-----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, W12gQP9mjq3zrtunRUfEQ0ryNhKMU5OgaVcH0QeBUfbby7CGXoijHlxYnusmIk0Q YQBFsgmoNtnnlJIRUsbYPw== 0000102198-96-000016.txt : 19961217 0000102198-96-000016.hdr.sgml : 19961217 ACCESSION NUMBER: 0000102198-96-000016 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19961031 FILED AS OF DATE: 19961216 SROS: AMEX FILER: COMPANY DATA: COMPANY CONFORMED NAME: COMPETITIVE TECHNOLOGIES INC CENTRAL INDEX KEY: 0000102198 STANDARD INDUSTRIAL CLASSIFICATION: PATENT OWNERS & LESSORS [6794] 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: 96680904 BUSINESS ADDRESS: STREET 1: 1960 BRONSON ROAD STREET 2: P.O. BOX 340 CITY: FAIRFIELD STATE: CT ZIP: 06430 BUSINESS PHONE: 203-255-6044 MAIL ADDRESS: STREET 1: 1960 BRONSON ROAD STREET 2: P.O. BOX 340 CITY: FAIRFIELD STATE: CT ZIP: 06430 FORMER COMPANY: FORMER CONFORMED NAME: UNIVERSITY PATENTS INC DATE OF NAME CHANGE: 19920703 10-Q 1 10-Q October 1996 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, 1996 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) 1960 Bronson Road P.O. Box 340 Fairfield, Connecticut 06430 (Address of principal executive (Zip Code) offices) Registrant's telephone number, including area code: (203) 255-6044 1465 Post Road East, P.O. Box 901, Westport, CT 06881-0901 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, 1996 5,905,329 shares Exhibit Index on sequentially numbered page 16 of 18. Page 1 of 18 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, 1996 and July 31, 1996 3 Consolidated Statements of Operations for the three months ended October 31, 1996 and 1995 4 Consolidated Statement of Changes in Shareholders' Interest for the three months ended October 31, 1996 5 Consolidated Statements of Cash Flows for the three months ended October 31, 1996 and 1995 6 Notes to Consolidated Financial Statements 7-9 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 10-15 PART II. OTHER INFORMATION Item 2. Changes in Securities 16 Item 6. Exhibits and Reports on Form 8-K 16 Signatures 17 PART I. FINANCIAL INFORMATION COMPETITIVE TECHNOLOGIES, INC. AND SUBSIDIARIES Consolidated Balance Sheets October 31, and July 31, 1996 (Unaudited) October 31, July 31, 1996 1996 ASSETS Current assets: Cash and cash equivalents $ 1,648,966 $ 560,640 Short-term investments, at market 3,476,351 3,820,990 Receivables, including $73,622 and $19,910 receivable from related parties in October and July, respectively 592,887 1,088,030 Prepaid expenses and other current assets 182,285 218,903 Total current assets 5,900,489 5,688,563 Property and equipment, net 169,623 144,360 Investments 356,149 321,145 Intangible assets acquired, principally licenses and patented technologies 1,754,469 1,794,795 Directors' escrow account 325,000 325,000 Other assets 74,075 94,277 TOTAL ASSETS $ 8,579,805 $ 8,368,140 LIABILITIES AND SHAREHOLDERS' INTEREST Current liabilities: Accounts payable, including $10,184 and $9,365 payable to related parties in October and July, respectively $ 153,474 $ 83,571 Accrued liabilities, including $3,040 payable to related parties in October 1,331,541 794,250 Current portion of purchase obligation 550,000 550,000 Total current liabilities 2,035,015 1,427,821 Noncurrent portion of purchase obligation, net of unamortized discount 680,995 652,367 Commitments and contingencies Shareholders' interest: 5% preferred stock, $25 par value 60,675 60,675 Common stock, $.01 par value 59,303 59,258 Capital in excess of par value 25,023,568 24,993,926 25,000 shares of treasury stock, at cost (174,713) (174,713) Net unrealized holding gains on available-for-sale securities 31,035 10,605 Accumulated deficit (19,136,073) (18,661,799) Total shareholders' interest 5,863,795 6,287,952 TOTAL LIABILITIES AND SHAREHOLDERS' INTEREST $ 8,579,805 $ 8,368,140 See accompanying notes PART I. FINANCIAL INFORMATION (Continued) COMPETITIVE TECHNOLOGIES, INC. AND SUBSIDIARIES Consolidated Statements of Operations for the three months ended October 31, 1996 and 1995 (Unaudited) 1996 1995 Revenues: Retained royalties $ 241,201 $ 201,450 Revenues under service contracts and grants, including $56,466, and $37,106 from related parties in 1996 and 1995, respectively 261,200 117,779 502,401 319,229 Costs of technology management services, of which $5,762 and $1,627 were paid to related parties in 1996 and 1995, respectively 654,359 263,013 General and administration expenses, of which $21,287 and $25,591 were paid to related parties in 1996 and 1995, respectively 343,721 309,827 998,080 572,840 Operating loss (495,679) (253,611) Interest income 40,447 54,896 Interest expense (28,628) -- Income (losses) related to equity method affiliates 20,004 30,841 Other income (expense), net (3,918) 666 Loss before income taxes (467,774) (167,208) Provision for income taxes 6,500 7,000 Net loss $ (474,274) $ (174,208) Net loss per share (primary and fully diluted): $ (0.08) $ (0.03) Weighted average number of common and common equivalent shares outstanding (primary and fully diluted) 5,903,100 5,813,952 See accompanying notes PART I. FINANCIAL INFORMATION (Continued) COMPETITIVE TECHNOLOGIES, INC. AND SUBSIDIARIES Consolidated Statement of Changes in Shareholders' Interest For the three months ended October 31, 1996 (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, 1996 2,427 $60,675 5,925,829 $59,258 $24,993,926 (25,000) $(174,713) $ 10,605 $(18,661,799) Exercise of common stock options . . . . 4,500 45 29,642 Net change in unrealized holding gains on available- for-sale securities . 20,430 Net loss. . . . . . . . (474,274) Balance - October 31, 1996 2,427 $60,675 5,930,329 $59,303 $25,023,568 (25,000) $(174,713) $ 31,035 $(19,136,073)
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, 1996 and 1995 (Unaudited) 1996 1995 Cash flow from operating activities: Loss from continuing operations $ (474,274) $ (174,208) Noncash items included in loss from continuing operations: Depreciation and amortization 92,668 47,456 (Income) losses related to equity method affiliates (20,004) (30,841) Directors' stock and stock retirement plan accruals 41,550 15,000 Amortization of discount on purchase obligation 28,628 -- Other noncash items 5,414 4,466 Other -- 15,476 Net changes in various operating accounts: Receivables 495,143 270,980 Prepaid expenses and other current assets 14,201 (16,649) Accounts payable and accrued liabilities 560,230 (165,168) Net cash flow (used in) from operating activities 743,556 (33,488) Cash flow from investing activities: Purchases of property and equipment, net (40,644) (17,607) Proceeds from sales of short-term investments 365,069 290,671 Investments in affiliates and subsidiaries (9,342) -- Net cash flow from investing activities 315,083 273,064 Cash flow from financing activities: Proceeds from issuance of common stock, net 29,687 28,750 Net cash flow from financing activities 29,687 28,750 Net increase in cash and cash equivalents 1,088,326 268,326 Cash and cash equivalents, beginning of period 560,640 336,098 Cash and cash equivalents, end of period $ 1,648,966 $ 604,424 Supplemental cash flow information: Cash paid for income taxes $ 20,900 $ 17,298 There were no noncash investing or financing activities during the three months ended October 31, 1996 and 1995. 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 fiscal 1997. 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, 1996. 2. Acquisition of USET On January 31, 1996, the Company purchased the remaining interests in USET (see Note 2 to Consolidated Financial Statements in the Company's Annual Report on Form 10-K for the year ended July 31, 1996). The following unaudited pro forma summary information presents the consolidated results of operations of the Company as if this acquisition had occurred on August 1, 1994 (in thousands, except per share amounts). The unaudited pro forma amounts are based on assumptions and estimates the Company believes are reasonable; however, such amounts do not necessarily represent results which would have occurred if the acquisition had taken place on the basis assumed, nor are they indicative of the results of future combined operations. For the quarter ended October 31, 1995 Total revenues $ 617 Operating loss (87) Loss from continuing operations (60) Per share loss from continuing operations $(0.01) 3. Short-term Investments As of October 31, 1996 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 $ 1,491 $31 -- $ 1,460 1 year Other U.S. government Within debt 1,985 -- -- 1,985 1 year securities 2018 Total $ 3,476 $31 -- $ 3,445 For the quarter ended October 31, 1996 proceeds from the sale of available-for-sale securities were $365,069 with no gain or loss realized. 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, 1996 1996 Royalties $351,266 $ 879,380 Government contracts 57,817 74,978 Other 183,804 133,672 $592,887 $1,088,030 5. Accrued Liabilities Accrued liabilities were: October 31, July 31, 1996 1996 Accrued compensation $ 177,802 $ 125,256 Royalties payable 861,025 417,656 Deferred revenues 102,315 16,587 Other accrued liabilities 190,399 234,751 $1,331,541 $ 794,250 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, 1996, the Company had received aggregate cash proceeds of approximately $1,011,000 from the January 1989 sale of UOP's assets to Unilens. As cash proceeds were received, the Company paid a 4% commission to OALP, its joint venture partner. Further hearings in this case have been adjourned to dates in calendar 1997. 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 $1,648,966 at October 31, 1996 are $1,088,326 higher than cash and cash equivalents of $560,640 at July 31, 1996. Operating activities provided $743,556, investing activities provided $315,083 and financing activities provided $29,687. Competitive Technologies, Inc. ("CTI") and its majority owned subsidiaries' ("the Company") loss of $474,274 for the three months ended October 31, 1996 included the following noncash items: depreciation and amortization of approximately $93,000, income related to equity method affiliates of approximately $20,000, amortization of discount on purchase obligation of approximately $29,000 and accruals of approximately $47,000. 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. Approximately $971,000 of cash provided by operations is from the decrease in royalties receivable and the increase in royalties payable. This reflects the normal cycle of royalty collections and payments with the consolidation of University Science, Engineering and Technology, Inc. ("USET"). Approximately $30,000 of property and equipment purchases in this quarter relate to improving and furnishing CTI's principal office. CTI relocated its principal office on November 8, 1996 and expects additional purchases to complete those improvements and furnishings during the next quarter. Proceeds from sales of short-term investments of approximately $365,000 are from the Company's sales of U.S. government debt securities. The Company received $29,687 during the quarter from employ- ees' exercising stock options to purchase 4,500 shares of common stock at prices from $6.5625 to $6.6250. The Company carries liability insurance, directors' and officers' liability insurance and casualty insurance for owned or leased tangible assets. It does not carry key person life insur- ance. There are no legal restrictions on payments of dividends by CTI. At October 31, 1996, CTI had outstanding commitments for capital expenditures of approximately $57,000 in connection with improving and furnishing its new principal office. In addition, the Company expects to pay approximately $550,000 of the USET purchase obligation on January 31, 1997. The Company continues to pursue additional university and corporate technology management opportunities. If and when these opportunities are consummated, the Company expects to commit capital resources to these operations. The Company does not believe that inflation had a significant impact on its operations during 1996 or 1995 or that it will have a significant impact on operations during the next twelve-month operating period. Vector Vision, Inc. ("VVI"), CTI's 52.8% owned subsidiary, continues to seek additional financing to support its continuing development. Without additional outside financing, VVI's develop- ment activities will proceed at a minimum level. The Company is not obligated to provide additional funding to VVI. VVI's operating activities during the quarter were funded primarily by the approximately $36,000 remaining on its Small Business Innova- tion Research ("SBIR") contract awarded in April, 1996. With more than $5,125,000 in cash, cash equivalents and short- term investments at October 31, 1996, the Company anticipates that currently available funds will be sufficient to finance cash needs over the next two to four years for its current operating 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) is subject to many factors which are outside the Company's control and to presently unanticipated opportunities that may arise in the future. Accordingly, there can be no assurance that the Company's current expectations regarding the sufficiency of currently available funds will prove to be accurate. Results of Operations - Three Months Ended October 31, 1996 vs. Three Months Ended October 31, 1995 Through January 31, 1996, the Company accounted for its investment in USET on the equity method and recorded 20% of USET's net income. The Company has consolidated USET's results of operations for all periods since February 1, 1996. Consolidated revenues for the quarter ended October 31, 1996 were $183,172 (57%) higher than for the quarter ended October 31, 1995. Retained royalties were $39,751 (20%) higher. However, excluding USET's effect, retained royalties were $83,237 (41%) lower. Up-front license fees for a plasma display energy recovery technology of approximately $97,000 for the quarter ended October 31, 1995 were non-recurring and this decrease was only partially offset by other royalty increases in the quarter ended October 31, 1996, including modest increases in royalties on sales of Renova and Ethyol (see Item 7 in the Company's Annual Report on Form 10-K for the year ended July 31, 1996). The consolidation of USET's retained royalties increased retained royalties for the quarter ended October 31, 1996 by $122,988. Revenues under service contracts were $261,200, $151,205 higher than in the quarter ended October 31, 1995. This increase includes VVI's SBIR contract ($36,000), intercorporate service contracts ($106,000) and other collaborative service contracts. Approximately $50,000 of the increase in intercorporate service contracts was from international contracts. Expansion of the Company's focus to include providing technology management services to corporations is beginning to generate revenues. VVI's SBIR contract was completed in October, 1996 and the Company expects to complete its $800,000 contract with the Department of the Air Force in November, 1996. Revenues from this contract were similar in the quarters ended October 31, 1996 and 1995. There were no grant revenues in the fiscal 1997 quarter compared with approximately $8,000 in support of VVI's development activities in the fiscal 1996 quarter. Costs of technology management services were $391,346 (149%) higher in fiscal 1997 than in fiscal 1996 as more fully discussed below. Costs related to retained royalties were approximately $169,000 higher in the first quarter of fiscal 1997. This increase reflects inclusion of USET's domestic and foreign patent expenses ($21,000) and amortization of the cost of intangible assets acquired ($35,000) in the fiscal 1997 quarter. It also reflects increased costs for consultants retained to assist in evaluating and marketing corporate technologies ($26,000), domestic patent costs on a new university technology ($14,000) and lower recoveries of foreign patent costs against university royalties ($19,000). In addition, personnel costs (including benefits and overheads) associated with patenting and licensing services were higher ($55,000) in the fiscal 1997 quarter as a result of hiring employees after the fiscal 1996 quarter to evaluate and market corporate technologies. These costs include domestic and foreign patent prosecution, maintenance and litigation expenses. The Company carefully evaluates the future revenue potential of each technology before it incurs substantial patent or enforcement expenses. The Company expects costs related to retained royalties to continue to increase during fiscal 1997 as it expands its technology management services to corporations and universities. Costs related to service contracts (including direct charges for subcontractors' services and personnel costs associated with service contracts) were approximately $92,000 higher in the first quarter of fiscal 1997 than in the first quarter of fiscal 1996. This increase includes costs in connection with VVI's SBIR contract ($36,000), direct costs related to new corporate client service contracts ($27,000) and increased personnel costs (including benefits and overheads) associated with corporate and collaborative service contracts. Costs related to grant revenues decreased approximately $8,000 in proportion to the reduction in grant revenues. Costs associated with new client development (principally personnel costs, including benefits and overheads) increased approximately $138,000 over the first quarter of fiscal 1996. The Company's strategic decision to expand its focus to include providing technology management services to corporations required hiring experienced employees to identify and develop new opportuni- ties into client relationships. These employees were added after the first quarter of fiscal 1996. The Company expects this effort to result in royalty and service contract revenues in the future. The Company expects this process to continue to generate additional service and royalty revenues for the future as it has for this fiscal quarter. General and administration expenses were approximately $34,000 (11%) higher in the fiscal 1997 quarter. This increase included operating expenses supporting the Company's and USET's ongoing operations. As the Company continues to develop its domestic and international licensing and contract services operations, it expects these expenses to continue to increase. In addition, the Company has signed a new five-year office lease beginning in November, 1996 and incurred relocation expenses in November, 1996, which are expected to increase other operating expenses in the second quarter of fiscal 1997. The net effect of these increases in operating revenues and expenses was to increase the Company's operating loss by $242,068 (95%) compared to the first quarter of fiscal 1996. Interest income decreased $14,449 (26%) because of lower average invested balances and lower interest rates in the quarter ended October 31, 1996. Interest expense of $28,628 in the fiscal 1997 quarter relates to the debt incurred in connection with the acquisition of USET. In the fiscal 1997 first quarter, net income related to equity method affiliates was principally CTI's equity in the net income of Equine Biodiagnostics, Inc. ("EBI") ($22,000) offset by CTI's equity in other net losses. At October 31, 1996, CTI owned 33.7% of the outstanding common stock of Knowledge Solutions, Inc. (KSI") and has loaned KSI $50,000 under a subordinated secured convertible note (see Note 4 to Consolidated Financial Statements in the Company's Annual Report on Form 10-K for the year ended July 31, 1996), but has no further obligation to provide additional funding to KSI. CTI's investment in KSI has been reduced to zero. In the quarter ended October 31, 1995, net income related to equity method affiliates included the Company's 20% equity in the net income of USET ($32,000), its 35.9% equity in the net loss of KSI ($19,000) and its 37.5% equity in the net income of EBI ($18,000). Other expense for the quarter ended October 31, 1996 was legal expenses incurred in connection with a suit brought against CTI, some of its subsidiaries and directors as more fully detailed in Note 16 to Consolidated Financial Statements in the Company's Annual Report on Form 10-K for the year ended July 31, 1996. Further hearings in this case have been adjourned to dates in calendar 1997. CTI is unable to estimate the related legal expenses which may be incurred in the remaining quarters of 1997. Unilens made no payments in either quarter of fiscal 1997 or 1996. Since CTI carries this receivable at zero value, any collections will be recorded in the period collected. Through October 31, 1996, the Company had received aggregate cash proceeds of approxi- mately $1,011,000 from the January 1989 sale of UOP's assets to Unilens. As cash proceeds were received, CTI paid a 4% commission to Optical Associates, L.P., its joint venture partner. 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 adopted Statement of Financial Accounting Standards No. 123, "Accounting for Stock-Based Compensation," effective August 1, 1996 and will disclose the pro forma effects fair value accounting would have had on net income and earnings per share in its consolidated financial statements for the year ending July 31, 1997. It has not had a material effect on the accompany- ing financial statements. The Company adopted Statement of Financial Accounting Standards No. 121, "Accounting for the Impairment of Long-lived Assets and for Long-lived Assets to be Disposed of," effective August 1, 1996. It has not had a material effect on the accompany- ing financial statements. Results of Operations - Three Months Ended October 31, 1996 vs. Three Months Ended July 31, 1996 Consolidated revenues for the quarter ended October 31, 1996 were $338,465 (40%) lower than for the quarter ended July 31, 1996. Historically, retained royalties in the first fiscal quarter are lower than in the fourth quarter because of licensees who report semiannually. Retained royalties were $391,912 (62%) lower than in the fourth quarter of fiscal 1996. Revenues under service contracts were $53,447 (26%) higher in the first quarter of fiscal 1997. Although revenues from VVI's SBIR and from CTI's contract with the Department of the Air Force declined approximately $46,000, the Company's revenues from contract services to corporate and other clients increased approximately $97,000. Total operating expenses of $998,080 in the first quarter of fiscal 1997 were approximately $69,000 (7%) higher than in the fourth quarter of fiscal 1996. In the first quarter costs of technology management services were approximately $110,000 (20%) higher and general and administration expenses were approximately $41,000 (11%) lower than in the fourth quarter. While costs related to retained royalties were similar in both quarters, both costs related to service contracts and costs associated with new client development increased as the Company continued its efforts to expand its services to corporate clients and to grow its corporate client base. The combined effect of the reduction in consolidated revenues and the increase in operating expenses in the first quarter of fiscal 1997 resulted in an increased operating loss which accounted for nearly the entire increase in the Company's net loss. PART II - OTHER INFORMATION Item 2. Changes in Securities (c) As of September 17, 1996, the registrant issued to Falls River Group (FRG) non-transferrable warrants to purchase 3,000 shares of the registrant's common stock at $9.875 (the mean between the high and low prices on the American Stock Exchange on September 17, 1996). The warrants were issued in consideration of FRG's assistance in establishing the registrant's office and operations in Cleveland, Ohio. The warrants become exercisable in March, 1997, and expire five years from issuance. There were no under- writers involved in the transaction. The warrants and the common stock underlying the warrants were exempt from registration under Section 4(2) of the Securities Act of 1933. The warrants con- tained, and the shares issuable upon exercise will contain, restrictive legends. Item 6. Exhibits and Reports on Form 8-K Page A) Exhibits 11.1 Schedule of computation of earnings per share for the three months ended October 31, 1996 and 1995. 18 27.1 Financial Data Schedule (EDGAR only). B) Reports on Form 8-K No reports on Form 8-K were filed during the quarter for which this report is filed. 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 16, 1996 By: s/ 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, 1996 1995 Net loss applicable to common stock $ (474,274) $ (174,208) Common and common equivalent shares - primary: Weighted average common shares outstanding 5,903,100 5,813,952 Adjustments for assumed exercise of stock options 68,006* 5,255* Adjustments for assumed exercise of stock warrants 22,685* -- Weighted average number of common and common equivalent shares outstanding 5,993,791 5,819,207 Common and common equivalent shares - fully diluted: Weighted average common shares outstanding 5,903,100 5,813,952 Adjustments for assumed exercise of stock options 81,214* 14,924* Adjustments for assumed exercise of stock warrants 27,609* -- Weighted average number of common and common equivalent shares outstanding 6,011,923 5,828,876 Primary and fully diluted $ (0.08) $ (0.03) * 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, 1996 0000102198 COMPETITIVE TECHNOLOGIES, INC. 3-MOS JUL-31-1997 OCT-31-1996 1,648,966 3,476,351 592,887 0 0 5,900,489 415,850 246,227 8,579,805 2,035,015 0 0 60,675 59,303 5,743,817 8,579,805 0 502,401 0 998,080 0 0 28,628 (467,774) 6,500 (474,274) 0 0 0 (474,274) (0.08) (0.08)
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