FORWARD-LOOKING STATEMENTS

Statements about our future expectations are "forward-looking statements" within the meaning of applicable Federal Securities Laws, and are not guarantees of future performance. When used in herein, the words "may," "will," "should," "anticipate," "believe," "intend," "plan," "expect," "estimate," "approximate," and similar expressions are intended to identify such forward-looking statements. These statements involve risks and uncertainties inherent in our business, including those set forth in Item 1A under the caption "Risk Factors," in our most recent Annual Report on Form 10-K for the year ended July 31, 2008, filed with the Securities and Exchange Commission ("SEC") on October 28, 2008, and other filings with the SEC, and are subject to change at any time. Our actual results could differ materially from these forward-looking statements. We undertake no obligation to update publicly any forward-looking statement.

OVERVIEW

Competitive Technologies, Inc. ("CTT"), was incorporated in Delaware in 1971, succeeding an Illinois corporation incorporated in 1968. CTT and its subsidiaries (collectively, "we," "our," or "us"), provide distribution, patent and technology transfer, sales and licensing services focusing on the needs of our customers, matching those requirements with commercially viable technology or product solutions. We develop relationships with universities, companies, inventors and patent or intellectual property holders to obtain the rights or a license to their intellectual property (collectively, the "technology" or "technologies"), or to their product. They become our clients, for whom we find markets to sell or further develop or distribute their technology or product. We also develop relationships with those who have a need or use for technologies or products. They become our customers, usually through a license or sublicense, or distribution agreement.

We earn revenue in two ways, from licensing our clients' and our own technologies to our customer licensees, and in a business model that allows us to share in the profits of distribution of finished products. Our customers pay us license fees, royalties based on usage of the technology, or per unit fees, and we share that revenue with our clients. Our revenue fluctuates due to changes in revenue of our customers, upfront license fees, new licenses granted, new distribution agreements, expiration of existing licenses or agreements, and/or the expiration or economic obsolescence of patents underlying licenses or products.

We acquire rights to commercialize a technology or product on an exclusive or non-exclusive basis, worldwide or limited to a specific geographic area. When we license or sublicense those rights to our customers, we may limit rights to a defined field of use. Technologies can be early, mid, or late stage. Products we evaluate must be a working prototype or finished product. We establish channel partners based on forging relationships with mutually aligned goals and matched competencies, to deliver solutions that benefit the ultimate end-user.

RELIANCE ON ONE REVENUE SOURCE

In fiscal 2007, we had a significant concentration of revenue from our homocysteine assay technology. The primary underlying patent for this technology expired in July 2007 and we do not receive revenue for sales made after that date on that patent. Revenue in fiscal 2008 for the homocysteine technology reflects back royalties previously unreported by customers. We continue to seek revenue from new technology licenses or product distributions to mitigate the concentration of revenue, and replace revenue from expiring agreements. We have created a new business model for appropriate technologies that allows us to move beyond our usual royalty arrangement and share in the profits of distribution.

We filed a patent infringement complaint against three suspected infringers, but believe progress in this case may be subject to delaying tactics by the defendants, adding to the normal period of time it takes for such cases to work their way through the court system. In response to the action we filed, one defendant has requested that the United States Patent and Trademark Office ("USPTO") re-evaluate the validity of our patent. Re-examination

We rounded all amounts in this Item 2 to the nearest thousand dollars, except per share data. Certain amounts may not total precisely.

The following discussion and analysis provides information that we believe is relevant to an assessment and understanding of our financial condition and results of operations. This discussion and analysis should be read in conjunction with our Consolidated Financial Statements and Notes thereto.

RESULTS OF OPERATIONS - THREE MONTHS ENDED JANUARY 31, 2009 ("SECOND QUARTER 2009") VS. THREE MONTHS ENDED JANUARY 31, 2008 ("SECOND QUARTER 2008")

We incurred a net loss of $932,000 or $0.11 per share for the second quarter 2009, compared to a net loss of $1,299,000 or $0.16 per share for the second quarter 2008, a 28% decrease in net loss of $367,000, or $0.05 per share. As explained in detail below, the decrease in the net loss reflects a decrease of $868,000 in expenses partially offset by a decrease in revenue of $501,000.

     REVENUE

     In the second quarter 2009, total revenue was $29,000, compared to $530,000
for the second quarter 2008, a 95% decrease of $501,000.

     Retained royalties for the second quarter 2009 were $27,000, which was
$402,000, or 94% less than the $429,000 of retained royalties reported in the
second quarter 2008. The following compares retained royalty revenue by
technology in the second quarter 2009 with the second quarter 2008.

                                    For the three months ended January 31,
                              --------------------------------------------
                                 2009      2008   (Decrease)  % (Decrease)
                              -------  --------  -----------  ------------
Homocysteine assay            $ 5,000  $ 57,000  $  (52,000)          (91)
Sexual Dysfunction                  -   320,000    (320,000)         (100)
All other technologies         22,000    52,000     (30,000)          (58)
                              -------  --------  -----------
    TOTAL RETAINED ROYALTIES  $27,000  $429,000  $ (402,000)          (94)
                              =======  ========  ===========

We received minimal royalty revenue from our homocysteine technology in the second quarter 2009 compared to the $57,000 received in the second quarter 2008, reflecting back royalties previously unreported by customers. The reduction of homocysteine royalty revenue is due to the expiration of the primary underlying patent in July 2007, and we do not receive revenue for sales made after that date on that patent.

Royalty revenues from our sexual dysfunction technology in second quarter 2008 were a result of settling our arbitration proceeding against our licensee, Palatin Technologies, Inc. We recovered $800,000, recording revenue of $320,000 and reducing patent enforcement expenses $480,000 in accordance with the agreement with our client.

We actively market existing technologies, and seek new technologies to grow the revenue stream. We have created a new business model for appropriate technologies that allows us to move beyond our usual royalty arrangement and share in the profits of distribution.

Investment income includes dividends and interest earned on our invested cash. Investment income was $2,000 in the second quarter 2009, which was a decrease of $49,000, or 96% from the $51,000 reported for the second

Product Sales for second quarter 2008 revenue are primarily from sales of our thermal therapy units, which we no longer carry, and our electronic stress management and memory improvement device, which is not being actively marketed at this time.

EXPENSES

                                          For the three months ended January 31,
                                 -----------------------------------------------
                                                        Increase     % Increase
                                     2009        2008    (Decrease)   (Decrease)
                                 --------  -----------  -----------  -----------

Cost of product sales            $      -  $   48,000   $  (48,000)        (100)
Personnel and other direct
  expenses relating to revenue    482,000     907,000     (425,000)         (47)
General and administrative
  expenses                        479,000     916,000     (437,000)         (48)
Patent enforcement expenses net
  of reimbursements                     -    (123,000)     123,000          100
Loss on sale of available-for-
  sale securities                       -      81,000      (81,000)        (100)
                                 --------  -----------  -----------
 TOTAL EXPENSES                  $961,000  $1,829,000   $ (868,000)         (47)
                                 ========  ===========  ===========

Total expenses decreased $868,000 or 47% in the second quarter 2009, compared to the second quarter 2008.

Personnel and other direct expenses relating to revenue decreased a net $425,000 or 47% in the second quarter 2009, compared to the second quarter 2008. Payroll and related benefits decreased by $145,000 as a result of reducing full-time equivalent headcount from 16 to 12. Subsequent reductions have brought this figure to nine, with the financial benefit to be recognized in the third quarter of fiscal 2009. Severance was $46,000 less in 2009 because three employees were terminated in the second quarter of fiscal 2008 versus two in the second quarter of fiscal 2009. Employer 401(k) expenses were $150,000 less in 2009 because the Compensation Committee of the Board of Directors approved a $50,000 contribution to the 401(k) for fiscal 2008. We had previously recorded an accrual for $150,000 and the adjustment was reflected in the second quarter of fiscal 2009. In addition, we adjusted our accrual for the expected fiscal 2009 contribution to $50,000. We incurred the following costs in fiscal 2008 which did not repeat in fiscal 2009: $20,000 to acquire the rights to our solar panel technology, $22,000 for a patent application and contracts to acquire the rights to our ultra low power pulse oximeter technology, $13,000 for an exhibit and presentation in Manhattan for our MC Square memory improvement device, and $12,000 paid to the University of Connecticut for development of an asthma assay. In addition, we reduced consulting costs $10,000 as management made a concerted effort to lower costs.

General and administrative expenses decreased a net $437,000 in the second quarter 2009, compared to the second quarter 2008. The decrease in expenses is primarily due to the following reductions: legal fees as a result of less active litigation, $228,000, primarily the Marcovitch case; marketing expenses, $24,000, primarily due costs incurred to launch MC Square, our memory improvement device in the U.S. in the second quarter of fiscal 2008; investor relations expenses as a result of negotiation of more favorable terms with outside consultants and costs related to investor meetings from the second quarter of fiscal 2008 which did not recur in fiscal 2009, $41,000; auditing expenses as a result of an S-8 filed in fiscal 2008 for stock contributed to the 401(k) plan, $16,000; and lower director costs, primarily related to equity compensation, $42,000. We are currently subletting a portion of our excess office space, resulting in a $4,000 savings in our building rent expense for the second quarter of fiscal 2009. We have reduced travel and entertainment, dues and subscriptions, supplies and other miscellaneous office expenses by $34,000 in the second quarter of fiscal 2009, as a result of reducing head count and a concerted effort by management to lower costs. During the first quarter of fiscal 2009, we completed our internal controls assessment for fiscal 2008. We completed our assessment of internal controls for fiscal 2007 in the second quarter of fiscal 2008. As a result, costs for section 404 compliance were $32,000 less in the second quarter of fiscal 2009, when compared with the second quarter of fiscal 2008. In addition, we originally planned to publish a four-color annual report for fiscal 2008. At the end of the year we decided to issue an annual report at a significantly lower cost, and plan to issue a similar annual report for fiscal 2009. As a result, the accrual for the

Patent enforcement expenses, net of reimbursements, increased a net $123,000 in the second quarter 2009, compared to the second quarter 2008. Patent enforcement expenses vary, depending on the activity relating to outstanding litigation. The increase in expenses is primarily due to settlement of litigation with Palatin in the second quarter 2008 which allowed us to recoup $480,000 of incurred legal fees. There were no significant legal fee recoveries in fiscal 2009.

RESULTS OF OPERATIONS - SIX MONTHS ENDED JANUARY 31, 2009 ("FIRST HALF 2009") VS. SIX MONTHS ENDED JANUARY 31, 2008 ("FIRST HALF 2008")

We incurred a net loss of $1,900,000 or $0.23 per share for the first half 2009, compared to a net loss of $3,859,000 or $0.47 per share for the first half 2008, a 51% decrease in net loss of $1,959,000, or $0.24 per share. As explained in detail below, the decrease in the net loss reflects a decrease of $2,557,000 in expenses partially offset by a decrease in revenue of $598,000.

     REVENUE

     In the first half 2009, total revenue was $133,000, compared to $731,000
for the first half 2008, an 82% decrease of $598,000.

Retained royalties for the first half 2009 were $54,000, which was $499,000, or
90% less than the $553,000 of retained royalties reported in the first half
2008.  The following compares retained royalty revenue by technology in the
first half 2009 with the first half 2008.

                                      For the six months ended January 31,
                              --------------------------------------------
                                 2009      2008   (Decrease)  % (Decrease)
                              -------  --------  -----------  ------------
Homocysteine assay            $ 5,000  $ 83,000  $  (78,000)          (94)
Sexual Dysfunction                  -   320,000    (320,000)         (100)
All other technologies         49,000   150,000    (101,000)          (67)
                              -------  --------  -----------
    TOTAL RETAINED ROYALTIES  $54,000  $553,000  $ (499,000)          (90)
                              =======  ========  ===========

We received minimal royalty revenue from our homocysteine technology in the first half 2009 compared to the $83,000 received in the first half 2008, reflecting back royalties previously unreported by customers. The reduction of homocysteine royalty revenue is due to the expiration of the primary underlying patent in July 2007, and we do not receive revenue for sales made after that date on that patent.

Royalty revenues from our sexual dysfunction technology in first half 2008 were a result of settling our arbitration proceeding against our licensee, Palatin Technologies, Inc. We recovered $800,000, recording revenue of $320,000 and reducing patent enforcement expenses $480,000 in accordance with the agreement with our client.

We actively market existing technologies, and seek new technologies to grow the revenue stream. We have created a new business model for appropriate technologies that allows us to move beyond our usual royalty arrangement and share in the profits of distribution.

Investment income includes dividends and interest earned on our invested cash. Investment income was $7,000 in the first half 2009, a decrease of $113,000, or 94%, from the $120,000 reported for the first half 2008. The decrease was primarily due to lower invested balances for the first six months of fiscal 2009 as compared to the prior year.

Other income for first half 2009 is revenue from a one-time sale of our Flip Chip patents.

     EXPENSES

                                            For the six months ended January 31,
                              --------------------------------------------------
                                                       Increase      % Increase
                                    2009         2008    (Decrease)   (Decrease)
                              -----------  ----------  ------------  -----------
Cost of product sales         $        -   $   51,000  $   (51,000)        (100)
Personnel and other direct
  expenses relating to
  revenue                      1,160,000    2,015,000  $  (855,000)         (42)
General and administrative
  expenses                     1,271,000    2,193,000     (922,000)         (42)
Patent enforcement expenses
  net of reimbursements            2,000       32,000      (30,000)         (94)
Loss on permanent impairment
  of available-for-sale
  securities                           -      228,000     (228,000)        (100)
Loss on sale of available-
  for-sale Securities                  -       71,000      (71,000)        (100)
Insurance recovery              (400,000)           -     (400,000)           -
                              -----------  ----------  ------------
  TOTAL EXPENSES              $2,033,000   $4,590,000  $(2,557,000)         (56)
                              ===========  ==========  ============

Total expenses decreased $2,557,000 or 56% in the first half 2009, compared to the first half 2008.

Personnel and other direct expenses relating to revenue decreased a net $855,000 or 42% in the first half 2009, compared to the first half 2008. Payroll and related benefits decreased by $318,000 as a result of reducing full-time equivalent headcount from 16 to nine. Severance costs decreased $207,000 as seven people were terminated in fiscal 2008 versus three in fiscal 2009. Employer 401(k) expenses were $150,000 less in 2009 because the Compensation Committee of the Board of Directors approved a $50,000 contribution to the 401(k) for fiscal 2008. We had previously recorded an accrual for $150,000 and the adjustment was reflected in the second quarter of fiscal 2009. In addition, we adjusted our accrual for the expected fiscal 2009 contribution to $50,000. During the first six months of fiscal 2008 we accrued $128,000 for employee bonuses assuming that the Company would be profitable for fiscal 2008. This accrual was reversed in the second half of fiscal 2008. No accrual for employee bonuses has been recorded for fiscal 2009. The following costs were incurred in fiscal 2008 and did not recur in fiscal 2009: $20,000 to acquire the rights to our solar panel technology; $21,000 to obtain the rights to an ultra-low power pulse-oximeter technology; $46,000 paid to the University of Connecticut for development of an asthma assay; $30,000 for the US launch of MC Square, our memory improvement device; and $14,000 of legal expenses to attempt to collect reported but unpaid homocysteine royalties. In addition, we reduced consulting costs by $25,000 as management made a concerted effort to lower costs. These were offset by $106,000 increase in costs related to the commercialization of our pain management medical device.

General and administrative expenses decreased a net $922,000 in the first half 2009, compared to the first half 2008. The decrease in expenses is primarily due to the following reductions: legal fees as a result of less active litigation, $531,000, primarily the Marcovitch case; marketing expenses, $41,000, primarily due to the attendance at a major IP conference in 2008 not repeated in 2009; investor relations expenses as a result of negotiation of more favorable terms with outside consultants, $71,000; auditing expenses as a result of permission needed from prior auditor for SEC filings, including an S-8 in fiscal 2008, $31,000; reduced travel and entertainment expenses, dues and subscriptions, supplies and other miscellaneous office expenses as a result of lower headcount and concerted effort by management to reduce costs, $53,000; and the decision to not repeat the CTT Innovation Conference, $16,000. Other expenses incurred in 2008 and not repeated in 2009 include $23,000 to market MC Square, our stress relief and memory improvement device. In addition, Directors Fees and Expenses decreased $120,000, primarily due to lower equity compensation costs. We originally planned to publish a four-color annual report for fiscal 2008. At the end of the year

Patent enforcement expenses, net of reimbursements, decreased a net $30,000 in the first half 2009, compared to the first half 2008. Patent enforcement expenses vary, depending on the activity relating to outstanding litigation. The reduction of expenses is primarily due to settlement of litigation with Palatin in the second quarter 2008.

Loss on permanent impairment of available-for-sale securities in fiscal 2008 related to our investment in Palatin Technologies. During the first quarter of fiscal 2008, the Company determined that the decline in market value of Palatin shares was other than temporary and wrote the investment down to its fair market value as of October 31, 2007.

Loss on sale of available-for-sale securities in fiscal 2008 is from the sale of our investments in Clinuvel and Palatin.

Insurance recovery in 2009 represents settlement of our action against Federal Insurance to cover our legal fees and loss associated with the case involving Ben Marcovitch and other co-defendants. (See Note 10.)

Our liquidity requirements arise principally from our working capital needs, including funds needed to find and obtain new technologies or products, and protect and enforce our intellectual property rights, if necessary. We fund our liquidity requirements with a combination of cash on hand and cash flows from operations, if any, including royalty legal awards. In addition, we have the ability to fund our requirements through sales of common stock under the Fusion agreement. At January 31, 2009, we had no outstanding debt or credit facility.

We believe we will successfully license and distribute new technologies, including our pain management medical device under the agreements noted below, and collect due, but unpaid, royalties on existing licenses to add revenue. Although there can be no assurance that we will be successful in our efforts, we believe the combination of our cash on hand, the ability to raise funds from sales of our common stock under the Fusion agreement, and revenue from executing our strategy will be sufficient to meet our obligations of current and anticipated operating cash requirements. In fiscal 2009, we will raise cash through the sale of common stock to Fusion as needed, when our stock price is at or above $1.00. If necessary, we will meet anticipated operating cash requirements by further reducing costs, pursuing additional equity financing, and/or the sale of certain assets and technologies while we pursue licensing and distribution opportunities for our remaining portfolio of technologies.

In late fiscal 2007, we obtained exclusive worldwide distribution rights to a non-invasive pain management medical device for rapid treatment of high-intensity oncologic and neuropathic pain, including pain resistant to morphine and other drugs. Developed in Italy by CTT's client, Prof. Giuseppe Marineo, DSc, MD, the technology was brought to CTT through the efforts of Prof. Giancarlo Elia Valori of the Italian business development group, Sviluppo Lazio S.p.A., and assistance from the Zangani Investor Community(TM). The unit, with a biophysical rather than a biochemical approach, uses a multi-processor able to simultaneously treat multiple pain areas by applying surface electrodes to the skin. The device's European CE mark certification allows it to be distributed and sold throughout Europe, and makes it eligible for approval for distribution and sales in multiple global markets. A U.S. patent has been applied for, and in February 2009, CTT received FDA 510(k) authorization for U.S. sales of the device. Several thousand patients in various hospitals have been successfully treated using the technology. CTT partner, GEOMC Co., Ltd. of Korea, is manufacturing the product commercially for worldwide distribution.

In July 2008, the Company signed a country-exclusive distribution agreement with Excel Life Sciences, Inc. for India. In the first half fiscal 2009, the Company signed three additional country-exclusive distribution agreements with GEOMC Co., Ltd. for Korea, Biogene Pharma Limited for Bangladesh, and Able Global Healthcare Sdn. Bhd. for Malaysia. In February 2009, we signed an agreement with Life Episteme srl granting them exclusive distribution rights in 29 countries throughout Europe, Asia, Africa, the Middle East, South America and Oceania. In March 2009,

The signed distribution agreements for this device now cover over 48% of the world's population. Contractual minimums have a retail sales value of over $25 million for 2009 and about $50 million for 2010. Our distributors expect sales to exceed the contract minimums. The Company will share in revenue derived from sales of the device to distributors.

Cash and cash equivalents consist of demand deposits and interest earning investments with maturities of three months or less, including overnight bank deposits and money market funds. We carry cash equivalents at cost.

At January 31, 2009, cash and cash equivalents were $694,000 compared to $2,237,000 at July 31, 2008. The loss of $1,900,000 for the first six months of fiscal 2009 contained non-cash charges of $78,000 and reduction in assets and liabilities of $76,000, resulting in cash used in operations of $1,899,000. We sold shares to Fusion per our equity financing agreement totaling $362,000. These activities reduced cash by $1,543,000. As of March 12, 2009, our cash and cash equivalents balance is over $275,000.

We currently have the benefit of using a portion of our accumulated NOLs to eliminate any future regular federal and state income tax liabilities. We will continue to receive this benefit until we have utilized all of our NOLs, federal and state. However, we cannot determine when and if we will be profitable and . . .