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 [No Fee Required]
For the fiscal year ended July 31, 1996.
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 until November 7, 1996)
offices until November 7, 1996)
1960 Bronson Road
P.O. Box 340
Fairfield Connecticut 06430
(Address of principal executive (Zip Code effective November 8, 1996)
offices effective November 8, 1996)
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 52.
Page 1 of 111 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 21, 1996, 5,800,086 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
$65,976,000.
DOCUMENTS INCORPORATED BY REFERENCE
Incorporated Document Location in Form 10-K
Registrant's definitive proxy Part III
statement for its 1996 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 corporations, to federal
agencies and laboratories, and to universities 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.
On January 31, 1996, UPAT Services, Inc. ("USI"), a wholly-owned
subsidiary of CTI, purchased the partnership interests of the other
limited partners in USET Acquisition Partners, L. P. ("UAP") and
thereby acquired 100% of USET Holding Co. ("Holding") and University
Science, Engineering and Technology, Inc. ("USET"). The total
purchase price was $1,835,000 with $500,000 paid in cash at the
closing and the balance to be paid without interest on each succeeding
January 31 in installments equal to 60% of USET's earned revenues for
the preceding calendar year or the remaining unpaid balance of the
purchase price, whichever is less. This transaction is more fully
described in Note 2 to Consolidated Financial Statements. Effective
January 31, 1996, CTI began to account for UAP, Holding and USET as
consolidated subsidiaries. Accordingly, their results of operations
have been included in consolidated results of operations from January
31, 1996. Through January 31, 1996, CTI accounted for its investment
in UAP, Holding and USET on the equity method and recorded 20% of
their net income.
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.
The aggregate number of persons employed full-time by the
registrant and its subsidiaries on October 1, 1996 was approximately
24. Substantially all employees are salaried and none is represented
by a labor union. Certain of these employees also perform services
for Knowledge Solutions, Inc.
Technology Management Services
Technology Transfer Services
To Universities
The registrant and its subsidiaries, Competitive Technologies of
PA, Inc. ("CTI-PA"), USET and Competitive Technologies of Ohio, Inc.
(formerly CTI-Intercorporate Licensing, Inc.) ("CTI-OH"), provide
technical evaluation, patent and market assessment, patent application
and prosecution, patent enforcement, 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 institu-
tions, 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.
Retained royalty revenues for the registrant and its subsidiaries
in the last five years were derived from the following portfolios (in
thousands):
1996 1995 1994 1993 1992
The USET portfolio:
Registrant's
share $ 972 $ 752 $ 671 $ 618 $ 504
USET's share 611 -- -- -- --
The CTI-PA
portfolio $ 37 44 47 33 --
$1,620 $ 796 $ 718 $ 651 $ 504
In addition to retained royalties earned from services to
university clients, CTI-PA earned approximately $59,000, $44,000,
$39,000 and $25,000 under service contracts to provide technology
management and related services to Lehigh University for the years
ended July 31, 1996, 1995, 1994 and 1993, respectively. (References
herein to years are to fiscal years ended July 31, unless the context
otherwise requires.)
Effective January 31, 1996, in a transaction more fully detailed
in Note 2 to Consolidated Financial Statements, a wholly-owned
subsidiary of the registrant became the sole owner of USET, Inc.
Since February 1, 1996, the registrant has managed USET as a wholly-
owned subsidiary.
Between 1991 and effective until January 31, 1996, as a result
of various agreements made by the registrant and USI, the registrant
managed 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 and USET each retains 20% of
royalties received from licensees although individual amounts range
from 4% to 28%. In addition, the registrant and USET each share 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 was obligated to pay Macmillan, Inc. 90% of its royalties
earned in excess of $400,000 per year through August 31, 1995, up to
an aggregate maximum of $3,750,000 (as specifically set forth in the
purchase agreement with Macmillan, Inc. dated August 20, 1990).
Through July 31, 1996, USET had made contingent payments due which
totaled $982,000. Contingent purchase price payments may be required
during 1997 because USET has not yet received all royalties earned
through August 31, 1995 as defined in the purchase agreement. Such
expected payments during 1997 were accrued at January 31, 1996.
Prior to February 1, 1996, USI was the general partner and owned
20% of UAP. UAP owned 100% of the outstanding shares of USET Holding
Co. which owned 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 between the registrant and USET 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 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 3 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 retained royalties equal
to or exceeding 10% of consolidated revenue for the registrant and its
subsidiaries during 1996, 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 $289,000 (18%), $159,000 (20%) and
$150,000 (21%) of total retained royalties in 1996, 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. The registrant does not expect the
impact on fiscal 1997 to be material since license agreements provide
for royalties to be paid on their respective product sales until the
last licensed patents expire. These assay procedures are licensed to
Abbott Laboratories, Bayer Corporation, Bio-Rad Laboratories, Inc.,
Ciba-Corning Diagnostics Corporation, Dade International, Inc.,
Diagnostic Products Corporation, ICN Biomedicals, ICN Pharmaceuticals,
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 $562,000 (35%), $288,000 (36%) and $260,000
(36%) of total retained royalties in 1996, 1995 and 1994, respective-
ly.
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 throughout the world. During 1996
and 1995 the registrant made agreements with five and two additional
universities, respectively, 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
$351,000 (53%), $634,000 (70%) and $121,000 (49%) of revenues earned
under service contracts and grants in 1996, 1995 and 1994, respective-
ly.
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. Work on the contract began in February, 1995, and is
expected to continue through November, 1996. Through July 31, 1996,
the registrant had earned and recognized approximately $754,000 of
revenue on this contract of which approximately $435,000 was paid or
payable to subcontractors. The remaining approximately $46,000 of
revenue under this contract is expected to be earned in the first four
months of fiscal 1997. 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
$96,000, $106,000 and $114,000 under one of these subcontracts in
1996, 1995 and 1994, respectively. This subcontract runs through
April 30, 1997. Since the Federal agency will not be funding the
Lehigh University contract, Lehigh University is seeking other funding
for its project. CTI-PA's potential subcontract after April 30, 1997
depends upon whether other funding can be obtained in amounts
sufficient for Lehigh University to renew CTI-PA's subcontract.
In March, 1996, Vector Vision, Inc. ("VVI"), the registrant's
51.5% owned subsidiary, was awarded a Small Business Innovation
Research ("SBIR") fixed price contract totaling $99,000 for six months
of research on robust video coding techniques for wireless video
communications. Approximately $63,000 of this contract was earned and
recorded during 1996; the remainder is expected to be completed in the
first quarter of 1997.
The registrant and its subsidiaries continue to submit proposals
for technology transfer and other research services to Federal
agencies and laboratories. However, 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 $155,000 $29,000 and $18,000 in 1996, 1995 and 1994, respec-
tively. The registrant and its subsidiaries have served several
corporate clients during 1996 and have agreements to provide
technology management services in 1997.
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 four rounds of
financing (see Note 4 to Consolidated Financial Statements) which
generated $465,000 in equity and $100,000 in debt funding for KSI.
In addition, KSI received a $75,000 grant to support its development
activities. At July 31, 1996, the registrant owned 33.7% of KSI's
outstanding common stock. Through July 31, 1996, the registrant had
recorded a total of $241,000 as its equity in the losses of KSI during
the development of KSI's first products. Both the registrant and
KSI's other major shareholder expect KSI to support its continuing
operation either from sales of its products or from contracts to
develop other multimedia training products, but there can be no
assurance that these expectations will be realized.
In 1994 the registrant established a majority-owned subsidiary,
VVI, to develop and exploit a video compression technology developed
at Lehigh University. Research and development expenditures (included
in costs of technology management services in the Consolidated
Financial Statements) of approximately $64,000, $86,000 and $36,000
were incurred by VVI in 1996, 1995 and 1994, respectively. Since its
inception VVI has obtained $72,000 in equity funding, $49,000 in grant
funding and $63,000 in a Small Business Innovation Research contract.
VVI is obligated to repay up to three times total grant funds received
(see Note 14 to Consolidated Financial Statements). At July 31, 1996,
the registrant owned 51.5% of VVI's outstanding common stock. VVI's
minority shareholders are or were employees of VVI or CTI-PA. Unless
VVI obtains additional financing, it will not be able to continue
development of its video compression technology. VVI continues its
quest to become the video compression standard for telecommunications.
CTI-PA continues to seek 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 marketed in EBI's first month of operations. The
registrant had recorded equity in EBI's net income of $82,000 from
inception through July 31, 1996. At July 31, 1996, 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 $6,942,000 for
the fiscal year ended July 31, 1996. 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 sale.
After the sale the registrant continued to own 14.5% of UCI's
outstanding common stock. See Note 16 to Consolidated Financial
Statements.
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, the registrant
sold part of its investment in Plasmaco in 1995 and the remainder in
1996 and recorded gains totaling $105,000 on these sales.
Special Factors
Losses During Past Fiscal Years. On a consolidated basis the
registrant incurred net losses from continuing operations of $588,000,
$641,000 and $829,000 in 1996, 1995 and 1994, 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 in 1994. 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 on its sale of the assets of its optical products segment to
Unilens in 1994. The registrant's operating activities used
$1,228,000, $40,000 and $475,000 in 1996, 1995 and 1994, respectively.
The registrant's investing and financing activities provided
$1,452,000 in 1996 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 its subsidiaries share in royalties received from
licensees, the revenues from such licensees are dependent upon the
efforts and expenditures of such licensees. Retained royalties were
71%, 47% and 75% of the registrant's consolidated total revenues in
1996, 1995 and 1994, 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 may be declared invalid, that
patents may not issue on patent applications, or that new or
alternative technologies may render licensed patents uncommercial.
In addition, upon expiration of all patents underlying a patent
license, royalties to the registrant from such license will cease, and
there can be no assurance that the registrant will be able to replace
such royalties with royalty revenues from other licenses.
Risks Pertaining to Contracts with Federal Agencies and
Laboratories. To the extent that the registrant and its subsidiaries
earn revenues under contracts and subcontracts from agencies or
laboratories 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 15%, 37% and 13% of the registrant's consolidated
total revenues in 1996, 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, there can be no
assurance that they will be renewed. Although the registrant and its
subsidiaries continue to propose on such contracts as 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 22 years of experience in technology management
and commercialization and has been its president since September,
1992. Mr. McPike has been with the registrant for 13 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.
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, were reclassified to present UCI's net assets and the
registrant's equity in UCI's net results of operations as a discontin-
ued 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 in 1994. 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 were $2,764,000, for the six and one-half months
ended February 15, 1995 (date of sale) and $3,753,000 in 1994. UCI
markets its interactive courseware throughout the United States
principally 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.
Item 2. Properties
From August, 1996, through October, 1996, the registrant's
principal executive offices occupy approximately 1,900 square feet in
Westport, Connecticut under a temporary extension with its former
lessor.
Beginning in November, 1996, the registrant and USET expect to
occupy approximately 7,800 square feet in an office building in
Fairfield, Connecticut under a lease which expires December 31, 2001.
The registrant has an option to renew the lease through December 31,
2006.
Subsidiaries of the registrant have offices in Bethlehem,
Pennsylvania and Cleveland, Ohio under operating leases.
The registrant believes that these facilities are adequate for
its current and near-term operations.
Item 3. Legal Proceedings
On November 4, 1991 a 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. Hearings in the case have commenced before an attorney
referee; however, due to scheduling conflicts, further hearings have
been adjourned to a later unspecified date.
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 49 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. 47 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, 1996 High Low
First Quarter.................... 8 7/8 5 3/8
Second Quarter................... 13 3/4 7 1/2
Third Quarter.................... 12 5/8 9 3/4
Fourth Quarter................... 12 7/8 9
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
No cash dividends were declared on the registrant's common stock
during the last two fiscal years.
At October 21, 1996 there were approximately 1,045 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
1996 (3) 1995 1994 1993 1992
<S> <C> <C> <C> <C> <C>
Retained royalties $ 1,619,909 $ 796,243 $ 717,514 $ 650,651 $ 504,143
Revenues under service
contracts and grants 660,287 906,952 245,264 84,470 --
Total revenues $ 2,280,196 $ 1,703,195 $ 962,778 $ 735,121 $ 504,143
Loss from continuing
operations (2) $ (588,101) $ (641,249) $ (828,996) $(1,446,811) $ (690,697)
Income (loss) from operations
of discontinued operation -- 99,468 (10,786) (449,724) (476,318)
Net gain (loss) on disposal
of discontinued operations -- 2,534,505 221,852 (9,314) 180,504
Net income (loss) $ (588,101) $ 1,992,724 $ (617,930) $(1,905,849) $ (986,511)
Net (loss) income per share
of common stock:
Continuing operations $ (0.10) $ (0.11) $ (0.15) $ (0.27) $ (0.13)
Operations of discontinued
operation -- 0.02 -- (0.08) (0.09)
Net gain (loss) on disposal of
discontinued operations -- 0.43 0.04 -- 0.03
Net income (loss) $ (0.10) $ 0.34 $ (0.11) $ (0.35) $ (0.19)
Weighted average number of
common and common equivalent
shares outstanding 5,853,814 5,814,826 5,761,610 5,478,082 5,170,041
At year end:
Cash, cash equivalents
and short-term investments $ 4,381,630 $ 4,957,143 $ 1,939,525 $ 873,508 $ 922,034
Total assets $ 8,368,140 $ 6,768,942 $ 4,766,745 $ 4,454,778 $ 2,914,518
Long-term obligations $ 652,367 $ -- $ -- $ -- --
Shareholders' interest $ 6,287,952 $ 6,289,524 $ 4,149,775 $ 4,133,093 $ 2,486,255
</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 $34,000, ($104,000), $20,000, ($1,013,000) and ($286,000)
in 1996, 1995, 1994, 1993 and 1992, respectively, and gain on issuance of
shares by subsidiary of $233,000 and $44,000 in 1993 and 1992,
respectively.
(3) Includes results of USET's operations on a consolidated basis for the six
months from January 1, 1996 through July 31, 1996 (see Note 2 to
Consolidated Financial Statements).
(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
Cash and cash equivalents of $560,640 at July 31, 1996 are
$224,542 higher than cash and cash equivalents of $336,098 at July 31,
1995. Operating activities used $1,227,743, investing activities
provided $996,649 and financing activities provided $455,636 in the
year ended July 31, 1996.
Competitive Technologies, Inc. ("CTI") and its majority-owned
subsidiaries' ("the Company") loss from continuing operations of
$588,101 for the year ended July 31, 1996 included the following
noncash items: depreciation and amortization of approximately
$273,000, income related to equity method affiliates of approximately
$34,000, amortization of discount on purchase obligation of approxi-
mately $57,000 and accrued expenses of approximately $145,000.
In general, changes in various operating accounts result from
changes in the timing and amounts of cash flows before and after the
end of the period. The most substantial change in operating accounts
was the $724,088 increase in receivables of which $767,319 was the
increase in royalties receivable resulting from consolidating
University Science, Engineering and Technology, Inc. ("USET") at July
31, 1996.
Proceeds from sales of short-term investments of approximately
$3,695,000 are principally from the Company's sales of U.S. government
debt securities and principal redemptions by obligors of mortgage
backed securities. The Company reinvested $2,831,000 in U.S.
government debt securities.
In January, 1996, CTI received $96,907 in cash for the sale of
its remaining interest in Plasmaco, Inc. Since CTI's investment in
Plasmaco, Inc. was carried at no value, the $96,907 gain was included
in other income.
On January 31, 1996, the Company purchased the remaining
interests in USET. The total purchase price was $1,835,000 (excluding
expenses related to the acquisition) with $500,000 paid in cash at the
closing and the balance to be paid without interest on each succeeding
January 31 in installments equal to 60% of USET's gross retained
earned revenues for the preceding calendar year or the remaining
unpaid balance of the purchase price, whichever is less. However, if
any annual 60% installment would be less than $400,000, that
installment shall be equal to the lesser of $400,000 or 80% of USET's
gross retained earned revenues. CTI has guaranteed the payment of
these installments when due. The Company expects the January 31, 1997
payment to be approximately $550,000 funded substantially from USET's
operations during the previous calendar year.
After the purchase, the Company owns 100% of USET. At January
31, 1996, in addition to cash of approximately $605,000 and computer
equipment, USET's assets consisted principally of licenses and
patented technologies, the fair value of which is being amortized on
a straight-line basis over their estimated remaining lives (approxi-
mately 13 years). The Company accounted for the acquisition under the
purchase method and recorded the estimated present value of the
purchase obligation using a 10% discount rate. See Note 2 to
Consolidated Financial Statements.
In addition to the present value of the purchase obligation
totaling $1,202,367, the significant effects on the Company's
financial condition at July 31, 1996 as a result of consolidating USET
include: increasing cash and royalties receivable for the gross
amount of royalties received or receivable from licensees, recognizing
the cost of intangible assets acquired (principally licenses and
patented technologies) and recording the liability for the portion of
royalties collected or collectible from licensees but due and payable
to the university sources of those technologies.
In August, 1995, CTI formed a wholly-owned subsidiary, Competi-
tive Technologies of Ohio, Inc. (formerly CTI-Intercorporate
Licensing, Inc.) ("CTI-OH") to provide licensing and technology
management services to corporations, universities and other organiza-
tions which can be served from its Cleveland, Ohio base. CTI
accounts for CTI-OH as a consolidated subsidiary and CTI-OH's results
of operations since August 1, 1995, are included in the consolidated
results of operations.
During 1996 CTI received $426,886 from employees exercising stock
options to purchase 72,000 shares of common stock at prices from $4.75
to $6.875. In addition, CTI received $28,750 in August, 1995, from
the exercise of a warrant granted in August, 1990, to purchase 5,000
shares of common stock at $5.75 per share.
On December 31, 1995, CTI loaned $50,000 to Knowledge Solutions,
Inc. ("KSI"), its 33.7% owned equity affiliate, pursuant to a secured
convertible term promissory note bearing interest at the prime rate
plus one per cent and payable on or before December 31, 1996. Under
the terms of a related security agreement, KSI pledged all its
software, furniture, fixtures and equipment as collateral for this
loan. The outstanding principal balance of this note is convertible
into shares of KSI's Class A common stock at $.80 per share at CTI's
option. CTI's loan is subordinate to an otherwise identical $50,000
secured convertible loan from Safeguard Scientifics, Inc., the
unaffiliated majority shareholder of KSI.
The Company carries liability insurance, directors' and officers'
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, 1996, the Company had no outstanding commitments for
capital expenditures other than the obligations incurred in connection
with the purchase of USET.
The Company continues to pursue additional university and
corporate technology management opportunities. If and when these
opportunities are consummated, the Company expects to commit capital
resources to these operations.
The Company does not believe that inflation had a significant
impact on its operations during 1996 or 1995 or that it will have a
significant impact on operations during the next twelve-month
operating period.
Vector Vision, Inc. ("VVI"), CTI's 51.5% owned subsidiary,
continues to seek additional financing to support its continuing
development. Without additional outside financing, VVI's development
activities will proceed at a minimum level. The Company is not
obligated to provide additional funding to VVI. In April, 1996, VVI
began working under a Small Business Innovation Research award
totaling $99,000. Approximately $63,000 of this contract was earned
and recorded during 1996; the remainder is expected to be completed
in the first quarter of 1997.
With more than $4,380,000 in cash, cash equivalents and short-
term investments at July 31, 1996, the Company anticipates that
currently available funds will be sufficient to finance cash needs
over the next two to four years for its current operating activities
as well as for expansion of its technology management business
operations, including related investments in start-up companies. This
anticipation is based upon the Company's current expectations.
However, expansion of the Company's services and related investments
in start-up companies (with resulting increases in operating expenses)
is 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 - 1996 vs. 1995
The results of operations presented in the accompanying financial
statements present University Communications, Inc.'s ("UCI") results
of operations as a discontinued operation for all periods prior to
February 15, 1995. See Note 16 to Consolidated Financial Statements.
Through January 31, 1996, the Company accounted for its investment in
USET on the equity method and recorded 20% of its net income. The
Company has consolidated USET's results of operations for all periods
since February 1, 1996.
Consolidated revenues for the year ended July 31, 1996, were
$577,001 (34%) higher than for the year ended July 31, 1995.
Excluding USET's effect, retained royalties were $212,636 (27%) higher
than in 1995 principally because of up-front license fees for a plasma
display energy recovery technology and an increased minimum payment
on a technology in development. The consolidation of USET's retained
royalties since February 1, 1996 increased retained royalties by
$611,031. USET's royalties are expected to be approximately equal to
CTI's in any given period.
The Company's retained royalties from its Vitamin B12 assay were
approximately $562,000 (35%) and $288,000 (36%) of total retained
royalties in 1996 and 1995, respectively. Its retained royalties from
the gallium arsenide semiconductor inventions were approximately
$289,000 (18%) and $159,000 (20%) of total retained royalties in 1996
and 1995. No other technologies produced retained royalties equal to
or greater than 10% of consolidated revenue in 1996 or 1995. See Note
6 to Consolidated Financial Statements. The Company expects to
receive increased royalties from U.S. sales of two technologies
recently approved by the U.S. Food and Drug Administration, Ethyol and
Renova (Retin-A). Ethyol is U.S. Bioscience, Inc.'s chemo-radiother-
apy protective agent to protect patients against the harmful effect
of X-radiation. Renova is Johnson & Johnson's prescription skin cream
to reduce fine wrinkles, brown spots and surface roughness associated
with chronic sun exposure and the natural aging process. However, in
both cases the Company's royalty interest is indirect through other
licensors which may delay receipts of royalties for some months. In
addition, the Company has agreed to pay certain persons specified
percentages of Retin-A royalties received until certain total payments
have been made. At July 31, 1996, the remaining amount of such
contingent payments was $182,164.
Revenues under service contracts were $660,287 in 1996, $169,654
(21%) lower than in 1995. CTI's contract with the Department of the
Air Force which began in February, 1995, generated $254,000 in
contract revenues in 1996 compared with $500,000 in 1995. This
$246,000 reduction reflects substantially lower activity as the
Company approaches completion and delivery under the contract in
November, 1996. This and other reductions for certain service
contracts, some of which were nonrecurring, were partially offset by
more than $155,000 of contract revenues for various intercorporate
patent and licensing services in 1996. In April 1996, VVI began
working under a Small Business Innovation Research award totaling
$99,000. Approximately $63,000 of this contract was earned and
recorded during 1996; the remainder is expected to be completed in the
first quarter of 1997.
Grant revenues in 1996 were the $7,784 remaining from the grant
in support of VVI's development activities. Grant revenues in 1995
included approximately $36,000 on Competitive Technologies of PA,
Inc.'s ("CTI-PA") grant and $25,000 from the grant to VVI. In
consideration of their grant funding, CTI-PA and VVI are obligated to
repay from certain revenues up to three times total grant funds (see
Note 14 to Consolidated Financial Statements).
Costs of technology management services were $517,737 (39%)
higher in 1996 than in 1995 as more fully discussed below.
Costs related to retained royalties were $514,000 higher in 1996
than in 1995. The increase in these costs resulted from higher
domestic and foreign patent expenses associated with the USET
portfolio, consolidation of USET's operations for six months in 1996,
and additional expenses related to intercorporate licensing services.
These costs include domestic and foreign patent prosecution,
maintenance and litigation expenses. 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 continue to increase during fiscal
1997 as it expands its technology management services to corporations
and universities.
Costs related to service contracts (including direct charges for
subcontractors' services and employees' salaries, benefits and
overheads for services provided in connection with the related
contracts) were $132,000 lower than in 1995. CTI's contract with the
Department of the Air Force is responsible for a reduction of
approximately $168,000 which was offset by increased costs for various
intercorporate patent and licensing contract services in 1996.
Costs related to grant revenues decreased approximately $77,000
in proportion to the reduction in grant revenues.
Costs associated with new client development (principally
personnel costs) increased $212,000 over 1995. The Company's
personnel added during 1996 have not only identified new service
opportunities but they have developed several of them into agreements
with clients for services during 1996 and 1997. The time from initial
contact to signed service agreement varies substantially. The Company
expects this process to continue to generate additional service and
royalty revenues for the future.
General and administration expenses were $252,198 (25%) higher
in 1996. Although USET's operations added some general and adminis-
tration expenses, most of this increase occurred in the first and
fourth quarters of 1996 and is directly related to additional
personnel and related expenses, as well as higher shareholder
relations and other operating expenses supporting the Company's
ongoing operations. As the Company continues to develop its domestic
and international intercorporate licensing and contract services
operations, it expects these expenses to continue to increase. In
July, 1996, CTI obtained directors' and officers' liability insurance
which will add $75,000 of expenses in 1997. In addition, with the
expiration of its corporate office lease in August 1996 and a new
five-year office lease beginning in November 1996, the Company expects
to incur relocation expenses in the first half of fiscal 1997 and
higher office rental expenses beginning in the first half of fiscal
1997. Annual rent under the new lease, without reduction for expected
sublease rentals, is $180,000 beginning January 1, 1997. However, the
Company expects to reduce rent expense upon completion of subleases
currently being negotiated. Net rent expense under the old lease was
approximately $39,000 in 1996.
The net effect of the increases in operating revenues and
expenses was to increase the Company's operating loss by $192,934
(31%).
Interest income increased $57,227 (38%) primarily due to higher
average invested balances in 1996. Interest expense of $57,258 in
1996 relates to the debt incurred in connection with the acquisition
of USET.
In 1996, net income related to equity method affiliates included
USI's 20% equity in the net income of UAP ($30,000), CTI's equity in
the net loss of KSI ($70,000) and CTI's equity in the net income of
Equine Biodiagnostics, Inc. ("EBI") ($76,000). At July 31, 1996, CTI
owned 33.7% of the outstanding common stock of KSI and has loaned KSI
$50,000 under a subordinated secured convertible note (see Note 4 to
the accompanying financial statements), but has no further obligation
to provide additional funding to KSI. CTI's investment in KSI has
been reduced to zero. In 1995, losses related to equity method
affiliates included CTI's equity in the loss of KSI ($157,000), USI's
20% equity in the net income of UAP ($47,000) and CTI's equity in the
net income of EBI ($6,000) for four months of operations.
Included in other income for both 1996 and 1995 are $62,000 and
$60,000 gains realized by CTI on its sale of available-for-sale
securities offset by legal expenses of $80,000 and $132,000 in 1996
and 1995, respectively, 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. Hearings in the case have commenced
before an attorney referee; however, due to scheduling conflicts,
further hearings have been adjourned to a later unspecified date.
Through July 31, 1996, 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, CTI paid a
4% commission to OALP, its joint venture partner. CTI is unable to
estimate the related legal expenses which may be incurred in 1997.
Unilens made no payments in 1996 or 1995. Since CTI carries this
receivable at zero value, any collections will be recorded in the
period collected.
Minority interest in the losses of subsidiaries in 1995 of
$23,112 was VVI's minority shareholders' interest in its losses. The
minority interest in VVI's losses is limited to the minority's
interest in VVI's outstanding common stock. Unless VVI obtains
additional external equity financing, no further losses may be charged
to VVI's minority interest.
The Company has substantial net operating loss carryforwards for
Federal income tax purposes. These may not be used to reduce future
taxable income of USET. However, so long as the Company's other
operations generate current taxable losses equal to USET's current
taxable income, Federal income taxes payable can be minimized. The
Company is likely to pay higher state income taxes because those
current taxable losses will probably be generated in states where USET
has no operations. Provision was made in each year for estimated
state income taxes.
The Company will adopt Statement of Financial Accounting
Standards No. 123, "Accounting for Stock-Based Compensation,"
effective August 1, 1996 and disclose the pro forma effects fair value
accounting would have on net income and earnings per share (see Note
1 to Consolidated Financial Statements). The Company does not expect
adoption to have a material effect on its financial statements.
The Company does not expect adoption of Statement of Financial
Accounting Standards No. 121, "Accounting for the Impairment of Long-
lived Assets and for Long-lived Assets to be Disposed of," effective
August 1, 1996 to have a material effect on its financial statements
(see Note 1 to Consolidated Financial Statements).
Results of Operations - 1995 vs. 1994
The results of operations for fiscal 1994 presented in the
accompanying financial statements present UCI's results of operations
as a discontinued operation. See 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.
Revenues earned under other services contracts also increased in 1995.
Grant revenues in 1995 totaled $85,000 including the remaining
approximately $36,000 on CTI-PA's grant and $49,000 from a grant to
VVI.
Costs of technology management services were $692,000 (109%)
higher than in 1994. Costs related to retained royalties were
$114,000 (42%) lower in 1995 than in 1994. Costs related to service
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. Costs associated
with new client development (principally personnel costs) increased
$112,000 (85%) over 1994. 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 $321,000 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.
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), USI's 20% equity in
the net income of UAP ($47,000) and CTI's equity in the net income of
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 the suit discussed in Note 16 to
Consolidated Financial Statements. 1994 includes $38,000 proceeds in
excess of the fair value assigned to the installment obligation
receivable from Unilens Corp. USA ("Unilens").
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.
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 CTI's equity was in UCI's net loss for the full year.
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.
Item 8. Financial Statements and Supplementary Data
Page
Report of Independent Accountants 26
Consolidated Balance Sheets 27-28
Consolidated Statements of Operations 29-30
Consolidated Statements of Changes
in Shareholders' Interest 31
Consolidated Statements of Cash Flows 32-33
Notes to Consolidated Financial Statements 34-49
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, 1996
and 1995, 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, 1996. 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
audits 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, 1996
and 1995, and the results of their operations and their cash flows for
each of the three years in the period ended July 31, 1996, in
conformity with generally accepted accounting principles.
Coopers & Lybrand L.L.P.
September 30, 1996
Stamford, Connecticut
COMPETITIVE TECHNOLOGIES, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
July 31, 1996 and 1995
ASSETS
1996 1995
Current assets:
Cash and cash equivalents $ 560,640 $ 336,098
Short-term investments, at market 3,820,990 4,621,045
Receivables, including $19,910 and $34,768
receivable from related parties in
1996 and 1995, respectively 1,088,030 490,324
Prepaid expenses and other current assets 218,903 128,429
Total current assets 5,688,563 5,575,896
Property and equipment, net 144,360 133,833
Investments 321,145 489,786
Intangible assets acquired, principally
licenses and patented technologies, net
of accumulated amortization of $71,790
in 1996 1,794,795 --
Directors' escrow account 325,000 325,000
Other assets 94,277 244,427
TOTAL ASSETS $ 8,368,140 $ 6,768,942
See accompanying notes
COMPETITIVE TECHNOLOGIES, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
July 31, 1996 and 1995
(Continued)
1996 1995
LIABILITIES AND SHAREHOLDERS' INTEREST
Current liabilities:
Accounts payable, including $9,365 and
$4,219 payable to related parties
in 1996 and 1995, respectively $ 83,571 $ 126,606
Accrued liabilities 794,250 352,812
Current portion of purchase obligation 550,000 --
Total current liabilities 1,427,821 479,418
Noncurrent portion of purchase obligation,
net of unamortized discount of $132,633 652,367 --
Commitments and contingencies
Shareholders' interest:
5% preferred stock, $25 par value;
35,920 shares authorized; 2,427
issued and outstanding 60,675 60,675
Common stock, $.01 par value; shares
authorized: 7,964,080 in 1996 and
1995; issued: 5,925,829 in 1996 and
5,835,365 in 1995; outstanding:
5,900,829 in 1996 and 5,810,365
in 1995 59,258 58,353
Capital in excess of par value 24,993,926 24,410,143
25,000 shares of treasury stock
(common), at cost (174,713) (174,713)
Net unrealized holding gains on
available-for-sale securities 10,605 8,764
Accumulated deficit (18,661,799) (18,073,698)
Total shareholders' interest 6,287,952 6,289,524
TOTAL LIABILITIES AND SHAREHOLDERS'
INTEREST $ 8,368,140 $ 6,768,942
See accompanying notes
COMPETITIVE TECHNOLOGIES, INC. AND SUBSIDIARIES
Consolidated Statements of Operations
For the years ended July 31, 1996, 1995 and 1994
1996 1995 1994
Revenues:
Retained royalties $ 1,619,909 $ 796,243 $ 717,514
Revenues under service contracts
and grants, including $156,766,
$210,937 and $178,976 from
related parties in 1996, 1995
and 1994, respectively 660,287 906,952 245,264
2,280,196 1,703,195 962,778
Costs of technology management
services, of which $8,759, $5,557
and $6,010 were paid to related
parties in 1996, 1995 and 1994,
respectively 1,846,268 1,328,531 636,515
General and administration expenses,
of which $89,618, $106,894 and
$105,899 were paid to related
parties in 1996, 1995 and 1994,
respectively 1,255,688 1,003,490 1,324,373
3,101,956 2,332,021 1,960,888
Operating loss (821,760) (628,826) (998,110)
Interest income 208,285 151,058 108,151
Interest expense (57,413) -- --
Income (loss) related to
equity method affiliates 33,808 (103,520) 20,395
Other income (expense), net 78,979 (61,700) 45,008
Loss from continuing operations
before income taxes and
minority interest (558,101) (642,988) (824,556)
Provision for income taxes 30,000 21,373 18,440
Loss from continuing operations
before minority interest (588,101) (664,361) (842,996)
Minority interest in losses of
subsidiaries -- 23,112 14,000
Loss from continuing operations (588,101) (641,249) (828,996)
Income (loss) from operations of
discontinued operation -- 99,468 (10,786)
Net gain on disposal of
discontinued operations -- 2,534,505 221,852
Net (loss) income $ (588,101) $ 1,992,724 $ (617,930)
See accompanying notes
COMPETITIVE TECHNOLOGIES, INC. AND SUBSIDIARIES
Consolidated Statements of Operations
For the years ended July 31, 1996, 1995 and 1994
(Continued)
1996 1995 1994
Net income (loss) per share
(primary and fully diluted):
Continuing operations $ (0.10) $ (0.11) $ (0.15)
Operations of discontinued
operation -- 0.02 --
Net gain on disposal of
discontinued operations -- 0.43 0.04
Net (loss) income $ (0.10) $ 0.34 $ (0.11)
Weighted average number of common
and common equivalent shares
outstanding (primary and
fully diluted) 5,853,814 5,814,826 5,761,610
See accompanying notes
COMPETITIVE TECHNOLOGIES, INC. AND SUBSIDIARIES
Consolidated Statements of Changes in Shareholders' Interest
For the years ended July 31, 1996, 1995 and 1994
<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, 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 avail-
able-for-sale securi-
ties 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 treasury
stock from Knowledge
Solutions, Inc. . . . (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)
Exercise of common
stock warrants. . . . 5,000 50 28,700
Stock issued under
Directors' Stock
Participation Plan. . 4,776 48 39,952
Stock issued under
Employees' Common
Stock Retirement
Plan. . . . . . . . . 8,688 87 88,965
Exercise of common
stock options . . . . 72,000 720 426,166
Net change in unrealized
holding gains on
available-for-sale
securities. . . . . . 1 ,841
Net loss. . . . . . . . (588,101)
Balance - July 31, 1996 2,427 $60,675 5,925,829 $59,258 $24,993,926 (25,000) $(174,713)$ 10,605 $(18,661,799)
</TABLE>
See accompanying notes
COMPETITIVE TECHNOLOGIES, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
For the years ended July 31, 1996, 1995 and 1994
1996 1995 1994
Cash flow from operating
activities:
Loss from continuing operations $ (588,101) $ (641,249) $ (828,996)
Noncash items included in loss
from continuing operations:
Depreciation and
amortization 273,127 186,013 174,560
Equity method affiliates (33,808) 103,520 (20,395)
Minority interest -- (23,112) (14,000)
Directors' stock and
stock retirement plan
accruals 123,232 121,465 104,028
Amortization of discount
on purchase obligation 57,258 -- --
Other noncash items 21,657 (77,941) 28,093
Other (100,517) 64,705 81,324
Net changes in various
operating accounts:
Receivables (724,088) 172,334 36,038
Prepaid expenses and other
current assets (132,708) (70,889) (32,128)
Accounts payable and
accrued liabilities (123,795) 124,837 (3,622)
Net cash flow used in
operating activities (1,227,743) (40,317) (475,098)
Cash flow from investing
activities:
Purchases of property and
equipment, net (54,016) (106,223) (43,837)
Proceeds from sales of short-
term investments 3,694,767 2,231,629 240,493
Purchases of short-term
investments (2,831,180) (5,551,759) (1,026,067)
Net cash acquired in connection
with investment in subsidiary 105,171 -- --
Investments in affiliates and
subsidiaries 81,907 (85,800) (64,880)
Proceeds from disposal of dis-
continued operations, net -- 3,011,558 221,852
Net cash flow from (used in)
investing activities 996,649 (500,595) (672,439)
See accompanying notes
COMPETITIVE TECHNOLOGIES, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
For the years ended July 31, 1996, 1995 and 1994
(Continued)
1996 1995 1994
Cash flow from financing activities:
Proceeds from exercise of
stock options and warrants 455,636 -- --
Proceeds from issuance of
common stock, net -- 524,757
Net cash flow from financing
activities 455,636 -- 524,757
Net increase (decrease) in cash
and cash equivalents 224,542 (540,912) (622,780)
Cash and cash equivalents,
beginning of year 336,098 877,010 1,499,790
Cash and cash equivalents, end
of year $ 560,640 $ 336,098 $ 877,010
Supplemental cash flow information:
Cash paid for income taxes $ 42,067 $ 15,513 $ 17,254
Schedule of significant noncash
investing and financing
activities:
Debt incurred for investment
in subsidiary $ 1,145,109 $ -- $ --
Stock issued for investments in
affiliates and subsidiaries -- 205,325 --
Purchase of treasury stock -- (174,713) --
$ 1,145,109 $ 30,612 $ --
See accompanying notes
COMPETITIVE TECHNOLOGIES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
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"), Competitive
Technologies of Ohio, Inc. ("CTI-OH"), (formerly CTI-Intercorporate
Licensing, Inc.), 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 2, the Company purchased the
remaining interests in University Science, Engineering and Technology,
Inc. ("USET") on January 31, 1996. Accordingly, USET's results of
operations have been consolidated since January 31, 1996. Through
January 31, 1996, CTI accounted for its investment in USET on the
equity method and recorded 20% of its net income.
Business
The Company provides technology management services to its
clients which include corporations, federal agencies and laboratories
and universities in North America, Europe and the Far East. These
services include technical evaluations, patent and market assessments,
patent application and prosecution, patent enforcement, licensing,
license management and royalty distribution.
Management Estimates
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets
and liabilities and disclosure of contingent assets and liabilities
at the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. Actual results
could differ from those estimates.
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 through servicing agreements with various technology sources
under which the Company retains an agreed percentage of income derived
from license or sale of technologies. Royalties receivable are
recorded based on royalty reports actually received and therefore no
allowance for bad debts is required.
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 Note 14), 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.
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.
Intangible Assets Acquired
Intangible assets acquired in connection with the acquisition of
USET comprise principally licenses and patented technologies and were
recorded at their estimated fair value on January 31, 1996, which is
being amortized on a straight-line basis over their estimated
remaining lives (approximately 13 years).
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 1996.
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.
Stock-Based Compensation
In October, 1995, the Financial Accounting Standards Board issued
Statement No. 123, "Accounting for Stock-Based Compensation" which
requires adoption for fiscal years beginning after December 15, 1995.
This Statement allows companies either (a) to continue accounting for
employee stock-based compensation under Accounting Principles Board
Opinion No. 25 and disclose the pro forma effects that fair value
accounting would have on net income and earnings per share or (b) to
adopt the new fair value accounting rules for recognizing employee
stock-based compensation expense. In addition, the Statement requires
companies to adopt fair value accounting for stock options or other
equity instruments issued to nonemployee providers of goods and
services. The Company will adopt this Statement effective August 1,
1996 and disclose the pro forma effects fair value accounting would
have on net income and earnings per share. The Company does not
expect adoption to have a material effect on its financial statements.
Impairment of Long-lived Assets
In June, 1995, the Financial Accounting Standards Board issued
Statement No. 121, "Accounting for the Impairment of Long-lived Assets
and for Long-lived Assets to be Disposed of." This Statement requires
adoption for fiscal years beginning after December 15, 1995. This
Statement requires that companies review long-lived assets and certain
identifiable assets for impairment whenever events or changes in
circumstances indicate that the carrying amount of the asset may not
be recoverable. It requires that an impairment loss be recognized
based on the fair value of the asset if the sum of expected future
cash flows (undiscounted and without interest charges) is less than
the carrying amount of the asset. The Company does not expect
adoption of this Statement effective August 1, 1996 to have a material
effect on its financial statements.
2. ACQUISITION OF USET
On January 31, 1996, USI purchased the limited partnership
interests of Texas Research and Technology Foundation and United
Services Automobile Association in USET Acquisition Partners, L.P.
("UAP"). The total purchase price was $1,835,000 (excluding expenses
related to the acquisition) with $500,000 paid in cash and the balance
to be paid without interest on each succeeding January 31 in
installments equal to 60% of USET's gross retained earned revenues for
the preceding calendar year or the remaining unpaid balance of the
purchase price, whichever is less. However, if any annual 60%
installment would be less than $400,000, that installment shall be
equal to the lesser of $400,000 or 80% of USET's gross retained earned
revenues. CTI has guaranteed the payment of these installments when
due. At July 31, 1996, the carrying amount of the purchase obligation
approximates fair value.
After the purchase, USI owned 100% of all partnership interests
in UAP and as a result, UAP was dissolved. UAP's principal asset was
its investment in 100% of the equity of Holding. Holding's only asset
is its investment in 100% of the equity of USET. In addition to cash
of approximately $605,000 and computer equipment, USET's assets
consist principally of licenses and patented technologies. USI
accounted for the acquisition under the purchase method and recorded
the estimated present value of the purchase obligation of $1,145,109
using a 10% discount rate.
USET has obligations for certain future payments contingent upon
its royalties earned as defined in a prior acquisition agreement.
Contingent payments are calculated at 90% of USET's earned royalties
in excess of $400,000 per year through August 31, 1995 or until USET
has made 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
$982,000 have been made through July 31, 1996. Contingent purchase
price payments may be required during 1997 because USET has not yet
received all royalties earned through August 31, 1995 as defined in
the purchase agreement. Such expected payments were accrued at
January 31, 1996.
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, 1994 (in thousands, except per
share amounts). 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 For the year
ended ended
July 31, 1996 July 31, 1995
Total revenues $2,701 $2,242
Operating loss (662) (443)
Loss from continuing
operations (483) (621)
Per share loss from
continuing operations $(0.08) $(0.11)
3. 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.
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 $62,844 has been charged to operations in 1996, 1995 and
1994, respectively. Accumulated amortization was $219,954 and
$157,110 at July 31, 1996 and 1995, 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 an aggregate of 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.
4. INVESTMENTS IN EQUITY METHOD AFFILIATES
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 June, 1995, CTI acquired an additional 75,000
shares of KSI's Class A common stock for $75,000 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, 1996 and 1995 was 33.7% and 35.9%,
respectively.
On December 31, 1995, CTI loaned $50,000 to KSI pursuant to a
secured convertible term promissory note convertible into shares of
KSI's Class A common stock at $.80 per share at CTI's option. The
note bears interest at the prime rate plus one percent and is payable
on or before December 31, 1996. Under the terms of a related security
agreement, KSI pledged all its software, furniture, fixtures and
equipment as collateral for this loan. CTI's loan is subordinate to
an otherwise identical $50,000 secured convertible loan. This loan
has been accounted for as additional equity invested in KSI.
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. 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 to provide diagnostic laboratory services for the equine
industry. At July 31, 1996 and 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 follows (in thousands):
July 31, 1996 UAP KSI EBI OTHERS Total
(1)
Current assets $ -- $ 34 $ 307 $ 26 $ 367
Noncurrent assets -- 19 58 4 81
Current liabilities -- 123 59 3 185
Noncurrent liabilities -- -- 34 -- 34
Shareholders' equity
(deficit) -- (70) 272 27 229
Gross revenues 421 75 662 -- 1,158
Gross profit 382 54 608 -- 1,044
Net income (loss) 150 (188) 200 (3) 159
Equity in net income (loss) 30 (70) 76 (2) 34
Company's investments in -- -- 107 14 121
equity method affiliates
July 31, 1995 UAP KSI EBI Total
Current assets $ 637 $ 112 $ 99 $ 848
Noncurrent assets 809 22 58 889
Current liabilities 404 16 45 465
Noncurrent liabilities -- -- 44 44
Shareholders' equity 1,042 118 68 1,228
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 Total
Current assets $ 850 $ 21 $ 871
Noncurrent assets 618 -- 618
Current liabilities 585 -- 585
Noncurrent liabilities -- -- --
Shareholders' equity
(deficit) 883 21 904
Gross revenues 695 -- 695
Gross profit (loss) 585 -- 585
Net income (loss) 175 (29) 146
Equity in net income (loss) 35 (15) 20
Company's investments
in equity method
affiliates 205 10 215
(1) Effective January 31, 1996 CTI began to account for UAP as a
consolidated subsidiary. Results reported in this note for 1996 are for
the six months ended January 31, 1996 only (see Note 2).
At July 31, 1996 and 1995, the Company's investments in equity
method affiliates exceeded its share of their underlying net assets
by approximately $29,000 and $38,000, respectively.
5. INVESTMENTS ACCOUNTED FOR UNDER THE COST METHOD
Since February 15, 1995, CTI has accounted for its $159,375
investment in University Communications, Inc. ("UCI") under the cost
method (see Note 16). UCI stock is not publicly traded and there is
no quoted market price for its stock.
In January 1996, CTI received $96,907 in cash for the sale of its
remaining interest in Plasmaco, Inc. Since 1993 CTI's investment in
Plasmaco, Inc. was carried at no value and therefore, the $96,907 gain
was included in other income for fiscal 1996.
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. REVENUES
All of the Company's royalty revenues derive from its patent
rights to various technologies. Although patents may be declared
invalid, may not issue on patent applications, or new or alternative
technologies may render licensed patents uncommercial, the Company is
not aware of any such circumstances specific to its portfolio of
licensed technologies.
In addition, licensees may not develop products incorporating the
Company's patented technologies or they may be unsuccessful in
obtaining governmental approvals required to sell such products. In
such cases, except for minimum fees provided in certain license
agreements, royalty revenues generally would not accrue to the
Company.
Approximately 35% of retained royalties (25% of total revenues)
is from several licensees of the Vitamin B12 assay. Issued U.S.
patents on this technology expire from February, 1997 to May, 2001.
The Company does not expect the impact on fiscal 1997 to be material
since license agreements provide for royalties to be paid on their
respective product sales until the last licensed patents to expire.
Retained royalties for 1996, 1995 and 1994, include $268,542,
$108,773 and $107,427, respectively, from foreign sources.
Approximately 38% of revenues under service contracts and grants
(11% of total revenues) was earned under a single service contract.
This contract will be substantially complete by November, 1996 and no
such contract is expected to replace it in the near term. In
addition, 23% of revenues under service contracts and grants (7% of
total revenues) was earned under various contracts with a single
customer, nearly all of which must be renewed at least annually or are
for nonrecurring projects. There is a reasonable possibility that
some or all of these service contracts will not be renewed in the near
term. The Company expects these potential reductions in service
contract revenues to be partially offset by new service contracts with
various other clients.
7. RECEIVABLES
Receivables as of July 31, 1996 and 1995 comprise:
1996 1995
Royalties $ 879,380 $ 275,690
Government contracts 74,978 103,574
Other 133,672 111,060
$1,088,030 $ 490,324
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.
As of July 31, 1996 and 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
July 31, 1996:
U.S. Treasury Within
bills $ 1,471 $11 -- $ 1,460 1 year
Other U.S.
government debt Within
securities 2,350 -- -- 2,350 1 year
Total $ 3,821 $11 -- $ 3,810
July 31, 1995:
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 years ended July 31, 1996 and 1995, respectively,
proceeds from the sale of available-for-sale securities were
$3,694,767 and $2,231,629 which resulted in gross realized gains of
$61,691 and $59,809. In addition, realized gains on sale of short-
term investments classified as cash equivalents were $2,026 and $7,032
in the years ended July 31, 1995 and 1994, respectively. Cost is
based on specific identification in computing realized gains.
9. PROPERTY AND EQUIPMENT
Property and equipment as of July 31, 1996 and 1995 comprise:
1996 1995
Equipment at cost $ 367,504 $ 178,518
Leasehold improvements at cost -- 168,096
367,504 346,614
Accumulated depreciation
and amortization (223,144) (212,781)
$ 144,360 $ 133,833
Depreciation expense was $69,253, $52,069 and $38,552 in 1996,
1995 and 1994 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. At July 31, 1996 and 1995, the
escrow fund, which is invested in U.S. Treasury securities, amounted
to $ 435,959 (market: $435,959) and $412,114 (market: $412,114),
respectively. The escrow fund includes accumulated interest of
$110,959 and $87,114 in 1996 and 1995, 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, 1996 and 1995 were:
1996 1995
Accrued compensation $ 125,256 $ 115,010
Royalties payable 417,656 --
Other 251,338 237,802
$ 794,250 $ 352,812
12. INCOME TAXES
The current provision for income taxes for 1996, 1995 and 1994
is as follows:
1996 1995 1994
State taxes $30,000 $21,373 $18,440
There is no provision for Federal income taxes due to the
Company's net operating losses.
Components of the Company's net deferred tax assets as of July
31, 1996 and 1995 are as follows (in thousands):
1996 1995
Net operating loss carryforwards $ 5,060 $ 4,908
Net capital loss carryforwards 893 --
Discontinued operations 1,269 1,187
Other, net 631 1,086
Net deferred tax assets 7,853 7,181
Valuation allowance (7,853) (7,181)
Net deferred tax asset $ -- $ --
There is no tax effect on the disposal of discontinued operations
in 1995 due to the utilization of capital loss carryforwards.
At July 31, 1996, the Company had Federal net operating loss
carryforwards of approximately $14,883,000 which expire from 1999
through 2011. The Company also has investment tax credit carry-
forwards of approximately $65,000 which expire from 1999 through 2001.
At July 31, 1996, the Company had Connecticut net operating loss
carryforwards of approximately $1,120,000 which expire from 1997
through 2000 and Pennsylvania net operating loss carryforwards of
approximately $529,000 which expire from 1997 through 1999.
13. SHAREHOLDERS' INTEREST
Preferred Stock
Dividends on preferred stock are noncumulative and preferred
stock is redeemable at par value at the option of CTI.
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 and terminate ten years after the
grant date if not terminated earlier. 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 and terminate ten
years after the grant date if not terminated earlier. For non-
qualified 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, 1996:
Aggregate
Option Price Price
Shares per Share (in 000's)
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
Granted 86,000 $8.375 - 11.50 795
Exercised (72,000) $4.75 - 6.8750 (433)
Expired (50,000) $8.00 - 17.88 (548)
Options outstanding - July 31, 1996 429,900 $6.50 - 13.13 $3,905
Additional information related to stock options at July 31, 1996
and 1995 follows:
1996 1995
Exercisable options 420,900 441,400
Common shares reserved for
issuance on exercise of options 606,746 678,746
Shares available for future
option grants 176,846 212,846
Directors' Stock Participation Plan
Under the terms of the Directors' Stock Participation Plan which
expired in January, 1996, outside directors who served a full annual
term were eligible to receive shares of common stock of CTI. The
number of shares issuable each year to any director was the lesser of
2,000 shares or an aggregate fair market value on the date of issuance
of $10,000. The Company expects to submit a new plan for shareholder
approval at the annual meeting of shareholders in December 1996.
In 1996, 1995 and 1994, eligible directors were issued 4,776,
7,545 and 9,798, shares of common stock, respectively, the fair value
of which has been charged to expense.
Common Stock Warrants
The Company has the following warrants to purchase common stock
outstanding at July 31, 1996 which became exercisable six months after
the issue date:
Warrant Aggregate
Price per Exercise Expiration
Issued No. Shares Share Price Date
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
October 1994 6,000 $ 6.375 $ 38,250 April 1997
April 1995 12,000 $ 5.438 $ 65,256 April 1998
April 1996 2,000 $10.500 $ 21,000 April 1999
131,000 $1,041,806
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, 1996, 1995 and 1994 the board authorized contributions
of 8,688, 10,966 and 6,592 shares valued at approximately $89,000,
$66,000 and $50,000, respectively, based upon year-end closing prices.
These amounts have been charged to expense in 1996, 1995 and 1994,
respectively.
14. COMMITMENTS AND CONTINGENCIES
Operating Leases
In November, 1996, CTI expects to relocate its principal
executive office to Fairfield, Connecticut under a lease which expires
December 31, 2001. CTI has the option to extend the lease term for
an additional five years.
At July 31, 1996, future minimum rental payments required under
operating leases with initial or remaining noncancelable lease terms
in excess of one year (including the new lease) are as follows:
Years ending July 31:
1997 $ 128,811
1998 204,408
1999 206,879
2000 222,040
2001 205,681
Thereafter 84,375
Total minimum payments
required $1,052,194
Total rental expense for all operating leases was:
1996 1995 1994
Minimum rentals $ 365,940 $ 325,109 $ 338,719
Less: Sublease rentals (295,944) (310,032) (276,106)
$ 69,996 $ 15,077 $ 62,613
The lessor of CTI's office space during fiscal 1996, 1995 and
1994 was a partnership comprising four former officers of CTI.
Other Obligations
The Company has entered into a contract to employ its President
and Chief Executive Officer from August 1, 1995 through August 1, 1999
with compensation to him at a minimum of $160,000 per year.
CTI-PA and VVI have contingent obligations to repay up to
$209,067 and $224,127, respectively, (three times total grant funds
received) in consideration of grant funding received in 1994 and 1995.
CTI-PA is obligated to pay at the rate of 7.5% of its revenues, if
any, from transferring rights to inventions supported by the grant
funds. VVI is obligated to pay at rates of 1.5% of its net sales of
supported products or 15% of its revenues from licensing supported
products, if any. These obligations will be recognized when such
revenues are recognized.
15. RELATED PARTY TRANSACTIONS
CTI managed USET for UAP through January 31, 1996. During fiscal
1996 (through January 31, 1996), 1995 and 1994, CTI charged USET
$30,161, $52,490 and $84,484, respectively, for management, legal and
administrative services.
At July 31, 1995, the following amounts were receivable from and
payable to USET:
1995
Royalties receivable $275,690
Other receivable 8,074
Accounts payable 10,944
CTI incurred charges in connection with patent and trademark
litigation from a law firm in which a director of CTI until December,
1995, is a partner. Such charges amounted to approximately $8,000,
$25,000 and $40,000 in 1996, 1995 and 1994, respectively. That firm
agreed that payment of approximately $67,000 of fees incurred during
1992 in connection with Retin-A 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, 1996, CTI
had paid cumulative contingent fees of $46,409 of which $8,078, $5,557
and $6,010 were charged to operations in 1996, 1995 and 1994,
respectively.
During 1994 CTI incurred charges of approximately $20,000 for
corporate and investor relations services provided by a corporation
of which a former director of CTI was president.
During 1996, 1995 and 1994 CTI incurred charges of approximately
$90,000, $87,000 and $73,500, respectively, for consulting services
provided by its former chief executive officer who was 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 CTI earned approximately $69,000 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 $138,000, $211,000 and $179,000 in
1996, 1995 and 1994, 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.
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. 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 on its disposal of UOP's discontinued
operations of $221,852 in 1994. CTI also recognized other expenses
from continuing operations of $79,619 and $132,032 in 1996 and 1995,
respectively, 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. Hearings in the case have commenced before an attorney
referee; however, due to scheduling conflicts, further hearings have
been adjourned to a later unspecified date. Through July 31, 1996,
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") 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 partici-
pate 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. Upon completion of these and other transactions, Barden
owned 52.1% and CTI owned 14.5% of the outstanding common stock of
UCI.
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 year ended
July 31, 1994 follows (in thousands):
1995 1994
Gross revenues $2,764 $3,753
Gross profit 1,235 1,519
Net income (loss) 181 (20)
CTI's equity in net income (loss) 99 (11)
For services CTI provided to UCI, CTI charged UCI $3,786 and
$55,811 in 1995 and 1994, respectively.
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 (Item 10 (Directors and Executive Officers of the
Registrant), Item 11 (Executive Compensation), Item 12 (Security
Ownership of Certain Beneficial Owners and Management), and Item 13
(Certain Relationships and Related Transactions)) is incorporated by
reference, to the extent required, from the registrant's definitive
proxy statement for its 1996 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, 1996
and 1995. 27-28
Consolidated Statements of Operations for the
years ended July 31, 1996, 1995 and 1994. 29-30
Consolidated Statements of Changes in
Shareholders' Interest for the years ended
July 31, 1996, 1995 and 1994. 31
Consolidated Statements of Cash Flows for the
years ended July 31, 1996, 1995 and 1994. 32-33
Notes to Consolidated Financial Statements. 34-49
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 28, 1996
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 )
)
S/ 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 28, 1996
Bruce E. Langton )
)
H.S. LEAHEY* Director )
H.S. Leahey )
)
HARRY VAN BENSCHOTEN* Director )
Harry Van Benschoten )
)
)
)
* By S/ 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 filed
as Exhibit 3.1 to registrant's Form 10-K for
the year ended July 31, 1995 and hereby incor-
porated by reference.
3.2 By-laws of the registrant as amended to date
filed as Exhibit 3.2 to registrant's Form 10-Q
for the quarter ended October 31, 1995 and
hereby incorporated by reference.
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 Custody Account Agreement dated September 21, 57-66
1995 between The Putnam Trust Company and
registrant relating to transfer of Escrow
Agreement dated September 1, 1988 between
Putnam Trust Company of Greenwich, the regis-
trant and each of registrant's directors.
10.15 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.
10.16* Employment agreement between registrant and
George M. Stadler dated August 1, 1995 filed as
Exhibit 10.19 to registrant's Form 10-K for the
year ended July 31, 1995 and hereby incorporated
by reference.
10.17 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.
10.18 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.
10.19* 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.
10.20 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.
10.21 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.
10.22 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.
10.23 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.
10.24 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.
10.25 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.
10.26 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.
10.27 Stock Purchase Agreement by and among Knowledge
Solutions, Inc., Safeguard Scientifics, Inc.,
Competitive Technologies, Inc. and Donald Berman
dated May 17, 1995 filed as Exhibit 10.37 to
registrant's Form 10-K for the year ended July 31,
1995 and hereby incorporated by reference.
10.28 Agreement for Purchase and Sale of Partnership
Interests in USET Acquisition Partners, L.P.
effective January 31, 1996 by and between UPAT
Services, Inc., Texas Research and Technology
Foundation and United Services Automobile Associa-
tion filed as Exhibit 2.1 to registrant's Form 8-K
dated January 31, 1996 and hereby incorporated by
reference.
10.29 Promissory Note of UPAT Services, Inc. dated
January 31, 1996 in the principal amount of
$983,684.21 payable to United Services Automobile
Association ("USAA") filed as Exhibit 2.2 to
registrant's Form 8-K dated January 31, 1996 and
hereby incorporated by reference.
10.30 Promissory Note of UPAT Services, Inc. dated
January 31, 1996 in the principal amount of
$351,315.79 payable to Texas Research and Technol-
ogy Foundation filed as Exhibit 2.3 to regis-
trant's Form 8-K dated January 31, 1996 and hereby
incorporated by reference.
10.31 Security Agreement of UPAT Services, Inc. dated
January 31, 1996 to USAA and Texas Research and
Technology Foundation as collateral for the
related Promissory notes dated January 31, 1996
filed as Exhibit 2.4 to registrant's Form 8-K
dated January 31, 1996 and hereby incorporated by
reference.
10.32 USET Acquisition Partners, L.P. Assignment of
Partnership Interests to UPAT Services, Inc. by
Texas Research and Technology Foundation filed as
Exhibit 2.5 to registrant's Form 8-K dated January
31, 1996 and hereby incorporated by reference.
10.33 USET Acquisition Partners, L.P. Assignment of
Partnership Interests to UPAT Services, Inc. by
USAA filed as Exhibit 2.6 to registrant's Form 8-K
dated January 31, 1996 and hereby incorporated by
reference.
10.34 Lease agreement between registrant and The Bronson 67-106
Road Group made August 28, 1996.
11.1 Schedule of computation of earnings per share 107
for the three years ended July 31, 1996.
21.1 Subsidiaries of the registrant. 108
23.2 Consent of Coopers & Lybrand. 109
24.1 Power of attorney. 110-111
27.1 Financial Data Schedule - EDGAR only.
* Management Contract or Compensatory Plan
Exhibit 10.14
CUSTODY ACCOUNT AGREEMENT
"CORPORATE ACCOUNT"
The Putnam Trust Company of Greenwich
10 Mason Street
Greenwich, Connecticut 06830
Date: September 21, 1995
The undersigned corporation authorizes The Putnam Trust
Company of Greenwich (the "Bank") to establish an Custody Account
(the "Account") in the name of Competitive Technologies, Inc., a
corporation organized and existing in good standing in the State of
Delaware (the "Client").
This Account is subject to the following rules and conditions:
The service provided by the Bank will include the safekeeping
of the Account's securities and the collection of interest and
dividends. The Bank will send to the Client cash statements at
least monthly which will show all transactions occurring in the
Account.
Under the terms of this Agreement, the Bank cannot and will
not give investment advice or recommendations for the sale,
purchase, or other disposition of securities held by the Bank for
the account.
The Bank will carry out purchase and sale transactions as the
Company instructs pursuant to paragraph 4 of the Escrow Agreement
dated September 1, 1988 ("Escrow Agreement") attached to this
document. The Bank will provide me/us with advices of all purchase
and sale transactions.
The Bank will give the Company prompt notice of redemptions,
conversion rights, or the issuance of rights and warrants. When
action is required, the Bank will request the Company's written
instructions and will act on those instructions.
The Bank shall have no duty to notify the Company of any
rights, duties, limitations, conditions or other information set
forth in any security (including mandatory or optional put, call
and similar provisions), but the Bank shall forward to the Company
any notices or other documents subsequently received in regard to
any such security. The Bank's duty as to those securities issued
outside of the United States and those for which adequate financial
data cannot be readily obtained shall be limited to safekeeping.
The Bank shall have no duty to follow for coupon payments,
redemptions, exchanges, or other matters affecting these
securities.
All orders with respect to the Account shall be made as
specified in the attached Escrow Agreement dated September 1, 1988
between University Patents, Inc., now known as Competitive
Technologies, Inc. ("the Company"), the indemnified directors and
Putnam Trust Company of Greenwich, which agreement is being
transferred from Lafayette Bank & Trust Company pursuant to
authorization by the Company in the attached letter dated ,
1995. The Bank, in its sole discretion, may accept and act on
orders from any officer of the Client designated in the aforesaid
Certificate of Secretary, whether given orally, by telephone or
otherwise, which the Bank believes to genuine.
The Company will indemnify and hold harmless the Bank against
any and all claims, losses, liabilities or damages, for acting on
any instruction issued by the Company or anyone duly authorized by
the Company to act on the Company's behalf except that the Bank
will not be indemnified for gross negligence or willful misconduct.
The Bank shall have no duty to determine, for any purpose, if
receipts to or payments from the Account are properly allocated
between income and principal.
Securities in the account will be held at a carrying value of
$1.00 per bond or per share unless the Company provides tax cost
information.
The securities and cash deposited with the Bank in the account
are subject at all times to the Company's control. The Bank or a
depository designated by the Bank may hold securities of this
account in nominee registration or bearer form.
The Client understands and agrees that the Bank will charge
interest against the Account for any cash overdraft resulting from
any action by the Client or by an agent acting on its behalf. The
rate of interest will be two (2) percent over the Bank's "prime"
rate as published at the time the overdraft is created.
Fees will be the Bank's published rates in effect from time to
time applicable to the Bank's Custodian Account Service. The Bank
will charge fees to the Account at least once each year. The Bank
may review the cost of administering the Account from time to time
and may adjust fees to provide adequate payment for its services.
This Agreement and all applicable instructions will continue
until terminated at any time by written notice to the Bank. Notice
of termination given the Client to the Bank shall be effective upon
receipt of such notice. The Bank may terminate this Agreement on
30-days written notice to the Client. This Agreement may be
changed by mutual consent in writing.
The Company understands that the Bank provides for its
Custodian Accounts an option to invest in short-term liquid asset
funds. The Company requests that excess cash be invested in the
Government Obligation Fund.
Special Instructions:
ATTEST Client's Name:
S/ Jeanne Wendschuh COMPETITIVE TECHNOLOGIES, INC.
Assistant Secretary
By: S/ Frank R. McPike, Jr.
Name
Vice President
Title
Address to which statements should
be sent:
Competitive Technologies, Inc. THE PUTNAM TRUST COMPANY
P.O. Box 901 OF GREENWICH
Westport, CT 06881-0901
By: S/ Claire L. Reed
Name
In addition, monthly state-
ments are to be sent to
each of the indemnified
directors as specified in
the Escrow Agreement.
The Client understand's that the Bank provides for its Custodian
Accounts an option to invest in short-term liquid asset funds. The
Client also understands that the Bank will receive a fee from the
fund manager of 1/4 of 1% of the amount invested for administrative
services provided by the Bank. The Client requests that excess
cash be invested in securities of the type specified in paragraph
4 of the Escrow Agreement in the following short-term liquid asset
fund:
[x] Government Obligation Fund
[ ] Connecticut Municipal Cash Fund
[ ] Massachusetts Municipal Cash Fund
[ ] New York Municipal Cash Fund
[ ] Tax Free Obligation Fund
The Client acknowledges receipt of a prospectus for the fund
selected above.
COMPETITIVE TECHNOLOGIES, INC.
September 18, 1995
Lafayette Bank & Trust Co.
1643 Post Road East
Fairfield, CT 06430
Gentlemen:
Competitive Technologies, Inc., formerly known as University
Patents, Inc. ("the Company") and its directors have entered into
indemnity agreements which provide for the indemnification of and
the advancing of expenses of said directors by the Company. On
September 1, 1988, the Company and its directors entered into an
Escrow Agreement with Putnam Trust Company of Greenwich ("Putnam")
whereby Putnam would act as escrow agent. On July 29, 1991
Lafayette Bank & Trust Co. was appointed to act as escrow agent.
Effective on or after August 31, 1995, Lafayette American Bank &
Trust Co. resigned as custodian (Escrowee).
Pursuant to paragraph 9 of the Escrow Agreement, the Company
hereby authorizes Lafayette American Bank & Trust Co. to transfer
the balance of funds (both principal and interest) in the Escrow
account to Putnam Trust Company of Greenwich. The funds should be
transferred to Putnam Trust Company of Greenwich as follows:
Federal Reserve Bank of New York
For the account of Putnam Trust Company
Greenwich, Connecticut
ABA No. 021101470
Credit Account Competitive Technologies, Inc. Escrow Account
Attention: Claire Reed
Thank you for your assistance in this matter.
Very truly yours,
S/ Frank R. McPike, Jr.
COMPETITIVE TECHNOLOGIES, INC.
By: Frank R. McPike, Jr.
Vice President, Finance
cc: Ms. Frances Lee (Sachem Trust)
1465 Post Road East - P.O. Box 901 - Westport, CT 06881
203-255-6044 (phone) - 203-254-1102 (fax)
UNIVERSITY PATENTS, INC.
ESCROW AGREEMENT
September 1, 1988
Putnam Trust Company of Greenwich
10 Mason Street
Greenwich, CT 06830
Gentlemen:
(1) The background of this Escrow Agreement is that
University Patents, Inc., a Delaware corporation (the "Company"),
and the following directors of the Company: A. Sidney Alpert,
Arthur M. Lieberman, Bruce E. Langton, Peter F. McCloskey, Harry
Van Benschoten and Frank R. McPike, Jr., entered into certain
indemnity agreements (the "Indemnity Agreements"), which Agreements
provide for the indemnification of and the advancing of expenses of
said directors by the Company. Said directors and any future
directors of the Company with whom the Company shall enter into a
similar indemnity agreement and who shall execute a counterpart of
this Escrow Agreement are herein called the "Indemnitees". In
order to secure performance of the Company's obligations under the
Indemnity Agreements, the Company shall establish an escrow (the
"Escrow Fund") to be held and disposed of by you as escrowee (the
"Escrowee") in accordance with the terms and conditions hereinafter
set forth.
(2) Pursuant to the terms of the Indemnity Agreements, the
Company shall make cash deposits with the Escrowee in accordance
with the following schedule:
On or before August 1, 1988 . . . . . . . $175,000
August 1, 1989 . . . . . . . 50,000
August 1, 1990 . . . . . . . 50,000
August 1, 1991 . . . . . . . 50,000
$325,000
(3) In the event that the balance in the Escrow Fund (equal
to the deposits made plus interest earned on said fund and less
payments made from said fund in respect of expenses or claims)
shall at any time be reduced by reason of any payment to less than
the minimum balance for that date under the following schedule:
From August 1, 1988 through July 31, 1989 . . . $175,000
From August 1, 1989 through July 31, 1990 . . . 225,000
From August 1, 1990 through July 31, 1991 . . . 275,000
From August 1, 1991 through July 31, 1997 . . . 325,000
the Company shall restore such deficiency by a deposit or deposits
made within the succeeding six months.
1465 Post Road East - P.O. Box 901 - Westport, CT 06881
(203) 255-6044 Telex 501985 Fax (203) 254-1102
The Escrowee shall send to the Company and the Indemnitees a
monthly statement setting forth the balance of the Escrow Fund in
the Account. The Escrowee shall not be responsible for the
Company's failure to satisfy its obligations under this section of
the Escrow Agreement or any equivalent requirements under the
Indemnity Agreements.
(4) The Escrow shall invest and reinvest the Escrow Fund in
securities maturing within one year of the date of acquisition
issued or guaranteed as to principal or interest by the United
States, or by an entity controlled or supervised by and acting as
an instrumentality of the Government of the United States, or a
State or political subdivision thereof, an agency or
instrumentality of a State or political subdivision thereof, or a
municipal corporate instrumentality of any State or States, in
accordance with the written directions of the Company given from
time to time. The Escrowee shall sell securities in which the
Escrow Fund is invested when directed in writing to do so by the
Company or when necessary to obtain cash for payments required to
be made hereunder. The Escrowee shall have no liability of any
kind whatsoever for the investment or reinvestment of the Escrow
Fund in accordance with the terms hereof or upon the written
instruction of the Company.
(5) In the event that any Indemnitee files a written notice
(a "Claim Notice") with the Escrowee requesting a payment out of
the Escrow Fund in full or partial satisfaction of an obligation of
the Company to indemnify or advance expenses under the Indemnity
Agreement with said Indemnitee, the Escrowee shall mail copies of
said Claim Notice to the Company and the other indemnitees within
three (3) days of the Escrowee's receipt of said Claim Notice. If
the Escrowee does not receive a written notice from the Company
stating that it intends to contest such claim (a "Contest Notice")
within twenty (20) days after the delivery of the copy of the Claim
Notice to the Company, the Escrowee shall pay out of the Escrow
Fund (to the extent that it has sufficient funds) the amount
requested in said Claim Notice to or upon the written direction of
the Indemnitee. If the Escrowee does receive a Contest Notice
within said period, the Escrowee shall mail copies of such Contest
Notice to all of the Indemnitees within three (3) days of the
Escrowee's receipt of said Claim Notice, and shall not make any
payment in respect of said Claim Notice except as required by
Section (6) hereof or pursuant to a court order under Section (8)
(d).
(6) The Escrowee shall make payments out of the Escrow Fund
from time to time when directed to do so by a joint written
direction from the Company and all of the Indemnitees.
(7) The Escrow shall terminate at July 31, 1997, and the
Escrowee shall return the entire balance of the Escrow Fund to the
Company, except to the extent of any unresolved claims as to which
the Escrowee has received a Claim Notice prior to said date. Any
amounts reserved for such claims shall be retained by the Escrowee
until such time as it shall receive written instructions signed by
the Company and the appropriate Indemnitee(s) as to the disposition
of the balance of the Fund.
(8) To induce the Escrowee to act hereunder, the Company and
the Indemnitees hereby agree that:
(a) The Escrowee shall have no duties or
responsibilities except as expressly provided in this
Agreement and no implied duties or obligations shall be
imposed on the Escrowee. The Escrowee shall have no liability
or responsibility with respect to or arising out of any
agreement to which the Escrowee is not a party,
notwithstanding the fact that reference thereto may be made
herein or a copy thereof is attached hereto;
(b) The Escrow Agent may act in reliance upon any
instrument or signature believed by it to be genuine and may
assume that any person purporting to give any writing, notice,
advice or instruction in connection with the provisions hereof
has been duly authorized to do so; without limiting the
generality of the foregoing, it is expressly understood that
the Escrowee shall not be required to determine the
genuineness, validity or legal sufficiency of any document
deposited or to be deposited with it pursuant to this
Agreement;
(c) In the performance of its duties hereunder, the
Escrowee shall not be liable for any error of judgment or
execution, or for any act done or step taken, or omitted by it
in good faith, or for any mistake of law or fact; provided
that the Escrowee shall be liable for damages, losses or
expenses incurred as a direct result of any act or omission
constituting willful default, gross negligence or fraud. The
Escrowee may consult with, and obtain advice from legal
counsel in the event of any dispute or question as to the
performance or construction of any of the provisions hereof or
its duties hereunder and shall incur no liability for its acts
in good faith in accordance with the opinion and instructions
of such counsel.
(d) In case any property held by the Escrowee hereunder
shall be attached, garnished or levied upon under any order of
court, or the delivery thereof shall be stayed or enjoined by
any order of court, or any other order, judgment or decree
shall be made or entered by any court affecting such property,
or any part thereof, or any act of the Escrowee, it is hereby
expressly authorized in its sole discretion to obey and comply
with all writs, orders, judgments or decrees so entered or
issued, whether with or without jurisdiction, and in case the
Escrowee obeys and complies with any such writ, order,
judgment or decree, it shall not be liable to any of the
parties hereto, their heirs, personal representatives,
successors or assigns or to any other person, firm or
corporation, by reason of such compliance notwithstanding such
writ, order, judgment or decree be subsequently reversed,
modified, annulled, set aside or vacated; and
(e) The Escrowee shall be entitled to reasonable
compensation for its services, and may employ agents and
attorneys for the reasonable protection of the property held
hereunder and of itself and shall have a lien on any such
property for its compensation and for any and all costs,
expenses and attorneys' fees reasonably incurred by it and
shall be entitled to reimburse itself therefor out of any such
property, and if it shall be unable to reimburse itself from
such property, the Company agrees to pay any such amounts to
the Escrowee on demand.
(9) This Agreement may be modified only by the written
direction of the Company and all Indemnitees; provided, however,
that no such modification shall effect the Escrowee's duties or
responsibilities hereunder without the Escrowee's express written
consent.
(10) Subject as hereinabove provided, this Agreement shall be
binding upon and inure to the benefit of the parties and their
respective heirs, personal representatives, successors and assigns.
(11) All notices, requests, demands and other communications
hereunder shall be in writing, and shall be deemed to have been
given when delivered personally or when deposited in the United
States mail, registered or certified, and with proper postage
prepaid, addressed as follows:
(a) If to the Company, at: University Patents, Inc.
1465 Post Road East
P.O. Box 901
Westport, CT 06881
Attn: President
(b) If to an Indemnitee, at such Indemnitee's address set
forth in Appendix I attached hereto.
(c) If to the Escrowee, at: Putnam Trust Company of
Greenwich
10 Mason Street
Greenwich, CT 06830
Attn: Wm. Richard Moller
or to such other address for any of the parties hereto as may from
time to time be designated by notice given by such party to the
other parties in the manner hereinabove provided, except that the
Escrowee shall have no duty whatsoever with respect to any notice
or deposit until the same has been actually received by the
Escrowee.
(12) In the event that the Escrowee shall resign or in the
event that the Escrowee shall be removed by the mutual consent of
the Company and all of the Indemnitees, a successor Escrowee shall
be appointed by the Company. Any such successor Escrowee shall be
a bank and trust company which has capital and surplus aggregating
at least $50,000,000 and, upon acceptance of said appointment,
shall be entitled to all the rights, powers and indemnities
hereunder as if originally named herein.
(13) This Agreement shall be governed by and construed and
enforced in accordance with the laws of the State of Connecticut.
This agreement may be executed in one or more counterparts, each of
which shall be considered an original, but all of which together
shall constitute one and the same original.
Very truly yours,
UNIVERSITY PATENTS, INC.
By: S/ Frank R. McPike, Jr.
Frank R. McPike, Jr.
Vice President, Finance
S/ A. Sidney Alpert
A. Sidney Alpert
S/ Bruce E. Langton
Bruce E. Langton
S/ Arthur M. Lieberman
Arthur M. Lieberman
S/ Peter F. McCloskey
Peter F. McCloskey
S/ Frank R. McPike, Jr.
Frank R. McPike, Jr.
S/ Harry Van Benschoten
Harry Van Benschoten
Accepted and Agreed to:
PUTNAM TRUST COMPANY OF GREENWICH
By: S/ William R. Moller
Name: William R. Moller
Title: Senior Vice President & Secretary
Exhibit 10.34
LEASE
THIS Lease, made and entered into as of the 28th day of August
1996, by and between THE BRONSON ROAD GROUP, a general partnership
organized and existing under the laws of the State of Connecticut,
owner of that certain parcel of land together with the two
buildings known as 1960 Bronson Road, Fairfield, Connecticut (the
"Complex") (as described on Exhibit A attached hereto), and having
an office at 1960 Bronson Road, Fairfield, Connecticut (hereinafter
"LESSOR"), and COMPETITIVE TECHNOLOGIES, INC. a Delaware
corporation, having an office at No. 1465 Post Road East, Westport,
Connecticut (hereinafter "LESSEE").
W I T N E S S E T H:
WHEREAS, LESSOR desires to lease to LESSEE all of the interior
of Building 1 of the Complex (as described on Exhibit "A" attached
hereto) for the term and on the conditions hereinafter set forth;
and
WHEREAS, LESSEE desires to lease from LESSOR all of the
interior of Building 1 for the term and on the conditions
hereinafter set forth.
NOW, THEREFORE, in consideration of their respective
undertakings and agreements herein contained, the parties do hereby
agree as follows:
Section 1. Term, Leased Space and Fix-up.
(a) LEASED SPACE. (i) LESSOR hereby leases to LESSEE,
and LESSEE hereby leases from LESSOR all that certain space (herein
called the "Leased Space"), being the entire interior of Building
1 of the Complex, for the term (the "Term") commencing January 1,
1997 and ending December 31, 2001 (the "Termination Date"),
together with rights of ingress to and egress from the parking area
serving the Complex. LESSOR represents that the Leased Space
exclusive of any attic area contains approximately nine thousand
(9,000) square feet.
(ii) From November 1, 1996 through December 31,
1996, LESSEE may use and occupy the second floor and a portion of
the first floor of Building No. 1 as identified and described by
LESSOR to LESSEE.
(b) LESSEE shall take such Leased Space "as is" in accordance
with the provisions of Section 12 below. In lieu of any fix-up
allowance, LESSOR agrees that although LESSEE will take possession
of a substantial portion of the Leased Space on or about November
1, 1996, payment of rent shall begin as of January 1, 1997. Any
and all additional fix-up of the Leased Space shall be at the sole
cost and expense of LESSEE. In the event LESSEE desires to make
any material changes such as removal of interior walls or
partitions, it shall first obtain the written approval of LESSOR
which approval shall not be unreasonably withheld.
Section 2. End of Term. Upon expiration or other termination
of this Lease, LESSEE shall immediately quit and surrender to
LESSOR the Leased Space, broom clean, in good order and condition,
ordinary wear excepted, and LESSEE shall remove all its property.
LESSEE's obligations to observe or perform this covenant shall
survive the expiration or other termination of this Lease.
Section 3. Holding Over by Lessee. In the event that the
Lessee shall remain in the Leased Space after the expiration of the
term of this Lease without having executed a new written lease with
the LESSOR, such holding over shall not constitute a renewal or
extension of this Lease. The LESSOR may, at its option, elect to
treat the LESSEE as one who has not removed at the end of this
term, and shall thereupon be entitled to all the remedies against
the LESSEE provided by law or equity in that situation, or the
LESSOR may elect, at its option, without waiver of any rights or
remedies, to construe such holding over as a tenancy from month to
month, subject to all the terms and conditions of this Lease,
except as to duration thereof, and in that event the LESSEE shall
pay monthly rent in advance at the rate provided herein as
effective during the last month of the Term.
Section 4. Base Rent. This lease is a "gross lease" except
as otherwise set forth in this Lease. LESSEE agrees to pay and
shall pay to LESSOR, in United States legal tender at the time of
payment, base rent for the Leased Space as follows:
(i) for the period January 1, 1997 to June 30, 1999,
the amount of $450,000, payable in equal monthly installments
of $15,000, in advance on the first day of each month;
(ii) for the period July 1, 1999 to December 31, 2001,
the amount of $506,250, payable in equal monthly installments
of $16,875, in advance on the first day of each month.
Section 5. Additional Rent. In addition to the foregoing,
during the Term and any Renewal Term, LESSEE agrees to pay and
shall pay to LESSOR within thirty days of the sending of each
statement by LESSOR, the amount (if any) by which LESSOR's electric
utility charges for the Leased Space, as determined by a separate
electric meter, exceed the amount of $4.00 per square foot per
year. A year shall be defined as the period from , January 1 to
December 31, inclusive, of each lease year. A schedule of
electric utility charges for calendar year 1994 and 1995 and the
twelve months ending June 30, 1996 is annexed as Exhibit B.
Section 6. Heating and Air Conditioning. The LESSOR agrees
to furnish to the Leased Space adequate air conditioning during the
summer months and adequate heat during the winter months, but shall
not be liable for any damages by reason of failure to supply air
conditioning or heating caused by LESSEE's activities or omissions,
mechanical failure, repairs, or any other causes beyond the control
of the LESSOR. As used herein, the terms "adequate air
conditioning" and "adequate heat" shall mean that LESSOR shall
maintain the HVAC systems to produce in the cooling season interior
conditions of not more than 75 degrees F. Dry Bulb and 50% relative
humidity when the outside temperature is no more than 90 degrees F.
Dry Bulb, and 75 degrees F. Wet Bulb; and in the heating season not
less than 68 degrees F. Dry Bulb when the outside temperature is
not less than 0 degrees F. Dry Bulb.
Section 7. Utilities. All utilities of any kind whatsoever
used and consumed in the Leased Space, including electricity,
water, gas, and fuel, and utilities used for heating and air
conditioning, shall be paid by the LESSOR directly to the
appropriate utility company. Cleaning, janitorial services and
such other services as the LESSEE may find necessary or desirable
in connection with its occupancy of the Leased Space shall be
supplied by the LESSEE at its own expense. Lessee represents that
it does not expect nor intend to use any equipment or conduct any
operations which would require non-ordinary utility services and
amounts of consumption beyond general office usage.
Section 8. Taxes and Insurance. LESSEE shall obtain,
maintain in effect and pay for insurance, including general
liability insurance covering the Leased Premises, with policy
limits of at least $2,000,000 per occurrence and shall pay personal
property, excise, sales and other taxes related to its furniture,
fixtures, equipment and other personal property and related to the
Leased Space. At its option, LESSOR may review LESSEE's insurance
policies providing coverage for the above items and LESSEE's
payments on such tax statements. At the LESSOR's option, if the
LESSEE has not made timely payments, the LESSOR may pay insurance
statements of LESSEE relating to this Lease and the Leased Space
and bill LESSEE therefor. LESSEE shall pay such statements within
30 days of the sending thereof. LESSOR shall pay for all real
estate taxes and all impositions and assessments for public
improvements including but not limited to sewer use taxes and
sewage disposal for the Complex. LESSOR shall also maintain and
pay for adequate policies insuring the building in which the Leased
Premises are located for hazard and all risk type coverage, with
fire, extended and all risk coverage, excluding LESSEE's
improvements, and shall also maintain and pay for a policy of
public liability and property damage insurance covering the Complex
with the LESSEE's name endorsed thereon as an additional insured.
The policy limits shall be for at least $2,000,000 per occurrence.
A copy of the policy of such insurance shall be delivered to LESSEE
prior to commencement of the Lease.
(i) If approved by each respective insurer, each policy
of public liability insurance, hazard insurance or other insurance
insuring risks arising out of any occurrence at the Complex,
carried by LESSEE or LESSOR, shall provide that the insurer waives
any rights of subrogation against the LESSOR (in the case of
LESSEE's policies) and, against the LESSEE (in the case of LESSOR's
policies) in connection with or arising out of any claim or benefit
provided under such insurance policy.
(ii) In no event shall LESSEE or any person or entity
claiming an interest in the Leased Premises by, through or under
LESSEE and over whom LESSEE shall have control, claim, maintain or
prosecute any action or suit at law or in equity against the LESSOR
for any loss, cost or damage caused by or resulting from fire or
other risk or casualty in the Complex for which LESSEE is or may be
insured under a standard hazard and all risk insurance policy,
including fire, extended and/or all risk type coverage, whether or
not the property (tangible or intangible) is insured or required to
be insured under this Lease, and whether or not caused by the
negligence of the LESSOR, or the agents, or servants, or employees
of the LESSOR.
(iii) In no event shall LESSOR or any person or entity
claiming an interest in the Complex by, through or under LESSOR and
over whom LESSOR shall have control, claim, maintain or prosecute
any action or suit at law or in equity against the LESSEE for any
property damage to the Complex caused by or resulting from fire or
other risk or casualty in the Complex for which LESSOR is required
to be insured under the provisions of the Lease, whether or not
caused by the negligence of the LESSEE or the agents, servants
and/or employees of the LESSEE.
(iv) The limitation on claims by LESSOR or LESSEE or any
party claiming by or through LESSOR or LESSEE contained in
subparagraphs (ii) and (iii) above shall not apply with respect to
claims arising out of the gross negligence or wilful misconduct of
the other party, unless the damage had been insured by the party
seeking to make the claim and such insurance policy permits the
waiver of claim despite the gross negligence or wilful misconduct
of the other party.
Section 9. Indemnification. Notwithstanding anything to
the contrary contained in this Lease, LESSEE shall hold LESSOR
harmless and indemnify LESSOR from any and all damages resulting or
deriving from the intentional acts, breach of duty, negligence and
omissions of the LESSEE, its agents, servants, representatives,
employees, sublessors, assigns and guests.
Section 10. Security Deposit and Advance Payment of
Rent.
(a) SECURITY DEPOSIT. On the date of the execution
of this Lease, the LESSEE shall deposit with the LESSOR
the sum of Fifteen Thousand ($15,000.00) Dollars as
security for the faithful performance by the LESSEE of
all of the terms and conditions of this Lease including
but not limited to the covenant to make timely payments
of base rent, additional rent, or other charges for
services due hereunder. The LESSOR may use any part of
the security to satisfy any default or breach of the
LESSEE and any expense arising from such default or
breach including reasonable attorneys fees. If the
LESSEE shall comply fully with the terms of this Lease,
the security, with accumulated interest ("Security
Deposit"), shall be returned to the LESSEE at the
expiration of the Lease. In the event the LESSOR assigns
his interest in the Lease or Leased Space, the LESSEE
hereby consents to an assignment of the security deposit.
The Security Deposit shall be maintained in an interest
bearing account at People's Bank or at such other bank as
may reasonably be determined by LESSOR. LESSEE's Federal
Employer Identification number shall be placed on each
such account and LESSEE shall pay all taxes, if and when
due, on all such interest and shall hold harmless and
indemnify LESSOR therefrom. To the extent such
information is received by LESSOR it shall provide LESSEE
with timely notice thereof.
(b) FIRST RENTAL INSTALLMENT. On or before
November 1, 1996, the LESSEE shall pay to the LESSOR
$15,000 for the monthly rental installment due January
1, 1997.
(c) As used in this Lease, "rent" includes "base
rent" and "additional rent".
Section 11. Covenants.
(a) PURPOSE. The LESSEE covenants and agrees to
use the Leased Space only as its general offices and
agrees not to use or permit the Leased Space to be used
for any other purpose without the prior written consent
of the LESSOR endorsed hereon, which prior written
consent shall not be unreasonably withheld or delayed.
(b) FORCE MAJEURE. For the purpose of this Lease,
the term "Force Majeure" means any period of delay which
arises from or through Acts of God; strikes, lockouts, or
labor difficulties; explosions. sabotage, terrorist acts,
accidents, riots or civil commotion; acts of war; fires
or other casualties; legal requirements; delays caused by
the other party; and causes beyond the reasonable control
of a party.
(c) OBLIGATION TO PAY RENT. This Lease and the
obligation of the LESSEE to pay rent herein and perform
all of the other covenants and agreements herein shall in
no way be affected, impaired or excused because the
LESSOR is unable to supply or is delayed in supplying any
service expressly or impliedly to be supplied, or is
unable to make or is delayed in making repairs,
additions, alterations or decorations, or is unable to
supply or is delayed in supplying any equipment or
fixtures if the LESSOR is prevented or delayed from so
performing any of such covenants or agreements by reason
of Force Majeure or by reason of the conditions of supply
and demand which have been or are affected by Force
Majeure.
(d) SIGNS. The LESSEE covenants and agrees that no
lighting fixtures and exterior and interior signs,
drapes, curtains or any other types or kinds of devises
which may be seen from the exterior or interior of the
building shall be affixed to or place upon or used in any
part of the Leased Space by the LESSEE except in such
manner, and of such size, design and color as shall be
approved in advance by the LESSOR. The LESSOR agrees it
will not unreasonably withhold its consent. LESSOR at
its reasonable expense shall install or cause to be
installed a reasonable building exterior directory sign
affixed to or near Building 1 or on a pole sign.
(e) PEACEFUL POSSESSION. The LESSOR covenants that
the LESSEE on timely paying the said rental and timely
performing the covenants and conditions in this Lease
shall and may peaceably and quietly have, hold and enjoy
the Leased Space for the Term of the Lease without
hindrance or interruption by LESSOR..
(f) RIGHT TO INSPECT AND EXHIBIT. The LESSOR, or
its agents, shall have the right to enter the Leased
Space at reasonable hours in the day or night to examine
the Leased Space or to perform maintenance or to make
such repairs, additions or alterations as it shall deem
necessary for the safety, preservation or restoration of
the Leased Space and the Complex, or for the safety or
convenience of the occupants or users thereof.
(g) OBSERVATION OF LAWS, ORDINANCES, RULES AND
REGULATIONS. LESSEE shall faithfully observe and comply
with all laws, ordinances, rules and regulations of the
Federal, State, County and Municipal authorities
applicable to the business to be conducted by the LESSEE
in the Leased Space and to such Leased Space, and LESSEE
shall promptly correct and remedy any violations thereof.
LESSOR shall faithfully observe and comply with all
municipal, state and federal statutes, regulations and
ordinances now in force or which may hereafter be in
force with respect to the Complex, including any zoning
regulations, and will correct and remedy any violations
thereof known to it or of which it is notified except any
violations which are solely the result of any activity of
the LESSEE in the Leased Premises.
(h) NON-LIABILITY OF LESSOR. The LESSOR shall not
be responsible for the loss or damage to property, or
injury to persons, occurring in or about the Leased Space
by reason of any existing or future condition, defect,
matter or thing in the Leased Space, or for the acts,
omissions or negligence of other persons in and about the
said Complex.
Section 12. Condition of Premises.
(a) CONDITION OF PREMISES/REPAIRS/ALTERATIONS AND
IMPROVEMENTS. The LESSEE has examined the Leased Space
and accepts it in its present condition and without any
representations on the part of the LESSOR or its agents,
attorneys, representatives and employees as to the
present or future condition of the Leased Space. The
LESSEE at its own cost and expense, shall keep the Leased
Space in repair and good condition, including but not
limited to daily maintenance, and shall use all
reasonable precautions to prevent waste, damage or injury
to such Leased Space. The LESSEE agrees to keep the
Leased Space and all parts therefrom in a clean and
sanitary condition and free from trash, inflammable
material, hazards, obstacles and other objectionable
matter.
(b) LESSEE'S RESPONSIBILITIES FOR DAMAGE. All
damage or injury to the Complex and to its fixtures,
appurtenances and equipment caused by LESSEE moving
property in or out of the building or by installation or
removal of furniture, fixtures or other property, or from
any other cause of any other kind or nature whatsoever
due to omission, neglect, improper conduct or other cause
by LESSEE, its agents, servants, representatives, service
providers or employees shall be repaired by LESSEE at its
sole cost and expense, and if LESSEE fails to do so
promptly, such damage or injury may be repaired, restored
or replaced by LESSOR at LESSEE's expense. LESSEE shall
not place a load upon any floor of the Leased Space
exceeding the floor load per square foot area which such
floor was designed to carry.
(c) LESSOR's RESPONSIBILITIES. The LESSOR agrees
to keep the parking area servicing the Leased Space clean
and free of obstructions, debris, snow and ice, and to
maintain the grass area. The LESSOR shall, at its own
expense, maintain and keep in good repair the roof and
the external walls and structural components of the
Leased Space and any parking lot appurtenant thereto.
LESSOR shall be responsible for maintaining the exterior
of Building 1 including exterior windows and doors,
except for damage caused by LESSEE and its agents,
representatives, employees, suppliers and invitees.
LESSOR shall maintain, repair and replace when necessary
the heating, ventilation, air conditioning, plumbing,
electrical and other mechanical systems servicing the
Leased Premises so that such systems shall continue to be
in good working order.
(d) LESSOR REPAIRS. During the progress of any
work in the Leased Space performed by the LESSOR pursuant
to the provisions hereof, LESSOR may keep and store
therein all necessary materials, tools supplies and
equipment. LESSOR shall not be liable for inconvenience,
annoyance, disturbance, loss of business or other damage
of LESSEE by reason of making such repairs of the
performance of any such work, or on account of bringing
materials, tools, supplies and equipment into the Leased
Space during the course thereof and the obligations of
LESSEE under this Lease shall not be affected thereby,
provided that LESSOR uses efforts reasonable under the
circumstances to minimize to the extent practical any
resulting inconvenience, annoyance, disturbance, loss of
business or other damage to LESSEE or any subtenant by
reason of making such repairs or in the performance of
any such work or in any of the matters referred to above.
(e) OWNERSHIP OF PROPERTY AT TERMINATION OF LEASE.
All erections, alterations, additions and improvements
whether temporary or permanent in character, which may be
made upon the Leased Space either by the LESSOR or the
LESSEE, except furniture, movable trade fixtures and
movable partitions installed at the expense of the
LESSEE, shall be the property of the LESSOR and shall
remain upon and be surrendered with the Leased Space as
part thereof at the termination of this Lease, without
compensation to the LESSEE.
(f) DAMAGE BY FIRE, EXPLOSION, THE ELEMENTS OR
OTHERWISE. (i) Except as otherwise provided herein, in
the event of the destruction of the Leased Space by fire,
explosion, the elements or otherwise during the term
hereby created, or previously thereto, or such partial
destruction thereof as to render the Leased Space wholly
untenantable or unfit for occupancy, or should the Leased
Space be so badly injured that the same cannot be
repaired within 90 days from the happening of such
injury, then, and in such case, the Term hereby created
shall, at the option of either party, by notice from
either party to the other within fifteen (15) days of the
date of the casualty, cease and become null and void
from the date of such damage or destruction, and the
LESSEE shall immediately surrender the Leased Space and
all the LESSEE's interest therein to the LESSOR, and
shall pay rent only to the time of such surrender, in
which event the LESSOR may reenter and repossess the
Leased Space and may remove all parties therefrom. (ii)
Should the Leased Space be rendered untenantable and
unfit for occupancy, but yet be repairable within ninety
(90) days from the happening of said injury, upon prompt
request of the LESSEE by notice to LESSOR within fifteen
(15) days of the date of the casualty ("Notification"),
and if any mortgagee of the Complex shall agree, the
LESSOR shall enter and repair the same with reasonable
speed, and the rent shall be abated while repairs are
being made, but shall recommence immediately after said
repairs shall be completed and the Leased Space is
suitable for occupancy. If the LESSEE does not give such
Notification, this Lease shall be deemed terminated as of
the end of such fifteen (15) day period. If LESSEE
gives written notice within such fifteen (15) day period
that it does not intend the Lease to continue because of
the casualty, then this Lease shall be deemed terminated
on the date such written notice is received by LESSOR.
(iii) If the Leased Space shall be so slightly injured as
not to be rendered untenantable and LESSEE is able to
carry on its usual and customary day to day business
without material interruption, then the LESSOR agrees to
repair the same with reasonable promptness and in that
case the rent accrued and accruing shall not cease or
abate. The LESSEE shall immediately notify the LESSOR in
case of fire or other damage to the Leased Space.
Section 13. Default, Breach and Violation of Lease
Covenants, Agreements and Conditions.
(a) DEFAULT IN PAYMENT OF RENT. The LESSEE shall,
without any previous demand therefor, pay to the LESSOR,
or his designee, rent at the times and in the manner
provided above. In the event of the non-payment of said
rent, or any installment thereof, at the times and in the
manner above provided, and if the same shall remain in
default for ten (10) days after written notice to LESSEE,
or if the LESSEE shall be dispossessed or evicted for
non-payment of rent, or the Leased Space shall be
deserted or vacated, the LESSOR or its agents shall have
the right to and may enter the Leased Space as the agent
of the LESSEE, either by force or otherwise, without
being liable for any protection or damages therefor, and
may relet the Leased Space as the agent of the LESSEE,
and receive the rent therefor, upon such terms as shall
be satisfactory to the LESSOR, and all rights of the
LESSEE to repossess the Leased Space under this Lease
shall be forfeited. Such re-entry by the LESSOR shall
not operate to release the LESSEE from any rent to be
paid or covenants to be performed hereunder during the
full term of this Lease. For the purpose of reletting,
the LESSOR shall be authorized to pay for such utilities,
provide such maintenance and make such repairs or
alterations in or to the Leased Space as may be necessary
to keep or place the same in good order and condition.
The LESSEE shall be liable to the LESSOR for the cost of
such utilities, maintenance, repairs or alterations, and
all expenses of such reletting. If the sum realized or
to be realized from the reletting is insufficient to
satisfy the monthly or term rent provided in this Lease,
the LESSOR, at its option, may require the LESSEE to pay
such deficiency month by month. The LESSEE shall not be
entitled to any surplus accruing as a result of the re-
letting.
(b) ATTORNEYS FEES. The LESSEE shall pay, as
additional rent, all reasonable attorneys fees, costs,
fees and other expenses incurred by the LESSOR in
enforcing any of the obligations to it under this Lease.
If LESSEE obtains judgment against LESSOR for any
obligation owed to it by LESSOR pursuant to this Lease,
LESSEE shall be entitled to collect from LESSOR its
reasonable attorneys fees, costs and expenses.
(c) VIOLATION OF COVENANTS, FORFEITURE OF LEASE,
RE-ENTRY BY LESSOR. In case of violation or breach by
the Lessee of any of the covenants, agreements and
conditions of this Lease, or of the rules and regulations
now or hereafter to be reasonably established by the
LESSOR, and upon failure to discontinue such violation
within fifteen (15) days if monetary in nature (other
than rent as set forth in Section 13(a) above), otherwise
within thirty (30) days after notice thereof given to the
LESSEE, this Lease shall thenceforth, at the option of
the LESSOR, become terminated, subject to the LESSEE's
liability and responsibility thereunder for any rent to
be paid or covenants to be performed hereunder during the
full term of this Lease, and the LESSOR may re-enter
without further notice or demand, or may recover
possession thereof in the manner prescribed by the
statute relating to summary process. All right to any
such notice or demand of such re-entry is hereby
expressly waived by the LESSEE. The rent in such case
shall become due, be apportioned and paid on and up to
the day of such re-entry and the LESSEE shall be liable
for all loss or damage resulting from such violation as
aforesaid. No waiver by the LESSOR of any violation or
breach of condition, by the LESSEE shall constitute or be
construed as a waiver of any other violation or breach of
condition, nor shall lapse of time after breach of
condition by the LESSEE before the LESSOR shall exercise
its option under this paragraph operate to defeat the
right of the LESSOR to declare this Lease terminated and
to re-enter upon the Leased Space after the breach or
violation. Such re-entry or repossession by the LESSOR
shall not operate to release the LESSEE from any rent to
be paid or covenants to be performed hereunder during the
full term of this Lease. The LESSEE hereby waives all
right to any notice to quit possession as prescribed by
the statute relating to summary process.
(d) BANKRUPTCY, INSOLVENCY, ASSIGNMENT FOR BENEFIT
OF CREDITORS. It is further agreed that if at any time
during the term of this Lease, the LESSEE shall make any
assignment for the benefit of creditors, be decreed
insolvent , or files any voluntary bankruptcy petition,
or if a receiver shall be appointed for the LESSEE then
the LESSOR may, at its option, terminate this Lease,
exercise of such option to be evidenced by notice to that
effect served upon the assignee, receiver, trustee or
other person in charge of the liquidation of the property
of the LESSEE or the LESSEE's estate, but such
termination shall not release or discharge any payment of
rent payable hereunder during the full term of this Lease
and the responsibility or any liability by reason of any
agreement or covenant herein contained on the part of the
LESSEE or the LESSEE's legal representatives, to be
performed hereunder during the full term of this Lease.
(e) Notwithstanding any statutory, common law or other
requirement to the contrary, LESSOR shall have no duty or
obligation to mitigate damages after LESSEE's default(s),
and LESSEE hereby waives any such claim or defense
against LESSOR.
Section 14. Subordination and Attornment,
(a) SUBORDINATION TO MORTGAGES AND DEEDS OF TRUST.
This Lease is subject to and is hereby subordinated to all
present and future mortgages, deeds of trust and other
encumbrances affecting the Leased Space. The LESSEE agrees to
execute, at no expense to the LESSOR, any reasonable
instrument which may be deemed necessary or desirable by the
LESSOR further to effect the subordination of this Lease to
any such mortgage, deed of trust or encumbrance. LESSEE's
signed subordination agreement shall not be delivered by
LESSOR unless the mortgagee or other lender executes a
nondisturbance agreement in a form reasonably satisfactory to
LESSEE. LESSEE's approval of the form of such non-disturbance
agreement shall not be unreasonably withheld. If approved by
LESSOR's current mortgagee, LESSOR shall obtain a non-
disturbance agreement from such mortgagee.
(b) ATTORNMENT. LESSEE agrees that in the event
any mortgage lender succeeds to the interest of LESSOR
and said mortgage lender or its purchaser, successor or
other party who succeeds to the interest of LESSOR as
owner of the demised premises agrees that LESSEE's
possession may continue undisturbed by said succession,
then LESSEE agrees to, attorns to and recognizes said
mortgage lender, any other purchaser at a foreclosure
sale under said mortgage, any transferee who acquires the
demised premises by deed in lieu of foreclosure and their
respective successors and assigns as LESSOR under and for
the unexpired balance of the term of this Lease and any
extension or renewal thereof, upon the same terms and
conditions as set forth in this Lease.
Section 15. Mechanics' Liens. In the event that any
mechanics' lien is filed against the Complex or any part
thereof as a result of alterations, additions or improvements
made by the LESSEE, the LESSOR, at his option, after thirty
(30) days notice to the LESSEE (unless LESSEE bonds the same
within said period), may pay the said lien without inquiring
into the validity thereof, and the LESSEE shall forthwith
reimburse the LESSOR the total expense incurred by the LESSOR
in discharging the said lien as additional rent hereunder. If
the LESSEE does not make such payment within ten days after
demand by LESSOR, the Landlord, at its option may terminate
this Lease, in which case the LESSEE shall remain liable for
all damages sustained by LESSOR, including but not limited to
any rent to be paid or covenants to be performed hereunder
during the full term of this Lease. LESSEE shall secure or
obtain releases of such mechanics' liens in recordable form.
Section 16. EMINENT DOMAIN AND CONDEMNATION. If any portion
of Building 1 containing the Leased Space or a material portion of
the parking area of the Complex shall be taken by public or quasi-
public authority under any power of eminent domain or condemnation,
this Lease, at the option of the LESSOR, shall forthwith terminate
and the LESSEE shall have no claim or interest in or to any award
of damages for such taking except for its independent claim, if
any, for moving or similar expense.
Section 17. ASSIGNMENT/SUBLETTING.
(a) ASSIGNMENT. The LESSEE may assign this Lease
provided the LESSOR consents in writing thereto, but the
LESSOR may not unreasonably withhold consent thereto, further
provided such assignee will immediately assume, in writing,
all of the terms and conditions of this Lease and a
counterpart of such assumption is furnished immediately to the
LESSOR. If the terms of the said assumption provide for
rental, considerations, or fee(s) that if amortized over the
remaining term of this Lease would result in an effective
monthly rental or gross rental greater than the rent provided
for that period of time herein, then fifty percent (50%) of
the difference between the rent to be paid hereunder and the
rent, fee or consideration to be paid pursuant to the said
assignment shall belong to LESSOR and 50% shall belong to the
LESSEE. The LESSEE shall always remain responsible for
performance of the terms and conditions of this Lease.
(b) SUBLETTING. The LESSEE shall not sublet this
Lease in whole or in part without the express written
permission of the LESSOR, provided that such permission may
not be unreasonably withheld. If the terms of the said
sublease provide for rental, consideration, or fee(s) that if
amortized over the remaining term of this Lease would result
in an effective monthly rental or gross rental greater than
the rent provided for that period of time herein, then fifty
percent (50%) of the difference between the rent to be paid
hereunder and the rent, fee or consideration to be paid
pursuant to the said sublease shall belong to the LESSOR and
fifty percent (50%) of the difference between the rent to be
paid hereunder and the rent, fee or consideration to be paid
pursuant to the said sublease shall belong to the LESSEE. The
Tenant herein shall always remain responsible for performance
of the terms and conditions of this Lease.
(c) Notwithstanding everything to the contrary contained
in this Lease, LESSOR's review of each proposed assignee or
sublessee shall include, but not be limited to, the suitability of
their business for the Leased Space and the financial ability of
the proposed assignee or sublessee to perform the terms of this
Lease. which review LESSOR's approval shall not be unreasonably
withheld or unduly delayed.
Section 18. Lessee's Option For Renewal Term. LESSEE
shall have one option to continue this Lease for an additional term
of five years from January 1, 2002 through , December 1, 2006
subject to the following terms and conditions:
(i) from January 1, 2002 through June 30, 2003, base
rent shall be $26.00 per square foot of such Leased Space, a
total of $585,000 payable in equal monthly installments of
$19,500 in advance on the first day of each month.
(ii) from April 1, 2003 through December 31, 2006 base
rent shall be negotiated by the parties based on "gross" fair
market value as of July 1, 2003, but such base rent shall be
not less than $26.00 per square foot of such Leased Space.
Such rent shall total at least $585,000 payable in equal
monthly installments of at least $19,500 in advance on the
first day of each month.
(iii) The LESSEE shall not be in default of any term or
condition of this Lease at the time of its exercise of this
option.
(iv) This option shall be exercised by LESSEE only
through a writing to LESSOR in accordance with Section 24(b)
below received by LESSOR on or before June 30, 2001 at 5:00
p.m. Eastern Daylight Savings Time.
(v) Time is of the essence in LESSEE's exercise of this
option.
Section 19. Representations and Warranties
(a) The LESSEE represents and warrants to the
Lessor the following, upon which it intends the LESSOR to
rely:
(i) The LESSEE has the power to enter into
and perform this Lease.
(ii) This Lease constitutes a valid and
legally binding obligation of the Lessee,
enforceable in accordance with its terms.
(iii) Neither the execution and delivery of
this Lease, the consummation of the transactions
contemplated thereby nor the fulfillment by the
Lessee of or in compliance by the Lessee with the
terms and conditions hereof is prevented or limited
by or conflicts with or results in a breach of, or
default under, the terms, conditions or provisions
of any contractual or other restriction on the
Lessee, evidence of its indebtedness or agreement
or instrument of whatever nature to which the
LESSEE is bound, nor constitutes a default under
any of the foregoing or any other agreement. No
event has occurred and no condition exists which,
upon the execution and delivery hereof, constitutes
a Default hereunder or, but for the lapse of time
or the giving of notice, would constitute a Default
hereunder.
(iv) There is no action or proceeding pending
or, to the knowledge of the LESSEE threatened
against the LESSEE, before or in any court,
administrative agency or arbitration board that may
materially and adversely affect the ability of the
LESSEE to perform its obligations under this Lease
and all authorizations, consents and approvals of
governmental bodies or agencies required in
connection with the execution and delivery of this
Lease and in connection with the performance of the
LESSEE's obligations hereunder have been obtained.
(v) The execution, delivery and performance of
this Lease and any other instrument delivered by
the LESSEE pursuant to the terms hereof or thereof
are within the power of the LESSEE and are not in
contravention of any undertaking or agreement to
which the LESSEE is a party or by which it is
bound.
(vi) The LESSEE is a corporation duly
organized under the laws of the State of Delaware
and is in good standing. The LESSEE shall deliver
at the time of execution a certificate of Corporate
Authority authorizing the execution of this Lease
and the authority of the corporate office.
(b) The LESSOR represents and warrants to the LESSEE
the following, upon which it intends the LESSEE to rely:
(i) The LESSOR has the power to enter into and
perform this Lease.
(ii) This Lease constitutes a valid and
legally binding obligation of the LESSOR,
enforceable in accordance with its terms.
(iii) Neither the execution and delivery of
this Lease, the consummation of the transactions
contemplated thereby nor the fulfillment by the
LESSOR of or compliance by the LESSOR with the
terms and conditions hereof is prevented or limited
by or conflicts with or results in a breach of, or
default under, the terms, conditions or provisions
of any contractual or other restriction on the
LESSOR, evidence of its indebtedness or agreement
or instrument of whatever nature to which the
LESSOR is bound, nor constitutes a default under
any of the foregoing or any other agreement. No
event has occurred and no condition exists which,
upon the execution and delivery hereof constitutes
a Default hereunder or, but for the lapse of time
or the giving of notice, would constitute a Default
hereunder.
(iv) There is no action or proceeding pending
or, to the knowledge of the LESSOR threatened
against the LESSOR, before or in any court,
administrative agency or arbitration board that may
materially and adversely affect the ability of
LESSOR to perform its obligations under this Lease
and all authorizations, consents and approvals of
governmental bodies or agencies required in
connection with the execution and delivery of this
Lease and in connection with the performance of the
LESSOR's obligations hereunder or thereunder have
been obtained.
(v) The execution, delivery and performance of
this Lease and any other instrument delivered by
the LESSOR pursuant to the terms hereof or thereof
are within the power of the LESSOR and are not in
contravention of any undertaking or agreement to
which the LESSOR is a party or by which it is
bound.
(vi) LESSOR is a general partnership duly
organized under the laws of the State of
Connecticut and is duly authorized to enter into
this Lease.
Section 20. LESSEE's Right To Consider Rental of All Of
Building Two. At any time during the term of this Lease and any
extension thereof, if Building Two is not leased to any other
party, and is vacant, LESSOR or its successor shall give LESSEE
written notice thereof and LESSEE shall have the right to rent the
entire interior space of Building Two under the same terms and
conditions as set forth in this Lease. LESSEE shall have thirty
(30) days from the sending of written notice to notify LESSOR, or
the sender of the notice, if different, in writing, that it
exercises its right to and shall rent such interior space beginning
no more than thirty days after such notice to LESSOR. At LESSOR's
or its successor's option, any rental of less than all of the
interior space of Building Two shall be on such terms and
conditions as may be agreed between the parties. During the term
of this Lease and any extension thereof, LESSOR shall give such
written notice on each occasion when Building 2, having been
occupied, is not leased and is vacant.
Section 21. Use of Available Parking. During the term of
this Lease, LESSEE, including its employees, officers, clients and
business invitees will have the use of one-half of the parking
available for the Complex. No specific parking spaces or areas
will be reserved for LESSEE's use.
Section 22. LESSOR's Remedies. In addition to any other
remedies provided in this Lease, upon the occurrence of any event
of default, breach or violation on the part of LESSEE, LESSOR may,
at its option, exercise any, some or all of the remedies provided
to it in this Lease or otherwise, including but not limited to: (i)
notify LESSEE or otherwise take action as set forth in Section 13
above; (ii) cure such default, breach or violation on LESSEE's
behalf and collect all costs of doing so from LESSEE; (iii)
terminate this Lease by giving written notice of such election to
LESSEE, subject to any cure periods provided in this Lease; (iv)
exercise any, some or all of its rights and remedies which may
exist in this Lease, in law or equity. LESSOR's rights and
remedies shall be cumulative. LESSEE's covenants, agreements,
duties and obligations (including but not limited to the obligation
to pay rent in accordance with the terms of this Lease) shall
survive the termination of this Lease.
Section 23. LESSEE's Financial Disclosure. On or before
October 31 of each year, LESSEE shall provide to LESSOR copies of
its audited financial statements. If LESSEE's shareholder equity
is not at least Two Million ($2,000,000) Dollars, then within ten
(10) days of written notice from LESSOR or November 10 of the year
in which such shareholder equity falls below Two Million
($2,000,000) Dollars whichever is earlier, LESSEE shall provide
additional security in the form of a letter of credit from a bank
acceptable to LESSOR for a total of twelve times the amount of the
monthly installments then required to be paid by LESSEE pursuant to
this Leas Such security shall be maintained, if appropriate, as
set forth in Section 10 hereof.
Section 24. Miscellaneous Provisions.
(a) Lease Binding on Heirs, Successors, etc. All of the
terms covenants and conditions of this Lease shall inure to
the benefit of and be binding upon the respective heirs,
executors, administrators, successors and assigns of the
parties hereto. No change, amendment or modification of any
term or condition of this Lease and novation of the Lease
shall be binding unless in writing signed by both parties to
this Lease.
(b) Notices. All notices and demands, legal or
otherwise, incidental to this Lease, or the occupation of the
Leased Space, shall be in writing. If the LESSOR or its
agent, attorney, representative or employee desires to give or
serve upon the LESSEE any notice or demand, it shall be
sufficient to send a copy thereof by registered mail or
certified mail, addressed to the LESSEE at Building One, 1960
Bronson Road, Fairfield, Connecticut 06430, or to leave such
notice, demand or a copy thereof with a person at LESSEE's
administrative offices in such Leased Space. Notices from the
LESSEE to the LESSOR shall be sent by registered mail or
certified mail to the LESSOR at the place designated for the
payment of rent, or to such party or place as the LESSOR may
from time to time designate in writing.
(c) No Oral Changes. This instrument may not be changed
orally.
(d) Entire Agreement. This Lease contains the entire
agreement between the parties and all prior negotiations and
agreements are merged in this Lease. Neither LESSOR nor
LESSOR's agents have made any representations or warranties
with respect to the Leased Space, Building 1, the Complex or
this Lease except as expressly set forth in this Lease and no
rights, easements or licenses are or shall be acquired by
LESSEE by implication or otherwise unless expressly set forth
in this Lease. This Lease may not be changed, modified or
discharged, in whole or in part, orally, by conduct or by
omission of either or both of the parties hereto and no
executory agreement shall be effective to change, modify or
discharge, in whole or in part, this Lease or any provisions
of this Lease, unless such agreement is set forth in a written
instrument executed by the party against whom enforcement of
the change, modification or discharge is sought. All
references in this Lease to the consent or approval of LESSOR
shall be deemed to mean the written consent or approval of
LESSOR, as the case may be, and no consent or approval of
LESSOR shall be effective for any purpose unless such consent
or approval is set forth in a written instrument executed by
LESSOR.
(e) Invalidity of Term. If any term, covenant or
condition of this Lease or any application thereof shall be
invalid or unenforceable, the remainder of this Lease and any
other application of such term, covenant or condition shall
not be affected thereby.
(f) No Presumption against Drafter. This Lease shall be
construed without regard to any presumption or other rule
requiring construction against the party causing this Lease to
be drafted. In the event of any action, suit, dispute or
proceeding affecting the terms of this Lease, no weight shall
be given to any deletions or striking out of any of the terms
of this Lease contained in any draft of this Lease and no such
deletion or strike out shall be entered into evidence in any
such action, suit or dispute or proceeding given any weight
therein.
(g) Captions. The captions are inserted only as a
matter of convenience and for reference and in no way define,
limit or describe the scope of this Lease nor the intent of
any provision thereof.
(h) Connecticut Law. This Lease shall be construed and
enforced in accordance with Connecticut law.
IN WITNESS WHEREOF, the parties hereto have hereunto set their
hands and seals, and to a duplicate of the same tenor, the day and
year first written above.
Signed, Sealed and Delivered
In the Presence Of:
THE BRONSON ROAD GROUP
S/ Blair T. McMorrow
By S/ Fred E. Kaseff
Fred E. Kaseff
Its Attorney In Fact
Duly Authorized
S/ Joanne Epstein
S/ Donna Szybist COMPETITIVE TECHNOLOGIES, INC.
S/ Jeane E. Hancock By S/ Frank R. McPike, Jr.
Its Vice President
Duly Authorized.
STATE OF CONNECTICUT)
) ss: August 28, 1996
COUNTY OF FAIRFIELD )
Personally appeared Fred E. Kaseff, who acknowledged himself
to be the Attorney In Fact of THE BRONSON ROAD GROUP, signer and
sealer of the foregoing instrument and acknowledged the same to be
his free act and deed and the free act and deed of THE BRONSON ROAD
GROUP before me.
S/ Lorraine M. Pape
Notary Public
My Commission Expires: 1-31-2000
STATE OF CONNECTICUT)
) ss: August 28, 1996
COUNTY OF FAIRFIELD )
Personally appeared Frank R. McPike, Jr., who acknowledged
himself to be the Vice President of COMPETITIVE TECHNOLOGIES, INC.,
signer and sealer of the foregoing instrument and acknowledged the
same to be his free act and deed and the free act and deed of
COMPETITIVE TECHNOLOGIES, INC. before me.
S/ Donna Szybist
Notary Public
My Commission Expires: July 31, 1998
EXHIBIT A
Description of Land and Improvements
All that certain tract, piece or parcel of land situated in the
Town of Fairfield, County of Fairfield and State of Connecticut, in
quantity 1.38 acres, shown and designated on that certain map
entitled "Map of Property at 1960 BRONSON ROAD, Fairfield, Conn.,
June 27, 1985" and certified substantially correct by David S.
Huntington, which map is recorded in the office of the Fairfield
Town Clerk as Map No. 5370.
Said land is improved by two (2) two-story concrete block office
buildings with an aggregate net rentable area of approximately
18,000 square feet. The westernmost building, which contains net
rentable area of approximately 9,000 square feet and faces onto
Bronson Road, is hereby referred to as Building 1. The easternmost
building, which contains net rentable area of approximately 9,000
square feet and faces onto Hillside Road, is hereby referred to as
Building 2.
EXHIBIT B
Bronson Road
United Illuminating
Billing Period Amount $/Sq. Ft.
12/29/93-1/28/94 $ 8,762.13
1/28/94-3/1/94 $ 8,309.32
3/01/94-3/30/94 $ 5,873.28
3/30/94-4/28/94 $ 3,864.91
4/28/94-5/27/94 $ 3,782.40
5/27/94-6/29/94 $ 5,372.05
6/29/94-7/29/94 $ 5,226.34
7/29/94-8/30/94 $ 5,512.44
8/30/94-9/30/94 $ 4,734.51
9/30/94-10/28/94 $ 3,039.33
10/28/94-11/30/94 $ 4,349.02
11/30/94-12/29/94 $ 5,356.34
TOTAL 1994 $64,182.07 $ 3.57
Bronson Road
United Illuminating
Billing Period Amount $/Sq. Ft.
12/29/94-1/30/95 $ 6,492.15
1/30/95-2/28/95 $ 6,674.36
2/28/95-3/29/95 $ 4,737.20
3/29/95-5/1/95 $ 4,561.22
5/1/95-5/31/95 $ 4,224.60
5/31/95-6/28/95 $ 4,911.88
6/28/95-7/31/95 $ 5,260.53
7/31/95-8/31/95 $ 5,268.40
8/31/95-9/29/95 $ 4,288.88
9/29/95-10/27/95 $ 3,213.81
10/27/95-11/29/95 $ 5,194.69
11/29/95-12/29/95 $ 6,802.88
TOTAL 1995 $61,630.60 $ 3.42
Bronson Road
United Illuminating
Billing Period Amount $/Sq. Ft.
6/28/95-7/31/95 $ 5,260.53
7/31/95-8/31/95 $ 5,268.40
8/31/95-9/29/95 $ 4,288.88
9/29/95-10/27/95 $ 3,213.81
10/27/95-11/29/95 $ 5,194.69
11/29/95-12/29/95 $ 6,802.88
12/29/95-1/30/96 $ 7,675.95
1/30/96-2/28/96 $ 7,050.30
2/28/96-3/28/96 $ 5,822.41
3/28/96-4/30/96 $ 5,139.78
4/30/96-5/30/96 $ 4,679.04
5/30/96-6/28/96 $ 5,921.33
12 monhts ended 6/30/96 $66,318.00 $ 3.68
Exhibit 11.1
COMPETITIVE TECHNOLOGIES, INC.
Schedule of Computation of Earnings Per Share
Year ended July 31,
1996 1995 1994
Loss from continuing operations $ (588,101) $ (641,249) $ (828,996)
Income (loss) from operations of
discontinued operations -- 99,468 (10,786)
Net gain (loss) on disposal of
discontinued operations -- 2,534,505 221,852
Net income (loss) applicable to
common stock $ (588,101) $1,992,724 $ (617,930)
Common and common equivalents shares -
primary:
Weighted average common shares
outstanding 5,853,814 5,805,833 5,761,610
Adjustments for assumed exercise
of stock options 54,009* 5,986 7,838 *
Adjustments for assumed exercise
of stock warrants 15,373* 3,007 4,274 *
Weighted average number of common
and common equivalent shares
outstanding 5,923,196 5,814,826 5,773,722
Common and common equivalent shares -
fully diluted:
Weighted average common shares
outstanding 5,853,814 5,805,833 5,761,610
Adjustments for assumed exercise of
stock options 66,157* 5,986 14,341 *
Adjustments for assumed exercise of
stock warrants 21,507* 3,007 8,500 *
Weighted average number of common
and common equivalent shares
outstanding 5,941,478 5,814,826 5,784,451
Net income (loss) per share of common
stock - primary and fully diluted:
Continuing operations $ (0.10) $ (0.11) $ (0.15)
Operations of discontinued operation -- 0.02 (0.00)
Disposal of discontinued operations -- 0.43 0.04
Net income (loss) per share of
common stock $ (0.10) $ 0.34 $ (0.11)
* 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)
Competitive Technologies of Ohio, Inc. (Delaware)
University Science, Engineering and Technology, Inc. (Delaware)
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 on Form S-8 and the related prospectus (No. 33-
44612) pertaining to the Key Employees' Stock Option Plan and
Employees' Common Stock Retirement Plan of our report dated
September 30, 1996, on our audits of the consolidated financial
statements of Competitive Technologies, Inc. and Subsidiaries as of
July 31, 1996 and 1995 and for each of the three years in the
period ended July 31, 1996, 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 25, 1996
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 re-substitution, to do any and all acts and things and to
execute any all instruments which said attorneys and agents may
deem necessary or desirable to enable the Company to comply with
the Securities Act of 1933, as amended (the "Act"), and any rules,
regulations and requirements of the Securities and Exchange
Commission thereunder in connection with the registration under the
Act of securities of the Company 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 Registration Statement on Form S-8 to be
filed with the Securities and Exchange Commission by the Company in
respect of such securities, to any and all amendments to said
Registration Statement, 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 the 28th day of October, 1996.
COMPETITIVE TECHNOLOGIES, INC.
By: S/ George M. Stadler
George M. Stadler
President and CEO
ATTEST:
S/ Frank R. McPike, Jr.
Frank R. McPike, Jr.
Secretary
CAPACITIES SIGNATURES
President, CEO and Director S/ George M. Stadler
(Principal Executive Officer) George M. Stadler
Vice President, Finance,
Treasurer, Secretary and
Director (Principal Financial S/ Frank R. McPike, Jr.
and Accounting Officer Frank R. McPike, Jr.
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 S/ Harry Van Benschoten
Harry Van Benschoten
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
Financial Data Schedule for Form 10-K for July 31, 1996
</LEGEND>
<CIK> 0000102198
<NAME> COMPETITIVE TECHNOLOGIES, INC.
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUL-31-1996
<PERIOD-END> JUL-31-1996
<CASH> 560,640
<SECURITIES> 3,820,990
<RECEIVABLES> 1,088,030
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 5,688,563
<PP&E> 367,504
<DEPRECIATION> 223,144
<TOTAL-ASSETS> 8,368,140
<CURRENT-LIABILITIES> 1,427,821
<BONDS> 0
0
60,675
<COMMON> 59,258
<OTHER-SE> 6,168,019
<TOTAL-LIABILITY-AND-EQUITY> 8,368,140
<SALES> 0
<TOTAL-REVENUES> 2,280,196
<CGS> 0
<TOTAL-COSTS> 3,101,956
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 57,413
<INCOME-PRETAX> (558,101)
<INCOME-TAX> 30,000
<INCOME-CONTINUING> (588,101)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (588,101)
<EPS-PRIMARY> (0.10)
<EPS-DILUTED> (0.10)
</TABLE>
