-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, MG888dH8v67AJV1gf6tBObUfovivQWkXGtnNF/s3159MaRsS5GVyObHciQ+8piFP nAMU0IAg1whvnpx74gpq7Q== 0000102198-95-000024.txt : 19951214 0000102198-95-000024.hdr.sgml : 19951214 ACCESSION NUMBER: 0000102198-95-000024 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 19951031 FILED AS OF DATE: 19951213 SROS: AMEX FILER: COMPANY DATA: COMPANY CONFORMED NAME: COMPETITIVE TECHNOLOGIES INC CENTRAL INDEX KEY: 0000102198 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-EDUCATIONAL SERVICES [8200] IRS NUMBER: 362664428 STATE OF INCORPORATION: DE FISCAL YEAR END: 0731 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-08696 FILM NUMBER: 95601390 BUSINESS ADDRESS: STREET 1: 1465 POST RD E STREET 2: PO BOX 901 CITY: WESTPORT STATE: CT ZIP: 06881-0901 BUSINESS PHONE: 2032556044 MAIL ADDRESS: STREET 1: 1465 POST ROAD EAST STREET 2: P O BOX 901 CITY: WESTPORT STATE: CT ZIP: 06881-0901 FORMER COMPANY: FORMER CONFORMED NAME: UNIVERSITY PATENTS INC DATE OF NAME CHANGE: 19920703 10-Q 1 1ST QTR 10-Q 1996 10-Q October 1995 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended October 31, 1995 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission file number 1-8696 COMPETITIVE TECHNOLOGIES, INC. (Exact name of registrant as specified in its charter) Delaware 36-2664428 (State or other jurisdiction of (I.R.S. Employer Identification No.) incorporation or organization) 1465 Post Road East, P.O. Box 901 Westport, Connecticut 06881-0901 (Address of principal executive (Zip Code) offices) Registrant's telephone number, including area code: (203) 255-6044 N/A Former name, former address and former fiscal year, if changed since last report Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X . No . Common Stock outstanding as of December 1, 1995 5,815,365 shares Exhibit Index on sequentially numbered page 16 of 28. Page 1 of 28 sequentially numbered pages COMPETITIVE TECHNOLOGIES, INC. AND SUBSIDIARIES INDEX PART I. FINANCIAL INFORMATION Page No. Item 1. Condensed Financial Statements A. Financial Statements Consolidated Balance Sheets at October 31, 1995 and July 31, 1995 3 Consolidated Statements of Operations for the three months ended October 31, 1995 and 1994 4 Consolidated Statement of Changes in Shareholders' Interest for the three months ended October 31, 1995 5 Consolidated Statements of Cash Flows for the three months ended October 31, 1995 and 1994 6-7 Notes to Consolidated Financial Statements 8-10 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 11-15 PART II. OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K Signatures 16 PART I. FINANCIAL INFORMATION COMPETITIVE TECHNOLOGIES, INC. AND SUBSIDIARIES Consolidated Balance Sheets October 31, and July 31, 1995 (Unaudited) October 31, July 31, 1995 1995 ASSETS Current assets: Cash and cash equivalents $ 604,424 $ 336,098 Short-term investments, at market 4,346,159 4,621,045 Receivables, including $61,327 and $34,768 receivable from related parties in October and July 1995, respectively 219,344 490,324 Prepaid expenses and other current assets 127,368 128,429 Total current assets 5,297,295 5,575,896 Property and equipment, net 137,405 133,833 Investments 520,626 489,786 Directors' escrow account 325,000 325,000 Other assets 213,241 244,427 TOTAL ASSETS $ 6,493,567 $ 6,768,942 LIABILITIES AND SHAREHOLDERS' INTEREST Current liabilities: Accounts payable, including $1,959 and $4,219 payable to related parties in October and July 1995, respectively $ 55,415 $ 126,606 Accrued liabilities 279,249 352,812 Total current liabilities 334,664 479,418 Commitments and contingencies -- -- Shareholders' interest: 5% preferred stock, $25 par value 60,675 60,675 Common stock, $.01 par value 58,403 58,353 Capital in excess of par value 24,438,843 24,410,143 25,000 shares of treasury stock, at cost (174,713) (174,713) Net unrealized holding gains on available-for-sale securities 23,601 8,764 Accumulated deficit (18,247,906) (18,073,698) Total shareholders' interest 6,158,903 6,289,524 TOTAL LIABILITIES AND SHAREHOLDERS' INTEREST $ 6,493,567 $ 6,768,942 See accompanying notes PART I. FINANCIAL INFORMATION (Continued) COMPETITIVE TECHNOLOGIES, INC. AND SUBSIDIARIES Consolidated Statements of Operations for the three months ended October 31, 1995 and 1994 (Unaudited) 1995 1994 Revenues: Retained royalties $ 201,450 $ 89,905 Revenues under service contracts and grants, including $37,106, and $63,419 from related parties in 1995 and 1994, respectively 117,779 132,053 319,229 221,958 Costs of technology management services, of which $1,627 and $1,309 were paid to related parties in 1995 and 1994, respectively 174,059 152,127 General and administration expenses, of which $25,591 and $15,049 were paid to related parties in 1995 and 1994, respectively 398,781 275,885 572,840 428,012 Operating loss (253,611) (206,054) Interest income 54,896 18,584 Income (losses) related to equity method affiliates 30,841 (7,535) Other income (expense), net 666 3,510 Loss from continuing operations before income taxes and minority interest (167,208) (191,495) Provision for income taxes 7,000 5,609 Loss from continuing operations before minority interest (174,208) (197,104) Minority interest in losses of subsidiaries -- 7,000 Loss from continuing operations (174,208) (190,104) Income from operations of discontinued operation -- 59,139 Net loss $ (174,208) (130,965) Net income (loss) per share (primary and fully diluted): Continuing operations $ (0.03) $ (0.03) Operations of discontinued operation -- 0.01 Net loss $ (0.03) $ (0.02) Weighted average number of common and common equivalent shares outstanding (primary and fully diluted) 5,813,952 5,798,776 See accompanying notes PART I. FINANCIAL INFORMATION (Continued) COMPETITIVE TECHNOLOGIES, INC. AND SUBSIDIARIES Consolidated Statements of Changes in Shareholders' Interest For the three months ended October 31, 1995 (Unaudited)
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 Balance - July 31, 1995 2,427 $60,675 5,835,365 $58,353 $24,410,143 (25,000) $(174,713) $ 8,764 $(18,073,698) Exercise of common stock warrants. . . . 5,000 50 28,700 Net change in unrealized holding gains on available-for-sale securities . . . . . 14,837 Net loss . . . . . . (174,208) Balance - October 31, 1995 2,427 $60,675 5,840,365 $58,403 $24,438,843 (25,000) $(174,713) $ 23,601 $(18,247,906)
See accompanying notes PART I. FINANCIAL INFORMATION (Continued) COMPETITIVE TECHNOLOGIES, INC. AND SUBSIDIARIES Consolidated Statements of Cash Flows for the three months ended October 31, 1995 and 1994 (Unaudited) 1995 1994 Cash flow from operating activities: Loss from continuing operations $ (174,208) $ (190,104) Noncash items included in loss from continuing operations: Depreciation and amortization 47,456 47,892 (Income) losses related to equity method affiliates (30,841) 7,535 Minority interest -- (7,000) Accrual for issuance of directors' stock (7,500) 6,667 Accrual for stock retirement plan 22,500 18,750 Other noncash items 4,466 11,443 Other 15,476 22,312 Net changes in various operating accounts (see schedule) 89,163 168,393 Net cash flow (used in) from operating activities (33,488) 85,888 Cash flow from investing activities: Purchases of property and equipment, net (17,607) (65,559) Proceeds from sales of short-term investments 290,671 32,245 Net cash flow from (used in) investing activities 273,064 (33,314) Cash flow from financing activities: Proceeds from issuance of common stock, net 28,750 -- Net cash flow from financing activities 28,750 -- Net increase in cash and cash equivalents 268,326 52,574 Cash and cash equivalents, beginning of period 336,098 877,010 Cash and cash equivalents, end of period $ 604,424 $ 929,584 See accompanying notes PART I. FINANCIAL INFORMATION (Continued) COMPETITIVE TECHNOLOGIES, INC. AND SUBSIDIARIES Consolidated Statements of Cash Flows for the three months ended October 31, 1995 and 1994 (Unaudited) 1995 1994 Schedule of net changes in various operating accounts: Receivables $ 270,980 $ 203,283 Prepaid expenses and other current assets (16,649) (16,761) Accounts payable (71,191) (14,095) Accrued liabilities (93,977) (4,034) Net changes in various operating accounts $ 89,163 $ 168,393 Supplemental cash flow information: Cash paid for income taxes $ 17,298 $ 5,899 Schedule of noncash investing activities: Investments in affiliates and subsidiaries $ -- $ (205,325) Stock held by affiliates considered treasury stock $ -- $ 96,362 Schedule of noncash financing activities: Stock issued for investments in affiliates and subsidiaries $ -- $ 205,325 Stock held by affiliates considered treasury stock $ -- $ (96,362) See accompanying notes PART I. FINANCIAL INFORMATION (Continued) COMPETITIVE TECHNOLOGIES, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (Unaudited) 1. Interim Financial Statements Interim financial information presented in the accompanying financial statements and notes hereto is unaudited. The year end balance sheet data was derived from audited financial statements but does not include all disclosures required by generally accepted accounting principles. In the opinion of management, all adjustments which are necessary to present the financial statements fairly in conformity with generally accepted accounting principles, consisting only of normal recurring adjustments, have been made. Certain amounts have been reclassified to conform with the presentation in the financial statements for 1995. The interim financial statements and notes thereto as well as the accompanying Management's Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with the Company's Annual Report on Form 10-K for the year ended July 31, 1995. 2. CTI - Intercorporate Licensing, Inc. In August, 1995, Competitive Technologies, Inc. ("CTI") formed a wholly-owned subsidiary and purchased 2,000 shares of CTI- Intercorporate Licensing, Inc. ("CTI-ILI") common stock for $100,000 in cash to provide licensing and technology management services to corporations. CTI expects CTI-ILI to require additional cash of approximately $250,000 to fund its first year of operations. CTI expects to provide that cash in exchange for additional equity in CTI- ILI. CTI accounts for CTI-ILI as a consolidated subsidiary and CTI- ILI's results of operations since August 1, 1995, are included in the consolidated results of operations. 3. Short-term Investments As of October 31, 1995 the components of the Company's available- for-sale securities are as follows (in thousands): Gross Gross Unrealized Unrealized Aggregate Holding Holding Amortized Maturity Security Type Fair Value Gains Losses Cost Basis Grouping U.S. Treasury Within Bills $ 1,093 $23 -- $ 1,071 1 year Other U.S. government Within debt 3,176 -- -- 3,176 1 year securities Mortgaged backed Present securities 77 1 -- 76 through 2018 Total $ 4,346 $24 -- $ 4,323 For the quarter ended October 31, 1995 proceeds from the sale of available-for-sale securities were $290,671 which resulted in gross realized gains of $948. Cost is based on specific identification in computing realized gains. 4. Receivables Receivables comprise: October 31, July 31, 1995 1995 Royalties $ 39,787 $275,690 Government contracts 31,682 103,574 Other 147,875 111,060 $219,344 $490,324 5. Accrued Liabilities Accrued liabilities were: October 31, July 31, 1995 1995 Accrued compensation $ 126,020 $ 115,010 Other 153,229 237,802 $ 279,249 $ 352,812 6. Contingencies In November 1991, a suit was filed in Connecticut against CTI, its wholly-owned subsidiary, Genetic Technology Management, Inc. ("GTM"), its majority-owned subsidiary, University Optical Products Co. ("UOP"), and several current and former directors on behalf of the 59 limited partners of Optical Associates, Limited Partnership ("OALP"). The complaint alleges, among other things, that the January 1989 sale of UOP's assets to Unilens Corp. USA ("Unilens") violated the partnership agreement and that OALP is entitled to the full proceeds of the sale to Unilens. The complaint claims, among other things, money damages and treble and punitive damages in an unspecified amount and attorneys' fees. The Company believes that the asserted claims are without merit and intends to defend vigorously the action instituted by plaintiffs. Through October 31, 1995, the Company had received aggregate cash proceeds of approximately $1,011,000 from the January 1989 sale of UOP's assets to Unilens. As cash proceeds were received, the Company paid a 4% commission to OALP, its joint venture partner. The defendants' motion for summary judgment was denied. It is expected that the case will be tried during the second half of fiscal 1996. PART I. FINANCIAL INFORMATION (Continued) Management's Discussion and Analysis of Financial Condition and Results of Operations Financial Condition and Liquidity Cash and cash equivalents of $604,424 at October 31, 1995 are $268,326 higher than cash and cash equivalents of $336,098 at July 31, 1995. Operating activities used $33,488, investing activities provided $273,064 and financing activities provided $28,750. Competitive Technologies, Inc. ("CTI") and its majority owned subsidiaries' ("the Company") loss from continuing operations of $174,208 for the three months ended October 31, 1995 included the following noncash items: depreciation and amortization of approximately $47,000, income related to equity method affiliates of approximately $31,000, and accruals of approximately $15,000. In general, changes in various operating accounts result from changes in the timing and amounts of cash flows before and after the end of the period. Proceeds from sales of short-term investments are principally from the Company's sales of U.S. government debt securities and principal redemptions by obligors of mortgage backed securities. In August, 1995, CTI formed a wholly-owned subsidiary and purchased 2,000 shares of CTI-Intercorporate Licensing, Inc. ("CTI- ILI") common stock for $100,000 in cash to provide licensing and technology management services to corporations. CTI expects CTI-ILI to require additional cash of approximately $250,000 to fund its first year of operations. CTI expects to provide that cash in exchange for additional equity in CTI-ILI. CTI accounts for CTI- ILI as a consolidated subsidiary and CTI-ILI's results of opera- tions since August 1, 1995, are included in the consolidated results of operations. The Company received $28,750 in August, 1995, from the exercise of a warrant granted in August, 1990, to purchase 5,000 shares of common stock at $5.75 per share. The Company carries liability insurance and casualty insurance for owned or leased tangible assets. It does not carry key person life insurance. There are no legal restrictions on payments of dividends by CTI. At October 31, 1995, the Company had no outstanding commit- ments for capital expenditures. The Company is currently pursuing additional university and corporate technology management opportunities. If and when these opportunities are consummated, the Company expects to commit capital resources to fund their acquisition or start-up operations. The Company does not believe that inflation had a significant impact on its operations during 1995 or 1994 or that it will have a significant impact on operations during the next twelve-month operating period. Vector Vision, Inc. ("VVI"), CTI's 51.5% owned subsidiary, continues to seek additional financing to support its continuing development. Without additional outside financing, VVI's develop- ment activities will not be able to continue. The Company is not obligated to provide additional funding to VVI. With more than $4,950,000 in cash, cash equivalents and short- term investments at October 31, 1995, the Company anticipates that currently available funds will be sufficient to finance cash needs over the next two to five years for its current operating activi- ties as well as for expansion of its technology management business operations, including related investments in start-up companies. This anticipation is based upon the Company's current expectations. However, expansion of the Company's services and related invest- ments in start-up companies (with resulting increases in operating expenses) are subject to many factors which are outside the Company's control and to presently unanticipated opportunities that may arise in the future. Accordingly, there can be no assurance that the Company's current expectations regarding the sufficiency of currently available funds will prove to be accurate. Results of Operations - Three Months Ended October 31, 1995 vs. Reclassified Three Months Ended October 31, 1994 The results of operations for the three months ended October 31, 1994 presented in the accompanying condensed financial statements have been reclassified to present UCI's results of operations as a discontinued operation. See Note 16 to Consolidat- ed Financial Statements in the Company's Annual Report on Form 10-K for the year ended July 31, 1995. In addition, operating expenses have been reclassified to conform with the presentation in the Consolidated Financial Statements in the Company's Annual Report on Form 10-K for the year ended July 31, 1995. Consolidated revenues for the quarter ended October 31, 1995, were $97,271 (44%) higher than for the quarter ended October 31, 1994. Retained royalties were $111,545 (124%) higher than in the first quarter of fiscal 1995 principally because of up-front license fees for a plasma display energy recovery technology. Revenues under service contracts were $109,995 in the first quarter of fiscal 1996, $27,082 (33%) higher than in the first quarter of fiscal 1995. CTI's contract with the Department of the Air Force which began in February, 1995, generated $47,000 in contract revenues in the first quarter of fiscal 1996. In addition, revenues from other service contracts, some of which were nonrecur- ring, were lower than in the first quarter of fiscal 1995. Grant revenues in the first quarter of fiscal 1996 were the $7,784 remaining from the grant in support of VVI's development activities. Grant revenues in the first quarter of fiscal 1995 included approximately $36,000 on Competi- tive Technologies of PA, Inc.'s ("CTI-PA") grant and $13,000 from the grant to VVI. In consideration of their grant funding, CTI-PA and VVI are obligated to repay up to three times total grant funds received (see Notes 2 and 3 to Consolidated Financial Statements in the Company's Annual Report on Form 10-K for the year ended July 31, 1995). The Company has not applied for grants to support any of its operations during fiscal 1996. Costs of technology management services were $21,932 (14%) higher in the first quarter of fiscal 1996 than in the first quarter of fiscal 1995. Costs related to retained royalties were $32,000 higher in 1996 than in 1995. The increase in these costs resulted from higher domestic and foreign patent expenses associat- ed with the University Science, Engineering and Technology, Inc. ("USET") portfolio and additional expenses related to intercorpo- rate licensing services (see Note 4 to Consolidated Financial Statements in the Company's Annual Report on Form 10-K for the year ended July 31, 1995). These costs include domestic and foreign patent prosecution, maintenance and litigation expenses. The Company expects costs related to retained royalties to continue to increase during fiscal 1996 as it expands its technology management services to corporations and universities. Costs related to service contracts (including direct charges for subcontractors' services and employees' salaries, benefits and overheads for services provided in connection with the related contracts) increased $31,000 (36%) compared with the first quarter of fiscal 1995. CTI's contract with the Department of the Air Force is responsible for an increase of $47,000 which was partially offset by reductions in costs because certain service contracts in the fiscal 1995 quarter were nonrecurring. Costs related to grant revenues decreased in proportion to the reduction in grant revenues. General and administration expenses were $122,896 (45%) higher in the quarter ended October 31, 1995. Approximately $50,000 of this increase is directly related to additional personnel and related expenses of establishing CTI-Intercorporate Licensing, Inc. operations in Cleveland, Ohio. The remainder reflects additional personnel and higher shareholder relations and other operating expenses supporting the Company's ongoing operations. The Company plans certain additional increases in staffing to further expand its senior technology management team to service its corporate and university clients in fiscal 1996. The net effect of the increases in operating revenues and expenses was to increase the Company's operating loss by $47,557 (23%). Interest income increased $36,312 (195%) primarily due to higher average invested balances in fiscal 1996. In the quarter ended October 31, 1995, net income related to equity method affiliates included UPAT Services, Inc.'s ("USI") 20% equity in the net income of USET Acquisition Partners, L.P. ("UAP") ($32,000), CTI's equity in the net loss of Knowledge Solutions, Inc. ("KSI") ($19,000) and CTI's equity in the net income of Equine Biodiagnostics, Inc. ($18,000). At October 31, 1995, CTI owned 35.9% of the outstanding common stock of KSI and has no further obligation to provide additional funding to KSI. CTI's investment in KSI has been reduced to zero and therefore CTI will record no further equity in the losses of KSI. In the quarter ended October 31, 1994, losses related to equity method affiliates included CTI's equity in the loss of KSI ($23,000) and USI's 20% equity in the net income of UAP ($15,000). Minority interest in the losses of subsidiaries in the quarter ended October 31, 1994 of $7,000 was VVI's minority shareholders' interest in its losses. Unless VVI obtains additional external equity financing, no further losses may be charged to VVI's minority interest. The Company has net operating loss carryforwards for Federal income tax purposes. Provision was made in each quarter for estimated state income taxes. The Company's $59,139 income from operations of discontinued operation in the quarter ended October 31, 1994 reflects CTI's equity in University Communications, Inc.'s ("UCI") net results for that quarter. In October, 1995, the Financial Accounting Standards Board issued Statement No. 123, "Accounting for Stock-Based Compensation" which requires adoption for years beginning after December 15, 1995. This Statement allows companies either (a) to continue accounting for employee stock-based compensation under Accounting Principles Board Opinion No. 25 and disclose the pro forma effects that fair value accounting would have on net income and earnings per share or (b) to adopt the new fair value accounting rules for recognizing employee stock-based compensation expense. In addition, the Statement requires companies to adopt fair value accounting for stock options or other equity instruments issued to nonemployee providers of goods and services. The Company will adopt this Statement on August 1, 1996. The Company has not yet determined which alternative accounting it will adopt. Results of Operations - Three Months Ended October 31, 1995 vs. Three Months Ended July 31, 1995 Consolidated revenues for the quarter ended October 31, 1995 were $332,078 (51%) lower than for the quarter ended July 31, 1995. Historically, retained royalties in the first fiscal quarter are lower than in the fourth quarter because of licensees who report semiannually. Retained royalties were $122,956 (38%) lower than in the fourth quarter of fiscal 1995. Revenues under service contracts were $192,782 (64%) lower in the first quarter of fiscal 1996, of which $162,000 was due to lower revenues from CTI's contract with the Department of the Air Force. More than 60% of that contract had been completed by July 31, 1995, and CTI expects quarterly revenues from that contract to be nearer to the first quarter level for the remaining quarters of 1996. Other contracts and grants have also generated lower revenues than in the fourth quarter of fiscal 1995. Costs of technology management services were $197,695 (53%) lower for the quarter ended October 31, 1995 than for the quarter ended July 31, 1995. CTI's cost reimbursement contract with the Department of the Air Force accounted for $162,000 of this reduction. Other cost reductions in the first quarter were related to lower revenues for other contracts and grants. Intercorporate licensing activities increased these costs slightly in the first quarter and are expected to increase them more significantly in future quarters as the Company continues to expand its operations in this sector. For the quarter ended October 31, 1995 the Company's general and administration expenses were $134,566 (51%) higher than for the quarter ended July 31, 1995. Approximately $39,000 of this increase was because Company personnel provided less service under the Air Force contract and consequently spent more time on general and administrative activities for the Company. Approximately $50,000 of this increase was directly related to expenses of establishing CTI-Intercorporate Licensing, Inc. operations in Cleveland, Ohio. The Company plans additional increases in staffing to further expand its senior technology management team to service its corporate and university clients in fiscal 1996. In addition, a substantial portion of the expenses related to the Company's annual audit, preparation and filing of its Form 10-K and proxy statement with the Securities and Exchange Commission, and printing of its annual report to shareholders are incurred each year in the first quarter. The net effect of the reduction in costs of technology management services and increases in general and administration expenses was a reduction of $63,129 (10%) in total operating expenses compared to the fourth quarter of fiscal 1995. Partially offsetting the increase in the Company's operating loss between these two quarters were significantly lower ($50,000) legal expenses in connection with the suit discussed in Note 6 to the accompanying financial statements and increased ($64,927) income related to equity method affiliates. PART II - OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K Page A) Exhibits 3.1 By-laws of the registrant as amended to date. 18-27 11.1 Schedule of computation of earnings per share for the three months ended October 31, 1995 and 1994. 28 27.1 Financial Data Schedule (EDGAR only). 27.2 Restated Financial Data Schedules (EDGAR only). B) Reports on Form 8-K No reports on Form 8-K were filed during the quarter. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. Date: December 13, 1995 By: Frank R. McPike, Jr. Frank R. McPike, Jr. Vice President, Finance, Treasurer, Chief Financial Officer and Authorized Signer EX-11.1 2 Exhibit 11.1 COMPETITIVE TECHNOLOGIES, INC. Schedule of Computation of Earnings Per Share (Unaudited) Quarter ended October 31, 1995 1994 Loss from continuing operations $ (174,208) $ (190,104) Net income from discontinued operations -- 59,139 Net loss applicable to common stock $ (174,208) $ (130,965) Common and common equivalent shares - primary: Weighted average common shares outstanding 5,813,952 5,798,776 Adjustments for assumed exercise of stock options 5,255* 86,266* Adjustments for assumed exercise of stock warrants -- 144,706* Weighted average number of common and common equivalent shares outstanding 5,819,207 6,029,748 Common and common equivalent shares - fully diluted: Weighted average common shares outstanding 5,813,952 5,798,776 Adjustments for assumed exercise of stock options 14,924* 92,972* Adjustments for assumed exercise of stock warrants -- 155,955* Weighted average number of common and common equivalent shares outstanding 5,828,876 6,047,703 Loss from continuing operations per share of common stock: Primary and fully diluted $ (0.03) $ (0.03) Net income from discontinued operations per share of common stock: Primary and fully diluted -- 0.01 Net loss per share of common stock: Primary and fully diluted $ (0.03) $ (0.02) * Anti-dilutive. These calculations are submitted in accordance with Regulation S-K item 601 (b) (11) which differs from the requirements of paragraph 40 of Accounting Principles Board Opinion No. 15 because they produce an anti-dilutive result. EX-27.1 3
5 Financial Data Schedule for Form 10-Q for October 31, 1995 0000102198 COMPETITIVE TECHNOLOGIES, INC. 3-MOS JUL-31-1996 OCT-31-1995 604,424 4,346,159 219,344 0 0 5,297,295 364,221 226,816 6,493,567 334,664 0 58,403 0 60,675 6,039,825 6,493,567 0 319,229 0 572,840 0 0 0 (167,208) 7,000 (174,208) 0 0 0 (174,208) (0.03) (0.03)
EX-27.2 4
5 Restated Financial Data Schedules for January 31, 1995, April 30, 1995 and July 31, 1995 - to correct accumulated depreciation and interest expense amounts incorrectly reported as negative numbers and to correct general and administration expenses previously reported incorrectly. 0000102198 COMPETITIVE TECHNOLOGIES, INC. 6-MOS 9-MOS YEAR JUL-31-1995 JUL-31-1995 JUL-31-1995 JAN-31-1995 APR-30-1995 JUL-31-1995 1,422,137 3,939,754 336,098 1,210,349 1,208,165 4,621,045 979,623 452,870 490,324 0 0 0 0 0 0 3,944,966 5,738,137 5,575,896 1,540,130 335,952 346,614 746,153 214,795 212,781 6,463,436 6,928,415 6,768,942 1,821,393 619,261 479,418 0 0 0 58,243 58,243 58,353 0 0 0 60,675 60,675 60,675 3,901,250 6,190,236 6,170,496 6,463,436 6,928,415 6,768,942 0 0 0 3,079,383 1,051,888 1,703,195 0 0 0 297,701 712,209 1,120,483 0 0 0 0 0 0 17,261 0 0 (188,870) (662,428) (642,988) 24,609 14,673 21,373 (292,322) (653,989) (641,249) 0 2,633,973 2,633,973 0 0 0 0 0 0 (292,322) 1,979,984 1,992,724 (0.05) 0.34 0.34 (0.05) 0.34 0.34
EX-3.1 5 Exhibit 3.1 UNOFFICIAL BY-LAWS OF COMPETITIVE TECHNOLOGIES, INC. As Amended to date ARTICLE I MEETING OF SHAREHOLDERS SECTION 1.01. Annual Meetings. The annual meeting of shareholders for the election of Directors and for the transaction of such other proper business, notice of which is given in the notice of the meeting, shall be held commencing in 1976 on such day in December of each year and at such time and place, within or without the State of Delaware, as shall be designated by the Board of Directors and set forth in the notice of such meeting. SECTION 1.02. Special Meetings. Special meetings of the shareholders may be called at any time by the Chairman of the Board of Directors or by the President of the Corporation or by the Board of Directors. Special meetings shall be held at such place within or without the State of Delaware and at such hour as may be designated in the notice of such meeting and the business transacted shall be confined to the object stated in the notice of the meeting. SECTION 1.03. Notice of Shareholders' Meetings. The notice of all meetings of shareholders shall be in writing and shall state the place, date and hour of the meeting. The notice of an annual meeting shall state that the meeting is called for the election of the Directors to be elected at such meeting and for the transaction of such other business as is stated in the notice of the meeting. The notice of a special meeting shall state the purpose or purposes for which the meeting is called and shall also indicate that it is being issued by or at the direction of the person or persons calling the meeting. A copy of the notice of each meeting of shareholders shall be given, personally or by mail, not less than ten days nor more than fifty days before the date of the meeting, to each shareholder entitled to vote at such meeting at his record address or at such other address as he may have furnished by request in writing to the Secretary of the Corporation. If a meeting is adjourned to another time or place, and, if any announcement of the adjourned time or place is made at the meeting, it shall not be necessary to give notice of the adjourned meeting unless the adjournment is for more than thirty days or the Directors, after adjournment, fix a new record date for the adjourned meeting. Notice of a meeting need not be given to any shareholder who submits a signed waiver of notice, in person or by proxy, whether before or after the meeting. The attendance of a shareholder at a meeting, in person or by proxy, without protesting prior to the conclusion of the meeting the lack of notice of such meeting shall constitute a waiver of notice of the meeting. SECTION 1.04. Quorum at Shareholders' Meetings: Vote Required. At any meeting of the shareholders the holders of a majority of the outstanding shares entitled to vote thereat shall constitute a quorum. If there shall be less than a quorum at any meeting of the shareholders a majority of those present in person or by proxy may adjourn the meeting. Directors shall be elected by a plurality of the votes cast at a meeting of shareholders by the holders of shares entitled to vote in the election. Whenever any corporate action, other than the election of Directors, is to be taken by vote of the shareholders, it shall, except as otherwise required by the General Corporation Law, be authorized by a majority of the votes cast at a meeting of shareholders by the holders of shares entitled to vote thereon. SECTION 1.05. Inspectors at Shareholders' Meetings. The Board of Directors, in advance of any shareholders meeting, may appoint one or more inspectors to act at the meeting or any adjournment thereof. If inspectors are not so appointed, the person presiding at the shareholders' meeting may, and on the request of any shareholder entitled to vote thereat shall, appoint one or more inspectors. In case any person appointed fails to appear or act, the vacancy may be filled by appointment made by the Board of Directors in advance of the meeting or at the meeting by the person presiding thereat. Each inspector, before entering upon the discharge of his duties, shall take and sign an oath faithfully to execute the duties of inspector at such meeting with strict impartiality and according to the best of his ability. The inspectors shall determine the number of shares outstanding and the voting power of each, the shares represented at the meeting, the existence of a quorum, the validity and effect of proxies, and shall receive votes, ballots or consents, hear and determine all challenges and questions arising in connection with the right to vote, count and tabulate all votes, ballots or consents, determine the result, and do such acts as are proper to conduct the election or vote with fairness to all shareholders. On request of the person presiding at the meeting or any shareholder entitled to vote thereat, the inspectors shall make a report in writing of any challenge, question or matter determined by them and execute of certificate of any fact found by them. Any report or certificate made by them shall be prima facie evidence of the facts stated and of the vote as certified by them. ARTICLE II DIRECTORS SECTION 2.01. Qualifications and Number; Vacancies. A Director need not be a shareholder, a citizen of the United States, or a resident of the State of Delaware. The number of Directors constituting the entire Board is hereby fixed at such number as may be specified by resolution of the Board of Directors adopted by the same vote which is necessary under Article VII hereof to amend these by-laws. The number of Directors may be increased or decreased by amendment of these by-laws duly adopted by either the shareholders or the vote of a majority of the entire Board of Directors, provided that the number of Directors constituting the entire Board shall not be less than three. No decrease shall shorten the term of any incumbent Director. Any Director may be removed for cause by the shareholders. Vacancies and newly created directorships resulting from any increase in the authorized number of directors may be filled by a majority of the directors then in office, through less than a quorum, or by a sole remaining director. SECTION 2.02. Term. Each director shall hold office until the next annual meeting of shareholders and until his successor has been elected and qualified. SECTION 2.03. Place and Time of Meetings of the Board. Regular and special meetings of the Board shall be held at such places (within or without the State of Delaware) and at such times as may be fixed by the Board or upon call of the President of the Corporation or of the executive committee or of any two Directors, provided that the Board of Directors shall hold at least four meetings a year. SECTION 2.04. Quorum and Manner of Acting. A majority of the entire Board of Directors shall constitute a quorum for the transaction of business, but if there shall be less than a quorum at any meeting of the Board, a majority of those present (or if only one be present, then that one) may adjourn the meeting from time to time and the meeting may be held as adjourned without further notice. At all meetings of Directors, a quorum being present, all matters shall be decided by the vote of a majority of the Directors present at the time of the vote. SECTION 2.05. Remuneration of Directors. In addition to reimbursement for his reasonable expenses incurred in attending meetings or otherwise in connection with his attention to the affairs of the Corporation, each Director as such, and as a member of any committee of the Board, shall be entitled to receive such remuneration as may be fixed from time to time by the Board. SECTION 2.06. Notice of Meetings of the Board. Regular meetings of the Board may be held without notice if the time and place of such meetings are fixed by the Board. All regular meetings of the Board, the time and place of which have not been fixed by the Board, and all special meetings of the Board shall be held upon twenty-four hours' notice to the Directors given by letter or telegraph. No notice need specify the purpose of the meeting. Any requirement of notice shall be effectively waived by any Director who signs a waiver of notice before or after the meeting or who attends the meeting without protesting (prior thereto or at its commencement) the lack of notice to him. SECTION 2.07. Executive Committee and Other Committees. The Board of Directors, by resolution adopted by a majority of the entire Board, may designate from among its members an Executive Committee and other committees to serve at the pleasure of the Board. Each committee shall consist of three or more Directors. During the intervals between the meetings of the Board, the Executive Committee shall have all of the authority of the Board of Directors. Each other committee shall be empowered to perform such functions as may, by resolution, be delegated to it by the Board. The Board of Directors may designate one or more Directors as alternate members of any such committee, who may replace any absent member or members at any meetings of such committee. Vacancies in any committee, whether caused by resignation or by increase in the number of members constituting said committee, shall be filled by a majority of the entire Board of Directors. The Executive Committee may fix its own quorum. In the absence or disqualification of any member of any such committee, the member or members thereof present at any meeting and not disqualified from voting whether or not he or they constitute a quorum, may unanimously appoint another member of the Board of Directors to act at the meeting in place of any such absent or disqualified member. SECTION 2.08. Action Without Meeting. Any action required or permitted to be taken at any meeting of the Board of Directors, or of any committee thereof, may be taken without a meeting, if prior to such action a written consent thereto is signed by all members of the board, or of such committee as the case may be, and such written consent is filed with the minutes of proceedings of the board or committee. ARTICLE III OFFICERS SECTION 3.01. Officers. The Board of Directors, at its first meeting held after the annual meeting of shareholders in each year shall elect a Chairman of the Board, Chairman of the Executive Committee, a President, one or more Vice Presidents, a Secretary and a Treasurer and may, in its discretion, also appoint from time to time such other officers or agents as it may deem proper. The Chairman of the Board, Chairman of the Executive Committee and the President shall be elected from among the members of the Board of Directors. Any two or more offices may be held by the same person. Unless otherwise provided in the resolution of election or appointment or in the employment agreement with an officer, each officer shall hold office until the meeting of the Board of Directors following the next annual meeting of shareholders and until his successor has been elected and qualified; provided, however, that the Board of Directors may, unless otherwise provided in such resolution or agreement, remove any officer for cause or without cause at any time. SECTION 3.02. Chairman of the Board. The Chairman shall, if present, preside at all meetings of the shareholders and Board of Directors. The Chairman shall do and perform all other acts and duties which may be assigned to him from time to time by the Board of Directors. SECTION 3.03. Chairman of Executive Committee. The Chairman of the Executive Committee shall, if present, preside at all meetings of the Executive Committee and shall do and perform all other acts and duties which may be assigned to him from time to time by the Board of Directors. SECTION 3.04. President. In the absence of the Chairman of the Board or his inability to act, the President shall preside at all meetings of the shareholders and of the Board of Directors. The President shall do and perform all other acts and duties which may be assigned to him from time to time by the Board of Directors or the Chairman of the Board. SECTION 3.04A. Vice Presidents. The Vice Presidents shall do and perform such acts and duties as may be assigned to them from time to time by the Board of Directors, the Chairman of the Board or the President. SECTION 3.04B. Designations of CEO and COO. The Board of Directors shall from time to time designate the persons, whether by name or title, who shall be the Chief Executive Officer ("CEO") and Chief Operating Officer ("COO") of the Corporation. The CEO shall have general supervision of the affairs of the Corporation subject to the control of the Board of Directors. Both the CEO and the COO shall have the power on behalf of the Corporation to execute and deliver all contracts, instruments, conveyances or documents and to affix the corporate seal thereto." SECTION 3.05. Secretary. The Secretary shall keep minutes of the proceedings taken and the resolutions adopted at all meetings of the shareholders and the Board of Directors, and shall give due notice of the meetings of the shareholders and the Board of Directors. He shall have charge of the seal and all books and papers of the Corporation, and shall perform all duties incident to his office. In case of the absence or disability of the Secretary, his duties and powers may be exercised by such person as may be appointed by the Board of Directors or the Executive Committee. SECTION 3.06. Treasurer. The Treasurer shall receive all the monies belonging to the Corporation, and shall forthwith deposit the same to the credit of the Corporation in such financial institution as may be selected by the Board of Directors or the Executive Committee. He shall keep books of account and vouchers for all monies disbursed. He shall also perform such other duties as may be prescribed by the Board of Directors or Executive Committee or the President and in case of the absence or disability of Treasurer, his duties and powers may be exercised by such person as may be appointed by the Board of Directors or Executive Committee. ARTICLE IV INDEMNIFICATION SECTION 4.01. Indemnification. (a) The Corporation shall indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (other than an action by or in the right of the Corporation) by reason of the fact that he is or was a director, officer, employee or agent of the Corporation, or is or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, against expenses (including attorneys' fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by him in connection with such action, suit or proceeding if he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the Corporation, and, with respect to any criminal action or proceeding, had no reasonable cause to believe his conduct was unlawful. The termination of any action, suit or proceeding by judgment, order, settlement, conviction, or upon a plea of nolo contendere or its equivalent, shall not, of itself, create a presumption that the person did not act in good faith and in a manner which he reasonably believed to be in or not opposed to the best interests of the Corporation, and, with respect to any criminal action or proceeding, had reasonable cause to believe that his conduct was unlawful. (b) The Corporation shall indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action or suit by or in the right of the Corporation to procure a judgment in its favor by reason of the fact that he is or was a director, officer, employee or agent of the Corporation, or is or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise against expenses (including attorneys' fees) actually and reasonably incurred by him in connection with the defense or settlement of such action or suit if he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the Corporation and except that no indemnification shall be made in respect of any claim, issue or matter as to which such person shall have been adjudged to be liable for negligence or misconduct in the performance of his duty to the Corporation unless and only to the extent that the Court of Chancery of Delaware or the court in which such action or suit was brought shall determine upon application that, despite the adjudication of liability but in view of all the circumstances of the case, such person is fairly and reasonably entitled to indemnity for such expenses which such Court of Chancery or such other court shall deem proper. (c) To the extent that a director, officer, employee or agent of the Corporation has been successful on the merits or otherwise in defense of any action, suit or proceeding referred to in subsections (a) and (b), or in defense of any claim, issue or matter therein, he shall be indemnified against expenses (including attorneys' fees) actually and reasonably incurred by him in connection therewith. (d) Any indemnification under subsections (a) and (b) (unless ordered by a court) shall be made by the Corporation only as authorized in the specific case upon a determination that indemnification of the director, officer, employee or agent is proper in the circumstances because he has met the applicable standard of conduct set forth in subsections (a) and (b). Such determination shall be made (1) by the Board of Directors by a majority vote of a quorum consisting of directors who were not parties to such action, suit or proceeding, or (2) if such a quorum is not obtainable, or, even if obtainable a quorum of disinterested directors so directs, by independent legal counsel in a written option, or (3) by the stockholders. (e) Expenses incurred in defending a civil or criminal action, suit or proceeding may be paid by the Corporation in advance of the final disposition of such action, suit or proceeding as authorized by the Board of Directors in the manner provided in subsection (d) upon receipt of an undertaking by or on behalf of the director, officer, employee or agent to repay such amount unless it shall ultimately be determined that he is entitled to be indemnified by the Corporation as authorized in this Article IV. (f) The indemnification provided by this Article IV shall not be deemed exclusive of any other rights to which those indemnified may be entitled under any by-law, agreement, vote of stockholders or disinterested directors or otherwise, both as to action in his official capacity and as to action in another capacity while holding such office, and shall continue as to a person who has ceased to be a director, officer, employee or agent and shall inure to the benefit of the heirs, executors and administrators of such a person. (g) The Board of Directors may authorize, by a vote of a majority of the full Board, the Corporation to purchase and maintain insurance on behalf of any person who is or was a director, officer, employee or agent of the Corporation, or is or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise against any liability asserted against him and incurred by him in any such capacity, or arising out of his status as such, whether or not the Corporation would have the power to indemnify him against such liability under the provisions of this Article IV. ARTICLE V CAPITAL STOCK SECTION 5.01. Share Certificates. Each certificate representing shares of the Corporation shall be in such form as may be approved by the Board of Directors and, when issued, shall contain upon the face or back thereof the statements prescribed by the General Corporation Law and by any other applicable provision of law. Each such certificate shall be signed by the Chairman or President or a Vice President and by the Secretary or Treasurer or an Assistant Secretary or Assistant Treasurer. The signatures of said officers upon a certificate may be facsimile if the certificate is countersigned by a transfer agent or registered by a registrar other than the Corporation itself or its employee. In case any officer who has signed or whose facsimile signature has been placed upon a certificate shall have ceased to be such officer before such certificate is issued, it may be issued by the Corporation with the same effect as if he were such officer at the date of issue. SECTION 5.02. Lost, Destroyed or Stolen Certificates. No certificate representing shares shall be issued in place of any certificate alleged to have been lost, destroyed or stolen, except on production of evidence of such loss, destruction or theft and on delivery to the Corporation, if the Board of Directors shall so require, of a bond of indemnity in such amount, upon such terms and secured by such surety as the Board of Directors may in its discretion require. SECTION 5.03. Transfer of Shares. The shares of stock of the Corporation shall be transferable or assignable on the books of the Corporation only by the person to whom they have been issued or his legal representative, in person or by attorney, and only upon surrender of the certificate or certificates representing such shares properly assigned. The person in whose name shares of stock shall stand on the record of shareholders of the Corporation shall be deemed the owner thereof for all purposes as regards the Corporation. SECTION 5.04. Record Dates. For the purpose of determining the shareholders entitled to notice of or to vote at any meeting of shareholders or any adjournment thereof, or to express consent to corporate action in writing without a meeting, or entitled to receive payment of any dividend or other distribution or allotment of any rights, or entitled to exercise any rights in respect of any change, conversion or exchange of stock or for the purpose of any other action, the Board may fix, in advance, a date as the record date for any such determination of shareholders. Such date shall not be more than sixty nor less than ten days before the date of such meeting, nor more than sixty days prior to any other action. ARTICLE VI MISCELLANEOUS SECTION 6.01. Signing of Instruments. All checks, drafts, notes, acceptances, bills of exchange, and orders for the payment of money shall be signed in such manner and by such person or persons as may be authorized from time to time by the Board of Directors or the Executive Committee or by the by-laws. SECTION 6.02. Corporate Seal. The seal of the Corporation shall be in such form and shall have such content as the Board of Directors shall from time to time determine. ARTICLE VII AMENDMENTS OF BY-LAWS SECTION 7.01. Amendments. These by-laws may be altered, amended or repealed at any meeting, by vote of a majority of the Board of Directors, provided that notices of the proposed amendments shall have been sent by mail to all the Directors not less than three days before the meeting at which they are to be acted upon, or at any regular meeting of the Directors, by the unanimous vote of all the Directors present. -----END PRIVACY-ENHANCED MESSAGE-----