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 herein, the words "may," "will," "should," "anticipate," "believe," "appear," "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 this Annual Report on Form 10-K for the year ended July 31, 2009, 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 revenues 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 matching 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 main patent for this technology expired in July 2007 and we will not receive revenue for sales made after that date. Homocysteine revenue in 2008 reflects unreported back royalties. We continue to seek revenue from new technology licenses to mitigate the concentration of revenue, and replace revenue from expiring licenses. 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. On July 30, 2009, the homocysteine patent was upheld by the U.S. Patent and Trademark Office's Board of Patent Appeals and Interferences (BPAI). In September 2008, the patent had been denied by the examiner, but that denial was overruled by the BPAI. Further action in this case is pending as the BPAI result will now be returned to the U.S District Court for the District of Colorado. (For further information, see
ITEM 3. LEGAL PROCEEDINGS.)

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.

The Company incurred an operating loss for fiscal 2009, as well as an operating loss in fiscal 2008. During fiscal 2007, we had a significant concentration of revenues from our homocysteine assay technology. The patent for this technology expired in July 2007 and we will not receive revenues for sales made after that date. Revenue in 2008 for the homocysteine technology reflects previously unreported back royalties. We continue to seek revenue from new technologies or products to mitigate the concentration of revenues, and replace revenues from expiring licenses. At current reduced spending levels, the Company may not have sufficient cash flow to fund operating expenses beyond second quarter fiscal 2010. These conditions raise substantial doubt about the Company's ability to continue as a going concern. The financial statements do not include adjustments to reflect the possible future effect of the recoverability and classification of assets or amounts and classifications of liabilities that may result from the outcome of this uncertainty.

The Company's continuation as a going concern is dependent upon its developing other recurring revenue streams sufficient to cover operating costs. If necessary, we will meet anticipated operating cash requirements by further reducing costs, and/or pursuing sales of certain assets and technologies while we pursue licensing and distribution opportunities for our remaining portfolio of technologies. The company does not have any significant individual cash or capital requirements in the budget going forward. In addition, we will sell shares to Fusion Capital Fund II, LLC ("Fusion Capital") per our 2009 Agreement, on an as-needed basis, when the Company's stock price is at or above $1.00 per share. There can be no assurance that the Company will be successful in such efforts or that we will be able to obtain alternative financing should our stock price fall below $1.00 per share. Failure to develop a recurring revenue stream sufficient to cover operating expenses would negatively affect the Company's financial position.

RESULTS OF OPERATIONS - 2009 VS. 2008

SUMMARY OF RESULTS

We incurred a net loss for 2009 of $3,480,000, or $0.40 per share, compared to a net loss for 2008 of $5,966,000, or $0.73 per share, a decreased loss of $2,486,000, or $.33 per share. The reasons for the decrease in net loss are explained in detail below.

     REVENUES

     Total revenue for 2009 was $348,000, compared to $1,193,000 for 2008, a
decrease of $845,000, or 71%.

     Retained royalties for 2009 were $261,000, which was $712,000, or 73% lower
than the $973,000 reported in 2008. The following compares revenue from
technologies with retained royalties greater than or equal to $130,000 in 2009
or 2008.

                                              Increase     % Increase
                              2009      2008   (Decrease)   (Decrease)
                          --------  --------  -----------  -----------
Homocysteine assay        $ 18,000  $276,000  $ (258,000)         (93)
Sexual dysfunction               -   320,000    (320,000)        (100)
Plant regeneration         132,000         -     132,000            -
Plasma display              30,000   150,000    (120,000)         (80)
All other technologies      81,000   227,000    (146,000)         (64)
                          --------  --------  -----------
TOTAL RETAINED ROYALTIES  $261,000  $973,000  $ (712,000)        (73)%
                          ========  ========  ===========

During 2008, we announced an agreement with Palatin terminating the License Agreement of March 31, 1998 for our sexual dysfunction technology. As part of the agreement, Palatin agreed to pay CTT $800,000. CTT recorded revenue of $320,000 and reduced patent enforcement expenses by $480,000 in accordance with the agreement with our client. We received no revenue from this technology during 2009.

Plant regeneration technology provided $132,000 royalty income in fiscal 2009. This was primarily unreported back royalties. Going forward we expect this technology to provide revenue of approximately $17,000 per year.

The patent on our plasma display technology expired in August 2009. We will not receive any more revenue from this technology.

Investment income includes dividends and interest earned on our invested cash. Investment income for 2009 was $7,000, compared to $159,000 in 2008 a decrease of $152,000, or 96%. The decrease is due to lower average monthly cash balances in the current year compared to the prior year.

Product sales for 2009 represents sales of one pain therapy medical device and three electronic stress management and memory improvement devices (which we are no longer actively marketing). For 2008 sales are for our thermal therapy unit, which we no longer carry, and our electronic stress management and memory improvement product.

Sales of our pain therapy medical device will be recorded as net of amounts owed as royalties or revenue sharing with our manufacturing partner.

Other income for 2009 was primarily the proceeds of $71,000 on the sale of our flip chip patent.

EXPENSES

                                                       Increase      % Increase
                                    2009         2008  (Decrease)    (Decrease)
                              -----------  ----------  ------------  -----------

Cost of product sales         $    1,000   $   54,000  $   (53,000)         (98)
Personnel and other direct
  expenses relating to
  revenues                     2,024,000    3,202,000   (1,178,000)         (37)
General and administrative
  expenses                     2,199,000    3,563,000   (1,364,000)         (38)
Patent enforcement expenses,
  net of reimbursements            2,000       42,000      (40,000)         (95)
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)           -
Interest expense                   3,000            -        3,000            -
                              -----------  ----------  ------------
TOTAL EXPENSES                $3,829,000   $7,160,000  $(3,331,000)         (47)
                              ===========  ==========  ============

Total expenses decreased $3,331,000 or 47% in 2009 compared to 2008.

Cost of product sales in 2008 represents final liquidation of our thermal therapy inventory. The remaining costs related to our electronic stress management and memory improvement device. All the costs for 2009 relate to our stress management and memory improvement device. We are no longer actively marketing this device.

Personnel and other direct expenses relating to revenues decreased a net $1,178,000 or 37% in 2009, compared to 2008. Payroll and related benefits decreased by $445,000 as a result of reducing full-time equivalent

General and administrative expenses decreased a net $1,364,000 or 38% in 2009, compared to 2008. The decrease in expenses is primarily due to the following reductions: legal fees as a result of less active litigation, $859,000, primarily the Marcovitch case; marketing expenses, $62,000, primarily due to the attendance at a major IP conference in 2008 not repeated in 2009 and a smaller presence at the 2009 Biotechnology Industry Conference; investor relations expenses as a result of negotiation of more favorable terms with outside consultants, $83,000 auditing expenses due to an overaccrual of fiscal 2008 audit fees of approximately $35,000. In addition, we had to pay BDO, our former auditor, $15,000 in fiscal 2008 to obtain consents for an S-1. In addition, we saved $88,000 by reducing travel and entertainment expenses, dues and subscriptions expenses, supplies and other miscellaneous office expenses as a result of lower headcount and concerted effort by management to reduce costs, $112,000; lower workers compensation costs due to lower headcount, $7,000; lower product liability costs due to elimination of coverage for our electronic stress relief and memory improvement device, $15,000; and the decision to not repeat the CTT Innovation Conference, $126,000. Other expenses incurred in 2008 and not repeated in 2009 include $87,000 to market MC Square, our stress relief and memory improvement device. In addition, Directors Fees and Expenses decreased $151,000, primarily due to lower equity compensation costs. We are subletting a portion of our excess office space, resulting in a $10,000 savings in fiscal 2009. Our depreciation is $10,000 less in fiscal 2009 as most of our office equipment is fully depreciated but not yet in need of replacement. These savings were offset by a negative bad debt expense of $129,000 in fiscal 2008. In fiscal 2008 we reversed $129,000 of previously recorded bad debt expense due to the receipt of previously disputed homocysteine royalties. We recorded no bad debt expense in fiscal 2009. In addition, our Sarbanes-Oxley compliance costs are $93,000 higher in fiscal 2009. This is because the consultants we hired to perform our fiscal 2008 Sarbanes Oxley testing performed most of the work in the first quarter of fiscal 2009. Most of the work for fiscal 2009 was completed in the fourth quarter of fiscal 2009.

Patent enforcement expenses, net of reimbursements, decreased a net $40,000 or 95% in 2009, compared to 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 of fiscal 2008, so no expenses for this action were incurred after that time.

Loss on permanent impairment of available for sale securities of $228,000 relates to our investment in Palatin shares. During the first quarter of fiscal 2008, we determined that the decline in market value of the 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 securities of $71,000 relates to the sale of our available for sale Palatin and Clinuvel securities.

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-defendents (For further information, see the Marcovitch and Federal cases, ITEM 3. LEGAL PROCEEDINGS.).

Interest expense in 2009 was incurred as a result of our landlord allowing us to defer certain rent payments while we are in the process of commercializing our pain therapy device. No interest expense should be incurred after December 31, 2009.

In current and prior years, we generated significant federal and state income and alternative minimum tax ("AMT") losses, and these net operating losses ("NOLs") were carried forward for income tax purposes to be used against future taxable income. In 2009 and in 2008, we incurred a loss but did not record a benefit since the benefit was fully reserved (see below).

The NOLs are an asset to us if we can use them to offset or reduce future taxable income and therefore reduce the amount of both federal and state income taxes to be paid in future years. Previously, since we were incurring losses and could not be sure that we would have future taxable income to be able to use the benefit of our NOLs, we recorded a valuation allowance against the asset, reducing its book value to zero. In 2009 and in 2008, the benefit from our net loss was offset completely by a valuation allowance recorded against the asset. We did not show a benefit for income taxes. We will reverse the valuation allowance if we have future taxable income. We have substantial federal and state NOLs and capital loss carryforwards to use against future regular taxable income. In addition, we can use our NOLs to reduce our future AMT liability. A significant portion of the remaining NOLs at July 31, 2009, approximately $4,081,000, was derived from income tax deductions related to the stock options exercises. The tax effect of these deductions will be credited against capital in excess of par value at the time they are utilized for book purposes, and not credited to income. We will never receive a benefit for these NOLs in our statement of operations.

We adopted the provisions of FIN 48 on August 1, 2007. We did not record any unrecognized income tax benefits as a result of the implementation of FIN
48. At the adoption date, and at July 31, 2009, and July 31, 2008, we had no unrecognized tax benefits.

FINANCIAL CONDITION AND LIQUIDITY

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 Capital agreement. At July 31, 2009, we had no outstanding debt, and no credit facility.

We believe we will successfully license new technologies 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 Capital agreement, and revenue from executing our strategy will be sufficient to meet our obligations of current and anticipated operating cash requirements throughout fiscal 2010. In fiscal 2010, we will raise cash through sale of stock to Fusion as needed, provided that our stock price does not drop below $1.00. If necessary, we will meet anticipated operating cash requirements by further reducing costs, and/or pursuing sales of certain assets and technologies while we pursue licensing opportunities for our remaining portfolio of technologies. Our litigation costs, especially for the lawsuit against Ben Marcovitch, and others, should decline greatly from those reflected in our Statement of Operations through July 31, 2009.

In late fiscal 2007, the Company obtained exclusive worldwide distribution rights to a non-invasive pain therapy 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. In February 2009, CTT received FDA 510(k) clearance for U.S. sales of the device. Several thousand patients in various hospitals have been successfully treated using the technology. CTT's partner, GEOMC Co., Ltd. of Korea, is manufacturing the product commercially for worldwide distribution. U.S. and international patents are pending.

In July 2008, we signed a country-exclusive distribution agreement with Excel Life Sciences, Inc. for India. In the first six months fiscal 2009, we signed three additional country-exclusive distribution agreements with GEOMC

In April 2009, the Company, acknowledging the current difficult economic climate, entered into an agreement with Americorp Financial, LLC (AFS), where AFS will provide financing of sales of the pain therapy medical device for 24 - 60 month lease periods to hospitals, clinics and medical practices in the U.S. AFS will provide financing services under the name, Competitive Technologies Financial Services. CTT will receive the full retail sales price of the device upon execution of each lease, while AFS carries the lease.

Also in April 2009, we signed an agreement with Native Energy & Economic Development, giving them exclusive sales rights for selected U.S. government agencies, including the Department of Veteran's Affairs (VA), the Department of Defense (DOD), and the Indian Health Service (IHS).

In July 2009, we signed an agreement with Innovative Medical Therapies, Inc. ("IMT") granting them exclusive distribution rights to CTT's pain therapy medical device in the United States and related territories excluding selected Federal agencies. The contract provides for minimum monthly cash payments to CTT totaling over $1 million for the first eight months. These minimum monthly payments increase each year throughout the term of the agreement with, for example, the fourth year minimum payments reaching $9 million and eighth year minimum payments of $21 million dollars. IMT will receive shipments of CTT's pain therapy medical device in return for these payments

In October 2009, we signed an agreement with Athens, Greece-based Fintrade Medical granting them the exclusive rights to market and sell CTT's pain therapy medical device in Greece and Cyprus.

Also in October 2009, we signed an agreement with Calmar Pain Relief, LLC, a Delaware limited liability company ("Calmar"), with its headquarters in North Providence, Rhode Island. Calmar was established to provide medical equipment, office leasing, and other business services to medical doctors looking to offer CTT's non-invasive pain therapy to patients in a clinical setting. Calmar will furnish CTT's MC-5A pain therapy medical device to medical doctors who will open pain therapy treatment centers in selected U.S. cities over the next two years.

The signed distribution agreements for this device, now cover more than 50% of the world's population.

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 July 31, 2009, cash and cash equivalents were $752,000 compared to $2,237,000 at July 31, 2008. The fiscal 2009 loss of $3,480,000 contained non-cash charges of $293,000 and reduction in assets and liabilities of $305,000, resulting in cash used in operations of $3,492,000. Cash flow provided by investing activities includes proceeds of $2,008,000 primarily from the sale of common stock to Fusion. These activities reduced cash by $1,485,000. As of October 16, 2009, our cash and cash equivalents balance is approximately $469,000 million.

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 thus able to utilize the benefit of the remaining NOLs before they expire.

At July 31, 2009, we had aggregate federal net operating loss carryforwards of approximately $26,238,000, which expire at various times through 2029, with the majority of them expiring after 2011. A majority of our federal NOLs can be used to reduce taxable income used in calculating our AMT liability. We also have state net operating loss carryforwards of approximately $19,100,000 that expire through fiscal year 2013.

A significant portion of the NOLs remaining at July 31, 2009, approximately $4,081,000, was derived from income tax deductions related to the exercise of stock options. The tax effect of these deductions will be credited

FUNDING AND CAPITAL REQUIREMENTS

EQUITY FINANCING

On August 6, 2009, we entered into an agreement with Fusion Capital Fund II, LLC ("Fusion Capital") to sell up to $8 million of our common stock to Fusion Capital over a 25-month period (the "2009 Agreement"). We have the right to determine the timing and the amount of stock sold, if any, to Fusion Capital.

Under the terms of the 2009 Agreement, we issued 86,933 registered shares of our common stock to Fusion Capital on October 2, 2009, for its initial commitment (the "Initial Commitment Shares"), and agreed to issue 86,933 Additional Commitment Shares (the "Additional Commitment Shares") to Fusion Capital on a pro-rata basis as we sell the $8 million of stock (collectively, the "Commitment Shares"). Commencement of sales of common stock under the 2009 . . .