8-K/A January 1996
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
AMENDMENT NO. 1
AMENDMENT TO CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported) January 31, 1996
COMPETITIVE TECHNOLOGIES, INC.
(Exact name of registrant as specified in its charter)
Commission file number 1-8696
The undersigned registrant hereby amends the following items,
financial statements, exhibits or other portions of its Current
Report Dated January 31, 1996 on Form 8-K as set forth in the pages
attached hereto:
(List all such items, financial statements, exhibits or other portions
amended)
Item 7. Financial Statements and Exhibits
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this amendment to be signed on
its behalf by the undersigned hereunto duly authorized.
COMPETITIVE TECHNOLOGIES, INC.
Registrant
Date: April 11, 1996 s/ Frank R. McPike, Jr.
By: Frank R. McPike, Jr.
Vice President, Finance,
Treasurer, Chief Financial
Officer and Authorized Signer
Page 1 of 31 sequentially numbered pages
Item 7. Financial Statements and Exhibits
A. Financial Statements of Businesses Acquired Page
USET Acquisition Partners, L.P. and Subsidiaries
Report of Independent Accountant 5
Consolidated Balance Sheets as of July 31,
1995 and 1994 6-7
Consolidated Statements of Operations for the
years ended July 31, 1995, 1994 and 1993 8
Consolidated Statements of Changes in
Partners' Capital for the years ended July 31,
1995, 1994 and 1993 9
Consolidated Statements of Cash Flows for the
years ended July 31, 1995, 1994 and 1993 10-11
Notes to Consolidated Financial Statements 12-17
USET Acquisition Partners, L.P. and Subsidiaries (unaudited)
Condensed Consolidated Balance Sheet as
of January 31, 1996 18
Consolidated Statements of Operations for the
three months ended January 31, 1996 and 1995 19
Consolidated Statements of Operations for the
six months ended January 31, 1996 and 1995 20
Consolidated Statement of Changes in Partners'
Capital for the six months ended January 31, 1996 21
Consolidated Statements of Cash Flows for the
six months ended July 31, 1996 and 1995 22-23
Notes to Consolidated Financial Statements 24-25
B. Pro Forma Financial Information (Unaudited) 26
Pro Forma Consolidated Statement of Operations for the
year ended July 31, 1995 27-28
Pro Forma Consolidated Statement of Operations for the
six months ended January 31, 1996 29
Notes to Pro Forma Consolidated Financial Statements 30
C. Exhibits
2.1 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 Association
filed as Exhibit 2.1 to registrant's
Form 8-K dated January 31, 1996 and
hereby incorporated by reference.
2.2 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.
2.3 Promissory Note of UPAT Services,
Inc. dated January 31, 1996 in the
principal amount of $351,315.79
payable to Texas Research and
Technology Foundation filed as
Exhibit 2.3 to registrant's Form 8-K
dated January 31, 1996 and hereby
incorporated by reference.
2.4 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.
2.5 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.
2.6 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.
23.1 Consent of Independent Accountant 31
REPORT OF INDEPENDENT ACCOUNTANT
To the Partners of USET Acquisition Partners, L.P.:
I have audited the accompanying consolidated balance sheets of USET
Acquisition Partners, L.P. and Subsidiaries as of July 31, 1995 and
1994, and the related consolidated statements of operations,
changes in partners' capital and cash flows for each of the three
years in the period ended July 31, 1995. These financial
statements are the responsibility of the Company's management. My
responsibility is to express an opinion on these financial state-
ments based on my audits.
I conducted my audits in accordance with generally accepted
auditing standards. Those standards require that I plan and
perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statements. An audit also
includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall
financial statement presentation. I believe that my audits provide
a reasonable basis for my opinion.
In my opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of USET
Acquisition Partners, L.P. and Subsidiaries as of July 31, 1995 and
1994, and the results of their operations and their cash flows for
each of the three years in the period ended July 31, 1995, in
conformity with generally accepted accounting principles.
s/ Michael S. Levine, CPA
Michael S. Levine, CPA
Monroe, Connecticut
April 2, 1996
USET ACQUISITION PARTNERS, L.P. AND SUBSIDIARIES
Consolidated Balance Sheets
July 31, 1995 and 1994
ASSETS
1995 1994
Current assets:
Cash and cash equivalents $ 238,889 $ 469,485
Receivables, including $13,680 and
$31,178 receivable from CTI in
1995 and 1994, respectively 398,300 380,640
Income taxes receivable 22,341 1,095
Deferred tax benefits -- 73,430
Total current assets 659,530 924,650
Office furniture and equipment, net of
accumulated depreciation of $117,887
and $100,129 in 1995 and 1994,
respectively 25,876 37,457
Investment in Plasmaco, Inc., at cost 8,000 --
Deferred organization costs, net of
accumulated amortization of
$90,404 and $72,015 in 1995 and
1994, respectively 1,530 19,919
Intangible assets, net of
accumulated amortization of
$240,771 and $153,346 in 1995
and 1994, respectively 759,140 556,101
TOTAL ASSETS $ 1,454,076 $ 1,538,127
See accompanying notes
USET ACQUISITION PARTNERS, L.P. AND SUBSIDIARIES
Consolidated Balance Sheets
July 31, 1995 and 1994
(Continued)
1995 1994
LIABILITIES AND PARTNERS' CAPITAL
Current liabilities:
Accounts payable, including $4,506 and
$2,210 payable to CTI in
1995 and 1994, respectively $ 20,047 $ 23,658
Royalties payable, including $83,032
and $151,379 payable to CTI
in 1995 and 1994, respectively 352,823 511,248
Accrued liabilities 31,033 50,331
Total current liabilities 403,903 585,237
Commitments and contingencies -- --
Partners' capital 1,050,173 952,890
TOTAL LIABILITIES AND PARTNERS'
CAPITAL $ 1,454,076 $ 1,538,127
See accompanying notes
USET ACQUISITION PARTNERS, L.P. AND SUBSIDIARIES
Consolidated Statements of Operations
for the years ended July 31, 1995, 1994 and 1993
1995 1994 1993
Retained royalty revenues $ 720,517 $ 695,253 $ 595,268
Costs of technology management
services, of which $76,371,
$106,416 and $122,141 were
paid to CTI in 1995, 1994 and
1993, respectively 465,569 538,369 678,950
Operating income (loss) 254,948 156,884 (83,682)
Interest income 22,233 18,754 20,825
Income before income taxes 277,181 175,638 (62,857)
Provision (credit) for
income taxes 125,089 82,677 (20,026)
Net income (loss) $ 152,092 $ 92,961 $ (42,831)
See accompanying notes
USET ACQUISITION PARTNERS, L.P. AND SUBSIDIARIES
Consolidated Statements of Changes in Partners' Capital
for the years ended July 31, 1995, 1994 and 1993
Partners'
Capital
Balance - July 31, 1992 $ 902,760
Net loss for the year ended July 31, 1993 (42,831)
Balance - July 31, 1993 859,929
Net income for the year ended July 31, 1994 92,961
Balance - July 31, 1994 952,890
Distribution to partners (54,809)
Net income for the year ended July 31, 1995 152,092
Balance - July 31, 1995 $1,050,173
See accompanying notes
USET ACQUISITION PARTNERS, L.P. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
For the years ended July 31, 1995, 1994 and 1993
1995 1994 1993
Cash flow from operating
activities:
Net income (loss) $ 152,092 $ 92,961 $ (42,831)
Noncash items included in income
(loss) from operations:
Depreciation 17,758 17,287 23,832
Amortization of intangible
assets 87,425 70,077 204,925
Amortization of deferred
organization costs 18,389 18,385 18,388
Provision (credit) for
deferred income taxes 73,430 79,772 (23,010)
Net changes in various
operating accounts:
Royalties receivable (41,143) 129,008 (199,283)
Related party receivables 5,985 (11,306) 3,269
Other receivables 17,498 (347) (9,511)
Income taxes receivable (21,246) (1,420) --
Deferred tax benefits,
current -- (73,430) (79,772)
Accounts payable (3,611) (34,881) (19,510)
Royalties payable (158,425) 121,584 987
Accrued liabilities (19,298) 5,418 (18,548)
Change in deferred tax
benefits, noncurrent -- 73,430 79,772
Net cash flow from (used in)
operating activities 128,854 486,538 (61,292)
Cash flow from investing
activities:
Contingent purchase price
payments for intangible
assets (290,464) (130,780) (168,984)
Purchases of office
furniture and
equipment (6,177) (9,607) --
Purchases of investment (8,000) -- --
Net cash flow used in
investing activities (304,641) (140,387) (168,984)
See accompanying notes
USET ACQUISITION PARTNERS, L.P. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
For the years ended July 31, 1995, 1994 and 1993
(Continued)
1995 1994 1993
Cash flow from financing activities:
Distribution to partners (54,809) -- --
Net cash flow used in financing
activities (54,809) -- --
Net (decrease) increase in cash
and cash equivalents (230,596) 346,151 (230,276)
Cash and cash equivalents,
beginning of year 469,485 123,334 353,610
Cash and cash equivalents, end
of year $ 238,889 $ 469,485 $ 123,334
Supplemental cash flow information:
Cash paid for income taxes $ 72,905 $ 4,794 $ 2,515
See accompanying notes
USET ACQUISITION PARTNERS, L.P. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
1. Summary of Significant Accounting Policies
Financial Statements and Principles of Consolidation
The consolidated financial statements include the accounts of
USET Acquisition Partners, L.P. ("UAP" or "the Partnership") and its
wholly-owned subsidiaries ("the Company"). UAP's wholly-owned
subsidiaries are USET Holding Co. ("Holding") and University Science,
Engineering and Technology, Inc. ("USET"). Intercompany accounts and
transactions have been eliminated in consolidation.
UAP's principal asset is its investment in Holding. Holding's
only asset is its investment in USET. USET is the operating company
which manages and administers a portfolio of licenses and patented
technologies. Consequently, except for approximately $18,400
amortization of deferred organization costs in each year, the results
of operations presented in these consolidated financial statements are
those of USET.
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 revenue, net of amounts collected as agent for and due
to others, is included in operations in the period in which it is
earned and determinable. Such retained royalties are earned
principally through servicing agreements with various technology
sources, primarily universities, under which the Company retains an
agreed percentage of revenue derived from license or sale of
technologies.
Expenditures made in connection with evaluating the marketability
of inventions, patenting inventions, licensing patented inventions and
enforcing patents, net of amounts paid as agent for and due from
others, 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
two regional financial institutions. The Company's policy is to
monitor the financial strength of these institutions on an ongoing
basis.
Office Furniture and Equipment
Office furniture and equipment are stated at cost. Those costs
are charged to operations using a double-declining balance method over
their estimated useful lives (5 to 7 years). 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.
Deferred Organization Costs
Deferred organization costs of UAP are charged to operations on
a straight-line basis over their estimated useful life of five years.
Intangible Assets
Costs of intangible assets, primarily interests in licenses and
patented technologies, include $875,000 recorded on August 20, 1990,
when Holding acquired USET and subsequent contingent purchase price
payments to Macmillan, Inc. in accordance with the purchase agreement
(see Note 2). Contingent purchase price payments are recorded when
they are determinable.
Costs of intangible assets acquired are charged to operations on
a straight-line basis over the average remaining lives of the patents.
Results for the year ended July 31, 1993, include $166,667
amortization of a covenant not to compete which was acquired with the
technologies in August, 1990. The covenant was amortized over its
three-year life. The cost and related accumulated amortization of
intangible assets are removed from the accounts upon retirement or
other disposition and any resulting gain or loss is reflected in
operations.
Income Taxes
UAP is not subject to Federal or State income tax. Partnership
income or loss is allocated to partners in proportion to their
ownership interests and must be reported by partners in their
respective income tax filings. The tax returns, the qualification of
the partnership as such for tax purposes, and the amount of
distributable partnership income or loss are subject to examination
by Federal and State taxing authorities. If examinations result in
changes to the timing and amount of partnership revenues and expenses,
the tax liabilities of the partners could be changed accordingly. No
income taxes have been provided in these consolidated financial
statements for the Partnership.
Income taxes reported in these financial statements relate to
Holding and USET only.
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.
2. Organization and Operations
USET Acquisition Partners, Limited Partnership was formed on June
28, 1990 pursuant to the provisions of the Limited Partnership Law of
the State of Texas. The Partnership was organized to (a) service,
manage and protect patents, intellectual properties and other
technologies USET acquired from Macmillan, Inc. and (b) make and
administer license agreements with various users of such patents,
intellectual properties and other technologies, including
improvements. On August 20, 1990, the original partners of UAP
contributed $1,200,000 to fund the Partnership.
The net profits (losses) and property distributions of the
Partnership are initially allocated to the limited partners in
proportion to their percentage interests in the Partnership capital
contributions. At such time as such distributions to the limited
partners equal $1,200,000 (representing the return of their capital
contributions), the general partner is to receive a 20% interest and
the limited partners are to receive an 80% interest in the net profits
of the Partnership.
On July 27, 1990 the Partnership formed USET Holding Co., a Texas
corporation. The Partnership purchased 10 shares of no par value
common stock (100% of the outstanding shares) of USET Holding Co. for
$1,000,000 paid in cash on August 20, 1990.
USET Holding Co. purchased 1,000 shares of the common stock ($.01
par value per share) (100% of the outstanding shares) of USET on
August 20, 1990 from Macmillan, Inc. for $1,000,000 in cash and future
payments contingent upon royalties earned by USET as defined in the
acquisition agreement. Contingent payments are calculated at 90% of
USET's earned royalties in excess of $400,000 per year for up to five
years or until Macmillan has received cumulative contingent payments
of $3,750,000, whichever occurs first. USET has guaranteed such
contingent payments and has pledged substantially all of its assets
as collateral for them. Once contingent payments become due, they are
100% guaranteed by Competitive Technologies, Inc. ("CTI"). Cumulative
contingent payments of approximately $625,000 have been made through
July 31, 1995. This acquisition was accounted for as a purchase.
UPAT Services, Inc. ("USI"), a wholly-owned subsidiary of CTI,
is the general partner and holds a 20% partnership interest in UAP.
In addition, CTI manages USET for UAP. Both USET and CTI share in
amounts, primarily royalties received from optionees and licensees of
the portfolio of technologies, patents and licenses which was managed
by CTI prior to June 28, 1988. USET collects those receipts and
distributes them according to the terms of various agreements with CTI
and the sources of these technologies. Both USET and CTI also share
in expenses for patent prosecution and litigation incurred to maintain
this portfolio and both are entitled to recover certain of their
patent costs from royalties received on the related technologies
before distribution to the respective technology source.
3. Investment in Plasmaco, Inc.
In June, 1995, USET purchased 4,000 shares of the common stock
of Plasmaco, Inc. from CTI for $8,000 ($2 per share) in cash. USET
accounts for its investment under the cost method. USET's holding is
less than 1% of Plasmaco, Inc.'s outstanding common stock which is not
publicly traded and there is no quoted market price for its stock.
4. Retained Royalties
Retained royalties for 1995, 1994 and 1993, include $61,098,
$70,930 and $46,174, respectively, from foreign sources.
The only technology which contributed more than 15% of retained
royalty revenues during 1995, 1994 or 1993 was the Vitamin B12 assay.
It contributed $258,142 (36%), $220,108 (32%) and $257,446 (43%) to
retained royalty revenues in 1995, 1994 and 1993, respectively. These
Vitamin B12 assay patents expire from February, 1997 to May 2001.
5. Receivables
Receivables as of July 31, 1995 and 1994 comprise:
1995 1994
Royalties $358,528 $317,385
Related parties 13,680 31,178
Other 26,092 32,077
$398,300 $380,640
6. Income Taxes
Effective August 1, 1993, the Company adopted Statement of
Financial Accounting Standards No. 109 "Accounting for Income Taxes."
As permitted by Statement No. 109, prior years' financial statements
have not been restated. Adoption of Statement No. 109 had no
cumulative effect on the Company's net income.
The current provision (benefit) for income taxes for 1995, 1994
and 1993 is as follows:
1995 1994 1993
Federal
Current $ 32,446 $ -- $ --
Deferred 57,873 57,366 (17,993)
State
Current 19,213 2,905 2,984
Deferred 15,557 22,406 (5,017)
Total $125,089 $ 82,677 $(20,026)
The provision for income taxes differs from that computed using
the 34% statutory Federal income tax rate principally because of
partnership items not taxed at the partnership level, state income
taxes (net of their Federal benefit) and the effect of graduated
Federal tax rates.
The Company's current deferred tax assets as of July 31, 1994
comprise only net operating loss carryforwards which have been fully
utilized in 1995.
7. Commitments
Operating Leases
At July 31, 1995, future minimum rental payments under operating
leases with initial or remaining noncancelable lease terms in excess
of one year are $27,996, $6,614, $6,614 and $6,614 for 1996, 1997,
1998 and 1999, respectively.
Rental expense for all operating leases (principally for office
space) was $23,009, $22,549 and $21,934 in 1995, 1994 and 1993,
respectively.
8. Related Party Transactions
USET leases office space in Westport, Connecticut from CTI under
an operating lease expiring in August, 1996. USET paid CTI rent
totalling $21,149, $20,978 and $20,388, respectively, in the years
ended July 31, 1995, 1994 and 1993.
During the years ended July 31, 1995, 1994 and 1993, CTI charged
USET and UAP $55,222, $85,438 and $101,754, respectively, for
management, legal, accounting and administrative services. Further,
USET charged CTI $31,847, $12,300 and $5,280 during 1995, 1994 and
1993, respectively, for accounting and legal services.
CTI's share of royalty receipts and patenting costs is reported
in CTI's financial statements and excluded from these statements of
operations.
All amounts due and payable between USET or UAP and CTI are paid
on a current basis.
9. Subsequent Events (Unaudited)
On January 31, 1996, USI purchased the limited partnership
interests of the other limited partners in UAP. 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 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. After the purchase, USI owns 100% of all partnership interests
in UAP and as a result, UAP will be dissolved.
In January, 1996, USET received $20,516 from the sale of its
4,000 shares of Plasmaco, Inc. The gain of $12,516 will be recognized
in January, 1996.
USET ACQUISITION PARTNERS, L.P. AND SUBSIDIARIES
Condensed Consolidated Balance Sheet
January 31, 1996
(Unaudited)
ASSETS
1996
Current assets:
Cash and cash equivalents $ 605,171
Receivables, including $30,171
receivable from CTI 75,595
Total current assets 680,766
Office furniture and equipment, net of
accumulated depreciation of $124,441 26,286
Intangible assets, net of
accumulated amortization of
$292,324 987,686
TOTAL ASSETS $ 1,694,738
LIABILITIES AND PARTNERS' CAPITAL
Current liabilities:
Accounts payable, including $5,575
payable to CTI $ 65,765
Royalties payable, including $96,543
payable to CTI 353,730
Accrued liabilities 109,510
Total current liabilities 529,005
Commitments and contingencies --
Partners' capital 1,165,733
TOTAL LIABILITIES AND PARTNERS'
CAPITAL $ 1,694,738
See accompanying notes
USET ACQUISITION PARTNERS, L.P. AND SUBSIDIARIES
Consolidated Statements of Operations
for the three months ended January 31, 1996 and 1995
(Unaudited)
1996 1995
Retained royalty revenues $ 123,715 $ 165,574
Costs of technology management
services, of which $17,471
and $15,564 were paid to CTI
in 1996 and 1995, respectively 117,349 120,618
Operating income 6,366 44,956
Gain on sale of investment
in Plasmaco, Inc. 12,516 --
Interest income 6,760 4,506
Income before income taxes 25,642 49,462
Provision for income
taxes 11,825 28,760
Net income $ 13,817 $ 20,702
See accompanying notes
USET ACQUISITION PARTNERS, L.P. AND SUBSIDIARIES
Consolidated Statements of Operations
for the six months ended January 31, 1996 and 1995
(Unaudited)
1996 1995
Retained royalty revenues $ 421,145 $ 339,466
Costs of technology management
services, of which $42,123
and $31,837 were paid to CTI
in 1996 and 1995, respectively 234,987 221,590
Operating income 186,158 117,876
Gain on sale of investment
in Plasmaco, Inc. 12,516 --
Interest income 15,025 10,451
Income before income taxes 213,699 128,327
Provision for income
taxes 98,139 66,983
Net income $ 115,560 $ 61,344
See accompanying notes
USET ACQUISITION PARTNERS, L.P. AND SUBSIDIARIES
Consolidated Statement of Changes in Partners' Capital
for the six months ended January 31, 1996
(Unaudited)
Partners'
Capital
Balance - July 31, 1995 $1,050,173
Net income for the six months ended
January 31, 1996 115,560
Balance - January 31, 1996 $1,165,733
See accompanying notes
USET ACQUISITION PARTNERS, L.P. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
For the six months ended January 31, 1996 and 1995
(Unaudited)
1996 1995
Cash flow from operating
activities:
Net income $ 115,560 $ 61,344
Noncash items included in income
from operations:
Depreciation 6,554 6,720
Amortization of intangible
assets 51,553 34,484
Amortization of deferred
organization costs 1,530 9,192
Provision for
deferred income taxes -- 57,983
Net changes in various
operating accounts:
Royalties receivable 358,528 (120,741)
Related party receivables (18,692) (10,611)
Other receivables (17,131) 5,629
Income taxes receivable 22,341 1,095
Accounts payable 45,718 17,728
Royalties payable 907 (11,848)
Accrued liabilities 78,477 (10,644)
Other (12,516) --
Net cash flow from
operating activities 632,829 40,331
Cash flow from investing
activities:
Contingent purchase price
payments for intangible
assets (280,099) (219,547)
Purchases of office
furniture and
equipment (6,964) (6,177)
Proceeds on sale of
investment 20,516 --
Net cash flow used in
investing activities (266,547) (225,724)
See accompanying notes
USET ACQUISITION PARTNERS, L.P. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
For the six months ended January 31, 1996 and 1995
(Continued)
(Unaudited)
1996 1995
Cash flow from financing activities:
Distribution to partners -- (54,809)
Net cash flow used in financing
activities -- (54,809)
Net increase (decrease) in cash
and cash equivalents 366,282 (240,202)
Cash and cash equivalents,
beginning of year 238,889 469,485
Cash and cash equivalents, end
of period $ 605,171 $ 229,283
Supplemental cash flow information:
Cash paid for income taxes $ 62,950 $ 7,905
See accompanying notes
USET ACQUISITION PARTNERS, L.P. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
1. Interim Financial Statements
Interim financial information presented in the accompanying
financial statements and notes hereto is unaudited.
In the opinion of management, all adjustments which are necessary
to present the financial statements fairly in conformity with
generally accepted accounting principles, consisting only of normal
recurring adjustments, have been made.
The interim financial statements and notes thereto should be read
in conjunction with the Company's audited financial statements for the
three years ended July 31, 1995.
2. Sale of Partnership Interests
On January 31, 1996, UPAT Services, Inc., ("USI"), a wholly-owned
subsidiary of Competitive Technologies, Inc. ("CTI"), purchased the
limited partnership interests of the other limited partners in USET
Acquisition Partners, L.P. ("UAP" or the "Partnership"). 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 University Science,
Engineering and Technology, Inc.'s ("USET") 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. After the purchase, USI owns 100% of all
partnership interests in UAP and as a result, UAP will be dissolved.
3. Sale of Investment in Plasmaco, Inc.
In January, 1996, USET received $20,516 from the sale of its
4,000 shares of Plasmaco, Inc. and recognized a gain of $12,516.
4. Receivables
Receivables as of January 31, 1996 comprise:
Related parties $ 30,171
Other 45,424
$ 75,595
6. Accrued Liabilities
Accrued liabilities as of January 31, 1996 were:
Income taxes currently
payable $ 45,848
Other 63,662
$109,510
COMPETITIVE TECHNOLOGIES, INC. AND SUBSIDIARIES
Pro Forma Financial Information
(Unaudited)
The following pro forma statements of operations for the
Registrant for the fiscal year ended July 31, 1995 and for the six
months ended January 31, 1996 reflect the acquisition of USET
Acquisition Partners, L.P. and its wholly-owned subsidiaries, USET
Holding Co. and University Science, Engineering and Technology, Inc.
("USET"), as if it had occurred on August 1, 1994.
The acquisition was reflected in the Registrant's balance sheet
as at January 31, 1996 filed with its Quarterly Report on Form 10-Q
for the quarterly period ended January 31, 1996; therefore no pro
forma balance sheet is included in this pro forma financial
information. The Registrant accounted for the acquisition under the
purchase method and recorded the estimated present value of the
purchase obligation using a 10% discount rate. The purchase price was
allocated based on the estimated fair value of the assets acquired
(cash of approximately $605,000, computer equipment and intangible
assets, principally licenses and patented technologies) and
obligations assumed (principally accounts and royalties payable).
The unaudited pro forma financial information should be read in
conjunction with the financial statements of the Registrant included
in its Quarterly Report on Form 10-Q for the quarterly period ended
January 31, 1996 and its Annual Report on Form 10-K for the year ended
July 31, 1995. The unaudited pro forma statements of operations are
not necessarily indicative of what the actual results of operations
of the Registrant would have been if the acquisition had occurred on
August 1, 1994, nor do they purport to represent the results of
operations for future periods.
<TABLE>
<CAPTION>
COMPETITIVE TECHNOLOGIES, INC. AND SUBSIDIARIES
Pro Forma Consolidated Statement of Operations
for the year ended July 31, 1995
(Unaudited)
Historical
Historical USET Acquisition
Competitive Partners, L.P. Pro Forma Pro Forma
Technologies, Inc. and Subsidiaries Adjustments Results
<S> <C> <C> <C> <C>
Revenues:
Retained royalties $ 796,243 $ 720,517 $ -- $ 1,516,760
Revenues under service
contracts and grants 906,952 -- -- 906,952
1,703,195 720,517 -- 2,423,712
Costs of technology management
services 1,120,483 465,569 68,754 (A) 1,654,806
Marketing, general and
administration expenses 1,211,538 -- 1,211,538
2,332,021 465,569 68,754 2,866,344
Operating income (loss) (628,826) 254,948 (68,754) (442,632)
Interest income 151,058 22,233 (27,022) (B) 146,269
Interest expense (114,511) (C) (114,511)
Losses related to equity
method affiliates (103,520) -- (46,936) (D) (150,456)
Other expense, net (61,700) -- -- (61,700)
Income (loss) from continuing
operations before income
taxes and minority interest (642,988) 277,181 (257,223) (623,030)
Provision for income taxes 21,373 125,089 (125,089) (E) 21,373
Income (loss) from continuing
operations before minority
interest (664,361) 152,092 (132,134) (644,403)
Minority interest in losses
of subsidiaries 23,112 -- -- 23,112
Income (loss) from continuing
operations (641,249) 152,092 (132,134) (621,291)
Income from operations of
discontinued operation 99,468 -- -- 99,468
Net gain on disposal of
discontinued operation 2,534,505 -- -- 2,534,505
Net income $ 1,992,724 $ 152,092 $ (132,134) $ 2,012,682
See accompanying notes
COMPETITIVE TECHNOLOGIES, INC. AND SUBSIDIARIES
Pro Forma Consolidated Statement of Operations
for the year ended July 31, 1995
(Continued)
(Unaudited)
Historical
Historical USET Acquisition
Competitive Partners, L.P. Pro Forma Pro Forma
Technologies, Inc. and Subsidiaries Adjustments Results
Net income (loss) per share
(primary and fully diluted):
Continuing operations $ (0.11) $ (0.11)
Operations of discontinued
operation 0.02 0.02
Net gain on disposal of
discontinued operation 0.43 0.43
Net income $ 0.34 $ 0.34
Weighted average number of
common and common
equivalent shares out-
standing (primary and
fully diluted) 5,814,826 5,814,826
</TABLE>
See accompanying notes
<TABLE>
<CAPTION>
COMPETITIVE TECHNOLOGIES, INC. AND SUBSIDIARIES
Pro Forma Consolidated Statement of Operations
for the six months ended January 31, 1996
(Unaudited)
Historical
Historical USET Acquisition
Competitive Partners, L.P. Pro Forma Pro Forma
Technologies, Inc. and Subsidiaries Adjustments Results
<S> <C> <C> <C> <C>
Revenues:
Retained royalties $ 491,438 $ 421,145 $ -- $ 912,583
Revenues under service
contracts and grants 217,049 -- -- 217,049
708,487 421,145 -- 1,129,632
Costs of technology management
services 425,589 234,987 26,537 (A) 687,113
Marketing, general and
administration expenses 838,277 -- -- 838,277
1,263,866 234,987 26,537 1,525,390
Operating income (loss) (555,379) 186,158 (26,537) (395,758)
Interest income 106,577 15,025 (23,863) (B) 97,739
Interest expense (34,082) (C) (34,082)
Income related to equity
method affiliates 42,091 -- (24,069) (D) 18,022
Gain on sale of investment in
Plasmaco, Inc. 96,907 12,516 -- 109,423
Other income, net 19,371 -- -- 19,371
Income (loss) before income
taxes (290,433) 213,699 (108,551) (185,285)
Provision for income taxes 15,000 98,139 (98,139) (E) 15,000
Net income (loss) $ (305,433) $ 115,560 $ (10,412) $ (200,285)
Net income (loss) per share
(primary and fully diluted) $ (0.05) $ (0.03)
Weighted average number of
common and common equivalent
shares outstanding (primary
and fully diluted) 5,822,271 5,822,271
</TABLE>
See accompanying notes
COMPETITIVE TECHNOLOGIES, INC. AND SUBSIDIARIES
Notes to Pro Forma Consolidated Statements of Operations
(Unaudited)
A. These pro forma adjustments reflect additional amortization
expense which would have been recognized (a) if the acquisition had
occurred on August 1, 1994 and (b) if all $700,100 of contingent
payments made or estimated to be made to Macmillan, Inc. between
August 1, 1994 and June 10, 1996 had been accrued at August 1, 1994.
If the acquisition had occurred on August 1, 1994, the value of
intangible assets at August 1, 1994 would have been $2,186,500 after
accruing $700,100 of contingent payments made or estimated to be made
to Macmillan, Inc. between August 1, 1994 and June 10, 1996 (see Note
2 to the accompanying audited financial statements for USET
Acquisition Partners, L.P.) and after recording purchase accounting
adjustments to reflect the Registrant's valuation of the estimated
future revenue stream from USET's intangible assets, primarily
licenses and patented technologies. The pro forma adjustment for
amortization has been calculated based on the difference between
amortization actually recorded by USET during the respective period
and amortization that would have been recorded on a straight-line
basis over the average remaining lives of the patents at August 1,
1994 (approximately 14 years).
B. These pro forma adjustments reflect the reduction to interest
income the Registrant would have sustained if the acquisition had
occurred on August 1, 1994, the $500,000 cash paid at the closing had
been paid at August 1, 1994 and the second installment of the purchase
price ($432,310) equal to 60% of USET's gross retained earned revenues
for the preceding fiscal year ($720,517) had been paid on August 31,
1995. Compound interest for these adjustments has been calculated at
the Registrant's actual rates obtained during the respective periods
on a substantial portion of its invested cash and cash equivalents
(4.3% to 5.8%).
C. These pro forma adjustments reflect interest expense on the
Registrant's purchase obligation as if the obligation had been
incurred on August 1, 1994 and recorded at its estimated present value
using a 10% discount rate.
D. These pro forma adjustments reverse CTI's equity in UAP's net
income recorded in CTI's historical financial statements. If the
acquisition had accurred on August 1, 1994, UAP would not have been
accounted for under the equity method.
E. These pro forma adjustments reflect the estimated reduction of
USET's provision for income taxes that would have resulted from
offsetting USET's taxable income against the Registrant's taxable
losses in consolidated Federal and state income tax filings.
Exhibit 23.1
CONSENT OF INDEPENDENT ACCOUNTANT
I consent to the incorporation by reference in the registration
statements of Competitive Technologies, Inc. on Forms S-8 and the
related prospectuses (No. 2-69835 and No. 33-87756) pertaining to
the Key Employees' Stock Option Plan, on Form S-8 and the related
prospectus (No. 33-10528) pertaining to the Key Employees' Stock
Option Plan and the Directors' Stock Participation Plan, on Form S-
8 and the related prospectus (No. 33-44612) pertaining to the Key
Employees' Stock Option Plan, Directors' Stock Participation Plan
and Employees' Common Stock Retirement Plan and on Form S-8 and the
related prospectus (No. 33-48081) pertaining to Common Stock
Purchase Warrants dated October 22, 1990 of my report dated April
2, 1996 on my audits of the consolidated financial statements of
USET Acquisition Partners, L.P. and Subsidiaries as of July 31,
1995 and 1994 and for each of the three years in the period ended
July 31, 1995, which report is included in this Current Report on
Form 8-K/A.
S/ Michael S. Levine, CPA
Michael S. Levine, CPA
Monroe, Connecticut
April 11, 1996
