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Executives

Jean Wilczynski - Product Operations Manager

Conrad Mir - President and CEO

Analysts

Competitive Technologies, Inc. (OTCQX:CTTC) Q3 2013 Earnings Conference Call November 25, 2013 12:30 PM ET

Jean Wilczynski

Good afternoon. And welcome to Competitive Technologies’ 2013 Third Quarter Earnings Call. My name is Jean Wilczynski and I am CTI’s new Product Operations Manager. Today’s call will include a presentation of our third quarter financials, a brief overview of the company’s [current] state of affairs and brief question-and-answer period after the formal presentation portion of the call.

And now, please allow me to introduce CTI’s new President and CEO, Mr. Conrad Mir. Conrad?

Conrad Mir

Thank you, Jean. Good morning everyone or good afternoon. If I may, as I present and as everyone, anyone present, could you please mute your lines, since we've got people coming on and coming off and I would like everyone have the opportunity to listen to what is going on without any disruption.

So, let me begin, before we begin however, please note that today’s presentation contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause the actual results performance or achievements of the company’s or industry results to be materially different from any future results, performance or achievements expressed are implied by such forward-looking statements.

When we use in this today’s call, statements that are not statements of current or historical facts that have been to be forward-looking statements. Without limiting to full going, the words plan, intent, may, will, expect, believe, could, anticipate, estimate, continue, and, or similar expressions or other variations or comparable terminology are intended to identify such forward-looking statements.

Attendees are cautioned not to place undue reliance on these forward-looking statements, which speaks only as of the date hereof. The company undertakes no responsibility or obligation to update any forward-looking statements whether as a result of new information future events or otherwise except as required by law. Well, now that we’ve got that out of the way.

Thank you everyone again for attending our earnings call. As there is much to discuss, please allow me to present our financials, thereafter I will give a brief overview of what’s going on in the company based upon when I came in and the fact that we're under a corporate reengineering process that is quite different than where the company was when I started on September 26th.

So let me begin. We've put out a press release last week and a press release will delineate a lot of the things that I am saying today and putting in print. So revenues from the sale and shipment of Calmare pain therapy medical devices in the three months ended September 30th decreased 7% or $21,000 to $290,000 as compared with $311,000 for the comparable quarter of 2012. Total expenses for the three months ended September 30, 2013 decreased 3% or $21,000 to $809,000 as compared with $830,000 in the three months in this similar period of 2012.

Net loss for the quarter ended September 30, 2013 increased marginally to $602,000 or $0.04 per basic and diluted share in the three months ended September 30th as compared with the net loss of $597,000 or $0.04 per share diluted and basic for this similar quarter of 2012. This figure is largely influenced by the continued liabilities and warrants which are a component in several of our past finances. I would also assume that we will have similar kind of financing that will change this number and will affect us because of the fact that we will have warrants attributed.

Basic and diluted weighted average number of common shares for the three months increased 11% to $1.7 million more or less, while current shares outstanding [totalled] up to $19.2 million thus making the value of the company approximately $8.5 million. As far as cash on hand is concerned, the company is in a transition period and when I inherited the company, it was $90,000 and under my tenure [that] I began, up until now we raise a little bit of money, we had a little bit more running room and track our burn has substantially changed, so cash on hand is a moving target as it were right about now.

Total assets for the nine months ended September 30, 2013 marginally decreased by $63,041 to $4.7 million as compared to $4.771 million for the corresponding period of 2012. Liabilities for the nine months increased 18% were as similar to the three months and nothing significantly has changed when it came to the asset or liabilities from then till now.

So, those are the brief financials, I have tried to give you a very, 50,000 for the view of where we are you can go and see in our K, you can see where we are, sorry the Q, you can see the press release. And let me give you a little bit of color on the company that is not there and that’s in the state of affairs, what CTI was and what CTI is today.

When I started on the 26th of September, we embarked on a corporate reengineering which is designed to bring forward structure to CTI that includes a biotechnology business path that currently the company was not on. The company has been around for very long time, but it did not have a focus in one single industry or sector. Calmare moving forward will be our flagship product which will support this effort.

In order to effectuate this path however, CTI is currently working on the logistics of two pivotal studies under a flag of two prominent institutions. One of the studies will be cosponsored and the other one will be almost entirely funded by the institution. It is Paramount in its [excess] of this plan that the pivotal study is launched and completed so that we can reach an FDA approval versus what we have to which is an FDA clearance. The importance there that with FDA approval we will have insurance reimbursements and that is something that has been a problem for the company when we sell our products. The doctors will always ask are you reimbursable or how are you getting, how do we go about getting reimbursements, hopefully that would solve that problem.

[Contemporising] that effort, we started to broaden our general service administration contract. We are a GSA authorized vendor which allows us to sell to the military. However our contract as it stands does not give us the overall ability to sell to anybody at any given time from them calling us. We actually have to call them and in fact just as getting a low hanging fruit when it comes to the sales that we had made in the past.

Moving forward with a little bit effort we are going to go out there and look for a purchase agreement which looking forward means going through a process two to three months initiating the process making sure that once we get this type of agreement which modifies and changes the GSA designation whereby any entity in the U.S. government even in [middle] countries can make a purchase of our product, with very little effort on our side. So it eliminates the component of having to have a very large sales force.

And the most important thing I think from that until now and most usable thing that has contributed to where we are today is stock. When I walked in the stock was $0.055 and today we’re somewhere in the $0.48 and $0.40 range. A lot of this change and a lot of this movement had a lot to do with the fact that the company is changing. So we believe strongly that change is good provided that you have a plan and I’ve tried to outline some of the points of that plan.

And you can see very clearly that on the expense basis, we had a burn of $360,000 per month. Our burn was $112,000. So in reducing that burn, it makes us much more streamlined and allows us to broaden our ability to make revenues to support ourselves instead of having to be a burn kind of company. We want us to have revenues moving forward.

So that is effectively my overview of the company where it stands today. I will respectfully ask everybody to forgive the little bit of unprofessionalism that this conference call has as this is our first time in the couple of years in doing one, I think the number is about six years, so we [weren’t] really setup to do such. And this is our first big attempt in a right direction.

So I think, excuse me, if you can please mute your line so we can have the conference call.

Let me try to open the Q&A if this is possible. And make it as simple as possible for this to move forward. Are there any questions in the audience from anything that I have outlined to say?

Question-and-Answer Session

Unidentified Analyst

I got a question about the DoD contract?

Conrad Mir

Sure. Who am I speaking?

Unidentified Analyst

You are speaking to Joe [Finley] just a shareholder. How are you doing? And I am kind of wondering, it seems like in the past you’ve had some [salutary] results in military hospitals and always wondered why that marketplace didn’t grow a little more quickly for you, are you trying to getting to the more traditional and institutional marketplaces. Do you think broadening the GSA contract that you just outlined will help you perhaps take better advantage of the fact that DoD contractors sort of might be willing buyers without all the studies and FDA approval in place?

Conrad Mir

Yes, very much.

Unidentified Analyst

And speak the timing maybe about when that might start producing revenues? Thank you.

Conrad Mir

Okay, sure. The company currently has a GSA number, so we are preferred vendor. We got our GSA through the Office of Veterans Affairs. So doesn’t matter how you got it, but you got it. The kind of contract we have however requires us to go and chase after the sale versus the other way around where our (inaudible) you have that deal $400 note that you can buy a Home Depot for a $0.25. You have to get to that kind of agreement based upon certain protocols and certain filings that you need to be in compliance with.

That process had begun when it comes to how far it’s going to be, it could as quickly realized the changes in the revenue stream, it could be as quickly as five months like more realistically it will be about 11 to 12 months. Along the lines however, one assumes and one would hope that that effort will then support and complement what we currently have right now, which currently go after and we have a lot of the sell-through so a lot of our nation’s military hospitals know about us.

And we have a lot of starts and stops along the way, but because of the fact that we are FDA cleared and not FDA approved and the fact that our contract designation does not necessarily allow or afford us to have a (inaudible) situation that is what’s going to impact the amount of revenues we're going to get from the military. But I’m the strong proponent of DoD and GSA contract mechanism because many companies have built their business plan around that and I have done that in my past and I’m bringing that to this company as well. I hope that answers your question Joe?

Unidentified Analyst

It does. I mean I am a big proponent of it too, because I think success in DoD contract is often a precursor to success in traditional markets and it can be of all kinds of technologies not just medical?

Conrad Mir

Yes. Thank you for the question. Is there another question? I am not sure if there are other questions.

Unidentified Analyst

Well, I have actually several questions, who can I call to ask questions offline?

Conrad Mir

You can call me that will be fine. Who am I speaking with now?

Unidentified Analyst

My name is Tara [Holbrook]. I'm a user or was a user of the product.

Conrad Mir

Okay. I had no problem you can give me any call.

Unidentified Analyst

And what is your phone number, because I have called you for a couple of months and never seem to get response.

Conrad Mir

I don't know what number you're calling, but I'll give you my number.

Unidentified Analyst

Thank you.

Conrad Mir

This is my direct line and my office line 973-798-8882. You can call us at the office. Does that helped?

Unidentified Analyst

Thanks.

Conrad Mir

Is that better, is that something you would want us all or you can find our number on our website.

Unidentified Analyst

Yes. Okay. Thank you. I'll try again.

Conrad Mir

Sure.

Unidentified Analyst

Since you're waiting for questions and if you get, I spoke to a local doctor in my (inaudible) in California and he was informed, he informed me that in order to be trained on the use of the equipment he would need to go to Italy and I was very surprised hearing that. I'm sure that's my doubt, but that is true, but I'd like to help me understand what's necessary for a doctor or a chiropractor to use the product?

Conrad Mir

Okay. Let me do the following. I'll answer this question as this is our first conference call in a long time, but I’d like to try to limit the questions to investor questions, investors moving stated (inaudible) to the stock volume and to the business versus sales, but I will address this question.

Unidentified Analyst

That's truly is a relevant question.

Conrad Mir

That's fine.

Unidentified Analyst

Conrad, this is Joe Finley. Are you going to answer that question or not?

Unidentified Analyst

I asked a question, I guess I am not getting any answer. I apologize the call might have dropped on his end.

Unidentified Speaker

I think that’s what it is. Forgive me I don’t want to provide any misleading information. My name is Joe [O’Brian] I have had the pleasure to work with Conrad in the past, I don’t want to speak for him, but I am sure if you call the number that he gave you somebody will get back to you.

Unidentified Analyst

Okay, but not on the call.

Unidentified Speaker

I am just a shareholder but I didn’t understand that you actually go to Italy.

Unidentified Analyst

Neither Do I, but I couldn’t dispute him because I have never tried to get trained.

Unidentified Analyst

I think so, there is significant training and I think someone from the company has to come out and running it through a multiple steps. It’s not a small matter of just buying the machine I believe there is training involved?

Unidentified Speaker

Yeah, there is no question there is training available I know that Conrad is looking into training and is at the present time contemplating different levels of training and usage and license to get the equipment whether you are an MD, whether you are chiropractor or not. But as I said, I can’t speak for him on that matter.

Unidentified Analyst

Excuse me for interrupting.

Unidentified Speaker

Yeah, go ahead.

Unidentified Analyst

This particular call was for the state of the state of the company really basically Calmare is a number one product of the company is producing right now. Training I am sure can be obtained from any of the clinics throughout the country for the product, we are talking right now about CTI where it’s going and where it’s going to be in the future pertaining to profits and pertaining to this particular company that I have been involved in since 1992....

Jean Wilczynski

And who are you?

Unidentified Analyst

My name is Ted, how are you?

Jean Wilczynski

No I didn’t say how are you, who are you? You said you have been involved in the company and I am curious to know.

Unidentified Analyst

I am stockholder.

Jean Wilczynski

I see, okay.

Conrad Mir

Excuse me, everybody, I am sorry someone is using my connections.

Unidentified Analyst

Okay. Let me make another point that when the company put out its press release, it actually put the wrong phone number right at the heading pertaining to this call.

Conrad Mir

Okay. Update that on (inaudible) because that’s the way it is and that’s fine, you make mistakes and I appreciate that. So Mrs. Holbrook, let me get back to your question.

Unidentified Analyst

Okay.

Conrad Mir

I’m going to try and answer the way of asking, I am very sorry for the problem of miscommunications. I was trying to say that in the past we had normally gone back to Italy. And we’re going back to Italy because of the kind of product that we have we want to be integrity of the product and their results. Today we have training here in United States, Ms. Harrington is our main trainer and you have somebody in California, who is a doctor who can do training. I mean in the past because where we were having to trying to figure this out, it is not that simple and we do want to have that room to go to Italy and that's no longer.

Unidentified Analyst

I see. And who, I suppose the same number you gave me is the number what a doctor would call to for that?

Conrad Mir

Yes, we can have new trainers, since called the essentials location, our headquarters in Fairfield, Connecticut and you reach out to our head trainer and she will doing the call.

Unidentified Analyst

And do you plan to sell to the West Coast? I know you have a couple of markets here that are using the product; there is nothing in the Los Angeles that I am aware of? So I would think that might be a pretty good market for you?

Conrad Mir

It’s not like, we sell internationally. So the fact that we are having sold competitively in California, is just a function of how the company was. Look that gives a little time in order to for us to move forward in this reengineering effort that will rectify our [leasing] impact.

Unidentified Analyst

So where do you the license to sell you say internationally, just curious to know?

Conrad Mir

The company’s product is FDA cleared.

Unidentified Analyst

Right.

Conrad Mir

We can sale the product any place I the United States and in the world. As far as....

Unidentified Analyst

In the world, the entire world you have a license to sell?

Conrad Mir

We do, we do because we are also seeing margin in Europe.

Unidentified Analyst

I see.

Unidentified Analyst

Didn’t the company reserve a certain areas of the world?

Unidentified Analyst

I thought so too.

Unidentified Analyst

The inventor?

Conrad Mir

Yes. There are certain parts of Europe is reserved, some part of Europe is reserved for the inventor.

Unidentified Analyst

Yeah.

Conrad Mir

But you actually mean, we can sale anything, yeah we can sale anything. Also directly to the inventor, we can make that still happen. Well the question more of a whether if I can make the sale or what’s the fact that the end user here, can we have that person or that doctor who see the product, either/or, that end user will always get the product we can always [finger] that up.

Unidentified Analyst

Conrad this is [Joe Finley] again. Somewhere in the press release I thought or another press release you mentioned that there might be some individual sales or clinic sales that could possibly happen in the fourth quarter of this year. Is that still possibility or are they kind of rolling forward because of all kinds of things to do with the company’s cash position?

Conrad Mir

The company’s cash position only matters when it comes to the clinical trial or studies that will be co-sponsor, the other one is not co-sponsored and I can't add a lot of color to it because we have not disclosed that. But you can only go so fast and fortunately right now trying to get ourselves in a momentum, a full momentum of that process versus entreating as a worry in my opinion first six months of the year.

Unidentified Analyst

You comment on your book of business going forward?

Conrad Mir

We can comment minimally on a book-of-business, there is not much to say. They are accompanying in the last quarters, sold [four] units and prior to that all-in were similar between 15 to 19 years. I believe a lot of that has to do with the fact that our business plan does not sustain or did not sustain or did not sustain more than [the effort] we’ve already made, that is problematic.

And realistically if you're looking where the company is by changing the business plan, where you are now starting to end user that’s going to buy more than one unit, you can have a sustainable revenue model versus the model of knocking on doors and going to this doctor and that doctor and he buying one unit which is in effect where we are right now we have been and I'm in a process of changing that.

Unidentified Analyst

There are no disposables fail without add-on pieces of pads, I know the pads are used, but is that about as far as the disposables go?

Conrad Mir

Right, our disposables are very limited as we only have one product and it's only a first generation product. And Calmare 2.0, the new generation, it is our intent to had proprietary lead and proprietary pieces to the lead that would make it more of a sustainable business model (inaudible).

Unidentified Analyst

Are there any plans to build it in the U.S. or else other than Korea?

Conrad Mir

We have not disclosed that and I can't give any color on that. I'm sorry.

Unidentified Analyst

How many pieces of Calmare 1.0 do you have an inventory right now?

Conrad Mir

We had approximately 400.

Unidentified Analyst

Okay.

Conrad Mir

Give or take. So we had enough product to sell, we don't have a problem with that. If you monetize the whole number by whatever number -- if you try to capitalize the whole inventory, it sustains for two to three years. The objective is not necessarily to only have Calmare 1.0, which you have with 2.0, we’re going through proprietary products, proprietary consumables, I think that make the company, make it a real company, this is real company right at the beginning of the year.

Unidentified Analyst

What price you are selling them at nowadays for the few deliveries you’ve had in 2013? Are you hitting a certain price or is it all over the math?

Conrad Mir

We are getting a price that’s somewhere between 15% to 10% less than the number that we are trying to go after and sell for. So we are not getting huge discounts and most of them are no-discounts. So that would also contribute to the fact that we don’t have record-breaking sales. And we do have a sales person from latitude. We don’t have a lot of latitude in our current understanding with distributors, with our manufacturer in Korea. That’s something we need to also discuss and try to work on.

Unidentified Analyst

So does your arrangement with your distributor who is the manufacturer, are you seeing it sort of impede your ability to make price concession, have to get more of these out in the marketplace more quickly?

Conrad Mir

No, what I am saying is that our manufacturer, we are the sole distributor of the products here in United States.

Unidentified Analyst

And not manufacturer of the Korean company that I spoke?

Conrad Mir

The manufacturer effectively sells to us or provides product for us and provides products for whatever sales we’ve had in Europe. So globally we cover -- they cover all product manufacturers, hence they do manufacture. The agreement that we have today needs to be moved forward, you need to add some other components, that’s going to add, it’s going to support more sales from the United States. And so the current -- the revenue model that we were using is now changed, they also need to change their agreement. So we’re going to a point in time that hopefully we’ll take a big step forward again.

Unidentified Analyst

Nobody else has question, how are you funding your burn rate right now?

Conrad Mir

Well, right now we had some sales, we had make sales since I walk in and agree a little bit of money. So upon the threshold that -- the minimum threshold that I need to announce that, I will announce when I hit that threshold, but as of right now we have sustained ourselves in the past (inaudible) with the move burn, not the old burn.

Unidentified Analyst

Okay.

Conrad Mir

Okay, there is another gentleman who spoke of who is on the call who is saying our press release is wrong of the conference call. Just to be clear I read in the conference call and the numbers are pretty accurate. There is nothing wrong with the dial-in number. So we’ve got 19 people on the call today, and I think those 19 people start from the press release, but I am open to negotiations to help you with the numbers in the future. They feel they are going to be better today, do not best way to do any conference call on the planet but we are all on the call. So long story short, we have more than 20 people on the phone call and yeah, even though it may sound (inaudible). So on the call I’d like to answer any questions.

Unidentified Analyst

I think, I don’t know about the other person, I want to thank you personally, I am a shareholder. Thank you for having the calls because they were never done before and so this company operated (inaudible) backing of knowledge for shareholders almost unless call. I think the point the person was making is on the heading of your press release you had the calling, the final letters are 0204 and in the body of the press release the numbers were 0240, so somebody transposed 04. And I think if you were persistent, you get on to this call, but if you call the number at the heading of the press release, you had a deadline.

Conrad Mir

Again you are correct, so I spell it correct.

Unidentified Analyst

Yeah. Somebody made a transposition and you had to go twice and I’m glad 30 people found it, and I know it’s easily correctable but whoever made that point wasn’t making it up.

Conrad Mir

Okay. No problem with spelling correctly, I think that's right thing to do. If there aren’t any other questions -- of course there are, we have another one?

Jean Wilczynski

No, thank you very much.

Conrad Mir

Okay. Again I had put on my telephone number if you want to call me directly and they are open, and finally very important for a company to be able to be accessible and (inaudible) I will always try to email you back in response to your question you may have in the interim that the company is showing to move forward. And the company try to build itself out of hope from where it is now. I think it should be promising future if we are very conservative and we do the right thing (inaudible) time.

So in conclusion I thank you everyone for coming on the call. I assure you my next call will not be this way, but it would be much better. But I will do what I can and thank you very much everyone.

Unidentified Analyst

Thank you, Conrad.

Conrad Mir

Thank you very much.

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