COMPETITIVE TECHNOLOGIES INC - 10-Q Quarterly Report

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

FORM 10-Q

(Mark One)

[x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended January 31, 2003

OR

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

Commission file number 1-8696

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

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

1960 Bronson Road
Fairfield, Connecticut 06824
(Address of principal executive (Zip Code)
offices)

Registrant's telephone number, including area code: (203) 255-6044

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 is an accelerated filer
(as defined in rule 12b-2 of the Exchange Act). Yes ____. No X
..

Common Stock outstanding as of March 1, 2003 - 6,201,345 shares

Exhibit Index on sequentially numbered page 29 of 33.

Page 1 of 33 sequentially numbered pages

COMPETITIVE TECHNOLOGIES, INC. AND SUBSIDIARIES

INDEX

PART I. FINANCIAL INFORMATION Page No.

Item 1. Financial Statements

A. Condensed Financial Statements (Unaudited)

Consolidated Balance Sheets at
January 31, 2003 and July 31, 2002 3

Consolidated Statements of Operations for the
three months ended January 31, 2003 and 2002 4

Consolidated Statements of Operations for the
six months ended January 31, 2003 and 2002 5

Consolidated Statement of Changes in
Shareholders' Interest for the six
months ended January 31, 2003 6

Consolidated Statements of Cash Flows for the
six months ended January 31, 2003 and 2002 7

Notes to Consolidated Financial Statements 8-16

Item 2. Management's Discussion and Analysis of
Financial Condition and Results of
Operations 16-27

Item 3. Quantitative and Qualitative Disclosures
About Market Risk 27

Item 4. Controls and Procedures 27

PART II. OTHER INFORMATION

Item 1. Legal Proceedings 27-28
Item 4. Submission of Matters to a Vote
of Security Holders 28
Item 5. Other Matters 29
Item 6. Exhibits and Reports on Form 8-K 29

Signatures 29

Certifications 30-33

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

COMPETITIVE TECHNOLOGIES, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
January 31, 2003 and July 31, 2002
(Unaudited)

January 31, July 31,
2003 2002
ASSETS

Current assets:
Cash and cash equivalents $ 107,305 $ 750,421
Short-term investments 1,100,849 2,136,874
Accounts receivable 1,929,818 1,199,483
Notes receivable - E. L. Specialists, Inc. -- 200,000
Prepaid expenses and other current assets 264,406 261,198
Total current assets 3,402,378 4,547,976

Property and equipment, at cost, net 39,729 42,877
Investments, at cost 131,373 1,075,684
Intangible assets acquired, net 704,487 733,246
TOTAL ASSETS $ 4,277,967 $ 6,399,783

LIABILITIES AND SHAREHOLDERS' INTEREST

Current liabilities:
Accounts payable, including $555
payable to related parties in 2003 $ 221,082 $ 1,726,237
Accrued liabilities 1,583,273 1,680,903
Total current liabilities 1,804,355 3,407,140

Commitments and contingencies (Note 8) --

Shareholders' interest:
5% preferred stock, $25 par value 60,675 60,675
Common stock, $.01 par value 62,013 61,907
Capital in excess of par value 26,747,229 26,893,287
Treasury stock, at cost; 36,434
shares at July 31, 2002 -- (258,037)
Accumulated deficit (24,396,305) (23,765,189)

Total shareholders' interest 2,473,612 2,992,643

TOTAL LIABILITIES AND SHAREHOLDERS'
INTEREST $ 4,277,967 $ 6,399,783

See accompanying notes

PART I. FINANCIAL INFORMATION (Continued)

COMPETITIVE TECHNOLOGIES, INC. AND SUBSIDIARIES
Consolidated Statements of Operations
for the three months ended January 31, 2003 and 2002
(Unaudited)

2003 2002

Revenue $ 833,004 $ 797,189

Patent enforcement expenses, net of
reimbursements 118,362 553,022
Personnel and other direct expenses
relating to revenue, of which
$555 and $32,957 were to
related parties in 2003 and 2002,
respectively 670,672 594,383
General and administrative expenses 515,787 296,929
1,304,821 1,444,334
Operating loss (471,817) (647,145)

Impairment losses:
On loans to E. L. Specialists, Inc. -- (519,200)
On investment in NTRU Cryptosystems, Inc. (944,000) --
Interest income 6,105 26,677
Other income (expense), net (311) (455)

Loss before minority interest (1,410,023) (1,140,123)
Minority interest in losses of subsidiary -- (26,936)

Net loss $(1,410,023) $(1,167,059)

Net loss per share:
Basic and diluted $ (0.23) $ (0.19)

Weighted average number of common
shares outstanding:
Basic and diluted 6,174,196 6,144,242

See accompanying notes

PART I. FINANCIAL INFORMATION (Continued)

COMPETITIVE TECHNOLOGIES, INC. AND SUBSIDIARIES
Consolidated Statements of Operations
for the six months ended January 31, 2003 and 2002
(Unaudited)

2003 2002

Revenue $ 1,214,762 $ 1,206,928

Patent enforcement expenses, net of
reimbursements 153,505 1,184,637
Personnel and other direct expenses
relating to revenue, of which
$6,122 and $64,730 were to
related parties in 2003 and 2002,
respectively 1,410,668 1,045,912
General and administrative expenses 939,781 707,568
2,503,954 2,938,117
Operating loss (1,289,192) (1,731,189)

Reversal of accounts payable exchanged
for contingent note payable 1,583,445 --
Impairment losses:
On loans to E. L. Specialists, Inc. -- (519,200)
On investment in NTRU Cryptosystems, Inc. (944,000) --
Interest income 18,942 71,625
Other income (expense), net (311) (399)

Loss before minority interest (631,116) (2,179,163)
Minority interest in losses of subsidiary -- (26,936)

Net loss $ (631,116) $(2,206,099)

Net loss per share:
Basic and diluted $ (0.10) $ (0.36)

Weighted average number of common
shares outstanding:
Basic and diluted 6,166,284 6,141,797

See accompanying notes

PART I. FINANCIAL INFORMATION (Continued)

COMPETITIVE TECHNOLOGIES, INC. AND SUBSIDIARIES
Consolidated Statement of Changes in Shareholders' Interest
For the six months ended January 31, 2003
(Unaudited)

See accompanying notes

PART I. FINANCIAL INFORMATION (Continued)

COMPETITIVE TECHNOLOGIES, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
for the six months ended January 31, 2003 and 2002
(Unaudited)

2003 2002
Cash flow from operating activities:
Net loss $ (631,116) $(2,206,099)
Noncash items included in net loss:
Depreciation and amortization 95,474 103,319
Minority interest -- 26,936
Stock compensation 40,740 35,907
Reversal of accounts payable exchanged
for contingent note payable (1,583,445) --
Impairment losses on investments and 944,000 519,200
loans
Other 311 --
Net changes in various operating accounts:
Receivables (730,335) 988,596
Prepaid expenses and other current
assets (3,208) (79,676)
Accounts payable and accrued
liabilities 52,005 (862,916)
Net cash flow from operating activities (1,815,574) (1,474,733)

Cash flow from investing activities:
Purchases of property and equipment, net (13,567) (26,232)
Purchase of intangible assets (50,000) --
Proceeds from other short-term investments 1,036,025 2,181,345
Investments in and loans to cost-
method affiliates -- (344,200)
Sale of interests in E. L. Specialists, Inc. 200,000
- --
Other, net -- (26,936)
Net cash flow from investing activities 1,172,458 1,783,977

Net increase (decrease) in cash and cash
equivalents (643,116) 309,244
Cash and cash equivalents,(A) beginning
of period 750,421 224,436
Cash and cash equivalents,(B) end of period $ 107,305 $ 533,680

(A) Does not include short-term investments of $2,136,874 and $4,793,441
in 2003 and 2002, respectively.

(B) Does not include short-term investments of $1,100,849 and $2,612,096
in 2003 and 2002, respectively.

See accompanying notes

PART I. FINANCIAL INFORMATION (Continued)

COMPETITIVE TECHNOLOGIES, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements
(Unaudited)

1. Interim Financial Statements

Interim financial information presented in the accompanying
financial statements and notes hereto is unaudited.

The year-end balance sheet data were derived from audited
financial statements but do not include all disclosures required by
accounting principles generally accepted in the United States of
America. Certain amounts, including operating expenses, have been
reclassified to conform with the presentation in financial
statements for fiscal 2003.

In the opinion of management, all adjustments that are
necessary to present the financial statements fairly in conformity
with accounting principles generally accepted in the United States
of America, consisting only of normal recurring adjustments, have
been made.

The interim financial statements and notes thereto as well as
the accompanying Management's Discussion and Analysis of Financial
Condition and Results of Operations should be read in conjunction
with the Company's Annual Report on Form 10-K for the year ended
July 31, 2002.

The Company has incurred substantial losses and negative cash
flows from operations for the periods ended January 31, 2003 and
2002, respectively. For the year ended July 31, 2002, the Company
incurred a net loss of approximately $4,016,000 and negative cash
flows from operating activities of approximately $1,666,000.
Management expects that currently available funds and expected
revenues will be sufficient to finance cash needs for our current
material operating and enforcement activities at least into the
third quarter of fiscal 2004. However, we cannot assure you that
our current expectations regarding the sufficiency of currently
available funds and expected revenues will prove to be accurate.

2. Net Loss Per Share

The following table sets forth the computations of basic and
diluted net loss per share.

At January 31, 2003 and 2002, respectively, a total of options
and warrants to purchase 997,767 and 650,267 shares of common stock
were outstanding but were not included in the computation of
earnings per share because they were anti-dilutive (of total options
and warrants outstanding of 997,767 and 650,267).

3. Notes Receivable

E. L. Specialists, Inc.

Through a series of bridge financing agreements, the Company
loaned $1,056,300 ($956,300 in cash and $100,000 in services) to
E. L. Specialists, Inc. (ELS).

Effective August 5, 2002, CTT sold and transferred all its
interests related to ELS to MRM Acquisitions, LLC (MRM) for $200,000
cash. The transferred interests include CTT's notes receivable in
the face amount of $1,056,300 (plus interest) from ELS, its related
security interest in ELS' intellectual property, all its other
interests under agreements in connection with its notes receivable
from ELS and CTT's interest in a technology servicing agreement
related to ELS's intellectual property.

CTT collected $200,000 from MRM on August 5, 2002, after which
CTT had no remaining interest in ELS.

4. Receivables

Receivables were:
January 31, July 31,
2003 2002

Royalties $1,892,927 $1,158,685
Other 36,891 40,798
$1,929,818 $1,199,483

5. Investment in NTRU Cryptosystems, Inc.

In March 2003, the NTRU Cryptosystems, Inc. (NTRU) Board of
Directors approved a plan to redeem all outstanding shares of its
Series A and Series B Preferred Stock (NTRU Preferred Stock) in
exchange for cash or NTRU common stock. This will result in NTRU's
former Preferred Stock holders owning approximately 40% of NTRU's
outstanding common stock.

Competitive Technologies, Inc. (CTT) is a minority investor in
NTRU and currently owns 3,053,000 shares of NTRU common stock and
200,526 shares of NTRU Preferred Stock. At July 31 and October 31,
2002, CTT carried its investment in NTRU on the cost method at
$1,034,381. CTT will exchange its NTRU Preferred Stock for
approximately $90,000 in cash and will own approximately 10% of
NTRU's outstanding common stock after the recapitalization plan is
implemented.

CTT recorded a charge of $944,000 in its second quarter ended
January 31, 2003 due to the uncertain timing and amount of CTT's
expected future cash flows from its investment in NTRU's common
stock after its recapitalization.

CTT continues to hold a seat and participate actively on NTRU's
Board of Directors. CTT's management continues to believe NTRU's
encryption technology has value and these actions provide NTRU an
opportunity to allow applications to evolve to meet its customer's
needs.

6. Intangible Assets Acquired

The Company purchased additional patents during the first half
of fiscal 2003 for $50,000. These patents are being amortized on a
straight-line basis over their estimated remaining lives,
approximately 18 years.

The Company reported amortization expense of $78,759 in the
first half of fiscal 2003 and expects to record annual amortization
expense of approximately $158,000 for fiscal 2003, 2004, 2005, 2006,
$111,000 for fiscal 2007, and $3,000 for fiscal 2008.

January 31, July 31,
2003 2002
Intangible assets acquired,
principally licenses and
patented technologies,
at adjusted cost $1,687,067 $1,637,067
Accumulated amortization (982,580) (903,821)
$ 704,487 $ 733,246

7. Accrued Liabilities

Accrued liabilities were:
January 31, July 31,
2003 2002

Royalties payable $1,161,675 $1,308,381
Accrued professional fees 170,716 65,162
Accrued compensation 94,455 157,416
Deferred revenues 106,667 106,667
Other 49,760 43,277
$1,583,273 $1,680,903

8. Contingencies

Contingent Obligation

On October 28, 2002, the Company signed an agreement making any
further payments to our former patent litigation counsel completely
contingent on future receipts from Fujitsu. This contingent
obligation is reflected in a promissory note payable to our former
patent litigation counsel for $1,683,349 plus simple interest at the
annual rate of 11% from the agreement date (approximately $49,000 at
January 31, 2003) payable only from future receipts in a settlement
or other favorable outcome of the litigation against Fujitsu, if
any. Accordingly, in the first quarter of fiscal 2003, we reversed
from accounts payable $1,583,445 that was accrued at July 31, 2002.
Since interest is also contingently payable, the Company has
recorded no interest expense with respect to this note.

Litigation

Fujitsu

In December 2000, (coincident with filing a complaint with the
United States International Trade Commission (ITC) that was
withdrawn in August 2001) CTT and the University of Illinois filed a
complaint against Fujitsu Limited, Fujitsu General Limited, Fujitsu
General America, Fujitsu Microelectronics, Inc. and Fujitsu Hitachi
Plasma Display Ltd. (Fujitsu et al.) in the United States District
Court for the Central District of Illinois seeking damages for past
infringements and an injunction against future sales of plasma
display panels (PDPs) that infringe two U. S. patents held by CTT's
client, the University of Illinois. The two patents cover energy
recovery in flat plasma display panels. In July 2001, CTT
reactivated this complaint to pursue legal remedies (damages for
past infringing sales and possibly damages for willfulness) that are
not available at the ITC. In May 2002, the District Court granted
defendants' motion to transfer this case to the Northern District of
California. The trial in this case is currently scheduled for
October 2003.

Effective July 23, 2002, CTT and the University of Illinois
agreed that the University of Illinois would take the lead in this
litigation and assume the cost of new lead counsel. Before this
agreement, CTT bore the entire costs of lead counsel in this
litigation. In December 2002, CTT was dismissed as co-plaintiff
from this litigation but retains its economic interest in any
potential favorable outcome.

In September 2001, Fujitsu et al. filed suit against CTT and
Plasmaco, Inc. in the United States District Court for the District
of Delaware. This lawsuit alleged, among other things, that CTT
misappropriated confidential information and trade secrets supplied
by Fujitsu during the course of the ITC action. It also alleged
that, with Plasmaco's assistance, CTT abused the ITC process to
obtain information to which it otherwise would not have been
entitled and which it will use in the action against Fujitsu in the
United States District Court for the Central District of Illinois
(now in the Northern District of California). The Delaware District
Court dismissed this action at the request of Fujitsu who
subsequently re-instituted the case in the Northern District of
California.

CTT is unable to estimate the legal expenses or the loss it may
incur or the possible damages it may recover in these suits, if any,
and has recorded no potential judgment proceeds in its financial
statements to date.

LabCorp

On May 4, 1999, Metabolite Laboratories, Inc. (MLI) and CTT
(collectively plaintiffs) filed a complaint and jury demand against
Laboratory Corporation of America Holdings d/b/a LabCorp (LabCorp)
in the United States District Court for the District of Colorado.
The complaint alleged, among other things, that LabCorp owes
plaintiffs royalties for homocysteine assays performed beginning in
the summer of 1998 using methods falling within the claims of a
patent owned by CTT. CTT licensed the patent non-exclusively to MLI
and MLI sublicensed it to LabCorp. Plaintiffs claimed LabCorp's
actions constitute breach of contract and patent infringement. The
claim sought an injunction ordering LabCorp to perform all its
obligations under its agreement, to cure past breaches, to provide
an accounting of wrongfully withheld royalties and to refrain from
infringing the patent. Plaintiffs also sought unspecified money and
exemplary damages and attorneys' fees, among other things. LabCorp
filed an answer and counterclaims alleging noninfringement, patent
invalidity and patent misuse.

The jury that heard this case in November 2001 confirmed the
validity of CTT's patent rights and found that LabCorp willfully
contributed to and induced infringement and breached its contract.
In December 2001, the Court entered judgment affirming the jury's
verdict.

In November 2002, the Court confirmed its judgment in favor of
CTT and MLI. The Court's amended judgment awarded CTT approximately
$1,019,000 damages, $1,019,000 enhanced damages, and $132,000
prejudgment interest. If the Court's judgment is upheld in post-
trial motions and on appeal, CTT will retain approximately
$1,000,000 of damages awarded plus post-judgment interest at the
statutory rate. This judgment is pending appeal and post-trial
motions relating to awarding attorneys' fees to CTT.

CTT is unable to estimate the legal expenses it may incur or
the possible damages it may ultimately recover in this suit, if any.
CTT has not recorded revenue in its financial statements to date for
awarded damages, awarded enhanced damages or awarded interest from
the Court's November 2002 judgment.

In a January 2003 Stipulated Order, LabCorp agreed to post a
bond for all damages awarded in the November 2002 judgment and to
pay CTT a percentage of sales of homocysteine tests performed since
November 1, 2002 through final disposition of this case. In
addition, pursuant to this order, LabCorp agreed to pay $250,000 (in
twelve monthly installments of $20,824 each) for homocysteine assays
performed from November 1, 2001 through October 31, 2002 (of which
it has paid approximately $62,000). In exchange, this Stipulated
Order stayed execution of the monetary judgment and the permanent
injunction against LabCorp in the Court's November 2002 judgment.
This Stipulated Order is without prejudice to any party's position
on appeal. At January 31, 2003, CTT had recorded total royalties of
$403,408 (revenues of $161,363 in the second quarter of fiscal 2003
(of which $99,954 relate to assays performed from November 1, 2001
through October 31, 2002) and royalties payable of $242,045) from
LabCorp pursuant to this January 2003 Stipulated Order. LabCorp has
appealed the November 2002 judgment in favor of CTT. If the
judgment is reversed on appeal, LabCorp's ability to recover amounts
paid to CTT will depend on the extent and reason for the reversal.
CTT's management believes the probability that LabCorp will recover
such amounts is very unlikely.

MaternaTM

The University of Colorado Foundation, Inc., the University of
Colorado, the Board of Regents of the University of Colorado, Robert
H. Allen and Paul A. Seligman, plaintiffs, previously filed a
lawsuit against American Cyanamid Company (a subsidiary of Wyeth),
defendant, in the United States District Court for the District of
Colorado. This case involved a patent for an improved formulation
of Materna, a prenatal vitamin compound sold by defendant. While
the Company was not and is not a party to this case, the Company had
a contract with the University of Colorado to license University of
Colorado inventions to third parties. As a result of this contract,
the Company is entitled to share 18.2% of damages awarded to the
University of Colorado, if any, after deducting the legal expenses
of this suit.

On July 7, 2000, the District Court concluded that Robert H.
Allen and Paul A. Seligman were the sole inventors of the
reformulation of Materna that was the subject of the patent and that
defendant is liable to them and the other plaintiffs on their claims
for fraud and unjust enrichment.

On August 13, 2002, the District Court judge awarded
approximately $54 million, plus certain interest from January 1,
2002, to the plaintiffs, of which CTT's share would be approximately
$6 million plus its proportionate share of interest.

The defendant has appealed to the U.S. Court of Appeals for the
Federal Circuit and posted a $59 million bond and plaintiffs have
responded. CTT is unable to predict when this lawsuit will finally
be settled or when it will receive its share of damages finally
awarded, if any.

CTT has recorded no potential judgment proceeds in its
financial statements to date. The Company records expenses in
connection with this suit as they are incurred.

Optical Associates, Limited Partnership (OALP)

In 1989, University Optical Products Co. (UOP), a majority-
owned subsidiary of CTT which had developed a computer-based system
to manufacture specialty contact lenses, intraocular lenses and
other precision optical products, sold substantially all its assets
to Unilens Corp. USA (Unilens). The proceeds of the sale included
an installment obligation for $5,500,000 payable at a minimum of
$250,000 per year beginning in January 1992. Due to the uncertainty
of the timing and amount of future cash flows, income on the
installment obligation is recorded net of related expenses as the
payments are received. Cash received in excess of the fair value
assigned to the original obligation is recorded as other income from
continuing operations. As cash proceeds are received, CTT records a
4% commission expense payable to its joint venture partner, OALP.
Unilens made no payments in fiscal 2003 or 2002.

On November 4, 1991, a suit was filed in the Superior Court of
the Judicial District of Fairfield, Connecticut, at Bridgeport by
Bruce Arbeiter, Jeffrey A. Bigelow, Jeffrey W. Leiderman, Optical
Associates, Limited Partnership and Optical Associates Management
Corp. (OAMC) purportedly on behalf of all the limited partners of
OALP, as plaintiffs, against Genetic Technology Management, Inc.
(GTM), University Optical Products Co., the Company, Jay Warren
Blaker, L.W. Miles, A. Sidney Alpert, Frank R. McPike, Jr., Michael
Behar, Bruce E. Langton, Arthur M. Lieberman and Harry Van
Benschoten, as defendants. The complaint alleges, among other
things, that in January 1989 the defendants, GTM, UOP and the
Company, sold substantially all the assets of OALP to Unilens Corp.
USA and disbursed only 4% of the sales price to OALP, all in
violation of certain agreements, representations and legal
obligations; that OALP is entitled to the full proceeds of the sale
to Unilens; and that by vote of limited partners holding in excess
of 80% of the capital interests of OALP, the limited partners have
removed GTM as the general partner of OALP and replaced GTM with
OAMC. The complaint claims, among other things, money damages (in
an amount not specified in the claim for relief); treble and
punitive damages (with no amounts specified); attorneys fees; an
accounting; temporary and permanent injunctive relief; and judgment
holding that OAMC was legally substituted for GTM as the general
partner of OALP. Based upon all the facts available, management
believes that the claims asserted in the suit are without merit, and
the Company has vigorously defended against plaintiffs' claims. On
September 14, 2001, the attorney referee recommended that the Court
grant defendants' motion for dismissal, but plaintiffs objected.
There has been no further action and no final order has yet been
entered. Through January 31, 2003, the Company had received
aggregate cash proceeds of approximately $1,011,000 from the January
1989 sale of UOP's assets to Unilens.

CTT incurred no legal expenses related to this suit in the
first half of either fiscal year.

9. Related Party Transactions

During the six months ended January 31, 2003 and 2002, CTT
incurred charges of approximately $6,000 and $65,000, respectively,
for consulting services (including expenses and use taxes) provided
by one and two directors in the respective periods.

10. Recently Issued Accounting Pronouncements

In June 2001, the Financial Accounting Standards Board (FASB)
issued Statement No. 142, "Goodwill and Other Intangible Assets."
This statement establishes financial accounting and reporting for
acquired goodwill and other intangible assets acquired individually
or with a group of other assets but not acquired in a business
combination. The Company's adoption of this statement on August 1,
2002, did not have a material effect on its financial condition or
results of operations.

In August 2001, the FASB issued Statement No. 144, "Accounting
for the Impairment or Disposal of Long-lived Assets." This
statement establishes a single accounting model for the impairment
of long-lived assets. The Company's adoption of this statement on
August 1, 2002, did not have a material effect on its financial
condition or results of operations.

In December 2002, the FASB issued Statement No. 148, "Accounting
for Stock-Based Compensation - Transition and Disclosure." This
statement amends Statement No. 123, "Accounting for Stock-Based
Compensation," to provide alternative transition methods for a
voluntary change to the fair value based method of accounting for
stock-based employee compensation. This statement also requires
prominent disclosures in annual and interim financial statements
about the method of accounting for stock-based employee compensation
and its effect on reported results. The disclosure provisions of
this statement will be effective for the Company's third quarter
ending April 30, 2003.

In November 2002, the FASB issued Interpretation No. 45,
"Guarantor's Accounting and Disclosure Requirements for Guarantees,
Including Indirect Guarantees of Indebtedness of Others." FIN 45
expands previously issued accounting guidance and disclosure
requirements for certain guarantees and requires an entity to
recognize an initial liability for the fair value of an obligation
assumed by issuing a guarantee. The disclosure requirements of FIN
45 are effective for all financial statements issued after December
15, 2002. The Company will apply the initial recognition and
measurement provisions on a prospective basis to guarantees issued
or modified after December 31, 2002. Adoption of FIN 45 did not
have a material impact on the Company's financial position, results
of operations or cash flows.

In January 2003, the FASB issued Interpretation No. 46,
"Consolidation of Variable Interest Entities," to address
consolidation by business enterprises of variable interest entities
with certain characteristics. The Company is not involved in any
arrangements that this Interpretation addresses.

PART I. FINANCIAL INFORMATION (Continued)

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

We have rounded all amounts in this Item 2 to the nearest
thousand dollars. In addition, all periods discussed in this Item 2
relate to our fiscal years ending July 31 (first, second, third and
fourth quarters ending October 31, January 31, April 30 and July 31
respectively).

Critical Accounting Policies

Preparation of our consolidated financial statements in
conformity with accounting principles generally accepted in the
United States of America requires that we make estimates and
assumptions that affect the reported amounts of assets and
liabilities at the date of the financial statements, the reported
amounts of revenues and expenses for the reporting period, and
related disclosures. We base our estimates on the information
available at the time and assumptions we believe are reasonable.

We believe that significant estimates, assumptions and
judgments affect the following critical accounting policies used in
preparing our consolidated financial statements. Our audit
committee has reviewed their selection, application and disclosure.

Revenue Recognition

We derive revenues primarily from patent and technology license
and royalty fees. Since these revenues result from our
representation agreements with owners and assignees of intellectual
property rights, we record revenues net of the owners' and
assignees' shares of license and royalty fees. We stipulate the
terms of our licensing arrangements in written agreements with the
owners, assignees and licensees.

Single element arrangements

Since we usually have no significant obligations after we
execute license agreements, they are generally single element
arrangements. Under the terms of our license agreements, we
generally receive an upfront license fee and a royalty stream
based on the licensee's sales of products applying the licensed
technology.

License fees under single element arrangements

We recognize upfront, nonrefundable license fees when our
licensee executes the license agreement and pays the license
fee. When these two events occur, we have persuasive evidence
of an arrangement, no continuing obligations, completed
delivery, and assurance of collection.

Royalty fees under single element arrangements

Although we fix the royalty rate (e.g., percentage of
sales or rate per unit sold) in the license agreement, the
amount of earned royalties is contingent upon the amount of
licensed product the licensee sells. Royalties earned in each
reporting period are contingent on the outcome of events (i.e.,
the licensee's sales of licensed products) occurring within
that period that are not within our control and are not
directly tied to our providing services. Therefore, we
recognize this royalty revenue when the contingency is resolved
and we can estimate the amount of royalty fees earned, which is
upon our receipt of the licensee's royalty report.

Other arrangements

In limited instances, we enter into multiple element
arrangements with continuing service obligations. Based upon
the limited verifiable objective evidence available, we
generally defer all revenue from such multiple element
arrangements until we deliver all elements.

In limited instances, we enter into milestone billing
arrangements, which we evaluate on a case-by-case basis. In
these arrangements, we generally defer upfront fees and
recognize the related revenue and other services revenue as
earned over the entire arrangement.

Impairment of Intangible Assets and Long-Term Investments

We review intangible assets and investments in equity
securities that do not have readily determinable fair values for
impairment when events or changes in circumstances indicate that the
carrying amount of the asset may not be recoverable. If the sum of
expected future undiscounted cash flows is less than the carrying
amount of the asset, we recognize an impairment loss measured by the
amount the asset's carrying value exceeds its fair value and re-
evaluate the remaining useful life of the asset. If a quoted market
price is available for the asset or a similar asset, we use it in
determining fair value. If not, we determine fair value as the
present value of estimated cash flows based on reasonable and
supportable assumptions.

We regularly apply this policy to our equity investments in
privately held companies. We consider the investee's financial
health (including cash position), business outlook (including
product stage and viability to continue operations), recent funding
activities, and business plan (including historical and forecast
financial information). These investments are not readily
transferable and our opportunities to liquidate them are limited and
subject to many factors beyond our control, including circumstances
internal to the investee and broader economic conditions.

We also apply this policy regularly to all acquired intangible
assets.

See Notes 3, 7 and 14 to Consolidated Financial Statements and
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, 2002, for complete discussions of the results of
applying this policy in prior fiscal years. See Note 5 to the
accompanying financial statements and Management's Discussion and
Analysis of Financial Condition and Results of Operations in this
Quarterly Report on Form 10-Q for complete discussions of the
results of applying this policy in the current fiscal year.

Impairment of Loans

We review loans for impairment when events or changes in
circumstances indicate that the carrying amount of the loan may not
be recoverable. We determine the present value of expected future
cash flows under the loan (discounted at the loan's effective
interest rate) or the fair value of the collateral if the loan is
collateral dependent. If the fair value of the loan is less than
its carrying amount, we recognize an impairment loss based on the
fair value of the loan. This policy is consistent with Statement of
Financial Accounting Standards No. 114, "Accounting by Creditors for
Impairment of a Loan - an amendment of Statements No. 5 and 15."

See Notes 3 and 14 to Consolidated Financial Statements and
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, 2002, for discussion of the results of applying this
policy in prior fiscal years.

Results of Operations - Three Months Ended January 31, 2003 (Second
Quarter of 2003) vs. Three Months Ended January 31, 2002 (Second
Quarter of 2002)

Revenues

Our revenues for the second quarter of 2003 were $833,000,
which was $36,000 (4%) higher than in the second quarter of 2002.

In the second quarter of 2003, $625,000 (75%) of our retained
royalties were from three technologies: $287,000 (34%) from the
homocysteine assay; $278,000 (33%) from gallium arsenide
semiconductors; and $60,000 (7%) from the sexual dysfunction
therapeutic. Increases in homocysteine assay royalties more than
offset decreases in royalties from gallium arsenide semiconductors
and other technologies.

The increase in homocysteine assay royalties includes amounts
for assays performed in several quarters by LabCorp ($161,000 under
a stipulated order in the LabCorp litigation) and other clinical
laboratories ($75,000 under license agreements made in the second
quarter of 2003). LabCorp has appealed the judgment in favor of
CTT. If the judgment is reversed on appeal, LabCorp's ability to
recover amounts paid to CTT will depend on the extent and reason for
the reversal. CTT's management believes the probability that
LabCorp will recover such amounts is very unlikely. See also Note 8
to the accompanying financial statements.

The decrease in royalties from gallium arsenide semiconductors
is due to expired licenses and certain licensees' lower sales.

Although we have no royalties from EthyolTM (a chemotherapeutic
mitigation agent) for the second quarter of 2003 (because we reached
our $500,000 per calendar year maximum in the first quarter of
2003), we expect Ethyol royalties to resume in the third quarter of
2003.

The last vitamin B12 assay patent expired in November 2002.

Other changes in retained royalty revenues reflect changes in
the timing of royalties reported by licensees and in licensees'
sales of licensed products. Historically, the Company's royalty
revenues in its second and fourth quarters have been higher than in
its first and third quarters.

Since much of our retained royalty revenue depends on our
licensees' sales of licensed products, current economic conditions
may reduce our royalties from them. However, we cannot predict
either the timing or the amount of such potential changes, if any.

Operating expenses

Patent enforcement expenses, net of reimbursements, in the
second quarter of 2003 were $118,000, which was $435,000 (79%) lower
than in the second quarter of 2002. Our July 23, 2002, agreement
with the University of Illinois (for the University to take the lead
and assume the cost of new lead counsel in the litigation against
Fujitsu) substantially reduced our net patent enforcement expenses
in the second quarter of 2003. Patent enforcement expenses are
principally for outside litigation counsels' services in patent
litigations where our clients and we have sued to enforce their and
our patent rights. We have included details of progress and status
in these cases in Note 8 to the accompanying financial statements.

We have reclassified certain second quarter of 2002 amounts
between personnel and other direct expenses relating to revenue and
general and administrative expenses to conform to the presentation
for 2003. We classify domestic and foreign patent legal expenses
(net of reimbursements), amortization of intangible assets acquired,
employee salaries and benefits, and marketing and consulting
expenses related to technologies and specific revenue initiatives as
personnel and other direct expenses relating to revenue. We
classify directors' fees and expenses, public company expenses,
professional service expenses (including corporate legal, litigation
and audit), rent, and other general business and operating expenses
as general and administrative expenses.

Personnel and other direct expenses relating to revenue were
$671,000 for the second quarter of 2003, which was $76,000 (13%)
higher than in the second quarter of 2002. A reduction in
recruiting expense partially offset increases in expenses for
salaries and consultants we engaged (under agreements that are
terminable with one week's notice) to assist us in developing
specific revenue opportunities and strategic alliances and
relationships.

General and administrative expenses for the second quarter of
2003 were $516,000, which was $219,000 (74%) higher than in the
second quarter of 2002. This increase reflects increases in
corporate litigation expenses directly related to the SEC
investigation (see Item 3 "Legal Proceedings" in our Annual Report
on Form 10-K for the year ended July 31, 2002 and Item 1 "Legal
Proceedings" in Part II of this Quarterly Report on Form 10-Q for
the quarter ended January 31, 2003), investor relations, travel,
marketing and professional service expenses. During this quarter,
we participated in two international marketing events, including
Korea Technomart 2002.

Impairment loss on investment in NTRU Cryptosystems, Inc. (NTRU)

In March 2003, the NTRU Board of Directors approved a plan to
redeem all outstanding shares of its Series A and Series B Preferred
Stock (NTRU Preferred Stock) in exchange for cash or NTRU common
stock. This will result in NTRU's former Preferred Stock holders
owning approximately 40% of NTRU's outstanding common stock.

Competitive Technologies, Inc. (CTT) is a minority investor in
NTRU and currently owns 3,053,000 shares of NTRU common stock and
200,526 shares of NTRU Preferred Stock. At July 31 and October 31,
2002, CTT carried its investment in NTRU on the cost method at
$1,034,000. CTT will exchange its NTRU Preferred Stock for
approximately $90,000 in cash and will own approximately 10% of
NTRU's outstanding common stock after the recapitalization plan is
implemented.

CTT recorded a charge of $944,000 in its second quarter ended
January 31, 2003 due to the uncertain timing and amount of CTT's
expected future cash flows from its investment in NTRU's common
stock after its recapitalization.

CTT continues to hold a seat and participate actively on NTRU's
Board of Directors. CTT's management continues to believe NTRU's
encryption technology has value and these actions provide NTRU an
opportunity to allow applications to evolve to meet customer's needs
for strong encryption, a small footprint and low processing
requirements.

Impairment loss on loans to E. L. Specialists, Inc. (ELS)

In the second quarter of 2002, CTT recorded an impairment loss
of $519,200 against its notes receivable from ELS.

Interest income

Interest income of $6,000 for the second quarter of 2003 was
$21,000 (77%) lower than in the second quarter of 2002. Our average
invested balance was approximately 57% lower and our weighted
average interest rate was approximately 1.1% per annum compared with
approximately 2.1% per annum in fiscal 2002.

Income taxes

The Company has substantial net operating and capital loss
carryforwards for Federal income tax purposes. See Note 9 to
Consolidated Financial Statements in the Company's Annual Report on
Form 10-K for the year ended July 31, 2002.

Results of Operations - Six Months Ended January 31, 2003 (First
Half of 2003) vs. Six Months Ended January 31, 2002 (First Half of
2002)

Revenues

Our total revenues for the first half of 2003 were $1,215,000,
which was $8,000 (1%) higher than in the first half of 2002.

In the first half of 2003, $861,000 (71%) of our retained
royalties were from four technologies: $321,000 (26%) from the
homocysteine assay, $312,000 (26%) from gallium arsenide
semiconductors, $147,000 (12%) from Ethyol and $81,000 (7%) from the
babesiosis vaccine. Increases in royalties from the homocysteine
assay and Ethyol slightly more than offset decreases in royalties
from gallium arsenide semiconductors, vitamin B12 assays and other
technologies.

Ethyol's royalty base is higher since October 2001 when the
licensee began selling Ethyol directly in the United States rather
than through a distributor. In the first quarter of 2003, our
retained royalties from Ethyol reached our $500,000 per calendar
year maximum.

We discussed the increases in homocysteine assay royalties and
decreases in royalties from gallium arsenide semiconductors, vitamin
B12 assays and other technologies in the second quarter results
above.

On August 13, 2002, the District Court judge in the MaternaTM
case awarded to the plaintiffs approximately $54 million plus
certain interest from January 1, 2002, of which CTT's share would be
approximately $6 million plus its proportionate share of interest.
The defendant has appealed to the U.S. Court of Appeals for the
Federal Circuit and posted a $59 million bond and plaintiffs have
responded. We cannot predict when this lawsuit will finally be
settled or when we will receive our share of damages finally
awarded, if any. We have included details of progress and status in
this case in Note 8 to the accompanying financial statements.

The jury and judge in the U.S. District Court for the District
of Colorado confirmed our client's and our homocysteine patent
rights and found that LabCorp had willfully contributed to and
induced infringement.

In November 2002, the Court confirmed its judgment in favor of
CTT and MLI. The Court's amended judgment awarded CTT approximately
$1,019,000 damages, $1,019,000 enhanced damages, and $132,000
prejudgment interest. If the Court's judgment is upheld in post-
trial motions and on appeal, CTT will retain approximately
$1,000,000 of damages awarded plus post-judgment interest at the
statutory rate. This judgment is pending appeal and post-trial
motions relating to awarding attorneys' fees to CTT.

CTT is unable to estimate the legal expenses it may incur or
the possible damages it may ultimately recover in this suit, if any.
CTT has not recorded revenue in its financial statements to date for
awarded damages, awarded enhanced damages or awarded interest from
the Court's November 2002 judgment.

In a January 2003 Stipulated Order, LabCorp agreed to post a
bond for all damages awarded in the November 2002 judgment and to
pay CTT a percentage of sales of homocysteine tests performed since
November 1, 2002 through final disposition of this case. In
addition, pursuant to this order, LabCorp agreed to pay $250,000 (in
twelve monthly installments of $20,824 each) for homocysteine assays
performed from November 1, 2001 through October 31, 2002 (of which
it has paid approximately $62,000). In exchange, this Stipulated
Order stayed execution of the monetary judgment and the permanent
injunction against LabCorp in the Court's November 2002 judgment.
This Stipulated Order is without prejudice to any party's position
on appeal. At January 31, 2003, CTT had recorded total royalties of
$403,408 (revenues of $161,363 in the second quarter of fiscal 2003
(of which $99,954 relate to assays performed from November 1, 2001
through October 31, 2002) and royalties payable of $242,045) from
LabCorp pursuant to this January 2003 Stipulated Order. LabCorp has
appealed the November 2002 judgment in favor of CTT. If the
judgment is reversed on appeal, LabCorp's ability to recover amounts
paid to CTT will depend on the extent and reason for the reversal.
CTT's management believes the probability that LabCorp will recover
such amounts is very unlikely.

Based on the Court's judgment, we believe we are entitled to
royalties on all homocysteine assays performed by our licensees and
others and we are aggressively pursuing potential licenses.
However, we cannot assure you that we will ultimately prevail. We
have included details of progress and status in this case in Note 8
to the accompanying financial statements.

Operating expenses

Patent enforcement expenses, net of reimbursements, in the
first half of 2003 were $154,000, which was $1,031,000 (87%) lower
than in the first half of 2002. Our July 23, 2002, agreement with
the University of Illinois, our client, (for the University to take
the lead and assume the cost of new lead counsel in the litigation
against Fujitsu) substantially reduced our net patent enforcement
expenses in the first half of 2003. The level of patent enforcement
expenses varies depending on the stage of the litigation. We have
included details of progress and status in these cases in Note 8 to
the accompanying financial statements.

We have reclassified certain first half of 2002 amounts between
personnel and other direct expenses relating to revenue and general
and administrative expenses to conform to the presentation for 2003.

Personnel and other direct expenses relating to revenue were
$1,411,000 for the first half of 2003, which was $365,000 (35%)
higher than in the first half of 2002. A reduction in recruiting
expense partially offset increases in expenses for salaries and
consultants we engaged to assist us in developing specific revenue
opportunities and strategic alliances and relationships. During the
first quarter of 2003, we paid discretionary bonuses (which were
both approved and paid in the first quarter of 2003) in lieu of
increasing base salaries for our professional staff.

General and administrative expenses for the first half of 2003
were $940,000, which was $232,000 (33%) higher than in the first
half of 2002. Expenses that increased were investor relations,
travel, marketing, professional services and corporate litigation
expenses directly related to the SEC investigation (see Item 3
"Legal Proceedings" in our Annual Report on Form 10-K for the year
ended July 31, 2002 and Item 1 "Legal Proceedings" in Part II of
this quarterly Report on Form 10-Q for the quarter ended January 31,
2003). During the first half of 2003, we participated in three
international marketing events.

Reversal of accounts payable exchanged for contingent note payable

On October 28, 2002, the Company signed an agreement making
future payments completely contingent on future receipts from
Fujitsu. This contingent promissory note is payable to our former
patent litigation counsel for $1,683,000 plus simple interest at the
annual rate of 11% from the agreement date ($49,000 at January 31,
2003) payable only from future receipts in a settlement or other
favorable outcome of the litigation against Fujitsu, if any.
Accordingly, in the first quarter of 2003, we reversed from accounts
payable $1,583,000 that was accrued at July 31, 2002. This one-time
reversal constituted income in the first quarter of 2003 and
increased shareholders' interest.

We discussed the impairment losses on our investment in NTRU
Cryptosystems, Inc. (2003) and loans to E. L. Specialists, Inc.
(2002) in the second quarter results above.

Interest income

Interest income of $19,000 for the first half of 2003 was
$53,000 (74%) lower than in the first half of 2002. Our average
invested balance was approximately 53% lower and our weighted
average interest rate was approximately 1.5% per annum compared with
approximately 2.7% per annum in fiscal 2002.

Financial Condition and Liquidity

At January 31, 2003, cash and cash equivalents of $107,000 were
$643,000 lower than cash and cash equivalents of $750,000 at July
31, 2002. Operating activities used $1,816,000 and investing
activities provided $1,172,000 in the first half of 2003.

In addition, the Company held $1,101,000 in short-term
investments at January 31, 2003 compared with $2,137,000 at July 31,
2002. These investments are available for our current operating,
investing and financing needs.

The Company's net loss for the first half of 2003 included
noncash charges of $1,080,000 comprising $944,000 for the impairment
loss on investment in NTRU Cryptosystems, Inc., $95,000 for
depreciation and amortization and $41,000 for stock compensation.
In addition, the reversal of accounts payable of $1,583,000
exchanged for a contingent note payable was a noncash credit.

The most substantial changes in operating accounts were the
$734,000 (63%) increase in royalties receivable, the $1,505,000
(87%) decrease in accounts payable and the $147,000 (11%) decrease
in royalties payable. At January 31, 2003, amounts related to
LabCorp under the stipulated order discussed in the second quarter
results above included $331,000 royalties receivable and $199,000
royalties payable. In addition to fluctuations in the amounts of
royalties reported, the changes in royalties receivable and payable
reflect the Company's normal cycle of royalty collections and
payments.

During the six months ended January 31, 2003, the Company sold
$1,036,000 of short-term investments to support its operating and
investing activities.

In November 2002, the Company purchased certain intangible
assets for $50,000 cash.

Effective August 5, 2002, CTT sold and transferred all its
interests related to E. L. Specialists, Inc. to MRM Acquisitions,
LLC for $200,000 cash it collected on August 5, 2002.

At January 31, 2003, the Company's purchase commitments were
less than $5,000.

At January 31, 2003, the Company had no outstanding debt or
available credit facility.

In October 2002, the Company retained an investment banker to
advise and assist the Company in obtaining additional debt and/or
equity funding. Under this retainer (which either party currently
may terminate at any time), the Company committed to pay $10,000 per
month plus out-of-pocket expenses for six months plus certain fees
payable only if CTT completes a financing transaction. The
investment banker is assisting the Company in the offering described
in the next paragraph.

In February 2003, the Company began offering up to $5,000,000
aggregate principal amount of its 7.5% Senior Subordinated Notes due
2008 together with warrants to purchase shares of its common stock
in an offering exempt from registration under the Securities Act of
1933 pursuant to Rule 506 of Regulation D promulgated under the
Securities Act. The Notes and warrants will be sold only to
"accredited investors" within the meaning of Rule 501 under the
Securities Act. The Company will use the net proceeds of this
offering for working capital and other general corporate purposes
including funding CTT's technology commercialization strategy.
There can be no assurance that this offering will be successful.

At January 31, 2003, we had net working capital of $1,598,000,
which was $457,000 more than at July 31, 2002. Our accounts payable
at July 31, 2002, included $1,583,000 of invoices we reversed in
October 2002, as discussed above under "Reversal of accounts payable
exchanged for contingent note payable."

Based on our current expectations, we anticipate that currently
available funds and expected revenues will be sufficient to finance
cash needs for our current material operating and enforcement
activities at least into the third quarter of fiscal 2004. However,
we are considering additional opportunities to increase our cash
resources. In addition to engaging the investment banker and
offering the notes with warrants discussed above, we are pursuing an
opportunity to potentially monetize a portion of our interest in the
Materna judgment prior to its final resolution on appeal. We expect
to determine the specific terms of such a transaction during the
third or fourth quarter of 2003, when we will evaluate the economic
costs and benefits carefully.

We are also pursuing additional strategies to leverage our core
licensing competencies and generate near-term revenues. During the
first half of 2003, we obtained rights to license six new
technologies. In addition to the new homocysteine licenses
discussed above, we have granted two other licenses. We are also
moving forward to develop certain strategic alliances and
relationships.

We intend to continue to monitor our operating and enforcement
costs closely and to reduce them, if necessary, to meet these
expectations. However, royalty revenues, costs of enforcement
actions and expansion of our business are subject to many factors
outside our control or that we cannot currently anticipate.
Accordingly, we cannot assure you that our current expectations
regarding the sufficiency of currently available funds and expected
revenues will prove to be accurate.

At January 31, 2003, CTT's shareholders' interest was
$2,474,000. Under American Stock Exchange (AMEX) listing standards,
if CTT sustains a net loss in 2003 and has less than $4,000,000
shareholders' interest at July 31, 2003, or if CTT has less than
$2,000,000 shareholders' interest before July 31, 2003, the AMEX may
consider suspending dealings in or de-listing CTT's common stock.
We cannot assure you that we will continue to meet these
requirements.

Other Matters

The Company carries liability insurance, directors' and
officers' liability insurance and casualty insurance for owned or
leased tangible assets. We do not carry key person life insurance.
There are no legal restrictions on payments of dividends by CTT.

The Company is involved in four pending litigation matters,
three of which are patent enforcement suits. They are detailed in
Note 8 to the accompanying financial statements.

Recently Issued Accounting Pronouncements

In June 2001, the Financial Accounting Standards Board (FASB)
issued Statement No. 142, "Goodwill and Other Intangible Assets."
This statement establishes financial accounting and reporting for
acquired goodwill and other intangible assets acquired individually
or with a group of other assets but not acquired in a business
combination. The Company's adoption of this statement on August 1,
2002, did not have a material effect on its financial condition or
results of operations.

In August 2001, the FASB issued Statement No. 144, "Accounting
for the Impairment or Disposal of Long-lived Assets." This
statement establishes a single accounting model for the impairment
of long-lived assets. The Company's adoption of this statement on
August 1, 2002, did not have a material effect on its financial
condition or results of operations.

In December 2002, the FASB issued Statement No. 148, "Accounting
for Stock-Based Compensation - Transition and Disclosure." This
statement amends Statement No. 123, "Accounting for Stock-Based
Compensation," to provide alternative transition methods for a
voluntary change to the fair value based method of accounting for
stock-based employee compensation. This statement also requires
prominent disclosures in annual and interim financial statements
about the method of accounting for stock-based employee compensation
and its effect on reported results. The disclosure provisions of
this statement will be effective for the Company's third quarter
ending April 30, 2003.

In November 2002, the FASB issued Interpretation No. 45,
"Guarantor's Accounting and Disclosure Requirements for Guarantees,
Including Indirect Guarantees of Indebtedness of Others." FIN 45
expands previously issued accounting guidance and disclosure
requirements for certain guarantees and requires an entity to
recognize an initial liability for the fair value of an obligation
assumed by issuing a guarantee. The disclosure requirements of FIN
45 are effective for all financial statements issued after December
15, 2002. The Company will apply the initial recognition and
measurement provisions on a prospective basis to guarantees issued
or modified after December 31, 2002. Adoption of FIN 45 did not
have a material impact on the Company's financial position, results
of operations or cash flows.

In January 2003, the FASB issued Interpretation No. 46,
"Consolidation of Variable Interest Entities," to address
consolidation by business enterprises of variable interest entities
with certain characteristics. The Company is not involved in any
arrangements that this Interpretation addresses.

Forward-Looking Statements

Statements about the Company's future expectations, including
development and regulatory plans, and all other statements in this
Quarterly Report on Form 10-Q other than historical facts, are
"forward-looking statements" within the meaning of applicable
Federal Securities Laws and are not guarantees of future
performance. These statements involve risks and uncertainties
related to market acceptance of and competition for the Company's
licensed technologies and other risks and uncertainties inherent in
the Company's business, including those set forth in Item 1 of the
Company's Annual Report on Form 10-K for the year ended July 31,
2002 under the caption "Risk Factors," and other factors that may be
described in the Company's filings with the Securities and Exchange
Commission, and are subject to change at any time. The Company's
actual results could differ materially from these forward-looking
statements. The Company undertakes no obligation to update publicly
any forward-looking statement.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Not applicable.

Item 4. Controls and Procedures

(a) Evaluation of disclosure controls and procedures

The Company's Chief Executive Officer and Chief Financial
Officer evaluated the effectiveness of the design and operation of
our disclosure controls and procedures (as defined in Exchange Act
Rules 13a-14(c) and 15d-14(c)) as of January 31, 2003. The
Company's disclosure controls and procedures are designed to ensure
that information required to be disclosed in reports filed under the
Securities Exchange Act of 1934 is recorded, processed, summarized,
and reported as specified in the Securities and Exchange
Commission's rules and forms. Based on this evaluation, the
Company's Chief Executive Officer and Chief Financial Officer
concluded that these controls were effective as of January 31, 2003.

(b) Change in Internal Controls

There have been no significant changes in the Company's
internal controls or in other factors that could significantly
affect these controls subsequent to the date of their evaluation.
There were no significant deficiencies or material weaknesses in our
internal controls.

PART II - OTHER INFORMATION

Item 1. Legal Proceedings

The Company is involved in four pending litigation matters.
They are fully detailed in Note 8 to the accompanying Consolidated
Financial Statements.

By letter of January 6, 2003, George C. J. Bigar, a former
director of CTT, received a subpoena from the SEC seeking documents
from July 1, 1998 to date in connection with the SEC's private
investigation (detailed under Item 3 "Legal Proceedings" in our
Annual Report on Form 10-K for the year ended July 31, 2002) and
setting a date for Mr. Bigar to testify before officers of the SEC.
Mr. Bigar has produced the subpoenaed documents and completed his
testimony before the SEC. The Company has assumed responsibility
for Mr. Bigar's legal fees in this matter, which were approximately
$12,000 to January 31, 2003.

Item 4. Submission of Matters to a Vote of Security Holders

At the Company's annual meeting of stockholders held January
24, 2003, the following directors were elected:

Name Votes For Votes Withheld

Richard E. Carver 5,095,870 502,285
George W. Dunbar, Jr. 4,512,102 1,086,053
Samuel M. Fodale 4,538,622 1,059,533
John B. Nano 5,134,170 463,985
Charles J. Philippin 4,571,422 1,026,733
John M. Sabin 4,458,077 1,140,078

There were no broker non-votes.

Also at the Company's annual meeting of stockholders held
January 24, 2003, stockholders approved the proposal to amend the
1997 Employees' Stock Option Plan by increasing the number of shares
of common Stock available for option grants under the Plan by
150,000 shares to a total of 1,025,000 shares. There were 4,138,029
shares voted for and 1,387,109 shares voted against this proposal,
and 73,017 shares abstained. There were no broker non-votes on this
matter.

In addition, at the Company's annual meeting of stockholders
held January 24, 2003, stockholders approved the proposal to amend
the 2000 Directors Stock Option Plan by increasing the number of
shares of Common Stock available for option grants under the Plan by
150,000 shares to a total of 400,000 shares. There were 4,110,775
shares voted for and 1,422,328 shares voted against this proposal,
and 65,052 shares abstained. There were no broker non-votes on this
matter.

Item 5. Other Matters

Effective February 7, 2003, CTT appointed Paul A. Levitsky
(previously Associate General Counsel) as V. P. and General Counsel,
replacing George M. Yahwak who resigned. Before joining CTT, Mr.
Levitsky held progressive management positions during 15 years at
Pitney Bowes Inc.

Item 6. Exhibits and Reports on Form 8-K Page

A) Exhibits

3.1 By-laws of the registrant as amended
effective January 24, 2003, filed as
Exhibit 4.2 to the registrant's registration
statement on Form S-8, File Number 333-102798
and hereby incorporated by reference.

10.1 1997 Employees' Stock Option Plan as amended
January 24, 2003, filed as Exhibit 4.3 to the
registrant's registration statement on Form
S-8, File Number 333-102798 and hereby
incorporated by reference.

10.2 2000 Directors Stock Option Plan as amended
January 24, 2003, filed as Exhibit 4.4 to the
registrant's registration statement on Form
S-8, File Number 333-102798 and hereby
Incorporated by reference.

99.1 Certification by the Principal Executive
Officer of Competitive Technologies,
Inc. pursuant to Section 906 of the
Sarbanes-
Oxley Act of 2002 (18 U.S.C. 1350). 30

99.2 Certification by the Principal Financial
Officer of Competitive Technologies, Inc.
pursuant to Section 906 of the Sarbanes-
Oxley Act of 2002 (18 U.S.C. 1350). 32

B) Reports on Form 8-K

On February 21, 2003, the Company filed a report on Form 8-
K (date of earliest event reported February 7, 2003) under
Item 5 to report a potential substantial write-down of its
investment in NTRU.

SIGNATURES

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

COMPETITIVE TECHNOLOGIES, INC. COMPETITIVE TECHNOLOGIES, INC.
(the Company) (the Company)

By /s/ John B. Nano By /s/ Frank R. McPike, Jr.
John B. Nano Frank R. McPike, Jr.
President, Chief Executive Executive Vice President,
Officer and Authorized Signer Chief Financial Officer and
Authorized Signer

Date: March 17, 2003

CERTIFICATIONS

I, John B. Nano, President and Chief Executive Officer of
Competitive Technologies, Inc., certify that:

1. I have reviewed this quarterly report on Form 10-Q of
Competitive Technologies, Inc.;

2. Based on my knowledge, this quarterly report does not contain
any untrue statement of a material fact or omit to state a material
fact necessary to make the statements made, in light of the
circumstances under which such statements were made, not misleading
with respect to the period covered by this quarterly report;

3. Based on my knowledge, the financial statements, and other
financial information included in this quarterly report, fairly
present in all material respects the financial condition, results of
operations and cash flows of the registrant as of, and for, the
periods presented in this quarterly report;

4. The registrant's other certifying officer and I are responsible
for establishing and maintaining disclosure controls and procedures
(as defined in Exchange Act Rules 13a-14 and 15d-14) for the
registrant and we have:

a) designed such disclosure controls and procedures to ensure
that material information relating to the registrant, including
its consolidated subsidiaries, is made known to us by others
within those entities, particularly during the period in which
this quarterly report is being prepared;

b) evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to
the filing date of this quarterly report (the "Evaluation
Date"); and

c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based
on our evaluation as of the Evaluation Date;

5. The registrant's other certifying officer and I have disclosed,
based on our most recent evaluation, to the registrant's auditors
and the audit committee of registrant's board of directors (or
persons performing the equivalent function):

a) all significant deficiencies in the design or operation of
internal controls which could adversely affect the registrant's
ability to record, process, summarize and report financial data
and have identified for the registrant's auditors any material
weaknesses in internal controls; and

b) any fraud, whether or not material, that involves management
or other employees who have a significant role in the
registrant's internal controls; and

6. The registrant's other certifying officer and I have indicated
in this quarterly report whether or not there were significant
changes in internal controls or in other factors that could
significantly affect internal controls subsequent to the date of our
most recent evaluation, including any corrective actions with regard
to significant deficiencies and material weaknesses.

Date: March 17, 2003

/s/ John B. Nano
John B. Nano, President
and Chief Executive Officer
Competitive Technologies, Inc.

I, Frank R. McPike, Jr., Executive Vice President, Chief Financial
Officer and Treasurer of Competitive Technologies, Inc., certify
that:

1. I have reviewed this quarterly report on Form 10-Q of
Competitive Technologies, Inc.;

2. Based on my knowledge, this quarterly report does not contain
any untrue statement of a material fact or omit to state a material
fact necessary to make the statements made, in light of the
circumstances under which such statements were made, not misleading
with respect to the period covered by this quarterly report;

3. Based on my knowledge, the financial statements, and other
financial information included in this quarterly report, fairly
present in all material respects the financial condition, results of
operations and cash flows of the registrant as of, and for, the
periods presented in this quarterly report;

4. The registrant's other certifying officer and I are responsible
for establishing and maintaining disclosure controls and procedures
(as defined in Exchange Act Rules 13a-14 and 15d-14) for the
registrant and we have:

a) designed such disclosure controls and procedures to ensure
that material information relating to the registrant, including
its consolidated subsidiaries, is made known to us by others
within those entities, particularly during the period in which
this quarterly report is being prepared;

b) evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to
the filing date of this quarterly report (the "Evaluation
Date"); and

c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based
on our evaluation as of the Evaluation Date;

5. The registrant's other certifying officer and I have disclosed,
based on our most recent evaluation, to the registrant's auditors
and the audit committee of registrant's board of directors (or
persons performing the equivalent function):

a) all significant deficiencies in the design or operation of
internal controls which could adversely affect the registrant's
ability to record, process, summarize and report financial data
and have identified for the registrant's auditors any material
weaknesses in internal controls; and

b) any fraud, whether or not material, that involves management
or other employees who have a significant role in the
registrant's internal controls; and

6. The registrant's other certifying officer and I have indicated
in this quarterly report whether or not there were significant
changes in internal controls or in other factors that could
significantly affect internal controls subsequent to the date of our
most recent evaluation, including any corrective actions with regard
to significant deficiencies and material weaknesses.

Date: March 17, 2003

/s/ Frank R. McPike, Jr.
Frank R. McPike, Jr.
Executive Vice President,
Chief Financial Officer
and Treasurer of Competitive
Technologies, Inc.