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

FORM 10-K

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF
1934 FOR THE FISCAL YEAR ENDED JULY 31, 2007

Commission file number 1-8696

/X\
/XXXXX\
/XX------
/XXX---- COMPETITIVE
XXX---- TECHNOLOGIES
\XXX---- Unlocking the Potential of Innovation (R)
\XX------
\XXXXX/ Technology Transfer & Licensing Services
\X/

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

Registrant's telephone number, including area code: (203) 368-6044

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

Securities registered pursuant to Section 12(b) of the Act:

Title of Each Class Name of Each Exchange on which Registered
- ----------------------------- -------------------------------------------
Common Stock ($.01 par value) American Stock Exchange

Securities registered pursuant to Section 12(g) of the Act: None

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. [x]Yes [ ]No

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

The aggregate market value of the common equity held by non-affiliates of the
registrant as of January 31, 2007 (the last business day of the registrant's
most recently completed second fiscal quarter) was $18,746,515

The number of shares of the registrant's common stock outstanding as of October
18, 2007, was 8,107,380 shares.

American
Stock Exchange
Listed
CTT

Page 1

COMPETITIVE TECHNOLOGIES, INC.
TABLE OF CONTENTS

PART I

Forward-Looking Statements.....................................................3
Item 1. Business...........................................................3
Item 1A. Risk Factors..................................................... .9
Item 1B. Unresolved Staff Comments........................................ 14
Item 2. Properties........................................................14
Item 3. Legal Proceedings.................................................14
Item 4. Submission of Matters to a Vote of Security Holders...............20
Item 4A. Executive Officers of the Registrant..............................20

PART II

Item 5. Market for Registrant's Common Equity, Related Stockholder
Matters and Issuer Purchases of Equity Securities.................21
Item 6. Selected Financial Data...........................................22
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations...............................23
Item 7A. Quantitative and Qualitative Disclosures About Market Risk........33
Item 8. Financial Statements and Supplementary Data.......................34
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure...............................66
Item 9A. Controls and Procedures...........................................67
Item 9B. Other Information.................................................67

PART III

Item 10. Directors and Executive Officers of the Registrant...............68
Item 11. Executive Compensation...........................................72
Item 12. Security Ownership of Certain Beneficial Owners
and Management...................................................79
Item 13. Certain Relationships and Related Transactions...................80
Item 14. Principal Accounting Fees and Services...........................81

PART IV

Item 15. Exhibits and Financial Statement Schedules.......................81
Signatures....................................................................83
Exhibit Index.................................................................84

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PART I

FORWARD-LOOKING STATEMENTS

Statements about our future expectations are "forward-looking statements"
within the meaning of applicable Federal Securities Laws, and are not guarantees
of future performance. When used herein, the words "may," "will," "should,"
"anticipate," "believe," "appear," "intend," "plan," "expect," "estimate,"
"approximate," and similar expressions are intended to identify such
forward-looking statements. These statements involve risks and uncertainties
inherent in our business, including those set forth in Item 1A under the caption
"Risk Factors," in this Annual Report on Form 10-K for the year ended July 31,
2007, 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.

ITEM 1. BUSINESS

OVERVIEW: TECHNOLOGY COMMERCIALIZATION SERVICES

Competitive Technologies, Inc. ("CTT"), was incorporated in Delaware in
1971, succeeding an Illinois corporation incorporated in 1968. CTT and its
subsidiaries (collectively, the "registrant," "we," "our," or "us"), provide
technology transfer, selling and licensing services focused on the technology
needs of our customers, matching those requirements with commercially viable
technology solutions, bridging the gap between market demand and raw innovation.
We do this in two ways. First, we continually develop relationships with the
technology and research arms of universities, independent research institutions,
companies, individual inventors, patent attorneys and patent or other
intellectual property holders, who we then formally represent, becoming our
clients. We obtain from our clients the right to serve as their agent, or a
license to their invention, patent or intellectual property rights, their
technology. Our goal is to make a profit for our clients and us by finding
customers, or end users, who have a use for the particular technology, and
granting them a license or a sublicense to commercialize, sell, or further
develop the technology. Second, as we also have contacts and relationships with
those who have a need or use for particular technologies, usually other
businesses, who may or may not be our current customers, we match their needs
with one of our technologies, or find a technology to fit their needs. Since we
focus on available technologies, client side, and wanted or needed technologies,
customer side, we believe that we provide a valuable service in matching market
needs to technology solutions. Using our services provides benefits to the
provider and user of the technology. The technology provider client can focus on
research and invention, rather than on selling and marketing, as we effectively
become their marketing department. The technology user customer can focus on
selling and marketing, rather than on research and development. We maintain and
enforce our clients' and our technology patent rights, and monitor and address
any infringement. Our goal is to maximize the value of technologies for the
benefit of our clients, customers and shareholders.

When we acquire rights to commercialize a technology, we may acquire
exclusive or non-exclusive rights, worldwide or limited to a specific geographic
area. When we license or sublicense rights to our customers, we may grant
exclusive or non-exclusive rights, worldwide or geographically limited, and/or
we may limit rights to a defined field of use. Technologies can be early stage,
mid stage, or late stage.

We identify and commercialize, or find companies that commercialize for us,
innovative technologies in life and physical sciences, electronics, and
nanotechnologies. Life sciences include medical testing, diagnostics,
pharmaceuticals, biotechnologies, medical devices and other medical or
biological applications. Physical sciences include chemical, display, and
environmental applications. Electronics include communications, semiconductors,
Internet related, e-commerce and consumer electronics applications.
Nanotechnologies deal with the manipulation of microscopic particles into useful
arrangements, and smart or novel materials; a nano particle is one thousand
times smaller than the

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width of a human hair. We have technologies in each of these areas with a
concentration of revenues from life sciences.

We estimate that over the years we have licensed nearly 500 technologies to
and from corporations, and can count as our clients a number of major
universities and inventors. We are a vital part of the technology
commercialization community, and have paid over $100 million to universities in
shared technology revenues.

TECHNOLOGY ACQUISITION AND PORTFOLIO

We continue to work to expand our relationships with universities and
inventors, increasing the number of clients and technologies we represent, and
establishing us as the premier technology commercialization company. One of our
goals is to have a pipeline of technologies to generate a long-term recurring
revenue stream.

In addition to contacts with universities, independent research
institutions and inventors, inventors or intellectual property holders contact
us directly for evaluation and assistance. We evaluate potential technologies
based on the strength of the intellectual property, our ability to protect it,
its life stage, further development time needed, compatibility with existing
technology in our portfolio, marketability, market size, and potential
profitability. A majority of technologies initially reviewed are rejected. A
process to initiate representation is started for all technologies accepted.
When we accept a technology we believe that we have a chance to market it
successfully. We may reject a technology if more time and expense than we
originally planned is needed to protect and market the technology. Certain
technologies, once accepted, may be dormant for a period of time until a new
customer or application is identified. As explained in TECHNOLOGY PROTECTION AND
LITIGATION, some technologies may become involved in patent infringement and/or
litigation.

Generally, early stage technologies have limited current revenue potential
but may have high long-term revenue potential. Mid and late stage technologies
may produce more current revenues but depending on the time left on the related
patent, may have limited long-term revenue potential. We review and evaluate
numerous technologies since most are initially rejected. Of those we accept into
our portfolio, many will be commercially unsuccessful, produce little or no
revenues, and eventually abandoned. We expect others will produce steady
revenues and profitability for a period that could last several years, and a
small number will be very successful, producing significant revenues throughout
the life of the patent. When we accept a technology, we try to obtain rights to
improvements and/or refinements that extend the patentable life of the
technology and potential revenues. Because of these characteristics, revenues,
and profitability will fluctuate from year to year, in some cases significantly,
as well as bottom line net income as a percentage of and return on revenues. If
revenues are not generated as anticipated, we will incur a loss. We review the
revenue potential of technologies in our portfolio continuously, adding and
removing technologies as necessary.

When we review and evaluate a technology, we usually first sign a
non-disclosure confidentiality agreement with the prospective client. This
allows us access to non-public information and other details about the
technology that we agree to keep confidential. When we commercialize the
technology we require similar non-disclosure confidentiality agreements from
prospective customers. We include bilateral non-disclosure and confidentiality
provisions as part of nearly all licenses and sublicenses granted to protect the
technology's value, and our customers' business dealings and plans. As a result
of these obligations, as well as federal regulations for disclosure of
non-public information, we may not be able to disclose, and do not disclose
except under limited conditions, details about licenses and sublicenses granted
for technologies we are evaluating. Certain limited information that we believe
is necessary for an understanding of our financial results may be disclosed.

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MARKETING TECHNOLOGIES

We commercialize technologies through many methods, from contacts in
research and development, legal firms, marketing and executive levels at major
corporations, to seminars and trade shows. We perform market research to
determine the most likely users of technologies, and contact current or
prospective customers to determine if they have an interest in or a use for a
new technology.

TECHNOLOGY PROTECTION AND LITIGATION

An important part of our business is protecting our technologies from
patent infringement, domestically and internationally. We sometimes assist in
preparation of initial patent applications, and often are responsible for
prosecuting and maintaining patents. Patent enforcement is a part of our
business due to unintentional and willful patent infringement. In the case of
unintentional infringement, the infringer usually does not know that a patent
exists. These cases often can be resolved by the granting of a license. In cases
of willful infringement, certain infringers will continue to infringe absent
legal action. In addition, companies will attempt to find work-arounds to avoid
paying us, and our clients, proper royalties for use of our technologies. At
times these work-arounds may be successful. We defend our technologies on behalf
of our clients, CTT and licensees, and pursue patent infringement cases through
litigation, if necessary. Such actions and cases, even if settled out of court,
may take several years to complete, and the expenses may be borne by our
clients, by us, or shared. Any proceeds earned by the action usually are shared
in the same proportion as the costs. As a result, we may incur significant
expenses in some years and be reimbursed for them through proceeds of awards or
settlements several years later. Patent law provides for the potential of treble
damages in the event of a willful infringement, but such awards are solely at
the discretion of the court.

REVENUE GENERATION

We earn revenues principally from licensing technologies to generate
royalty fees based on usage or sales of the technologies. Generally, agreements
we enter into with clients and customers are for the duration of the technology
life, which usually is determined by applicable patent law. When our customers
pay us royalties, we share them with our clients. When we receive periodic
reports of sales of licensed products and royalties earned from our customers,
or we receive payment, whichever occurs first, we record revenues for our
portion of the royalty, and record our obligation to our clients for their
portion. Revenues we record are solely our share of gross revenues, net of our
clients' shares, which usually are fixed percentages. For early stage
technologies that may not be ready for commercial development without further
research, we may receive annual minimum royalty payments and/or milestone
payments based on research progress or subsequent sublicense or joint venture
proceeds. In certain sublicense or license arrangements, we may receive an
upfront fee upon execution of the license. Our fees generally are
non-refundable, and, except for annual minimum royalties, usually are not
creditable against future royalties. In certain cases, we may waive the first
year or few years' royalty fees in consideration for the upfront fee. In some
cases, we apply the upfront fee or initial royalty fees to reimburse patent
prosecution and/or maintenance costs incurred by either party. In these cases,
we record payments as a reduction of expense, and not as revenue. If the
reimbursement belongs solely to our client, we record no revenue or expense. As
a result, a new technology may not generate significant revenues in its early
years.

We set licensing terms in written agreements with clients and customers.
Generally, we enter into single element arrangements with customers, under which
we have no significant obligations after executing the agreements, other than
patent prosecution and maintenance. In limited instances, we may enter into
multiple element arrangements under which we may have continuing service
obligations. We defer all revenue from multiple element arrangements until
delivery of all required elements. We determine delivery of elements based on
verifiable objective evidence. We also may have milestone billing arrangements,
whereby we recognize non-refundable, upfront fees ratably over the entire
arrangement and milestone payments as the specified milestone is achieved. We
evaluate such billing

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arrangements on a case-by-case basis, and record revenues as appropriate. We do
not have multiple element or milestone billing arrangements at this time, but we
have had such arrangements in the past and could have in the future.

We have a concentration of retained royalties derived from one technology.
We are actively marketing our other technologies, and seeking new technologies
to mitigate this concentration of revenues and provide a steadier future revenue
stream. Technologies that produced revenues equal to or exceeding 15% of our
total retained royalties revenue, or at least $250,000 in 2007, 2006 or 2005
were:

2007 2006 2005
---------- ---------- ----------
Homocysteine assay $2,037,000 $3,196,000 $8,932,000
Ethyol(TM) $ 29,000 $ 483,000 $ 500,000
Gallium arsenide $ 34,000 $ 184,000 $ 860,000
Sexual dysfunction $ 60,000 $ 60,000 $ 843,000

As a percentage of total retained royalties for the same periods, these
technologies represented:

2007 2006 2005
---------- ---------- ----------
Homocysteine assay 75% 70% 77%
Ethyol 1% 11% 4%
Gallium arsenide 1% 4% 8%
Sexual dysfunction 2% 1% 7%

The homocysteine assay is a diagnostic blood test used to determine
homocysteine levels and a corresponding deficiency of folate or vitamin B12.
Studies suggest that high levels of homocysteine may be a primary risk factor
for cardiovascular, vascular and Alzheimer's diseases, and rheumatoid arthritis.
Our U.S. patent for this homocysteine assay expired in July 2007. We expect to
receive revenue from this technology for sales made prior to that date. In
addition, we are in litigation with Carolina Liquid Chemistries Corporation to
recover funds that we believe are due us for homocysteine assays kits
manufactured, sold or offered for sale in infringement of our patent. For
further information, see ITEM 3. LEGAL PROCEEDINGS. For further information see
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.

Ethyol is an agent that reduces certain side effects of chemotherapy, and
is licensed by Southern Research Institute ("SRI"), exclusively to MedImmune,
Inc. (formerly U.S. BioScience, Inc.). Pursuant to an agreement between CTT and
SRI, SRI paid us a maximum of $500,000 per calendar year from Ethyol license
income it received. During fiscal 2006 the agreement between SRI and MedImmune
reached its tenth anniversary. As a result, royalties will be earned in any of
the five years following the anniversary to the extent that Ethyol sales in each
of the next five years exceed the revenue generated in the anniversary year. We
expect to earn minimal royalties on the technology going forward. This patent
expires in December 2010.

Gallium arsenide is used to improve semiconductor operating
characteristics. U.S. patents were issued from March 1983 to May 1989. Patents
expired from May 2001 through September 2006. After September 2006, we will not
receive significant royalties for this technology.

The 2007 and 2006 revenue related to our sexual dysfunction technology was
due to receipt of an annual minimum license fee. According to our agreement with
our licensee, Palatin Technologies, Inc. ("Palatin"), if the agreement were to
stay in place, the minimum fee is due until such time as the technology is
commercialized, whereupon royalties will be due if higher than the minimum. The
increase in revenues in 2005 was due to a settlement with Palatin related to
certain fees received by Palatin in 2005. Pursuant to our license, we are
entitled to a portion of fees Palatin receives, which we believe have not been
paid. On September 11, 2007, we presented Palatin with a Notice of Termination
of the PT-14

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technology license agreement stating that Palatin committed a material breach of
the agreement originally signed between the two companies on March 31, 1998. For
further information, see ITEM 3. LEGAL PROCEEDINGS. This technology is a
therapeutic drug to treat male and female sexual dysfunction, which is
undergoing testing prior to approval. Final government approval, assuming
testing is successful, is still several years away.

We also earn revenues from royalty legal awards. Such awards may be
significant, generally are non-recurring and the result of successful patent
enforcement actions, and may include punitive damages, attorneys' fees, court
costs and interest. Out-of-court settlements may occur prior to or during
trials. Revenues from out of court settlements usually are included in retained
royalties.

Other technologies in our life sciences portfolio, many of which are
subject to testing, clinical trials and approvals, include:

- Pain management therapy that treats oncological, neuropathic and
morphine-resistant pain through a biophysical rather than a
biochemical approach;

- Nanotechnology bone cement biomaterial with a broad range of
potential applications, including dental, spinal and other bone
related applications. Exclusively licensed to Soteira Inc. for human
spinal applications;

- Lupus Diagnostic and Monitoring technology, a cost-effective
scalable testing platform used to diagnose and monitor the autoimmune
disease, Lupus;

- Cholesterol Trapping/Regeneration technology, that traps and
removes cholesterol in dairy products, including milk and cheese,
without sacrificing taste or nutritional value;

- Sunless tanning agent, a skin-pigment enhancer that may prevent
skin cancer from unprotected exposure to the sun licensed to Clinuvel
Pharmaceuticals, Ltd. (Australia);

- Green tea based cleanser formulation used in nutraceutical skin
products.

Our applied science/electronics portfolio includes:

- Age related memory improvement device that uses synchronized
sound and light rhythms to influence brain activity for stress
reduction, improved concentration and memory improvement;

- Radio Alert Warning System, a low powered dual-mode transmitter
capable of short-range interruption of commercial radio broadcasting
received by vehicles within a radius of up to 700 feet;

- Video and audio signal processing technology licensed in the
Motion Picture Electronics Group visual patent portfolio pool (MPEG 4
Visual), and used in streaming video products for personal computers
and wireless devices, including mobile phones;

- Encryption technology that operates at high speeds with low
memory requirements to secure applications used on the internet,
telecommunications, smart cards and e-commerce;

- AccuSpeech(TM), an interactive software platform designed to help
individuals master English when it is not their native language.

Page 7

Our physical sciences portfolio includes:

- A group of 50 patents related to the full value chain of light
emitting diodes (LEDs) - chips, phosphors, packaging and encapsulants;

- Primary optical device that significantly improves the brightness
and efficiency of high brightness light emitting diodes (HB LEDs);

- Clean, renewable fuel technologies, including patented
alternative fuel formulations and a method to convert municipal waste
to fuel grade ethanol and certain marketable chemicals;

RETAINED ROYALTIES FROM FOREIGN SOURCES

Retained royalties received from foreign licensees totaled approximately
$425,000, $477,000, and $757,000, in 2007, 2006 and 2005, respectively. Of the
foreign sourced royalties received, $184,000, $334,000 and $402,000, in 2007,
2006 and 2005, respectively, were from Japanese licenses.

INVESTMENTS

From time to time we provide other forms of assistance and funding to
certain development-stage companies to further develop specific technologies.

EMPLOYEES

As of October 18, 2007, we employed 15 people (full-time equivalents). We
also have independent consultants under contract to provide business development
services. In addition to the diverse technical, intellectual property, legal,
financial, marketing and business expertise of our professional team, from time
to time we rely on advice from outside technical and professional specialists to
fulfill our clients' and customers' unique technology needs.

CORPORATE GOVERNANCE

CTT's Corporate Governance Principles, Corporate Code of Conduct, the
Committee Charters for the Audit and Nominating Committees of the Board of
Directors, the unofficial restated Certificate of Incorporation and the By-Laws
are all available on our website at
www.competitivetech.net/investors/governance.html.

AVAILABLE INFORMATION

We make available without charge copies of our Annual Report, Annual Report
on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K,
amendments to those, and other reports filed with the Securities and Exchange
Commission ("SEC") on our website, www.competitivetech.net, as soon as
reasonably practicable after they are filed. Our website's content is not
intended to be incorporated by reference into this report or any other report we
file with the SEC. You may request a paper copy of materials we file with the
SEC by calling us at (203) 368-6044.

You may read and copy materials we file with the SEC on the SEC's website
at www.sec.gov, or at the SEC's Public Reference Room at 100 F Street, NE,
Washington, DC 20549. You may obtain information on the operation of the Public
Reference Room by calling (800) 732-0330.

FISCAL YEAR

Our fiscal year ends July 31, and our first, second, third and fourth
quarters end October 31, January 31, April 30 and July 31, respectively.

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ITEM 1A. RISK FACTORS

The risk factors described below are not all inclusive. All risk factors
should be considered carefully when evaluating our business, results of
operations, and financial position. We undertake no obligation to update
forward-looking statements or risk factors. There may be other risks and
uncertainties not highlighted herein that may become material factors affecting
our financial condition and business operations.

WE DERIVED MORE THAN 75% OF OUR RETAINED ROYALTIES IN FISCAL 2007 FROM ONE
TECHNOLOGY.

We derived approximately $2,037,000, or 75%, of 2007 retained royalties
from our homocysteine assay technology. In fiscal 2006, we derived approximately
70% of our retained royalties from this same technology.

Our U.S. patent for the homocysteine assay expired in July 2007, and
although we will not receive significant revenues from this technology after
that date, we expect to receive revenue for sales made prior to that date. In
addition, we are in litigation with Carolina Liquid Chemistries Corporation to
recover funds that we believe are due us for homocysteine assays kits
manufactured, sold or offered for sale in infringement of our patent. For
further information, see ITEM 3. LEGAL PROCEEDINGS.

A concentration of revenues makes our operations vulnerable to patent
changes or expiration, especially the homocysteine assay, and could have a
significant adverse impact on our financial position.

CERTAIN OF OUR LICENSED PATENTS HAVE RECENTLY EXPIRED OR WILL EXPIRE IN THE NEAR
FUTURE AND WE MAY NOT BE ABLE TO REPLACE THEIR ROYALTY REVENUES.

In 2007, we earned retained royalties from licenses for 17 patented
technologies. Royalties from 10 of those patented technologies have or will
expire between 2007 and 2012. Those patented technologies represented
approximately 88% of our retained royalties in 2007. Retained royalties of
approximately $2,072,533, or 76%, $25,992, or 1%, $267,527, or 10% and $29,007,
or 1%, were from patents expiring in fiscal 2007, 2008, 2009 and 2011,
respectively. The loss of these royalties, especially from the homocysteine
assay, will materially, adversely affect our operating results if we are unable
to replace them with revenues from other licenses or other sources. Since it
often takes two or more years for a technology to produce significant revenues,
we must continuously seek new sources of future revenues.

IN THREE OF THE LAST FIVE FISCAL YEARS, WE INCURRED SIGNIFICANT NET LOSSES AND
NEGATIVE CASH FLOWS, AND OUR ABILITY TO FINANCE FUTURE LOSSES IS LIMITED, AND
MAY SIGNIFICANTLY AFFECT EXISTING STOCKHOLDERS.

The table below summarizes our consolidated results of operations and cash
flows for the five years ended July 31, 2007:

2007 2006 2005 2004 2003
------------ ------------ ---------- ----------- ------------

Net income
(loss) $(8,893,946) $(2,377,224) $5,701,787 $2,954,529 $(1,935,301)
Net cash
flows from:
Operating
activities (5,437,443) (3,527,318) 5,006,936 2,328,684 (1,604,910)
Investing
activities (978,217) (141,644) 803,220 499,663 221,910
Financing
activities 78,425 2,298,726 4,159,711 (22,962 --
Net increase
(decrease) in
cash and cash
equivalents $(6,337,235) $(1,370,236) $9,969,867 $2,805,385 $(1,383,000)

Page 9

Our current recurring revenue stream is insufficient for us to be
profitable with our present cost structure. In 2005 and 2004, we were in part
profitable because of unusually large, upfront license fees received related to
our homocysteine technology that did not recur in 2007 or 2006. Without these
revenues, we would have incurred a loss in both years, and for each of the five
years ended July 31, 2007. To return to and sustain profitability, we must
increase recurring revenues by successfully licensing technologies with current
and long-term revenue streams, and continue to build our portfolio of innovative
technologies. Over the last six months we significantly reduced overhead with
reductions in staff across all functional departments of the company, reduced
extraneous litigations, and obtained new technologies to build revenue. We will
continue to monitor our cost structure, and expect to operate within our
generated revenue and cash balances.

Our future royalty revenues, obtaining rights to new technologies, granting
licenses, enforcing intellectual property rights, and profits or losses are
subject to many factors outside our control, or that we cannot anticipate,
including technological changes and developments, economic cycles, and the
ability of our licensees to commercialize our technologies successfully.
Consequently, we may not be able to generate sufficient revenues to be
profitable. Although we cannot be certain that we will be successful in these
efforts, we believe that our capital resources will sustain us at least through
fiscal 2008.

We have no outstanding debt or available credit facility, and believe it
would be very difficult to obtain debt financing due to the current composition
of our balance sheet, and unpredictable nature of our annual cash flows. Our
financing options are limited, and we must rely on cash on hand and cash flows
from operations, though this situation could change in the future. We did obtain
equity financing in 2004 that we completed in 2006. We continue to review
financing options for our business, which may in the future include more equity
financing. If we enter into an equity financing arrangement in the future, and
we sell shares of our common stock pursuant to such financing to raise cash to
operate the business, existing holders of our common stock may suffer
significant dilution to their equity position.

WE DEPEND ON RELATIONSHIPS WITH INVENTORS TO GAIN ACCESS TO NEW TECHNOLOGIES AND
INVENTIONS. IF WE FAIL TO MAINTAIN EXISTING RELATIONSHIPS OR TO DEVELOP NEW
RELATIONSHIPS, WE MAY HAVE FEWER TECHNOLOGIES AND INVENTIONS AVAILABLE TO
GENERATE REVENUES. TECHNOLOGY CAN CHANGE RAPIDLY AND INDUSTRY STANDARDS
CONTINUALLY EVOLVE, OFTEN MAKING PRODUCTS OBSOLETE, OR RESULTING IN SHORT
PRODUCT LIFECYCLES. OUR PROFITABILITY DEPENDS ON OUR LICENSEES' ABILITY TO ADAPT
TO SUCH CHANGES.

We do not invent new technologies or products. We depend on relationships
with universities, corporations, government agencies, research institutions,
inventors, and others to provide technology-based opportunities that we can
develop into profitable royalty-bearing licenses. Failure to maintain these
relationships or to develop new relationships could adversely affect our
operating results and financial condition. If we are unable to forge new
relationships or to maintain current relationships, we may be unable to identify
new technology-based opportunities and enter into royalty-bearing licenses. We
also are dependent on our clients' abilities to develop new technologies,
introduce new products, and adapt to changes in technology and economic needs.

We cannot be certain that current or new relationships will provide the
volume or quality of available new technologies necessary to sustain our
business. In some cases, universities and other sources of new technologies may
compete against us as they seek to develop and commercialize these technologies
themselves, or through entities that they develop, finance and/or control. In
other cases, universities receive financing for basic research from companies in
exchange for the exclusive right to commercialize any resulting inventions.
These and other strategies may reduce the number of technology sources,
potential clients, to whom we can market our services. If we are unable to
secure new sources of technology, it could have a material adverse effect on our
operating results and financial condition.

Page 10

WE RECEIVE MOST OF OUR REVENUES FROM CUSTOMERS OVER WHOM WE HAVE NO CONTROL.

We rely on royalties received from our customers for revenues. The
royalties we receive from customers depend on their efforts and expenditures
over which we have no control. Additionally, customers' development of new
products involves great risk since many new technologies do not become
commercially profitable products despite extensive development efforts. Our
license agreements do not require customers to advise us of problems they may
encounter in attempting to develop commercial products, and they usually treat
such information as confidential. We expect that our customers will encounter
problems frequently. Our customers' failure to resolve such problems may result
in a material adverse effect on our operating results and financial condition.

STRONG COMPETITION WITHIN OUR INDUSTRY MAY REDUCE OUR CLIENT BASE.

We compete with universities, law firms, venture capital firms and other
technology commercialization firms for technology licensing opportunities. Many
organizations offer some aspect of technology transfer services, and some are
well established and have more financial and human resources than we do. This
market is highly fragmented and participants frequently focus on a specific
technology area.

FRANK R. MCPIKE, JR., A FORMER PRESIDENT AND CHIEF EXECUTIVE OFFICER OF CTT, CTT
AND OTHER INDIVIDUALS HAVE BEEN NAMED IN A CIVIL SUIT FILED BY THE SEC.

On August 11, 2004 the SEC filed a civil suit in the United States District
Court for the District of Connecticut, naming Mr. McPike and six individual
brokers, alleging that from at least July 1998 to June 2001, these persons were
involved in a scheme to manipulate the price of our stock. The case relates to
our 1998 stock repurchase program under which we repurchased shares of our
common stock from time to time during the period from October 28, 1998 to March
22, 2001. CTT was named as a defendant in the suit due to the alleged conduct of
Mr. McPike, whose conduct in connection with the stock repurchase program was
imputed to CTT as a matter of law. Relating to CTT, the SEC in the suit sought a
permanent injunction prohibiting us from further violations of the Securities
Exchange Act of 1934 and a civil penalty pursuant to Section 21(d)(3) of the
Securities Exchange Act of 1934; this section provides for maximum penalties of
$550,000 for a corporate entity and $110,000 per individual. On September 24,
2004, we responded to this civil suit, and filed a motion to dismiss the suit.
On October 15, 2004, the SEC filed a motion opposing our motion to dismiss the
suit, and on July 21, 2005, our motion to dismiss the suit was denied. On April
10, 2006, we filed a motion for summary judgment to dismiss the case. On June
15, 2006, the SEC filed a motion to oppose our motion for summary judgment.

Defense costs incurred in 2005 and thereafter have been covered by our
insurance carrier, however, we cannot be certain that our insurance carrier will
cover all future costs.

On October 10, 2007 we agreed to settlement of this case. Without admitting
or denying the allegation of the complaint, we have consented to be permanently
restrained and enjoined from violating Sections 9(a) and 10(b) of the Securities
Exchange Act of 1934, and rule 10b-5 thereunder. No fines or penalties were
imposed by the SEC in connection with this settlement. The settlement agreement
has been approved by the SEC. Its anticipated acceptance by the Connecticut
Federal District Court will close the SEC's investigation and proceedings
against the company. No members of CTT's current Board or management held
positions with the company during the period of 1998-2001. For further
information, see ITEM 3. LEGAL PROCEEDINGS.

Page 11

OUR BY-LAWS PROVIDE THAT WE INDEMNIFY OUR DIRECTORS, OFFICERS, EMPLOYEES AND
AGENTS IN CERTAIN CIRCUMSTANCES. WE CARRY DIRECTORS AND OFFICERS LIABILITY
INSURANCE, SUBJECT TO DEDUCTIBLES, TO REDUCE THESE FINANCIAL OBLIGATIONS.

Our directors, officers, employees and agents may claim indemnification in
certain circumstances. We are currently exposed to potential indemnification
claims by a former executive in connection with a civil suit filed by the SEC.
For further information, see ITEM 3. LEGAL PROCEEDINGS.

WE ARE INVOLVED IN LAWSUITS THAT HISTORICALLY HAVE INVOLVED SIGNIFICANT LEGAL
EXPENSES. IF THE COURTS OR REGULATORY AGENCIES IN THESE SUITS OR ACTIONS DECIDE
AGAINST US, THIS COULD HAVE A MATERIAL ADVERSE EFFECT ON OUR BUSINESS, RESULTS
OF OPERATIONS AND FINANCIAL CONDITION. LEGAL FEES AND OTHER COSTS WE INCURRED
IN 2007 RELATING TO THESE CASES WERE SIGNIFICANT, AND THE AMOUNT OF COSTS WE
INCUR IN THE FUTURE MAY BE SIGNIFICANT.

For a complete description of all of the lawsuits we are involved in, see
ITEM 3. LEGAL PROCEEDINGS.

OUR REVENUE GROWTH DEPENDS ON OUR ABILITY TO UNDERSTAND THE TECHNOLOGY
REQUIREMENTS OF OUR CUSTOMERS IN THE CONTEXT OF THEIR MARKETS. IF WE FAIL TO
UNDERSTAND THEIR TECHNOLOGY NEEDS OR MARKETS, WE LIMIT OUR ABILITY TO MEET THOSE
NEEDS AND TO GENERATE REVENUES.

We believe that by focusing on the technology needs of our customers, we
are better positioned to generate revenues by providing technology solutions to
them. The market demands of our customers drive our revenues. The better we
understand their markets and requirements, the better we are able to identify
and obtain effective technology solutions for our customers. We rely on our
professional staff and contract business development consultants to understand
our customers' technical, commercial, and market requirements and constraints,
and to identify and obtain effective technology solutions for them.

OUR SUCCESS DEPENDS ON OUR ABILITY TO ATTRACT AND RETAIN KEY PERSONNEL.

Our success depends on the knowledge, efforts and abilities of a small
number of key personnel. John B. Nano is our Chairman, President, Chief
Executive Officer and Interim Chief Financial Officer and Aris D. Despo is our
Executive Vice President, Business Development. We rely on our professional
staff and contract business development consultants to identify intellectual
property opportunities and technology solutions, and to negotiate and close
license agreements. Competition for personnel with the necessary range and depth
of experience is intense. We cannot be certain that we will be able to continue
to attract and retain qualified personnel. If we are unable to hire and retain
highly qualified professionals and consultants, especially with our small number
of staff, our revenues, prospects, financial condition and future activities
could be materially adversely affected.

OUR CUSTOMERS, AND WE, DEPEND ON GOVERNMENT APPROVALS TO COMMERCIALLY DEVELOP
CERTAIN LICENSED PRODUCTS.

Commercial development of some licensed patents may require the approval of
governmental regulatory agencies, especially in the life sciences area, and
there is no assurance that those agencies will grant such approvals. In the
United States, the principal governmental agency involved is the U.S. Food and
Drug Administration ("FDA"). The FDA's approval process is rigorous, time
consuming and costly. Unless and until a licensee obtains approval for a product
requiring such approval, the licensee may not sell the product in the U.S., and
therefore we will not receive royalty income based on U.S. sales of the product.

Page 12

IF OUR CLIENTS AND WE ARE UNABLE TO PROTECT THE INTELLECTUAL PROPERTY UNDERLYING
OUR LICENSES, OR TO ENFORCE OUR PATENTS ADEQUATELY, WE MAY BE UNABLE TO DEVELOP
SUCH LICENSED PATENTS OR TECHNOLOGIES SUCCESSFULLY.

Our success in earning revenues from licenses is subject to the risk that
issued patents may be declared invalid, that a patent may not be issued on a
patent application, or that competitors may circumvent or infringe our licensed
patents and thereby render our licensed patents not commercially viable. In
addition, when all patents underlying a license expire, our royalties from that
license cease, and there can be no assurance that we will be able to replace
those royalties with royalty revenues from new or other licenses.

PATENT LITIGATION HAS INCREASED; IT CAN BE EXPENSIVE AND MAY DELAY OR PREVENT
OUR CUSTOMERS' PRODUCTS FROM ENTERING THE MARKET.

Our clients and/or we may pursue patent infringement litigation or
interference proceedings against sellers of products that we believe infringe
our patent rights. Holders of conflicting patents or sellers of competing
products also may challenge our patents in patent infringement litigation or
interference proceedings. For a description of proceedings in which we are
currently involved, see ITEM 3. LEGAL PROCEEDINGS.

We cannot be certain that our clients and/or we will be successful in any
such litigation or proceeding, and the results and costs may materially
adversely affect our business, operating results and financial condition.

DEVELOPING NEW PRODUCTS, CREATING EFFECTIVE COMMERCIALIZATION STRATEGIES FOR
TECHNOLOGIES, AND ENHANCING THOSE PRODUCTS AND STRATEGIES ARE SUBJECT TO
INHERENT RISKS. RISKS INCLUDE UNANTICIPATED DELAYS, UNRECOVERABLE EXPENSES,
TECHNICAL PROBLEMS OR DIFFICULTIES, AND THE POSSIBILITY THAT DEVELOPMENT FUNDS
WILL BE INSUFFICIENT. THE OCCURRENCE OF ANY ONE OR MORE OF THESE RISKS COULD
CAUSE US TO ABANDON OR SUBSTANTIALLY CHANGE OUR TECHNOLOGY COMMERCIALIZATION
STRATEGY.

Our success depends on, among other factors, our clients developing new or
improved technologies, our customers' products meeting targeted cost and
performance objectives for large-scale production, and our customers' ability to
adapt technologies to satisfy industry standards, and consumer expectations and
needs, and bringing their products to market before market saturation. They may
encounter unanticipated problems that result in increased costs or substantial
delays in introducing and marketing new products. Products may not be reliable
or durable under actual operating conditions or commercially viable and
competitive. New products may not meet price or other performance objectives
when introduced in the marketplace. Any of these events would adversely affect
our realization of royalties from new products.

WE HAVE NOT PAID DIVIDENDS ON OUR COMMON STOCK.

We have not paid cash dividends on our common stock since 1981, and, our
Board of Directors does not currently have plans to declare or pay cash
dividends in the future. The decision to pay dividends is solely at the
discretion of our Board of Directors based upon factors that they deem relevant,
and may change at any time.

AS A PUBLICLY HELD COMPANY, WE HAVE SIGNIFICANTLY HIGHER ADMINISTRATIVE COSTS.

The Sarbanes-Oxley Act of 2002, as well as new rules implemented by the SEC
and new listing requirements adopted by the American Stock Exchange in response
to the Sarbanes-Oxley Act of 2002, has required changes in corporate governance
practices, internal control policies and audit committee practices of public
companies. These new rules, regulations, and requirements have increased our
legal, audit, financial, compliance and administrative costs, and have made
certain other activities more time consuming and costly. The additional costs
are expected to continue. These new rules and regulations

Page 13

may make it more difficult and more expensive for us to obtain directors and
officers liability insurance in the future, and could make it more difficult for
us to attract and retain qualified members for our Board of Directors,
particularly to serve on our audit committee.

IN DEVELOPING NEW PRODUCTS WE ARE AFFECTED BY PATENT LAWS AND REGULATIONS.

Patent laws and regulations are constantly being reviewed for possible
revision. We cannot be certain how we will be affected by revisions.

ITEM 1B. UNRESOLVED STAFF COMMENTS,

Not applicable.

ITEM 2. PROPERTIES.

Our executive office is approximately 11,000 square feet of leased space in
an office building in Fairfield, Connecticut, under the terms of a seven-year
lease signed April 28, 2006. The lease commenced on August 24, 2006 and expires
on August 31, 2013. We have an option to terminate the lease after five years,
or to renew the lease for an additional five years under similar terms and
conditions. The lease provides for an average annual base rent of approximately
$265,000 over the life of the lease, after incentives, exclusive of taxes,
climate control, power and maintenance. The current management believes that we
have excess space and is seeking sub-tenants.

The lease for our prior executive office expired December 31, 2006. We were
not responsible for rent payments after September 1, 2006. An agreement with our
new landlord allowed us to vacate the former space by September 1, 2006,
releasing us from further rent obligations.

ITEM 3. LEGAL PROCEEDINGS.

FUJITSU

In December 2000, coincident with filing a complaint with the United States
International Trade Commission ("ITC") that was withdrawn in 2001, the
University of Illinois and CTT filed a complaint against Fujitsu Limited,
Fujitsu General Limited, Fujitsu General America, Fujitsu Microelectronics, Inc.
and Fujitsu Hitachi Plasma Display Ltd. (Fujitsu et al., collectively,
"Fujitsu") 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 alleged to infringe two U.S. patents held
by our client, the University of Illinois. The two patents cover energy recovery
technology for flat plasma display panels. In May 2002, the Central District
Court of Illinois granted Fujitsu's motion to transfer this case to the Northern
District of California.

In September 2001, Fujitsu filed counterclaims against the University of
Illinois and us in the United States District Court for the District of
Delaware, which subsequently were dismissed and reinstituted in the Northern
District of California. The counterclaims alleged, among other things, that we
had misappropriated confidential information and trade secrets supplied by
Fujitsu, and committed unfair competition in litigating the ITC action.

Effective July 23, 2002, the University of Illinois agreed to take the lead
in this litigation and assume the cost of new lead counsel. Before this
agreement, we bore the entire cost of lead counsel in this litigation. In late
2002, we were dismissed as co-plaintiff from this litigation, but we retained
our economic interest in any potential favorable outcome.

Page 14

On July 1, 2004, the court granted summary judgment in favor of Fujitsu.
The University of Illinois appealed the decision. On September 20, 2004, the
judge entered a stipulated order staying certain issues, including the
counterclaims, pending resolution of the University's appeal.

On May 1, 2006, the Court of Appeals for the Federal Circuit (the "CAFC")
heard the University of Illinois' appeal of the summary judgment. On June 15,
2006, the CAFC ruled in favor of Fujitsu, effectively ending the case. The only
claims in this matter still outstanding are Fujitsu's counterclaims against the
University of Illinois and CTT. In January 2007, each of the parties to the case
agreed to a stay of the matter pending settlement discussions.

In July 2007 a settlement was reached between CTT, the University of
Illinois and Fujitsu. As part of the settlement CTT agreed to pay Fujitsu a
minor portion of the approximately $233,000 costs awarded to Fujitsu by the CAFC
in 2006. The parties agreed to dismiss with prejudice all claims and
counterclaims in the suit. CTT's settlement eliminates any need for contingent
payment to our prior counsel in the ITC and District Court actions against
Fujitsu.

CAROLINA LIQUID CHEMISTRIES CORPORATION, ET AL.

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.
Carolina Liquid was served on September 1, 2005. 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.
Re-examination proceedings are now underway. We do not expect an adverse finding
by the USPTO, but completion of such action will delay the ultimate resolution
of the case. Further action in this case is pending.

PALATIN TECHNOLOGIES, INC.

CTT initiated litigation on September 14, 2005, against Palatin as a result
of Palatin's breach of a Settlement Agreement between CTT and Palatin dated June
17, 2005. The settlement resolved a prior dispute regarding CTT's rightful
portion of certain sublicense fees Palatin received from King Pharmaceuticals.
The parties have filed their complaints, counterclaims, and answers, and
discovery is currently underway.

CTT commenced an arbitration proceeding on June 5, 2006, as a result of
Palatin's breach of a License Agreement between CTT and Palatin dated March 31,
1998. The three-member panel of arbitrators has been selected, and a formal
hearing was to have been held in beginning of November 2007. The hearing date
has been extended to March 2008. The panel has agreed to allow both sides to
file dispositive motions to summarily resolve certain claims

On September 11, 2007, we presented Palatin with a Notice of Termination of
the PT-14 technology license agreement stating that Palatin committed a material
breach of the agreement originally signed between the two companies on March 31,
1998.

BEN MARCOVITCH AND OTHER CO-DEFENDANTS

Page 15

nutraceutical firm brought to CTT by Mr. Marcovitch. As announced on April 10,
2007, CTT had paid $750,000 to Agrofrut for a 5% ownership, and certain
marketing and investment options in Agrofrut.

On August 15, 2007, we retained Greenberg Traurig, LLP, an international
law firm, to recover the funds from Agrofrut, and Juan Carlos Esguerra of the
Bogota, Colombia-based law firm, Esguerra, Barrera, Arriaga, to handle CTT's
affairs in Colombia. CTT's advisors assembled the following information, which
we included in our subsequent Federal complaint described below. Breen &
Associates, an independent investigative firm, developed evidence that showed
that Mr. Marcovitch and Agrofrut provided CTT's Board of Directors with false
and misleading information. Included in those findings was the fact that papers
submitted by Mr. Marcovitch and Agrofrut prior to the March 28, 2007 CTT Board
meeting listed Dr. Raul Aragon Davalos as an executive and Chief Scientist of
Agrofrut, and the inventor of Agrofrut's new technology to remove complex
compounds such as bromelain and xylitol, at better than 99% purity, from
pineapples and other organic waste. Dr. Raul Aragon Davalos had actually been
killed in a drive-by shooting in Cali, Colombia on February 28, 2007. Dr. Raul
Aragon Davalos's assassination was known to Mr. Marcovitch and Betty Rios
Valencia, President and CEO of Agrofrut and former spouse of Mr. Marcovitch, as
well as to other executives of Agrofrut, but was never revealed to CTT by them.
Mr. Marcovitch had admitted to a CTT outside counsel, and to a CTT shareholder,
that he had attended Dr. Raul Aragon Davalos's funeral. Further, the
investigations have shown that Dr. Raul Aragon Davalos was a convicted drug
trafficker and that Ms. Rios Valencia also has a drug conviction record. Among
other things, the involvement of Mr. Marcovitch, Ms. Rios Valencia and John
Derek Elwin, III, a former CTT employee, with convicted drug traffickers
resulted in CTT's decisive actions against these individuals.

On August 31, 2007 we filed a Federal complaint in the U.S. District Court
for the District of Connecticut against Mr. Marcovitch and other co-defendants.
The complaint claims that false and misleading information had been provided to
CTT in a conspiracy to fraudulently obtain funds from CTT using the Agrofrut
transaction. Others named in the suit are Ms. Rios Valencia, Mr. Elwin, III, and
Agrofrut, E.U. In our lawsuit, we requested, among other relief, punitive
damages and attorneys' fees.

Based upon our understanding of the facts and issues, we have presented our
findings in our Federal complaint in a manner that will allow shareholders to
understand the gravity of the charges. It is our opinion and that of our Board
of Directors that this lawsuit is required to recover our $750,000 and to settle
outstanding issues regarding the named parties. The recent in-depth due
diligence and subsequent investigation by Breen & Associates, conducted prior to
Mr. Marcovitch's removal from the Board, disclosed several issues of credibility
and raised serious concerns regarding the defendants named in the lawsuit.

On October 22, 2007 at a show cause hearing, the Court stated that all
defendants named in the case, and their associates, were enjoined from any
further use of any remaining part of the $750,000 received from CTT. A full
disclosure of all accounts where remaining funds are held, and a complete
description of the disposition of any portion of the CTT payment must be made to
CTT's counsel by November 21, 2007. The Court adjourned the hearing on our
Application for Prejudgment Remedy until December 7, 2007.

We intend to aggressively pursue this matter.

EMPLOYMENT MATTERS

EMPLOYMENT MATTERS - JOHN B. NANO On August 10, 2005, we received notice
that John B. Nano, President and CEO from June 2002 to June 2005, had commenced
suit in the Superior Court in the Judicial District of Stamford, Connecticut
seeking the pre-judgment remedy of attachment. In his complaint, Mr. Nano sought
to attach our bank accounts in the amount of $1.4 million to preserve his
ability to collect should he succeed on his claim that CTT allegedly had
breached his employment contract because it denied him certain severance
benefits when it terminated his employment on June 14, 2005. Mr. Nano also
claimed, in the alternative, that CTT violated a draft of a separation agreement
and general release which it sought to negotiate with him at the time of his
departure. Mr. Nano claimed in his complaint that CTT withdrew the proposed
draft agreement after he communicated his acceptance to the then Chairman of
CTT's Board of Directors.

Page 16

On September 14, 2005, we announced that we had received notice that Mr.
Nano also had filed a complaint with the Occupational Safety and Health
Administration ("OSHA"), alleging a violation by CTT of Section 806 of the
Corporate and Criminal Fraud Accountability Act of 2002, 18 U.S.C. 1514A (the
"Sarbanes-Oxley Act") in connection with the termination of his employment. We
filed an answer to the OSHA inquiry on October 3, 2005. On March 2, 2006, Mr.
Nano notified OSHA that he withdrew his complaint, and reserved his right to
file the action in U.S. District Court.

On December 7, 2005, CTT filed a complaint against Mr. Nano in the Superior
Court in the Judicial District of Stamford, Connecticut, for monetary and
punitive damages.

On May 26, 2006, Mr. Nano filed a complaint in the United States District
Court of Connecticut, alleging that CTT violated Section 806 of the
Sarbanes-Oxley Act in connection with the termination of his employment. In his
complaint, Mr. Nano sought monetary damages, punitive damages, attorneys' fees,
and costs and other remuneration at the option of the court.

As a result of a proxy contest conducted for the election of Directors at
the annual meeting of shareholders on January 16, 2007, adjourned until February
2, 2007, a complete new Board of Directors was elected and installed. The
disputed matters regarding CTT's former Board of Directors and John B. Nano were
settled by the new Board. Mr. Nano's suit was brought under the Sarbanes-Oxley
law and requested $5.1 million plus damages against CTT. On January 24, 2007,
the parties met with Judge Thomas P. Smith, United States District Court of
Connecticut, who demanded that CTT or a reputable insurance company post a bond
of $2.5 million by the close of business on January 26, 2007 to serve as
security. Mr. Nano agreed to reduce his settlement demand and the new Board
agreed to pay Mr. Nano $1 million and to pay his legal fees of $650,000 to
settle the original suit. These amounts were paid in 2007. The $2.5 million bond
was distributed on February 7, 2007, with Mr. Nano receiving $1 million, his
legal advisors receiving $650,000, and the balance of $850,000 returned to CTT's
treasury.

EMPLOYMENT MATTERS - OTHER FORMER EMPLOYEES On September 29, 2006, CTT
received a demand letter from an attorney representing two of its officers, Aris
D. Despo and Paul A. Levitsky, demanding approximately $300,000 in total for
commission payments alleged to be due them for fiscal year 2006 under CTT's
prior annual incentive compensation plan, which was terminated in November 2005.
These individuals received commission payments in fiscal year 2005 related to
new homocysteine licenses granted in 2005, and claimed that the company was
obligated, and they were promised, that the payments would continue for a period
of two years thereafter. The letter also claimed that these individuals
anticipated that they would be entitled to at least an aggregate additional
$350,000 in commission payments in fiscal year 2007. CTT put these individuals
on administrative leave with pay on October 30, 2006.

During the quarter ended January 31, 2007, the Company took a charge of
approximately $200,000 in severance costs in full and final settlement of any
claims against the Company, pursuant to the terms of a separation agreement
effective January 6, 2007 with Mr. Despo ("Agreement 1"). Pursuant to the
Agreement, Mr. Despo also agreed to resign his employment, and executed a
release in favor of the Company. The Agreement included bi-weekly severance
payments to be paid over calendar 2007.

During the quarter ended January 31, 2007, the Company took a charge of
approximately $150,000 in severance costs in full and final settlement of any
claims against the Company, pursuant to the terms of a separation agreement
effective January 17, 2007, with Mr. Levitsky ("Agreement 2"). Pursuant to the
Agreement, Mr. Levitsky also agreed to resign his employment, and executed a
release in favor of the Company. The Agreement included an initial $50,000
payment with the balance to be paid bi-weekly over a six-month period. Both Mr.
Despo and Mr. Levitsky were rehired to their previous CTT positions by the new
CTT management effective February 14, 2007; and their corresponding outstanding
severance payments of approximately $356,000 were paid in a lump sum at that
time. Mr. Levitsky's employment with the Company has since been terminated as
part of the organization restructuring in August 2007.

Page 17

SECURITIES AND EXCHANGE COMMISSION

On August 11, 2004, the SEC filed a civil suit in the United States
District Court for the District of Connecticut, naming Frank R. McPike, Jr.,
former President and CEO of CTT, and six individual brokers, alleging that from
at least July 1998 to June 2001, the defendants were involved in a scheme to
manipulate the price of our stock. The case relates to our 1998 stock repurchase
program under which we repurchased shares of our common stock from time to time
during the period from October 28, 1998 to March 22, 2001. CTT was named as a
defendant in the suit due to the alleged conduct of Frank R. McPike, Jr., whose
conduct in connection with the stock repurchase program was imputed to CTT as a
matter of law. Relating to CTT, the SEC sought a permanent injunction
prohibiting us from further violations of the Securities Exchange Act of 1934,
and a civil penalty pursuant to Section 21(d)(3) of the Securities Exchange Act
of 1934 (this section provides for maximum penalties of $550,000 for a corporate
entity and $110,000 per individual). On September 24, 2004, we responded to this
civil suit, and filed a motion to dismiss the suit. On October 15, 2004, the SEC
filed a motion opposing our motion to dismiss the suit. On July 21, 2005, our
motion to dismiss the suit was denied. On April 10, 2006, we filed a separate
motion for summary judgment to dismiss the case, and on June 15, 2006, the SEC
filed a motion opposing our motion for summary judgment. On November 6, 2006,
the court denied our motion for summary judgment. Our appeal of the denial of
our motion for summary judgment in our favor was not successful.

We previously filed suit against our directors' and officers' insurance
carrier to obtain reimbursement of our costs to defend us and our directors and
officers. As part of an October 2004 settlement, our insurance carrier
acknowledged that the deductible under our insurance policy had been satisfied
relating to the SEC's civil suit. As a result, defense costs incurred in 2005
and thereafter have been covered by our insurance carrier.

On October 10, 2007 we agreed to a settlement of this case without the
company admitting or denying the allegation of the complaint, and consenting to
be permanently restrained and enjoined from violating Sections 9(a) and 10(b) of
the Securities Exchange Act of 1934, and rule 10b-5 thereunder. No fines or
penalties were imposed by the SEC in connection with this settlement. The
settlement agreement has been approved by the SEC. Its anticipated acceptance by
the Connecticut Federal District Court will close the SEC's investigation and
proceedings against the company. No members of CTT's current Board or management
held positions with the company during the period of 1998-2001.

LABORATORY CORPORATION OF AMERICA HOLDINGS D/B/A LABCORP

On May 4, 1999, a case was filed in the United States District Court for
the District of Colorado against Laboratory Corporation of America Holdings
d/b/a LabCorp ("LabCorp") by Metabolite Laboratories, Inc. ("MLI") and us
(collectively, the "Plaintiffs"). The case alleged, in part, breach of contract
and homocysteine assay patent infringement, and that LabCorp owed the Plaintiffs
royalties for homocysteine assays performed beginning in the summer of 1998
using methods falling within the claims of a patent we own. We licensed the
patent on a non-exclusive basis to MLI and MLI sublicensed it to LabCorp.

In November 2001 a jury confirmed the validity of our patent rights, found
that LabCorp had willfully infringed our patent and breached their sublicense
contract, and awarded damages to the Plaintiffs.

In an amended judgment issued in November 2002, the court awarded CTT
approximately $1,019,000 in damages, $1,019,000 in enhanced, punitive, damages,
$560,000 in attorneys' fees, and $132,000 in prejudgment interest, and had
issued a permanent injunction barring LabCorp from performing future
homocysteine assays.

The injunction against performing tests was stayed by the court pursuant to
a stipulated court order that expired in April 2005; pursuant to the stipulated
order LabCorp was allowed to perform assays

Page 18

in exchange for paying a royalty. LabCorp appealed the judgment, and on August
5, 2004, the CAFC denied LabCorp's appeal for a rehearing or a rehearing en banc
(rehearing by the full CAFC). As a result of this decision, on August 16, 2004,
the Plaintiffs received approximately $6.7 million, our share of which was
$921,000, and we recorded $815,000 in royalty legal awards and $105,000 in
interest income during 2005. After this decision LabCorp had appealed the case
to the U.S. Supreme Court (the "Supreme Court"). The payment did not include
attorneys' fees or court costs previously awarded to the Plaintiffs that were
under appeal with the court.

On January 24, 2005, the CAFC issued a summary dismissal of LabCorp's
appeal of the court's award of attorneys' fees and court costs from the original
case. Subsequently, we received payment from LabCorp for the attorneys' fees and
court costs. Our share of the payment was $231,000, and we recorded $221,000 in
royalty legal awards and $10,000 in interest income, also in 2005.

On June 22, 2006, the Supreme Court ruled that the writ of certiorari
previously granted, had been improvidently granted, thus dismissing the writ and
ending LabCorp's appeal of this homocysteine assay infringement case originally
filed.

On September 21, 2006, the District Court ruled on the remaining
outstanding motions and claims related to this case, and as result of the
ruling, the case effectively ended with no further awards granted.

We did not receive any awards from this case in 2007 or 2006. As a result
of this decision, the validity of our homocysteine patent was upheld.

ICR, LLC

On August 3, 2007, ICR, LLC filed a complaint in Superior Court, Judicial
District of Fairfield, at Bridgeport, Connecticut against CTT in an attempt to
collect funds allegedly owed them from a previously cancelled contract. Previous
management had employed ICR for public relations activity during their proxy
contest in their attempt to be re-elected. The consulting contract was cancelled
by the new management after their election in February 2007.

OTHER

On May 17, 2006, we filed a complaint against Dr. Arnold H. Pross in the
New York Supreme Court in Nassau County, alleging the posting of defamatory
statements against Donald J. Freed, our former President and Chief Executive
Officer, as well as CTT, on public message boards. On July 20, 2006, Dr. Pross
filed a motion to dismiss our complaint based upon a lack of personal
jurisdiction. On October 13, 2006, we filed a motion opposing Dr. Pross' motion.
The Court ruled that it has no jurisdiction in New York State for the matters at
issue. CTT has subsequently allowed the case to drop without further action.

SUMMARY

We are unable to estimate legal expenses or losses we may incur, if any, or
possible damages we may recover in these suits, if any, and we have not recorded
any potential judgment losses or proceeds in our financial statements to date.
We record expenses in connection with these suits as they are incurred.

We believe that 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 19

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

On February 2, 2007, at the reconvened Annual Meeting of Stockholders of
the Company, the existing Board of Directors of the Company was replaced by the
shareholders with the following new directors: John B. Nano, Ben Marcovitch,
William L. Reali, Joel M. Evans, MD., Richard D. Hornidge, Jr. and Ralph S.
Torello. The final confirmed vote by the Independent Inspectors of Election to
elect the forgoing directors was 2,893,470 as opposed to 1,549,754 for the
former management slate, a margin of 1,343,716 shares and a total of
approximately two to one for those voting for directors.

In addition, immediately following the stockholders meeting, the new board
met and elected John B. Nano as Chairman of the Board of Directors, Chief
Executive Officer and President. At that time the Board also terminated Donald
J. Freed as Chief Executive Officer.

The newly elected Board appointed William L. Reali as Chairman of the Audit
Committee with Richard Hornidge and Joel Evans as members. The Board appointed
Ben Marcovitch as Chairman of the Nominating committee with William L. Reali and
Joel Evans as members. The Board appointed Richard Hornidge as chairman of the
Compensation Committee with Ben Marcovitch and Ralph Torello as members.

Subsequently, on August 8, 2007 we announced that Ben Marcovitch had been
removed from our Board of Directors by unanimous vote of CTT's five Directors
for violating CTT's Code of Conduct.

ITEM 4A. EXECUTIVE OFFICERS OF THE REGISTRANT.

The names of our executive officers, their ages and background information are
as follows:

John B. Nano, 63, has served as our President and Chief Executive Officer
and Interim Chief Financial Officer, as well as Chairman of the Board of
Directors, since February 2007. From January 2006 to January 2007 he served as
President and Chief Executive Officer of Articulated Technologies, LLC., a
company involved in creating and commercializing patented light emitting diode
technologies for global solid state lighting applications. Mr. Nano previously
served as President and Chief Executive Officer, and a member of the Board of
CTT from June 2002 through June 2005. Prior to joining CTT, Mr. Nano served as
a Principal reporting to the Chairman of Stonehenge Networks Holdings, N.V., a
global virtual private network provider, with positions in operating, strategic
planning and finance from 2000 to 2001. From 1998 to 1999, Mr. Nano served as
Executive Vice President and Chief Financial Officer of ConAgra Trade Group,
Inc., a subsidiary of ConAgra, Inc., an international food company. From 1983
to 1998, he served as Executive Vice President, Chief Financial Officer and
President of an Internet Startup Division of Sunkyong America, a subsidiary of
the Korean conglomerate, Sunkyong Group.

Aris D. Despo, 54, has served as our Executive Vice President, Business
Development since February 2007, a position he also held from January 2004
through December 2006. Mr. Despo served as a consultant to CTT from July 2002
through December 2003.

Page 20

PART II
-------

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND
ISSUER PURCHASES OF EQUITY SECURITIES.

Market information. Our common stock has been quoted on the American Stock
Exchange ("AMEX") under the ticker symbol CTT since April 25, 1984. The
following table, for the periods indicated, sets forth the quarterly high and
low sales price of our common shares as reported by the AMEX.

YEAR ENDED Year Ended
July 31, 2007 JULY 31, 2006
- ---------------------------- ----------------------------
HIGH LOW High Low
----- ----- ----- -----
FIRST QUARTER $2.85 $2.27 First Quarter $7.03 $4.71
SECOND QUARTER $2.80 $2.16 Second Quarter $5.35 $3.61
THIRD QUARTER $3.74 $2.40 Third Quarter $5.00 $3.01
FOURTH QUARTER $3.73 $2.30 Fourth Quarter $3.95 $2.10

Holders. At October 18, 2007, there were approximately 544 holders of
record of our common stock.

Dividends. No cash dividends were declared on our common stock during the
last two fiscal years.

Sales and issuances of unregistered securities. During the year ended July
31, 2006, we sold and issued a total of 595,092 shares of common stock pursuant
to a $5 million equity financing arrangement, receiving a total of $2,282,459 in
cash. The equity financing arrangement was completed and terminated in the
fourth quarter of 2006 (see ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS). All securities were issued
without registration under Section 4(2) of the Securities Act. Private placement
offers and sales were made and registered under the Securities Act for resale by
the purchaser.

Page 21

COMPETITIVE TECHNOLOGIES, INC.

ITEM 6. SELECTED FINANCIAL DATA (1) (4)

2007 2006 2005 2004 2003
------------ ------------ ------------ ---------- ------------
STATEMENT OF OPERATIONS SUMMARY:
Total revenues (2) $ 4,167,216 $ 5,187,631 $ 14,174,354 $8,021,654 $ 3,319,556
Net income (loss) (2) (3) $(8,893,946) $(2,377,224) $ 5,701,787 $2,954,529 $(1,935,301)
Net income (loss) per share:
Basic $ (1.11) $ (0.31) $ 0.84 $ 0.47 $ (0.31)
Assuming dilution $ (1.11) $ (0.31) $ 0.78 $ 0.46 $ (0.31)
Weighted average number of common shares
outstanding:
Basic 8,040,455 7,651,635 6,762,553 6,247,588 6,182,657
Assuming dilution 8,040,455 7,651,635 7,324,701 6,456,860 6,182,657

YEAR-END BALANCE SHEET SUMMARY: At July 31,
------------ ------------ ------------ ---------- ------------
Cash and cash equivalents $ 6,572,076 $12,909,311 $ 14,279,547 $4,309,680 $ 1,504,295
Total assets 9,712,733 18,416,901 19,441,093 6,680,807 2,952,501
Total long-term obligations 62,624 - - - -
Total shareholders' interest 7,598,816 14,454,200 14,107,881 4,938,518 1,169,427

<FN>

(1) This summary should be read in conjunction with our Consolidated Financial
Statements and Notes thereto. All amounts in these notes are rounded to
thousands.

(2) 2007 includes $806,000 for the sale of video compression patents. 2006
includes upfront license fees totaling $460,000. 2005 includes homocysteine
upfront license fees totaling $6,181,000, settlements with JDS Uniphase and
Palatin totaling $1,390,000, $930,000 of dividends, and $1,037,000 from
LabCorp awards. 2004 includes $4,694,000 from the Materna(TM) award and
$1,203,000 from the Unilens settlement and stock sale. 2003 includes
$600,000 relating to the Materna(TM) legal award.

(3) 2007 includes $877,000 of non-cash compensation related to stock options,
$1,650,000 for the settlement of the case, including legal fees, brought
against us by John B. Nano (see ITEM 3, LEGAL PROCEEDINGS), write-off of
$750,000 investment in non-public companies and related investigative fees
of $189,000, and $711,000 of costs related to the proxy contest, including
$125,000 non-cash compensation in the form of shares of common stock. 2006
includes $398,000 of non-cash compensation expense related to stock options
and $371,000 of legal costs relating to Mr. Nano (see ITEM 3, LEGAL
PROCEEDINGS). 2005 includes $170,000 of non-cash compensation expense
related to stock options, $782,000 in defense costs relating to an OSHA
claim by two former employees, and $228,000 relating to compliance with
Section 404 of the Sarbanes-Oxley Act.

(4) No cash dividends were declared or paid in any year presented.

Page 22

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATION

Forward-Looking Statements
- --------------------------

OVERVIEW

We are a full service technology transfer and licensing provider. We
provide technology transfer, selling and licensing services focused on the
technology needs of our customers, matching those requirements with commercially
viable technology solutions, bridging the gap between market demand and
innovation. We develop relationships with universities, companies, inventors and
patent or intellectual property holders to obtain the rights or a license to
their intellectual property rights, principally patents and inventions
(collectively, the "technology" or "technologies"). They become our clients, for
whom we find markets to sell or further develop their technology. We also
develop relationships with those who have a need or use for technologies. They
become our customers, usually through a license or sublicense. We identify and
commercialize innovative technologies in life and physical sciences,
electronics, and nano science developed by universities, companies and
inventors. Our goal is to maximize the value of intellectual assets for the
benefit of our clients, customers and shareholders.

We earn revenues primarily from licensing our clients' and our own
technologies to our customers (licensees). Our customers pay us royalties based
on usage of the technology, and we share those royalties with our clients. In
the normal course of business, our revenues fluctuate from quarter to quarter,
and year to year, due to changes in revenues of our customers, upfront license
fees, new licenses granted, expiration of existing licenses, and/or the
expiration or economic obsolescence of patents underlying licenses.

Reliance on one revenue source. For the three years ended July 31, 2007, we
had a significant concentration of revenues from our homocysteine assay
technology. The patent for this technology expired in July 2007. We expect to
receive revenues for any homocysteine assays conducted prior to the expiration
date, but we will not receive revenues from this technology for sales made after
that date. Revenues from our homocysteine assay technology decreased compared to
2006 due to upfront license fees received in 2006 that did not occur in the
current year, and a decrease in the number of reported tests performed by two of
our licensees. In 2005, we received over $6 million in upfront fees from new
homocysteine licenses granted in that year. We believe that we had licenses with
the premier distributors and laboratories in the United States that sell and/or
perform tests used to measure homocysteine levels. We perform audits of our
licensees to insure that we capture all available revenues. We believe that part
of the decrease in the number of tests reported may be due to suspected
infringers who are selling homocysteine tests without a license.

We filed a patent infringement complaint against three suspected
infringers, but we believe progress in this case may be subject to delaying
tactics by the defendants, as well as the normal extended period of time it
takes for such cases to work their way through the court system. In addition, in
response to the patent enforcement action we filed, one of the defendants has
requested that the United States Patent and Trademark Office ("USPTO")
re-evaluate the validity of our patent. While we do not expect

Page 23

an adverse finding by the USPTO, such actions could further delay the ultimate
resolution of the case, and negatively impact our reported financial results
through decreased revenues and increased legal costs. (For further information,
see ITEM 3. LEGAL PROCEEDINGS.)

Presentation All amounts in this Item 7 have been rounded to the nearest
thousand dollars. In addition, all periods discussed in this Item 7 relate to
our fiscal year ending July 31; first, second, third and fourth quarters ending
October 31, January 31, April 30 and July 31, respectively.

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 - 2007 VS. 2006

SUMMARY OF RESULTS

We incurred a net loss for 2007 of $8,894,000, or $1.11 per share, compared
to a net loss for 2006 of $2,377,000, or $0.31 per diluted share, an increased
loss of $6,517,000, or $.80 per share. The reasons for the increase in net loss
are explained in detail below. Our current revenue stream is insufficient for us
to be profitable with our present cost structure. We have plans in place to
increase revenues and we expect to be profitable on a long-term basis.

REVENUES

Total revenues for 2007 were $4,167,000, compared to $5,188,000 for 2006, a
decrease of $1,021,000, or 20%.

Retained royalties for 2007 were $2,731,000, which was $1,816,000, or 40%
lower than the $4,547,000 reported in 2006. The following compares revenues from
technologies with retained royalties greater than or equal to $150,000 in 2007
or 2006.

Increase % Increase
2007 2006 (Decrease) (Decrease)
---------- ---------- ------------ -----------
Homocysteine assay $2,037,000 $3,196,000 $(1,159,000) (36)
Ethyol(TM) 29,000 483,000 (454,000) (94)
Gallium arsenide 34,000 184,000 (150,000) (82)
Wireless FM modulator 216,000 132,000 84,000 64
Plasma display 150,000 150,000 - --
All other technologies 265,000 402,000 (137,000) (34)
---------- ---------- ------------ -----------
TOTAL RETAINED ROYALTIES $2,731,000 $4,547,000 $(1,816,000) (40)%
========== ========== ============ ===========

During 2007 and 2006, we received $0 and $386,000, respectively, of upfront
fees from new homocysteine licenses granted in the year. While the receipt of
upfront licensee fees is common, the magnitude of such fees fluctuates,
sometimes significantly from period to period. Without upfront license fees,
revenues from this technology were $2,037,000, and $2,810,000, for 2007 and
2006, respectively, a $773,000 decrease from 2006. This decrease is due
principally to fewer tests performed by two of our larger licensees. In
addition, we believe that infringers have negatively impacted the amount of
revenues we are receiving relating to our homocysteine technology. Our U.S.
patent that covers this homocysteine assay, the validity of which has been
confirmed by a court decision, expired in July 2007. We expect to receive
revenues for any homocysteine assays conducted prior to the expiration date, but
we will not receive revenues from this technology for sales made after that
date.

Page 24

Approximately 75% of our retained royalties for 2007 were from our
homocysteine assays technology. We continue to seek revenue from new technology
licenses to mitigate the concentration of revenues, and replace revenue from
expiring licenses.

In 2006, royalties from Ethyol sales were limited to a maximum of $500,000
per calendar year. During fiscal 2006 this agreement reached its tenth
anniversary. As a result, royalties will be earned in any of the five years
following the anniversary to the extent that Ethyol sales exceed the revenue
generated in the anniversary year. We expect to earn minimal royalties on this
technology going forward. This patent expires in December 2010.

U.S. patents for gallium arsenide were issued from March 1983 to May 1989.
This technology was licensed to several foreign and one U.S. licensee. Patents
expired from May 2001 through September 2006. After September 2006, we do not
expect significant future revenues for this technology. The decrease in gallium
arsenide revenues in 2007 was due to the expiration of the last of the patents.

Investment income includes dividends and interest earned on our invested
cash. Investment income for 2007 was $554,000, compared to $592,000 in 2006 a
decrease of $38,000, or 6%, compared to 2006. The decrease is due to lower
average monthly cash balances in the current year compared to the prior year,
offset by significantly higher rates of return earned on the invested cash.

Other income for 2007 is primarily the proceeds of $806,000 on the sale of
patents related to our Video Compression technology during the fourth quarter.
Other income also includes sales of product and a marketing study.

EXPENSES

Increase % Increase
2007 2006 (Decrease) (Decrease)
----------- ---------- ----------- -----------
Personnel and other
direct expenses
relating to
revenues $ 5,598,000 $4,356,000 $ 1,242,000 29
General and
administrative
expenses 5,736,000 2,791,000 2,945,000 106
Patent enforcement
expenses, net of
reimbursements 977,000 465,000 512,000 110
Loss on investment 750,000 - 750,000 -
----------- ---------- ----------- -----------
TOTAL EXPENSES $13,061,000 $7,612,000 $ 5,449,000 72%
=========== ========== =========== ===========

Total expenses increased $5,449,000 in 2007 compared to 2006. A major part
of the expenditures in 2007 was costs associated with the prior Board and
management's annual meeting and proxy contest of about $1 million, amounts
accrued to settle Mr. Nano's suit of $5.1 million for $1.0 million and related
legal costs of $0.65 million, and the loss on the Agrofrut investment of
$750,000, as well as an increase of $467,000 in compensation expense related to
change of control stock options.

Personnel and other direct expenses relating to revenues increased a net
$1,242,000 in 2007, compared to 2006, due to a combination of several factors.
The increase in 2007 was due to $356,000 of severance costs accrued for Aris D.
Despo and Paul A. Levitsky (see ITEM 3. LEGAL PROCEEDINGS), and the addition of
six new staff members early in the year. We have restructured our organization
to lower overhead costs by cutting our senior level staff from 13 to 6. 2007
also includes non-cash compensation expense related to stock options of $467,000
for the acceleration of vesting of the options that were outstanding on February
2, 2007 due to the change in control provisions of the 1997 Employees' Stock
Option Plan activated by the removal of the prior Board, and $195,000 for the
grant of 400,000 options to purchase common stock granted during the third
quarter of fiscal 2007 with 25% of such options vesting immediately and
therefore required to be expensed.

Page 25

General and administrative expenses increased a net $2,945,000 in 2007,
compared to 2006, principally due to corporate litigation, annual meetings and
proxy contest costs as discussed above.

Patent enforcement expenses, net of reimbursements, increased a net
$512,000 in 2007, compared to 2006, as we incurred substantial costs to defend
our homocysteine and Fujitsu patent infringement lawsuits. (For further
information, see ITEM 3. LEGAL PROCEEDINGS.)

Loss on Investment. In April 2007, we invested $750,000 in a non-public
company located in Cali, Colombia for a) 5% ownership, including proprietary
technology for converting biomass waste to nutraceutical ingredients; b) an
option to purchase the remaining 95% ownership and c) an exclusive marketing
agreement. During the fourth quarter, it was determined that the technology was
not viable and that we had been defrauded. As a result, the entire investment of
$750,000 was written off. We have brought a lawsuit against the non-public
company, a former CTT director, his former spouse and a former CTT employee to
attempt to recover our investment. (For further information, see ITEM 3. LEGAL
PROCEEDINGS.)

PROVISION FOR INCOME TAXES

The NOLs are an asset to us if we can use them to offset or reduce future
taxable income and therefore reduce the amount of both federal and state income
taxes to be paid in future years. Previously, since we were incurring losses and
could not be sure that we would have future taxable income to be able to use the
benefit of our NOLs, we recorded a valuation allowance against the asset,
reducing its book value to zero. In 2007 and in 2006, the benefit from our net
loss was offset completely by a valuation allowance recorded against the asset.
We did not show a benefit for income taxes, other than the benefit described
above. We will reverse the valuation allowance if we have future taxable income.
We have substantial federal and state operating and capital loss carryforwards
to use against future regular taxable income. In addition, we can use our NOLs
to reduce our future AMT liability. A significant portion of the remaining NOLs
at July 31, 2007, approximately $4,057,000, was derived from income tax
deductions related to the stock options exercises. The tax effect of these
deductions will be credited against capital in excess of par value at the time
they are utilized for book purposes, and not credited to income. We will never
receive a benefit for these NOLs in our statement of operations.

RESULTS OF OPERATIONS - 2006 VS. 2005

SUMMARY OF RESULTS

We incurred a net loss for 2006 of $2,377,000, or $0.31 per share, compared
to net income for 2005 of $5,702,000, or $0.78 per diluted share, a decrease of
$8,079,000, or $1.09 per diluted share. The decrease in net income is explained
below.

REVENUES

Total revenues for 2006 were $5,188,000, compared to $14,174,000 for 2005,
a decrease of $8,986,000, or 63%. In 2005, we received unusually high revenues
from upfront license fees related to our homocysteine technology, and legal
awards and dividends, which did not recur in 2006.

Page 26

Retained royalties for 2006 were $4,547,000, which was $7,091,000, or 61%
lower than the $11,638,000 reported in 2005. The following table compares
revenues from technologies with retained royalties greater than or equal to
$150,000 in 2006 or 2005.

Increase % Increase
2006 2005 (Decrease) (Decrease)
---------- ----------- ------------ -----------
Homocysteine assay $3,196,000 $ 8,932,000 $(5,736,000) (64)
Ethyol 483,000 500,000 (17,000) (3)
Gallium arsenide 184,000 860,000 (676,000) (79)
Plasma display 150,000 150,000 - -
Sexual dysfunction 60,000 843,000 (783,000) (93)
All other technologies 474,000 353,000 121,000 34
---------- ----------- ------------ -----------
Total retained royalties $4,547,000 $11,638,000 $(7,091,000) (61)%
========== =========== ============ ===========

Approximately 88% of our retained royalties for 2006 were from four
technologies: 70% from homocysteine assays, 11% from Ethyol, 4% from gallium
arsenide patents, and 3% from plasma display.

During 2006 and 2005, we received $386,000 and $6,181,000, respectively, of
upfront fees from new homocysteine licenses granted in the year. While the
receipt of upfront licensee fees is common, the magnitude of such fees
fluctuates, sometimes significantly from period to period. Without upfront
license fees, revenues from this technology were $2,810,000, and $2,751,000, for
2006 and 2005, respectively. The increase in 2006 was due to a combination of
new licenses granted and the inclusion of a full year of revenues from several
licenses granted during the prior year, partially offset by a decrease in tests
performed by one of our larger licensees. Our patent for this homocysteine
assay, the validity of which has been confirmed by a court decision, expired in
July 2007.

Royalties from Ethyol sales were limited to a maximum of $500,000 per
calendar year, and we have received this amount every calendar year since 2002.
Differences from year-to-year are due to timing of receipts.

U.S. patents for gallium arsenide were issued from March 1983 to May 1989.
This technology was licensed to several foreign and one U.S. licensee. Patents
expired in May 2001 through September 2006. After September 2006, we do not
expect significant future revenues for this technology. The decrease in gallium
arsenide revenues in 2006 was due to the receipt in 2005 of a one-time
settlement of back royalties from one customer as a result of a royalty audit
and subsequent litigation relating to an expired license. Our share of the
settlement was $607,000, net of fees paid to a royalty auditing firm.
Approximately $184,000 and $253,000 of royalties earned in 2006 and 2005,
respectively, were from foreign licenses.

The decrease in revenues in 2006 compared to 2005 related to our sexual
dysfunction technology was due to a settlement received from Palatin
Technologies, Inc. ("Palatin") on June 17, 2005, related to a fee received by
Palatin in August 2004. The settlement was the result of a mediation of a prior
dispute whereby we had demanded arbitration, which is the sole method of dispute
resolution pursuant to the license between us and Palatin, due to our belief
that Palatin was in material breach of the license for not paying us a
percentage of the subcontract fee they received, as provided for in the license.
Pursuant to the settlement, Palatin made a cash payment to us, our share of
which was $680,000, and further agreed to issue to us promptly 170,000 shares of
its unrestricted common stock, bringing the total in 2005 for the settlement to
$783,000. (For further information, see ITEM 3. LEGAL PROCEEDINGS.)

Royalty legal awards of $1,037,000 in 2005 were from two awards we received
related to litigation against Laboratory Corporation of America Holdings d/b/a
LabCorp ("LabCorp"), including $816,000 from the original November 2002 decision
in this homocysteine patent infringement case, that

Page 27

LabCorp had appealed unsuccessfully, and $221,000 for attorneys' fees and court
costs also awarded to us in the original case. There were no legal awards in
2006. (For further information, see ITEM 3. LEGAL PROCEEDINGS.)

Dividends received of $930,000 for 2005 were from our receipt of three
separate dividends from Melanotan Corporation, in which we own approximately
20.9% of the common stock. These dividends are described in detail in Note 5 of
Notes to Consolidated Financial Statements in Part II, Item 8. No dividends were
received in 2006.

Investment income for 2006 was $592,000, compared to $433,000 in 2005.
Included in 2005 were $115,000 of interest from the LabCorp awards, and $52,000
of interest earned on an outstanding note receivable that was fully repaid in
2005. Without these items, investment income for 2006 increased $326,000, or
123%, compared to 2005. The increase is due to a combination of significantly
higher rates of return on invested cash and higher average monthly cash balances
in the current year compared to the prior year.

Increase % Increase
Expenses 2006 2005 (Decrease) (Decrease)
- -------------------- ---------- ---------- ----------- -----------
Personnel and other
direct expenses
relating to revenues $4,356,000 $5,143,000 $ (787,000) (15)
General and
administrative
expenses 2,791,000 3,046,000 (255,000) (8)
Patent enforcement
expenses, net of
reimbursements 465,000 273,000 192,000 70
---------- ---------- ----------- -----------
TOTAL EXPENSES $7,612,000 $8,462,000 $ (850,000) (10)%
========== ========== =========== ===========

Personnel and other direct expenses relating to revenues decreased a net
$787,000 in 2006, compared to 2005, due to a combination of several factors.
Personnel expenses decreased a net $592,000 in 2006, compared to the prior year.
This was due to a $1,095,000 decrease in commission and bonus expense, as a
result of the decrease in our financial results, partially offset by an increase
aggregating to $344,000 in other personnel costs for recruiting expenses
incurred to add business development and business development support employees,
and for severance costs, and a net $167,000 increase for non-cash compensation
charges related to stock options. The 2006 non-cash stock option compensation
expense of $265,000 was the result of our adoption of a new accounting
pronouncement in 2006 that required us to recognize expense for stock options
vesting during the year. This expense will continue in future years. Previously
we did not have to recognize any expense except if a prior grant was modified.
The non-cash stock option compensation expense of $98,000 recognized in 2005 was
related to modifications of stock options previously granted to a former
employee. Other direct expenses relating to revenues decreased $156,000,
principally as a result of less costs incurred in 2006, compared to the prior
year, for our review of the feasibility of certain technologies.

General and administrative expenses decreased a net $255,000 in 2006,
compared to 2005, due to a combination of several factors. Legal and other
defense costs related to a whistleblower claim filed against us by a former
employee decreased $670,000 from the prior year. General corporate legal expense
decreased $69,000 compared to the prior year due to less activity. Investor
relations and marketing expenses decreased $109,000. In addition, there was a
$162,000 decrease in costs incurred in 2006 compared to the prior year to comply
with internal control documentation, testing and audit requirements of Section
404 of the Sarbanes-Oxley Act of 2002 ("SOX 404"). 2005 was our first year under
the SOX 404 requirements, and costs were high as a result of initial
implementation costs, including the creation of original documentation,
management testing and external auditing of management's testing results. In
2006, we only had to update the documentation. In addition, as a result of new
regulations issued by the Securities and Exchange Commission ("SEC"), we were
not required to have our independent auditors test our assertions about the
effectiveness of our internal controls in 2006. This reduced our current year
costs since we did not have to accrue external audit fees for this purpose.

Page 28

Since we have decided that we will maintain our internal control documentation
and testing, we will have ongoing compliance costs.

Partially offsetting these decreases, other legal expenses increased
$371,000 in 2006, compared to 2005, related to our defense of two complaints
filed against CTT by a former President and CEO, and the complaint we filed
against him (see ITEM 3. "LEGAL PROCEEDINGS"). Legal expenses also increased
because we recorded a $168,000 credit in 2005 to expense a reimbursement from
our directors and officers liability insurance carrier for legal costs incurred
and expensed in prior years related to an SEC investigation and subsequent civil
suit. There was no such credit in 2006. Directors' fees and expenses increased
an aggregate of $232,000, principally as a result of an increase in the coverage
levels of our directors and officers liability insurance, and a net increase in
non-cash stock option compensation expense. In 2006, we recognized non-cash
expense for stock options granted to directors pursuant to the adoption of a new
accounting pronouncement. Previously, we did not recognize expense related to
stock options issued to directors, except that in 2005 we recognized expense
relating to a modification of previously issued stock options.

Patent enforcement expenses, net of reimbursements, increased a net
$192,000 in 2006, compared to 2005, as we incurred substantial costs to defend
our homocysteine patent from an appeal to the U.S. Supreme Court by LabCorp of
an earlier decision in our favor. The appeal was unsuccessful. The level of
patent enforcement expenses relates to our legal strategies and varies depending
on the stage and activity, if any, relating to each litigation

PROVISION FOR INCOME TAXES

In current and prior years, we generated significant federal and state
income and alternative minimum tax ("AMT") losses, and these net operating
losses ("NOLs") were carried forward for income tax purposes to be used against
future taxable income. In 2005, we utilized a portion of our NOL carry-forwards
against our regular federal and state taxable income, effectively eliminating
our 2005 regular income tax liabilities. However, in 2005 we expected to be
subject to the AMT liability, where we are limited to using 90% of our NOL
carry-forwards against taxable income. Our 2005 provision for income taxes of
$10,400 principally was for our estimated net AMT liability. In 2006, we
incurred a loss but did not record a benefit since the benefit was fully
reserved (see below). However, we did record a $12,000 benefit due to a change
in estimate of fiscal year 2005 federal AMT liability. In addition, we
determined that we met certain conditions that made us eligible for a $35,000
refund of the AMT paid in 2005, which we received subsequent to 2006. As a
result, in 2006 we recorded in total a benefit for income taxes of $47,000. We
will be subject to the full AMT in future years.

The NOLs are an asset to us if we can use them to offset or reduce future
taxable income and therefore reduce the amount of both federal and state income
taxes to be paid in future years. Previously, since we were incurring losses and
could not be sure that we would have future taxable income to be able to use the
benefit of our NOLs, we recorded a valuation allowance against the asset,
reducing its book value to zero. In 2006, the benefit from our net loss was
offset completely by a valuation allowance recorded against the asset. We did
not show a benefit for income taxes, other than the benefit described above. We
will reverse the valuation allowance if we have future taxable income. We have
substantial federal and state operating and capital loss carryforwards to use
against future regular taxable income. In addition, we can use our NOLs to
reduce our future AMT liability. A significant portion of the remaining NOLs at
July 31, 2006, approximately $4,057,000, was derived from income tax deductions
related to the stock options exercises. The tax effect of these deductions will
be credited against capital in excess of par value at the time they are utilized
for book purposes, and not credited to income. We will never receive a benefit
for these NOLs in our statement of operations.

Page 29

FINANCIAL CONDITION AND LIQUIDITY

Our liquidity requirements arise principally from our working capital
needs, including funds needed to find and obtain new technologies and to 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 July 31, 2007, we had no outstanding debt or available credit facility,
and we believe that it would be very difficult for CTT to obtain any form of
debt financing due to the current composition of our balance sheet, including a
lack of hard assets against which to borrow, and the unpredictable nature of our
annual cash flows. Our financing options currently are limited. We must rely on
cash on hand and cash flows from operations, if any, though this situation could
change in the future. We did obtain equity financing in 2004 that we completed
in 2006. We continue to review financing options for our business, which may in
the future include more equity financing.

We believe we will be successful in increasing recurring revenues in fiscal
2008 by licensing new technologies to customers and collecting due, but unpaid,
royalties on existing licenses, to more than offset our operating costs and
produce a profit for fiscal 2008. To date, such revenue and achievement of
profitability has not yet occurred. However, if necessary, we will meet
anticipated operating cash requirements by further reducing costs, and/or
monetizing assets. We believe that the combination of our cash on hand and
existing revenue flow will be sufficient to meet our current and anticipated
operating cash requirements through fiscal 2008.

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.

During the year ended July 31, 2006, we completed our equity financing (see
below), which provided a significant amount of cash during the year. Since that
financing has been completed, we will be limited in 2008 to financing our
liquidity needs solely from cash on hand, and cash flow from operations, if any.

At July 31, 2007, cash and cash equivalents were $6,572,000 compared to
$12,909,000 at July 31, 2006. Cash used in operating activities in 2007 was
$5,437,000, compared to $3,527,000 in 2006. The decrease in cash provided by
operations in the current year principally was the result of the increased net
loss incurred in 2007, offset by a decrease in receivable as a result of
collection of the payment from Lab Corp in January 2007. Cash used in investing
activities was $978,000, compared to $142,000 in the prior year. The increase in
the current year is primarily related to the investment in Agrofrut, E.U. during
the third quarter of 2007 (see ITEM 3. LEGAL PROCEEDINGS), as well as the
purchase of furniture and fixtures for CTT's new offices, which the prior
management moved into in August 2006. Net cash provided by financing activities
was $78,000 in 2007, compared to $2,299,000 in 2006. The decrease in cash
provided by financing activities in 2007 compared to 2006, was due to cash
received in 2006 as the result of the sale of common stock pursuant to an equity
financing arrangement. This arrangement was completed in 2006.

In addition to fluctuations in the amounts of retained royalties revenues
reported, changes in royalties receivable and payable reflect our normal cycle
of royalty collections and payments.

FUNDING AND CAPITAL REQUIREMENTS

EQUITY FINANCING

In February 2004, we entered into an agreement with Fusion Capital Fund II,
LLC ("Fusion Capital") to sell them up to $5 million of our common stock over a
twenty-month period from the commencement date of May 6, 2004 (the "Stock Sale
Agreement"). We exercised our right to extend the term of the Stock Sale
Agreement by six months. We also had the right to determine the timing and
amount of stock sold, if any, to Fusion Capital. In June 2006, the Stock Sale
Agreement terminated upon reaching the $5 million threshold of common stock sold
to Fusion Capital.

Page 30

Pursuant to the Stock Sale Agreement, we issued 53,138 shares of our common
stock to Fusion Capital at inception (the "Initial Shares"), and issued them
35,425 additional commitment shares on a pro-rata basis as we sold the $5
million of stock (collectively, the "Commitment Shares").

Cash received and common stock sold and issued pursuant to the Stock Sale
Agreement were as follows:

Commitment
CASH Shares Shares TOTAL
RECEIVED Sold Issued SHARES
---------- ------- ---------- ---------
Year ended July 31, 2004 $ 200,002 50,938 54,554 105,492
Year ended July 31, 2005 2,517,539 367,875 17,837 385,712
Year ended July 31, 2006 2,282,459 578,920 16,172 595,092
---------- ------- ---------- ---------
Total $5,000,000 997,733 88,563 1,086,296
========== ======= ========== =========

We did not exercise the option to enter into a second $5 million Stock Sale
Agreement with Fusion Capital.

INCOME TAXES

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.

CAPITAL REQUIREMENTS

Our plan is to increase annual recurring revenues, achieve profitability
and increase shareholder value. To accomplish our goals, we have increased our
global marketing capabilities, searching for new sources of technologies,
licensing those technologies, and establishing strategic relationships.

In August 2006 the prior management moved to a new office. The new office
space has a seven-year lease agreement through August 2013. Since the new space
is larger than the prior space, our annual rent expense will be $100,000 -
$125,000 more than we incurred in 2006. We are attempting to find a sub-tenant
to offset some of the obligations under the lease. The increase in equipment and
furnishings in 2007 was due to the purchase of furniture for CTT's new office
space.

GENERAL

The amounts and timing of our future cash requirements depends 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 license technologies with sufficient current and
long-term revenue streams, and continually add new licenses. However, obtaining
rights to new technologies, granting rights to licensees, enforcing intellectual
property rights, and collecting royalty revenues are subject to many factors,
some of which are beyond our control and/or that we cannot currently anticipate.
Although there can be no assurance that we will be successful in our efforts, we
believe our cash on hand will be sufficient to meet our current and anticipated
operating cash requirements for at least the next year.

Page 31

CONTRACTUAL OBLIGATIONS AND CONTINGENCIES

At July 31, 2007, our contractual obligations were:

Contractual Within 1 More than
Obligations: Total year 1-3 years 3-5 years 5 years
---------- ------------ ---------- ---------- ----------
Operating lease
obligations,
principally rent $1,775,000 $ 285,000 $ 591,000 $ 572,000 $ 327,000

Nano employment
agreement 875,000 350,000 525,000 - -
---------- ------------ ---------- ---------- ----------
$2,650,000 $ 635,000 $1,116,000 $ 572,000 $ 327,000
========== ============ ========== ========== ==========

Any other commitments we may have are contingent upon a future event.

CONTINGENCIES. Our directors, officers, employees and agents may claim
indemnification in certain circumstances. We are currently exposed to potential
indemnification claims by a former executive in connection with a civil suit
filed by the SEC (see ITEM 3. LEGAL PROCEEDINGS). 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 potential and
actual 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 July 31, 2007, CTT and its majority owned subsidiary, Vector Vision,
Inc. ("VVI"), have remaining obligations, contingent upon receipt of certain
revenues, to repay up to $199,006 and $210,123, respectively, in consideration
of grant funding received in 1994 and 1995. CTT also is obligated to pay at the
rate of 7.5% of its revenues, 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 revenues from
licensing supported products, if any. We recognize these obligations only if we
receive revenues related to the grant funds. We recognized approximately $10,900
of these obligations in 2007.

Currently, we engage independent consultants who provide us with business
development, consulting 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. We have neither accrued nor paid significant
incentive compensation under such contracts.

CRITICAL ACCOUNTING ESTIMATES

The preparation of our consolidated financial statements in conformity with
accounting principles generally accepted in the U.S. requires that we make
estimates, assumptions and judgments 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

Page 32

information available at the time, and assumptions we believe are reasonable. By
their nature, estimates, assumptions and judgments are subject to change at any
time, and may depend on factors we cannot control. As a result, if future events
differ from our estimates, assumptions and judgments, we may need to adjust or
revise them in later periods.

We believe the following significant estimates, assumptions and judgments
we used in preparing our consolidated financial statements are critical to
understanding our financial condition and operations.

UPFRONT LICENSE FEES RECEIVED. Upfront license fees received in 2007 and
2006 from new licenses were recorded in retained royalties in accordance with
our revenue recognition policies, which are described in the notes to our
consolidated financial statements.

STOCK-BASED COMPENSATION. We account for stock-based compensation on a fair
value basis. Stock-based compensation cost is measured at the grant date based
on the value of the award and is recognized as expense over the service
(vesting) period. Determining the fair value of stock-based awards at the grant
date requires judgment, including, estimating the expected life of the stock
option, volatility, and the amount of stock-based awards that can be expected to
be forfeited. Our estimates were based on our historical experience with stock
option awards.

EQUITY SECURITIES. We believe that unrealized changes in the value of our
equity securities are temporary and therefore we have not recognized any gains
or losses in earnings. If we determine that the changes in value are not
temporary, we will recognize gains or losses at that time.

RELATED PARTY TRANSACTIONS

Our board of directors determined that when a director's services are
outside the normal duties of a director, we compensate the director at the rate
of $1,000 per day, plus expenses, which is the same amount we pay a director for
attending a one-day Board meeting. We classify these amounts as consulting
expenses, included in personnel and other direct expenses relating to revenues.

We incurred charges for consulting services, including expenses and use
taxes, provided by one former director of $0, $1,000 and $25,000, in 2007, 2006
and 2005, respectively. We also incurred a charge of $22,000 in 2007, for
consulting services provided by a relative of our current President and CEO, and
of $17,000 in 2006 for consulting services provided by a relative of a former
President and CEO.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We do not have significant market risk to the valuation of our assets other
than risks related to our equity security holdings of Palatin and Clinuvel. The
value of both the Palatin and Clinuvel stock is included in current assets as
available-for-sale securities. The value of both assets is subject to market
fluctuations in the per share price of the stock as well as foreign currency
fluctuations of the Australian Stock Exchange-traded Clinuvel shares. We
currently consider unrealized fluctuations in the fair value of both the Palatin
and Clinuval shares to be temporary, and therefore have recorded changes in the
fair values as part of other comprehensive income (loss), which is included as a
component of equity. During the year ended July 31, 2007, the following changes
in fair value occurred with respect to the Palatin and Clinuvel shares:

Palatin Clinuvel Total
--------- --------- --------
Unrealized increase (decrease)
in market price
of securities held $(16,320) $ 668,311 $651,991
Unrealized translation
adjustments on
securities held -- 151,685 151,685
--------- --------- --------
Other comprehensive
income (loss) $(16,320) $ 819,996 $803,676
========= ========= ========

Page 33

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Description Page
- ----------- ----

Reports of Independent Registered Public Accounting Firms 35 - 36

Consolidated Balance Sheets 37

Consolidated Statements of Operations 38

Consolidated Statements of Changes in Shareholders' Interest 39

Consolidated Statements of Cash Flows 41

Notes to Consolidated Financial Statements 42 - 65

Page 34

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders of
Competitive Technologies, Inc.
New York, New York

We have audited the accompanying consolidated balance sheet of Competitive
Technologies, Inc. and Subsidiaries as of July 31, 2007 and the related
consolidated statement of operations, changes in shareholders' interest and cash
flows for the year ended July 31, 2007. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audit.

We conducted our audit in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. The Company has determined that it
is not required to have, nor were we engaged to perform, an audit of its
internal control over financial reporting. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.

In our opinion, such consolidated financial statements present fairly, in all
material respects, the financial position of Competitive Technologies, Inc. and
Subsidiaries at June 30, 2007, and the results of their operations and their
cash flows for the year ended June 30, 2007 in conformity with accounting
principles generally accepted in the United States of America.

/s/ Mahoney Cohen & Company, CPA, P.C.
Mahoney Cohen & Company, CPA, P.C.

New York, New York
October 24, 2007

Page 35

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
-------------------------------------------------------

Board of Directors and Stockholders
Competitive Technologies, Inc.
Fairfield, Connecticut

We have audited the accompanying consolidated balance sheet of Competitive
Technologies, Inc. and Subsidiaries as of July 31, 2006, and the related
consolidated statements of operations, changes in shareholders' interest and
cash flows for each of the two years in the period ended July 31, 2006. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.

We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. The Company is not required to
have, nor were we engaged to perform, an audit of its internal control over
financial reporting. Our audits included consideration of internal control over
financial reporting as a basis for designing audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Company's internal control over financial
reporting. Accordingly, we express no such opinion. An audit also includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Competitive
Technologies, Inc. and Subsidiaries at July 31, 2006, and the results of their
operations and their cash flows for each of the two years in the period ended
July 31, 2006, in conformity with accounting principles generally accepted in
the United States of America.

/s/ BDO Seidman, LLP
BDO Seidman, LLP
Valhalla, New York
October 4, 2006

Page 36

COMPETITIVE TECHNOLOGIES, INC. AND SUBSIDIARIES
Consolidated Balance Sheets

July 31, 2007 July 31, 2006
--------------- ---------------
ASSETS
Current Assets:
Cash and cash equivalents $ 6,572,076 $ 12,909,311
Receivables, net of allowance of
$422,604 and $0 at
July 31, 2007 and 2006 739,797 3,831,501
Available-for-sale securities 1,630,237 327,420
Prepaid expenses and other current assets 422,200 416,262
--------------- ---------------
Total current assets 9,364,310 17,484,494
Equity Securities - 499,141
Prepaid Royalties - 264,947
Property and equipment, net 304,185 148,845
Other Long Term Assets 43,861 -
Intangible assets acquired, net 377 19,474
--------------- ---------------
TOTAL ASSETS $ 9,712,733 $ 18,416,901
=============== ===============

LIABILITIES AND SHAREHOLDERS' INTEREST
Current Liabilities:
Accounts payable $ 727,808 $ 584,833
Accrued expenses and other liabilities 1,323,485 3,377,868
--------------- ---------------
Total current liabilities 2,051,293 3,962,701
Deferred Rent 62,624 -
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,
8,107,380 and 7,956,534 shares
issued respectively 81,073 79,565
Capital in excess of par value 35,263,453 34,030,075
Accumulated deficit (28,315,344) (19,421,398)
Accumulated other compre-
hensive income (loss) 508,959 (294,717)
--------------- ---------------
Total shareholders' interest 7,598,816 14,454,200
--------------- ---------------
TOTAL LIABILITIES AND
SHAREHOLDERS' INTEREST $ 9,712,733 $ 18,416,901
=============== ===============

See accompanying notes

Page 37

COMPETITIVE TECHNOLOGIES, INC. AND SUBSIDIARIES
Consolidated Statements of Operations

Years ended July 31,
---------------------------------------
2007 2006 2005
------------ ------------ -----------
REVENUES
Retained royalties $ 2,731,318 $ 4,546,815 $11,638,209
Royalty legal awards - - 1,036,613
Dividends received - - 930,042
Investment income 553,951 591,633 433,110
Other income 881,947 49,183 103,972
Settlement with Unilens, net - - 32,408
------------ ------------ -----------
4,167,216 5,187,631 14,174,354
------------ ------------ -----------
EXPENSES
Personnel and other direct
expenses relating to revenues 5,598,091 4,355,671 5,142,749
General and
administrative expenses 5,735,661 2,791,304 3,046,464
Patent enforcement expenses,
net of reimbursements 977,410 465,069 272,954
Loss on investment 750,000 - -
------------ ------------ -----------
13,061,162 7,612,044 8,462,167
------------ ------------ -----------
Income (loss) before
income taxes (8,893,946) (2,424,413) 5,712,187
Provision (benefit) for
income taxes -- (47,189) 10,400
------------ ------------ -----------
NET INCOME (LOSS) $(8,893,946) $(2,377,224) $ 5,701,787
============ ============ ===========
Net income (loss) per
common share:
Basic earnings (loss)
per share $ (1.11) $ (0.31) $ 0.84
============ ============ ===========
Diluted earnings (loss)
per share $ (1.11) $ (0.31) $ 0.78
============ ============ ===========
Weighted average number
of common shares Outstanding:
Basic 8,040,455 7,651,635 6,762,553
Diluted 8,040,455 7,651,635 7,324,701

See accompanying notes

Page 38

COMPETITIVE TECHNOLOGIES, INC. AND SUBSIDIARIES
Consolidated Statements of Changes in Shareholders' Interest

PREFERRED STOCK COMMON STOCK
--------------- ------------------ TOTAL
SHARES SHARES CAPITAL IN ACCUM. OTHER SHARE-
OUTST- OUTST- EXCESS OF ACCUMULATED COMPREHENSIVE TREASURY HOLDERS'
ANDING AMOUNT ANDING AMOUNT PAR VALUE DEFICIT INCOME/(LOSS) STOCK INTEREST
------ ------- --------- ------- ------------ ------------- --------------- ---------- ------------
Balance - July 31,
2004 2,427 $60,675 6,349,189 $63,492 $27,560,312 $(22,745,961) $ - $ - $ 4,938,518
Comprehensive
Income:
Net Income 5,701,787 5,701,787
Unrealized de-
crease in market
price of secur-
ities (387,419) (387,419)
Foreign currency
translation gain
on securities 120,036 120,036
------ ------- --------- ------- ------------ ------------- --------------- ---------- ------------
Comprehesive
income 5,701,787 (267,383) 5,434,404
Stock sold and
issued in eq-
uity financing 385,712 3,857 2,513,682 2,517,539
Amortization of
deferred equity
financing costs (815,720) (815,720)
4,248 common
shares received
for exercise
of options (46,410) (46,410)
Exercise of com-
mon stock options 522,701 5,226 1,682,591 46,410 1,734,227
Stock option
compensation
expense 170,350 170,350
Exercise of common
stock warrants 37,171 372 (372) -
Stock issued to
401(k)plan 25,056 251 99,722 99,973
Stock issued
to Directors 6,920 69 74,931 75,000
------ ------- --------- ------- ------------ ------------- --------------- ---------- ------------
Balance - July 31,
2005 2,427 60,675 7,326,749 73,267 31,285,496 (17,044,174) (267,383) - 14,107,881
Comprehensive loss:
Net loss (2,377,224) (2,377,224)
Unrealized de-
crease in market
price of secur-
ities (183,621) (183,621)
Foreign currency
translation gain
on securities (75,837) (75,837)
Reversal of sale
restriction
discounts on
securities 232,124 232,124
------ ------- --------- ------- ------------ ------------- --------------- ---------- ------------
Comprehensive
loss (2,377,224) (27,334) (2,404,558)

Page 39

COMPETITIVE TECHNOLOGIES, INC. AND SUBSIDIARIES
Consolidated Statements of Changes in Shareholders' Interest

PREFERRED STOCK COMMON STOCK
--------------- ------------------ TOTAL
SHARES SHARES CAPITAL IN ACCUM. OTHER SHARE-
OUTST- OUTST- EXCESS OF ACCUMULATED COMPREHENSIVE TREASURY HOLDERS'
ANDING AMOUNT ANDING AMOUNT PAR VALUE DEFICIT INCOME/(LOSS) STOCK INTEREST
------ ------- --------- ------- ------------ ------------- --------------- ---------- ------------
Compensation
expense from
stock option
grants 398,416 398,416
Stock sold
and issued
in equity
financing 595,092 5,952 2,276,507 2,282,459
Amortization
of deferred
equity fin-
ancing costs (96,227) (96,227)
Exercise of
common stock
options 6,250 62 16,205 16,267
Stock issued
under 401(k)
plan 15,943 159 99,803 99,962
Stock issued
to Directors 12,500 125 49,875 50,000
------ ------- --------- ------- ------------ ------------- --------------- ---------- ------------
Balance - July 31,
2006 2,427 60,675 7,956,534 79,565 34,030,075 (19,421,398) (294,717) - 14,454,200
Comprehensive loss:
Net loss (8,893,946) (8,893,946)
Unrealized in-
crease in market
value of secur-
ities 651,991 651,991
Foreign currency
translation ad-
justments on
securities 151,685 151,685
------------
Comprehensive
income (8,090,270)
------------
Compensation
expense from
stock option
grants 845,368 845,368
Modification of
stock options 31,550 31,550
Exercise of com-
mon stock options 35,500 355 78,070 78,425
Stock issued to
401(k) plan 52,846 528 124,452 124,980
Stock issued for
services provided 50,000 500 124,500 125,000
Stock issued
to Directors 12,500 125 29,438 29,563
------ ------- --------- ------- ------------ ------------- --------------- ---------- ------------
Balance - July 31,
2007 2,427 $60,675 8,107,380 $81,073 $35,263,453 $(28,315,344) $ 508,959 - $ 7,598,816
====== ======= ========= ======= ============ ============= =============== ========== ============
<FN>

See accompanying notes

Page 40

COMPETITIVE TECHNOLOGIES, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows

Year ended July 31,
----------------------------------------
2007 2006 2005
------------ ------------ ------------
CASH FLOWS FROM
OPERATING ACTIVITIES:
Net income (loss) $(8,893,946) $(2,377,224) $ 5,701,787
Non-cash and other expenses
(income) included in
net income (loss)
Write-off of investment
in non-public companies 750,000 - -
Reserve for disputed receivables 169,042 - -
Write off of prepaid royalties 264,947 - -
Depreciation and amortization 91,974 46,759 33,028
Deferred rent 62,624 - -
Share-based compensation
- stock options 876,918 398,416 170,350
Stock issued as compensation
for services rendered 125,000 - -
Stock compensation accrued 150,812 175,000 175,000
Stock dividend - - (825,682)
Collection on Unilens receivable
and sale of Unilens stock, net - - (84,555)
Other - (14,990) -
Changes in assets
and liabilities:
Receivables 2,669,100 40,511 (3,613,310)
Prepaid expenses and other assets (49,799) (318,917) (138,191)
Accounts payable, accrued
expenses and other liabilities (1,654,115) (1,476,873) 3,588,509
------------ ------------ ------------
Net cash provided by (used in)
operating activities (5,437,443) (3,527,318) 5,006,936
------------ ------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment (228,217) (141,644) (34,920)
Collection on Unilens
receivable, net - - 838,140
Investment in non-public company (750,000) - -
------------ ------------ ------------
Net cash provided by (used in)
investing activities (978,217) (141,644) 803,220
------------ ------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from sale of common stock - 2,282,459 2,517,539
Proceeds from exercises of
stock options 78,425 16,267 1,687,817
Deferred equity financing
costs paid - - (45,645)
------------ ------------ ------------
Net cash provided by
financing activities 78,425 2,298,726 4,159,711
------------ ------------ ------------
Net increase (decrease) in cash
and cash equivalents (6,337,235) (1,370,236) 9,969,867
Cash and cash equivalents at
beginning of year 12,909,311 14,279,547 4,309,680
------------ ------------ ------------
Cash and cash equivalents at
end of year $ 6,572,076 $12,909,311 $14,279,547
============ ============ ============

See accompanying notes

Page 41

COMPETITIVE TECHNOLOGIES, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

1. BUSINESS AND BASIS OF PRESENTATION

Competitive Technologies, Inc. ("CTT") and its wholly-owned subsidiary, CTT
Trading Company, LLC ("CTT Trading"), and 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.A. and Asia, with respect to a broad range of life and
physical sciences, electronics, and nano (microscopic particles) technology
originally invented by various individuals, corporations and universities. We
are compensated for our services primarily by sharing in the license and royalty
fees generated from our successful licensing of our clients' technologies.

The consolidated financial statements include the accounts of CTT, CTT
Trading and VVI. Intercompany accounts and transactions have been eliminated in
consolidation.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

USE OF ESTIMATES

The preparation of consolidated financial statements in conformity with
accounting principles generally accepted in the United States of America
requires that we make estimates, judgments and assumptions that affect the
reported amounts of assets, liabilities, revenues, expenses, and disclosure of
contingent assets and liabilities. Actual results could differ from our
estimates, and the differences could be significant.

REVENUE RECOGNITION

Retained royalties - We earn revenues primarily from patent and technology
license and royalty fees. In most cases, we obtain or license the rights to an
invention, patent or intellectual property (collectively, the "technology"),
from a university, inventor, owner, corporation and/or assignee of the
technology (collectively, "clients"), and then license or sublicense our rights
to our customers, who either commercialize or further test and develop the
technology. Generally, the licenses we enter into with our customers are for the
duration of the technology life, which usually is determined by applicable
patent law. Our customers (licensees) pay us royalties based on their usage or
sales of the technology, and we share the fees with our clients. When we receive
periodic reports of sales of licensed products and royalties earned from our
customers, or we receive payment, whichever occurs first, we record revenues for
our portion of the royalty, and record our obligation to our clients for their
portion. The revenues we record are solely our share of the gross revenues, net
of our clients' shares, which usually are fixed percentages. For early stage
technologies that may not be ready for commercial development without further
research, we may receive annual minimum royalty payments or milestone payments
based on research progress or subsequent sublicense or joint venture proceeds.
We receive royalty payments based on our customers' usage or sales of the
technology, and, under certain of our sublicense or license arrangements, we
receive an upfront license fee. In certain cases we may waive the first year or
few years royalty fees in consideration of the upfront license fee.
Occasionally, we apply the upfront license fee or initial royalty fees to
reimburse our client's and/or our patent prosecution and/or maintenance costs
incurred. In these cases, we record the payments as a reduction of expense, and
not as revenue. If the reimbursement belongs solely to our client, we record no
revenue or expense. As a result, a new technology may not generate significant
revenues in its early years.

We stipulate the terms of our licensing arrangements in separate written
agreements with our clients and with our customers. Specific terms of such
agreements generally are required to be confidential pursuant to the terms of
the agreement. In the majority of licenses and sublicenses we grant, we enter
into single element arrangements with our customers, under which we have no
significant obligations after executing the agreements. We usually have a right
to audit reported revenues as part of our agreements with our customers.
Retained royalties earned are of the following types:

Page 42

Non-refundable, upfront license fee - Unless we remit the upfront license
fee to our clients to reimburse them for patent prosecution and/or maintenance
costs, we recognize our share of non-refundable, upfront license fees received
as revenue upon execution of a license or sublicense agreement, and collection
of the upfront fee from our customers since, upon the occurrence of these two
events, we have an arrangement with our customer, delivery is complete,
collection of the fee has occurred and we have no continuing obligations.

Royalty fees - The royalty rate is fixed in the license agreement, with the
amount of royalties earned contingent upon our customer's usage of our
technology. The amount of royalties we earn in each reporting period is
contingent upon the outcome of events that are not within our control, and is
not directly tied to services that we provide. We determine the amount of
royalty fee revenue to record when we can estimate the amount of royalty fees
that we have earned for a period. This occurs either when we receive cash from
our customers or we receive royalty reports from our customers listing usage or
sales of licensed products and royalties earned in the period. We receive these
reports monthly, quarterly, or semi-annually. Since reports are not received on
the same frequency, revenues will fluctuate from one quarter to another.

In certain limited instances, we may enter into multiple element
arrangements under which we may have continuing service obligations. Unlike
single element arrangements, we defer all revenue from multiple element
arrangements until we have delivered all the required elements. We determine
delivery of elements based on verifiable objective evidence. Currently, we do
not have any multiple element or milestone billing arrangements, though we have
had such arrangements in the past and could have such arrangements in the
future. We also may have milestone billing arrangements. We evaluate milestone
billing arrangements on a case-by-case basis, recording revenues under the
milestone payment method, whereby we recognize non-refundable, upfront license
fees ratably over the entire arrangement and milestone payments as we achieve
the specified milestone.

Retained royalties from foreign licensees were $425,466, $477,052, and
$757,322 for 2007, 2006 and 2005, respectively, including $33,827, $184,209, and
$252,480, respectively, from the gallium arsenide portfolio. Retained royalties
from Japanese licenses were $183,821, $334,203, and $402,744, in 2007, 2006 and
2005, respectively.

Royalty legal awards - We earn non-recurring revenues from royalty legal
awards, principally from patent infringement actions filed on behalf of our
clients and/or us. Patent infringement litigation cases occur generally when a
customer or another party either ignores our patent rights, or challenges the
legal standing of our clients' or our technology rights. These cases, even if
settled out of court, may take several years to complete, and the expenses may
be borne by our clients, by us, or shared. We share royalty legal awards in
accordance with the agreements we have with our clients, usually after
reimbursing each party for their related legal expenses. We recognize royalty
legal award revenue when our rights to litigation awards are final and
unappealable and we have assurance of collecting those awards, or when we have
collected litigation awards in cash, from the adverse party or by sale of our
rights to another party without recourse, and we have no obligation or are very
unlikely to be obligated to repay such collected amounts. Proceeds from cases
settled out of court are recorded as retained royalties.

Legal awards in patent infringement cases usually include an amount for
interest, as determined by the court, and payable through the date the judgment
is paid. The court awards interest to recognize the fact that we were entitled
to the income at a prior date but did not receive it at the time it was due. An
amount for interest also may be included in other settlements with customers. If
interest is included in an award or settlement, we generally record it as
interest income when we receive it.

Unless otherwise specified, we record all other revenues as we earn them.

CONCENTRATION OF REVENUES

Approximately $2,037,000, or 75%, of 2007 retained royalties was derived
from the homocysteine assay. In 2006 and 2005, we derived approximately 70% and
77%, respectively, of our retained royalties from this same technology.

Page 43

The homocysteine assay is a diagnostic blood test used to determine
homocysteine levels and a corresponding deficiency of folate or vitamin B12. Our
U.S. patent that covers this assay expired in July 2007, and we will not receive
any significant royalties after that date.

Certain of our other patents have expired recently or will soon expire. In
2007, we derived retained royalties from licenses on 17 patented technologies.
Royalties from 10 of those patented technologies have or will expire between
2007 and 2012. Those patented technologies represented approximately 88% of our
retained royalties in 2007. Retained royalties of $2,072,533, or 76%, $25,992,
or 1%, $267,527, or 10%, and $29,007, or 1%, were from patents expiring in
fiscal 2007, 2008, 2009 and 2011, respectively. We seek to replace revenues from
expiring patents with revenues from new technologies, but we cannot be sure as
to the timing of any new revenues.

EXPENSES

We recognize expenses related to evaluating, patenting and licensing
inventions, and enforcing intellectual property rights in the period incurred.

Personnel and other direct expenses relating to revenues include employee
salaries and benefits, marketing and consulting expenses related to technologies
and specific revenue initiatives, domestic and foreign patent legal filing,
prosecution and maintenance expenses, net of reimbursements, amortization and
impairment of intangible assets acquired, and other direct costs relating to
revenue. Costs of independent contractors who assist us in licensing specific
technologies also are included in personnel and other direct expenses, as are
costs of royalty audits.

General and administrative expenses include directors' fees and expenses,
public company related expenses, professional services, including financing,
audit and legal, except for patent related legal, rent and other general
business and operating expenses.

Patent enforcement expenses, net of reimbursements, include direct costs
incurred to enforce our patent rights, excluding personnel related costs. In
certain instances we recover amounts previously expensed from future revenues
received and record our reimbursement as a reduction of expense.

CASH AND CASH EQUIVALENTS

EQUITY SECURITIES

Equity securities are classified as currents assets and carried at fair
value as determined by the closing stock price at the balance sheet date.
Temporary unrealized holding gains and losses are excluded from earnings and
recorded as a component of other comprehensive income or loss. Permanent
declines in fair value are included in income at the time the determination is
made.

PROPERTY AND EQUIPMENT

Property and equipment are carried at cost less an allowance for
depreciation. Expenditures for normal maintenance and repair are charged to
expense as incurred. The costs of depreciable assets are charged to operations
on a straight-line basis over their estimated useful lives, three to five years
for equipment, or the terms of the related lease for leasehold improvements. The
cost and related accumulated depreciation or amortization of property and
equipment are removed from the accounts upon retirement or other disposition,
and any resulting gain or loss is reflected in earnings.

Page 44

INTANGIBLE ASSETS ACQUIRED

Intangible assets acquired are comprised of certain licenses and patented
technologies acquired in 1996, and are stated at the lower of cost or estimated
fair value. We amortize that value on a straight-line basis over the estimated
remaining lives of the assets.

IMPAIRMENT OF LONG-LIVED AND INTANGIBLE ASSETS ACQUIRED

We review our long-lived and intangible assets acquired for impairment to
determine if the carrying amount of the asset is recoverable. If the estimated
fair value is less than the carrying amount of the asset, we record an
impairment loss that is measured by the amount that the carrying value of the
asset exceeds its estimated fair value. If a quoted market price is available
for the asset or a similar asset, we use it in determining the estimated fair
value. We also re-evaluate the remaining useful life of the asset and adjust the
useful life accordingly. There were no items of impairment identified.

INCOME TAXES

Income taxes are accounted for on the asset and liability method. The
provision for income taxes is the estimated amount of our income tax liability
for the year, combined with the change during the year in deferred tax assets
and liabilities. We recognize deferred income taxes for the future income tax
consequences of differences between the income tax and financial reporting bases
of assets and liabilities at each balance sheet date. We base the amount of
deferred income taxes recorded on enacted income tax laws and statutory income
tax rates applicable to the periods in which the differences are expected to
affect our taxable income. We establish valuation allowances against deferred
income tax assets to reduce their carrying values to the amount that we estimate
we are more likely than not to realize. In addition, we may be subject to the
alternative minimum tax ("AMT"). We record any AMT liability in the year in
which it is incurred.

NET INCOME (LOSS) PER SHARE

We calculate basic net income (loss) per share based on the weighted
average number of common shares outstanding during the period without giving any
effect to potentially dilutive securities. Net income (loss) per share, assuming
dilution, is calculated giving effect to all potentially dilutive securities
outstanding during the period.

STOCK-BASED COMPENSATION

Effective August 1, 2005, we adopted Financial Accounting Standards Board
Statement No. 123(R), "Share-Based Payment" ("FAS 123R"), which establishes the
accounting required for share-based compensation, including stock options. FAS
123R requires us to measure the fair value at the grant date, as defined in FAS
123R, of all share-based awards, and recognize such value as compensation
expense in our statements of operations over the requisite service, vesting
period. We elected to adopt FAS 123R using a modified prospective application,
whereby the provisions of the statement were applied going forward only from the
date of adoption to new, issued subsequent to July 31, 2005, stock option
awards, and for the portion of any previously issued and outstanding stock
option awards which vested after the date of adoption. We recognized as expense
the fair value of stock options issued prior to August 1, 2005, but vesting
after August 1, 2005, over the remaining vesting period. In addition,
compensation expense must be recognized for any awards modified, repurchased, or
cancelled after the date of adoption. Under the modified prospective
application, no restatement of previously issued results was required. We use
the Black-Scholes option-pricing model to measure fair value, which is the same
method we used in prior years for disclosure purposes. This model requires the
use of subjective input assumptions, including estimated life and related
volatility, and expected forfeitures over the term of the grant. The estimate of
forfeitures was not previously required for disclosure purposes and is a new
variable for us. All of our assumptions are based upon historical experience;
however, actual results could differ significantly from our current estimates.

The adoption of this pronouncement has resulted in our recognizing non-cash
compensation expense related to stock options granted to employees, which is
included in personnel and other direct expenses related to revenues, and stock
options granted to our directors, which is included in general and
administrative expenses.

Page 45

SUPPLEMENTAL CASH FLOW INFORMATION

Non-cash investing and financing activities are excluded from the
Consolidated Statements of Cash Flows. In 2007 our non-cash operating activities
included a reserve for our clients' share of disputed receivables of $253,562
and a corresponding decrease in royalties payable to our clients. In 2007 our
non-cash investing activities were comprised of a net $803,676 unrealized gain
on our Clinuvel and Palatin common stock (see Note 13). In 2006, our non-cash
investing activities were comprised of a net $27,334 unrealized holding loss on
our Clinuvel and Palatin common stock. In 2005, our non-cash investing
activities were comprised of a net $267,383 unrealized holding loss on our
Clinuvel common stock. Non-cash financing activities included $154,543, $149,962
and $174,973, in 2007, 2006 and 2005 respectively, of stock issued pursuant to
our 401(k) plan and a directors' stock plan. Non-cash financing activities in
2005 included $46,410 of stock tendered for an option exercise.

FISCAL YEAR

Our fiscal year ends July 31, and our first, second, third and fourth
quarters end October 31, January 31, April 30 and July 31, respectively. Fiscal
year 2007 is the year ended July 31, 2007.

RECENT ACCOUNTING PRONOUNCEMENTS

In July 2006, the Financial Accounting Standards Board ("FASB") issued FASB
Interpretation No. 48, "Accounting for Uncertainty in Income Taxes, an
interpretation of FASB Statement No. 109" ("FIN 48"). FIN 48 clarifies the
accounting for uncertainty in income taxes by requiring a tax position be
recognized only when it is more likely than not that the tax position, based on
its technical merits, will be sustained upon ultimate settlement with the
applicable tax authority. The tax benefit to be recognized is the largest amount
of tax benefit that has a greater than fifty percent likelihood of being
realized upon ultimate settlement with the applicable tax authority that has
full knowledge of all relevant information. FIN 48 is effective for years
beginning after December15, 2006. This statement becomes effective for the
Company's annual reporting period that begins in August 2007. The Company does
not anticipate that the adoption of FIN 48 will have a material impact on the
Company's financial condition, results of operations or cash flows.

In September 2006, the SEC released Staff Accounting Bulletin No. 108,
"Considering the Effects of Prior Year Misstatements when Qualifying
Misstatements in Current Year Financial Statement" ("SAB 108"). SAB 108 provides
interpretive guidance on the SEC's views on how the effects of the carryover of
reversal of prior year misstatements should be considered in quantifying a
current year misstatement. We adopted SAB 108 during 2006. The adoption did not
have a material impact on our financial position and results of operations.

In September 2006, the FASB issued Statement of Financial Accounting
Standards ("SFAS")No. 157, "Fair Value Measurements" ("SFAS 157"). This
statement establishes a framework for measuring fair value in generally accepted
accounting principles and expands disclosures about fair value measurements.
SFAS 157 is effective for financial statements issued for fiscal years beginning
after November 15, 2007, and interim periods within those fiscal years. The
provisions of SFAS 157 should be applied prospectively as of the beginning of
the fiscal year in which SFAS 157 is initially applied, except in limited
circumstances. We are currently evaluating the impact of SFAS 157 on our
consolidated financial statements.

In February 2007, the FASB issued SFAS No. 159, "The Fair Value Option for
Financial Assets and Financial Liabilities-including an amendment of FASB
Statement No. 115" ("SFAS 159"). This statement permits entities to choose to
measure many financial instruments and certain other items at fair value that
are not currently required to be measured at fair value and establishes
presentation and disclosure requirements designed to facilitate comparisons
between entities that choose different measurement attributes for similar types
of assets and liabilities. SFAS 159 is effective as of the beginning of an
entity's first fiscal year that begins after November 15, 2007. Early adoption
is permitted as of the beginning of a fiscal year that begins on or before
November 15, 2007, provided the entity also elects to apply the provisions of
SFAS 157. We are currently evaluating the impact of SFAS 159 on our consolidated
financial statements.

Page 46

No other new accounting pronouncements issued or effective during the
fiscal year has had or is expected to have a material impact on the consolidated
financial statements.

3. RETAINED ROYALTIES: PRIOR YEAR LICENSES GRANTED AND SETTLEMENTS

Abbott Laboratories, Inc. - In December 2004, we granted Abbott
Laboratories, Inc. ("Abbott") a license to sell tests used to measure
homocysteine levels. The license relieved Abbott's customers from their
obligation to pay us royalties on tests performed using the Abbott homocysteine
assay. The license also released Abbott's customers of any obligation to pay us
royalties for past homocysteine tests performed using Abbott assays, but does
not entitle them to any refund of any royalties previously paid to us. The term
of the license was through July 2007, with certain limited exceptions.

Pursuant to the license, Abbott paid us a one-time, non-refundable and
non-creditable, against future royalties, upfront license fee, and agreed to pay
certain "Milestone Fees," as defined in the license, and per test royalties on
homocysteine assay sales in the United States after January 1, 2006. No per test
royalties were due from Abbott in calendar year 2005. We recorded in retained
royalties our share of the upfront license fee, which was $5,200,000 in 2005,
and accrued over calendar 2005 the present value of the Milestone Fees. The
difference between the present value and the gross amount of the Milestone Fees
was recorded in interest income. Our share of the Milestone Fees aggregated to
$1,600,000, of which we were paid $800,000 in February 2006, with the remaining
$800,000 paid to us in January 2007.

Diagnostic Products Corporation - Effective November 1, 2004, we granted
Diagnostic Products Corporation ("DPC") a license to sell tests used to measure
homocysteine levels. The license relieved DPC's customers from their obligation
to pay us royalties on tests performed using DPC's products, and also released
DPC's customers of any obligation to pay royalties to us for past homocysteine
tests performed using DPC's assays, but does not entitle them to any refund of
any royalties previously paid to us. Pursuant to this license, DPC paid us a
one-time, non-refundable and non-creditable against future royalties, upfront
license fee, our share of which was $550,000, and recorded in 2005, and per test
royalties on homocysteine assay sales in the United States after November 1,
2004. We recorded in retained royalties our share of the upfront license fee in
2005. The term of the license was through July 2007, with certain limited
exceptions.

Bayer Corporation - On October 21, 2004, we granted Bayer Corporation, et
al., ("Bayer") a license under which Bayer agreed to pay us a non-refundable,
non-creditable upfront license fee and royalties on sales of homocysteine assays
beginning as of July 1, 2004. The upfront license fee was paid one-half upon
signing the license and the other half in October 2005. We recorded our share of
the upfront license fee in 2006 and 2005 as it was paid, since the license is
cancelable. This license settled a complaint we filed previously against Bayer
alleging infringement of our patent covering homocysteine assays. The litigation
was dismissed with prejudice after the license was signed.

Axis-Shield - On April 28, 2005, we announced that we had settled all
outstanding litigation with Axis-Shield plc and Axis-Shield, ASA (collectively,
"Axis-Shield"). Pursuant to the settlement, Axis-Shield was granted a license to
sell tests used to measure homocysteine levels, paid us a non-refundable,
non-creditable upfront license fee, and agreed to pay royalties to us from the
date of the license. The license also released Axis-Shield's customers of any
obligation to pay royalties to us for past homocysteine tests performed using
Axis-Shield's assays, but does not entitle them to any refund of any royalties
previously paid to us. All of the litigation between the parties was dismissed
with prejudice. The term of the license was through July 2007.

Other homocysteine licenses - In 2006 and 2005, we granted new licenses to
sell tests used to measure homocysteine levels to other laboratories and
distributors. These licenses provided for non-refundable, non-creditable upfront
license fees, the amount of which varied from licensee to licensee, back
royalties up through the date of the license, and a royalty to be paid to us
from the date of the license forward based on a fixed fee per test. The amount
of the fixed fee per test is determined based on estimated volume. The term of
all of the licenses granted was through July 2007.

Page 47

Our U.S. patent for the homocysteine assay expired in July 2007, and
although we will not receive significant revenues from this technology after
that date, we do expect to receive revenue for sales made prior to that date. We
are in litigation with Carolina Liquid Chemistries Corporation to recover funds
that we believe are due us for homocysteine assays kits manufactured, sold or
offered for sale in infringement of our patent.

Palatin Technologies, Inc. - In 2005, pursuant to a mediated settlement
agreement with Palatin Technologies, Inc. ("Palatin") (for a description of the
mediated agreement and other issues with Palatin, see Note 18), Palatin made a
cash payment to us of $1,700,000, our share of which was $680,000, and which we
recorded in retained royalties in 2005. In addition, Palatin further agreed to
issue to us promptly 170,000 shares of Palatin unrestricted common stock. On
July 5, 2005, Palatin issued restricted shares to us that were not registered
for resale, restricting us from selling, transferring or otherwise disposing of
the shares. We estimated the value of the common stock that we were owed on the
day the settlement was reached, less a 20% discount to reflect the impact of the
sale restriction, to be $102,816. This amount was accrued in retained royalties.
The total recorded in 2005 for the settlement was $782,816.

On October 13, 2005, Palatin filed a registration statement (prospectus)
with the Securities and Exchange Commission ("SEC") to register the restricted
shares for sale, and we later determined that we could trade the shares even
though the legend was still in place. As a result, in 2006 we reversed $25,704,
which was the original 20% discount to the value of the Palatin shares. The
unrealized gain on the reversal was recorded as an increase to the value of the
asset and a credit to other comprehensive income (loss), which is included as a
component of shareholders' interest. We also reclassified the shares to
available-for-sale securities included in current assets, as we may sell the
shares at any time. Other unrealized changes in the fair value of the shares are
included in other comprehensive income (loss). There were no realized gains or
losses relating to the Palatin shares during 2007, 2006 or 2005.

JDS Uniphase Corporation - On March 31, 2005, we announced that we had
resolved litigation filed in October 2004 against JDS Uniphase Corporation ("JDS
Uniphase"). The settlement was for back royalties determined as a result of a
prior year royalty audit and subsequent litigation relating to an expired
patent. As a result, in 2005 we recognized our share of the revenues, $607,411
in retained royalties, net of the costs of the audit.

Summary of licenses granted and settlement activity - The aggregate total
retained royalties recorded in 2006 for non-refundable, non-creditable upfront
license fees, was $459,968. Of this amount, $386,178 was from homocysteine
licenses. In 2005, we recorded $7,586,598 in retained royalties, representing
the aggregate total received during the year for the non-refundable,
non-creditable upfront homocysteine license fees, the sublicense fee from
Palatin, and the settlement of the back royalty audit with JDS Uniphase. Of this
amount, $6,181,117 was from homocysteine licenses. These revenues did not recur
in the same magnitude in 2006, and may not recur at all in subsequent years, or
may recur in different magnitudes. Without these upfront license fees and other
revenues our retained royalties for 2006 and 2005 would have been $4,086,847 and
$4,051,611, respectively. There were no significant upfront license fees and no
royalty audit settlements in 2007.

4. ROYALTY LEGAL AWARDS

In 2005, pursuant to decisions against Laboratory Corporation of America
Holdings d/b/a LabCorp ("LabCorp"), we received $920,552, from which we recorded
$815,492 in royalty legal awards and $105,060 in interest income in 2005 (for a
description of this case, see Note 18). The payment did not include attorneys'
fees or court costs previously awarded from the original case that were under
appeal with the court. Subsequently, LabCorp lost the appeal, and on April 15,
2005, we announced that we had received payment from LabCorp for the attorneys'
fees and court costs. Our share of the payment was $231,056, and we recorded an
additional $221,121 in royalty legal awards and $9,935 in interest income in
2005, for a total of $1,036,613 in retained royalties in 2005.

Page 48

5. DIVIDENDS RECEIVED

In 2005, we received three separate dividends from Melanotan Corporation
("MelanoTan"), in which we have an ownership interest of approximately 20.9%. We
previously had purchased the shares of MelanoTan for a nominal amount, and, in a
separate transaction, we licensed to MelanoTan certain rights relating to a
sunless tanning technology that we own. The technology may lessen or prevent
skin cancer caused by unprotected sun exposure. MelanoTan sublicensed the rights
to Clinuvel Pharmaceuticals Limited (formerly EpiTan Limited, "Clinuvel") and
also had received shares of Clinuvel. MelanoTan has no operations of its own.

Clinuvel essentially is a research and development company that is in the
process of conducting safety and efficacy trials, and evaluating the technology
for future commercialization. They currently are planning expanded trials in
Australia, Europe and the U.S. Clinuvel common stock is traded on the Australian
Stock Exchange (quoted in Australian dollars) under the symbol CUV.

In October 2004, MelanoTan paid its shareholders a dividend in the form of
shares of Clinuvel common stock. As a result, we received 1,252,346 shares of
Clinuvel common stock. As a condition to receiving the dividend, we agreed not
to sell, transfer or otherwise dispose of the shares before October 21, 2005.

We estimated the fair value of the Clinuvel common stock using the closing
price of the shares ($0.93 per share, Australian dollars), and the exchange rate
for converting Australian dollars to U.S. dollars ($0.7289 Australian dollars to
$1.00 U.S. dollar), on the date that MelanoTan's board of directors approved the
dividend. We then discounted the value of the shares using a 20% discount factor
to recognize the estimated impact of the sale restriction and the risk
associated with an investment in Clinuvel stock, since Clinuvel had minimal
revenues and had incurred substantial accumulated net losses. We recorded the
estimated value of the shares, $679,149, as dividend income.

In May 2005 MelanoTan paid a special cash dividend. Our share of the
dividend was $104,360. In addition, in June 2005, MelanoTan paid another
dividend in the form of Clinuvel common stock. As a result, we received an
additional 660,686 shares of Clinuvel common stock and recorded additional
dividend income of $146,533. As a condition to receiving this dividend, we again
agreed not to sell, transfer or otherwise dispose of the shares before October
21, 2005. We valued the shares and dividend received in the same manner as the
October 2004 dividend, except with a price per share of $0.36 Australian
dollars, and an exchange rate of $0.7701 Australian dollars to $1.00 U.S.
dollar. In total in 2005, we recorded $930,042 of dividend income from
MelanoTan, and we received and directly own 1,913,032 shares of Clinuvel common
stock. Our ownership percentage of Clinuvel's common stock is not significant.
As a result of the dividends, MelanoTan does not own any more stock of Clinuvel
and our ownership in MelanoTan has limited value.

In 2006, the sale restriction lapsed and we now are free to sell, transfer
and dispose of the shares. As a result, we reversed the original 20% discount to
the value of the shares and recorded an unrealized gain of $206,420 to increase
the value of the asset, with the credit to other comprehensive income (loss).
Other unrealized changes in the fair value of the Clinuvel shares due to market
price and foreign exchange rate fluctuations from the date of receipt also have
been recorded in other comprehensive income (loss), since we believe that the
changes are temporary. There were no realized gains or losses relating to the
Clinuvel shares during 2007 or 2006. We recorded the value of the shares as a
non-current asset in equity securities at July 31, 2006, as we intended to hold
the shares as a long-term investment at that time. As of July 31, 2007, these
shares are shown as Available-for-sale Securities in current assets and we plan
to start selling these shares during fiscal 2008.

6. INVESTMENT IN NON-PUBLIC COMPANY

On April 18, 2007, we paid $750,000 to a Colombia-based non-public company,
Agrofrut, E.U. ("Agrofrut"), for a) 5% ownership of Agrofrut, including
proprietary technology for converting biomass waste to nutraceutical
ingredients; b) an option to exchange CTT's common stock for the remaining 95%
ownership of Agrofrut; and c) an exclusive marketing agreement for Agrofrut's
products during the option period. The option was for a purchase within 180
days, using a formula provided in the agreement. The investment was initially
recorded at cost on the Consolidated Balance Sheet.

Page 49

Agrofrut's extraction technology was supposed to use biomass waste from
pineapples and other agricultural products to produce nutraceutical ingredients
such as bromelain and xylitol, among other important by-products, including
ethanol and other alternative fuels. The principal shareholder of Agrofrut is
Betty Rios Valencia, the former spouse of Ben Marcovitch, one of our former
Directors.

In August 2007, we determined that false and misleading information had
been provided to CTT by Mr. Marcovitch and Ms. Rios Valencia in an attempt to
defraud the company. We have instituted a lawsuit against Agrofrut, Ms. Rios
Valencia, Mr. Marcovitch, and John Derek Elwin III, a former CTT employee, to
recover our investment in Agrofrut (for further information, see Note 18). We
have also filed a claim under our fraud insurance policy. As a result, during
the fourth quarter of 2007, we recorded a Loss on Investment of $750,000.

7. INCOME TAXES

In current and prior years, we generated significant federal and state
income and alternative minimum tax losses, and these net operating losses
("NOLs") were carried forward for income tax purposes to be used against future
taxable income. In 2005, we utilized a portion of our NOL carry-forwards against
our regular federal and state taxable income, effectively eliminating our 2005
regular income tax liabilities. However, in 2005 we expected to be subject to
the AMT liability, where we are limited to using 90% of our NOL carry-forwards
against taxable income. Our 2005 provision of $10,400 principally was for our
estimated net AMT liability. In 2006, we incurred a loss but did not record a
benefit since, consistent with prior years, we provided a 100% valuation
allowance against the asset. However, we did record a $12,000 benefit due to a
change in estimate of the fiscal year 2005 federal AMT liability. In addition,
we determined that we met certain conditions that made us eligible for a $35,189
refund of AMT paid in 2005, which we received subsequent to 2006. As a result,
in 2006 we recorded in total a benefit for income taxes of $47,189. We will be
subject to the full AMT in future years.

A reconciliation of our effective income tax rate compared to the U.S.
federal statutory rate is as follows:

Year ended July 31,
--------------------------
2007 2006 2005
-------- ------- -------
Provision (benefit) at U.S. federal statutory rate (34.0)% (34.0)% 34.0%
State provision (benefit), net of U.S. federal tax (5.1) (5.5) 5.3
Permanent differences 2.8 3.8 -
Dividends received exclusion - - (3.7)
Other items - (9.1) 0.3
Deferred tax valuation allowance 36.3 42.9 (35.7)
-------- ------- -------
Effective income tax rate 0.0% (1.9)% 0.2%
======== ======= =======

Net deferred tax assets consist of the following:

JULY 31, July 31,
2007 2006
------------ ------------
Net federal and state operating loss carryforwards $ 6,856,470 $ 4,042,744
Net capital loss carryforwards 552,490 784,935
Impairment of investments 760,931 480,554
Other, net 322,375 122,738
------------ ------------
Deferred tax assets 8,492,266 5,430,971
Valuation allowance (8,492,266) (5,430,971)
------------ ------------
Net deferred tax assets $ -- $ --
============ ============

Page 50

At July 31, 2007, we had aggregate federal net operating loss carryforwards
of approximately $17,020,000, which expire at various times through 2026, with
the majority of them expiring after 2011. A majority of our federal NOLs can be
used to reduce taxable income used in calculating our AMT liability. We also
have state net operating loss carryforwards of approximately $13,876,000 that
expire through fiscal year 2011.

A significant portion of the NOLs remaining at July 31, 2007, approximately
$4,057,000, was derived from income tax deductions related to the exercise of
stock options. The tax effect of these deductions will be credited against
capital in excess of par value at the time they are utilized for book purposes,
and not credited to income. We will never receive a benefit for these NOLs in
our statement of operations.

Changes in the valuation allowance were as follows:

Year ended July 31,
-----------------------------------
2007 2006 2005
---------- ---------- -----------
Balance, beginning of year $5,430,971 $4,391,180 $4,992,007
Change in temporary differences 480,014 37,144 (11,083)
Change in net operating and capital losses 2,581,281 1,002,647 (589,744)
---------- ---------- -----------
Balance, end of year $8,492,266 $5,430,971 $4,391,180
========== ========== ===========

Our ability to derive future tax benefits from the net deferred tax assets
is uncertain and therefore we continue to provide a full valuation allowance
against the assets, reducing the carrying value to zero. We will reverse the
valuation allowance if future financial results are sufficient to support a
carrying value for the deferred tax assets.

8. NET INCOME (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:

2007 2006 2005
--------- --------- ---------
Denominator for basic net income
(loss) per share, weighted
average shares outstanding 8,040,455 7,651,635 6,762,553
Dilutive effect of warrants and
common stock options N/A N/A 562,148
--------- --------- ---------
Denominator for net income
(loss) per share, assuming dilution 8,040,455 7,651,635 7,324,701
========= ========= =========

Options and warrants to purchase 960,825, 992,973, and 161,000 shares of
our common stock at July 31, 2007, 2006 and 2005, 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 years ended July
31, 2007 and 2006, 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 and warrants would have been anti-dilutive.

Page 51

9. COMPREHENSIVE INCOME (LOSS)

Accumulated other comprehensive loss consists of the following:

JULY 31, 2007 July 31, 2006
-------------- ---------------
Accumulated net unrealized holding
gain/(loss) on equity securities $ 80,951 $ (571,040)
Accumulated unrealized foreign
currency translation gain 195,884 44,199
Accumulated unrealized gain from
reversal of sale restriction discount 232,124 232,124
-------------- ---------------
Accumulated other comprehensive income (loss) $ 508,959 $ (294,717)
============== ===============

10. EQUITY FINANCING

Pursuant to the Stock Sale Agreement, we issued 53,138 shares of our common
stock to Fusion Capital at inception ("initial shares"), and issued them 35,425
additional shares on a pro-rata basis as we sold the $5 million of stock
(collectively, "Commitment Shares").

Cash received and common stock sold and issued pursuant to the Stock Sale
Agreement were as follows:

CASH Shares Commitment TOTAL
RECEIVED Sold Shares Issued SHARES
---------- ------- ------------- ---------
Year ended July 31, 2004 $ 200,002 50,938 54,554 105,492
Year ended July 31, 2005 2,517,539 367,875 17,837 385,712
Year ended July 31, 2006 2,282,459 578,920 16,172 595,092
---------- ------- ------------- ---------
Total $5,000,000 997,733 88,563 1,086,296
========== ======= ============= =========

In consideration for assisting us in arranging the transaction with Fusion
Capital, we paid our financial advisor a fee of $250,000 ("Success Fee") of 5%
of the total potential equity financing from Fusion Capital. We granted the
advisor warrants to purchase 57,537 shares of our common stock, approximately 5%
of 1,159,552 shares, the estimated maximum number of shares that could have been
sold to Fusion Capital, excluding the Commitment Shares. The warrants were
exercisable upon receipt, at an exercise price of $4.345 per share, or 110% of
the $3.95 average closing price of our common stock for the 10-day trading
period ended January 21, 2004. On January 20, 2005, our advisor elected a
cashless exercise pursuant to the terms of the warrant, and we issued them
37,171 shares of common stock, after withholding 20,366 shares tendered as
payment for the exercise price of the warrant. We determined the number of
shares to withhold based on a per share price equivalent to the average per
share price on the exercise date, in accordance with the warrant.

In addition to the Success Fee, we incurred other costs relating to the
completion of the Stock Sale Agreement, including professional fees, listing
fees and due diligence. We also incurred non-cash costs for the estimated fair
value of the Initial Shares, $316,171, and the warrants issued to our financial
advisor, $236,465. We capitalized all cash and non-cash costs, aggregating
$1,008,204, including $45,645 incurred in 2005, as deferred financing costs. We
amortized the asset by charging the balance against capital in excess of par
value on a pro-rata basis as we sold shares to Fusion Capital.

Page 52

We did not exercise the option to enter into a second $5 million Stock Sale
Agreement with Fusion Capital.

11. RECEIVABLES

Receivables consist of the following:

JULY 31, 2007 July 31, 2006
-------------- --------------
Royalties, net of reserve of $422,604
at July 31, 2007 $ 513,085 $ 3,307,482
Receivables from insurance carrier 177,304 354,832
Other 49,408 169,187
-------------- --------------
Receivables $ 739,797 $ 3,831,501
============== ==============

12. PROPERTY AND EQUIPMENT, NET

Property and equipment, net, consist of the following:

JULY 31, 2007 July 31, 2006
--------------- ---------------
Equipment and furnishings $ 419,279 $ 330,113
Leasehold improvements 93,063 64,285
--------------- ---------------
Property and equipment, gross 512,342 394,398
Accumulated depreciation and amortization (208,157) (245,553)
--------------- ---------------
Property and equipment, net $ 304,185 $ 148,845
=============== ===============

Depreciation expense was $72,879, $27,662, and $19,449, in 2007, 2006, and
2005, respectively.

13. AVAILABLE-FOR-SALE AND EQUITY SECURITIES

The Palatin and Clinuvel common stock we hold are categorized as
available-for-sale and carried at fair value. As of July 31, 2007, shares of
both Palatin and Clinuvel are classified in current assets. As of July 31, 2006,
the Palatin shares were classified in current assets, while the Clinuvel shares
were classified in noncurrent assets. The fair value of equity securities and
other investments consists of the following:

JULY 31, July 31, Number of
2007 2006 shares Type
---------- --------- --------- ------------
Palatin (current asset,
original basis $295,596) $ 311,100 $ 327,420 170,000 Common stock
Clinuvel (original
basis $825,682) $1,319,137 $ 499,141 1,913,032 Common stock
MelanoTan -- -- 378,000 Common stock
NTRU Cryptosystems, Inc.
("NTRU") -- -- 3,129,509 Common stock

At July 31, 2006 the Palatin shares included shares held on behalf of our
client. As of January 31, 2007 we reported the value of these shares as royalty
income to our client and deducted allowable legal expenses against such royalty
payment, as allowed under our agreement. As a result, the Company holds these
shares on their own as of July 31, 2007. For a description of Palatin, see Note
3. For a description of Clinuvel and MelanoTan, see Note 5. MelanoTan has no
operations and its shares have limited value.

In prior years, we acquired 3,129,509 shares of NTRU common stock, and
certain preferred stock that later was redeemed, in exchange for cash and a
reduction in our future royalty percentage on sales of NTRU's products. NTRU is
a privately held company that sells encryption software for security purposes,
principally in wireless markets. There is no active public market for NTRU
shares. Although we previously wrote down the value of NTRU to $0, we continue
to own the shares.

Page 53

14. INTANGIBLE ASSETS ACQUIRED, NET

Intangible assets acquired, net, consist of the following:

JULY 31, 2007 July 31, 2006
--------------- ---------------
Intangible assets acquired, principally
licenses and patented Technologies,
at cost, net of impairment charges $ 1,152,842 $ 1,152,842
Accumulated amortization (1,152,465) (1,133,368)
--------------- ---------------
Intangible assets acquired, net $ 377 $ 19,474
=============== ===============

The weighted average life of the remaining technologies was 0 years and 1.0
year, respectively, at July 31, 2007 and 2006.

Amortization expense was $19,097, $19,097, and $13,579, in 2007, 2006 and
2005, respectively.

15. ACCRUED EXPENSES AND OTHER LIABILITIES

Accrued expenses and other liabilities consist of the following:

JULY 31, 2007 July 31, 2006
-------------- --------------
Royalties payable $ 594,331 $ 2,460,950
Accrued compensation 236,218 533,431
Accrued professional fees 388,779 251,514
Other 104,157 131,973
-------------- --------------
Accrued expenses and other liabilities $ 1,323,485 $ 3,377,868
============== ==============

16. SHAREHOLDERS' INTEREST AND STOCK-BASED COMPENSATION PLANS

Preferred Stock - At our option, we may redeem our preferred stock at its
par value at any time. Dividends on the preferred stock are non-cumulative. The
preferred stock is not registered to be publicly traded.

Employee Stock Option Plans - Pursuant to our 1997 Employees' Stock Option
Plan, as amended (the "1997 Option Plan"), we may grant to employees either
incentive stock options or nonqualified stock options (as defined by the
Internal Revenue Service). The stock options must be granted at exercise prices
not less than 100% of the fair market value of our common stock at the grant
date. The maximum life of stock options granted under this plan is ten years
from the grant date. The Compensation Committee or the Board of Directors
determines vesting provisions when stock options are granted, and stock options
granted generally vest over three or four years. No options may be granted under
this plan after September 30, 2007. The following information relates to the
1997 Option Plan:

JULY 31, 2007 July 31, 2006
------------- -------------
Common shares reserved for issuance
on exercise of options 618,575 1,044,348
============= =============
Shares available for future option grants 436,723 437,075
============= =============

Prior to the 1997 Option Plan, we had a stock option plan that expired on
December 31, 2000, after which date no option could be granted under the plan.
Pursuant to this plan both incentive stock options and nonqualified stock
options were granted to key employees. Incentive stock options could be granted
at an exercise price not less than the fair market value of our common stock on
the grant date. Nonqualified stock options could be granted at an exercise price
not less than 85% of the fair market value of the common stock on the grant
date. Options generally vested over a period of up to three years after the
grant date and expire ten years after the grant date if not terminated earlier.
No options may be granted under this plan. The number of common shares reserved
for issuance on exercise of stock options as of July 31, 2007 and 2006 is 15,250
and 51,250, respectively.

2000 Directors Stock Option Plan - We also have a Directors Stock Option
Plan (the "Directors Option Plan"), under which we grant each non-employee
director 10,000 fully vested, nonqualified common

Page 54

stock options when the director first is elected as a director, and 10,000 more
common stock options on the first business day of January thereafter, as long as
the individual is a director. All such stock options are granted at an option
price not less than 100% of the fair market value of the common stock at the
grant date. The maximum life of options granted under this plan is ten years
from the grant date. No options may be granted after January 4, 2010. In 2007,
the remaining 10,000 stock options in the plan were allocated equally to the
five outgoing non-employee directors. In 2006, 50,000 stock options were granted
pursuant to this plan, and 10,000 stock options expired. In 2005, 60,000, stock
options were granted pursuant to this plan.

The following information relates to the 2000 Directors Stock Option Plan:

JULY 31, 2007 July 31, 2006
------------- -------------
Common shares reserved for issuance
on exercise of options 327,000 329,000
============= =============
Shares available for future option grants - 10,000
============= =============

At the Annual Meeting on February 2, 2007, our former Board of Directors
was not reelected. On August 1, 2007, following a 180-day allowed grace period
after the prior Board's termination, 282,000 options that had been granted to,
but not exercised by the Directors became available for future grant under this
plan. In August 2007, we made an initial grant of 10,000 shares each to
Directors Evans, Hornidge, Reali and Torello. An initial grant of 10,000 shares
was made to Director Howard in October 2007.

Summary of Common Stock Options - Pursuantto FAS 123R, the total fair value
of shares vested in 2007 and 2006 was $845,368 and $388,529, respectively, of
non-cash compensation expense. Of this amount, $829,512 and $254,548,
respectively, was included in personnel and other direct expenses relating to
revenues, from stock options granted to employees in the current and prior
years, and vesting during 2007 and 2006. This amount includes a one-time charge
of $466,995 on February 2, 2007 when all of the thenoutstanding stock options
became vested under the change in control provisions of the plan. Stock options
granted during the year are outstanding only a portion of theyear, with the
compensation expense recognized for that portion of the year. As of July 31,
2007, there was $435,815 of total unrecognized compensation cost related to
outstanding non-vested stock options granted under the 1997 Option Plan. This
cost is expected to be recognized over a weighted average period of 1.48 years.
We also recognized $15,856 of noncash compensation expense from stock options
granted to directors pursuant to the Directors Option Plan. Since these stock
options are fully vested upon grant, the full fair value of the stock options is
recorded as expense at the date of grant.

In 2007, 2006 and 2005, we recorded non-cash charges of $31,550, $9,887 and
$97,750, respectively, as a result of extending the exercise terms of certain
stock options previously granted to former employees. In addition, in 2005 we
recorded a noncash charge of $72,600 as a result of modifying the terms of
certain stock options previously granted to a former director to extend the
exercise term of the awards.

In total for 2007, we recognized non-cash expense of $861,062 included in
personnel and other direct expenses relating to revenues, and $15,856 included
in general and administrative expenses. In total for 2006, we recognized
non-cash expense of $264,435 included in personnel and other direct expenses
relating to revenues, and $133,981 included in general and administrative
expenses.

We estimated the fair value of each option on the grant date using a
Black-Scholes option-pricing model with the following weighted average
assumptions:

Year ended July 31,
------------------------------
2007 2006 2005
---------- -------- --------
Dividend yield (1) 0.0% 0.0% 0.0%
Expected volatility (2) 78.6% 80.2% 75.8%
Risk-free interest rates (3) 4.8% 4.1% 3.6%
Expected lives (2) 5 YEARS 5 years 5 years

Page 55

(1) We have not paid cash dividends on our common stock since 1981, and we
currently do not have any plans to pay or declare any cash dividends.
Consequently, we used an expected dividend rate of zero for the valuations.

(2) Estimated based on our historical experience. Volatility was based on
historical experience over a period equivalent to the expected life in
years.

(3) Based on the U.S. Treasury constant maturity interest rate with a term
consistent with the expected life of the options granted.

A summary of the status of all our common stock options as of July 31,
2007, 2006 and 2005, and changes during the years then ended is presented below.

Year Ended July 31,
-------------------------------------------------------------
2007 2006 2005
------------------- ------------------ --------------------
WEIGHTED Weighted Weighted
AVERAGE Average Average
EXERCISE Exercise Exercise
SHARES PRICE Shares Price Shares Price
--------- --------- -------- --------- ---------- ---------
Outstanding at
beginning
of year 992,973 $ 5.46 740,223 $ 5.72 1,134,795 $ 4.35
Granted 560,000 2.47 279,000 4.97 253,000 5.42
Forfeited (514,648) 4.52 -- -- (115,623) 2.59
Exercised (35,500) 2.21 (1,250) 3.01 (531,949) 3.17
Expired or
terminated (42,000) 8.92 (25,000) 8.79 -- --
--------- --------- -------- --------- ---------- ---------
Outstanding at
end of year 960,825 $ 4.19 992,973 $ 5.46 740,223 $ 5.72
========= ========= ======== ========= ========== =========
Exercisable at
end of year 660,825 $ 4.95 609,473 $ 6.04 509,979 $ 6.74
Weighted aver-
age fair value
per share of
options issued
during the year $ 1.64 $ 3.32 $ 3.30

The total intrinsic value of stock options exercised during 2007, 2006 and
2005, was $38,744, $2,135 and $2,959,902, respectively. Total proceeds from
stock option exercises were $78,425, $16,267 and $1,687,817, in 2007, 2006 and
2005, respectively. Generally, we issue new shares of common stock to satisfy
stock option exercises.

The following table summarizes information about all common stock options
outstanding at July 31, 2007.

Weighted Weighted
Average Average
Remaining Weighted Remaining Weighted
Range of Number Contractual Average Number Contractual Average
Exercise Outst- Life in Exercise Exer- Life in Exercise
Prices anding Years Price cisable Years Price
- -------------- ------- ----------- --------- ------- ----------- ---------
1.95 - $2.50 154,000 7.48 $ 2.31 154,000 7.48 $ 2.31
2.51 - $3.50 407,500 9.50 $ 2.53 107,500 9.48 $ 2.57
3.51 - $6.50 267,325 6.13 $ 5.26 267,325 6.13 $ 5.26
6.51 - $11.09 132,000 4.55 $ 9.32 132,000 4.55 $ 9.32

Page 56

A summary of the status of the Company's non-vested shares as of July 31,
2007 and changes during the year ended July 31, 2007 is presented below:

Non Vested Shares Shares Weighted Average Grant Date Fair Value
Non vested at July 31, 2006 383,500 $ 2.95
Granted 560,000 1.64
Vested (490,250) 2.32
Forfeited and expired (153,250) 2.77
--------- ---------------------------------------
Non vested at July 31, 2007 300,000 $ 1.66
========= =======================================

Prior to the adoption of FAS 123R, in 2005 we accounted for our share-based
compensation plans under the provisions of Accounting Principles Board Opinion
No. 25, "Accounting for Stock Issued to Employees", and related interpretations.
Since the exercise price of stock options granted pursuant to our stock option
plans to employees and directors was at least equal to the market value of the
underlying common stock on the grant date, we did not record any compensation
expense for stock options granted in prior years. However, prior to the adoption
of SFAS 123R, we did record compensation expense related to modifications made
to vested option awards previously granted.

If compensation cost for our stock-based compensation plans had been
determined based on the fair value method, estimated using the Black-Scholes
option pricing model, at the grant dates in accordance with Financial Accounting
Standards Board Statement No. 123, "Accounting for Stock-Based Compensation",
our pro forma net income and earnings per share would have been as follows:

Year Ended
July 31, 2005
---------------
Net income, as reported $ 5,701,787
Deduct: Pro forma compensation
expense for stock options issued
using a fair value method (1) (509,796)
Pro forma net income $ 5,191,991
===============
Basic net income per share:
As reported $ 0.84
===============
Pro forma $ 0.77
===============
Net income per share,
assuming dilution:
As reported $ 0.78
===============
Pro forma $ 0.71
---------------

(1) Compensation expense was reduced for forfeitures as they actually occurred.

1996 Directors' Stock Participation Plan - Pursuant to the terms of our
1996 Directors' Stock Participation Plan, on the first business day of January
of each year, we issue to each outside director who has been elected by a vote
of our shareholders and has served at least one year as a director, the lesser
of 2,500 shares of our common stock or a number of shares of common stock equal
to $15,000 on the date such shares are issued. If an otherwise eligible director
terminates as a director before the first business day of the year, we issue
such director a number of shares equal to the proportion of the year served by
that director. This plan expires on January 3, 2011.

Page 57

We issued 12,500, 12,500, and 6,920 shares of common stock to eligible
directors in 2007, 2006 and 2005, respectively, and charged to expense $29,563,
$50,000, and $75,000, in 2007, 2006 and 2005, respectively, for the shares
issued under this plan. The following information relates to the 1996 Directors'
Stock Participation Plan:

JULY 31, 2007 July 31, 2006
------------- -------------
Common shares reserved for
future share issuances 59,159 71,659
============= =============

There was no significant impact on the calculation of net income (loss) per
share for the years ended July 31, 2007, 2006 and 2005, as a result of the
issuance of shares to our directors.

17. 401(K) PLAN

We have an employee defined contribution plan qualified under section
401(k) of the Internal Revenue Code (the "Plan"), for all our employees who have
attained the age of 21 and meet certain service requirements. The Plan has been
in effect since January 1, 1997. Participation in the Plan is voluntary.
Employees may defer compensation up to a specific dollar amount determined by
the Internal Revenue Service for each calendar year. We do not make matching
contributions, and employees are not allowed to invest in our stock under the
Plan.

We may make discretionary contributions to the Plan solely on the
authorization of our directors, who may authorize a contribution of a dollar
amount to be allocated to participants according to the provisions of the Plan,
and payable in shares of our common stock valued as of the date the shares are
contributed to the Plan. Our directors authorized and we expensed $140,000,
$125,000, and $100,000 in 2007, 2006, and 2005, respectively, for such
discretionary contributions. We have not yet contributed the related shares of
our common stock to the Plan for 2007, however, we did contribute the related
shares of our common stock to the Plan for 2006 and 2005.

18. COMMITMENTS AND CONTINGENCIES

Operating Leases - We have our offices in Fairfield, Connecticut under a
new lease that commenced on August 24, 2006, and expires on August 31, 2013. We
have an option to renew this lease for an additional five years.

At July 31, 2007, future minimum rental payments required under operating
leases with initial or remaining non-cancelable lease terms in excess of one
year, including the new office lease, were:

Year ending July 31,
2008 $ 285,433
2009 296,055
2010 294,567
2011 280,598
2012 291,220
Thereafter 327,069
----------
Total minimum payments required $1,774,942
==========

Total rental expense for all operating leases was:

Year ended July 31,
-----------------------------
2007 2006 2005
-------- -------- ---------
Minimum rental payments $295,992 $181,267 $236,572
Less: Sublease rentals -- -- (2,412)
-------- -------- ---------
Net rent expense $295,992 $181,267 $234,160
======== ======== =========

Employment Agreement - On February 2, 2007, we entered into an employment
agreement with John B. Nano, our President and Chief Executive Officer. He was
also appointed Chairman of the Board at no additional

Page 58

compensation. This agreement expires on February 2, 2010. Pursuant to the terms
of the agreement, Mr. Nano will receive a minimum base compensation of $350,000,
subject to change upon approval of our Board of Directors, eligibility to
participate in all employee benefit plans, and is eligible, in the event of a
termination of his employment for other than cause, to receive the continuation
of base compensation and benefits through the term of the agreement, but not
less than twelve months. In the event of a change in control, as defined, he is
eligible to receive a continuation of the amount of base compensation in effect
immediately prior to such termination or resignation for a period equal to twice
that for a termination without cause or for the remainder of the employment
agreement term, whichever is longer. The agreement automatically renews for one
year periods, unless notice is given 180 days in advance. Mr. Nano is also
entitled to a car allowance or lease of a car equal to an S-class Mercedes. The
agreement also called for the payment of $1 million to Mr. Nano and $650,000 to
his legal advisors in settlement of his lawsuit against us. See below under
"Employment Matters - John B. Nano."

Contingencies - Revenue based - As of July 31, 2007, CTT and VVI have
obligations, contingent upon receipt of certain revenues, to repay up to
$199,006 and $210,123, respectively, from grant funding received in 1994 and
1995. CTT also is obligated to pay at the rate of 7.5% of its revenues, 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 revenues from licensing supported products, if any. We recognize
these obligations only if we receive revenues related to the grant funds. We
recognized $10,900 and $0 related to these obligations in 2007 and 2006.

Contingencies - Litigation

FUJITSU

In December 2000, coincident with filing a complaint with the United States
International Trade Commission ("ITC") that was withdrawn in 2001, the
University of Illinois and CTT filed a complaint against Fujitsu Limited,
Fujitsu General Limited, Fujitsu General America, Fujitsu Microelectronics, Inc.
and Fujitsu Hitachi Plasma Display Ltd. (Fujitsu et al., collectively,
"Fujitsu") 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 alleged to infringe two U.S. patents held
by our Client, the University of Illinois. The two patents cover energy recovery
technology for flat plasma display panels. In May 2002, the Central District
Court of Illinois granted Fujitsu's motion to transfer this case to the Northern
District of California.

Page 59

CAROLINA LIQUID CHEMISTRIES CORPORATION, ET AL.

PALATIN TECHNOLOGIES, INC.

CTT commenced an arbitration proceeding on June 5, 2006, as a result of
Palatin's breach of a License Agreement between CTT and Palatin dated March 31,
1998. The three-member panel of arbitrators has been selected, and a formal
hearing was to have been held in beginning of November 2007. The hearing date
has been extended to March 2008. The Panel has agreed to allow both sides to
file dispositive motions to summarily resolve certain claims

BEN MARCOVITCH AND OTHER CO-DEFENDANTS

On August 8, 2007 we announced that former CTT Director Ben Marcovitch had
been removed for cause from our Board of Directors by unanimous vote of CTT's
five Directors for violating CTT's Code of Conduct. At that time, CTT also
withdrew from its involvement with Agrofrut, E.U., a nutraceutical firm brought
to CTT by Mr. Marcovitch. As announced on April 10, 2007, CTT had paid $750,000
to Agrofrut for a 5% ownership, and certain marketing and investment options in
Agrofrut.

Page 60

technology to remove complex compounds such as bromelain and xylitol, at better
than 99% purity, from pineapples and other organic waste. Dr Raul Aragon Davalos
had actually been killed in a drive-by shooting in Cali, Colombia on February
28, 2007. Dr. Raul Aragon Davalos's assassination was known to Mr. Marcovitch
and Betty Rios Valencia, President and CEO of Agrofrut and former spouse of Mr.
Marcovitch, as well as to other executives of Agrofrut, but was never revealed
to CTT by them. Mr. Marcovitch had admitted to a CTT outside counsel, and to a
CTT shareholder, that he had attended Dr. Raul Aragon Davalos's funeral.
Further, the investigations have shown that Dr. Raul Aragon Davalos was a
convicted drug trafficker and that Ms. Rios Valencia also has a drug conviction
record. Among other things, the involvement of Mr. Marcovitch, Ms. Rios Valencia
and John Derek Elwin, III, a former CTT employee, with convicted drug
traffickers resulted in CTT's decisive actions against these individuals.

We intend to aggressively pursue this matter.

EMPLOYMENT MATTERS

Employment matters - John B. Nano - On August 10, 2005, we received notice
that John B. Nano, President and CEO from June 2002 to June 2005, had commenced
suit in the Superior Court in the Judicial District of Stamford, Connecticut
seeking the pre-judgment remedy of attachment. In his complaint, Mr. Nano sought
to attach our bank accounts in the amount of $1.4 million to preserve his
ability to collect should he succeed on his claim that CTT allegedly had
breached his employment contract because it denied him certain severance
benefits when it terminated his employment on June 14, 2005. Mr. Nano also
claimed, in the alternative, that CTT violated a draft of a separation agreement
and general release which it sought to negotiate with him at the time of his
departure. Mr. Nano claimed in his complaint that CTT withdrew the proposed
draft agreement after he communicated his acceptance to the then Chairman of
CTT's Board of Directors. .

On December 7, 2005, CTT filed a complaint against Mr. Nano in the Superior
Court in the Judicial District of Stamford, Connecticut, for monetary and
punitive damages.

Page 61

As a result of a proxy contest conducted for the election of Directors at
the annual meeting of shareholders on January 16, 2007, adjourned until February
2, 2007, a complete new Board of Directors was elected and installed. The
disputed matters regarding CTT's former Board of Directors and John B. Nano were
settled by the new Board. The new Board appointed Mr. Nano as President and CEO,
and elected him Chairman of the Board. Mr. Nano was later appointed Interim CFO.
Mr. Nano's suit was brought under the Sarbanes-Oxley law and requested $5.1
million plus damages against CTT. On January 24, 2007, the parties met with
Judge Thomas P. Smith, United States District Court of Connecticut, who demanded
that CTT or a reputable insurance company post a bond of $2.5 million by the
close of business on January 26, 2007 to serve as security. Mr. Nano agreed to
reduce his settlement demand and the new Board agreed to pay Mr. Nano $1 million
and to pay his legal fees of $650,000 to settle the original suit. These amounts
were paid in 2007. The $2.5 million bond was distributed on February 7, 2007,
with Mr. Nano receiving $1 million, his legal advisors receiving $650,000, and
the balance of $850,000 returned to CTT's treasury.

Employment matters - other former employees - On September 29, 2006, CTT
received a demand letter from an attorney representing two of its officers, Aris
D. Despo and Paul A. Levitsky, demanding approximately $300,000 in total for
commission payments alleged to be due them for fiscal year 2006 under CTT's
prior annual incentive compensation plan, which was terminated in November 2005.
These individuals received commission payments in fiscal year 2005 related to
new homocysteine licenses granted in 2005, and claimed that CTT was obligated,
and they were promised, that payments would continue for a period of two years
thereafter. The letter also claimed that these individuals anticipated that they
would be entitled to at least an aggregate additional $350,000 in commission
payments in fiscal year 2007. CTT put these individuals on administrative leave
with pay on October 30, 2006.

During the quarter ended January 31, 2007, the Company took a charge of
approximately $200,000 in severance costs in full and final settlement of any
claims against the Company, pursuant to the terms of a separation agreement
effective January 6, 2007 with Mr. Despo. Pursuant to the agreement, Mr. Despo
also agreed to resign his employment, and executed a release in favor of the
Company. The agreement included bi-weekly severance payments to be paid over
calendar 2007.

During the quarter ended January 31, 2007, the Company took a charge of
approximately $150,000 in severance costs in full and final settlement of any
claims against the Company, pursuant to the terms of a separation agreement
effective January 17, 2007, with Mr. Levitsky. Pursuant to the agreement, Mr.
Levitsky also agreed to resign his employment, and executed a release in favor
of the Company. The agreement included an initial $50,000 payment with the
balance to be paid bi-weekly over a six-month period. Both Mr. Despo and Mr.
Levitsky were rehired to their previous CTT positions by the new CTT management
effective February 14, 2007; and their corresponding outstanding severance
payments of approximately $356,000 were paid in a lump sum at that time. Mr.
Levitsky's employment with the company has since been terminated as part of the
organization restructuring in August 2007.

SECURITIES AND EXCHANGE COMMISSION

Page 62

LABORATORY CORPORATION OF AMERICA HOLDINGS D/B/A LABCORP

On May 4, 1999, a case was filed in the U.S. District Court for the
District of Colorado against Laboratory Corporation of America Holdings d/b/a
LabCorp ("LabCorp") by Metabolite Laboratories, Inc. ("MLI") and us
(collectively, the "Plaintiffs"). The case alleged, in part, breach of contract
and homocysteine assay patent infringement, and that LabCorp owed the Plaintiffs
royalties for homocysteine assays performed beginning in the summer of 1998
using methods falling within the claims of a patent we own. We licensed the
patent on a non-exclusive basis to MLI and MLI sublicensed it to LabCorp.

The injunction against performing tests was stayed by the court pursuant to
a stipulated court order that expired in April 2005; pursuant to the stipulated
order LabCorp was allowed to perform assays in exchange for paying a royalty.
LabCorp appealed the judgment, and on August 5, 2004, the CAFC denied LabCorp's
appeal for a rehearing or a rehearing en banc (rehearing by the full CAFC). As a
result of this decision, on August 16, 2004, the Plaintiffs received
approximately $6.7 million, our share of which was $921,000, and we recorded
$815,000 in royalty legal awards and $105,000 in interest income during 2005.
After this decision LabCorp had appealed the case to the U.S. Supreme Court (the
"Supreme Court"). The payment did not include attorneys' fees or court costs
previously awarded to the Plaintiffs that were under appeal with the court.

On September 21, 2006, the district court ruled on the remaining
outstanding motions and claims related to this case, and as result of the
ruling, the case effectively ended with no further awards granted.

We did not receive any awards from this case in 2007 or 2006. As a result
of this decision, the validity of our homocysteine patent was upheld.

Page 63

ICR, LLC

OTHER

On May 17, 2006, we filed a complaint against Dr. Arnold H. Pross in the
New York Supreme Court in Nassau County, alleging the posting of defamatory
statements against Donald J. Freed, our former President and Chief Executive
Officer, as well as CTT, on public message boards. On July 20, 2006, Dr. Pross
filed a motion to dismiss our complaint based upon a lack of personal
jurisdiction. On October 13, 2006, we filed a motion opposing Dr. Pross' motion.
The Court ruled that it has no jurisdiction in New York State for the matters at
issue. CTT subsequently allowed the case to drop without further action.

CONSULTANTS

Currently, we engage independent consultants who provide us with business
development and evaluation services under contracts that are cancelable upon
written notice. Certain of these contracts include contingencies for potential
payments to the consultant if we earn revenues as a result of the efforts of
the consultant. For the years ended July 31, 2007, 2006 and 2005, we neither
accrued nor paid incentive compensation under such contracts.

SUMMARY

Page 64

19. SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)

First Second Third Fourth
Quarter Quarter Quarter Quarter
YEAR ENDED JULY 31, 2007
Total revenues $ 895,176 $ 903,992 $ 892,586 $ 1,475,462
Operating loss (1) (1,287,134) (3,722,614) (2,163,091) (2,275,058)
Net loss (1,122,162) (3,562,831) (2,041,854) (2,167,099)
Net loss per share:
Basic (0.14) (0.44) (0.25) (0.28)
Assuming dilution (0.14) (0.44) (0.25) (0.28)
Weighted average number
of common shares
outstanding
Basic 7,988,701 8,017,260 8,047,899 8,107,380
Assuming dilution 7,988,701 8,017,260 8,047,899 8,107,380

YEAR ENDED JULY 31, 2006
Total revenues $ 1,366,321 $ 1,271,242 $ 1,198,602 $ 1,351,466
Operating loss (1) (459,846) (761,887) (1,209,530) (584,783)
Net loss (333,005) (641,153) (1,054,040) (349,026)
Net loss per share:
Basic (0.04) (0.09) (0.14) (0.04)
Assuming dilution (0.04) (0.09) (0.14) (0.04)
Weighted average number
of common shares
outstanding
Basic 7,410,416 7,579,940 7,710,134 7,907,972
Assuming dilution 7,410,416 7,579,940 7,710,134 7,907,972

1) Operating (loss) is defined herein as revenues less expenses, excluding
investment income, net and income taxes.

20. SUBSEQUENT EVENTS

On August 8, 2007, the Company announced that it had restructured its
organization to lower overhead costs. Effective August 1, 2007, the Company's
staff was reduced by four senior members, who all signed termination agreements
between August 1 and August 8, 2007, including severance benefits. The cost of
those benefits was $202,728, and will be reflected in the Company's first
quarter fiscal 2008 financial results.

Page 65

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURES

TERMINATION OF PREVIOUS INDEPENDENT ACCOUNTANT

Effective February 12, 2007, the accounting firm BDO Seidman, LLP (BDO)
resigned as the CTT's independent registered public accountant.

BDO's reports on CTT's financial statements for the past two years have not
contained any adverse opinion or disclaimer of opinion, or been qualified or
modified as to uncertainty, audit scope, or accounting principles.

During the two most recent fiscal years and through February 12, 2007,
there have been no disagreements between CTT and BDO on any matter of accounting
principles or practices, financial statement disclosure or auditing scope of
procedure, which disagreements, if not resolved to the satisfaction of BDO,
would have caused them to make reference to the subject matter thereof in their
report on the Registrant's financial statements for such periods.

During the two most recent fiscal years and through February 12, 2007,
there have been no reportable events (as defined in Item 304(a)(1)(v) of
Regulation S-K.

ENGAGEMENT OF NEW INDEPENDENT ACCOUNTANT

Effective February 20, 2007, CTT engaged Mahoney Cohen & Company, CPA,
P.C., (Mahoney Cohen) as their independent registered public accountants.
Mahoney Cohen is a premier certified public accounting firm servicing the middle
market. Founded in 1969, Mahoney Cohen is the 38th largest CPA firm in the
United States. The firm currently has a staff of over 215, including 26
partners, and offices in New York City, Miami, Florida and Boca Raton, Florida.

DEPARTURE OF CHIEF FINANCIAL OFFICER

Effective February 6, 2007, CTT terminated Michael D. Davidson as Senior
Vice President and Chief Financial Officer. Pending finding a suitable
replacement, Mr. Nano presently operates as the company's Interim Chief
Financial Officer.

ITEM 9A. CONTROLS AND PROCEDURES

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

Our management, including our President, Chief Executive Officer, and
Interim Chief Financial Officer, evaluated the effectiveness of the design
and operation of our disclosure controls and procedures (as defined in
Exchange Act Rules 13a-15(e) and 15d-15(e)) as of July 31, 2007. Our
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, our President, Chief Executive Officer, and Interim Chief
Financial Officer concluded that our disclosure controls and procedures,
except as noted below, were effective as of July 31, 2007.

(b) Evaluation of internal controls over financial reporting
--------------------------------------------------------

CTT management and public accountants have identified deficiencies
within its internal control framework, which, if left uncorrected could
result in a material weakness. Our internal control deficiencies related to
the recording of certain accruals, financial statement presentation and
stock option information. Disclosure controls and procedures have now been
put in place, and we believe that the remedial steps the Company has taken
addresses the conditions identified. We will continue to monitor the
effectiveness of the internal policies and believe that there are no
material inaccuracies, or omissions of material facts in this reporting
10-K.

There were no changes in our internal control over financial reporting
during the quarter ended July 31, 2007, that have materially affected, or
are reasonably likely to materially affect, our internal control over
financial reporting other than the ones identified in (b) above.

ITEM 9B. OTHER INFORMATION

None.

Page 67

PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

DIRECTORS

All persons named below are directors of CTT on the filing date of this
document. No director or executive officer is related by family to any other
director or executive officer. The following table sets forth information
regarding each director according to information furnished to us by each:

POSITIONS CURRENTLY COMMITTEE DIRECTOR OF
NAME AGE HELD WITH CTT MEMBERSHIPS CTT SINCE
- ------------------------ --- ------------------- ----------- -------------

Joel M. Evans, M.D. 47 Director A, N February 2007

Richard D. Hornidge, Jr. 61 Director A, C* February 2007

Rustin Howard. 51 Director C October 2007

John B. Nano 63 Chairman of the -- February 2007
Board of Directors,
President and Chief
Executive Officer

William L. Reali 65 Director A*, N February 2007

Ralph S. Torello 69 Director C February 2007

A - Audit Committee
C - Compensation and Stock Option Committee
N - Nominating and Corporate Governance Committee
* - Committee Chair

JOEL M. EVANS, M.D. Dr. Evans founded The Center for Women's Health in
Stamford, Connecticut in June 1996 and since then has been its Director. From
November 1996 to present, Dr. Evans has been a lecturer and senior faculty
member of The Center for Mind Body Medicine in Washington, D.C. Dr. Evans has
been featured in magazines as well as interviewed on television and radio shows
across the country. Dr. Evans is an Assistant Clinical Professor at the Albert
Einstein College of Medicine in New York City and helped create a clinical study
at Columbia University Medical Center for use of the herb, black cohosh, in
breast cancer. From November 2005 to present, Dr. Evans has been a member of
the Scientific Advisory Board for Metagenics Incorporated, a nutritional
supplement manufacturer. Dr. Evans brings key nutriceutical experience to the
Company.

Dr. Evans completed his undergraduate and medical studies at the Sophie
Davis School of Biomedical Education of the City College of New York and the Mt.
Sinai School of Medicine. He fulfilled his residency at the Albert Einstein
College of Medicine.

RICHARD D. HORNIDGE, JR. Mr. Hornidge has been a tennis professional at Willows
Racquet Club in North Andover, Massachusetts since February 2005. Prior to that
he was an independent consultant. From June 1984 through June 1989, Mr.
Hornidge was President of Travis Associates, an employment agency. Mr. Hornidge
was a program coordinator for Raytheon from 1973 through 1984, where he was
involved in the Patriot Missile test equipment program.

Mr. Hornidge received a BA from Boston University.

RUSTIN HOWARD. Mr. Howard is principal of Whitesand Investments LLC, an angel
investment organization that operates as a traditional venture fund.

In 1990, he founded and served as CEO and Chairman of Phyton, Inc., a world
leader in the use of proprietary plant cell fermentation technology, including
the production of paclitaxel, the active ingredient of

Page 68

Bristol-Myers Squibb's multi-billion dollar anticancer drug, Taxol(R). Phyton
was sold to DFB Pharmaceuticals, Inc. in 2003.

Additionally, Mr. Howard is the Chairman of DeepGulf, Inc., and a co-owner
and officer of Silver Bullet Technology. DeepGulf builds underwater pipelines
and associated facilities in deep and ultra-deep offshore oil and gas production
fields. Silver Bullet Technology, where he has been primarily responsible for
corporate and financial oversight as well as strategic planning, manufactures
and sells software for the banking and payment processing industry. Previously,
he served as president and CEO of BioWorks Inc., a biotechnology company he
founded to develop, produce, and sell products that replace chemical pesticides.

He earned his MBA from Cornell University's Johnson Graduate School of
Management, where he focused his studies on Entrepreneurship, and managing
innovation and technology.

JOHN B. NANO. Mr. Nano is President and Chief Executive Officer of Competitive
Technologies, Inc. and Chairman of the Board of Directors. In January 2006 Mr.
Nano became President and Chief Executive Officer of Articulated Technologies,
LLC, a company involved in creating and commercializing patented light emitting
diode technologies for global solid state lighting applications. He is
currently a member of their Board of Directors. Mr. Nano served as President
and CEO, and a member of the Board of CTT from June 2002 through June 2005. He
has a broad background in domestic and international operating experience with
technology-based companies focusing on life sciences, physical sciences, digital
technology and electronics. Prior to joining CTT in 2002, Mr. Nano held various
executive leadership positions in operations, strategic planning, business
development, M&A and finance, including at Stonehenge Network Holdings, N.V. as
a Principal, at ConAgra Trade Group, Inc., a subsidiary of ConAgra, Inc., as
Executive VP and Chief Financial Officer; at Sunkyong America, a subsidiary of
the Sunkyong Group, a Korean conglomerate, as Executive VP and Chief Financial
Officer, and as President of an Internet Startup Division of Sunkyong America.

Mr. Nano is a graduate of MIT's Sloan School Executive Program, holds an
MBA in Finance from Northeastern University, and a BS in Chemical Engineering
from Worcester Polytechnic Institute.

WILLIAM L. REALI. Mr. Reali is a Certified Public Accountant with the firm of
Reali, Giampetro and Scott in Canfield, Ohio. The firm provides auditing and
other related accounting and tax services to a diverse group of business
clients. Over the past five years, Mr. Reali's primary responsibility with the
firm has been business consulting, working with large and small national and
multinational clients. He has worked with distressed companies assisting them
with cost reduction, turn-around programs and re-organization.

Serving as Chairman of various community associations, Mr. Reali donates a
great deal of time to local organizations.

Mr. Reali received his BA from Youngstown State University.

RALPH S. TORELLO. Mr. Torello has been an independent financial consultant for
the past five years. With over 45 years' experience in the financial and venture
capital field, he advises various companies on their financial strategies.
Included among the companies and individuals that Mr. Torello has performed
consulting services for are Goodnight Audio, a full service recording studio,
Patriot American Mortgage, a commercial and home mortgage company, DDS
Technologies, Inc., an organic waste processor, and Coit Medical, a medical
accessory marketer.

During the eighties and nineties he handled personal ventures in oil
exploration, real estate and the development of bio-organic products. During the
seventies and eighties, Mr. Torello was Managing Partner of his own venture
capital and development firm. During the sixties, he was Director of Financial
Analysis for The Singer Company, Assistant to the President of Illinois Tool
Works, Vice President of Laird Industries, and head of Investment Banking for
Bay Securities in San Francisco.

Mr. Torello received a BS from Fordham University, and holds an MBA from
Harvard University.

Page 69

EXECUTIVE OFFICERS

The names of our executive officers, their ages and background information
are as follows:

John B. Nano, 63, has served as our President and Chief Executive Officer
and Interim Chief Financial Officer, as well as Chairman of the Board of
Directors, since February 2007. From January 2006 to January 2007 he served as
President and Chief Executive Officer of Articulated Technologies, LLC., a
company involved in creating and commercializing patented light emitting diode
technologies for global solid state lighting applications. Mr. Nano previously
served as President and Chief Executive Officer, and a member of the Board of
CTT from June 2002 through June 2005. Prior to joining CTT, Mr. Nano served as a
Principal reporting to the Chairman of Stonehenge Networks Holdings, N.V., a
global virtual private network provider, with positions in operating, strategic
planning and finance from 2000 to 2001. From 1998 to 1999, Mr. Nano served as
Executive Vice President and Chief Financial Officer of ConAgra Trade Group,
Inc., a subsidiary of ConAgra, Inc., an international food company. From 1983 to
1998, he served as Executive Vice President, Chief Financial Officer and
President of an Internet Startup Division of Sunkyong America, a subsidiary of
the Korean conglomerate, Sunkyong Group.

BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

Section 16(a) of the Securities Exchange Act of 1934 (the "Exchange Act")
requires our directors and officers, and persons who own more than ten percent
of the Common Stock to file reports of ownership and changes in ownership with
the Securities and Exchange Commission ("SEC") and the American Stock Exchange.
SEC regulations require reporting persons to furnish us with copies of all
Section 16(a) forms they file.

Based solely on a review of the copies of such reports received or written
representations from certain reporting persons with respect to fiscal 2007, we
believe that all reporting persons complied with all applicable reporting
requirements.

CORPORATE GOVERNANCE

AUDIT COMMITTEE

The function of the Audit Committee is to assist the Board in fulfilling
its responsibility to the stockholders relating to our corporate accounting
matters, financial reporting practices, and the quality and integrity of our
financial reports. The Audit Committee's purpose is to assist the Board with
overseeing:
- -- the reliability and integrity of our financial statements, accounting
policies, internal controls and disclosure practices;
- -- our compliance with legal and regulatory requirements, including our
disclosure controls and procedures;
- -- our independent auditor's qualifications, engagement, compensation, and
independence;
- -- the performance of our independent auditor; and
- -- the production of an annual report of the Audit Committee for inclusion in
our annual proxy statement.

Page 70

The Audit Committee is to be composed of not less than three of our
independent directors. The Board has determined that each member of the Audit
Committee is an independent director in accordance with the applicable rules of
the American Stock Exchange and the Securities Exchange Act of 1934. It has also
determined that each member is financially literate and has identified Mr.
Reali, who is a certified public accountant, as an audit committee financial
expert as defined by the Securities and Exchange Commission. The Audit Committee
operates pursuant to its charter, which was adopted by the Board, a copy of
which was filed as Appendix A to our 2004 Proxy Statement. The Audit Committee
evaluates the adequacy of its charter annually.

COMPENSATION AND STOCK OPTION COMMITTEE

The purpose of the Compensation Committee is to:
-- review and approve corporate goals and objectives relevant to CEO
compensation, evaluate the CEO's performance in light of those goals
and objectives, and determine and approve the CEO's compensation level
based on this evaluation;
-- review and approve the compensation of our other officers based
on recommendations from the CEO;
-- review, approve and make recommendations to the Board with
respect to incentive compensation plans or programs, or other
equity-based plans or programs, including but not limited to our
Annual Incentive Plan, our 1997 Employees' Stock Option Plan, and our
401(k) Plan; and
-- produce an annual report of the Compensation Committee on
executive compensation for inclusion in our annual proxy statement.

The Compensation Committee is to be composed of not less than three of our
independent directors. The Board has determined that each member of the
Compensation Committee is (a) an independent director in accordance with the
applicable rules of the American Stock Exchange and any other applicable legal
or regulatory requirement, (b) a non-employee director within the meaning of
Rule 16-b3(i) under the Securities Exchange Act of 1934, and (c) an outside
director within the meaning of Section 162(m) of the Internal Revenue Code of
1986 (the "Internal Revenue Code").

The new Board of Directors is reviewing all compensation plans to assure
effectiveness and fiduciary responsibility.

NOMINATING AND CORPORATE GOVERNANCE COMMITTEE

The purpose of the Nominating Committee is to:
-- identify individuals qualified to become members of the Board,
consistent with criteria approved by the Board;
-- recommend to the Board candidates for all directorships to be
filled by the Board or our stockholders;
-- in consultation with the Chairman of the Board, recommend to the
Board members of the Board to be appointed to committees of the Board
and the chairpersons thereof, including filling any vacancies;
-- develop and recommend to the Board a set of corporate governance
principles applicable to us;
-- oversee, evaluate and monitor the Board and its individual
members, and our corporate governance principles and procedures; and
-- fulfill such other duties and responsibilities as may be set
forth in its charter or assigned by the Board from time to time.

The Nominating Committee is to be composed of not less than three of our
independent directors. The Board has determined that each member of the
Nominating Committee is an independent director in

Page 71

accordance with the applicable rules of the American Stock Exchange and any
other applicable legal or regulatory requirement. The Nominating Committee
operates pursuant to its charter, which was adopted by the Board, a copy of
which was filed as Appendix B to our 2004 Proxy Statement.

The Nominating Committee will consider nominees recommended by stockholders
but it has not identified any special procedures stockholders need to follow in
submitting such recommendations. The Nominating Committee has not identified any
such procedures because as discussed below under the heading "Stockholder
Communications to the Board," stockholders are free to send communications in
writing directly to the Board, committees of the Board, and/or individual
directors, at our corporate address in care of our Secretary.

ITEM 11. EXECUTIVE COMPENSATION

SUMMARY COMPENSATION

The following table summarizes the total compensation awarded to, earned by
or paid by us for services rendered during fiscal year 2007 to the named
executive officers that served during the year ended July 31, 2007 (the "Named
Executive Officers").

Stock
Name and Option All Other
Principal Position Year Salary Bonus Awards Compensation Total
- -------------------- ---- -------- ------ -------- -------------- --------
Current Executive
Officers:
- -------------------- ---- -------- ------ -------- -------------- --------
John Nano (1)
Chairman of the
Board of Directors,
President and Chief
Executive Officer,
Interim Chief
Financial Officer 2007 $134,615 $ - $226,985 $ 23,084(2)(3) $384,684
- -------------------- ---- -------- ------ -------- -------------- --------
Aris Despo
Executive Vice
President -
Business
Development 2007 189,139 - 991 216,169(3)(4) 406,299
- -------------------- ---- -------- ------ -------- -------------- --------
Former Executive
Officers:
- -------------------- ---- -------- ------ -------- -------------- --------
Donald J. Freed (5)
Former President
and Chief
Executive Officer 2007 214,531 - 210,515 20,969(2)(3) 446,015
- -------------------- ---- -------- ------ -------- -------------- --------
Michael E. Kiley (6)
Former Executive
Vice President
and Chief
Operating Officer 2007 113,462 - 24,616 63,379(6) 201,457
- -------------------- ---- -------- ------ -------- -------------- --------
Michael D.
Davidson (7)
Former Chief
Financial
Officer 2007 144,365 5,000 98,329 - 247,694
- -------------------- ---- -------- ------ -------- -------------- --------
Paul Levitsky (8)
Former Vice
President and
General Counsel 2007 182,862 - 237 164,169(3)(4) 347,268
- -------------------- ---- -------- ------ -------- -------------- --------

(1) Represents salary since February 6, 2007. Mr. Nano does not receive
additional compensation for serving as Chairman of the Board.
(2) Represents payment of $13,787 auto lease for Mr. Nano; $8,800 auto
allowance for Dr. Freed.
(3) Represents accrual for discretionary contribution to 401(k) plan for year
ended July 31, 2007 of $9,297 for Mr. Nano, $12,169 for Mr. Despo, $12,169
for Mr. Levitsky and $12,169 for Dr. Freed.
(4) Represents severance payments of $204,000 for Mr. Despo, and $152,000 for
Mr. Levitsky. See Note 18 of Notes to Consolidated Financial Statements in
Part II, Item 8.
(5) Dr. Freed's employment with the company terminated on February 4, 2007.

Page 72

(6) Mr. Kiley resigned on November 27, 2006. We recognized $31,550 in
compensation expense for modification of terms of his vested stock options
outstanding, and reversed $6,934 of compensation expense related to stock
options accrued, but not vested. Mr. Kiley received $63,379 for a
consulting agreement with CTT from November 28, 2006 through February 21,
2007.
(7) Mr. Davidson's employment with the company terminated on February 6, 2007.
(8) Mr. Levitsky's employment with the company terminated on August 7, 2007.

GRANTS OF PLAN BASED AWARDS

The following table shows equity awards granted to named executive officers
during 2007. Equity awards granted in 2007 identified in the table below are
also reported in the Outstanding Equity Awards at 2007 Year End Table.

Option
Awards:
Number of Closing Grant Date
Securities Market Fair Value
Underlying Exercise Price on of Stock
Options Price Grant Date Option Grants
Name Grant Date (#)(1) ($/Share) ($) ($)(2)
Current
Executive
Officers
John Nano 02/02/07(3) 400,000 2.52 2.50 662,800
Aris Despo 08/16/06(4) 10,000 2.33 2.35 15,890
Former
Executive
Officers
Donald Freed 08/16/06(5) 18,000 2.33 2.35 28,602
Michael Kiley 08/16/06(4) 15,000 2.33 2.35 23,835
Michael
Davidson 08/16/06(5) 12,000 2.33 2.35 19,068
Paul Levitsky 08/16/06(4) 12,000 2.33 2.35 19,068

(1) Granted pursuant to our 1997 Employees' Stock Option Plan.
(2) These amounts reflect the fair value as of the option grant date as
determined by SFAS 123(R) for accounting purposes. For a description of the
assumptions used to determine the grant date fair value, see Note 16 of
Notes to Consolidated Financial Statements in Part II, Item 8. Pursuant to
SEC rules, the amounts shown exclude the impact of estimated forfeitures
related to service-based vesting conditions.
(3) These stock options vest 25% on issuance and 25% annually for three
additional years.
(4) These stock options as issued would have vested 25% on the first
anniversary of the grant and 25% annually thereafter. However, these
employees resigned prior to the first anniversary of the grant and none of
these options vested. Mr. Despo was subsequently rehired. Mr. Levitsky was
subsequently rehired and later his employment with the company was
terminated.
(5) These stock options as issued would have vested 25% on the first
anniversary of the grant and 25% annually thereafter. However, due to the
change in control on February 2, 2007, these options vested 100% on that
date.

OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END

Number of Number of
Securities Securities
Underlying Underlying
Unexercised Unexercised Option
Options (#) Options (#) Expiration
Name Exercisable(1) Unexercisable(1) Option Price Date
John Nano 100,000 300,000(2) $ 2.52 02/02/17

(1) Option awards under our 1997 Employees' Stock Option Plan.
(2) Vesting schedule: 25% each on February 2, 2008, 2009 and 2010,
respectively.

Page 73

OPTION EXERCISES DURING FISCAL YEAR 2007

The following table sets forth information with respect to the named
executive officers concerning exercises of options during fiscal year 2007.

Option Awards
-----------------------------------
Number of Shares Value
Acquired or Realized on
Name Exercised (#) Exercise ($)(1)
----------------- ----------------
Michael Davidson 12,000 $ 15,360
Paul Levitsky 10,000 6,650

(1) The value realized on exercise is calculated as the difference between the
closing price of the shares underlying the options exercised and the
applicable exercise price of those options.

EMPLOYMENT, SEVERANCE AND CHANGE OF CONTROL ARRANGEMENTS

John B. Nano signed an employment agreement with the Company in February 2,
2007. The agreement provides for employment for a period of three years from the
effective date, ending at the close of business on February 2, 2010. The
agreement states that the Company employs Mr. Nano as its President and Chief
Executive Officer, and that he reports to the Company's Board of Directors. The
agreement also states that Mr. Nano was appointed to the Board as its Chairman,
without any additional compensation. The agreement established his starting
annual base salary at $350,000, subject to reviews and increases at the sole
discretion of the Board. The complete agreement, including all terms and
definitions, can be found at www.sec.gov with the current report on Form 8-K
dated February 6, 2007.

Mr. Nano's responsibilities and duties are appropriate to the position of
Chief Executive Officer the Company, including, without limitation, developing
and implementing an overall strategic plan and annual business plans, raising
new capital, and supervising day-to-day operations. The agreement entitles Mr.
Nano to receive a yearly bonus of up to 50% of his base compensation, based upon
the Company's performance and his performance of objectives during that time
period as determined by the Compensation Committee of the Board. Mr. Nano's
agreement provides for reimbursement of business related expenses, a leased car,
and participation in employee benefit programs and plans.

The company granted Mr. Nano ten year options ("Plan Options") for the
purchase of an aggregate of 400,000 shares of the Company's common stock at the
mean average of the high and low share price on the effective date of the
agreement. The Plan Options vest 25% on each of the following four dates:
immediately upon employment; on each successive one year anniversary of the date
of employment.

If Mr. Nano resigns his employment for good reason, or the Company
terminates his employment without cause, he will be entitled to receive all
accrued but unpaid salary and benefits through the date of termination plus
severance benefits. In the event Mr. Nano resigns from the Company without good
reason, or if the Company terminates his employment with cause, the Company has
no liability to him except to pay his base compensation and any accrued benefits
through his last day worked, and he will not be entitled to receive severance or
other benefits.

In the event of Mr. Nano's death, or if he is unable to fulfill his
obligations to the Company due to illness, injury, physical or mental incapacity
or other disability, for any 120 days within any 12 month period, all
obligations under the agreement are terminated; except that: the Company will
pay his base compensation and accrued benefits to him or to his estate, and any
unvested Plan Options granted under this agreement will become fully vested and
immediately exercisable for a period of one year by him or his estate. In the
event of his death, any post-retirement benefits shall be paid to Executive's
estate. In the event of his disability, he will be reimbursed for one-time
premium post-retirement health coverage not to exceed $120,000.

Page 74

If the Company terminates Mr. Nano's employment without cause in
conjunction with a Change in Control, he will be entitled to receive all accrued
but unpaid salary and benefits through the date of termination plus the Change
in Control benefit.

The agreement's severance benefit granted to Mr. Nano provides for no less
than twelve months continuation of his base compensation, his employment
benefits, vesting of Options granted, and reimbursement for post retirement
health coverage.

The agreement's Changes in Control benefit granted to Mr. Nano provides for
continuation of compensation in effect to be paid for a period of either twice
the amount of the severance benefit period, or the remainder of his employment
term, whichever is longer; continuation of his employment benefits and
reimbursement for post-retirement health care benefits; and full and immediate
vesting of any unvested but outstanding Options

The following table summarizes the value of benefits payable to Mr. Nano
pursuant to the arrangements described above:

SUMMARY OF POTENTIAL PAYMENTS AT JULY 31, 2007 FOR JOHN B. NANO EMPLOYMENT
CONTRACT (1)

Post
Benefits Retirement
Severance Summary Options Healthcare Total
($) ($) Vesting ($) ($) ($)
----------- ----------- ----------- ----------- ----------
Resignation - - - - -
Termination
- - cause - - - - -
Death or
disability - - 434,324 (4) 120,000 554,324
Resignation
- - good reason 875,000 (2) 130,890 (3) 434,324 (4) 120,000 1,560,214
Termination
- - w/o cause 875,000 (2) 130,890 (3) 434,324 (4) 120,000 1,560,214
Change of
control 875,000 (2) 130,890 (3) 434,324 (4) 120,000 1,560,214

(1) Calculated based on the termination, resignation or change of control
taking place as of July 31, 2007, the last day of our most recent fiscal
year.
(2) Reflects continued base salary for remaining term of the agreement.
(3) Reflects continued benefits of auto, medical, dental, vision and life
insurance plan coverage for remaining term of the agreement.
(4) Reflects accelerated vesting of the unamortized cost of the options, as if
the officer continued employment for the remaining term of the agreement.

COMPENSATION DISCUSSION AND ANALYSIS

The purpose of CTT's Incentive Plan, which was approved by the Board on
November 22, 2005, is to attract and retain personnel of experience and ability
by providing an incentive to those who contribute to the successful operation of
CTT. The Incentive Plan provides for eligible employees to earn an annual bonus
incentive in cash. The targeted annual bonus incentive award is a percentage of
the participant's salary earned during the plan year, as defined in the
Incentive Plan, and is comprised of two parts, 50% of which is dependent upon
attainment of financial performance metrics that serve as our company wide goals
and objectives and are set at the beginning of the year (the "Company
Component"), and 50% of which is dependent upon the individual's performance
compared to each individuals' pre-established goals and objectives (the
"Individual Component"). If our financial performance is less than 70% of its
goal, there will be no award for the Company Component. If our financial
performance is more than 120% of its goal, then the Company Component award will
increase up to 125% of the award and may, under certain conditions, as defined,
increase up to a maximum of 200% of the award. If a participant meets his or her
individual goals, we may pay the Individual Component regardless of whether the
Company Component is met. The Committee may suspend or amend the Incentive Plan
at any time from time to time, and the Board may terminate the Incentive Plan.

Page 75

The Committee also determines the number and terms of stock options to
grant to all employees pursuant to the Stock Option Plan. This plan provides
additional long-term incentive for employees to maximize stockholder value and
to attract, retain and motivate our employees to continue employment with us. To
encourage and recognize the cooperative teamwork of all employees that is
required to achieve our goals, we grant stock options to all employees to give
them a proprietary interest in CTT.

REPORT OF THE COMPENSATION AND STOCK OPTION COMMITTEE

This report of the Compensation and Stock Option Committee (the
"Committee") shall not be deemed incorporated by reference by any general
statement incorporating the Proxy Statement by reference into any filing under
the Securities Act of 1933 or the Securities Exchange Act of 1934 (the "Acts"),
except to the extent that CTT specifically incorporates this information by
reference, and shall not otherwise be deemed filed under such Acts.

CTT's compensation program consists of base salary, bonus, stock options,
other incentive awards and other benefits, which the Committee generally reviews
annually. The Committee's overall philosophy is to align compensation with our
business strategy and to support achievement of our long-term goals. In order to
attract and retain competent executives, we believe that it is essential to
maintain an executive compensation program that provides overall compensation
competitive with that paid to executives with comparable qualifications and
experience.

The new Board of Directors is reviewing all compensation plans to assure
effectiveness and fiduciary responsibility.

COMPENSATION AND STOCK OPTION COMMITTEE REPORT:

We have reviewed and discussed with management certain Executive
Compensation and Compensation Discussion and Analysis provisions to be included
in the Company's Annual Report on Form 10-K, filed pursuant to the Securities
Exchange Act of 1934, as amended (the "Annual Report"). Based on the reviews and
discussions referred to above, we recommend to the Board of Directors that the
Executive Compensation and Compensation Discussion and Analysis provisions
referred to above be included in the Company's Annual Report.

Submitted by the Compensation and Stock Option Committee of the Board of
Directors
Richard D. Hornidge, Jr. (Chairman)
Rustin Howard
Ralph S. Torello

This Compensation Committee Report is not deemed incorporated by reference
by any general statement incorporating by reference of this Annual Report into
any filing under the Securities Act of 1933, as Amended, or the Exchange Act,
except to the extent that the Company specifically incorporates this information
by reference, and shall not otherwise be deemed filed under either such Acts.

Page 76

DIRECTOR COMPENSATION

The following table summarizes the total compensation awarded to, earned by
or paid by us for services rendered during fiscal year 2007 to the non-employee
Board of Director members:

Fees Other
Earned or Equity
Paid in Option Compen-
Name Cash Awards(1) sation(2) Total
Current Board:
Joel M. Evans, M.D. (3) $ 10,000 - - $10,000
Richard D. Hornidge, Jr. (3) 12,000 - - 12,000
Rustin Howard (4) - - -
Ben Marcovitch (3)(5) 9,500 - - 9,500
William L. Reali (3) 14,500 - - 14,500
Ralph S. Torello (3) 10,500 - - 10,500
Former Board:
Richard E. Carver (6) 37,500 $ 3,172 $ 5,913 46,585
George W. Dunbar, Jr. (6) 13,500 3,172 5,913 22,585
Maria-Luisa Maccecchini, Ph.D. (6) 15,000 3,172 5,913 24,085
Charles J. Philippin (6) 16,000 3,172 5,913 25,085
John M. Sabin (6) 18,000 3,172 5,913 27,085

(1) Each director serving as such on January 3, 2007 received a stock option
for 2,000 shares of common stock at $2.37 per share. We estimated the fair
value of stock awards at $1.586 per share using the Black-Scholes option
valuation model with expected life of 5 years, risk free interest rate of
4.66%, volatility of 79.678% and dividend yield of 0. See Footnote 16 in
Notes to Consolidated Financial Statements in Part II, Item 8.
(2) Each director serving as such on January 3, 2007 received 2,500 shares of
stock under the 1996 Directors' Stock Participation Plan. The fair market
value of the stock was $2.37 per share.
(3) Elected to office on February 2, 2007.
(4) Appointed by the Board on October 5, 2007.
(5) Terminated by the Board on August 8, 2007.
(6) Not reelected on February 2, 2007.

Page 77

OUTSTANDING EQUITY AWARDS AT JULY 31, 2007

Number of
Securities
Underlying Option Option
Unexercised Exercise Expiration
Name Options (1) Price Date(2)
Richard E Carver 4,000 $ 8.375 8/1/07
20,000 6.50 8/1/07
10,000 2.14 8/1/07
10,000 2.50 8/1/07
10,000 10.835 8/1/07
10,000 4.00 8/1/07
2,000 2.37 8/1/07
George W. Dunbar, Jr. 10,000 $ 8.375 8/1/07
20,000 6.50 8/1/07
10,000 2.14 8/1/07
10,000 2.50 8/1/07
10,000 10.835 8/1/07
10,000 4.00 8/1/07
2,000 2.37 8/1/07
Maria-Luisa Maccecchini, Ph.D. 10,000 11.035 8/1/07
10,000 4.00 8/1/07
2,000 2.37 8/1/07
Charles J. Philippin 10,000 $ 8.375 8/1/07
20,000 6.50 8/1/07
10,000 2.14 8/1/07
10,000 2.50 8/1/07
10,000 10.835 8/1/07
10,000 4.00 8/1/07
2,000 2.37 8/1/07
John M. Sabin 10,000 8.375 8/1/07
20,000 6.50 8/1/07
10,000 10.835 8/1/07
10,000 4.00 8/1/07

(1) Each stock option was granted pursuant to our 2000 Directors Stock Option
Plan. The shares were vested immediately on issuance.

(2) When the directors were terminated on February 2, 2007, they had 180 days
in which to exercise their options. This expiration date is reflected in
the table above.

Each of our non-employee directors is paid an annual cash retainer of
$10,000, paid quarterly in arrears, for their services to the Company. In
addition, directors are issued shares of common stock pursuant to our 1996
Directors' Stock Participation Plan, as amended, and are granted stock options
to purchase common stock pursuant to our 2000 Directors Stock Option Plan, both
as described below. In addition, effective in fiscal year 2005, the Chairman of
the Board, if a non-employee, and the Chairman of the Audit Committee are paid
annual stipends for the additional responsibilities and time commitments
required of them. Mr. Nano, as an employee of the Company, has not been paid any
compensation for serving as Chairman of the Board. Mr. Carver received stipends
of $24,000 and $48,000 in 2007 and 2006, respectively. Mr. Reali has served as
Chairman of the Audit Committee since February 2, 2007 and he has received a
$3,000 stipend in 2007. Mr. Sabin served as Chairman of the Audit Committee
until February 2, 2007 and received a $3,000 and $6,000 stipend in 2007 and
2006, respectively.

Each non-employee director is also paid $1,000 for each Board meeting
attended and $500 for each committee meeting attended. All directors are
reimbursed for out-of-pocket expenses incurred to attend Board and committee
meetings.

Page 78

Pursuant to our 1996 Directors' Stock Participation Plan, as amended, on
the first business day of January, each non-employee director who has been
elected by the stockholders and has served at least one full year as a director
is issued a number of shares of common stock equal to the lesser of $15,000
divided by the per share fair market value of such stock on the issuance date,
or 2,500 shares. If a non-employee director were to leave the Board after
serving at least one full year, but prior to the January issuance date, we will
issue shares of common stock to the director on a pro-rata basis up to the
termination date. Common stock may not be issued to pursuant to this plan after
January 3, 2011.

Pursuant to our 2000 Directors Stock Option Plan, non-employee directors
are granted 10,000 fully vested, non-qualified stock options to purchase our
common stock on the date the individual is first elected as a director, whether
by the stockholders or by the Board, and is granted 10,000 options on the first
business day of January thereafter, provided the individual is still a director.
The stock options granted are at an exercise price not less than 100% of the
fair market value of the common stock at the grant date and have a term of ten
years from date of grant. If an individual's directorship terminates because of
death or permanent disability, the stock options may be exercised within one
year after termination. If the termination is for any other reason, the stock
options may be exercised within 180 days after termination. However, the Board
has the discretion to amend previously granted stock options to provide that
such stock options may continue to be exercisable for specified additional
periods following termination. In no event may a stock option be exercised after
the expiration of its ten-year term. Stock options may not be granted under this
plan after the first business day of January 2010.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

BENEFICIAL OWNERSHIP OF SHARES:

Names of Beneficial Owners Amount
(and address, if ownership Beneficially
is more than 5%) Owned (A) Percent (%)
- ------------------------------------------------ ------------ --- -----------
Directors and executive officers
- ------------------------------------------------ ------------ --- -----------
Aris Despo 3,492 *
- ------------------------------------------------ ------------ --- -----------
Joel M. Evans, M.D. 11,000 (B) *
- ------------------------------------------------ ------------ --- -----------
Richard D. Hornidge, Jr. 80,000 (B) 1.0
- ------------------------------------------------ ------------ --- -----------
Rustin Howard 10,000 (B) *
- ------------------------------------------------ ------------ --- -----------
Paul A. Levitsky (C) 10,000 *
- ------------------------------------------------ ------------ --- -----------
John B. Nano 109,022 (B) 1.3
- ------------------------------------------------ ------------ --- -----------
William L. Reali 15,000 (B) *
- ------------------------------------------------ ------------ --- -----------
Ralph S. Torello 10,000 (B) *
- ------------------------------------------------ ------------ --- -----------
All directors and executive officers as a group 248,514 3.0
- ------------------------------------------------ ------------ --- -----------

* Less than 1%
(A) Except as indicated in notes that follow, designated person or group has
sole voting and investment power
(B) Persons listed below have right to acquire the listed number of shares
within 60 days from October 15, 2007 upon the exercise of stock options:

Name Right to Acquire
------------------------ ----------------
Joel M. Evans, M.D. 10,000
Richard D. Hornidge, Jr. 10,000
Rustin Howard 10,000
John B. Nano 100,000
William L. Reali 10,000
Ralph S. Torello 10,000
----------------
All Directors and
Executive Officers
as a Group 150,000
================

Page 79

Equity Compensation Plan Information

Number of
securities
remaining
Number of Weighted- available
Securities to be average for future
issued upon exercise issuance
exercise of price of (excluding
outstanding outstanding options
Plan Category options options outstanding)
- ------------------------------- ---------------- ------------ ------------
Equity Compensation plans
approved by security holders
- ------------------------------- ---------------- ------------ ------------
1997 Employees'
Stock Option Plan (1) 618,575 $ 3.04 436,723
- ------------------------------- ---------------- ------------ ------------
2000 Directors'
Stock Option Plan (2) 327,000 6.24 --
- ------------------------------- ---------------- ------------ ------------
1996 Directors'
Stock Participation Plan (3) - 59,159
- ------------------------------- ---------------- ------------ ------------

(1) The 1997 Employees' Stock Option Plan provides for the granting of stock
options to purchase our common stock. Stock options granted under the Plan
must be granted at not less than 100% of the fair market value on the date
of grant. The Compensation Committee determines the vesting period for the
stock options. Stock options expire upon termination of grantee's
employment or ten years after date of grant. At the option of the
Compensation Committee, grants may continue to be exercisable through up to
ten years after the grant date, irrespective of the termination of the
optionee's employment with us. No options may be granted pursuant to this
plan after September 30, 2007. On September 28, 2007, we granted 190,000
options under this plan.

(2) The 2000 Directors' Stock Option Plan provides for the granting of stock
options to purchase our common stock. Stock options may be granted under
this Plan to non-employee directors at not less than 100% of the fair
market value on the date of grant. Each non-employee director is eligible
to receive a grant of 10,000 fully vested common stock options when first
elected as a director and 10,000 more common stock options on the first
business day of January thereafter, as long as the individual is a
director. The maximum life of options granted under this plan is ten years
from the date of grant. No options may be granted after January 4, 2010,
the first business day in January 2010. On August 1, 2007, following a
180-day allowed grace period after the prior Board's termination, 282,000
options that had been granted to, but not exercised by the Directors became
available for future grant under this plan. In August 2007, we made an
initial grant of 10,000 shares each to Directors Evans, Hornidge, Reali and
Torello. An initial grant of 10,000 shares was made to Director Howard in
October 2007.

(3) The 1996 Directors' Stock Participation Plan calls for the issuance of
stock to each non-employee who has been served at least one year as a
director on the first business day in January. They are entitled to receive
the lesser of 2,500 shares of our common stock or a number of shares of
common stock equal to $15,000 on the date such shares are issued. If an
otherwise eligible director terminates as a director before the first
business day of the year, we issue such director a number of shares equal
to the portion of the year served by that director. This plan expires on
January 3, 2011, the first business day in January 2011.

ITEM 13. CERTAIN RELATIONSHIPS, RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE

Our Board of Directors determined that when a director's services are
outside the normal duties of a director, we compensate the director at the rate
of $1,000 per day, plus expenses, which is the same amount we pay a director for
attending a one-day Board meeting. We classify these amounts as consulting
expenses, included in personnel and other direct expenses relating to revenues.

Page 80

of $22,000 in 2007, for consulting services provided by a relative of our
current President and CEO, and of $17,000 in 2006 for consulting services
provided by a relative of a former President and CEO.

CTT's Board of Directors is composed of six members (refer to Item 10, Part
III). Directors Evans, Hornidge, Howard, Reali and Torello are considered to be
independent directors. Director Nano is not considered an independent director,
as he is an employee of the Company.

ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES

INDEPENDENT PUBLIC ACCOUNTANTS

Effective February 12, 2007, the accounting firm BDO Seidman, LLP resigned
as the company's independent registered public accountants. Effective February
20, 2007, the company engaged Mahoney Cohen & Company, CPA, P.C. ("Mahoney
Cohen") as their independent registered public accountants.

Fees Billed by Principal Accountants - The following table presents fees
for professional services rendered by Mahoney Cohen and BDO for the years ended
July 31, 2007 and 2006:

2007 2006
------------------ --------
Mahoney BDO BDO
Cohen Seidman Seidman
-------- -------- --------
Audit fees $129,056 $ 17,375 $117,000
Audit related fees (1) 2,355 8,580 -
All other fees --
-------- -------- --------
TOTAL $131,411 $ 25,955 $117,000
======== ======== ========

(1) Fees for review of work papers and proxy consultation.

AUDIT COMMITTEE PRE-APPROVAL OF SERVICES OF PRINCIPAL ACCOUNTANTS

The Audit Committee has the sole authority and responsibility to select,
evaluate, determine the compensation of, and, where appropriate, replace the
independent auditor. After determining that providing the non-audit services is
compatible with maintaining the auditor's independence, the Audit Committee
pre-approves all audit and permitted non-audit services to be performed by the
independent auditor, except for de minimus amounts. If it is not practical for
the Audit Committee to meet to approve fees for permitted non-audit services,
the Audit Committee has authorized its chairman, currently Mr. Reali, to approve
them and to review such pre-approvals with the Audit Committee at its next
meeting.

PART IV

ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

(a) List of financial statements and schedules.

The following consolidated financial statements of Competitive
Technologies, Inc. and Subsidiaries are included herein by reference to the
pages listed in "Item 8. Financial Statements and Supplementary Data":

Reports of Independent Registered Public Accounting Firms

Consolidated Balance Sheets as of July 31, 2007 and 2006

Consolidated Statements of Operations for the years ended July 31,
2007, 2006 and 2005

Page 81

Consolidated Statements of Changes in Shareholders' Interest for the
years ended July 31, 2007, 2006 and 2005

Consolidated Statements of Cash Flows for the years ended July 31,
2007, 2006 and 2005

Notes to Consolidated Financial Statements

All financial statement schedules have been omitted because the information
is not present or is not present in sufficient amounts to require submission of
the schedule, or because the information required is included in the financial
statements or the notes thereto.

(b) List of exhibits: See Exhibit Index immediately preceding exhibits.

Page 82

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) 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/ John B. Nano
-----------------
John B. Nano
Chairman, President and Chief Executive
Officer, Interim Chief Financial Officer,
Director and Authorized Signer

Date: October ____, 2007

Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.

Name Title ) Date
- ---------------------------- ------------------------ ) ------------------
)
/s/ Joel M. Evans, M.D. Director ) October 29, 2007
- ---------------------------- )
Joel M. Evans, M.D. )
)
)
/s/ Richard D. Hornidge, Jr. Director ) October 29, 2007
- ---------------------------- )
Richard D. Hornidge, Jr. )
)
)
/s/ Rustin Howard Director ) October 29, 2007
- ---------------------------- )
Rustin Howard )
)
Chairman, President, )
Chief Executive Officer, )
/s/ John B. Nano Interim Chief Financial ) October 29, 2007
- ---------------------------- Officer and Director )
John B. Nano )
)
)
/s/ William L. Reali Director ) October 29, 2007
- ---------------------------- )
William L. Reali )
)
)
Ralph S. Torello Director )
- ---------------------------- )
Ralph S. Torello )
)

Page 83

EXHIBIT INDEX

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

3.1 Unofficial restated certificate of incorporation of the registrant as
amended to date filed (on April 1, 1998) as Exhibit 4.1 to registrant's
Registration Statement on Form S-8, File Number 333-49095 and hereby
incorporated by reference.

3.2 By-laws of the registrant as amended effective October 14, 2005, filed
(on December 12, 2005) as Exhibit 3.2 to registrant's Quarterly Report
on Form 10-Q for the quarterly period ended October 31, 2005, and
hereby incorporated by reference.

10.1* Registrant's Restated Key Employees' Stock Option Plan filed (on
January 29, 2003) as Exhibit 4.3 to registrant's Registration Statement
on Form S-8, File Number 33-87756, and hereby incorporated by
reference.

10.2* Registrant's Annual Incentive Plan filed (on November 25, 2005) as
Exhibit 99.1 to registrant's Current Report on Form 8-K dated November
22, 2005, and hereby incorporated by reference.

10.3* Registrant's 2000 Directors Stock Option Plan as amended January 24,
2003, filed (on January 29, 2003) as Exhibit 4.4 to registrant's
Registration Statement on Form S-8, File Number 333-102798 and hereby
incorporated by reference.

10.4* Registrant's 1996 Directors' Stock Participation Plan as amended
January 14, 2005, filed (on January 21, 2005) as Exhibit 10.2 to
registrant's Current Report on Form 8-K, and hereby incorporated by
reference.

10.5* Registrant's 1997 Employees' Stock Option Plan as amended January 14,
2005, filed (on January 21, 2005) as Exhibit 4.3 to registrant's
Current Report on Form 8-K, and hereby incorporated by reference.

10.6* Severance Agreement and General Release between registrant and Frank R.
McPike, Jr. effective November 1, 2003, filed (on March 16, 2004) as
Exhibit 10.2 to registrant's Form 10-Q for the quarterly period ended
January 31, 2004, and hereby incorporated by reference.

10.7 Common Stock Purchase Agreement between the registrant and Fusion
Capital Fund II, LLC dated February 25, 2004 filed (on February 27,
2004) as Exhibit 10.1 to registrant's Current Report on Form 8-K dated
February 25, 2004, and hereby incorporated by reference.

10.8 Registration Rights Agreement between the registrant and Fusion Capital
Fund II, LLC dated February 25, 2004 filed (on February 27, 2004) as
Exhibit 10.2 to registrant's Current Report on Form 8-K dated February
25, 2004, and hereby incorporated by reference.

10.9* Amended and Restated Employment Agreement by and between registrant and
Donald J. Freed effective October 1, 2005, filed (on October 13, 2005)
as Exhibit 10.22 to registrant's Annual Report on Form 10-K for the
year ended July 31, 2005, and hereby incorporated by reference.

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10.10* Amendment number one made February 15, 2006, to Amended and Restated
Employment Agreement, dated as of October 1, 2005, between registrant
and Donald J. Freed, filed (on February 23, 2006) as Exhibit 10.1 to
registrant's Current Report on Form 8-K dated February 23, 2006, and
hereby incorporated by reference.

10.11* Employment Agreement dated as of February 15, 2006 between registrant
and Michael E. Kiley, filed (on February 23, 2006) as Exhibit 10.1 to
registrant's Current Report on Form 8-K dated February 23, 2006, and
hereby incorporated by reference.

10.12 Lease agreement dated April 28, 2006, between 1375 Kings Highway/777
Commerce Drive Associates, LLC, and 14 Mamaroneck Avenue Reinvestment
Associates, LLC, and Competitive Technologies, Inc. filed (on June 9,
2006) as Exhibit 10.27 to registrant's Quarterly Report on Form 10-Q
for the quarterly period ended April 30, 2006, and hereby incorporated
by reference.

10.13 Amendment to Lease made July 20, 2006 by and between 1375 Kings
Highway/777 Commerce Drive Associates, LLC, and 14 Mamaroneck Avenue
Reinvestment Associates, LLC, and Competitive Technologies, Inc., filed
(on October 30, 2006) as Exhibit 10.17 to registrant's Annual Report on
Form 10-K for the year ended July 31, 2006, and hereby incorporated by
reference.

10.14 Employment Agreement dated February 2, 2007 between registrant and John
B. Nano, filed (on February 6, 2007) as Exhibit 10.1 to registrant's
Current Report on Form 8-K dated February 6, 2007, and hereby
incorporated by reference.

10.15 Stock Purchase Agreement dated April 17, 2007 between registrant and
Betty Rios Valencia, and Agrofrut E.U. filed on April 19, 2007 as
Exhibit 10.1 to registrant's Current Report on Form 8-K dated April 19,
2007, and hereby incorporated by reference.

10.16^ Second Amendment to Lease made July 20, 2006 by and between 1375 Kings
Highway/777 Commerce Drive Associates, LLC, and 14 Mamaroneck Avenue
Reinvestment Associates, LLC and Competitive Technologies, Inc., and
hereby incorporated by reference.

21^ Subsidiaries of registrant.

23.1^ Consent of Mahoney Cohen & Company, CPA, P.C.

23.2^ Consent of BDO Seidman, LLP.

31.1^ Certification of the Principal Executive and Interim Chief Financial
Officer 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 Principal Executive and Interim Chief Financial
Officer of Competitive Technologies, Inc. pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002 (18 U.S.C. 1350).

* Management Contract or Compensatory Plan

^ Filed herewith

+ Furnished herewith

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