Edgar Filing: COMPETITIVE TECHNOLOGIES INC

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-Q
AMENDMENT NO. 1

(Mark One)

[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 for the quarterly period ended October 31, 2010
-----------------------------------------------

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 for the transition period from to

Commission file number 1-8696
------

*
*****
**-----**
**----- COMPETITIVE
****---- TECHNOLOGIES
**===== Unlocking the Potential of Innovation (R)
**=====**
*****
* (R) Technology Transfer and Licensing Services

COMPETITIVE TECHNOLOGIES, INC.
(Exact name of registrant as specified in its charter)
www.competitivetech.net

Delaware 36-2664428
---------------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)

1375 Kings Highway East, Fairfield, Connecticut 06824
-----------------------------------------------------
(Address of principal executive offices) (Zip Code)

(203) 368-6044
--------------------------------------------------------------------------------
(Registrant's telephone number, including area code)
N/A
--------------------------------------------------------------------------------
(Former name, former address and former fiscal year, if changed since last
report)

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes [X] No [ ]

Indicate by check mark whether the registrant has submitted electronically and
posted on its corporate Web site, if any, every Interactive Data File required
to be submitted and posted pursuant to Rule 405 of Regulation S-T during the
preceding 12 months. Yes [ ] No [ ]

Indicate by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer or a smaller reporting company. See
definition of "accelerated filer, large accelerated filer and smaller reporting
company" as defined in Rule 12b-2 of the Exchange Act.
Large accelerated filer [ ] Accelerated filer [ ]
Non-accelerated filer [ ] Smaller reporting company [X]

Indicate by check mark whether the registrant is a shell company (as defined in
rule 12b-2 of the Exchange Act). Yes [ ] No [X]

The number of shares of the registrant's common stock outstanding as of December
15, 2010 was 13,824,944 shares.

EXPLANATORY NOTE
----------------

This Amendment No. 1 on Form 10-Q revises the Quarterly Report on Form 10-Q
for the period ended October 31, 2010 of Competitive Technologies, Inc.,
initially filed on December 15, 2010 (the "Form 10-Q"). The revisions are in
response to comments received from the SEC.

Page 2

COMPETITIVE TECHNOLOGIES, INC.
------------------------------

INDEX TO QUARTERLY REPORT ON FORM 10-Q

PART I. FINANCIAL INFORMATION PAGE NO.
-------- ------------------------------------------------------------- --------

Item 1. Condensed Consolidated Interim Financial Statements
(Unaudited)

Condensed Consolidated Balance Sheets at October 31, 2010
(unaudited) and July 31, 2010 4

Condensed Consolidated Statements of Operations for the
three months ended October 31, 2010 and 2009 (unaudited) 5

Condensed Consolidated Statement of Changes in Shareholders'
Interest for the three months ended October 31, 2010 (unaudited) 6

Condensed Consolidated Statements of Cash Flows for the
three months ended October 31, 2010 and 2009 (unaudited) 7

Notes to Condensed Consolidated Interim Financial
Statements (unaudited) 8 - 13

Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 14 - 18

Item 3. Quantitative and Qualitative Disclosures About Market Risk 18

Item 4. Controls and Procedures 18

PART II. OTHER INFORMATION
-------- -------------------------------------------------------------

Item 1. Legal Proceedings 19

Item 1A. Risk factors 19

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 19

Item 3. Defaults Upon Senior Securities 19

Item 5. Other Information 19

Item 6. Exhibits 19

Signatures 20

Exhibit Index 21

Page 3

PART I. FINANCIAL INFORMATION
------------------------------

ITEM 1. CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

COMPETITIVE TECHNOLOGIES, INC. AND SUBSIDIARIES

Condensed Consolidated Balance Sheets

OCTOBER 31, July 31,
2010 2010
------------- -------------
(UNAUDITED)
ASSETS
Current Assets:
Cash and cash equivalents $ 872,764 $ 907,484
Receivables, net of allowance of $101,154
at October 31, 2010 and July 31, 2009 1,788,678 3,536,572
Inventory 245,582 272,869
Prepaid expenses and other current assets 77,026 69,080
------------- -------------
Total current assets 2,984,050 4,786,005

Property and equipment, net 162,540 163,918
------------- -------------

TOTAL ASSETS $ 3,146,590 $ 4,949,923
============= =============

LIABILITIES AND SHAREHOLDERS' INTEREST
Current Liabilities:
Accounts payable $ 836,033 $ 1,046,174
Accrued expenses and other liabilities 727,034 1,228,878
------------- -------------
Total current liabilities 1,563,067 2,275,052
Deferred Rent 60,462 66,369
------------- -------------

Total Liabilities 1,623,529 2,341,421
------------- -------------
Commitments and Contingencies
Shareholders' interest:
5% preferred stock, $25 par value, 35,920 shares
authorized, 2,427 shares issued and outstanding 60,675 60,675
Common stock, $.01 par value, 20,000,000 shares
authorized, 13,824,944 shares
issued and outstanding 138,249 138,249
Capital in excess of par value 43,453,126 43,444,154
Receivable from Crisnic (564,420) (564,420)
Accumulated deficit (41,564,569) (40,470,156)
------------- -------------
Total shareholders' interest 1,523,061 2,608,502
------------- -------------

TOTAL LIABILITIES AND SHAREHOLDERS' INTEREST $ 3,146,590 $ 4,949,923
============= =============

See accompanying notes

Page 4

PART I. FINANCIAL INFORMATION (CONTINUED)
------------------------------------------

COMPETITIVE TECHNOLOGIES, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Operations
(Unaudited)

Three months ended October 31,
2010 2009
----------------- -----------------
REVENUE
Product sales $ 107,996 $ 135,096
Retained royalties 7,464 9,001
Investment income 10 30
Other income 4,000 -
----------------- -----------------
TOTAL REVENUE 119,470 144,127
----------------- -----------------

EXPENSES
Cost of product sales 18,191 -
Personnel and other direct expenses
relating to revenue 476,403 442,393
General and administrative expenses 717,594 456,291
Interest expense 1,695 1,169
----------------- -----------------
TOTAL EXPENSES 1,213,883 899,853
----------------- -----------------

(Loss) before income taxes (1,094,413) (755,726)
Provision (benefit) for income taxes - -
----------------- -----------------

NET (LOSS) $ (1,094,413) $ (755,726)
================= =================

Basic and diluted (loss) per share $ (0.08) $ (0.08)
================= =================

Basic and diluted weighted average number
of common shares outstanding: 13,824,944 9,885,432

See accompanying notes

Page 5

PART I. FINANCIAL INFORMATION (CONTINUED)

COMPETITIVE TECHNOLOGIES, INC. AND SUBSIDIARIES
Condensed Consolidated Statement of Changes in Shareholders' Interest
For the Three Months Ended October 31, 2010
(Unaudited)

PREFERRED STOCK COMMON STOCK
------------------ --------------------- RECEIVABLE TOTAL
SHARES CAPITAL FROM SHARE-
OUTST- SHARES IN EXCESS CRISNIC ACCUMULATED HOLDERS'
ANDING AMOUNT OUTSTANDING AMOUNT OF PAR VALUE FUND DEFICIT INTEREST
--------- ------- ----------- -------- ------------- ------------ ------------- ------------

Balance - July 31, 2010 2,427 $60,675 13,824,944 $138,249 $ 43,444,154 $ (564,420) $(40,470,156) $ 2,608,502

NET (LOSS) (1,094,413) (1,094,413)
COMPENSATION EXPENSE
FROM STOCK OPTION GRANTS - - - - 8,972 - - 8,972
--------- ------- ----------- -------- ------------- ------------ ------------- ------------
BALANCE - OCTOBER 31, 2010 2,427 $60,675 13,824,944 $138,249 $ 43,453,126 $ (564,420) $(41,564,569) $ 1,523,061
========= ======= =========== ======== ============= ============ ============= ============

See accompanying notes

Page 6

PART I. FINANCIAL INFORMATION (CONTINUED)

COMPETITIVE TECHNOLOGIES, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows
(Unaudited)

Three months ended October 31,
2010 2009
--------------- ---------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net (loss) $ (1,094,413) $ (755,726)
Adjustments to reconcile net (loss) to net
cash used in operating activities:
Depreciation and amortization 14,473 13,952
Deferred rent (5,907) (2,638)
Share-based compensation - stock options 8,972 59,082
Accrued director's stock compensation (2,225) -
Accrued stock contribution 12,500 12,500
Changes in assets and liabilities:
Receivables 1,747,894 (103,124)
Prepaid expenses and other current assets (7,946) 84,602
Receipt of Customer Deposits 109,000
Inventory 18,191 -
Accounts payable, accrued expenses and
other liabilities (722,260) (78,856)
--------------- ---------------
Net cash (used in) operating activities (30,721) (661,208)
--------------- ---------------

CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment (3,999) (22,000)
--------------- ---------------

CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from sale of stock - 525,002
Deferred finance charges - (49,172)
--------------- ---------------
Net cash provided by financing activities - 475,830
--------------- ---------------

Net (decrease) in cash and cash equivalents (34,720) (207,378)
Cash and cash equivalents at beginning
of period 907,484 752,071
--------------- ---------------

Cash and cash equivalents at end of period $ 872,764 $ 544,693
=============== ===============

SUPPLEMENTAL DISCLOSURE OF NON-CASH TRANSACTIONS:

On October 2, 2009 the Company issued 86,933 registered shares of Common
Stock valued at $212,116 to Fusion Capital II, LLC as initial commitment shares
per our equity financing agreement, dated August 6, 2009.

During the the quarter ended October 31, 2009, the Company amortized
$41,090 of deferred financing costs related to our equity financing agreement
against Capital in Excess of Par Value.

On October 1, 2010, the Company signed an operating rental agreement for a
pain device of $9,096.

See accompanying notes

Page 7

PART I. FINANCIAL INFORMATION (CONTINUED)

COMPETITIVE TECHNOLOGIES, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Interim Financial Statements
(Unaudited)

1. BASIS OF PRESENTATION

The interim condensed consolidated financial information presented in the
accompanying condensed consolidated financial statements and notes hereto is
unaudited.

Competitive Technologies, Inc. ("CTTC") and its majority-owned subsidiary,
Vector Vision, Inc. ("VVI"), (collectively, "we" or "us") provide patent and
technology licensing and commercialization services throughout the world, with
concentrations in the U.S. and Asia, with respect to a broad range of life and
physical sciences, electronics, and nanotechnologies originally invented by
individuals, corporations and universities. We are compensated for our services
by sharing in the profits of distribution or the license and royalty fees
generated from the successful licensing of clients' technologies. During the
quarter ended October 31, 2010, the Company dissolved its wholly-owned
subsidiary, CTT Trading Company, LLC and absorbed all of its functions.

The consolidated financial statements include the accounts of CTTC and VVI.
Inter-company accounts and transactions have been eliminated in consolidation.

On November 15, 2010, the Board of Directors of CTTC approved a fiscal
year-end change from July 31 to December 31, in order to align its fiscal
periods with the calendar year.

CTTC will file its Form 10-Q for the old 2011 fiscal year period for the
quarter ended October 31, 2010, and will file a Transitional Report on Form 10-Q
for the two and five months ended December 31, 2010. CTTC will subsequently file
its quarterly and annual reports for the new fiscal year ending December 31.
CTTC's annual report on Form 10-K for the fiscal year ending December 31, 2011
will include separate audited financial statements for the five-month
transitional period.

We believe we made all adjustments necessary, consisting only of normal
recurring adjustments, to present the unaudited condensed consolidated financial
statements in conformity with accounting principles generally accepted in the
U.S. The results for the three months ended October 31, 2010, are not
necessarily indicative of the results that can be expected for the transitional
period ending December 31, 2010 or for the next full fiscal year ending December
31, 2011.

The interim unaudited condensed consolidated financial statements, and
notes thereto, should be read in conjunction with our Annual Report on Form 10-K
for the year ended July 31, 2010, filed with the Securities and Exchange
Commission ("SEC") on October 27, 2010.

The Company has incurred operating losses since fiscal 2006. During the
year ended July 31, 2010, and into the three months ended October 31, 2010, we
had a significant concentration of revenues from our Calmare(R) pain therapy
medical device technology. We continue to seek revenue from new technologies or
products to mitigate the concentration of revenues, and replace revenues from
expiring licenses on other technologies. At current reduced spending levels, the
Company may not have sufficient cash flow to fund operating expenses beyond the
third quarter of calendar 2011. 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.

Page 8

costs by $1.5 million annually. If necessary, CTTC 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. There can be no
assurance that the Company will be successful in such efforts. Failure to
develop a recurring revenue stream sufficient to cover operating expenses would
negatively affect the Company's financial position.

In fiscal 2010, the Company incorporated revenue from the sale of inventory
into its revenue stream. That source of revenue is expected to continue as sales
of its Calmare(R) pain therapy medical device continue to expand and other
products are added to the Company's portfolio of technologies.

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. At October 31, 2010,
we had no outstanding long-term debt, and no credit facility.

2. NET LOSS PER COMMON SHARE

The following sets forth the denominator used in the calculations of basic
net income (loss) per share and net income (loss) per share assuming dilution:

Three months ended October 31,
--------------------------------
2010 2009
--------------- ---------------
Denominator for basic net income (loss) per
share, weighted average shares outstanding 13,824,944 9,885,432
Dilutive effect of common stock options N/A N/A
Denominator for net income (loss) per share,
assuming dilution 13,824,944 9,885,432
=============== ===============

Options to purchase 309,000 and 770,750 shares of our common stock at
October 31, 2010 and 2009, respectively, were outstanding but were not included
in the computation of net income (loss) per share because they were
anti-dilutive. Due to the net loss incurred for the three months ended October
31, 2010 and 2009, the denominator used in the calculation of basic net loss per
share was the same as that used for net loss per share, assuming dilution, since
the effect of any options would have been anti-dilutive.

3. RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

Transfers of Financial Assets. In June 2009, the FASB issued a new
accounting standard that eliminates the exceptions for qualifying
special-purpose entities from consolidation guidance and the exception that
permitted sale accounting for certain mortgage securitizations when a transferor
has not surrendered control over the transferred financial assets. This standard
is effective as of the beginning of the first annual reporting period that
begins after November 15, 2009. Upon adoption, this standard did not have a
material impact on the financial statements.

Variable Interest Entities. In June 2009, the FASB issued a new accounting
standard that requires an enterprise to perform an analysis to determine whether
the enterprise's variable interest or interests give it a controlling financial
interest in a variable interest entity. This analysis identifies the primary
beneficiary of a variable interest entity as the enterprise that has both of the
following characteristics: (1) the power to direct the activities of the
variable interest entity that most significantly impact the entities economic
performance, and (2) the obligation to

Page 9

absorb losses of the entity that could potentially be significant to the
variable interest entity or the right to receive benefits from the entity that
could potentially be significant to the variable interest entity. Additionally,
an enterprise is required to assess whether it has an implicit financial
responsibility to ensure that a variable interest entity operates as designed
when determining whether it has the power to direct the activities of the
variable interest entity that most significantly impact the entity's economic
performance. This standard is effective as of the beginning of the first annual
reporting period that begins after November 15, 2009. Earlier application is
prohibited. Upon adoption, this standard did not have a material impact on the
financial statements.

Fair Value Disclosures. In January 2010, the FASB issued an accounting
standards update that requires new disclosures for transfers in and out of
Levels 1 and 2 fair value measurements, and roll forward of activity in Level 3
fair value measurements. The new disclosures are effective for reporting periods
beginning after December 15, 2009, except for the roll forward of activity in
Level 3 fair value measurements. Those disclosures are effective for fiscal
years beginning after December 15, 2010. Upon adoption, this standard did not
have a material impact on the financial statements.

No other new accounting pronouncements issued or effective during the three
months ended October 31, 2010 has had or is expected to have a material impact
on the consolidated financial statements.

4. RECEIVABLES

Receivables consist of the following:

OCTOBER 31, July 31,
2010 2010
------------ ----------
Accounts Receivable $ 1,198,485 $1,339,488
Royalties, net of allowance of $101,154
at October 31, 2010 and July 31, 2010 559,376 1,045,681
Due from Crisnic Fund S.A - 1,117,747
Other 30,817 33,656
------------ ----------
Total receivables $ 1,788,678 $3,536,572
============ ==========

5. AVAILABLE-FOR-SALE AND EQUITY SECURITIES

The fair value of the equity securities we held were categorized as
available-for-sale securities, which were carried at a fair value of zero,
consisted of shares in Security Innovation and Xion Pharmaceutical. We own
223,317 shares of stock in the privately held Security Innovation, an
independent provider of secure software located in Wilmington, MA.

In September 2009 we announced the formation of a joint venture with Xion
Corporation for the commercialization of our patented melanocortin analogues for
treating sexual dysfunction and obesity. CTTC currently owns 60 shares of common
stock or 33% of the outstanding stock of privately held Xion Pharmaceutical
Corporation.

6. FAIR VALUE OF FINANCIAL INSTRUMENTS

The carrying amounts reported in our Condensed Consolidated Balance Sheet
for Cash and Cash Equivalents, Accounts Receivable, Accounts Payable and Accrued
Expenses and Other Liabilities approximate fair value due to the short-term
maturity of those financial instruments.

Page 10

7. PREPAID EXPENSES AND OTHER CURRENT ASSETS

Prepaid expenses and other current assets consist of the following:

OCTOBER 31, 2010 July 31, 2010
----------------- --------------
Prepaid insurance $ 27,444 $ 25,283
Prepaid investor relations service - 20,000
Other 49,582 23,797
----------------- --------------
Prepaid expenses and other current assets $ 77,026 $ 69,080
================= ==============

8. PROPERTY AND EQUIPMENT

Property and equipment, net, consist of the following:

OCTOBER 31, 2010 July 31, 2010
------------------ ---------------
Equipment and furnishings $ 447,478 $ 434,383
Leasehold improvements 113,838 113,838
------------------ ---------------
Property and equipment, gross 561,316 548,221
Accumulated depreciation and amortization (398,776) (384,303)
------------------ ---------------
Property and equipment, net $ 162,540 $ 163,918
================== ===============

Depreciation expense was $14,473 and $13,952, during the quarters ended October
31, 2010, and 2009, respectively.

9. ACCRUED EXPENSES AND OTHER LIABILITIES

Accrued expenses and other liabilities consist of the following:

OCTOBER 31, July 31,
2010 2010
------------ ----------

Royalties payable $ 239,076 $ 362,435
Deferred payroll 63,648 152,808
Due to GEOMC - 289,981
Accrued accounting fees 85,373 77,748
Accrued commissions 80,000 80,000
Other accrued liabilities 258,937 265,906
------------ ----------
Accrued Expenses and Other Liabilities $ 727,034 $1,228,878
============ ==========

10. SHAREHOLDERS' INTEREST

During the three months ended October 31, 2010, the Company recognized
expense of $8,972 for stock options issued to employees in prior years.

On June 2, 2010, we entered into an agreement with Crisnic Fund, S.A.
("Crisnic") to sell up to two million shares of our common stock to Crisnic at a
15% discount from the volume weighted average price on the date the SEC declared
our registration statement effective.

Following the closing date for the sale, the stock price went down rapidly,
to the point where Crisnic was unable to complete the funding for the
transaction. Because the stock was trading below the discounted price of $2.04,
portions of the shares could not be sold to third parties at the agreed-upon
price, as had been planned by Crisnic. Shares were sold in several traunches,
initially at the agreed upon price per share of $2.04, and as market conditions
worsened, at lower prices which would still enable the Company to receive the
necessary financing. No shares were sold below $0.90.

Page 11

The Company ultimately received approximately $1.6 million for the sale of
1,447,867 shares of common stock (including 75,000 shares given to Crisnic as a
fee). The remaining 627,133 shares of stock remain outstanding and are
reflected as a receivable reducing equity in our financial statements. These
shares were valued at $0.90. Plans to sell these shares had been halted due to
market conditions. In November 2010, the Company issued 69,528 shares to
attorneys and the contractor where the CEO is employed to offset accrued
liabilities. We intend to issue some of the remaining outstanding shares to
offset additional accrued liabilities to employees and contractors. The Company
is also in discussions with several parties interested in purchasing the
remaining outstanding shares.

11. CONTINGENCIES

As of October 31, 2010, CTTC and its majority owned subsidiary, VVI, have
remaining obligations, contingent upon receipt of certain revenue, to repay up
to $199,006 and $203,478, respectively, in consideration of grant funding
received in 1994 and 1995. CTTC is also obligated to pay at the rate of 7.5% of
its revenue, if any, from transferring rights to certain inventions supported by
the grant funds. VVI is obligated to pay at rates of 1.5% of its net sales of
supported products or 15% of its revenue from licensing supported products, if
any. We recognize these obligations only if we receive revenue related to the
grant funds. We recognized approximately $475 of these obligations in the
quarter ended October 31, 2010.

Carolina Liquid Chemistries Corporation, et al. (Case pending) - On August
29, 2005, we filed a complaint against Carolina Liquid Chemistries Corporation
("Carolina Liquid") in the United States District Court for the District of
Colorado, alleging patent infringement of our patent covering homocysteine
assays, and seeking monetary damages, punitive damages, attorneys' fees, court
costs and other remuneration at the option of the court. As we became aware of
other infringers, we amended our complaint to add as defendants Catch, Inc.
("Catch") and the Diazyme Laboratories Division of General Atomics ("Diazyme").
On September 6, 2006, Diazyme filed for declaratory judgment in the Southern
District of California for a change in venue and a declaration of
non-infringement and invalidity. On September 12, 2006, the District Court in
Colorado ruled that both Catch and Diazyme be added as defendants to the
Carolina Liquid case. On October 23, 2006, Diazyme requested the United States
Patent and Trademark Office (the "USPTO") to re-evaluate the validity of our
patent and this request was granted by the USPTO on December 14, 2006. On July
30, 2009, the U.S. Patent and Trademark Office's Board of Patent Appeals and
Interferences (BPAI) upheld the homocysteine patent. In September 2008, the
patent had been denied by the examiner, but that denial was overruled by the
BPAI. While the examiner had appealed that BPAI decision, delaying further
action, that appeal was denied by the BPAI on December 13, 2010. Future action
on this case pends final action from the USPTO, prior to being returned to the
U.S. District Court for the District of Colorado.

Employment matters - former employee (Cases pending) - In September 2003, a
former employee filed a whistleblower complaint with OSHA alleging that the
employee had been terminated for engaging in conduct protected under the
Sarbanes Oxley Act of 2002 (SOX). In February 2005, OSHA found probable cause
to support the employee's complaint and ordered reinstatement and payment of
damages. CTTC filed objections and requested a de novo hearing before an
Administrative Law Judge ("ALJ"). Based on evidence submitted at the May 2005
hearing, in October 2005 the ALJ issued a written decision recommending
dismissal of the employee's claim without relief. The employee then appealed
the case to the Administrative Review Board ("ARB"). In March 2008, the ARB
issued a decision and order of remand, holding that the ALJ erred in shifting
the burden of proof to CTTC based on a mere inference of discrimination and
remanding the case to the ALJ for clarification of the judge's analysis under
the appropriate burden of proof. In January 2009, the ALJ ruled in favor of
CTTC on the ARB remand. The employee has now appealed the January 2009 ALJ
ruling to the ARB and we await the ARB's decision. The employee had previously
requested reconsideration of the ARB order of remand based on the Board's
failure to address the employee's appeal issues; that request was denied by the
ARB in October 2008.

In August 2007, the same former employee filed a new SOX whistleblower
complaint with OSHA alleging that in April 2007 CTTC and its former general
counsel retaliated against the employee for past-protected conduct by refusing
to consider the employee's new employer when awarding a consulting contract. In
March 2008, OSHA dismissed the employee's complaint citing the lack of probable
cause. The employee filed objections and requested de novo review by an ALJ. In
August 2008, the employee gave notice of intent to terminate proceedings before
the

Page 12

ALJ and remove the case to federal district court. In October 2008, the former
employee moved to voluntarily dismiss with prejudice the case before the ALJ. We
anticipate no further action on this matter.

On September 5, 2008, CTTC filed a complaint in the U.S. District Court for
the District of Connecticut against the former employee seeking a declaration
that CTTC did not violate SOX as alleged in the employee's 2007 OSHA complaint,
and to recover approximately $80,000 that CTTC paid to the employee in
compliance with a court order that was subsequently vacated by the U.S. Court of
Appeals for the Second Circuit. On July 1, 2009, the judge ruled in favor of the
former employee's motion to dismiss. The court abstained from ruling on the
question of unjust enrichment due to the unresolved questions before the
Department of Labor Administrative Review Board.

On December 4, 2008, the former employee filed a complaint with the
Department of Labor asking to have the Connecticut case dismissed. On June 1,
2009, the Department dismissed the former employees complaint, finding that
"there is no reasonable cause to believe that the Respondent (CTTC) violated
SOX". We anticipate no further action on this matter.

John B. Nano vs. Competitive Technologies, Inc - On September 3, 2010, the
Board of Directors of CTTC removed John B. Nano as an Officer of the Corporation
in all capacities for cause, consisting of violation of his fiduciary duties to
the Corporation and violation of the CTTC Corporate Code of Conduct. On
September 13, 2010, the Board of Directors also removed John B. Nano as a
Director of the Corporation in all capacities for cause, consisting of violation
of his fiduciary duties to the Corporation and violation of the CTTC Corporate
Code of Conduct. Details of these actions are outlined in Form 8-K filings with
the SEC on September 13, 2010, and September 17, 2010. Mr. Nano was previously
the Chairman of the Board of Directors, President and Chief Executive Officer of
CTTC.

On September 23, 2010 the Company was served notice that John B. Nano,
CTTC's former Chairman, President and CEO had filed a Notice of Application for
Prejudgment Remedy/Claim and an Application for an Order Pendente Lite for
breach of his employment contract with us. The applications were filed in the
State of Connecticut Superior Court in Bridgeport, CT. Mr. Nano is seeking
$750,000 that he claimed is owed under his contract had he been terminated
without cause. Mr. Nano's employment contract with the Company had called for
arbitration, which has been requested to resolve this conflict. In November
2010, the Company funded $750,000 as a Prejudgment Remedy held in escrow with
the Company's counsel and the case is now proceeding through the arbitration
process, which is expected to take several months. The Company does not believe
it is liable for any of this amount since the former Chairman, President and CEO
was terminated for cause.

Summary - We may be a party to other legal actions and proceedings from
time to time. We are unable to estimate legal expenses or losses we may incur,
if any, or possible damages we may recover, and have not recorded any potential
judgment losses or proceeds in our financial statements to date. We record
expenses in connection with these suits as incurred.

We believe we carry adequate liability insurance, directors and officers
insurance, casualty insurance, for owned or leased tangible assets, and other
insurance as needed to cover us against potential and actual claims and lawsuits
that occur in the ordinary course of our business. However, an unfavorable
resolution of any or all matters, and/or our incurrence of significant legal
fees and other costs to defend or prosecute any of these actions and proceedings
may, depending on the amount and timing, have a material adverse effect on our
consolidated financial position, results of operations or cash flows in a
particular period.

Page 13

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

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, 2010,
filed with the Securities and Exchange Commission ("SEC") on October 27, 2010,
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. ("CTTC"), was incorporated in Delaware in
1971, succeeding an Illinois corporation incorporated in 1968. CTTC and its
majority owned subsidiary (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 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 three ways, retained royalties from licensing our
clients' and our own technologies to our customer licensees, product sales fees
in a business model that allows us to share in the profits of distribution of
finished products, and sales of inventory. 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. We currently maintain a small inventory of our
Calmare(R) pain therapy medical device and we recognize revenue from those sales
as devices are shipped to our customers.

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 working prototypes or finished products. We establish channel
partners based on forging relationships with mutually aligned goals and matched
competencies to deliver solutions that benefit the ultimate end-user.

Sales of our Calmare(R) pain therapy medical device continue to be a major
source of revenue for the Company. Since acquiring the rights to the "Scrambler
Therapy" technology in 2007, the Company has entered into a number of
International distribution agreements, currently covering 34 countries. In 2010,
the Company became its own distributor in the U.S, contracting with
approximately 30 commissioned sales representatives. During fiscal 2010, the
Company entered into several sales agreements with physician groups, who are
implementing pain clinics throughout various regions of the country which are
starting to generate both revenue and more interest in the Calmare(R) device
among doctors and patients. The Calmare(R) device is successfully treating
patients at Walter Reed Army Medical Center and is being reviewed by several
facilities within the Veterans Health Administration.

On November 15, 2010, the Board of Directors of CTTC approved a fiscal
year-end change from July 31 to December 31, in order to align its fiscal
periods with the calendar year.

Page 14

CTTC will file its Form 10-Q for the old 2011 fiscal year period for the
quarter ended October 31, 2010, and will file a Transitional Report on Form 10-Q
for the two and five months ended December 31, 2010. CTTC will subsequently file
its quarterly and annual reports for the new fiscal year ending December 31.
CTTC's annual report on Form 10-K for the fiscal year ending December 31, 2011,
will include separate audited financial statements for the five-month
transitional period.

PRESENTATION

We rounded all amounts in this Item 2 to the nearest thousand dollars.
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 OCTOBER 31, 2010 VS. THREE MONTHS
ENDED OCTOBER 31, 2009 ("FIRST QUARTER FISCAL 2010")

SUMMARY OF RESULTS

We incurred a net loss of $1,094,000 or $0.08 per share for the quarter
ended October 31, 2010, compared to a net loss of $756,000 or $0.08 per share
for the first quarter fiscal 2010, a 45% increase in net loss of $338,000. As
explained in detail below, the increase in the net loss reflects a decrease of
$25,000 in revenue and an increase in expenses of $314,000.

REVENUE

In the quarter ended October 31, 2010, total revenue was $119,000, compared
to $144,000 for the first quarter fiscal 2010, a 17% decrease or $25,000.

We actively market existing technologies, and seek new technologies to grow
the revenue stream. In fiscal 2009, we 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.

Product sales for the quarter ended October 31, 2010, we recorded $108,000
from the sale and shipment of two Calmare(R) pain therapy medical devices to US
customers. In the first quarter fiscal 2010, we recorded $135,000 in revenue
from the sale and shipment of 12 Calmare(R) pain therapy medical devices; one to
a US customer and 11 overseas. Because we are the US distributor, we recognize
more revenue on US sales.

Retained royalties for the quarter ended October 31, 2010, were $8,000,
which was $2,000, or 17% less than the $9,000 of retained royalties reported in
the first quarter fiscal 2010.

EXPENSES

Total expenses increased $314,000 or 35% in the quarter ended October 31,
2010, compared to the first quarter fiscal 2010.

Cost of product sales increased $18,000 or 100% in the quarter ended
October 31, 2010, compared to the first quarter fiscal 2010. This represents the
cost of the two Calmare(R) pain therapy medical devices. There was no cost of
product sales recorded for the devices sold in the first quarter fiscal 2010
because they were shipped directly from the manufacturer.

Personnel and other direct expenses relating to revenue increased $34,000
or 8% in the quarter ended October 31, 2010, compared to the first quarter
fiscal 2010. Personnel and related benefit expenses were lower in the quarter

Page 15

ended October 31, 2010 due to the termination of our former CEO in the middle of
the quarter, as well as severance payments to terminated employees and changes
in benefit plan enrollment and costs. That decrease was offset by increased
patent related expenses ($48,000), primarily due to International patents
associated with our Calmare(R) device, and increased consulting fees ($24,000),
primarily due to work related to Federal government sales of our Calmare(R)
device and the management services our current CEO.

General and administrative expenses increased $262,000 in the quarter ended
October 31, 2010, compared to the first quarter fiscal 2010. The increase is
primarily due to increases in legal fees of $153,000 associated with increased
Board activity relating to the termination of the former CEO and the new legal
activity relating to the former CEO challenging his termination for cause.
Marketing expenses, investor relations expenses, and consultant fee and expenses
were also higher in the quarter ended October 31, 2010, primarily due to work
related to developing and implementing an insurance reimbursement strategy for
our Calmare(R) device and efforts to increase awareness of our Calmare(R) pain
therapy in the medical device market, as well as payments for research reports
completed to increase awareness of the Company and interest in the Company's
stock. The increases were offset by a reduction in the expenses for Section 404
work due to the contracting of a new firm to complete the work at lower cost.

FINANCIAL CONDITION AND LIQUIDITY

Our future cash requirements depend on many factors, including results of
our operations and marketing efforts, results and costs of our legal
proceedings, and our equity financing. To achieve and sustain profitability, we
must increase the number of distributors for our products, broaden the base of
technologies for distribution, license technologies with sufficient current and
long-term revenue streams, and add new licenses. Obtaining rights to new
technologies, granting rights to licensees and distributors, enforcing
intellectual property rights, and collecting revenue are subject to many
factors, some of which are beyond our control. Although we cannot be certain
that we will be successful in these efforts, we believe the combination of our
cash on hand and revenue from executing our strategic plan will be sufficient to
meet our obligations of current and anticipated operating cash requirements
in the near future.

In fiscal 2010, the Company incorporated revenue from the sale of inventory
into its revenue stream. That source of revenue is expected to continue as
sales of its Calmare(R) pain therapy medical device continue to expand and other
products are added to the Company's portfolio of technologies.

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 October 31, 2010, cash and cash equivalents were $873,000 compared to
$907,000 at July 31, 2010. The loss of $1,094,000 for the quarter ended October
31, 2010 contained non-cash charges of $28,000 and reduction in assets and
liabilities of $1,036,000, resulting in cash used in operations of $31,000.

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
utilize the benefit of the remaining NOLs before they expire.

GOING CONCERN

The Company has incurred operating losses since fiscal 2006. During the
year ended July 31, 2010 and into the three months ended October 31, 2010, we
had a significant concentration of revenues from our Calmare(R) pain therapy
medical device technology. We continue to seek revenue from new technologies or
products to mitigate the concentration

Page 16

of revenues, and replace revenues from expiring licenses on other technologies.
At current reduced spending levels, the Company may not have sufficient cash
flow to fund operating expenses beyond the third quarter of calendar 2011.
These conditions raise substantial doubt about the Company's ability to continue
as a going concern.

The Company's continuation as a going concern is dependent upon its
developing recurring revenue streams sufficient to cover operating costs. The
company does not have any significant individual cash or capital requirements in
the budget going forward. During the three months ended October 31, 2010, the
Company undertook a major reduction of its operating expenses. The reduction
continues to be implemented and is expected to reduce costs by $1.5 million
annually. If necessary, CTTC 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. There can be no assurance that the Company
will be successful in such efforts. Failure to develop a recurring revenue
stream sufficient to cover operating expenses would negatively affect the
Company's financial position.

CAPITAL REQUIREMENTS

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 expect our capital expenditures to be less than $100,000 in the coming year.

CONTRACTUAL OBLIGATIONS AND CONTINGENCIES

There have been no substantial changes to our contractual obligations since
July 31, 2010.

Contingencies. Our directors, officers, employees and agents may claim
indemnification in certain circumstances. We seek to limit and reduce our
potential financial obligations for indemnification by carrying directors and
officers liability insurance, subject to deductibles.

We also carry liability insurance, casualty insurance, for owned or leased
tangible assets, and other insurance as needed to cover us against claims and
lawsuits that occur in the ordinary course of business.

Many of our license and service agreements provide that upfront license
fees, license fees and/or royalties we receive are applied against amounts that
our clients or we have incurred for patent application, prosecution, issuance
and maintenance costs. If we incur such costs, we expense them as incurred, and
reduce our expense if we are reimbursed from future fees and/or royalties we
receive. If the reimbursement belongs to our client, we record no revenue or
expense.

As of October 31, 2010, CTTC and its majority-owned subsidiary, VVI, have
remaining obligations, contingent upon receipt of certain revenue, to repay up
to $199,006 and $203,478, respectively, in consideration of grant funding
received in 1994 and 1995. CTTC is also obligated to pay at the rate of 7.5% of
its revenue, if any, from transferring rights to certain inventions supported by
the grant funds. VVI is obligated to pay at rates of 1.5% of its net sales of
supported products or 15% of its revenue from licensing supported products, if
any. We recognize these obligations only if we receive revenue related to the
grant funds. We recognized approximately $475 of these obligations in the
quarter ended October 31, 2010.

We engage independent consultants who provide us with business development
and/or evaluation services under contracts that are cancelable on certain
written notice. These contracts include contingencies for potential incentive
compensation earned solely on sales resulting directly from the work of the
consultant. For the three months ended October 31, 2010, and 2009, we recorded
approximately $14,000, and $11,000, respectively of these contingent
compensation expenses.

Page 17

CRITICAL ACCOUNTING ESTIMATES

There have been no significant changes in our accounting estimates
described under the caption "Critical Accounting Estimates" included in Part II,
Item 7, "Management's Discussion and Analysis of Financial Condition and Results
of Operations," in our Annual report on Form 10-K for the year ended July 31,
2010.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Not applicable.

ITEM 4. CONTROLS AND PROCEDURES

(a) Evaluation of disclosure controls and procedures
------------------------------------------------

Our management evaluated the effectiveness of the design and operation of
our disclosure controls and procedures (as defined in Securities Exchange Act
Rules 13a-15(e) and 15d-15(e)) as of October 31, 2010. Our disclosure controls
and procedures are designed to ensure that information required to be disclosed
by the issuer in the reports that it files or submits under the Act (15 U.S.C.
78a et seq.) is recorded, processed, summarized, and reported, within the time
periods specified in the Commission's rules and forms. Disclosure controls and
procedures include, without limitation, controls and procedures designed to
ensure that information required to be disclosed by an issuer in the reports
that it files or submits under the Act is accumulated and communicated to the
issuer's management, including its principal executive and principal financial
officers, or persons performing similar functions, as appropriate to allow
timely decisions regarding required disclosure. Based on this evaluation,
management concluded that our disclosure controls and procedures were effective
as of October 31, 2010.

(b) Change in Internal Controls
---------------------------

There were no changes in our internal control over financial reporting for
the period ending October 31, 2010, that have materially affected, or are
reasonably likely to materially affect, our internal control over financial
reporting.

Page 18

PART II - OTHER INFORMATION

Item 1. Legal Proceedings

See Part I, Note 11 to the accompanying unaudited condensed consolidated
financial statements of this Quarterly Report on Form 10-Q.

Item 1A. Risk Factors

There have been no material changes with respect to the risk factors
disclosed in our Annual Report on Form 10-K for the fiscal year ended July 31,
2010.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

None

Item 3. Defaults Upon Senior Securities

None

Item 5. Other Information

None.

Item 6. Exhibits

31.1 Certification by the Chief Executive Officer of Competitive Technologies,
Inc. pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (Rule
13a-14(a) or Rule 15d-14(a)).

31.2 Certification by the Chief Financial Officer of Competitive Technologies,
Inc. pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (Rule
13a-14(a) or Rule 15d-14(a)).

32.1 Certification by the Chief Executive Officer of Competitive Technologies,
Inc. pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C.
1350) (furnished herewith).

32.2 Certification by the Chief Financial Officer of Competitive Technologies,
Inc. pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C.
1350) (furnished herewith).

Page 19

SIGNATURES
----------

Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.

COMPETITIVE TECHNOLOGIES, INC.
(the registrant)

By /s/ Johnnie D. Johnson.
--------------------------
Johnnie D. Johnson
Chief Executive Officer,
Chief Financial Officer, Chief Accounting Officer
(Principal Executive, Financial, and Accounting
Officer)

March 3, 2011

Page 20

INDEX TO EXHIBITS

Exhibit No. Description
----------- -----------

31.1 Certification by the Chief Executive Officer of Competitive Technologies,
Inc. pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (Rule
13a-14(a) or Rule 15d-14(a)).

31.2 Certification by the Chief Financial Officer of Competitive Technologies,
Inc. pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (Rule
13a-14(a) or Rule 15d-14(a)).

32.1 Certification by the Chief Executive Officer of Competitive Technologies,
Inc. pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C.
1350) (furnished herewith).

32.2 Certification by the Chief Financial Officer of Competitive Technologies,
Inc. pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C.
1350) (furnished herewith).

Page 21