Filed
Pursuant to Rule 424(b)(3)
Registration
No. 333-113751
PROSPECTUS
Competitive
Technologies, Inc.
531,341
Shares of Common Stock
This
Prospectus relates to the sale of up to 531,341 shares of our common stock
by
Fusion Capital Fund II, LLC (“Fusion Capital”). Fusion Capital is sometimes
referred to in this Prospectus as the selling stockholder. The prices at which
Fusion Capital may sell the shares will be determined by the prevailing market
price for the shares or in negotiated transactions. We will not receive any
proceeds from the sale of our shares by Fusion Capital.
Our
common stock is traded on the American Stock Exchange under the symbol “CTT.” On
January 31, 2006, the last reported sale price for our common stock as reported
on the American Stock Exchange was $3.88 per share.
Investing
in our common stock involves a high degree of risk. You should consider
carefully the “Risk Factors” beginning on page 3 for a discussion of these
risks.
The
selling stockholder is an “underwriter” within the meaning of the Securities Act
of 1933.
Neither
the Securities and Exchange Commission nor any state securities commission
has
approved or disapproved of these securities or determined if this Prospectus
is
truthful or complete. Any representation to the contrary is a criminal
offense.
The
date
of this Prospectus is February 17, 2006.
TABLE
OF CONTENTS
|
Prospectus
Summary
|
1
|
|
Risk
Factors
|
3
|
|
Forward-Looking
Statements
|
7
|
|
Use
of Proceeds
|
8
|
|
Description
of Securities
|
8
|
|
Principal
Stockholders
|
9
|
|
Market
Price of Our Common Equity
|
10
|
|
The
Fusion Capital Transaction
|
10
|
|
Selling
Stockholder
|
14
|
|
Plan
of Distribution
|
14
|
|
Legal
Matters
|
15
|
|
Experts
|
15
|
|
Where
You Can Find More Information
|
16
|
|
Incorporation
of Certain Information by Reference
|
16
|
|
Information
with Respect to the Registrant
|
16
|
|
Material
Changes
|
16
|
Prospectus
Summary
The
following summary highlights information contained elsewhere in this Prospectus.
It may not contain all of the information that is important to you. You should
read the entire Prospectus carefully, especially the discussion regarding the
risks of investing in CTT common stock under the heading “Risk Factors,” before
investing in CTT common stock.
Business
Competitive
Technologies, Inc. (“CTT”), is a Delaware corporation incorporated in 1971 to
succeed an Illinois corporation incorporated in 1968. CTT and its subsidiary
(collectively, the “registrant,” “we,” “our,” “us”, or the “Company”), provide
technology transfer, selling and licensing services focused on the technology
needs of its customers, matching those requirements with commercially viable
technology solutions, bridging the gap between market demand and raw innovation.
We do this in two ways. First, we develop, and have developed over the years,
relationships with the technology and research arms of universities, independent
research institutions and companies, and inventors, patent attorneys and patent
or other intellectual property holders, whom we then formally represent, and
they become our “Clients”. From our Clients we obtain rights to serve as their
agent, or receive a license from them to their invention, patent or intellectual
property rights (collectively, “Technology”). We then find customers, or end
users, who have a use for the particular Technology, and we grant them a license
or a sublicense to the Technology either to commercialize (sell) it or further
develop the Technology. Second, as we also have contacts and relationships
with
those who have a need or use for particular Technologies (usually companies
and
industry, who may or may not be current customers of ours), we match their
needs
with one of our Technologies (“reverse marketing”), or find a Technology to fit
their needs and grant them a license or a sublicense. Since we focus on both
Technologies available (Client side) and Technologies wanted or needed (customer
side), we believe that we provide a valuable service in matching market needs
to
Technology solutions. Using our services provides benefits to both the
Technology provider and the user of the Technology; the Client, or Technology
provider (usually a university or an inventor), can focus solely on research
and
innovation, rather than on selling and marketing, and the staffing needed to
sell and market their Technology, and the Technology user, or customer, can
focus on selling, development and marketing, rather than on research and
development. We also work to maintain and enforce our Clients’ and our own legal
patent rights with respect to Technologies, and monitor and address any
infringement. Our goal is to maximize the value of the Technology for the
benefit of our Clients, customers and shareholders.
When
we
acquire a Technology, we may acquire exclusive or non-exclusive rights,
worldwide rights or rights limited to a specific geographic area. When we
license or sublicense rights to our customers, we may grant exclusive or
non-exclusive rights, worldwide or geographically limited rights and/or we
may
limit rights to a defined field of use. Technologies can be either early stage,
mid stage, or late stage. Currently, we define early stage Technologies as
those
that require further development and/or testing and regulatory approval before
they can be commercialized and generate significant revenues, such period of
time usually being in excess of 30 months. Mid stage are defined as Technologies
that require some further refinement, but we believe are closer (approximately
15 - 30 months) to generating significant revenues than early stage. Late stage
Technologies are fully developed and ready to be marketed and usually can
generate revenues immediately, or within 15 months. We strive to have a balanced
portfolio with Technologies in each stage of the life cycle; our goal is to
have
over half our portfolio in late stage Technologies. Currently, we have less
than
half our portfolio in late stage Technologies, and we are focusing on correcting
this imbalance in our portfolio. The stage that a Technology is classified
in
may change at any time based upon information currently available to us. In
addition, how we define a stage may change.
We
identify and commercialize (or find companies that will commercialize
Technologies for us) innovative Technologies in life and physical sciences,
electronics, and nanotechnologies. Life sciences include medical testing,
diagnostics, pharmaceuticals, biotechnologies, medical devices and other medical
or biological applications. Physical sciences include chemical, display, and
environmental applications. Electronics include communications, semiconductors,
Internet related, e-commerce and consumer electronics applications.
Nanotechnologies deal with the manipulation of microscopic particles into useful
arrangements, and smart or novel materials (a nano particle is one thousand
times smaller than the width of a human hair). We currently have Technologies
in
each of these areas, though a majority of our revenues come from the life
sciences area.
We
estimate that over the years we have licensed nearly 500 Technologies to and
from corporations, and can count as our Clients several major universities
and
inventors.
We
compete with universities, law firms, venture capital firms and other technology
commercialization firms for technology licensing opportunities. Many
organizations offer some aspect of technology transfer services, and some are
well established and have more financial and human resources than we do. The
market is highly fragmented and many participants focus on a specific technology
area.
1
Corporate
Information
CTT
is
incorporated under the laws of the State of Delaware. Our executive offices
are
located at 1960 Bronson Road, Fairfield, Connecticut 06824, and our telephone
number is (203) 255-6044. The address of our website is www.competitivetech.net.
Unless
otherwise stated herein, information on our web site is not part of this
Prospectus.
CTT
Common Stock
CTT
common stock trades on the American Stock Exchange under the symbol
“CTT.”
The
Offering
On
February 25, 2004, we entered into a common stock purchase agreement with Fusion
Capital Fund II, LLC (“Fusion Capital”), pursuant to which Fusion Capital has
agreed to purchase on each trading day, subject to CTT’s rights to increase,
reduce or suspend these purchases and terminate the agreement with Fusion
Capital at any time, $12,500 of our common stock up to an aggregate purchase
price, under certain conditions, of $5.0 million. The $5.0 million of common
stock is to be purchased over a twenty (20) month period, subject to a six
(6)
month extension or earlier termination at our discretion. Subject to certain
provisions of the common stock purchase agreement, we can control the size
and
timing of any sales of our common stock to Fusion Capital. On January 9, 2006
we
notified Fusion Capital that we were extending the common stock purchase
agreement by six (6) months.
In
May
2004, we registered 1,248,115 shares of our common stock for sale by Fusion
Capital, of which 716,774 shares have been sold to Fusion Capital and 82,321
shares have been issued to Fusion Capital as a commitment fee as of January
31,
2006. Fusion Capital, the selling stockholder under this Prospectus, is offering
for sale the remaining shares from the February 25, 2004 agreement, consisting
of up to 531,341 shares of our common stock. All of these shares previously
were
registered in our May 2004 registration statement, number 333-113751 on Form
S-1, and our February 2005 registration statement, number 333-113751 on Form
S-3.
As
of
January 31, 2006, there were 7,669,333 shares of our common stock outstanding,
including the 82,321 shares issued to Fusion Capital as a commitment fee, but
excluding the additional 6,242 shares issuable to Fusion Capital as compensation
for its purchase commitment, and the additional 442,778 shares not yet purchased
by Fusion Capital which are included in the total shares offered by Fusion
Capital pursuant to this Prospectus. The number of shares offered by this
Prospectus represents approximately 6.9% of the total common stock outstanding
as of January 31, 2006. The number of shares ultimately offered for sale by
Fusion Capital is dependent upon the number of shares purchased by Fusion
Capital under the common stock purchase agreement. This number may be affected
by other factors more fully described under the heading “The Fusion Capital
Transaction.”
2
Risk
Factors
An
investment in CTT common stock involves a high degree of risk. You should
carefully consider the following risk factors and other information in this
Prospectus before deciding to invest in shares of CTT common stock. Our most
significant risks and uncertainties are described below; however, they are
not
the only risks that we face. If any of the following risks actually occurs,
our
business, financial condition, liquidity, results of operations and prospects
for growth could be materially adversely affected, the trading of our common
stock could decline, and you may lose all or part of your investment. You should
acquire shares of our common stock only if you can afford to lose your entire
investment. We make various statements in this section which constitute
“forward-looking statements” under Section 27A of the Securities Act of 1933.
See “Forward-Looking Statements.”
In
three of the last five fiscal years, we have experienced significant net
losses.
The
table
below summarizes our consolidated results of operations and cash flows for
the
five years ended July 31, 2005:
|
2005
|
2004
|
2003
|
2002
|
2001
|
||||||||||||
|
Net
income (loss)
|
$
|
5,701,787
|
$
|
2,954,529
|
$
|
(1,935,301
|
)
|
$
|
(4,016,428
|
)
|
$
|
(2,500,749
|
)
|
|||
|
Net
cash flow from:
|
||||||||||||||||
|
Operating
activities
|
$
|
5,006,936
|
$
|
2,328,684
|
$
|
(1,604,910
|
)
|
$
|
(1,666,360
|
)
|
$
|
(246,834
|
)
|
|||
|
Investing
activities
|
$
|
803,220
|
$
|
499,663
|
$
|
221,910
|
$
|
(464,222
|
)
|
$
|
(793,554
|
)
|
||||
|
Financing
activities
|
$
|
4,159,711
|
$
|
(22,962
|
)
|
$
|
—
|
$
|
—
|
$
|
(658,164
|
)
|
||||
|
Net
increase (decrease) in cash and cash equivalents
|
$
|
9,969,867
|
$
|
2,805,385
|
$
|
(1,383,000
|
)
|
$
|
(2,130,582
|
)
|
$
|
(1,698,552
|
)
|
|||
Although
we have generated significant net income and positive cash flows in fiscal
2005
and 2004, we can not be sure that this trend will continue. For our fiscal
first
quarter ended October 31, 2005, we incurred a net loss of $333,005. We incurred
substantial net losses in the three years ending July 31, 2003, principally
from
low revenues and expenses related to patent enforcement litigation, which we
have since reduced significantly.
To
sustain profitability, we must successfully license Technologies with current
and long-term revenue streams, and we must continually add new such licenses.
In
addition, we must control our costs, including litigation related
costs.
Our
future royalty revenues, obtaining rights to new Technologies, granting
licenses, enforcing intellectual property rights, and profits or losses are
subject to many factors outside our control, or that we currently cannot
anticipate, including technological changes and developments, economic cycles,
and the ability of our licensees to commercialize our Technologies successfully.
Consequently, we may not be able to generate sufficient revenues to be
profitable. We cannot be assured that we will be successful in these
efforts.
We
derived more than 96% of our retained royalty revenues in fiscal 2005 from
four
Technologies.
We
derived approximately $11,135,000, or 96%, of 2005 retained royalties from
four
Technologies: $8,932,000, or 77%, from the homocysteine assay, $500,000, or
4%,
from Ethyol, $860,000, or 8%, from gallium arsenide patents and $843,000, or
7%,
from sexual dysfunction patents. In fiscal 2004, we derived approximately 74%
of
our retained royalties from the same four Technologies.
Our
U.S.
patent that covers the homocysteine assay expires in July 2007. Of the
$8,932,000 of homocysteine assay royalties, approximately $6,181,000 was for
non-refundable, non-creditable, up-front royalty fees. The remaining $2,751,000
includes revenues from many new licenses which did not accrue revenue for a
full
year in 2005. Our retained royalties from Ethyol are limited to a maximum of
$500,000 per calendar year, and since calendar 2003 we have received the
maximum. We expect Ethyol retained royalties to continue at their 2005 level
for
several years (this patent expires in December 2010). Certain of the gallium
arsenide patents have expired and we expect less retained royalties from gallium
arsenide in the future. Retained royalties from the sexual dysfunction license
include the settlement of a mediated dispute.
Such
a
concentration of revenues makes our operations vulnerable to changes in any
one
of them, especially the homocysteine assay, and such changes could have a
significant adverse impact on our financial position.
3
In
November 2005, the U.S. Supreme Court (the “Court”) agreed to hear an appeal of
a judgment upholding and validating our homocysteine assay patent. We currently
expect the Court to hear oral arguments in late March 2006, and issue their
findings in June 2006, although this schedule may be delayed. This uncertainty
may have an adverse impact on our current licenses. In addition, if
our
patent is not upheld this will have a significant, adverse impact on our
business, results of operations, cash flows and financial position, and we
may
have to refund certain royalties paid to us in the past.
Certain
of our licensed patents have recently expired or will expire in the near future
and we may not be able to replace their royalty revenues.
In
fiscal
2005, we derived retained royalties from licenses on twenty-four (24) patented
Technologies. We expect royalties from twelve (12) of those patented
Technologies to expire in the next five years. When
all
patents underlying a license expire, our royalties from that license cease,
and
there can be no assurance that we will be able to replace those royalties with
royalty revenues from new or other licenses. Those
patented Technologies represented approximately 87% of our retained royalties
in
fiscal 2005. Fiscal 2005 retained royalty revenues of approximately $612,000,
or
5%, $9,240,000, or 79%, and $224,000, or 2%, respectively, were from patents
expiring in fiscal 2005, 2007 and 2009. The loss of these royalties, especially
the homocysteine assay, may materially, adversely affect our operating results
if we are unable to replace them with revenue from other licenses or other
sources. Since it often takes two or more years for a Technology to produce
significant revenues, we must continuously seek new sources of future
revenues.
We
currently are involved in lawsuits that historically have involved significant
legal expenses. In addition, our most recent former President and Chief
Executive Officer has filed complaints against us seeking certain damages.
If
the courts or regulatory agencies in these suits or actions decide against
us,
this could have a materially adverse effect on our business, results of
operations and financial condition.
We
have
incurred significant legal expenses in such lawsuits and actions, including
patent enforcement lawsuits. If the courts in these suits decide against us,
or
if we have to incur significant legal and other expenses, this could have a
materially adverse affect on our business, results of operations and financial
condition.
Sales
of our common stock to Fusion Capital will cause dilution to current
stockholders and Fusion Capital’s sale of those shares of common stock could
cause the price of our common stock to decline.
The
price
of the common stock to be sold and issued to Fusion Capital pursuant to the
common stock purchase agreement will fluctuate based on the price of our common
stock. All shares under the offering are freely tradable. Fusion Capital’s
purchase price per share is equal to the lesser of: (i) the lowest sale price
of
our common stock on the purchase date or (ii) the average of the three (3)
lowest closing sale prices of our common stock during the twelve (12)
consecutive trading days prior to the date of a purchase by Fusion
Capital.
Fusion
Capital may sell none, some or all of the shares of common stock purchased
from
us at any time. We expect that Fusion Capital will sell any shares that they
purchase over a period of up to twenty-six (26) months from
the
commencement date (May 6, 2004) of the agreement,
including a six (6) month extension or earlier termination at our discretion.
Depending upon market liquidity at the time, a sale of shares by Fusion Capital
at any given time could cause the trading price of our common stock to decline.
The sale of a substantial number of shares of our common stock, or the
anticipation of such sales, could make it more difficult for us to sell equity
or equity-related securities in the future at a time and at a price at which
we
might otherwise wish to effect sales.
In
May
2004, we registered 1,248,115 shares of our common stock for sale by Fusion
Capital of which 799,095 shares have been issued to Fusion Capital as of January
31, 2006. We have the right but not the obligation to sell additional shares
to
Fusion Capital under the common stock purchase agreement. Under our agreement
with Fusion Capital, Fusion Capital does not have the right or the obligation
to
purchase any shares of our common stock in the event that the purchase price
is
less than $1.00 per share.
The
sale
of shares to Fusion Capital may result in significant dilution to the ownership
interests of other holders of our common stock. The amount of dilution would
be
higher if the per share market price of our common stock is lower at the time
we
sell shares to Fusion Capital, since a lower market price would cause more
shares of our common stock to be issued to Fusion Capital for the same proceeds.
Subsequent sales of these shares in the open market by Fusion Capital also
may
have the effect of lowering our stock price, thereby increasing the number
of
shares issuable under the common stock purchase agreement and consequently
further diluting our outstanding shares. Although we have the right to reduce
or
suspend sales to Fusion Capital at any time, our financial condition at the
time
may require us to waive our right to suspend purchases even if there is a
decline in the market price.
4
The
existence of the agreement with Fusion Capital to purchase shares of our common
stock could cause downward pressure on the market price of our common
stock.
Both
the
actual and the potential for dilution resulting from sales of our common stock
to Fusion Capital could cause holders to elect to sell their shares of our
common stock, which could cause the trading price of our common stock to
decrease. In addition, prospective investors anticipating the downward pressure
on the price of our common stock due to the shares available for sale by Fusion
Capital could refrain from purchases or cause sales or short sales in
anticipation of a decline of the market price, which may itself cause the price
of our stock to decline.
Employee
and director stock options and warrants may potentially cause dilution to our
current stockholders and could adversely affect the market price of our common
stock.
As
of
January 31, 2006, an aggregate of 992,973 employee and director stock options
were outstanding and we expect to issue additional options and possibly warrants
in the future. For the life of all such options and warrants, the holders of
such options and warrants will have the opportunity to profit from a rise in
the
market price of our common stock, with a resulting dilution in the interest
of
holders of our common stock. The terms on which we will be able to obtain
additional capital during the life of such options and warrants may be adversely
affected.
A
former Chief Executive Officer and CTT have been named in a civil suit filed
by
the Securities and Exchange Commission (“SEC”). Until this matter is resolved,
our stock price may be adversely impacted, our operations and expenses may
be
negatively affected, and our ability to obtain any debt financing may be
restricted.
On
August
11, 2004, the SEC filed a civil suit naming Competitive Technologies, Inc.,
our
former Chief Executive Officer (“CEO”) from 2001, and six individual brokers in
the United States District Court for the District of Connecticut, alleging
that
from at least July 1998 to June 2001, CTT was involved in a scheme to manipulate
the price of our stock. The case relates to our 1998 stock repurchase program
under which we repurchased shares of our common stock from time to time during
the period from October 28, 1998 to March 22, 2001. CTT was named as a defendant
in the suit due to the alleged conduct of our former CEO, whose conduct in
connection with the stock repurchase program was imputed to CTT as a matter
of
law. Relating to CTT, the SEC in the suit seeks a permanent injunction
prohibiting us from further violations of the Securities Exchange Act of 1934
and a civil penalty pursuant to Section 21(d)(3) of the Securities Exchange
Act
of 1934 (this section provides for maximum penalties of $550,000 for a corporate
entity and $110,000 per individual). On September 24, 2004, we responded to
this
civil suit, and filed a motion to dismiss the suit. On October 15, 2004, the
SEC
filed a motion opposing our motion to dismiss the suit. Further action in this
case is pending.
Until
this matter is resolved, our stock price may be adversely impacted, our
operations and expenses may be negatively affected, and our ability to obtain
debt financing may be severely restricted. Costs incurred since August 2004
relating to the suit have been covered by our directors’ and officers’ insurance
carrier.
Our
By-Laws provide that we will indemnify our directors, officers, employees and
agents in certain circumstances. We carry directors’ and officers’ liability
insurance (subject to deductibles) to reduce these financial
obligations.
Our
directors, officers, employees and agents may claim indemnification in certain
circumstances. We are currently exposed to potential indemnification claims
in
connection with the civil suit filed by the SEC and with complaints filed by
certain former employees alleging discriminatory employment practices in
violation of Section 806 of the Corporate and Criminal Fraud Accountability
Act
of 2002.
We
seek
to limit and reduce our potential financial obligations for indemnification
by
carrying directors’ and officers’ liability insurance (subject to
deductibles).
Our
revenue growth depends on our ability to understand the Technology requirements
of our customers in the context of their markets. If we fail to understand
their
Technology needs or markets, we limit our ability to meet those needs and to
generate revenues.
We
believe that by focusing on the Technology needs of our customers, we are better
positioned to generate revenues by providing them Technology solutions. In
this
way, the market demands of our customers drive our revenues. The better we
understand their markets and requirements, the better we are able to identify
and obtain effective Technology solutions for our customers. Currently, we
rely
on our professional staff and contract business development consultants to
understand our customers’ technical, commercial, and market requirements and
constraints, and to identify and obtain effective Technology solutions for
them.
5
Our
success depends on our ability to attract and retain key
personnel.
Our
success depends on the knowledge, efforts and abilities of a small number of
key
personnel. Dr. D. J. Freed is our President and Chief Executive Officer, Michael
D. Davidson is our Vice President and Chief Financial Officer, Dr. Michael
E.
Kiley is our Executive Vice President and Chief Technology Officer, and Paul
A.
Levitsky is our Vice President, General Counsel, and Corporate Secretary.
We
rely
on our professional staff and contract business development consultants to
identify intellectual property opportunities and Technology solutions, and
to
negotiate and close license agreements. Competition for personnel with the
necessary breadth and depth of experience is intense and we cannot assure you
that we will be able to continue to attract and retain qualified personnel.
If
we are unable to hire and retain highly qualified professionals and consultants,
our revenues, prospects, financial condition and future activities could be
materially adversely affected.
We
depend on our relationships with inventors to gain access to new Technologies
and inventions. If we fail to maintain existing relationships or to develop
new
relationships, we may reduce the number of Technologies and inventions available
to generate revenues. In addition, Technology can change rapidly and industry
standards are continually evolving. This often makes products obsolete or
results in short product lifecycles. Our profitability also depends on our
licensees’ ability to adapt to such changes.
We
do not
invent new Technologies or products ourselves. We depend on relationships with
universities, corporations, governmental agencies, research institutions,
inventors, and others to provide us with Technology-based opportunities that
we
can develop into profitable royalty-bearing licenses. Our failure to maintain
these relationships or to develop new relationships could adversely affect
our
business, operating results and financial condition. If we are unable to forge
new relationships or to maintain our current relationships, we may be unable
to
identify new Technology-based opportunities and royalty-bearing licenses. We
also are dependent on our Clients’ abilities to develop new Technologies,
introduce new products and adapt to changes in Technology and economic
needs.
Further,
we cannot be certain that our current or any new relationships will provide
the
volume or quality of available new Technologies necessary to sustain our
business. In some cases, universities and other sources of new Technologies
may
compete against us as they seek to develop and commercialize these Technologies
themselves or through entities that they develop, finance and/or control. In
other cases, universities receive financing for basic research from companies
in
exchange for the exclusive right to commercialize any resulting inventions.
These and other strategies may reduce the number of Technology sources
(potential Clients) to whom we can market our services. If we are unable to
secure new sources of Technology, it could have a material adverse effect on
our
business, operating results and financial condition.
We
receive most of our revenues from customers over whom we have no
control.
We
rely
on royalties received from our customers for revenues. The royalties we receive
from our customers depend on their efforts and expenditures and we have no
control over their efforts or expenditures. Additionally, our customers’
development of new products involves great risk since many new Technologies
do
not become commercially profitable products despite extensive development
efforts. Our license agreements do not require customers to advise us of
problems they may encounter in attempting to develop commercial products and
they usually treat such information as confidential. You should expect our
customers to encounter problems frequently. Our customers’ failure to resolve
such problems may result in a material adverse effect on our business, operating
results and financial condition.
Our
customers, and therefore we, depend on receiving government approvals to exploit
certain licensed products commercially.
Commercial
exploitation of some licensed patents may require the approval of governmental
regulatory agencies, especially in the life sciences area, and there is no
assurance that those agencies will grant such approvals. In the United States,
the principal governmental agency involved is the U.S. Food and Drug
Administration (“FDA”). The FDA’s approval process is rigorous, time consuming
and costly. In addition, governmental agencies similar to the FDA exist in
other
countries. Unless and until a licensee obtains approval for a product requiring
such approval, the licensee may not sell the product in the U.S.A. or such
other
countries, and therefore we will not receive royalty income based on sales
of
such product.
If
our Clients and we are unable to protect the intellectual property underlying
our licenses or to enforce our patents adequately, we may be unable to exploit
such licensed patents or Technologies successfully.
Our
success in earning revenues from licenses is subject to the risk that issued
patents may be declared invalid, that patents may not issue on patent
applications, or that competitors may circumvent or infringe our licensed
patents and thereby render our licensed patents not commercially viable.
In
addition, when all patents underlying a license expire, our royalties from
that
license cease, and there can be no assurance that we will be able to replace
those royalties with royalty revenues from new or other
licenses.
6
Patent
litigation has increased; it can be expensive and may delay or prevent our
customers’ products from entering the market.
Our
Clients and/or we may pursue patent infringement litigation or interference
proceedings against sellers of products that we believe infringe our patent
rights. Holders of conflicting patents or sellers of competing products also
may
challenge our patents in patent infringement litigation or interference
proceedings. We cannot assure you that our Clients and/or we will be successful
in any such litigation or proceeding, and the results and costs of such
litigation or proceeding may materially adversely affect our business, operating
results and financial condition.
Developing
new products, creating effective commercialization strategies for Technologies,
and enhancing those products and strategies are subject to inherent risks.
These
risks include unanticipated delays, unrecoverable expenses, technical problems
or difficulties, and the possibility that development funds will be
insufficient. The occurrence of any one or more of these risks could make us
abandon or substantially change our Technology commercialization
strategy.
Our
success depends on, among other factors, our Clients developing new or improved
Technologies, our customers’ products meeting targeted cost and performance
objectives for large-scale production, and our customers’ ability to adapt
Technologies to satisfy industry standards, satisfy consumer expectations and
needs, and bring their products to market before the market is saturated. They
may encounter unanticipated technical or other problems that result in increased
costs or substantial delays in introducing and marketing new products. Current
and future products may not be reliable or durable under actual operating
conditions or otherwise commercially viable and competitive. New products may
not satisfy price or other performance objectives when introduced in the
marketplace. Any of these events would adversely affect our realization of
royalties from such new products.
Strong
competition within our industry may reduce our Client
base.
We
compete with universities, law firms, venture capital firms and other Technology
commercialization firms for Technology licensing opportunities. Many
organizations offer some aspect of Technology transfer services, and some are
well established and have more financial and human resources than we do. This
market is highly fragmented and many participants focus on a specific Technology
area.
We
have not paid dividends and may not pay dividends on our common stock in the
foreseeable future.
We
have
not paid cash dividends on our common stock since 1981, and, our Board of
Directors currently does not have plans to declare or pay cash dividends in
the
future. However, the decision to pay dividends is solely at the discretion
of
our Board of Directors based upon factors that they deem relevant, and may
change at any time.
Being
a public company increases our administrative costs.
The
Sarbanes-Oxley Act of 2002, as well as new rules subsequently implemented by
the
SEC and new listing requirements subsequently adopted by the American Stock
Exchange in response to the Sarbanes-Oxley Act of 2002, have required changes
in
corporate governance practices, internal control policies and audit committee
practices of public companies. These new rules, regulations, and requirements
have significantly increased our legal, audit, financial, compliance and
administrative costs, and have made certain other activities more time consuming
and costly. The additional costs are expected to continue. In addition, these
new rules and regulations may make it more difficult and more expensive for
us
to obtain directors and officers liability insurance in the future, and could
make it more difficult for us to attract and retain qualified members for our
Board of Directors, particularly to serve on our audit committee.
Forward-Looking
Statements
This
Prospectus contains forward-looking statements within the meaning of Section
27A
of the Securities Act of 1933 and Section 21E of the Securities Exchange Act
of
1934. Such forward-looking statements include statements regarding, among
others, (a) our expectations about product development activities, (b) our
growth strategies, (c) operating performance, (d) anticipated trends in our
industry and competition, (e) our future financing plans, and (f) our
anticipated needs for working capital. Forward-looking statements, which involve
assumptions and describe our future plans, strategies, and expectations, are
not
guarantees of future performance, and generally are identifiable by use of
the
words “may,” “will,” “should,” “expect,”
“anticipate,” “approximate,” “estimate,”
“believe,” “intend,” “strategy”, “plan,” or “project,” or the
negative of these words or other variations on these words or comparable
terminology. This information may involve known and unknown risks,
uncertainties, and other factors that may cause our actual results, performance,
or achievements to be materially different from the future results, performance,
or achievements expressed or implied by any forward-looking statements. These
statements may be found in this Prospectus. Actual events or results may differ
materially from those discussed in forward-looking statements as a result of
various factors, including, without limitation, the risks outlined under “Risk
Factors” and matters described in this Prospectus generally. In light of these
risks and uncertainties, the events anticipated in the forward-looking
statements may or may not occur. These statements are based on current
expectations and speak only as of the date of such statements. We undertake
no
obligation to publicly update or revise any forward-looking statement, whether
as a result of future events, new information or otherwise.
7
The
information contained in this Prospectus, as well as in our SEC filings,
identifies important factors that could adversely affect actual results and
performance. We urge prospective investors to consider such factors
carefully.
All
forward-looking statements attributable to CTT are expressly qualified in their
entirety by the foregoing cautionary statements.
Use
of Proceeds
This
Prospectus relates to shares of our common stock that may be offered and sold
from time to time by Fusion Capital, the selling stockholder. We will receive
no
proceeds from the sale of shares of common stock in this offering. However,
we
may receive up to $5.0 million in proceeds from the sale of our common stock
to
Fusion Capital under the common stock purchase agreement. As of January 31,
2006, we have received approximately $4.1 million in gross proceeds under the
common stock purchase agreement with Fusion Capital. The proceeds we have
received to date and will receive in the future under the common stock purchase
agreement, net of our costs incurred in connection with the offering, have
been
or will be used to implement our strategic business plan and for working capital
and other general corporate purposes.
Description
of Securities
Our
authorized capital stock consists of 20,000,000 shares of common stock, par
value of $0.01 per share, and 35,920 shares of preferred stock, par value of
$25.00 per share.
Common
Stock
As
of
January 31, 2006, 7,669,333 shares of common stock were outstanding. Our common
stock is traded on the American Stock Exchange under the trading symbol “CTT.”
Each holder of common stock is entitled to one vote for each share on all
matters submitted to a vote of the stockholders. There are no cumulative voting
rights, which means that the holders of more than 50% of the aggregate
outstanding shares of common and preferred stock can elect all of the directors
to our Board of Directors, in which event the holders of the remaining shares
will not be able to elect any directors. Subject to the rights of the holders
of
preferred stock to receive preferential non-cumulative dividends, the holders
of
the common stock are entitled to receive dividends on such shares, if, as and
when declared payable by our Board of Directors from funds legally available
for
that purpose. There are no restrictions in our certificate of incorporation
on
our ability to repurchase or redeem shares from funds legally available for
that
purpose while there is any arrearage in the payment of dividends on preferred
stock. The common stock has no preemptive, conversion, sinking fund or
redemption rights. All outstanding shares of common stock are fully paid and
non-assessable. Upon our liquidation, dissolution or winding up, the holders
of
common stock are entitled to share ratably in assets remaining available for
distribution after payment of all debts and payment of the preferential
liquidation rights of shares of preferred stock then outstanding.
Preferred
Stock
As
of
January 31, 2006, 2,427 shares of preferred stock were issued and outstanding.
Each holder of preferred stock is entitled to one vote for each share on all
matters submitted to a vote of the stockholders. The holders of preferred stock
are entitled to receive, if, as and when declared by our Board of Directors,
out
of funds legally available therefore, preferential non-cumulative dividends
at
the rate of $1.25 per share per annum, payable quarterly, before any dividends
may be declared or paid upon or other distribution made in respect of any share
of common stock. The preferred stock is redeemable in whole at any time or
in
part from time to time on 30 days’ notice, at our option, at a redemption price
of $25.00 per share. Upon our liquidation, dissolution or winding up, the
holders of preferred stock are entitled to $25.00 a share in cash before any
distribution of assets can be made to the holders of the common stock. The
preferred stock has no preemptive, sinking fund or conversion
rights.
8
Principal
Stockholders
The
following table sets forth the beneficial ownership of shares of the Company's
common stock as of January
31,
2006 by
each director, by the executive officers of the Company, and by each person
known to the Company to be the beneficial owner of more than 5% of the Company's
outstanding common stock. Unless otherwise indicated
in the footnotes, all of such interests are owned directly, and the indicated
person or entity has sole voting and investment power. The
indicated owners furnished such information to the Company as of January 31,
2006, except as otherwise indicated in the footnotes.
|
Names
of Beneficial Owners
(and
address, if ownership
is
more than 5%)
|
Amount
Beneficially
Owned
|
(A)
|
Percent
|
(B) | |||||
|
Directors
and executive officers
|
|||||||||
|
Richard
E. Carver
|
86,604
|
(C)
|
1.1
|
%
|
|||||
|
Michael
D. Davidson
|
11,676
|
(D)
|
—
|
||||||
|
George
W. Dunbar, Jr.
|
86,109
|
(E)
|
1.1
|
%
|
|||||
|
Donald
J. Freed
|
25,473
|
(F)
|
—
|
||||||
|
Michael
E. Kiley
|
16,813
|
(G)
|
—
|
||||||
|
Maria-Luisa
Maccecchini
|
24,500
|
(H)
|
—
|
||||||
|
John
B. Nano
|
12,502
|
(I)
|
—
|
||||||
|
Charles
J. Philippin
|
124,884
|
(J)
|
1.6
|
%
|
|||||
|
John
M. Sabin
|
71,284
|
(K)
|
—
|
||||||
|
All
directors and executive officers as a group
|
447,343
|
(L)
|
5.6
|
%
|
|||||
___________________
|
(A)
|
Except
as indicated in the notes that follow, the designated person or
group has
sole voting and investment power.
|
|
(B)
|
Percentages
of less than 1% are not shown.
|
|
(C)
|
Consists
of 22,604 shares of Common Stock plus 64,000 stock options deemed
exercised solely for purposes of showing total shares owned by
Mr.
Carver.
|
|
(D)
|
Consists
of 1,676 shares of Common Stock plus 10,000 stock options deemed
exercised
solely for purposes of showing total shares owned by Mr. Davidson.
Includes 676 shares of Common Stock held under the Company’s 401(k) Plan,
as to which Mr. Davidson has full investment power. Does not include
676
unvested shares of common stock allocated to Mr. Davidson under
the
Company’s 401(k) plan.
|
|
(E)
|
Consists
of 16,109 shares of Common Stock and 70,000 stock options deemed
exercised
solely for purposes of showing total shares owned by Mr.
Dunbar.
|
|
(F)
|
Consists
of 9,223 shares of Common Stock plus 16,250 stock options deemed
exercised
solely for purposes of showing total shares owned by Dr. Freed.
Includes
3,723 shares of Common Stock held under the Company’s 401(k) plan, as to
which Dr. Freed has investment
power.
|
|
(G)
|
Consists
of 1,813 shares of Common Stock plus 15,000 stock options deemed
exercised
solely for purposes of showing total shares owned by Dr. Kiley.
Includes
813 shares of Common Stock held under the Company’s 401(k) Plan, as to
which Dr. Kiley has full investment power. Does not include 812
unvested
shares of common stock allocated to Dr. Kiley under the Company’s 401(k)
plan.
|
|
(H)
|
Consists
of 4,500 shares of Common Stock plus 20,000 stock options deemed
exercised
solely for purposes of showing total shares owned by Dr.
Maccecchini.
|
|
(I)
|
Consists
of 12,502 shares of Common Stock as reported on Form 4 filed with
the
United States Securities and Exchange Commission on June 28, 2005,
the
most recent information available to the
Company.
|
|
(J)
|
Consists
of 54,884 shares of Common Stock plus 70,000 stock options deemed
exercised solely for purposes of showing total shares owned by
Mr.
Philippin.
|
|
(K)
|
Consists
of 21,284 shares of Common Stock plus 50,000 stock options deemed
exercised solely for purposes of showing total shares owned by
Mr. Sabin.
Includes 200 shares of Common Stock held by his
spouse.
|
9
|
(L)
|
Consists
of 132,093 shares of Common Stock plus 315,250 stock options to
purchase
shares of Common Stock deemed exercised solely for purposes of
showing
total shares owned by the group. The total for this group excludes
Mr.
Nano’s ownership.
|
At
January 31, 2006, the stock transfer records maintained by the Company with
respect to its Preferred Stock showed that the largest holder of Preferred
Stock
owned 500 shares.
Market
Price of Our Common Equity
(a) Market
information. Our
common stock is listed on the American Stock Exchange. The following table
sets
forth the quarterly high and low sales prices of our common stock as reported
by
the American Stock Exchange for the periods indicated.
|
Fiscal
Year Ended
July
31, 2006
|
Fiscal
Year Ended
July
31, 2005
|
Fiscal
Year Ended
July
31, 2004
|
||||||||
|
High
|
Low
|
High
|
Low
|
High
|
Low
|
|||||
|
First
Quarter
|
$7.03
|
$4.71
|
First
Quarter
|
$
5.75
|
$3.36
|
First
Quarter
|
$2.10
|
$1.53
|
||
|
Second
Quarter
|
$5.35
|
$3.61
|
Second
Quarter
|
$13.39
|
$4.97
|
Second
Quarter
|
$6.36
|
$1.97
|
||
|
Third
Quarter
|
$15.55
|
$6.30
|
Third
Quarter
|
$6.50
|
$3.70
|
|||||
|
Fourth
Quarter
|
$11.67
|
$5.61
|
Fourth
Quarter
|
$5.25
|
$3.00
|
|||||
The
Fusion Capital Transaction
General
On
February 25, 2004, we entered into a common stock purchase agreement with Fusion
Capital Fund II, LLC (“Fusion Capital”) under which Fusion Capital agreed to
purchase on each trading day during the term of the agreement, subject to our
right to increase, reduce or suspend these purchases and our right to terminate
the agreement with Fusion Capital at any time, $12,500 of our common stock
up to
an aggregate of $5.0 million. The $5.0 million of common stock is to be
purchased over a twenty (20) month period, subject to a six (6) month extension
or earlier termination at our discretion. On January 9, 2006, we notified Fusion
Capital that we were extending the common stock purchase agreement by six (6)
months. The purchase price of our common stock will be based upon the future
market price of the common stock without any fixed discount to the market price.
We have the right to set a minimum purchase price at any time as described
below. Fusion Capital does not have the right or the obligation to purchase
shares of our common stock in the event that the price of our common stock
is
less than $1.00 per share.
We
have
authorized the sale and issuance of up to 1,248,115 shares of our common stock
to Fusion Capital under the common stock purchase agreement, all of which we
registered in May 2004. At that time, we estimated that the maximum number
of
shares we would sell to Fusion Capital under the common stock purchase agreement
would be 1,159,552 shares (exclusive of the 88,563 shares that are issuable
to
Fusion Capital as a commitment fee, of which we have issued 82,321 of such
shares as of January 31, 2006). From May 2004 through January 31, 2006, we
sold
an aggregate of 716,774 shares of common stock to Fusion Capital for proceeds
of
$4,117,493. Therefore, 442,778 shares of common stock offered by this Prospectus
remain available for sale to Fusion Capital with maximum additional proceeds
of
$882,507. Assuming a purchase price of $3.88 per share (the closing sale price
of the common stock on January 31, 2006) and the purchase by Fusion Capital
of
227,450 of the remaining 442,778 shares under the common stock purchase
agreement, aggregate proceeds to us would be $5,000,000. If we decided to sell
and issue more than the 1,248,115 shares to Fusion Capital (19.99% of our
outstanding shares as of February 25, 2004, the date of the common stock
purchase agreement), we would be required to obtain stockholder approval of
the
common stock purchase agreement in order to be in compliance with the American
Stock Exchange rules. We may, but shall be under no obligation to, request
our
stockholders to approve the transaction contemplated by the common stock
purchase agreement.
Purchase
of Shares Under the Common Stock Purchase Agreement
Under
the
common stock purchase agreement, on each trading day Fusion Capital is obligated
to purchase a specified dollar amount of our common stock. Subject to our right
to suspend such purchases at any time and our right to terminate the agreement
with Fusion Capital at any time, each as described below, Fusion Capital will
purchase on each trading day during the term of the agreement $12,500 of our
common stock. We have the right to increase the daily purchase amount at any
time, provided however, we may not increase the daily purchase amount above
$12,500 unless our stock price is above $4.50 per share for ten (10) consecutive
trading days and provided that the closing sale price of our stock remains
at
least $4.50. The purchase price per share is equal to the lesser
of:
10
|
·
|
the
lowest sale price of our common stock on the purchase date;
or
|
|
·
|
the
average of the three (3) lowest closing sale prices of our common
stock
during the twelve (12) consecutive trading days prior to the date
of a
purchase by Fusion Capital.
|
We
may
decrease this daily purchase amount at any time. The purchase price will be
adjusted for any reorganization, recapitalization, non-cash dividend, stock
split, or other similar transaction occurring during the trading days in which
the closing sales price is used to compute the purchase price. Fusion Capital
may not purchase shares of our common stock under the common stock purchase
agreement if Fusion Capital, together with its affiliates, would beneficially
own more than 9.9% of our common stock outstanding at the time of purchase
by
Fusion Capital. However, even though Fusion Capital may not receive additional
shares of our common stock in the event that the 9.9% limitation is ever
reached, they still are obligated to purchase up to $12,500 on each trading
day,
unless the common stock purchase agreement is suspended, an event of default
occurs or the agreement is terminated. Under these circumstances, Fusion Capital
would have the right to acquire additional shares in the future should its
ownership subsequently become less than 9.9%. Fusion Capital has the right
at
any time to sell any shares purchased under the common stock purchase agreement
which would allow it to avoid the 9.9% limitation. Therefore, we do not believe
that the percentage of our outstanding common stock owned by Fusion Capital
will
ever reach the 9.9% limitation.
The
following table sets forth the amount of proceeds we would receive from Fusion
Capital from the sale of shares of our common stock offered by this Prospectus
at varying purchase prices:
|
Assumed
Average Purchase Price
|
Number
of
Shares
to be
Issued
if Full
Amount
Purchased(1)
|
Percentage
Outstanding After Giving
Effect
to the Issuance to Fusion
Capital(2)
|
Proceeds
from the Sale of Shares
to Fusion Capital
|
|||||||
|
$3.00
|
294,169
|
3.7
|
%
|
$
|
882,507
|
|||||
|
$3.88
(3)
|
227,450
|
2.9
|
%
|
$
|
882,507
|
|||||
|
$5.00
|
176,501
|
2.2
|
%
|
$
|
882,507
|
|||||
|
$6.00
|
147,084
|
1.9
|
%
|
$
|
882,507
|
|||||
|
(1)
|
Does
not include the 6,242 that will be issued to Fusion Capital as a
commitment fee.
|
|
(2)
|
Based
on 7,675,575 shares outstanding as of January 31, 2006, which includes
82,321 shares of common stock issued to Fusion Capital as a commitment
fee, the 6,242 shares of common stock that will be issued to Fusion
Capital as a commitment fee and the number of shares to be issued
if full
amount purchased at the corresponding assumed purchase price set
forth in
the adjacent column.
|
|
(3)
|
Closing
sale price of our common stock on January 31,
2006.
|
We
estimate that we will issue no more than 1,248,115 shares to Fusion Capital
under the common stock purchase agreement, including the shares issued and
issuable as a commitment fee, all of which are included in this offering. We
have the right to terminate the agreement without any payment or liability
to
Fusion Capital at any time, including in the event that more than 1,248,115
shares are issuable to Fusion Capital under the common stock purchase
agreement.
Minimum
Purchase Price
We
have
the right to set a minimum purchase price (“floor price”) at any time.
Currently, the floor price is set at $3.00 per share. We can increase or
decrease the floor price at any time upon one trading day prior notice to Fusion
Capital. However, the floor price may not be less than $1.00 per share. Fusion
Capital does not have the right or the obligation to purchase any shares of
our
common stock in the event that the purchase price is less than the then
applicable floor price.
11
Our
Right to Suspend Purchases
We
have
the unconditional right to suspend purchases at any time for any reason
effective upon one trading day’s notice. Any suspension would remain in effect
until our revocation of the suspension. To the extent we need to use the cash
proceeds of the sales of common stock under the common stock purchase agreement
for working capital purposes or other business purposes, we do not intend to
restrict purchases under the common stock purchase agreement.
Our
Right to Increase and Decrease the Daily Purchase Amount
Under
the
common stock purchase agreement Fusion Capital has agreed to purchase on each
trading day during the twenty (20) month term and six (6) month extension of
the
agreement, $12,500 of our common stock, or an aggregate of $5.0 million of
our
common stock. We have the unconditional right to decrease the daily amount
to be
purchased by Fusion Capital at any time for any reason effective upon one
trading day’s notice. We also have the right to increase the daily purchase
amount at any time for any reason as the market price of our common stock
increases. Specifically, for every $0.25 increase in Threshold Price above
$4.50
(subject to equitable adjustment for any reorganization, recapitalization,
non-cash dividend, stock split or other similar transaction), we have the right
to increase the daily purchase amount by up to an additional $2,500. For
example, if the Threshold Price is $5.00 we would have the right to increase
the
daily purchase amount up to an aggregate of $17,500. By way of another example,
if the Threshold Price is $5.50, we would have the right to increase the daily
purchase amount up to an aggregate of $22,500. The “Threshold Price” is the
lowest sale price of our common stock during the five (5) trading days
immediately preceding our notice to Fusion Capital to increase the daily
purchase amount. This notice becomes effective five (5) trading days after
receipt by Fusion Capital. If at any time during any trading day the sale price
of our common stock is below the Threshold Price, the applicable increase in
the
daily purchase amount will be void and Fusion Capital’s obligations to purchase
shares of our common stock in excess of the applicable daily purchase amount
will be terminated.
Our
Termination Rights
We
have
the unconditional right at any time for any reason to give notice to Fusion
Capital terminating the common stock purchase agreement. This notice shall
be
effective one trading day after Fusion Capital receives it.
Effect
of Performance of the Common Stock Purchase Agreement on our
Stockholders
All
shares registered in this offering will be freely tradable. It is anticipated
that shares registered in this offering will be sold over a period of up to
six
(6) months from the date of this Prospectus. The sale of a significant amount
of
shares registered in this offering at any given time could cause the trading
price of our common stock to decline and to be highly volatile. Fusion Capital
may ultimately purchase all of the shares of common stock issuable under the
common stock purchase agreement, and it may sell some, none or all of the shares
of common stock it acquires upon purchase. Therefore, the purchases under the
common stock purchase agreement may result in substantial dilution to the
interests of other holders of our common stock. However, we have the right
at
any time for any reason to: (1) reduce the daily purchase amount, (2) suspend
purchases of the common stock by Fusion Capital and (3) terminate the common
stock purchase agreement.
Principal
Market Requirements
In
order
to satisfy any principal securities or market requirements, we cannot without
the approval of our stockholders, issue shares of our common stock to Fusion
Capital under the common stock purchase agreement in excess of 19.99% of the
outstanding shares of our common stock as of the date of the common stock
purchase agreement.
12
No
Short-Selling or Hedging by Fusion Capital
Fusion
Capital has agreed that neither it nor any of its affiliates, agents or
representatives will cause or engage in any direct or indirect short-selling
or
hedging of our common stock during any time prior to the termination of the
common stock purchase agreement.
Events
of Default
Fusion
Capital may terminate the common stock purchase agreement without any liability
or payment to us upon the occurrence of any of the following events of
default:
|
·
|
the
effectiveness of the registration statement of which this Prospectus
is a
part lapses for any reason (including, without limitation, the issuance
of
a stop order) or is unavailable to Fusion Capital for sale of our
common
stock offered hereby, and such lapse or unavailability continues
for a
period of ten (10) consecutive trading days or for more than an aggregate
of thirty (30) trading days in any 365-day
period;
|
|
·
|
suspension
by our principal market, the American Stock Exchange, of our common
stock
from trading for a period of three (3) consecutive trading
days;
|
|
·
|
our
common stock is delisted from the American Stock Exchange, our principal
market, and is not immediately thereafter trading on the New York
Stock
Exchange, the Nasdaq National Market, the Nasdaq Small Cap Market
or the
Nasdaq OTC Bulletin Board;
|
|
·
|
the
transfer agent’s failure for five (5) trading days to issue to Fusion
Capital shares of our common stock which Fusion Capital is entitled
to
under the common stock purchase
agreement;
|
|
·
|
if
at any time the issuance of shares of our common stock to Fusion
Capital
would exceed the number of shares of our common stock that we may
issue
without breaching the rules or regulations of our principal
market;
|
|
·
|
any
breach of the representations or warranties or covenants contained
in the
common stock purchase agreement or any related agreements which has
or
which could have a material adverse affect on us, Fusion Capital
or the
value of our common shares subject to a cure period of ten (10)
days;
|
|
·
|
a
default by us of any payment obligation in excess of $1.0 million;
or
|
|
·
|
our
insolvency or our participation or threatened participation in any
insolvency or bankruptcy proceedings by or against
us.
|
Commitment
Shares Issued to Fusion Capital
Under
the
terms of the common stock purchase agreement Fusion Capital is entitled to
receive 88,563 shares of our common stock as a commitment fee. We have issued
82,321 shares to Fusion Capital and the remaining 6,242 shares will be issued
on
a pro rata basis during the remaining period of the common stock purchase
agreement as Fusion Capital purchases shares.
No
Variable Priced Financings
Until
the
termination of the common stock purchase agreement, we have agreed not to issue,
or enter into any agreement with respect to the issuance of, any floating
conversion rate or variable priced equity or floating conversion rate or
variable priced equity-like securities.
Expense
Reimbursement
We
previously paid Fusion Capital $35,000 as the full and complete expense
reimbursement of Fusion Capital’s expenses in connection with entering into the
transaction. Such amount included payment of Fusion Capital’s due diligence
expenses and legal fees.
13
Our
Option for a Second Tranche
Under
the
common stock purchase agreement, twenty (20) days after the completion of the
purchase of an aggregate of $5.0 million in shares of our common stock by Fusion
Capital, we may, in our sole discretion, deliver an irrevocable written notice
to Fusion Capital to enter into an additional common stock purchase agreement
with Fusion Capital for the purchase of $5.0 million of additional shares of
our
common stock. The terms and conditions of the second common stock purchase
agreement shall be in form and substance identical in all respects to the
initial agreement provided that the second common stock purchase agreement
will
not have an option for an additional tranche.
Selling
Stockholder
The
following table presents information regarding the selling stockholder. Neither
the selling stockholder nor any of its affiliates has held a position or office,
or had any other material relationship, with us.
|
Selling
Stockholder
|
Shares
Beneficially
Owned
Before
Offering(1)
|
Percentage
of
Outstanding
Shares
Beneficially
Owned
Before
Offering(1)
|
Shares
to be
Sold
in the
Offering
|
Percentage
of
Outstanding
Shares
Beneficially
Owned
After
Offering
|
|||||||||
|
Fusion
Capital Fund II, LLC (2)(3)
|
82,321
|
1.1%
|
|
531,341
|
0%
|
|
|||||||
|
(1)
|
The
offering date is deemed to be the date of this
Prospectus.
|
|
(2)
|
As
of the date hereof, Fusion Capital has acquired 799,095 shares of
our
common stock and may purchase up to an additional 442,778 shares
under the
common stock purchase agreement. Fusion Capital may acquire an additional
6,242 shares of our common stock as an additional commitment fee
under the
common stock purchase agreement as purchases are made. Percentage
of
outstanding shares is based on 7,669,333 shares of common stock
outstanding as of January 31, 2006, including 82,321 shares of our
common
stock as a commitment fee, but excluding the additional 449,020 shares
of
common stock that may be acquired by Fusion Capital from us under
the
common stock purchase agreement after the date hereof. Fusion Capital
may
not purchase shares of our common stock under the common stock purchase
agreement if Fusion Capital, together with its affiliates, would
beneficially own more than 9.9% of our common stock outstanding at
the
time of the purchase by Fusion Capital; provided, however, that this
limitation does not affect Fusion Capital’s obligation to purchase shares
in accordance with the terms of the common stock purchase agreement.
Fusion Capital has the right at any time to sell any shares purchased
under the common stock purchase agreement which would allow it to
avoid
the 9.9% limitation. Therefore, we do not believe that the percentage
of
our outstanding common stock owned by Fusion Capital will ever reach
the
9.9% limitation.
|
|
(3)
|
Steven
G. Martin and Joshua B. Scheinfeld, the principals of Fusion Capital,
are
deemed to be beneficial owners of all of the shares of common stock
owned
by Fusion Capital. Messrs. Martin and Scheinfeld have shared voting
and
dispositive power over the shares being offered under this
Prospectus.
|
Plan
of Distribution
The
common stock offered by this Prospectus is being offered by Fusion Capital,
the
selling stockholder. The common stock may be sold or distributed from time
to
time by the selling stockholder directly to one or more purchasers or through
brokers, dealers, or underwriters who may act solely as agents at market prices
prevailing at the time of sale, at prices related to the prevailing market
prices, at negotiated prices, or at fixed prices, which may be changed. The
sale
of the common stock offered by this Prospectus may be effected in one or more
of
the following methods:
|
·
|
ordinary
brokers’ transactions;
|
|
·
|
transactions
involving cross or block trades;
|
|
·
|
through
brokers, dealers, or underwriters who may act solely as
agents;
|
|
·
|
“at
the market” into an existing market for the common
stock;
|
|
·
|
in
other ways not involving market makers or established trading markets,
including direct sales to purchasers or sales effected through
agents;
|
14
|
·
|
in
privately negotiated transactions;
or
|
|
·
|
any
combination of the foregoing.
|
In
order
to comply with the securities laws of certain states, if applicable, the shares
may be sold only through registered or licensed brokers or dealers. In addition,
in certain states, the shares may not be sold unless they have been registered
or qualified for sale in the state or an exemption from the registration or
qualification requirement is available and complied with.
Brokers,
dealers, underwriters, or agents participating in the distribution of the shares
as agents may receive compensation in the form of commissions, discounts, or
concessions from the selling stockholder and /or purchasers of the common stock
for whom the broker-dealers may act as agent. The compensation paid to a
particular broker-dealer may be less than or in excess of customary
commissions.
Fusion
Capital is an “underwriter” within the meaning of the Securities Act of
1933.
Neither
we nor Fusion Capital can presently estimate the amount of compensation that
any
agent will receive. We know of no existing arrangements between Fusion Capital,
any other stockholder, broker, dealer, underwriter, or agent relating to the
sale or distribution of the shares offered by this Prospectus. At the time
a
particular offer of shares is made, a Prospectus supplement, if required, will
be distributed that will set forth the names of any agents, underwriters, or
dealers and any compensation from the selling stockholder and any other required
information.
We
will
pay all of the expenses incident to the registration, offering, and sale of
the
shares to the public other than commissions or discounts of underwriters,
broker-dealers, or agents. We have also agreed to indemnify Fusion Capital
and
related persons against specified liabilities, including liabilities under
the
Securities Act.
Insofar
as indemnification for liabilities arising under the Securities Act may be
permitted to our directors, officers, and controlling persons, we have been
advised that in the opinion of the SEC this indemnification is against public
policy as expressed in the Securities Act and is therefore
unenforceable.
Fusion
Capital and its affiliates have agreed not to engage in any direct or indirect
short selling or hedging of our common stock during the term of the common
stock
purchase agreement.
We
have
advised Fusion Capital that while it is engaged in a distribution of the shares
included in this Prospectus it is required to comply with Regulation M
promulgated under the Securities Exchange Act of 1934. With certain exceptions,
Regulation M precludes the selling stockholder, any affiliated purchasers,
and
any broker-dealer or other person who participates in the distribution from
bidding for or purchasing, or attempting to induce any person to bid for or
purchase any security which is the subject of the distribution until the entire
distribution is complete. Regulation M also prohibits any bids or purchases
made
in order to stabilize the price of a security in connection with the
distribution of that security. All of the foregoing may affect the marketability
of the shares offered by this Prospectus.
This
offering will terminate on the date that all shares offered by this Prospectus
have been sold by Fusion Capital.
Legal
Matters
The
validity of the common stock offered by this Prospectus was passed upon for
us
by Seyfarth Shaw LLP, Chicago, Illinois. Allan J. Reich, one of the partners
of
the law firm of Seyfarth Shaw LLP is the owner of 15,000 shares of our common
stock. The interests in our common stock of the other attorneys at Seyfarth
Shaw
LLP participating in such matter are immaterial.
Experts
The
financial statements of Competitive Technologies, Inc. as of July 31, 2005
and
2004, and for the years then ended, incorporated in this Prospectus by reference
to our Annual Report on Form 10-K for the fiscal year ended July 31, 2005,
have
been so incorporated in reliance on the report of BDO Seidman, LLP, an
independent registered public accounting firm, given on the authority of said
firm as experts in auditing and accounting.
15
Where
You Can Find More Information
CTT
has
filed a Registration Statement on Form S-1 with the SEC. This Prospectus, which
forms a part of the Registration Statement, does not contain all of the
information included in the Registration Statement. Some information is omitted
from this Prospectus in accordance with the rules of the SEC and you should
refer to the Registration Statement and its exhibits for additional information.
Our internet website address is www.competitivetech.net.
Unless
otherwise stated herein, the contents of our website are not part of this
Registration Statement and our Internet address is included in this document
as
an inactive textual reference only. Our Registration Statement, Proxy Statement,
Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports
on
Form 8-K, and any amendments to those reports filed by us with the SEC pursuant
to Sections 13(a) and 15(d) of the Securities Exchange Act of 1934, are
accessible free of charge through our website as soon as reasonably practicable
after we electronically file those documents with, or otherwise furnish them
to,
the SEC. The public may read and copy any materials we file with the SEC at
the
SEC’s Public Reference Room at 100 F Street, N.E., Washington, D.C. 20549. The
public may obtain information on the operation of the Public Reference Room
by
calling the SEC at 1-800-SEC-0330. Our filings with the SEC are also available
to the public on the SEC’s Internet web site at www.sec.gov.
You
should rely only on the information incorporated by reference or provided in
this Prospectus or any supplement. CTT has not authorized anyone else to provide
you with different information. This Prospectus is an offer to sell or buy
only
the securities described in this document, but only under circumstances and
in
jurisdictions where it is lawful to do so. The information contained in this
Prospectus is current and accurate only as of the date of this
Prospectus.
Incorporation
of Certain Information by Reference
The
Securities and Exchange Commission allows us to “incorporate by reference” the
information we file with them, which means that we can disclose important
information to you by referring you to the documents we have filed with the
Securities and Exchange Commission. The information incorporated by reference
is
considered to be a part of this Prospectus. We are incorporating by reference
in
this Prospectus the following documents previously filed by us:
1. Our
Annual Report on Form 10-K for the fiscal year ended July 31, 2005, filed
October 13, 2005.
2. Our
Quarterly Report on Form 10-Q for the quarterly period ended October 31, 2005,
filed December 12, 2005.
3. Our
Current Reports on Form 8-K filed on December 12, 2005, November 25, 2005,
November 2, 2005, and October 20, 2005.
We
will
provide to you, upon written or oral request and without charge, a copy of
any
or all of the documents referred to above which we have incorporated in this
Prospectus by reference. You can request copies of such documents if you call
or
write us at the following address or phone number: Secretary, Competitive
Technologies, Inc., 1960 Bronson Road, Fairfield, Connecticut 06824, telephone
(203) 255-6044, or you may visit our website at www.competitivetech.net.
Information
with Respect to the Registrant
The
information required to be disclosed in the registration statement pertaining
to
the Company is incorporated by reference from the documents listed as
incorporated by reference in “Incorporation of Certain Information by
Reference.” Such documents are being delivered with this Prospectus. See
“Prospectus Summary,” “Risk Factors,” and “Incorporation of Certain Information
by Reference.”
Material
Changes
There
have been no material changes in our affairs which have occurred since July
31,
2005 which have not been described in a Quarterly Report on Form 10-Q or a
Current Report on Form 8-K that we have filed that has not otherwise been
described in this Prospectus.
16
No
dealer, salesperson, or other person has been authorized to give any information
or to make any representation not contained in this Prospectus, and, if given
or
made, such information and representation should not be relied upon as having
been authorized by CTT or the selling stockholder. This Prospectus does not
constitute an offer to sell or a solicitation of an offer to buy any of the
securities offered by this Prospectus in any jurisdiction or to any person
to
whom it is unlawful to make such offer or solicitation. Neither the delivery
of
this Prospectus nor any sale made hereunder shall under any circumstances create
an implication that there has been no change in the facts set forth in this
Prospectus or in the affairs of CTT since the date hereof.
531,341
SHARES
COMPETITIVE
TECHNOLOGIES, INC.
COMMON
STOCK
PROSPECTUS
February
17, 2006