FAIRFIELD, Conn., March 18, 2002 (PRIMEZONE) -- Competitive Technologies, Inc. (AMEX:CTT) today announced its fiscal second quarter results for the three and six months ended January 31, 2002.
CTT revenues for the second quarter of fiscal 2002 were $797,189 compared with $1,561,198 in the second quarter of fiscal 2001. Revenues for the six months ended January 31, 2002 were $1,206,928 compared with $2,024,776 in the six months ended January 31, 2001.
Retained royalties of $797,189 for the second quarter of fiscal 2002 were $761,399 (49%) lower than retained royalties of $1,558,588 in the second quarter of fiscal 2001. Retained royalties of $1,181,928 for the six months ended January 31, 2002 were $839,329 (42%) lower than retained royalties of $2,021,257 in the six months ended January 31, 2001.
Retained royalties from the gallium arsenide semiconductor inventions for the quarter and six months ended January 31, 2002, were $509,106 and $517,562, respectively, and accounted for approximately $708,000 and $730,000 of these reductions, respectively. Also lower were retained royalties from expiring Vitamin B12 assay patents. In addition, a licensee (which previously had been paying $100,000 minimum annual retained royalties in the second quarter of prior fiscal years) terminated its license in the second quarter of fiscal 2002.
Net loss for the second quarter of fiscal 2002 was $1,167,059, ($0.19) per share, including net patent enforcement expenses of $553,022, compared with net income of $494,203, $0.08 per share, for the second quarter of fiscal 2001, including net patent enforcement expenses of $305,792. Net loss for the six months ended January 31, 2002 was $2,206,099, ($0.36) per share, including net patent enforcement expenses of $1,184,637, compared with net income of $309,063, $0.05 per share, for the six months ended January 31, 2001, including net patent enforcement expenses of $365,877. Net patent enforcement expenses are patent enforcement expenses net of reimbursements.
Through a series of bridge financing agreements, CTT committed to lend $1,056,300 to E. L. Specialists, Inc. (ELS). As of January 31, 2002, CTT had advanced $945,000 ($870,000 in cash and $75,000 in services) of which $750,000 was in default and the remainder was payable on demand. As of March 15, 2002, CTT had advanced cash and services totaling $1,056,300 to ELS. ELS has been unable to arrange other financial support necessary to continue operating. CTT may be required to foreclose on its security interest in ELS's intellectual property to recover its advances to ELS. As a result, in the second quarter of fiscal 2002, CTT recorded an impairment loss of $519,200 against its notes receivable from ELS. These total charges represent: (a) $244,200 committed in excess of an independent appraiser's valuation of CTT's security interest in ELS's intellectual property and (b) an estimated additional $275,000 to bring ELS's intellectual property to a licensable state for its principal markets.
For the second quarter of fiscal 2002, net patent enforcement expenses, principally related to the legal actions in which CTT and its clients have sued to enforce their patent rights, increased $247,230 (81%) over the second quarter of fiscal 2001. For the six months ended January 31, 2002, net patent enforcement expenses increased $818,760 (224%) over the six months ended January 31, 2001.
CTT is currently involved in several patent enforcement litigations: LabCorp, Fujitsu and Materna(tm).
In November 2001, a jury heard the case brought by CTT and its licensee, Metabolite Laboratories, Inc., against Laboratory Corporation of America Holdings (LabCorp). The jury upheld the validity of CTT's patent, found that LabCorp had infringed it, and found that LabCorp's infringement was willful. The Court has not yet entered a final judgment and post-trial motions are pending.
The Fujitsu case is awaiting judicial decision of proper district court venue for hearing the case. The case is currently pending in the U.S. District Court for the Central District of Illinois.
A preliminary favorable opinion offered in July 2001 in the case of CTT and its client, the University of Colorado, against American Cyanamid regarding royalties due on sales of Materna still awaits final resolution, including matters of attorney fees, costs, interest on delayed payments and punitive damages.
Operating loss for the second quarter of fiscal 2002 was $647,145 compared with operating income of $399,484 for the second quarter of fiscal 2001. Operating loss for the six months ended January 31, 2002 was $1,731,189 compared with operating income of $94,639 for the six months ended January 31, 2001.
Total operating expenses for the second quarter of fiscal 2002, including $553,022 in net patent enforcement expenses, were $1,444,334, which was $282,620 (24%) higher than in the second quarter of fiscal 2001. Total operating expenses for the six months ended January 31, 2002, including $1,184,637 in net patent enforcement expenses, were $2,938,117, which was $1,007,980 (52%) higher than in the six months ended January 31, 2001. Net patent enforcement expenses, personnel and related expenses, and recruiting expenses were higher in the second quarter of fiscal 2002, while directors' stock expense was lower compared with the second quarter of fiscal 2001. Net patent enforcement expenses, personnel and related expenses, corporate legal expenses and recruiting expenses were higher in the six months of fiscal 2002, while consultants' fees and expenses and directors' stock expense were lower compared with the same period of fiscal 2001.
Frank R. McPike, Jr., President and CEO of CTT said, "Sales of products using our gallium arsenide technology for telecommunications applications, principally fiber optics, have experienced a significant downturn which negatively impacted our royalties. While we cannot predict whether the downturn has bottomed out, we hope to see this important segment of our royalty stream begin to move toward levels reported prior to the downturn."
Mr. McPike continued, "We intend to continue our strategy of vigorously enforcing the intellectual property rights of our clients. CTT has either won or favorably settled all actions it has taken in the past. We believe that the end result will be a strongly positive one for CTT, its clients and its shareholders. We expect the resolution of the three ongoing disputes to have a positive effect on CTT's earnings."
Mr. McPike added, "We are disappointed with E. L. Specialists' inability to obtain sufficient financing to move its business plan forward. While we have recorded an impairment charge in the second quarter, we will continue to work to recover our advances."
Richard E. Carver, Chairman of CTT's Board of Directors, commented, "We are repositioning the Company for growth and our search for a CEO is progressing. The Search Committee of the Board, consisting of Charles J. Philippin, George W. Dunbar and me, has interviewed several impressive candidates. We expect to make our selection before the end of April 2002."
About Competitive Technologies, Inc.
Competitive Technologies is a global leader in identifying, developing and commercializing innovative life sciences, physical sciences and digital technologies. Competitive Technologies' specialized expertise and experience make it a valuable partner for inventors, companies and universities of all sizes. CTT has been responsible for closing hundreds of licensing agreements. CTT clients and licensees include: Sony, Matsushita Electric Industrial, the University of Arizona, the University of Colorado, the University of Illinois, Digital Ink, Inc., NTRU Cryptosystems, Inc., Palatin Technologies, Inc. and Ribozyme Pharmaceuticals, Inc. Competitive Technologies, Inc. is based in Fairfield, Connecticut and has affiliates in Osaka, Japan and London, England.
Statements about the Company's future expectations, including development and regulatory plans, and all other statements in this document other than historical facts are "forward-looking statements" within the meaning of applicable Federal Securities Laws and are not guarantees of future performance. These statements involve risks and uncertainties related to market acceptance of and competition for the Company's licensed technologies and other risks and uncertainties inherent in CTT's business, including those set forth in Item 1 of the Company's most recent Form 10-K and other factors that may be described in CTT's filings with the SEC, and are subject to change at any time. The Company's actual results could differ materially from these forward-looking statements. The Company undertakes no obligation to update publicly any forward-looking statement.
COMPETITIVE TECHNOLOGIES, INC.
AND SUBSIDIARIES
CONDENSED CONSOLIDATED RESULTS OF OPERATIONS
(Unaudited)
Second Quarter ended Six Months ended
January 31, January 31,
2002 2001 2002 2001
----------- ---------- ----------- ----------
Revenues:
Retained royalties $ 797,189 $1,558,588 $ 1,181,928 $2,021,257
Other revenues -- 2,610 25,000 3,519
----------- ---------- ----------- ----------
Total revenues 797,189 1,561,198 1,206,928 2,024,776
----------- ---------- ----------- ----------
Operating expenses
Patent enforcement
expenses, net of
reimbursements 553,022 305,792 1,184,637 365,877
Other costs of
technology manage-
ment services 517,833 386,308 1,036,176 718,702
General and
administration
expenses 373,479 469,614 717,304 845,558
----------- ---------- ----------- ----------
Total operating
expenses 1,444,334 1,161,714 2,938,117 1,930,137
----------- ---------- ----------- ----------
Operating income
(loss) $ (647,145) $ 399,484 $(1,731,189) $ 94,639
=========== ========== =========== ==========
Impairment loss on
loans to E. L
Specialists, Inc. $ (519,200) $ -- $ (519,200) $ --
=========== ========== =========== ==========
Income (loss)
before minority
interest $(1,140,123) $ 494,203 $(2,179,163) $ 309,063
=========== ========== =========== ==========
Net income (loss) $(1,167,059) $ 494,203 $(2,206,099) $ 309,063
=========== ========== =========== ==========
Net income (loss)
per share
Basic and diluted $ (0.19) $ 0.08 $ (0.36) $ 0.05
=========== ========== =========== ==========
Weighted average
number of common
shares outstanding:
Basic 6,144,242 6,117,761 6,141,797 6,148,537
Diluted 6,144,242 6,159,701 6,141,797 6,200,061
Other Financial Data
Cash and cash
equivalents $ 533,680 $ 417,392
=========== ==========
Short-term
investments $ 2,612,096 $5,675,791
=========== ==========
Royalties
receivable $ 1,746,890 $3,494,039
=========== ==========
Total assets $ 7,607,766 $12,623,660
=========== ==========
Royalties payable $ 1,367,934 $2,499,171
=========== ==========
Total liabilities $ 2,804,794 $2,965,847
=========== ==========
Shareholders' equity $ 4,802,972 $9,657,813
=========== ==========