781) (184,922)
$ 133,833 $ 79,679
Depreciation expense was $52,069, $38,552 and $33,092 in 1995,
1994 and 1993 respectively.
10. DIRECTORS' ESCROW ACCOUNT
CTI entered into indemnity agreements with each of its directors
indemnifying them against certain possible claims and expenses and
created an escrow fund in the aggregate sum of $325,000 for the
indemnification of directors as authorized by shareholders. The
escrow terminates at July 31, 1997. CTI does not presently maintain
a policy of directors' liability insurance. At July 31, 1995 and
1994, the escrow fund, which is invested in U.S. Treasury securities,
amounted to $412,114 (market: 412,114) and $394,568 (market:
$394,568), respectively. The escrow fund includes accumulated
interest of $87,114 and $69,568 in 1995 and 1994, respectively, which
is not contractually required for the fund, is available for use by
CTI and is reported in the accompanying financial statements as cash
and cash equivalents.
11. ACCRUED LIABILITIES
Accrued liabilities at July 31, 1995 and 1994 were:
1995 1994
Accrued compensation $ 115,010 $ 84,453
Other 237,802 167,288
$ 352,812 $ 251,741
12. INCOME TAXES
Effective August 1, 1993, the Company adopted Statement of
Financial Accounting Standards No. 109 "Accounting for Income Taxes."
As permitted by Statement No. 109, prior years' financial statements
have not been restated. Adoption of Statement No. 109 had no
cumulative effect on the Company's net income.
The current provision for income taxes for 1995, 1994 and 1993
is as follows:
1995 1994 1993
State taxes $21,373 $18,440 $ --
The provision for income taxes from continuing operations differs
from that computed using the 34% statutory federal income tax rate as
a result of the following factors:
1995 1994 1993
Expected tax benefit at
federal statutory rate $(218,616) $(280,349) $(499,659)
State income taxes, net of
Federal benefit 14,106 12,170 --
Goodwill amortization -- -- 10,683
Effect of net operating
loss not utilized 172,916 280,349 225,312
Losses related to equity
method affiliates 51,155 4,994 344,278
Gain on issuance of shares
by subsidiary -- -- (79,082)
Other 1,812 1,276 (1,532)
Provision for income taxes $ 21,373 $ 18,440 $ --
Deferred income taxes reflect the net tax effects of temporary
differences between the carrying amounts of assets and liabilities for
financial reporting purposes and the amounts used for income tax
purposes. Components of the Company's deferred tax assets and
liabilities as of July 31, 1995 and 1994 are as follows (in thou-
sands):
1995 1994
Deferred tax assets:
Current
Accrued stock compensation $ 34 $ 25
Noncurrent
Discontinued operations 1,187 1,098
Investments in affiliates 981 1,114
Depreciation 20 9
Excess of purchase price over net
assets acquired 124 57
Net operating loss carryforwards 4,908 4,838
Net capital loss carryforwards -- 276
Investment tax credit carryforwards 65 65
Other -- 10
Total deferred tax assets 7,319 7,492
Deferred tax liabilities: 1995 1994
Noncurrent
Discontinued operations (124) (115)
Other (14) (5)
Total deferred tax liabilities (138) (120)
Net deferred tax assets 7,181 7,372
Valuation allowance (7,181) (7,372)
Net deferred tax asset $ -- $ --
There is no tax effect on the disposal of discontinued operations
due to the utilization of capital loss carryforwards.
At July 31, 1995, the Company had Federal net operating loss
carryforwards of approximately $14,500,000 which expire from 1999
through 2010. The Company also has investment tax credit carry-
forwards of approximately $65,000 which expire from 1999 through 2001.
At July 31, 1995, the Company had Connecticut net operating loss
carryforwards of approximately $1,290,000 which expire from 1997
through 2000 and Pennsylvania net operating loss carryforwards of
approximately $290,000 which expire from 1996 through 1998.
13. SHAREHOLDERS' INTEREST
Outstanding Shares
Dividends on preferred stock are noncumulative and preferred
stock is redeemable at par value at the option of CTI.
In September, 1993, CTI sold 100,000 shares of its common stock
under Regulation S to a foreign purchaser for $5.8828 per share in
exchange for approximately $525,000, net of expenses of the sale.
Employee Stock Option Plan
CTI has a stock option plan which expires December 31, 2000.
Under this plan both incentive stock options and nonqualified stock
options may be granted to key employees. Incentive stock options are
granted at an exercise price equal to the fair market value of the
optioned stock on the grant date. Nonqualified stock options may be
granted at an exercise price from 85% to 100% of the fair market value
of the optioned stock on the grant date. Options generally become
exercisable six months after the grant date. For nonqualified stock
options, the difference between the exercise price and the fair market
value of the optioned stock on the grant date, if any, is charged to
expense over the term of the option. Stock appreciation rights may
be granted either at the time an option is granted or any time
thereafter. There are no stock appreciation rights outstanding.
The following summarizes stock option activity for the three-year
period ended July 31, 1995:
Aggregate
Option Price Price
Shares per Share (in 000's)
Options outstanding - July 31, 1992 248,052 $4.75 - 17.88 $2,481
Granted 80,000 $9.875 - 11.062 861
Terminated (750) $13.00 (9)
Options outstanding - July 31, 1993 327,302 $4.75 - 17.88 3,333
Granted 73,000 $6.5625 - 6.875 491
Expired (15,096) $5.875 - 17.25 (207)
Terminated (6,500) $9.875 - 11.875 (69)
Options outstanding - July 31, 1994 378,706 $4.75 - 17.88 3,548
Granted 92,500 $6.50 - 6.5625 607
Expired (5,306) $11.44 - 12.63 (64)
Options outstanding - July 31, 1995 465,900 $4.75 - 17.88 $4,091
Additional information related to stock options at July 31, 1995
and 1994 follows:
1995 1994
Exercisable options 441,400 334,706
Common shares reserved for
issuance on exercise of options 678,746 378,746
Shares available for future
option grants 212,846 40
Directors' Stock Participation Plan
Under the terms of the Directors' Stock Participation Plan (the
"Plan"), outside directors who have served a full annual term are
eligible to receive shares of common stock of CTI. Under the Plan as
amended by shareholders' approval in December 1986, the number of
shares issuable each year to any director is the lesser of 2,000
shares or an aggregate fair market value on the date of issuance of
$10,000. The Plan expires in January 1996.
In 1995, 1994 and 1993, eligible directors were issued 7,545,
9,798, and 3,856 shares of common stock, respectively, the fair value
of which has been charged to expense.
At July 31, 1995 and 1994, 25,223 and 32,768 shares, respec-
tively, were reserved for future issuance under the Plan.
Common Stock Warrants
The Company has the following outstanding warrants at July 31,
1995 which became exercisable six months after the issue date:
Warrant Aggregate
Price per Exercise Expiration
Issued No. Shares Share Price Date
August 1990 5,000 $5.75 $ 28,750 August 1995
October 1990 40,000 6.125 245,000 October 1995
June 1991 15,000 7.3125 109,687 June 1996
November 1993 50,000 8.375 418,750 November 1996
November 1993 50,000 8.375 418,750 November 1996
April 1994 6,000 6.375 38,250 April 1997
September 1994 5,000 8.310 41,550 September 1997
Employees' Stock Retirement Plan
Effective August 1, 1990, CTI adopted an Employees' Common Stock
Retirement Plan. Under the terms of this Plan, a committee of outside
directors annually recommends for full Board approval a contribution
of shares of CTI's common stock to the Plan. For the fiscal years
ended July 31, 1995, 1994 and 1993 the board authorized contributions
of 10,966, 6,592 and 5,220 shares valued at approximately $66,000,
$50,000 and $44,000, respectively, based upon year-end closing prices.
These amounts have been charged to expense in 1995, 1994 and
1993, respectively.
14. COMMITMENTS
Operating Leases
At July 31, 1995, future minimum rental payments required under
operating leases with initial or remaining noncancelable lease terms
in excess of one year are as follows:
Gross Sublease Net
Years ending July 31: Rentals Rentals Rentals
1996 $ 320,103 $(285,195) $ 34,908
1997 26,675 (19,015) 7,660
Total minimum payments
required $ 346,778 $(304,210) $ 42,568
Total rental expense for all operating leases was:
1995 1994 1993
Minimum rentals $ 325,109 $ 338,719 $ 324,939
Less: Sublease rentals (310,032) (276,106) (261,455)
$ 15,077 $ 62,613 $ 63,484
The lessor of CTI's office space is a partnership comprising four
former officers of CTI, including one who is currently a director of
CTI.
15. RELATED PARTY TRANSACTIONS
CTI incurred charges in connection with patent and trademark
litigation from a law firm in which a director of CTI is a partner.
Such charges amounted to approximately $25,000, $40,000 and $32,000
in 1995, 1994 and 1993, respectively. That firm agreed that
payment of approximately $67,000 of fees incurred during 1992 would
be contingent upon CTI's receipt of proceeds from settlement of the
related litigation. CTI agreed to pay the director's firm one-half
of such receipts, if any, to a limit of three times the contingent
fees incurred or approximately $202,000. The litigation was settled
in June, 1992. Through July 31, 1995, CTI had paid cumulative
contingent fees of $38,331 of which $5,557, $6,010 and $26,764 were
charged to operations in 1995, 1994 and 1993, respectively.
During 1994 and 1993 CTI incurred charges of approximately
$20,000 and $24,000, respectively, for corporate and investor
relations services provided by a corporation of which a former
director of CTI was president.
During 1995 and 1994 CTI incurred charges of approximately
$87,000 and $73,500, respectively, for consulting services provided
by its former chief executive officer who is also a director.
CTI earned approximately $60,000 for management and accounting
services performed for KSI in 1995 (see Note 4). Since CTI accounts
for KSI on the equity method, this amount has not been eliminated in
these consolidated financial statements.
During 1994 and 1993 CTI earned approximately $69,000 and
$148,000, respectively, from UCI for consulting services, rent, and
interest on outstanding notes receivable. These amounts have not been
eliminated in these consolidated financial statements.
CTI-PA earned approximately $211,000, $179,000 and $84,000 in
1995, 1994 and 1993, respectively, from contracts with Lehigh
University, which owns 20% of the outstanding common stock of CTI-PA.
16. DISCONTINUED OPERATIONS
University Optical Products Co.
In 1989 University Optical Products Co. ("UOP"), a majority-owned
subsidiary of CTI which had developed a computer-based system to
manufacture specialty contact lenses, intraocular lenses and other
precision optical products, sold substantially all its assets to
Unilens Corp. USA. Amounts related to the sale of the UOP assets are
presented as discontinued operations.
The proceeds of the sale included an installment obligation for
$5,500,000 payable at a minimum of $250,000 per year beginning in
January 1992. Both Unilens Corp. USA and Unilens Optical Corp., the
parent company of Unilens Corp. USA and guarantor of the obligation,
were development stage companies in 1989. CTI recorded the original
installment obligation in 1989 at $470,000, which was its estimated
fair value at the time of the transaction. In 1990 CTI recorded the
$470,000 as loss from discontinued operations. Due to the uncertainty
of the timing and amount of future cash flows, income on the
installment obligation is recorded net of related expenses as the
payments are received. Such amounts have been recorded as gain on
discontinued operations until the fair value assigned to the original
obligation was received. Cash received in excess of such amount is
recorded as other income from continuing operations. As cash proceeds
are received, CTI records a 4% commission expense payable to its joint
venture partner, Optical Associates, Limited Partnership ("OALP").
CTI recognized net gains (losses) on its disposal of UOP's
discontinued operations of $221,852 and ($9,314) in the statements of
operations for 1994 and 1993, respectively. CTI also recognized other
expenses from continuing operations of $132,032 in 1995 for legal
expenses related to the suit described in the following paragraph and
other income of $37,976 in 1994.
In November, 1991, a suit was filed in Connecticut against CTI,
its wholly-owned subsidiary, GTM, its majority-owned subsidiary, UOP,
and several current and former directors on behalf of the 59 limited
partners of 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. The defendants' motion for summary judgment was
denied. It is expected that the case will be tried during fiscal
1996. Through July 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.
University Communications, Inc.
On February 15, 1995, Barden Companies, Inc. ("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 which was recorded in the third quarter
of 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.
Summarized information from UCI's unaudited financial statements
for six and one-half months ended February 15, 1995 and the years
ended July 31, 1994 and 1993 follows (in thousands):
1995 1994 1993
Gross revenues $2,764 $3,753 $2,183
Gross profit 1,235 1,519 675
Net income (loss) 181 (20) (766)
CTI's equity in net income (loss) 99 (11) (450)
At July 31, 1994, $313,992 was receivable from UCI including a
loan of $150,000 bearing interest at 8%, accumulated interest on that
loan of $40,000 and other receivables of $123,992.
For services CTI provided to UCI, CTI charged UCI $3,786, $55,811
and $78,270, in 1995, 1994 and 1993, respectively.
17. SUBSEQUENT EVENT (UNAUDITED)
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.
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholders
of Knowledge Solutions, Inc.
We have audited the accompanying balance sheet of Knowledge Solutions,
Inc. as of June 30, 1995, and the related statements of operations,
changes in shareholders' interest and cash flows from June 21, 1994
(date of inception) through June 30, 1995. These financial statements
are the responsibility of the management of Knowledge Solutions, Inc.
Our responsibility is to express an opinion on these financial
statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on
a test basis, evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We
believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of Knowledge
Solutions, Inc. as of June 30, 1995, and the results of its operations
and its cash flows for the period from June 21, 1994 (date of
inception) through June 30, 1995, in conformity with generally
accepted accounting principles.
The accompanying financial statements have been prepared assuming that
Knowledge Solutions, Inc. will continue as a going concern. As
discussed in Note 1 to the financial statements, KSI has generated
losses from operations and has a deficit accumulated during the
development stage that raise substantial doubt about its ability to
continue as a going concern. Management's plans in regard to these
matters are also described in Note 1. The financial statements do not
include any adjustment that might result from the outcome of this
uncertainty.
S/ Coopers & Lybrand L.L.P.
COOPERS & LYBRAND L.L.P.
October 16, 1995
Stamford, Connecticut
KNOWLEDGE SOLUTIONS, INC.
A Development Stage Enterprise
Balance Sheet
June 30, 1995
ASSETS
Current assets:
Cash $ 126,130
Receivables 1,840
Prepaid expenses 523
Total current assets 128,493
Property and equipment, net 22,352
TOTAL ASSETS $ 150,845
LIABILITIES AND SHAREHOLDERS' INTEREST
Current liabilities:
Accounts payable, including $1,061 payable
to related parties $ 6,105
Accrued compensation 2,691
Accrued expenses 2,522
Total current liabilities 11,318
Shareholders' Interest:
Class A common stock, $0.001 par value; shares
authorized: 3,500,000; issued: 580,325;
outstanding: 375,000 580
Class B common stock, $0.001 par value; shares
authorized: 1,500,000; issued and
outstanding: 260,000 260
Capital in excess of par value 669,663
205,325 shares of treasury stock, at cost (153,125)
Deficit accumulated during the
development stage (377,851)
Total shareholders' interest 139,527
TOTAL LIABILITIES AND SHAREHOLDERS'
INTEREST $ 150,845
See accompanying notes
KNOWLEDGE SOLUTIONS, INC.
A Development Stage Enterprise
Statement of Operations
For the period from June 21, 1994 (date of inception)
through June 30, 1995
Grant revenue $ 73,687
Costs and expenses:
Research and development costs, including
$53,000 paid to related parties (225,320)
Selling, general and administrative
expenses, including $40,000 paid to
related parties (176,956)
(402,276)
Operating loss (328,589)
Loss on investment (52,200)
Interest income 3,238
Loss before income tax expense (377,551)
Provision for income taxes 300
Net loss $(377,851)
Net loss per share (primary and
fully diluted) $ (0.70)
Weighted average number of common and
common equivalent shares outstanding
(primary and fully diluted) 541,313
See accompanying notes
KNOWLEDGE SOLUTIONS, INC.
A Development Stage Enterprise
Statement of Changes in Shareholders' Interest
For the period from June 21, 1994 (date of inception) through June 30, 1995
<TABLE>
<CAPTION>
Deficit
Class A Common Class B Common Accumulated
Stock Stock Capital in Treasury Stock During the
Shares Shares Excess of Shares Development
Date issued Amount issued Amount Par value held Amount Stage
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Stock issued to Competitive
Technologies, Inc ("CTI")
for cash ................... 6/94 -- $ -- 100,000 $ 100 $ 24,900 -- $ -- $ --
(1) Stock issued to Dr. Francis
Harvey...................... 7/94 100,000 100 24,900
Stock issued to Dr. Adam
Nelson for cash............. 9/94 20,000 20 4,980
Stock issued to Safeguard
Scientifics, Inc. for cash.. 9/94 200,000 200 194,978
(2) Stock issued to Competitive
Technologies, Inc. in exchange
for 25,000 shares of CTI's
common stock................. 9/94 205,325 205 205,120
(3) Stock issued to Safeguard
Scientifics, Inc. for cash... 6/95 100,000 100 99,900
(2) Purchase of 205,325 shares of
treasury stock from Competitive
Technologies, Inc. in exchange
for 25,000 shares of CTI's
common stock................ 6/95 (205,325) (153,125)
Stock issued to Competitive
Technologies, Inc. for cash.. 6/95 75,000 75 74,925
(1) Stock issued to Competitive
Technologies, Inc............. 6/95 40,000 40 39,960
Net loss....................... (377,851)
Balance - June 30, 1995 580,325 $ 580 260,000 $ 260 $ 669,663 (205,325) $(153,125) $(377,851)
</TABLE>
(1) Stock issued in exchange for services provided. The value of the
services was determined by KSI's board of directors.
(2) Stock value was determined by KSI's board of directors based on
the market value of Competitive Technologies, Inc.'s common stock
exchanged.
(3) In connection with this transaction KSI also issued warrants to
purchase an additional 100,000 shares of Class A common stock at
$1.00 per share through December 31, 1994 and 133,333 shares of
Class A common stock at $1.50 per share through December 31, 1995.
See accompanying notes
KNOWLEDGE SOLUTIONS, INC.
A Development Stage Enterprise
Statement of Cash Flows
For the period from June 21, 1994 (date of inception)
through June 30, 1995
Cash flow from operating activities:
Net loss $(377,851)
Non-cash items included in net loss:
Depreciation 3,480
Expenses paid by issuance of stock 65,000
Loss on investment 52,200
Net changes in various operating
accounts 8,955
Net cash flows used in operating activities (248,216)
Cash flow from investing activities:
Purchase of property and equipment (25,832)
Net cash flows used in investing activities (25,832)
Cash flow from financing activities:
Proceeds from issuance of common stock,
net of expenses 400,178
Net cash flows from financing activities 400,178
Net increase in cash and cash equivalents 126,130
Cash and cash equivalents at inception --
Cash and cash equivalents at end of period $ 126,130
Supplemental cash flow information:
Cash paid for income taxes $ 300
See accompanying notes
KNOWLEDGE SOLUTIONS, INC.
A Development Stage Enterprise
Notes to Financial Statements
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization and Basis of Financial Statements
Knowledge Solutions, Inc. ("KSI") was formed in June, 1994 to
develop and deliver interactive multimedia training packages. KSI
is a development stage enterprise involved in developing and
marketing its initial product. It has made no product sales to
date. At June 30, 1995, Safeguard Scientifics, Inc. ("SSI"), owned
46.2% and Competitive Technologies, Inc. ("CTI") owned 33.9% of
KSI's outstanding common stock.
The accompanying financial statements have been prepared
assuming that KSI will continue as a going concern, which contem-
plates the realization of assets and the satisfaction of liabili-
ties in the normal course of business. KSI has incurred operating
losses since inception and had an accumulated deficit of $377,851
at June 30, 1995. As of June 30, 1995, KSI's current assets exceed
its current liabilities by $117,175. KSI is currently marketing
its first multimedia Agility training product and seeking contracts
to develop multimedia training products for others. It is
uncertain whether KSI will be able to achieve profitable operations
or generate sufficient internal cash flow to maintain its opera-
tions and other sources of funds may not be available. Neither SSI
nor CTI is willing to provide additional financial support to KSI.
These factors raise substantial doubt about KSI's ability to
continue as a going concern. KSI's financial statements do not
include any adjustments that might result from the outcome of this
uncertainty.
Grant Revenues
Grant revenues, which are nonrefundable except under certain
conditions, are recognized in the period the grant funds are
received.
Property and Equipment
The costs of depreciable assets are charged to operations on
a straight-line basis over their estimated useful lives. The cost
and related accumulated depreciation of property and equipment are
removed from the accounts upon retirement or other disposition; any
resulting gain or loss is reflected in earnings.
Cash
KSI's banking activity and cash balances are maintained with
a single bank. KSI's policy is to monitor the bank's financial
strength on an ongoing basis.
Income Taxes
Deferred income taxes are recognized for the tax consequences
in future years of differences between the tax bases of assets and
liabilities and their financial reporting amounts at each balance
sheet date based on enacted tax laws and statutory tax rates
applicable to the periods in which the differences are expected to
affect taxable income. Valuation allowances are established when
necessary to reduce deferred tax assets to the amount expected to
be realized. Provision for income taxes is the tax payable for the
year and the change during the year in deferred tax assets and
liabilities.
Net Loss per Share
Net loss per share, both primary and fully diluted, is
computed based on the weighted average number of common shares
outstanding and dilutive common share equivalents. Fully diluted
net loss per share is anti-dilutive for the year ended June 30,
1995.
2. INVESTMENT IN COMPETITIVE TECHNOLOGIES, INC.
In September, 1994, KSI acquired 25,000 shares of CTI's common
stock valued at $205,325 in exchange for 205,325 shares of KSI's
Class A common stock. KSI classified the CTI stock as available-
for-sale.
In June, 1995, KSI reacquired the 205,325 shares of its Class
A common stock from CTI in exchange for the 25,000 shares of CTI
common stock. The $52,200 realized loss was charged against income
in KSI's statement of operations. The 205,325 KSI shares are
classified as treasury stock at June 30, 1995 at cost ($153,125).
3. PROPERTY AND EQUIPMENT
Property and equipment as of June 30, 1995 comprised:
Computer equipment $23,356
Furniture and fixtures 2,476
25,832
Less: accumulated depreciation (3,480)
$22,352
4. INCOME TAXES
The current provision for income taxes for 1995 comprises
state income taxes. At June 30, 1995, KSI had a net operating loss
carryforward of $261,639 which expires in 2010 for federal and in
1998 for state tax purposes.
The provision for income taxes differs from that computed
using the statutory federal income tax rate of 34% as follows:
Expected tax benefit at federal statutory rate $(128,469)
Loss on investment 17,748
Services paid with common stock 22,100
Effect of net operating loss not utilized 88,234
Other 687
Provision for income taxes $ 300
Deferred income taxes reflect the net tax effects of temporary
differences between the carrying amounts of assets and liabilities
for financial reporting purposes and the amounts used for income
tax purposes. KSI's net deferred tax asset of $88,957 is entirely
offset by a valuation allowance of $88,957 at June 30, 1995.
5. SHAREHOLDERS' INTEREST
Capital Stock
In the event of any voluntary or involuntary liquidation,
dissolution or winding up of KSI which is commenced during the
"Preference Period" (as defined below), the holders of Class A
common stock are entitled to a liquidation preference equal to
$1.50 per share. If the assets of KSI are insufficient to permit
payment of the full preferential amount to Class A shareholders,
all of the net assets of KSI shall be distributed ratably among
the holders of Class A common stock. After payment of the
liquidation preference to holders of Class A common stock and
payment of $.001 per share to holders of Class B common stock, or
upon the expiration of the Preference Period, in the event of
liquidation, holders of Class A common stock will be entitled to
share ratably with the holders of Class B common stock in all
assets remaining after payment of liabilities.
The Preference period will expire upon the end of any fiscal
year in which KSI and any subsidiaries shall have consolidated net
income before taxes of not less than $1,000,000. The Class A
common stock and Class B common stock will automatically be
reclassified as a single class of common stock on a share for share
basis at the end of the Preference Period.
Employee Stock Option Plan
KSI has a stock option plan ("the Plan") which was approved by
the Board of Directors and shareholders on December 12, 1994. No
option may be granted under the Plan after December 11, 2004. Both
incentive stock options and nonqualified stock options may be
granted to key employees under the Plan. All stock options are
granted at an exercise price equal to the fair market value of the
optioned stock on the grant date. Options generally become
exercisable according to a vesting schedule approved by the Board
at the grant date.
The following summarizes the stock option activity for the
period from the approval of the Plan through June 30, 1995:
Option Aggregate
Shares Price Price
Options granted and outstanding 20,000 $ 1.00 $20,000
Additional information related to stock options at June 30,
1995 follows:
Exercisable options NONE
Class B common shares reserved for issuance
on exercise of options 150,000
Shares available for future option grants 130,000
Common Stock Warrants
KSI has the following outstanding warrants at June 30, 1995:
Aggregate
Exercise Expiration
Issued Exercisable No. Shares Class Share Price Date
September 1994 September 1994 133,333 A $1.50 $200,000 December 1995
March 1995 March 1996 5,000 B $1.00 $ 5,000 March 2000
6. COMMITMENTS
KSI leases office space in Lehigh, Pennsylvania, under a lease
expiring in August of 1995. Rent expense in 1995 amounted to
$2,751.
KSI was awarded a $75,000 grant to support its development
activities from September 1, 1994, through August 31, 1995. In
consideration of the grant funding KSI has a contingent obligation
to repay up to three times total grant funds received at rates of
1% of aggregate net sales of supported products or 2% of revenues
from licensing supported products, if any. KSI will recognize such
obligations when it recognizes revenues from sales or licenses.
Effective October, 1994, Competitive Technologies of PA, Inc.
granted KSI an exclusive ten-year license agreement to its process
model for interactive multimedia training in exchange for a 3%
royalty on future sales of licensed products and services. KSI
will recognize such obligations when it recognizes revenues from
sales.
7. RELATED PARTY TRANSACTIONS
During 1995 KSI incurred $40,000 of charges for management and
accounting services performed by CTI which have not been eliminated
in CTI's consolidated financial statements. Services were paid by
the issuance of Class B common stock.
KSI incurred charges of $5,500 during 1995 for consulting
services provided by a director.
During 1995 KSI incurred charges of $47,500 for product
development consulting services performed by the inventor of the
process model who is also a shareholder. $25,000 of these services
were paid by the issuance of Class B common stock.
8. SUBSEQUENT EVENT
During July, 1995, KSI incurred charges of $20,000 for
management and consulting services performed by CTI which have not
been eliminated in CTI's consolidated financial statements.
Services were paid by the issuance of Class B common stock. After
this transaction, CTI owned 35.9% of KSI.
Item 9. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure.
Not applicable.
PART III
Pursuant to General Instruction G(3), the information called
for by Part III (Items 10 through 13) is incorporated by reference,
to the extent required, from the registrant's definitive proxy
statement for its 1995 annual meeting of stockholders to be filed
with the Commission pursuant to Regulation 14A not later than 120
days after the end of the fiscal year covered by this Form 10-K.
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on
Form 8-K.
(a) List of financial statements and schedules. Page
Competitive Technologies, Inc. and Subsidiaries:
Consolidated Balance Sheets as of July 31, 1995
and 1994. 25-26
Consolidated Statements of Operations for the
years ended July 31, 1995, 1994 and 1993. 27-28
Consolidated Statements of Changes in
Shareholders' Interest for the years ended
July 31, 1995, 1994 and 1993. 29
Consolidated Statements of Cash Flows for the
years ended July 31, 1995, 1994 and 1993. 30-32
Notes to Consolidated Financial Statements. 33-48
Knowledge Solutions, Inc.
Balance Sheet as of June 30, 1995. 50
Statement of Operations for the period
from June 1, 1994 (date of inception)
through June 30, 1995. 51
Statement of Changes in Shareholders' Interest
for the period from June 1, 1994
(date of inception) through June 30, 1995. 52
Statement of Cash Flows for the period from
June 1, 1994 (date of inception)
through June 30, 1995. 53
Notes to Financial Statements 54-58
All financial statement schedules have been omitted because
the information is not present or is not present in sufficient
amounts to require submission of the schedule or because the
information required is included in the financial statements or the
notes thereto.
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the fourth quarter.
(c) List of exhibits: See Exhibit Index immediately preceding
exhibits.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
COMPETITIVE TECHNOLOGIES, INC.
(Registrant)
By S/ FRANK R. McPIKE, JR.
Frank R. McPike, Jr.
Vice President, Finance
Date: October 26, 1995
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
Name Title Date
GEORGE M. STADLER* President, Chief )
George M. Stadler Executive Officer )
and Director )
)
FRANK R. McPIKE, JR. Vice President, )
Frank R. McPike, Jr. Finance, Treasurer, )
Secretary and Director )
(Principal Financial )
and Accounting Officer) )
)
MICHAEL G. BOLTON* Director )
Michael G. Bolton )
)
BRUCE E. LANGTON* Director ) October 26, 1995
Bruce E. Langton )
)
H.S. LEAHEY* Director )
H.S. Leahey )
)
DAVID M. TOBEY* Director )
David M. Tobey )
)
HARRY VAN BENSCHOTEN* Director )
Harry Van Benschoten )
)
)
)
* By FRANK R. McPIKE, JR. )
Frank R. McPike, Jr., Attorney-in-Fact )
EXHIBIT INDEX
Exhibit
No. Description Page
3.1 Unofficial restated certificate of incorpora-
tion of the registrant as amended to date. 68-72
3.2 By-laws of the registrant as amended to date. 73-82
10.1* Registrant's Restated Key Employees' Stock
Option Plan, filed as Exhibit 4.3 to regis-
trant's Registration Statement on Form S-8,
File No. 33-87756 and hereby incorporated by
reference.
10.2* Employment Agreement between registrant and A.
Sidney Alpert dated as of April 1, 1992 filed
as Exhibit 19.1 to registrant's Form 10-Q for
the three months ended April 30, 1992 and
hereby incorporated by reference.
10.3* Incentive Compensation Plan filed as Exhibit
13.47 to Post Effective Amendment No. 6 to
Registration Statement on Form S-1 No. 2-55141
and hereby incorporated by reference; and
amendment thereto adopted by the Board of
Directors on April 12, 1983 filed as Exhibit
10.5 to registrant's Form 10-K for the fiscal
year ended July 31, 1983 and hereby incorpor-
ated by reference.
10.4* Registrant's Restated Directors' Stock Partici-
pation Plan filed as Exhibit 10.3 to regis-
trant's Form 10-Q for the quarter ended January
31, 1995 and hereby incorporated by reference.
10.5 Limited Partnership Agreement of Optical Asso-
ciates, Limited Partnership dated November 3,
1983 filed as Exhibit 19.02 to registrant's
Form 10-Q for the quarter ended January 31,
1984 and hereby incorporated by reference.
10.6 Joint Venture Agreement dated April 30, 1984
between Optical Associates, Limited Partnership
and University Optical Products Co., filed as
Exhibit 19.02 to registrant's Form 10-Q for the
quarter ended April 30, 1984 and hereby incor-
porated by reference; moratorium agreement
dated July 20, 1987 between University Optical
Products Co. and Optical Associates, Limited
Partnership filed as Exhibit 10.14 to regis-
trant's Form 10-K for the fiscal year ended
July 31, 1987 and hereby incorporated by refer-
ence.
10.7* Form of long-term disability income policy and
schedule of information for Mr. Alpert filed as
Exhibit 10.42 to registrant's Form 10-K for the
fiscal year ended July 31, 1985 and hereby
incorporated by reference.
10.8 Indemnity Agreement dated September 1, 1988
between the registrant and A. S. Alpert (simi-
lar agreements have been signed by each of the
registrant's directors) filed as Exhibit 10.24
to registrant's Form 10-K for the fiscal year
ended July 31, 1988 and hereby incorporated by
reference.
10.9 Asset Purchase Agreement among University
Optical Products Co., Unilens Corp. USA, Uni-
lens Optical Corp. and the registrant dated
January 23, 1989 filed as Exhibit 19.1 to
registrant's Form 10-Q for six months ended
January 31, 1989 and hereby incorporated by
reference.
10.10 Asset Purchase Agreement between USET, Inc. and
the registrant dated June 28, 1988 filed as
Exhibit 2.1 to registrant's Form 8-K dated June
28, 1988 and hereby incorporated by reference;
and Letter Agreement between Macmillan and the
registrant dated June 15, 1989 amending the
Purchase Agreement dated June 28, 1988 filed as
Exhibit 10.17 to registrant's Form 10-K for the
year ended July 31, 1991 and hereby incorporat-
ed by reference.
10.11 Asset Purchase Agreement between Unilens Corp.
U.S.A. and University Optical Products Co.
dated November 30, 1989 filed as Exhibit 19.1
to registrant's Form 10-Q for the three months
ended October 31, 1989 and hereby incorporated
by reference.
10.12 Stock Purchase Agreement dated as of August 20,
1990 between USET Holding Co. and Macmillan,
Inc. for the purchase and sale of the outstand-
ing capital stock of University Science, Engi-
neering and Technology, Inc. filed as Exhibit
10.33 to registrant's Form 10-K for the year
ended July 31, 1990 and hereby incorporated by
reference.
10.13 Guarantee Agreement dated as of August 20, 1990
by and among Macmillan, Inc., VenTex, Universi-
ty Science, Engineering and Technology, Inc.
and registrant filed as Exhibit 10.34 to regi-
strant's Form 10-K for the year ended July 31,
1990 and hereby incorporated by reference.
10.14 Agreement dated August 20, 1990 between TRTF
Venture, Inc., UPAT Services, Inc. and the
registrant dated August 20, 1990 authorizing
the registrant to have exclusive right to
appoint and/or remove the directors of Univer-
sity Science, Engineering and Technology, Inc.
and USET Holding Co. filed as Exhibit 10.35 to
registrant's Form 10-K for the year ended July
31, 1990 and hereby incorporated by reference.
10.15 Agreement of Limited Partnership of USET Acqui-
sition Partners, L.P. dated as of June 28, 1990
between VenTex and USAA, a reciprocal inter-
insurance exchange, filed as Exhibit 10.36 to
registrant's Form 10-K for the year ended July
31, 1990 and hereby incorporated by reference.
10.16 Election to Continue Partnership Business,
Amendment of Agreement of Limited Partnership
and Admission of New General Partner for USET
Acquisition Partners, L.P., between all of the
Limited Partners of USET Acquisition Partners,
L.P., Ventex and UPAT Services, Inc. (a wholly-
owned subsidiary of the registrant), dated as
of April 19, 1991 filed as Exhibit 19.2 to
registrant's Form 10-Q for the nine months
ended April 30, 1991 and hereby incorporated by
reference.
10.17 Custodian Agreement dated July 29, 1991 between
Lafayette Bank and Trust Company and registrant
relating to transfer of Escrow Agreement dated
September 1, 1988 between Putnam Trust Company
of Greenwich, the registrant and each of regi-
strant's directors filed as Exhibit 10.44 to
the registrant's Form 10-K for the year ended
July 31, 1991 and hereby incorporated by refer-
ence.
10.18 Lease agreement between 1465 Realty Associates
and registrant dated August 8, 1991 filed as
Exhibit 10.45 to registrant's Form 10-K for the
year ended July 31, 1991 and hereby incorporat-
ed by reference.
10.19* Employment agreement between registrant and
George M. Stadler dated August 1, 1995. 83-86
10.20 Private Placement Agreement dated as of Novem-
ber 11, 1992 between the registrant and Capital
Assurance Company, Inc. filed as Exhibit 19.3
to registrant's Form 10-Q for the three months
ended October 31, 1992 and hereby incorporated
by reference.
10.21 Letter Agreement with Capital Assurance Compa-
ny, Inc. dated March 8, 1993 filed as Exhibit
4.3 to registrant's registration statement on
Form S-3 (No. 33-60210) and hereby incorporated
by reference.
10.22 Purchase and Subscription Agreement dated July
9, 1993 by and among University Communications,
Inc., Competitive Technologies, Inc. (formerly
University Patents, Inc.) and Barden Communica-
tions, Inc. filed as Exhibit 10.1 to regis-
trant's Form 8-K dated July 9, 1993 and hereby
incorporated by reference.
10.23 Technology Management Agreement made February
12, 1993 between Lehigh University and Competi-
tive Technologies, Inc. effective September 30,
1992 filed as Exhibit 2.3 to registrant's Form
8-K dated February 12, 1993 and hereby incorpo-
rated by reference.
10.24* Employment Agreement between registrant and
Frank R. McPike, Jr. dated September 15, 1993
filed as Exhibit 10.46 to registrant's Form 10-
K for the year ended July 31, 1993 and hereby
incorporated by reference.
10.25 Settlement and Forbearance Agreement dated July
15, 1993 among registrant, Unilens Corp. USA
and Unilens Vision Inc. filed as Exhibit 10.47
to registrant's Form 10-K for the year ended
July 31, 1993 and hereby incorporated by refer-
ence.
10.26 Stock Purchase Agreement dated July 15, 1993
among registrant, Unilens Corp. USA and Unilens
Vision Inc. filed as Exhibit 10.48 to regi-
strant's Form 10-K for the year ended July 31,
1993 and hereby incorporated by reference.
10.27 Amendment and Modification Agreement dated
September 27, 1993 among registrant, Unilens
Corp. USA and Unilens Vision Inc. filed as
Exhibit 10.49 to registrant's Form 10-K and
hereby incorporated by reference.
10.28 Common Stock Purchase Warrant issued by regis-
trant to Spencer Trask Holdings, Inc. as of
November 22, 1993 filed as Exhibit 10.2 to
registrant's Form 10-Q for the quarter ended
January 31, 1994 and hereby incorporated by
reference.
10.29 Common Stock Purchase Warrant issued by the
registrant to Christopher D. Illick as of
November 22, 1993 filed as Exhibit 10.3 to
registrant's Form 10-Q for the quarter ended
January 31, 1994 and hereby incorporated by
reference.
10.30 Common Stock Purchase Warrant issued by regis-
trant to Desmond Towey & Associates as of April
26, 1994 filed as Exhibit 10.1 to registrant's
From 10-Q for the quarter ended April 30, 1994
and hereby incorporated by reference.
10.31 Stock Purchase Agreement dated September 12,
1994 between Knowledge Solutions, Inc. and
Safeguard Scientifics, Inc. filed as Exhibit
10.49 to registrant's Form 10-K for the year
ended July 31, 1994 and hereby incorporated by
reference.
10.32 Voting Agreement dated September 12, 1994 among
Knowledge Solutions, Inc., Safeguard Scienti-
fics, Inc. the registrant, Francis Harvey and
Adam Nelson filed as Exhibit 10.50 to regis-
trant's Form 10-K for the year ended July 31,
1994 and hereby incorporated by reference.
10.33 Common Stock Purchase Warrant issued to Robert
Frost as of September 16, 1994 filed as Exhibit
10.1 to registrant's Form 10-Q for the quarter
ended October 31, 1994 and hereby incorporated
by reference.
10.34 Exchange Agreement dated as of September 30,
1994 among Plasmaco, Inc. and the holders of
Series A through D Preferred Stock of Plamsaco,
including the registrant filed as Exhibit 10.51
to registrant's Form 10-K for the year ended
July 31, 1994 and hereby incorporated by refer-
ence.
10.35 Contract awarded by Department of the Air Force
to registrant No. F33615-95-C-5514 dated Janu-
ary 24, 1995 filed as Exhibit 10.1 to regi-
strant's Form 10-Q for the quarter ended Janu-
ary 31, 1995 and hereby incorporated by refer-
ence.
10.36 Letter from Barden Companies, Inc. to Competitive
Technologies, Inc. dated February 14, 1995,
received by the registrant February 15, 1995 filed
as Exhibit 2.1 to registrant's Form 8-K dated
February 15, 1995 and hereby incorporated by
reference.
10.37 Stock Purchase Agreement by and among Knowledge
Solutions, Inc., Safeguard Scientifics, Inc.,
Competitive Technologies, Inc. and Donald Berman
dated May 17, 1995. 87-96
11.1 Schedule of computation of earnings per share
for the three years ended July 31, 1995. 97
21.1 Subsidiaries of the registrant. 98
23.1 Consent of Coopers & Lybrand. 99
23.2 Consent of Coopers & Lybrand. 100
24.1 Power of attorney. 101-102
27.1 Financial Data Schedule - EDGAR only.
* Management Contract or Compensatory Plan
Exhibit 3.1
UNOFFICAL RESTATED CERTIFICATE OF INCORPORATION
OF
COMPETITIVE TECHNOLOGIES, INC.
as Amended to date
COMPETITIVE TECHNOLOGIES, INC., a corporation organized and
existing under the laws of the State of Delaware, hereby certifies
as follows:
1. The name of the corporation is COMPETITIVE TECHNOLOGIES,
INC., and the name under which the corporation was originally
incorporated is U.P. Inc. The date of filing of its original
Certificate of Incorporation with the Secretary of State was August
12, 1971.
2. This Restated Certificate of Incorporation only restates
and integrates and does not further amend the provisions of the
Certificate of Incorporation of this corporation as heretofore
amended or supplemented and there is no discrepancy between those
provisions and the provisions of this Restated Certificate of
Incorporation.
3. The text of the Certificate of Incorporation as amended
or supplemented heretofore is hereby restated without further
amendments or changes to read as herein set forth in full:
FIRST: The name of the corporation (hereinafter called
the "Corporation") is Competitive Technologies, Inc.
SECOND: The registered office of the Corporation is to
be located at 100 West Tenth Street, in the City of
Wilmington, in the County of New Castle, in the State of
Delaware. The name of its registered agent at that address is
The Corporation Trust Company.
THIRD: The purpose of the Corporation is to engage in
any lawful act or activity for which corporations may be
organized under the General Corporation Law of Delaware
FOURTH: The total number of shares of stock of all
classes of stock which the Corporation shall have authority to
issue is 8,000,000 shares, of which 35,920 shares, with a par
value of $25.00 each, are to be Preferred Stock, and 7,964,080
shares, with a par value of $.01 each, are to be Common Stock.
The designations and the powers, preferences and rights,
and the qualifications, limitations or restrictions of the
classes of stock of the Corporation are as follows:
1. Dividends: The holders of the Preferred Stock
shall be entitled to receive, out of any funds of the
Corporation lawfully available for dividends under the
laws of the State of Delaware, if, as and when declared
by the Board of Directors in its discretion, preferential
dividends at the rate of 5% of the par value of the
Preferred Stock, per share per annum, and no more,
payable quarterly on the 30th day of January, April, July
and October, respectively, in each year, before any
dividends shall be declared or paid upon or set apart
for, or other distribution shall be ordered or made in
respect of, any shares of Common Stock; provided,
however, that dividends on the Preferred Stock shall be
noncumulative, so that if such dividends on the
Preferred Stock are not declared or paid in whole or in
part, the unpaid dividends shall not accumulate.
2. Preference Upon Liquidation: In the event of
any liquidation, dissolution or winding up of the
Corporation or any reduction of its capital resulting in
any distribution of its assets to its stockholders,
whether voluntary or involuntary, the holders of the
Preferred Stock shall be entitled to receive, for each
share thereof, out of the assets of the Corporation,
whether from capital, surplus or earnings available for
distribution to its stockholders, $25.00 per share in
cash, before any distribution of assets of the
Corporation shall be made to the holders of the Common
Stock; but the holders of the Preferred Stock shall be
entitled to no further participation in such
distribution. If, upon any such liquidation,
dissolution, winding up or reduction, the assets of the
Corporation distributable as aforesaid among the holders
of the Preferred Stock shall be insufficient to permit of
the payment to them of the full preferential amount
aforesaid, then the entire assets of the Corporation to
be distributed shall be distributed ratably among the
holders of the Preferred Stock in proportion to the full
preferential amount to which they are respectively
entitled. A consolidation or merger of the Corporation,
or a sale or transfer of all or substantially all of its
assets as an entirety, shall not be regarded as a
voluntary liquidation, dissolution or winding up of the
Corporation.
3. Voluntary Redemption: The Corporation may, at
its option, expressed by resolution of its Board of
Directors, at any time or from time to time, redeem the
whole or any part of the Preferred Stock at a redemption
price for each share thereof equal to $25.00. Notice of
any proposed redemption of shares of Preferred Stock
shall be given by the Corporation by mailing a copy of
such notice at least 30 days prior to the date fixed for
such redemption to the holders of record of the shares of
Preferred Stock to be redeemed, at their respective
addresses appearing on the books of the Corporation. If
less than all the shares of Preferred Stock are to be
redeemed as herein provided, the redemption shall be made
in such amount, at such place, by such method, either by
lot or pro rata, and subject to such provisions of
convenience as shall from time to time be determined by
resolution of the Board of Directors. From and after the
date fixed in any such notice as the date of redemption,
unless default shall be made by the Corporation in
providing moneys at the time and place specified for the
payment of the redemption price pursuant to said notice,
all rights of the holders of said shares of Preferred
Stock so called for redemption as stockholders of the
Corporation, except only the right to receive the
redemption price, shall cease and determine and such
shares shall be deemed no longer to be outstanding.
4. Voting Power: The holders of the Preferred
Stock and of the Common Stock shall possess full voting
power for the election of directors and for all other
purposes. Holders of stock of whatever class entitled to
vote shall have one vote for each share of stock held by
them.
5. No Preemptive Rights: No holder of any class
of stock of the Corporation, whether now or hereafter
authorized, shall have any preemptive, preferential or
other rights to subscribe for or purchase or acquire any
shares of any class of stock or any other securities of
the Corporation, whether now or hereafter authorized, and
whether or not convertible into, or evidencing or
carrying the right to purchase, shares or any other
securities now or hereafter authorized, and whether the
same shall be issued for cash, services or property, or
by way of dividend or otherwise.
FIFTH: The name and mailing address of the incorporator
is as follows:
Name Address
Jesse J. Holland 208 South LaSalle Street
Chicago, Illinois 60604
SIXTH: Whenever the vote of stockholders at a meeting
thereof is required or permitted to be taken for or in
connection with any corporate action, the meeting and vote of
stockholders may be dispensed with and such action may be
taken with the written consent of stockholders having not less
than the minimum percentage of the total vote required by
statute for the proposed corporate action, and provided that
prompt notice be given to all stockholders of the taking of
corporate action without a meeting and by less than unanimous
consent.
SEVENTH: The Corporation shall, to the fullest extent
permitted by Section 145 of the General Corporation Law of
Delaware, indemnify any and all persons whom it shall have
power to indemnify under said section from and against any and
all of the expenses, liabilities or other matters referred to
in or covered by said section.
EIGHT: The Board of Directors shall have power, without
stockholder action:
1. To make By-laws for the Corporation, and to
amend, alter or repeal any By-laws.
2. To set apart out of any of the funds of the
Corporation available for dividends a reserve or reserves
for any proper purpose and to abolish any such reserve or
reserves.
In addition to the powers and authorities herein or by
statute expressly conferred upon it, the Board of Directors
may exercise all such powers and do all such acts and things
as may be exercised or done by the Corporation, subject,
nevertheless, to the provisions of the laws of the State of
Delaware, of this Certificate of Incorporation and of the By-
laws of the Corporation.
NINTH: No director of the Corporation shall be
personally liable to the Corporation or its stockholders for
monetary damages for breach of fiduciary duty by such director
as a director; provided, however, that this Article NINTH
shall not eliminate or limit the liability of a director to
the extent provided by applicable law (i) for any breach of
the director's duty of loyalty to the Corporation or its
stockholders, (ii) for acts or omissions not in good faith or
which involve intentional misconduct or a knowing violation of
law, (iii) under Section 174 of the General Corporation Law of
the State of Delaware, or (iv) for any transaction from which
the director derived an improper personal benefit. No
amendment to or repeal of this Article NINTH shall apply to or
have any effect on the liability or alleged liability of any
director of the Corporation for or with respect to any acts or
omissions of such director occurring prior to such amendment
or repeal.
4. This Restated Certificate of Incorporation was duly
adopted by the Board of Directors in accordance with Section 245 of
the General Corporation Law of the State of Delaware.
IN WITNESS WHEREOF, said COMPETITIVE TECHNOLOGIES, INC. has
caused this Certificate to be signed by A. SIDNEY ALPERT, its
President, and attested by FRANK R. MCPIKE, JR., its Secretary,
this 10 day of June, 1992.
COMPETITIVE TECHNOLOGIES, INC.
By: S/ A. Sidney Alpert
President
ATTEST:
By: S/ Frank R. McPike, Jr.
Secretary
Exhibit 3.2
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 be the Chief Executive Officer of
the Corporation and as such shall have general supervision of the
affairs of the Corporation subject to the control of the 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 be the Chief Operating Officer of the
Corporation. He shall do and perform all acts and duties which may
be assigned to him from time to time by the Board of Directors or
the Chairman of the Board. The President 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 3.04A. 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 3.05. 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.
Exhibit 10.19
EMPLOYMENT AGREEMENT
AGREEMENT dated as of August 1, 1995 between Competitive
Technologies, Inc., a Delaware corporation (herein called "CTI")
and George M. Stadler of Fairfield, CT. (herein called "Stadler").
WITNESSETH
1. Employment and Term: CTI hereby employs Stadler and Stadler
hereby agrees to continue employment by CTI for a period commencing
August 1, 1995 and ending four (4) years thereafter, unless sooner
terminated as hereinafter provided.
2. Extension of Term: Subject to the provision of paragraph 9
hereof, the term of this Agreement shall be extended automatically
for consecutive periods of twelve (12) calendar months each,
commencing August 1, 1999, unless either party hereto shall give
written notice to the other, not later than one hundred twenty
(120) days prior to August 1, 1999 or August 1 of any calendar year
thereafter that either party elects to terminate this Agreement as
of August 1 of that year.
3. Duties: During the term hereof Stadler shall serve in the
executive position of President and Chief Executive Officer of CTI
and he shall perform during normal business hours such duties as
may be assigned to him from time to time by the Board of Directors
of CTI. Stadler shall report directly to the Board of Directors of
CTI.
4. Compensation: During the term hereof CTI shall pay Stadler
compensation at the rate of a minimum of One Hundred Sixty Thousand
($160,000) Dollars per year, payable in twenty-six equal payments
per year. Stadler's compensation shall be reviewed annually by the
Board of Directors of CTI.
5. Expense Reimbursement and Fringe Benefits: CTI shall
reimburse Stadler for all expenses incurred by him on behalf of or
attributable to the business of CTI. Stadler shall be entitled to
all medical and hospitalization benefits, group life insurance
coverage, if any, and all other fringe benefits which CTI or its
associated companies currently provides or which it may hereafter
institute.
6. Restrictive Covenants: In the event that Stadler terminates
this Agreement, Stadler covenants and agrees that, for a period of
one (1) year following such termination, he will not engage,
directly or indirectly, as an owner, employee, officer, agent,
representative or otherwise, or become a principal stockholder, in
any business operating in the United States of America which is
competitive with the principal business engaged in by CTI.
7. Right of CTI to Injunction: If Stadler violates the
provisions of paragraph 6 hereof, CTI shall be entitled to an
injunction to be issued by a court of competent jurisdiction
enjoining the breach of said provisions by Stadler.
8. Safeguarding of Information: Stadler agrees that (a) he will
keep in strict confidence all proprietary information which he may
acquire during his employment relating to the business or affairs
of CTI or any of its associated companies; and (b) he will not,
without the prior written consent of CTI, communicate, divulge,
disclose, or use such confidential information except as may be
required to perform his duties hereunder.
9. Termination: In the event of the death of Stadler, this
Agreement shall terminate on the last day of the calendar month in
which such death shall occur, provided that all accrued rights of
Stadler at the time of his death (including salary, stock options,
severance pay installments and stock retirement benefits) shall be
paid to his wife, and if and so long as she shall survive him. If
his wife shall not survive him or shall not survive long enough to
receive the benefits of such rights, any balance remaining
thereafter shall be paid to Stadler's estate.
CTI shall have the right to terminate this Agreement:
(a) at any time for cause which for the purposes hereof shall
mean any criminal act by Stadler for which he is
convicted; or
(b) if Stadler is personally unable to perform his duties
hereunder for a period of six (6) consecutive months due
to physical or mental illness, disability or incapacity;
provided, however, that if CTI shall have terminated this
Agreement because of such illness, disability or
incapacity and if such illness, disability or incapacity
shall have been cured prior to the expiration of this
Agreement, then, in such event, this Agreement shall ipso
facto be reinstated for the remainder of the term hereof
with the same force and effect as if CTI had never
exercised its right of termination except that Stadler
shall not be entitled to compensation hereunder for the
period during which this Agreement shall have been in a
state of termination, and the executive duties to be
performed by Stadler hereunder shall be those as shall be
specified by the Board of Directors of CTI.
In the event CTI terminates this Agreement without cause,
Stadler shall be paid, as liquidated damages, an amount
equal to the lesser of (a) one and one-half times his
then currently yearly salary, or (b) the total salary due
for the remaining term of this Agreement.
10. Incentive Compensation: CTI's Board of Directors will revise
and modify the Company's existing "Incentive Compensation Plan"
dated July 31, 1979 and Stadler will be eligible to participate in
this new plan.
11. Enforceability after Termination: The covenants and
agreements set forth in paragraphs 6, 7 and 8 shall survive and be
enforceable after the termination of this Agreement.
12. Complete Agreement: This Agreement constitutes the complete
agreement between CTI and Stadler, no verbal or other statements,
inducements or representations have been made to or relied upon by
Stadler, and no modification hereof shall be binding on either
party unless in writing and signed by both parties hereto.
13. Severability: If any term or provision of this Agreement
shall to any extent be held invalid or unenforceable, the remaining
terms and provisions of this Agreement shall not be affected
thereby and shall be valid and enforceable to the fullest extent
permitted by law.
14. Binding upon Successor: This Agreement shall be binding upon
and inure to the benefit of Stadler and shall be binding upon and
inure to the benefit of CTI and its successors and assigns.
However, in the event that CTI is acquired or merged with another
company, and/or experiences a significant change in its present
stock ownership by an individual or group of individuals (i.e. -
accumulation of more than 10% of the shares outstanding), Stadler's
minimum rate of compensation under this Agreement will be his
present rate of compensation at the time of such merger,
acquisition, and/or change in stock ownership. Further, Stadler
will be given an opportunity to negotiate a new Agreement and/or to
modify this present Agreement prior to such change.
15. Governing Law: This Agreement shall be governed by the laws
of Connecticut as to both interpretation and performance.
16. Arbitration: Standard AAA provision.
IN WITNESS WHEREOF, Competitive Technologies, Inc. has caused
this Agreement to be duly executed by its authorized officers and
its corporate seal to be hereunto affixed, and George M. Stadler
has duly signed and sealed this Agreement, all as of the day and
year first above written.
ATTEST: COMPETITIVE TECHNOLOGIES, INC.
S/ Lorraine Frauenhofer S/ Frank R. McPike, Jr.
Frank R. McPike, Jr.
Vice President, Finance
Treasurer and Secretary
S/ Marie Cataldo By: S/ Bruce Langton
Bruce Langton
Chairman of the Compensation and
Stock Option Committee of the Board
of Directors
S/ George M. Stadler
George M. Stadler
Exhibit 10.37
STOCK PURCHASE AGREEMENT
KNOWLEDGE SOLUTIONS, INC.
THIS AGREEMENT is made as of the 17th day of May, 1995 by and among
Knowledge Solutions, Inc., a Delaware corporation (the "Company"),
Safeguard Scientifics (Delaware), Inc., a Delaware corporation
("Safeguard"), Competitive Technologies, Inc., a Delaware
Corporation formerly known as University Patents, Inc. ("CTI") and
Donald Berman, a resident ("Berman")
(individually referred to as the "Purchaser" or "Safeguard", "CTI"
or "Berman" and collectively referred to as the "Purchasers").
ARTICLE I
PURCHASE, SALE AND TERMS OF SHARES
1.01. The Shares. The Company has authorized the
issuance, sale and exchange of a total of 225,000 shares (the
"Shares") of its authorized but unissued shares of Class A Common
Stock, $.001 par value (the "Stock"), at a purchase price of $1.00
per share to the Purchasers.
1.02. Purchase and Sale.
Subject to the terms and conditions herein set forth, the
Company hereby issues and sells to each Purchaser, and each
Purchaser (severally but not jointly) hereby purchase the number of
Shares set forth opposite such Purchaser's name below.
Number of
Shares of Class A
Purchaser Common Stock Purchase Price
Safeguard Scientifics
(Delaware), Inc. 100,000 $100,000
Competitive Technologies,
Inc. 75,000 $ 75,000
Donald Berman 50,000 $ 50,000
Total: 225,000 $225,000
The Company is delivering to each Purchaser a certificate for the
Shares, registered in the Purchaser's name (or its nominee),
against delivery of a certified check payable to the order of the
Company, or a transfer of funds to the account of the Company by
wire transfer, for such Purchaser's purchase price.
1.03. Representations by the Purchaser.
Each Purchaser makes the following representations and
warranties for itself only:
(a) Investment Representations. The Purchaser
represents that it is its present intention to acquire the Shares
for its own account (and it will be the sole beneficial owner
thereof) and that the Shares are being and will be acquired by it
for the purpose of investment and not with a view to distribution
or resale thereof except pursuant to registration under the
Securities Act or exemption therefrom. The Purchaser further
represents that it understands and agrees that, until registered
under the Securities Act or transferred pursuant to the provisions
of Rule 144 or Rule 144A as promulgated by the Commission, all
certificates evidencing any of the Shares, whether upon initial
issuance or upon any transfer thereof, shall bear a legend,
prominently stamped or printed thereon, reading substantially as
follows:
"The securities represented by this certificate have not
been registered under the Securities Act of 1933 or
applicable state securities laws. These securities may
not be offered for sale, sold or transferred, in the
absence of an effective registration statement under the
Act and any applicable state securities laws or an
opinion of counsel satisfactory to the Company of the
availability of an exemption from registration
thereunder."
(b) Access to Information. Purchaser has had the
opportunity to ask questions of and receive answers from management
of the Company concerning the terms and conditions of the offering
of the Shares and the additional information, documents, records
and books relative to its business, assets, financial condition,
results of operations and liabilities (contingent or otherwise) of
the Company.
(c) Sophistication and Knowledge. Purchaser has such
knowledge and experience in financial and business matters that it
is capable of evaluating the merits and risks of the purchase of
the Shares. Purchaser can bear the economic risks of this
investment and can afford a complete loss of its investment.
(d) Lack of Liquidity. Purchaser has no present need
for liquidity in connection with its purchase of the Shares.
(e) Suitability and Investment Objectives. The purchase
of the Shares by Purchaser is consistent with the general
investment objectives of the Purchaser. The Purchaser understands
that the purchase of the Shares involves a high degree of risk in
view of the fact that, among other things, the Company is a start-
up enterprise, and there may be no established market for the
Company's capital stock.
(f) Accredited Investor Status. Purchaser is an
"Accredited Investor" as that term is defined in Rule 501 of
Regulation D promulgated under the Securities Act.
1.04. Brokers or Finders. Purchaser represents that no
Person has or will have, as a result of the transactions
contemplated by this Agreement, any right, interest or valid claim
against or upon the Company for any commission, fee or other
compensation as a finder or broker because of any act or omission
by Purchaser or its agents.
ARTICLE II
CLOSING DOCUMENTATION
2.01. Documentation at Closing. The Company shall deliver
to each Purchaser all of the following materials, each in form and
substance satisfactory to the Purchaser:
(a) A copy of the Certificate of Incorporation of the
Company, as amended or restated to date; a copy of the resolutions
of the Board of Directors providing for the approval of this
Agreement, the issuance of the Shares, and all other agreements or
matters contemplated hereby or executed in connection herewith; all
of which have been certified by the Secretary of the Company to be
true, complete and correct in every particular; and certified
copies of all documents evidencing other necessary corporate or
other action and governmental approvals, if any, required to be
obtained at or prior to the Closing with respect to this Agreement
and the issuance of the Shares.
(b) A Good Standing Certificate issued by the Secretary
of State of the State of incorporation of the Company and each
other jurisdiction in which the Company is required to qualify to
do business as a foreign corporation.
(C) Simultaneously with the closing of this investment,
CTI and the Company will enter into an amendment to the KSI-UPI
Stock Exchange Agreement originally dated as of September 12, 1994
pursuant to which they will reverse and cancel the exchange of
stock made pursuant to the original agreement. The execution of
such amendment is a condition to Safeguard's obligation to close
under this Agreement.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants as of the Closing as
follows:
3.01. Organization and Standing of the Company. The
Company is a duly organized and validly existing corporation in
good standing under the laws of the State of Delaware and has all
requisite corporate power and authority for the ownership and
operation of its properties and for the carrying on of its business
as now conducted and as now proposed to be conducted and to execute
and deliver this Agreement and the Voting Agreement, to issue, sell
and deliver the Share and to perform its other obligations pursuant
hereto and thereto. The Company is duly licensed or qualified and
in good standing as a foreign corporation authorized to do business
in all jurisdictions wherein the character of the property owned or
leased or the nature of the activities conducted by it makes such
licensing or qualification necessary, except where the failure to
be so licensed or qualified would not have a material adverse
effect on the business, operations or financial condition of the
Company.
3.02. Corporate Action. This Agreement has been duly
authorized, executed and delivered by the Company and constitute
the legal, valid and binding obligations of the Company,
enforceable against the Company in accordance with their respective
terms. The Shares have been duly authorized. The issuance, sale
and delivery of the Shares have been duly authorized by all
required corporation action; the Shares have been validly issued,
are fully paid and nonassessable with no personal liability
attaching to the ownership thereof and are free and clear of all
liens, charges, restrictions, claims and encumbrances imposed by or
through the Company except as set forth in this Agreement and the
Voting Agreement, as of the Closing.
3.03. Litigation. There is no litigation or governmental
proceeding or investigation pending or, to the knowledge of the
Company, threatened against the Company affecting any of its
properties or assets, nor, to the best knowledge of the Company,
has there occurred any event or does there exist any condition on
the basis of which any litigation, proceeding or investigation
might properly be instituted. The Company is not in default with
respect to any order, writ, injunction, decree, ruling or decision
of any court, commission, board or other government agency, which
such default might have a material adverse effect on the business,
assets, liabilities, operations, Intellectual Property Rights,
management or financial condition of the Company. There are no
actions or proceedings pending or, to the Company's knowledge,
threatened (or any basis therefor known to the Company) which might
result, either in any case or in the aggregate, in any material
adverse change in the business, operations, Intellectual Property
Rights, affairs or financial condition of the Company or in any of
its properties or assets, or which might call into question the
validity of this Agreement, any of the Shares, or any action taken
or to be taken pursuant hereto or thereto. The foregoing sentences
include, without limiting their generality, actions pending or, to
the Company's knowledge, threatened (or any basis therefor known to
the Company) involving the prior employment or engagement of any of
the Company's officers, employees or consultants or their use in
connection with the Company's business of any information or
techniques allegedly proprietary to any of their former employers
or to any other Person.
3.04. Certain Agreements of Officers and Employees.
(a) No officer, employee or consultant of the Company
is, or is now, to the Company's knowledge, expected to be, in
violation of any term of any employment contract, patent disclosure
agreement, proprietary information agreement, noncompetition
agreement, nonsolicitation agreement, confidentiality agreement, or
any other similar contract or agreement or any restrictive
covenant, relating to the right of any such officer, employee, or
consultant to be employed or engaged by the Company because of the
nature of the business conducted or to be conducted by the Company
or relating to the use of trade secrets or proprietary information
of others, and to the Company's best knowledge and belief, the
continued employment or engagement of the Company's officers,
employees or consultants does not subject the Company or any
Purchaser to any liability with respect to any of the foregoing
matters.
(b) No officer, consultant or Key Employee of the Company
whose termination, either individually or in the aggregate, could
have an adverse effect on the Company, has terminated, or to the
best knowledge of the Company, has any present intention of
terminating, his employment or engagement with the Company.
3.05. Compliance with Other Instruments. The Company is
in compliance in all respects with the terms and provisions of this
Agreement and of its Certificate of Incorporation and By-laws, each
as amended and/or restated to date, and in all respects with the
material terms and provisions of all mortgages, indentures, leases,
agreements and other instruments by which it is bound or to which
it or any of its properties or assets are subject. The Company is
in compliance in all material respects with all judgments, decrees,
governmental orders, laws, statutes, rules or regulations by which
it is bound or to which it or any of its properties or assets are
subject. Neither the execution, issuance and delivery of this
Agreement or the Voting Agreement, nor the consummation of any
transaction contemplated hereby or thereby, has constituted or
resulted in or will constitute or result in a default or violation
of any term or provision of any of the foregoing documents,
instruments, judgments, agreements, decrees, orders, statutes,
rules and regulations.
3.06. Title to Assets, Patents. The Company has good and
marketable title in fee to such of its fixed assets as are real
property, and good and merchantable title to all of its other
assets, now carried on its books, which assets consist of those
reflected in the most recent balance sheet of the Company included
in Exhibit 3.07 attached hereto, or acquired since the date of such
balance sheet (except personal property disposed of since said date
in the ordinary course of business) free of any mortgages, pledges,
charges, liens, security interests or other encumbrances. The
Company enjoys peaceful and undisturbed possession under all leases
under which it is operating, and all said leases are valid and
subsisting and in full force and effect.
The Company owns or has a valid right to use the Intellectual
Property Rights being used to conduct its business as now operated
and as now proposed to be operated or under development or now
proposed to be developed by the Company, and the conduct of its
business as now operated and as now proposed to be operated and the
development, manufacture and distribution of the products under
development or now proposed to be developed by the Company does not
and will not conflict with or infringe upon the intellectual
property rights of others. Descriptions of certain Intellectual
Property Rights and products under development or now proposed to
be developed by the Company is contained in Exhibit 3.06. Such
descriptions do not necessarily describe all Intellectual Property
Rights and products under development or proposed to be developed
by the Company. A complete list of licenses and registrations of
such Intellectual Property rights is attached hereto as Exhibit
3.06. Except as set forth on Exhibit 3.06, no claim is pending or
threatened against the Company and/or its officers, employees and
consultants to the effect that any such Intellectual Property Right
owned or licensed by the Company, or which the Company otherwise
has the right to use, is invalid or unenforceable by the Company.
Except pursuant to the terms of any licenses specified on Exhibit
3.06, the Company has no obligation to compensate any Person for
the use of any such Intellectual Property Rights, no other Person
has any right, title or interest in or to such Intellectual
Property and the Company has not granted any Person any license or
other right to use any of the Intellectual Property Rights of the
Company, whether requiring payment of royalties or not.
The Company has taken all reasonable measures to protect and
preserve the security, confidentiality and value of its
Intellectual Property Rights, including its trade secrets and other
confidential information. All employees and consultants of the
Company involved in the design, review, evaluation or development
of products or Intellectual Property Rights have executed a
nondisclosure and assignment of inventions agreements sufficient to
protect the confidentiality and value of the Company's Intellectual
Property Rights and to vest in the Company exclusive ownership of
such Intellectual Property Rights. To the best knowledge of the
Company, all trade secrets and other confidential information of
the Company are presently valid and protectable and are not part of
the public domain or knowledge, nor, to the best knowledge of the
Company, have they been used, divulged or appropriated for the
benefit of any person other than the Company or otherwise to the
detriment of the Company. To the best of the Company's knowledge,
no employee or consultant of the Company has used any trade secrets
or other confidential information of any other person in the course
of their work for the Company. The Company is the exclusive owner
of all right, title and interest in its Intellectual Property
Rights as purported to be owned by the Company, and such
Intellectual Property Rights are valid and in full force and
effect. Neither the Company, nor any of its employees or
consultants has received notice of, and to the best of the
Company's knowledge after reasonable investigation, there are no
claims that the Company's Intellectual Property Rights or the use
or ownership thereof by the Company infringes, violates or
conflicts with any such right of any third party. No university,
hospital, government agency (whether federal or state) or other
organization which sponsored research and development conducted by
the Company or any employee of the Company or has any claim of
right to or ownership of or other encumbrance upon the Intellectual
Property Rights of the Company.
3.07. Financial Information. The financial statements of
the Company as of December 31, 1994 and as of March 31, 1995 (the
"Financial Statement Date"), in each case including the Company's
Statement of Income and Balance Sheet, attached hereto as Exhibit
3.07, present fairly the financial position of the Company as at
the date or dates thereof and have been prepared in accordance with
generally accepted accounting principles consistently applied,
except for the absence in the March 31, 1995 financial statements
of footnotes and normal non-material year-end adjustments (the
"Financial Statements"). The Company does not have, and has no
reasonable grounds to know of, any liability, contingent or
otherwise, not adequately reflected in or reserved against in the
Financial Statements. Except as set forth in Exhibit 3.07, since
the Financial Statement Date (i) there has been no material adverse
change in the business, assets, operations, affairs, prospects or
financial condition of the Company; (ii) neither the business,
financial condition, operations, prospects or affairs of the
Company nor any of its properties or assets, including without
limitation, its Intellectual Property Rights, have been materially
adversely affected as the result of any legislative or regulatory
change, any revocation or change in any franchise, permit, license
or right to do business, or any other event or occurrence, whether
or not insured against; and (iii) the Company has not entered into
any material transaction other than in the ordinary course of
business, made any distribution on its capital stock, or redeemed
or repurchased any of its capital stock, except as set forth on
Exhibit 3.07.
3.08. Taxes. The Company has accurately prepared and
timely filed all federal, state and other tax returns required by
law to be filed by it, has paid or made provision for the payment
of all taxes shown to be due and all additional assessments, and
adequate provisions have been made and are reflected in the
Company's financial statements for all current taxes and other
charges to which the Company is subject and which are not currently
due and payable.
3.09. ERISA. The Company presently makes no contributions
to any employee pension benefit plans for its employees which are
subject to the Employee Retirement Income Security Act of 1974, as
amended ("ERISA").
3.10. Transactions with Affiliates. Except as set forth
in Exhibit 3.10, there are no outstanding loans, obligations,
leases, royalty agreements or other continuing transactions between
the Company and any officer, employee, consultant or director of
the Company or any Person owning five percent (5%) or more of the
capital stock of the Company or any member of the immediate family
of such officer, employee, consultant, director or stockholder or
any corporation or other entity controlled by such officer,
employee, consultant, director or stockholder, or a member of the
immediate family of such officer, employee, consultant, director or
stockholder.
3.11. Assumptions or Guaranties of Indebtedness of Other
Persons. The Company has not assumed, guaranteed, endorsed or
otherwise become directly or contingently liable on (including,
without limitation, liability by way of agreement, contingent or
otherwise, to purchase, to provide funds for payment, to supply
funds to or otherwise invest in the debtor or otherwise to assure
the creditor against loss), any Indebtedness of any other Person.
3.12. Disclosure. Neither this Agreement, the Financial
Statements, nor any other agreement, document, certificate,
statement, whether oral or written, furnished to any of the
Purchasers or their special counsel by or on behalf of the Company
in connection with the transactions contemplated hereby contains
any untrue statement of a material fact or omits to state a
material fact necessary in order to make the statements contained
herein or therein, in light of the circumstances in which made, not
misleading.
3.13. Brokers or Finders. No Person has or will have, as
a result of the transactions contemplated by this Agreement, any
right, interest or valid claim against or upon the Company for any
commission, fee or other compensation as a finder or broker because
of any act or omission by the Company or its respective agents.
3.14. Capitalization; Status of Capital Stock. As of the
Closing, the Company capitalization (including all outstanding
options, warrants, rights, and convertible securities) will be as
set forth in Exhibit 3.14 hereto. The Shares when issued and
delivered in accordance with the terms hereof. None of the
Company's outstanding securities or authorized capital stock or the
Shares are subject to any rights of redemption, repurchase, rights
of first refusal, preemptive rights or other similar rights,
whether contractual, statutory or otherwise, for the benefit of the
Company, any stockholder, or any other Person. There are no
restrictions on the transfer of shares of capital stock of the
Company other than those imposed by relevant federal and state
securities laws. The offer and sale of all capital stock and other
securities of the Company issued before the Closing complied with
or were exempt from all applicable federal and state securities
laws and no stockholder has a right of rescission or damages with
respect thereto.
3.15. Insurance. The Company carries insurance covering
its properties and business adequate and customary for the type and
scope of the properties, assets and business, and similar to
companies of comparable size and condition similarly situated in
the same industry in which the Company operates, but in any event
in amounts sufficient to prevent the Company from becoming a
co-insurer or self-insurer, with provision for reasonable
deductibles.
3.16. Books and Records. The books of account, ledgers,
order books, records and documents of the Company accurately and
completely reflect all material information relating to the
business of the Company, the location and collection of its assets,
and the nature of all transactions giving rise to the obligations
or accounts receivable of the Company.
3.17. Environmental and Safety Laws. To the best of the
Company's knowledge after due investigation, it is not in violation
of any applicable statute, law or regulation relating to the
environment or occupational safety and health, and to the best of
its knowledge after due investigation, no material expenditures
will be required in order to comply with any such statute, law or
regulation.
ARTICLE IV
MISCELLANEOUS
4.01. Amendments, Waivers and Consents. Any provision in
the Agreement to the contrary notwithstanding, and except as
hereinafter provided, changes in, termination or amendments of or
additions to this Agreement may be made, and compliance with any
covenant or provision set forth herein may be omitted or waived,
upon the written agreement of the parties hereto. Any waiver or
consent may be given subject to satisfaction of conditions stated
therein and any waiver or consent shall be effective only in the
specific instance and for the specific purpose for which given.
4.02. Survival of Representations and Warranties. All
representations and warranties made in this Agreement, the Shares,
or any other instrument or document delivered in connection
herewith or therewith, shall survive the execution and delivery
hereof or thereof.
4.03. Governing Law. This Agreement shall be governed by,
and construed in accordance with, the internal laws of the State of
Delaware, and without giving effect to choice of laws provisions.
4.04. Counterparts. This Agreement may be executed in any
number of counterparts, all of which taken together shall
constitute one and the same instrument, and any of the parties
hereto may execute this Agreement by signing any such counterpart.
IN WITNESS WHEREOF, the parties hereto have caused this Stock
Purchase Agreement to be executed as of the date first above
written.
KNOWLEDGE SOLUTIONS, INC. SAFEGUARD SCIENTIFICS
(DELAWARE), INC.
By: S/ Frank R. McPike, Jr. By: S/ Donald R. Caldwell
Title: Vice President Title: President
COMPETITIVE TECHNOLOGIES, INC.
By: S/ George M. Stadler
Title: President DONALD BERMAN
Exhibit 11.1
COMPETITIVE TECHNOLOGIES, INC.
Schedule of Computation of Earnings Per Share
Year ended July 31,
1995 1994 1993
Loss from continuing operations (641,249) (828,996) (1,446,811)
Income (loss) from operations of
discontinued operations 99,468 (10,786) (449,724)
Net gain (loss) on disposal of
discontinued operations 2,534,505 221,852 (9,314)
Net income (loss) applicable to
common stock 1,992,724 (617,930) (1,905,849)
Common and common equivalents shares -
primary:
Weighted average common shares
outstanding 5,805,833 5,761,610 5,478,082
Adjustments for assumed exercise
of stock options 5,986 7,838 * 32,382 *
Adjustments for assumed exercise
of stock warrants 3,007 4,274 * 20,443 *
Weighted average number of common and
common equivalent shares out-
standing 5,814,826 5,773,722 5,530,907
Common and common equivalent shares -
fully diluted:
Weighted average common shares
outstanding 5,805,833 5,761,610 5,478,082
Adjustments for assumed exercise of
stock options 5,986 14,341 * 32,382 *
Adjustments for assumed exercise of
stock warrants 3,007 8,500 * 20,443 *
Weighted average number of common and
common equivalent shares out-
standing 5,814,826 5,784,451 5,530,907
Net income (loss) per share of common
stock - primary and fully diluted:
Continuing operations (0.11) (0.15) (0.27)
Operations of discontinued operation 0.02 (0.00) (0.08)
Disposal of discontinued operations 0.43 0.04 (0.00)
Net income (loss) per share of
common stock 0.34 (0.11) (0.35)
* Anti-dilutive.
These calculations are submitted in accordance with the requirements of
Regulation S-K item 601 (b) (11) which differ from the requirements of
paragraph 40 of Accounting Principles Board Opinion No. 15 and produce an
anti-dilutive result.
Exhibit 21.1
COMPETITIVE TECHNOLOGIES, INC.
Subsidiaries of the Registrant
(omitting subsidiaries which do
not constitute significant
subsidiaries)
University Optical Products Co. (Delaware)
Competitive Technologies of PA, Inc. (Pennsylvania)
Exhibit 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the registration
statements of Competitive Technologies, Inc. on Forms S-8 and the
related prospectuses (No. 2-69835 and No. 33-87756) pertaining to
the Key Employees' Stock Option Plan, on Form S-8 and the related
prospectus (No. 33-10528) pertaining to the Key Employees' Stock
Option Plan and the Directors' Stock Participation Plan, on Form S-
8 and the related prospectus (No. 33-44612) pertaining to the Key
Employees' Stock Option Plan, Directors' Stock Participation Plan
and Employees' Common Stock Retirement Plan and on Form S-8 and the
related prospectus (No. 33-48081) pertaining to Common Stock
Purchase Warrants dated October 22, 1990 of our report dated
September 29, 1995, on our audits of the consolidated financial
statements of Competitive Technologies, Inc. and Subsidiaries as of
July 31, 1995 and 1994 and for each of the three years in the
period ended July 31, 1995, which report is included in this Annual
Report on Form 10-K.
S/ Coopers & Lybrand L.L.P.
COOPERS & LYBRAND L.L.P.
Stamford, Connecticut
October 26, 1995
Exhibit 23.2
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the registration
statements of Competitive Technologies, Inc. on Forms S-8 and the
related prospectuses (No. 2-69835 and No. 33-87756) pertaining to
the Key Employees' Stock Option Plan, on Form S-8 and the related
prospectus (No. 33-10528) pertaining to the Key Employees' Stock
Option Plan and the Directors' Stock Participation Plan, on Form S-
8 and the related prospectus (No. 33-44612) pertaining to the Key
Employees' Stock Option Plan, Directors' Stock Participation Plan
and Employees' Common Stock Retirement Plan and on Form S-8 and the
related prospectus (No. 33-48081) pertaining to Common Stock
Purchase Warrants dated October 22, 1990 of our report dated
October 16, 1995, on our audit of the financial statements of
Knowledge Solutions, Inc. as of June 30, 1995 and for the year
ended June 30, 1995, which report is included in this Annual Report
on Form 10-K.
S/ Coopers & Lybrand L.L.P.
COOPERS & LYBRAND L.L.P.
Stamford, Connecticut
October 26, 1995
Exhibit 24.1
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned,
COMPETITIVE TECHNOLOGIES, INC., a Delaware corporation (the
"Company"), and each of the undersigned directors and officers of
the Company, does hereby constitute and appoint George M. Stadler,
and Frank R. McPike, Jr., and each of them severally, the true and
lawful attorneys and agents of the undersigned, each with full
power to act without any other and with full power of substitution
and resubstitution, to do any and all acts and things and to
execute any and all instruments which said attorneys and agents may
deem necessary or desirable to enable the Company to comply with
the Securities Exchange Act of 1934, as amended (the "Act"), and
any rules, regulations and requirements of the Securities and
Exchange Commission thereunder in connection with the filing under
the Act of the Company's Annual Report on Form 10-K for fiscal year
ended July 31, 1995, and all related matters, including
specifically, but without limiting the generality of the foregoing,
power and authority to sign the name of the Company and the names
of the undersigned directors and officers in the capacities
indicated below to the Form 10-K to be filed with the Securities
and Exchange Commission, and to any and all amendments to said Form
10-K, and to any and all instruments or documents filed as part of
or in connection with any of the foregoing and any and all
amendments thereto; and each of the undersigned hereby ratifies and
confirms all that said attorneys and agents, or any of them, shall
do or cause to be done by virtue hereof.
This Power of Attorney may be executed in one or more
counterparts, each of which shall be deemed an original, but all of
which, when taken together, shall be and constitute one instrument.
IN WITNESS WHEREOF, each of the undersigned has subscribed
these presents this 26th day of October, 1995.
COMPETITIVE TECHNOLOGIES, INC.
By: S/ George M. Stadler
George M. Stadler
President
ATTEST:
By: S/ Frank R. McPike, Jr.
Frank R. McPike, Jr.
Secretary
Capacities Signatures
President and Director
(Principal Executive Officer) S/ George M. Stadler
George M. Stadler
Vice President, Finance,
Treasurer, Secretary and Director
(Principal Financial and
Accounting Officer) S/ Frank R. McPike, Jr.
Frank R. McPike, Jr.
Director
A. Sidney Alpert
Director S/ Michael G. Bolton
Michael G. Bolton
Director S/ Bruce E. Langton
Bruce E. Langton
Director S/ H.S. Leahey
H.S. Leahey
Director
Arthur M. Lieberman
Director S/ David Tobey
David Tobey
Director S/ Harry Van Benschoten
Harry Van Benschoten
<TABLE> <S> <C>
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<NAME> COMPETITIVE TECHNOLOGIES, INC.
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<PERIOD-END> JUL-31-1995
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