Poor 2Q for Competitive Technologies - Analyst Blog

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Competitive Technologies, Inc. ( CTTC ), a worldwide provider of patent and technology licensing and commercialization services, recently reported a loss of 6 cents per share in the second quarter of fiscal 2012, a penny higher than the Zacks Consensus Estimate of a loss of 5 cents. However, the quarter's loss was 40% narrower than the year-ago quarter loss of 12 cents per share.

Competitive Technologies earns revenue in two ways: sales of finished products (product revenues) and retained royalties from licensing its clients' and own technologies to customer licensees (other revenues) .

Total revenue declined a massive 62.4% year over year to $123 thousand during the quarter. Other revenue skyrocketed 275% to $60 thousand but a 79.7% drop in product revenues to $63 thousand was a letdown. The huge decline in the company's product sales was attributable to lower Calmare pain therapy medical device sales.

The Calmare device, a major source of Competitive Technologies' revenue, is a solution for chronic pain management. It provides lasting effects in the treatment of chemotherapy-induced peripheral neuropathy (CIPN), drug-resistant chronic neuropathic and cancer pain. In the reported quarter, Competitive Technologies sold and shipped only one Calmare device compared to 4 units sold in the second quarter of 2011.

Gross profit from product sale was $17 thousand, significantly down from $189 thousand in the year-ago quarter. As a result, product sales gross margin stood at 26.9%, much lower than the year-ago level of 60.7%.

Net loss remained at $942 thousand compared with a net loss of $1.33 million in the second quarter of fiscal 2011.

The company exited the second quarter with cash and equivalents of $20 thousand compared with $28 thousand at the end of fiscal 2011. Year-to-date, net cash used in operating activities was $458.5 thousand versus $278.7 thousand in the comparable period last year.

On the heels of the huge sales decline, the company is now focusing on increasing the sales of the Calmare device as well as Scrambler Therapy technology to treat neuropathic and cancer pain. Competitive Technologies currently plans to gain private health insurance reimbursement from a number of private insurers to satisfy the financial needs of doctors and clinics and obtain a reasonable reimbursement rate from the Medicare system to provide income for medical practices and hospitals.

With all the sales effort, the company expects revenues to increase over the next two fiscal years. Competitive Technologies is also working on new and existing technologies or products to diversify the product base. The stock carries a Zacks #3 Rank (Hold rating in the short term).

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