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

                                    FORM 10-Q

(Mark One)

|X|   QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
      EXCHANGE ACT OF 1934 for the quarterly period ended April 30, 2005
                           ---------------------------------------------

                                       OR

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

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

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

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

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

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

                                      N/A
--------------------------------------------------------------------------------
   (Former name, former address and former fiscal year, if changed since last
                                    report)

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

Indicate by check mark whether the registrant is an accelerated filer (as
defined in rule 12b-2 of the Exchange Act). Yes |_| No |X|

The number of shares of the registrant's common stock outstanding as of June 10,
2005 was 7,001,749 shares.

<PAGE>

                         COMPETITIVE TECHNOLOGIES, INC.

                     INDEX TO QUARTERLY REPORT ON FORM 10-Q

<TABLE>
<CAPTION>
PART I.  FINANCIAL INFORMATION                                                   Page No.
                                                                                 --------
<S>                                                                               <C>
Item 1.    Condensed Consolidated Financial Statements (Unaudited)

           Consolidated Balance Sheets at April 30, 2005, and July 31, 2004.............3

           Consolidated Statements of Operations for the
              three months ended April 30, 2005 and 2004................................4

           Consolidated Statements of Operations for the
              nine months ended April 30, 2005 and 2004.................................5

           Consolidated Statement of Comprehensive Income and Changes in
              Shareholders' Interest for the nine months ended April 30, 2005...........6

           Consolidated Statements of Cash Flows for the
              nine months ended April 30, 2005 and 2004.................................7

           Notes to Consolidated Financial Statements..............................8 - 17

Item 2.    Management's Discussion and Analysis of Financial Condition
              and Results of Operations...........................................18 - 29

Item 3.    Quantitative and Qualitative Disclosures About Market Risk..................30

Item 4.    Controls and Procedures.....................................................30

PART II.  OTHER INFORMATION

Item 1.    Legal Proceedings...........................................................31

Item 2.    Unregistered Sales of Equity Securities and Use of Proceeds.................31

Item 4.    Submission of Matters to a Vote of Security Holders.........................31

Item 6.    Exhibits....................................................................31

Signatures.............................................................................32
</TABLE>


                                     Page 2
<PAGE>

                          PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

                         COMPETITIVE TECHNOLOGIES, INC.
                           Consolidated Balance Sheets

<TABLE>
<CAPTION>
                                                                  April 30,           July 31,
                                                                    2005                2004
                                                                 (Unaudited)             *
                                                                ------------       ------------
<S>                                                             <C>                <C>
ASSETS
Current assets:
  Cash and cash equivalents                                     $ 16,555,147       $  4,309,680
  Receivables                                                      3,083,470            829,996
  Prepaid expenses and other current assets                          624,080            209,154
                                                                ------------       ------------
    Total current assets                                          20,262,697          5,348,830

Deferred equity financing costs, net                                  96,227            866,302
Non-current receivable, net                                               --            394,133
Intangible assets acquired, net                                       41,965             52,150
Property and equipment, net                                           35,280             19,392
                                                                ------------       ------------
      TOTAL ASSETS                                              $ 20,436,169       $  6,680,807
                                                                ============       ============

LIABILITIES AND SHAREHOLDERS' INTEREST
Current liabilities:
  Accounts payable                                              $    292,817       $    162,913
  Accrued expenses and other liabilities                           7,120,008          1,579,376
                                                                ------------       ------------
    Total current liabilities                                      7,412,825          1,742,289
                                                                ------------       ------------
Commitments and contingencies                                             --                 --
Shareholders' interest:
  5% preferred stock, $25 par value, 35,920                           60,675             60,675
    shares authorized, 2,427 shares issued and outstanding
  Common stock, $.01 par value, 20,000,000                            69,892             63,492
    shares authorized, 6,989,249 and 6,349,189
    shares issued, respectively
  Capital in excess of par value                                  30,578,871         27,560,312
  Accumulated deficit                                            (17,460,891)       (22,745,961)
  Accumulated other comprehensive loss                              (225,203)                --
                                                                ------------       ------------

    Total shareholders' interest                                  13,023,344          4,938,518
                                                                ------------       ------------

      TOTAL LIABILITIES AND SHAREHOLDERS'
        INTEREST                                                $ 20,436,169       $  6,680,807
                                                                ============       ============
</TABLE>

                             See accompanying notes

* Balances were derived from the July 31, 2004 audited balance sheet.


                                     Page 3
<PAGE>

                    PART I. FINANCIAL INFORMATION (Continued)

                         COMPETITIVE TECHNOLOGIES, INC.
                      Consolidated Statements of Operations
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                                 Three months ended
                                                                     April 30,
                                                           -----------------------------
                                                               2005              2004
                                                           -----------       -----------
<S>                                                        <C>               <C>
Revenues
Retained royalties                                         $ 2,078,013       $   518,214
Royalty settlements and awards                                 221,121         3,271,063
Dividend received                                              104,360                --
Settlement with Unilens, net                                        --            92,612
Interest income                                                 92,931           273,403
Other income                                                    36,411                --
                                                           -----------       -----------
                                                             2,532,836         4,155,292
                                                           -----------       -----------

Expenses
Personnel and other direct expenses
  relating to revenues                                       1,169,779         1,082,987
General and administrative expenses                          1,029,759           343,379
Patent enforcement expenses, net of
  reimbursements                                                 7,131            21,815
                                                           -----------       -----------
                                                             2,206,669         1,448,181
                                                           -----------       -----------

Income before income taxes                                     326,167         2,707,111
Provision (benefit) for income taxes                           (33,735)           40,000
                                                           -----------       -----------
Net income                                                 $   359,902       $ 2,667,111
                                                           ===========       ===========

Net income per common share:
  Basic                                                    $      0.05       $      0.43
                                                           ===========       ===========
  Assuming dilution                                        $      0.05       $      0.42
                                                           ===========       ===========

Weighted average number of common shares outstanding:
  Basic                                                      6,867,774         6,267,314
  Assuming dilution                                          7,685,033         6,382,210
</TABLE>

                             See accompanying notes


                                     Page 4
<PAGE>

                    PART I. FINANCIAL INFORMATION (Continued)

                         COMPETITIVE TECHNOLOGIES, INC.
                      Consolidated Statements of Operations
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                                Nine months ended
                                                                     April 30,
                                                           ----------------------------
                                                              2005             2004
                                                           -----------      -----------
<S>                                                        <C>              <C>
Revenues
Retained royalties                                         $ 9,520,370      $ 1,603,168
Royalty settlements and awards                               1,036,613        4,338,836
Dividends received                                             783,509               --
Settlement with Unilens, net                                        --          252,848
Interest income                                                305,776          361,252
Other income                                                   100,972               --
                                                           -----------      -----------
                                                            11,747,240        6,556,104
                                                           -----------      -----------

Expenses
Personnel and other direct expenses
  relating to revenues                                       4,288,985        2,229,881
General and administrative expenses                          1,844,630        1,140,706
Patent enforcement expenses, net of
  reimbursements                                               291,555           68,826
                                                           -----------      -----------
                                                             6,425,170        3,439,413
                                                           -----------      -----------

Income before income taxes                                   5,322,070        3,116,691
Provision for income taxes                                      37,000           40,000
                                                           -----------      -----------
Net income                                                 $ 5,285,070      $ 3,076,691
                                                           ===========      ===========

Net income per common share:
  Basic                                                    $      0.80      $      0.49
                                                           ===========      ===========
  Assuming dilution                                        $      0.73      $      0.48
                                                           ===========      ===========

Weighted average number of common shares outstanding:
  Basic                                                      6,631,269        6,225,124
  Assuming dilution                                          7,241,606        6,404,183
</TABLE>

                             See accompanying notes


                                     Page 5
<PAGE>

                    PART I. FINANCIAL INFORMATION (Continued)

                         COMPETITIVE TECHNOLOGIES, INC.
               Consolidated Statement of Comprehensive Income and
                    Changes in Shareholders' Interest For the
                        nine months ended April 30, 2005
                                   (Unaudited)

<TABLE>
<CAPTION>
                                              Preferred Stock                 Common Stock
                                      ----------------------------    ----------------------------
                                            Shares                                                         Capital
                                        issued and                          Shares                    in excess of      Accumulated
                                       outstanding          Amount          issued          Amount       par value          Deficit
                                      ------------    ------------    ------------    ------------    ------------     ------------
<S>                                          <C>      <C>                <C>          <C>             <C>              <C>
Balance - August 1, 2004                     2,427    $     60,675       6,349,189    $     63,492    $ 27,560,312     $(22,745,961)
                                      ------------    ------------    ------------    ------------    ------------     ------------

Comprehensive income:
Net income                                      --              --              --              --              --        5,285,070
Net unrealized holding loss on
securities held                                 --              --              --              --              --               --
Unrealized foreign currency
translation adjustments                         --              --              --              --              --               --
                                      ------------    ------------    ------------    ------------    ------------     ------------
Comprehensive income                            --              --              --              --              --        5,285,070
                                      ------------    ------------    ------------    ------------    ------------     ------------
Common stock received on exercise of
common stock options (4,248 shares)             --              --              --              --              --               --
Exercise of common stock options                --              --         185,201           1,851         975,966               --
Stock option compensation expense               --              --              --              --         170,350               --
Exercise of common stock warrants               --              --          37,171             372            (372)              --
Stock issued under 401(k) Plan                  --              --          25,056             251          99,722               --
Stock issued to Directors                       --              --           6,920              69          74,931               --
Sales and issuances of stock in
equity financing                                --              --         385,712           3,857       2,513,682               --
Amortization of deferred equity
financing costs                                 --              --              --              --        (815,720)              --

                                      ------------    ------------    ------------    ------------    ------------     ------------
Balance - April 30, 2005                     2,427    $     60,675       6,989,249    $     69,892    $ 30,578,871     $(17,460,891)
                                      ============    ============    ============    ============    ============     ============

<CAPTION>
                                        Accumulated
                                               other                                              Total
                                       comprehensive                          Treasury    Shareholders'
                                                loss         Subtotal            Stock         Interest
                                       -------------     ------------     ------------    -------------
<S>                                     <C>              <C>              <C>              <C>
Balance - August 1, 2004                $         --     $  4,938,518     $         --     $  4,938,518
                                        ------------     ------------     ------------     ------------

Comprehensive income:
Net income                                        --        5,285,070               --        5,285,070
Net unrealized holding loss on
securities held                             (350,657)        (350,657)              --         (350,657)
Unrealized foreign currency
translation adjustments                      125,454          125,454               --          125,454
                                        ------------     ------------     ------------     ------------
Comprehensive income                        (225,203)       5,059,867               --        5,059,867
                                        ------------     ------------     ------------     ------------
Common stock received on exercise of
common stock options (4,248 shares)               --               --          (46,410)         (46,410)
Exercise of common stock options                  --          977,817           46,410        1,024,227
Stock option compensation expense                 --          170,350               --          170,350
Exercise of common stock warrants                 --               --               --               --
Stock issued under 401(k) Plan                    --           99,973               --           99,973
Stock issued to Directors                         --           75,000               --           75,000
Sales and issuances of stock in
equity financing                                  --        2,517,539               --        2,517,539
Amortization of deferred equity
financing costs                                   --         (815,720)              --         (815,720)

                                        ------------     ------------     ------------     ------------
Balance - April 30, 2005                $   (225,203)    $ 13,023,344     $         --     $ 13,023,344
                                        ============     ============     ============     ============
</TABLE>

                             See accompanying notes


                                     Page 6
<PAGE>

                    PART I. FINANCIAL INFORMATION (Continued)

                         COMPETITIVE TECHNOLOGIES, INC.
                      Consolidated Statements of Cash Flows
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                                Nine months ended
                                                                     April 30,
                                                              2005               2004
                                                          ------------       ------------
<S>                                                       <C>                <C>
Cash flows from operating activities:
Net income                                                $  5,285,070       $  3,076,691
 Noncash and other expenses (income)
    included in net income:
      Depreciation and amortization                             25,475             45,051
      Stock option compensation                                170,350                 --
      Stock compensation accrued                               131,250             82,870
      Stock dividend                                          (679,149)                --
     Accrued dividend receivable                              (104,360)                --
      Other                                                    (44,341)          (200,870)
 (Increase) decrease in current assets:
      Receivables                                           (2,237,093)           271,499
      Prepaid expenses and other current assets                 39,020            155,350
 Increase (decrease) in current liabilities:
      Accounts payable and accrued expenses                  5,713,180           (535,162)
        and other liabilities
                                                          ------------       ------------
Net cash provided by operating activities                    8,299,402          2,895,429
                                                          ------------       ------------

Cash flows from investing activities:
  Purchases of property and equipment                          (31,178)            (2,010)
  Collection on Unilens receivable, net                        527,532            252,847
  Other                                                             --              2,364
                                                          ------------       ------------
Net cash provided by investing activities                      496,354            253,201
                                                          ------------       ------------

Cash flows from financing activities:
  Proceeds from exercises of stock options                     977,817             26,958
  Payment of deferred equity financing costs                   (45,645)          (196,014)
  Proceeds from sales of common stock                        2,517,539                 --
                                                          ------------       ------------
Net cash provided by (used in ) financing activities         3,449,711           (169,056)
                                                          ------------       ------------

Net increase in cash and cash equivalents                   12,245,467          2,979,574
Cash and cash equivalents at beginning of year               4,309,680          1,504,295
                                                          ------------       ------------
Cash and cash equivalents at end of period                $ 16,555,147       $  4,483,869
                                                          ============       ============
</TABLE>

                             See accompanying notes


                                     Page 7
<PAGE>

                    PART I. FINANCIAL INFORMATION (Continued)

                         COMPETITIVE TECHNOLOGIES, INC.

                   Notes to Consolidated Financial Statements
                                   (Unaudited)

1. Basis of Presentation

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

      Competitive Technologies, Inc. ("CTT") and its majority owned subsidiary
(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, electronic, physical,
and nano (microscopic particles) science technologies 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 the
successful licensing of our clients' technologies. The consolidated financial
statements include the accounts of CTT and its subsidiary. Intercompany accounts
and transactions have been eliminated in consolidation. Certain amounts in the
prior year accompanying unaudited consolidated financial statements have been
reclassified to conform to the current year's presentation.

      We believe we have made all adjustments, primarily normal and recurring
adjustments, which are necessary to present the unaudited consolidated financial
statements fairly in conformity with accounting principles generally accepted in
the United States of America. The results for the three and nine months ended
April 30, 2005, are not necessarily indicative of the results that can be
expected for the full year.

      You should read the interim unaudited consolidated financial statements
and notes thereto, as well as the accompanying Management's Discussion and
Analysis of Financial Condition and Results of Operations, in conjunction with
our Annual Report on Form 10-K for the year ended July 31, 2004. This report is
available on our website at www.competitivetech.net.

2. Legal and Other Settlements, and New Licenses Granted

      JDS Uniphase Corporation

      On March 31, 2005, we announced that we had resolved litigation against
JDS Uniphase Corporation ("JDS Uniphase"), whereby we had alleged that JDS
Uniphase had failed to fulfill obligations under a license agreement and
misrepresented royalties due us. In our complaint we had sought damages,
interest, court costs and attorneys fees, and punitive damages. We filed the
complaint on October 5, 2004, in the Superior Court, Judicial District of
Fairfield, at Bridgeport, Connecticut.

      The settlement was for back royalties as a result of a royalty audit and
subsequent litigation relating to an expired patent. In early June 2005, we
finalized the fees to be paid to the royalty auditing firm that we used, and we
reflected the fees as a reduction of our share of the total settlement, which we
recognized in retained royalties in the quarter ended April 30, 2005. The net
revenue we recognized was $575,000. We are in negotiations with our client, the
University of Illinois at Urbana-Champaign, in an attempt to recover a portion
of the audit fees incurred in pursuit of the back royalties, but we have not
recorded any potential recovery of such costs.


                                     Page 8
<PAGE>

      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. Axis-Shield paid an upfront
license fee and will pay royalties going forward from the date of the license.
The term of the license is through July 2007, the expiration date of the patent.
All of the litigation between the parties was dismissed with prejudice shortly
thereafter.

      On February 1, 2005, we had filed a complaint alleging infringement of our
patent covering homocysteine assays against Axis-Shield in the U.S. District
Court for the District of Colorado, seeking monetary damages, punitive damages,
attorneys fees, court costs and other remuneration at the option of the court.
Axis-Shield was served notice of our complaint on February 7, 2005. Also on
February 7, 2005, we were served notice that Axis-Shield had filed a complaint
against CTT on November 10, 2004, in the U.S. District Court for the District of
Connecticut seeking declaratory relief that our patent covering homocysteine
assays was invalid and that Axis-Shield had not infringed and was not infringing
on our patent covering homocysteine assays. In addition, Axis-Shield alleged
that CTT had engaged in unfair competition by threats of and actual litigation
in the health industry, and had sought general, compensatory and exemplary
damages, and attorneys fees, court costs and other remuneration at the option of
the court.

      Abbott Laboratories, Inc.

      In December 2004, we granted Abbott Laboratories, Inc. ("Abbott") a
license to sell tests used to measure homocysteine levels. The license settled
litigation previously filed against Abbott. The license relieves Abbott's
customers from their obligation to pay us royalties on tests performed using the
Abbott homocysteine assay. The license also releases Abbott's customers of any
obligation to pay us royalties for homocysteine tests performed using Abbott
assays in the past, but does not entitle them to any refund of any royalties
previously paid to us. The term of the license is through July 2007, the
expiration date of the patent, with certain limited exceptions.

      Pursuant to the license, Abbott agreed to pay us an upfront license fee,
certain "Milestone Fees" (as defined in the license), and per test royalties on
homocysteine assay sales in the U.S. after January 1, 2006. In January 2005,
upon receipt, we recorded $5.2 million in retained royalties, representing our
share of the upfront license fee. This fee is non-refundable and is not
creditable against future royalties. The Milestone Fees, our share of which
aggregates to $1,600,000, will be paid to us in two equal installments on
January 31, 2006 and 2007, as long as our patent is valid and enforceable. We
are accruing the present value of the aggregate of the Milestone Fees in
retained royalties in calendar year 2005 and, accordingly, we accrued $400,000
during the three months ended April 30, 2005, and $533,333 year-to-date. No per
test royalties are payable in calendar year 2005.

      Other

      In prior quarters we granted new licenses to sell tests used to measure
homocysteine levels to Bayer Corporation, Diagnostics Products Corporation,
Genchem and Roche Diagnostics GmbH. These licenses and other new licenses
granted in the current fiscal year relating to homocysteine testing generally
provide for an upfront license fee and a royalty to be paid to us based on a
fixed fee per test. The amount of the fixed fee is determined based on estimated
volume.


                                     Page 9
<PAGE>

      Federal Insurance Company

      Effective October 13, 2004, Federal Insurance Company ("Federal") agreed
to pay us $167,500 to reimburse us for prior costs incurred and acknowledged
that the deductible under our insurance policy was deemed satisfied for purposes
of a civil suit filed against CTT by the Securities and Exchange Commission
("SEC"). We recorded the payment as a reduction of litigation expenses, which
are included in general and administrative expenses, in the quarter ended
October 31, 2004. In addition, on September 15, 2004, the Chubb Group of
Insurance Companies, on behalf of Federal, agreed to accept coverage for losses,
including defense costs, as a result of the SEC's civil suit, according to the
terms of the policy. Accordingly, we have not recorded any significant costs in
the current fiscal year relating to the SEC civil suit.

3. Royalty Settlements and Awards

      On August 5, 2004, the U.S. Court of Appeals for the Federal Circuit
("CAFC") denied the petition of Laboratory Corporation of America Holdings d/b/a
LabCorp ("LabCorp") for a rehearing or a rehearing en banc (rehearing by the
full CAFC) of a June 8, 2004 decision affirming a November 2002 decision in
favor of Metabolite Laboratories, Inc. and us (collectively, the "Plaintiffs").
As a result of this decision, on August 16, 2004, the Plaintiffs received
approximately $6.7 million. Our share of the $6.7 million payment was $920,552,
and we recorded $815,492 in royalty settlements and awards and $105,060 in
interest income during the quarter ended October 31, 2004. 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, 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 $221,121 in royalty settlements and
awards and $9,935 in interest income during the quarter ended April 30, 2005.
Our claim for additional attorneys' fees and court costs related to the appeals
process is still pending.

      On November 3, 2004, LabCorp filed a petition for a writ of certiorari
with the U.S. Supreme Court (the "Court") relating to the November 2002
decision. (A writ of certiorari is a petition requesting the Court to hear an
appeal.) On February 28, 2005, we announced that the Court had invited the
Solicitor General's Office (the "SGO") to file a brief in this case expressing
its views on the question of the patentability of method patents of this type.
The SGO's decision is not expected for several months. They may elect to file a
brief or may opt not to file a brief, and the Court is not obligated to follow
the SGO's views on the matter. If the Court denies LabCorp's petition, then
LabCorp will have no further avenues of appeal. If the Court agrees to hear
LabCorp's appeal, and remands the case to the District Court, and then if the
original judgment is subsequently reversed, LabCorp may attempt to recover
amounts paid to the Plaintiffs, including royalties paid to us as part of a
January 2003 stipulated court order (the "Stipulated Order"). (Pursuant to the
Stipulated Order, the court had stayed execution of a monetary judgment and a
permanent injunction that prevented LabCorp from performing homocysteine assays,
and LabCorp had agreed to pay us a percentage of their homocysteine assay sales
during their appeals process.) LabCorp's ability to recover any amounts paid to
the Plaintiffs would depend on the extent and reason for the reversal. From
January 2003 through April 30, 2005, LabCorp paid us an aggregate of $1,909,276
under the Stipulated Order, including both our retained amounts and amounts paid
or payable to our clients. We believe that the probability that LabCorp will
recover any amounts paid is remote.

      In the prior year, we received cash of $3,271,063 in royalty settlements
and awards from the finalization of our portion of the Materna(TM) litigation
award that had been pending for several years. We also received $272,711 in
interest.


                                    Page 10
<PAGE>

4. Dividends and Comprehensive Income

      During the three months ended April 30, 2005, our investee, Melanotan
Corporation ("MelanoTan"), declared a special cash dividend. We accrued our
share of the dividend, $104,360, at April 30, 2005. The dividend was received in
May 2005.

      In October 2004, Melanotan paid its shareholders a dividend in the form of
shares of common stock of EpiTan Limited (Australia) ("EpiTan"), MelanoTan's
investee. As a result, we received 1,252,346 shares of EpiTan common stock.
Previously, we licensed our rights to a sunless tanning technology (that may
prevent or lessen skin cancer caused by exposure to the sun) to MelanoTan and
MelanoTan sublicensed the rights to EpiTan (MelanoTan has no operations of its
own). MelanoTan also received shares of EpiTan. EpiTan essentially is a research
and development company that is in the process of conducting trials and
evaluating the technology for future commercialization. EpiTan common stock is
traded on the Australian Stock Exchange (quoted in Australian dollars) under the
symbol EPT. 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 EpiTan 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 EpiTan stock, since EpiTan has minimal revenues
and has incurred substantial current and accumulated net losses. We recorded the
estimated value of the shares, $679,149, as dividend income and included the
asset in prepaid expenses and other current assets, since we are restricted from
trading the shares.

      Unrealized market price and foreign exchange gains and losses relating to
the shares are included in other comprehensive loss in shareholders' interest.
Other comprehensive loss for the three and nine months ended April 30, 2005, was
$228,276 and $225,203, respectively. Other comprehensive loss for the three
months ended April 30, 2005, consisted of an unrealized loss on the market value
of the shares of $300,563, partially offset by an unrealized foreign exchange
gain of $72,287 on the value of the U.S. dollar ("USD") compared to the
Australian dollar ("AUD"). Other comprehensive loss for the nine months ended
April 30, 2005, consisted of an unrealized loss on the market value of the
shares of $350,657, partially offset by an unrealized foreign exchange gain of
$125,454 on the value of the USD compared to the AUD. Comprehensive income for
the three and nine months ended April 30, 2005, was $131,626 and $5,059,867,
respectively.


                                    Page 11
<PAGE>

5. Provision for income taxes

      In 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. Due to our current year income before
income taxes, we will utilize a portion of our NOLs against our current year
regular federal and state taxable income, effectively eliminating our regular
income tax liabilities for fiscal 2005. However, we expect to be subject to the
federal alternative minimum tax ("AMT"), where we are limited to using 90% of
our NOL against income, and our year-to-date provision is for our estimated AMT
liability. The credit recorded in the third quarter of 2005 was due to a change
in estimate of our full year AMT liability. In the third quarter 2004, we
recorded a provision for AMT liability of $40,000.

      The NOLs are an asset to us since 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 against future income tax liabilities, we
recorded a valuation allowance against the asset, reducing its book value to
zero. As a result of the income we earned for the three and nine months ended
April 30, 2005, we reversed $102,000 and $1,916,000, respectively, of the
valuation allowance, representing the amount of the NOL we will utilize to
offset any income tax liability (excluding the AMT liability) on income earned
in the quarter and year, and recorded a provision for income taxes of the same
amount. The effective tax rate of the provision for the third quarter of 2005
was 31.4%. We estimate that our effective income tax rate for full fiscal year
2005 will be approximately 36.0%. The difference between the actual rate and the
effective rate for the third quarter of 2005 was due principally to intraperiod
tax allocation.

6. Net Income Per Common Share

      The following sets forth our computations of basic and diluted net income
per common share.

<TABLE>
<CAPTION>
                                                       Three months ended             Nine months ended
                                                            April 30,                     April 30,
                                                    ------------------------      ------------------------
                                                       2005           2004           2005           2004
                                                    ---------      ---------      ---------      ---------
<S>                                                 <C>            <C>            <C>            <C>
Denominator for basic net income per common
share, weighted average common shares
outstanding                                         6,867,774      6,267,314      6,631,269      6,225,124

Dilutive effect of warrants and employees' and
directors' common stock options                       817,259        114,896        610,337        179,059
                                                    ---------      ---------      ---------      ---------

Denominator for net income per common share,
assuming dilution                                   7,685,033      6,382,210      7,241,606      6,404,183
                                                    =========      =========      =========      =========
</TABLE>

      At April 30, 2005 all outstanding options to purchase shares of common
stock were included in the computation of fully diluted earnings per share. At
April 30, 2004, stock options and warrants to purchase 482,689 shares of common
stock were outstanding but were not included in the computation of earnings per
share because the exercise prices were greater than the weighted average share
prices for the quarters, making them anti-dilutive (total options and warrants
outstanding were 1,175,223 and 1,181,254, respectively).


                                    Page 12
<PAGE>

7. Stock-Based Compensation

      We account for grants of stock options using the intrinsic value method
pursuant to Accounting Principles Board Opinion No. 25, "Accounting for Stock
Issued to Employees," and related interpretations. Accordingly, since the
exercise price of the stock options granted under 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 have not recorded any compensation expense
for stock options granted. However, during the three and nine months ended April
30, 2005, we did record $170,350 of stock option compensation expense related to
modifications made to certain existing vested option awards to extend the
exercise term of awards previously granted to our former Controller and a former
director. The expense relating to the former director, $70,600, was incurred in
the quarter ended January 31, 2005, but not recorded until the quarter ended
April 30, 2005.

      Under the provisions of Financial Accounting Standards Board Statement No.
123, "Accounting for Stock-Based Compensation," we are required to disclose the
impact on net income if we had used a fair value method, as defined, to account
for grants of stock options. Using the fair value method, as defined, our
results would have been:

<TABLE>
<CAPTION>
                                                       Three months ended                    Nine months ended
                                                             April 30,                            April 30,
                                                 ---------------------------------    ----------------------------------
                                                      2005               2004              2005                2004
                                                 --------------     --------------    --------------      --------------
<S>                                              <C>                <C>               <C>                 <C>
Net income, as reported                          $      359,902     $    2,667,111    $    5,285,070      $    3,076,691

Add back/Deduct: Pro forma stock
    option compensation income
    (expense) for stock options granted
    using a fair value method                            82,991            (32,742)         (341,172)           (202,298)
                                                 --------------     --------------    --------------      --------------

Pro forma net income                             $      442,893     $    2,634,369    $    4,943,898      $    2,874,393
                                                 ==============     ==============    ==============      ==============

Basic income per common share:
         As reported                             $         0.05     $         0.43    $         0.80      $         0.49
                                                 ==============     ==============    ==============      ==============
         Pro forma                               $         0.06     $         0.42    $         0.75      $         0.46
                                                 ==============     ==============    ==============      ==============

Income per common share, assuming dilution:
         As reported                             $         0.05     $         0.42    $         0.73      $         0.48
                                                 ==============     ==============    ==============      ==============
         Pro forma                               $         0.06     $         0.41    $         0.68      $         0.45
                                                 ==============     ==============    ==============      ==============
</TABLE>

      The pro forma stock option compensation income (expense) for the nine
months ended April 30, 2005, includes $162,416 of net compensation expense
related to stock options granted or modified during the quarter ended January
31, 2005, that was omitted from the second quarter disclosure. The pro forma
income shown for the three months ended April 30, 2005, was due to the
difference between using the intrinsic value method, which we use to determine
any expense to be recorded, and the fair value method, which we are required to
use for disclosure purposes, for the options that were modified.

      We estimated the fair value of stock options at the grant date using the
Black-Scholes option-pricing model. The Black-Scholes option-pricing model was
developed for use in estimating the fair value of traded options that have no
vesting restrictions and are fully transferable. In addition, option valuation
models require highly subjective input assumptions, including expected stock
price volatility and expected stock option lives. Because our stock options are
not publicly traded and have characteristics significantly different from those
of traded options, and because changes in the subjective input assumptions
affect the fair value estimate, we do not believe that option valuation models
necessarily provide a reliable single measure of the fair value of our stock
options.


                                    Page 13
<PAGE>

      The pro forma information shown above may not be representative of fair
value compensation effects in future periods.

8. Common Stock Sales Pursuant to Equity Financing

      Pursuant to our February 2004 equity financing agreement with Fusion
Capital Fund II ("Fusion Capital"), we sold and issued the following shares to
Fusion Capital since July 31, 2004:

<TABLE>
<CAPTION>
                                                                           Commitment
                                               Cash          Shares          Shares           Total
                                           Received            Sold          Issued          Shares
                                         ----------      ----------      ----------      ----------
<S>                                      <C>                <C>              <C>            <C>
Three months ended October 31, 2004      $  350,007          94,558           2,480          97,038
Three months ended January 31, 2005       1,062,532         178,296           7,527         185,823
Three months ended April 30, 2005         1,105,000          95,021           7,830         102,851
                                         ----------      ----------      ----------      ----------

Nine months ended April 30, 2005         $2,517,539         367,875          17,837         385,712
                                         ==========      ==========      ==========      ==========
</TABLE>

      We are using the proceeds for general working capital needs. The aggregate
proceeds received from sales of common stock to Fusion Capital pursuant to the
equity financing agreement from the date of inception through April 30, 2005,
are approximately $2,718,000. In addition, we amortized $135,895 and $815,720,
respectively, for the three and nine months ended April 30, 2005, of deferred
equity financing costs against capital in excess of par value. (We also
increased deferred equity financing costs by a net $45,645 during the year.) We
will amortize the remaining net balance of deferred equity financing costs of
$96,227 against capital in excess of par value as we sell common stock to Fusion
Capital in the future. We currently estimate that we will sell $3.5 million of
stock in total to Fusion Capital.

      On January 20, 2005, our advisor for the Fusion Capital financing
exercised their warrant to acquire 57,537 shares of our common stock. We had
issued the warrant to them on February 25, 2004 as part of their consideration
for their assistance in arranging the transaction with Fusion Capital. Our
advisor elected a cashless exercise pursuant to the terms of the warrant, and we
issued 37,171 shares of common stock to them, 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 of $12.275 (the average
per share price on January 20, 2005, the exercise date), as provided in the
warrant.


                                    Page 14
<PAGE>

9. Receivables

      Receivables consist of the following:

                                                  April 30,             July 31,
                                                       2005                 2004
                                                 ----------           ----------

Royalties                                        $2,478,885           $  453,138
Unilens receivable, net                             269,086              357,064
Dividend receivable                                 104,360                   --
Other                                               231,139               19,794
                                                 ----------           ----------

Receivables                                      $3,083,470           $  829,996
                                                 ==========           ==========

Royalties receivable increased principally due to the accrued receivable related
to the Abbott license, and also due to increased homocysteine retained
royalties, due to new licenses granted in the current year.

10. Accrued expenses and other liabilities

      Accrued expenses and other liabilities consist of the following:

                                                     April 30,          July 31,
                                                          2005              2004
                                                    ----------        ----------

Accrued royalties payable                           $4,462,547        $  625,908
Accrued compensation                                 1,608,462           534,945
Accrued professional fees                              969,791           294,100
Accrued other                                           79,208           124,423
                                                    ----------        ----------

Accrued expenses and other liabilities              $7,120,008        $1,579,376
                                                    ==========        ==========

      The increase in accrued royalties payable since July 31, 2004 is the
result of increased royalties from new homocysteine licenses collected on behalf
of our clients, including royalties payable pursuant to the Abbott license,
which will not be paid until 2006. The increase in accrued compensation is due
principally to bonus and commission accruals, while the increase in accrued
professional fees includes amounts due for the audit of JDS Uniphase and
Sarbanes-Oxley Act compliance.

      We have accrued what we believe is the maximum amount of expense for
commissions (none of the accrual has yet been paid) pursuant to our Incentive
Compensation Plan ("ICP Plan"). The expense was accrued based on net new
business revenue, and prior to this fiscal year we have not paid any such
commissions. In order to ensure that the expense is calculated in accordance
with the ICP Plan and is reasonable, we have hired an independent, outside
compensation consulting firm to review the ICP Plan and the accrual, and report
their results to our President and the Compensation Committee of our Board of
Directors. We expect the study to be completed by July 31, 2005, the end of our
fiscal year. After we receive the report, we may, or may not, revise the amount
of the expense, or adjust the form of payment of the commission. Any revision
would be recorded in the quarter ended July 31, 2005, and the amount of such
revision may be significant to our results for the quarter and year ended July
31, 2005.


                                    Page 15
<PAGE>

11. Contingencies

      Occupational Safety and Health Administration ("OSHA")

      On February 2, 2005, OSHA issued a finding that there was probable cause
to believe that CTT had violated Section 806 of the Corporate and Criminal Fraud
Accountability Act of 2002, 18 U.S.C. 1514A, by terminating Wil Jacques and
Scott Bechtel in June 2003. Jacques and Bechtel contend that they were
improperly terminated for raising concerns about financial reporting. CTT
contends that Jacques and Bechtel did not raise protected concerns and were
terminated for lawful, non-discriminatory reasons, that OSHA failed to fairly
investigate and consider all relevant facts, and that the conclusions drawn by
OSHA were legally erroneous. Based on the finding, OSHA ordered that the
complainants be reinstated and that CTT pay damages totaling approximately
$827,000. CTT denies that it is liable to the complainants in any amount.

      The OSHA finding did not constitute a final agency order. In accordance
with law and regulation, on February 11, 2005, we filed timely objections and
requested a de novo hearing before an Administrative Law Judge ("ALJ") of the
U.S. Department of Labor ("DOL"). The hearing was held in May 2005. The decision
of the ALJ is pending. We cannot predict the total amount of legal fees or other
expenses that we will incur relating to this matter. Legal fees incurred in the
quarter ending April 30, 2005 were $367,000.

      On May 18, 2005, CTT and plaintiff Jacques entered into a memorandum of
understanding whereby all claims against CTT by Jacques were resolved. The
settlement is pending approval from the ALJ. Pursuant to the settlement, CTT
will pay plaintiff Jacques a lump sum payment and reimbursement for certain
reasonable legal fees, and agreed to pay him certain minimum consulting fees
over the next two years. The lump sum payment and legal fee reimbursement will
be recorded in the quarter ending July 31, 2005. The consulting fees are not
significant, and will be recorded as they are paid.

      Separate from the hearing before the ALJ, CTT appealed the reinstatement
order before a judge in the United States District Court, District of
Connecticut (the "District Court"). The reinstatement order would have required
reinstatement as of February 8, 2005. On May 13, 2005, the appeal was denied. On
May 16, 2005, CTT filed for a reconsideration and/or modification of the May 13,
2005 order. On May 23, 2005, the District Court granted CTT's motion for
reconsideration, but did not change the ruling requiring reinstatement. CTT has
not granted the plaintiffs reinstatement, and has not, as of April 30, 2005,
accrued any costs for reinstatement for Mr. Betchel from February 8, 2005 though
April 30, 2005, as they would not be significant. The DOL has requested a show
cause hearing before the District Court as to why CTT should not be held in
contempt of court for not complying with the reinstatement order. This hearing
is pending.

      Palatin Technologies, Inc.

      On October 27, 2004, we notified Palatin Technologies, Inc. ("Palatin")
that we were demanding arbitration as a result of our belief that Palatin was in
material breach of their license agreement with us for their exclusive use of
our technology in developing their experimental therapeutic treatment for male
and female sexual dysfunction. The terms of our license with Palatin provide for
binding arbitration of disputes. Also pursuant to the terms of our license, we
are entitled to receive 20% of any sublicense fee that Palatin receives. On
August 13, 2004, Palatin announced that they had granted a co-exclusive license
to King Pharmaceuticals, Inc. ("King"), included in a $20 million Collaborative
Development and Marketing Agreement between Palatin and King. On August 18,
2004, Palatin announced that they had received the $20 million from King, but we
did not receive any funds from Palatin relating to this sublicense, which caused
us to notify Palatin that they were in breach. The parties have agreed to try to
have the dispute mediated in mid-June. If the mediation is unsuccessful, an
arbitration hearing will be held thereafter.


                                    Page 16
<PAGE>

      Bio-Rad Laboratories, Inc.

      On December 23, 2004, we filed a complaint alleging infringement of our
patent covering homocysteine assays against Bio-Rad Laboratories, Inc.,
("BioRad"), in the U.S. District Court for the District of Colorado, seeking
monetary damages, punitive damages, attorneys fees, court costs and other
remuneration at the option of the court. BioRad was served notice of our
complaint in January 2005. On May 13, 2005, we agreed to drop the case since
BioRad purchases their homocysteine test kits from Axis-Shield, and sales of
kits from Axis-Shield are now under license.

      Fujitsu

      On March 1, 2005, the University of Illinois appealed the summary judgment
that was granted on July 1, 2004, in favor of Fujitsu. No decision on the appeal
has been reached, and the parties are waiting assignment of an oral hearing
date. On September 20, 2004, the judge had entered a stipulated order staying
certain issues relating to the case, including the counterclaims, pending
resolution of the appeal of the summary judgment.

      General

      We cannot predict the final outcomes to our legal actions and proceedings,
nor are we able to estimate the legal expenses or potential losses we may incur,
or possible damages we may recover in any of these legal actions and
proceedings, if any. We have not recorded any potential losses or income in our
financial statements to date. We record expenses in connection with these
matters as they are incurred. An unfavorable resolution of any or all matters
where we are a defendant, and/or our incurrence of significant legal fees and
other costs to defend or prosecute any of these actions and proceedings may,
depending upon the amount and timing, have a material adverse effect on our
consolidated financial position, results of operations or cash flows in a
particular period.

      We believe that we carry adequate liability insurance, directors' and
officers' insurance, casualty insurance (for owned or leased tangible assets),
and other insurance to cover us against potential claims that occur in the
normal course of our business.

12. Recently Issued Accounting Pronouncements

      In December 2004, the Financial Accounting Standards Board issued
Statement No. 123 (revised 2004), "Share-Based Payment." This Statement
established standards for accounting for transactions in which an entity
exchanges its equity instruments for goods or services, focusing primarily on
employee services exchanged for an award of equity instruments, including stock
options. It requires entities to expense the estimated fair value of employee
stock options and similar awards over the requisite service period (generally
the vesting period). We will adopt the provisions of this statement beginning
August 1, 2005, utilizing the "modified prospective application" (as defined in
the statement), whereby beginning August 1, 2005, we will recognize compensation
expense for the estimated fair value of new awards and of any awards modified,
repurchased or cancelled after June 15, 2005, over their respective requisite
service periods. We also will recognize compensation expense for awards
previously issued and outstanding that vest after August 1, 2005, over their
respective remaining vesting periods. For outstanding but unvested awards at
April 30, 2005, we currently estimate that we will record compensation expense
of approximately $168,000 and $74,000, respectively, in fiscal 2006 and 2007.
Recognizing compensation expense for share-based payments awarded on or after
August 1, 2005, will reduce our net income in the future, but we cannot estimate
the amount of that reduction, which will depend on the number of stock options
awarded, option vesting periods, and other factors used in estimating the fair
value of awards granted in the future.


                                    Page 17
<PAGE>

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

Forward-Looking Statements

      Certain statements about our future expectations, including development
and regulatory plans, and all other statements in this Quarterly Report on Form
10-Q, other than historical facts, are "forward-looking statements" within the
meaning of applicable Federal Securities Laws, and are not guarantees of future
performance. When used in this Form 10-Q, the words "anticipate," "believe,"
"intend," "plan," "expect," "estimate," "approximate," and similar expressions,
as they relate to us or our business or management, are intended to identify
such forward-looking statements. These statements involve risks and
uncertainties related to market acceptance of and competition for our licensed
technologies, growth strategies, operating performance, industry trends, and
other risks and uncertainties inherent in our business, including those set
forth in Item 7 under the caption "Risk Factors," in our Annual Report on Form
10-K for the year ended July 31, 2004, filed with the Securities and Exchange
Commission ("SEC") on October 29, 2004, and other factors that may be described
in our other filings with the SEC, and are subject to change at any time. Our
actual results could differ materially from these forward-looking statements. We
undertake no obligation to update publicly any forward-looking statement.

Overview

      We are a full service technology transfer and licensing provider focused
on the technology needs of our customers and transforming those requirements
into commercially viable solutions. We develop relationships with universities,
companies, inventors and patent or intellectual property holders to obtain
agency rights or a license to their technologies, and they become our clients,
for whom we find markets for the technologies. We also develop relationships
with those who have a need or use for specific technologies, and they become our
customers, usually through a license or sublicense. We identify and
commercialize innovative technologies in life, electronic, nano, and physical
sciences developed by universities, companies and inventors, and match our
customers' needs with our clients' technologies. 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
intellectual property rights, principally patents and inventions (collectively,
the "Technology"), to our customers (licensees). Our customers pay us royalties
based on their use of the Technology, and we share those royalties with our
clients. We determine the amount of royalty revenue to record when we can
estimate the amount of royalties we have earned for a period, which usually
occurs when we receive periodic royalty reports from our customers listing their
sales of licensed products and the royalties we 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 addition, revenues will fluctuate from quarter to quarter due to
expiring licenses, and normal fluctuations in revenues of our customers.

      For the three and nine months ended April 30, 2005, we had a concentration
of revenues derived from homocysteine assays, on which the patent expires in
July 2007. Revenues relating to licenses for the homocysteine assay, excluding
upfront license fees, continue to grow, and we believe that this trend will
continue, but we cannot predict the magnitude of growth or if or when we will
succeed in closing additional license agreements and enforcing our patent
rights. During the quarter ended April 30, 2005, we settled patent infringement


                                    Page 18
<PAGE>

litigation and granted a new license to Axis-Shield plc and Axis-Shield, ASA
(collectively, "Axis-Shield") and new licenses with other distributors and
laboratories. We also dropped litigation against Bio-Rad Laboratories, Inc.
("BioRad"), since they purchase their test kits from Axis-Shield. In prior
quarters, we granted a new license to Diagnostic Products Corporation ("DPC"),
Roche Diagnostics Gmbh ("Roche") and settled patent infringement litigation and
granted new licenses to Bayer Corporation ("Bayer") and Abbott Laboratories,
Inc. ("Abbott"). We believe that we currently have licenses with the most
significant distributors and laboratories in the United States that sell and/or
perform tests used to measure homocysteine levels.

      Because we have rounded all amounts in this Item 2 to the nearest thousand
dollars, certain amounts may not total precisely. In addition, all periods
discussed in this Item 2 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).

Results of Operations - Three Months Ended April 30, 2005 (Third Quarter 2005)
vs. Three Months Ended April 30, 2004 (Third Quarter 2004)

Summary of Results

      Net income for the third quarter 2005 was $360,000, or $0.05 per diluted
share, compared to net income of $2,667,000, or $0.42 per diluted share, for the
third quarter 2004, a decrease of $2,307,000, or $0.37 per diluted share.

Revenues

      In the third quarter 2005, total revenues were $2,533,000, compared to
$4,155,000 for the third quarter 2004, a decrease of $1,622,000, or 39%.

      Retained royalties for the third quarter 2005 were $2,078,000, which was
$1,560,000, or 301% higher than the $518,000 reported in the third quarter 2004.
The following compares retained royalty revenues by Technology in the third
quarter 2005 with the third quarter 2004.

<TABLE>
<CAPTION>
                                             For the three months ended April 30,
                                ---------------------------------------------------------------
                                                                     Increase        % Increase
                                    2005             2004          (Decrease)        (Decrease)
                                -----------      -----------      -----------       -----------
<S>                             <C>              <C>              <C>                       <C>
Homocysteine assay              $   943,854      $   110,227      $   833,627               756%
Gallium arsenide                    584,018           87,520          496,498               567%
Ethyol                              469,968          200,365          269,603               135%
All other Technologies               80,173          120,102          (39,929)              (33%)
                                -----------      -----------      -----------
  Total retained royalties      $ 2,078,013      $   518,214      $ 1,559,799               301%
                                ===========      ===========      ===========
</TABLE>

      The increase in revenues from the homocysteine assay was due principally
to royalties earned on new licenses granted in the first and second quarters of
2005, principally from the Abbott license, and our share of an upfront license
fee received from Axis-Shield during the third quarter 2005. The increase in
gallium arsenide revenues resulted from 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. The settlement occurred during the quarter. Our
share of the settlement was $575,000, net of fees paid to a royalty auditing
firm. This settlement accounted for nearly all of the revenue in the third
quarter 2005 for this Technology, and without this settlement, royalties would
have decreased due to licenses that


                                    Page 19
<PAGE>

expired in the prior year. We are in negotiations with our client, the
University of Illinois at Urbana-Champaign, in an attempt to recover a portion
of the audit fees incurred in pursuit of the back royalties, but we have not
recorded any potential recovery of such costs. Royalties from sales of Ethyol
increased as a result of the timing of royalty reports received related to this
Technology. In 2005, we recorded most of the royalties in the third quarter,
while in 2004 we recorded royalties in the second and third quarters. Royalties
from Ethyol sales are limited to $500,000 per calendar year, and in 2004 we
reached the maximum in the third quarter while in 2005 we will not reach the
maximum until the fourth quarter, when we will record the remaining $30,000. For
revenues from all other technologies, royalties decreased due to expired
licenses.

      Approximately 45% (without the settlement of back royalties, the
percentage would have been 63%) of our retained royalties for third quarter 2005
was from the homocysteine assay Technology, on which the patent expires in July
2007. We continue to seek licenses to new Technologies to mitigate this
concentration of revenues, to replace revenues from expiring licenses and to
provide future revenues.

      Royalty settlements and awards in the third quarter 2005 were from our
receipt of an award of attorneys' fees and court costs previously awarded to us
by the court related to our successful patent infringement case against
Laboratory Corporation of America Holdings d/b/a LabCorp ("LabCorp"). On January
24, 2005, the U.S. Court of Appeals for the Federal Circuit ("CAFC") issued a
summary dismissal of LabCorp's appeal of the court's award of attorneys' fees
and court costs from the original case, 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 $231,000, and we recorded $221,000 in
royalty settlements and awards and $10,000 in interest income.

      On November 3, 2004, LabCorp filed a petition for a writ of certiorari
with the U.S. Supreme Court (the "Court") relating to this case, and on February
28, 2005, the Court invited the Solicitor General's Office (the "SGO") to file a
brief in this case expressing its views on the question of the patentability of
method patents of this type. The SGO's decision is not expected for several
months. The SGO may elect to file a brief or may opt not to file a brief, and
the Court is not obligated to follow the SGO's views on the matter. The Court's
decision is pending. We also have sought to be awarded legal fees related to
LabCorp's appeals of this case, and this request is still pending before the
court. For further discussion, see Note 3 to the accompanying unaudited
condensed consolidated financial statements. In 2004, royalty settlements and
awards were from the finalization and receipt of our portion of the Materna(TM)
litigation award.

      Dividend received was from the accrual of a special cash dividend from our
investee, Melanotan Corporation ("MelanoTan"). The dividend was declared during
the third quarter of 2005, and received in May 2005. There was no dividend
received in the prior year. Unrealized market price and foreign exchange gains
and losses relating to the shares are included in other comprehensive income
(loss) in shareholders' interest.

      Settlement with Unilens, net, in the third quarter 2004, was from the
third installment from Unilens Corp. USA ("Unilens") under our October 2003
settlement of an old receivable from Unilens. During fiscal 2004, due to
Unilens' financial condition and the uncertainty of collecting the installments
due from the settlement, we recorded revenue, net of related expenses, when we
received payments from Unilens. At July 31, 2004, we reviewed Unilens' financial
condition and determined that the entire remaining balance of the receivable was
collectible, and recorded the net present value of the receivable and related
settlement income at July 31, 2004. Thus, in fiscal 2005 we record only minimal
interest income related to the settlement, and no other revenues.

      Interest income in the third quarter 2005 was less than in the third
quarter 2004 since in the third quarter 2004 we recorded $273,000 of interest
upon receipt of the Materna litigation award. This accounted for nearly all of
the interest income in the third quarter of 2004. Excluding this item, interest
income increased over the third quarter 2004 due to interest earned on
significantly higher invested cash and cash equivalents balances (we had little
cash during most of the third quarter of 2004). Interest income for the third
quarter of 2005 also includes $10,000 from the LabCorp award.


                                    Page 20
<PAGE>

      Expenses

<TABLE>
<CAPTION>
                                                     For the three months ended April 30,
                                         -----------------------------------------------------------
                                                                           Increase       % Increase
                                               2005            2004      (Decrease)       (Decrease)
                                         ----------      ----------      ----------       ----------
<S>                                      <C>             <C>             <C>                     <C>
Personnel and other direct expenses
   relating to revenues                  $1,169,779      $1,082,987      $   86,792                8%
General and administrative expenses       1,029,759         343,379         686,380              200%
Patent enforcement expenses, net of
   reimbursements                             7,131          21,815         (14,684)             (67%)
                                         ----------      ----------      ----------
  Total expenses                         $2,206,669      $1,448,181      $  758,488               52%
                                         ==========      ==========      ==========
</TABLE>

      Personnel and other direct expenses relating to revenues increased overall
due to a combination of several factors. In the third quarter of 2005, we
incurred a non-cash charge of $98,000 as a result of modifying the terms of
certain stock options previously granted to our former Controller. There was no
such expense in the prior year. The charge was required due to an extension of
the exercise terms of the options. Salary and benefits costs increased $109,000
because we have more employees, and for certain salary increases. Bonus costs
increased $107,000 over the prior year due to the positive results achieved
during the current fiscal year compared to the prior year. In the third quarter
2005, we accrued $167,000 for bonus and commissions, compared to $60,000 in the
third quarter 2004. Costs of consultants also increased $48,000 in the third
quarter of 2005 due to increased marketing and business development efforts.
Offsetting these increases, costs for recruiting new employees decreased $66,000
in the third quarter of 2005, compared to the prior year as we did not add any
new employees in the third quarter of 2005. Severance costs decreased $112,500.
In the third quarter 2004 we paid severance to a former officer. Direct expenses
relating to revenues decreased $17,000 as the legal fees incurred relating to
the back royalty litigation were more than offset by a $46,000 intangible
impairment charge recorded in the third quarter of 2004. No impairment charges
have been recorded in fiscal 2005.

      In the third quarter 2005, we accrued what we believe is the maximum
amount of expense for commissions (none of the accrual has yet been paid)
pursuant to our Incentive Compensation Plan ("ICP Plan"). The expense was
accrued based on net new business revenue, and prior to this fiscal year we have
not paid any such commissions. In order to ensure that the expense is calculated
in accordance with the ICP Plan and is reasonable, we have hired an independent,
outside compensation consulting firm to review the ICP Plan and the accrual, and
report their results to our President and the Compensation Committee of our
Board of Directors. We expect the study to be completed by July 31, 2005, the
end of our fiscal year. After we receive the report, we may, or may not, revise
the amount of the expense, or adjust the form of payment of the commission. Any
revision will be recorded in the quarter ended July 31, 2005, and the amount of
such revision may be significant to our results for the quarter and year ended
July 31, 2005.

      General and administrative expenses increased due to several factors. We
incurred $367,000 in legal costs related to our defense of a preliminary finding
by the Occupational Safety and Health Administration ("OSHA") that there was
probable cause to believe that Competitive Technologies, Inc. ("CTT") had
violated Section 806 of the Corporate and Criminal Fraud Accountability Act of
2002, 18 U.S.C. 1514A, by terminating Wil Jacques and Scott Bechtel in June
2003. We filed timely objections and requested a de novo hearing before an
Administrative Law Judge of the U.S. Department of Labor. The hearing was held
in May 2005. (For further discussion, see Note 11 to the accompanying unaudited
condensed consolidated financial statements.) In the third quarter of 2005, we


                                    Page 21
<PAGE>

also incurred approximately $126,000 of costs that we did not incur in the prior
year to comply with the internal control documentation and testing requirements
of Section 404 of the Sarbanes-Oxley Act of 2002. This compliance cost is
ongoing. Other increases included $42,000 in public company expenses, which
includes costs relating to our annual report, proxy, annual meeting, and costs
relating to investor relations, $28,000 in travel related both to investor
relations to present CTT to current and potential investors across the country
and in Europe, and to review new business opportunities. We are exploring new
business opportunities, including expanding our marketing capabilities on a more
global basis, searching for new sources of Technology, and researching potential
acquisition candidates in order to grow and increase shareholder value. We
expect this trend to continue. Directors' fees and expenses increased $90,000,
principally due to a non-cash charge of $73,000 incurred in the third quarter of
2005 as a result of modifying the terms of certain stock options previously
granted to a former director. There was no such expense in the prior year. The
charge was required due to an extension of the exercise terms of stock options.

      Patent enforcement expenses, net of reimbursements, decreased in the third
quarter 2005 compared to the third quarter 2004, due to less activity in the
current year related to patent infringement lawsuits as most of our cases were
settled favorably in prior quarters. The level of patent enforcement expenses
relates to our legal strategy and varies depending on the stage of the
litigation. Earlier this fiscal year, we demanded arbitration of our dispute
with Palatin Technologies, Inc. ("Palatin") for sublicense fees that we believe
are owed us as a result of Palatin granting an exclusive sublicense to an
outside party. The fees related to this matter in the third quarter of 2005 were
not significant. (For further discussion, see Note 11 to the accompanying
unaudited condensed consolidated financial statements.)

      Provision for income taxes

      In 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. Due to our current year income before
income taxes, we will utilize a portion of our NOLs against our current year
regular federal and state taxable income, effectively eliminating our regular
income tax liabilities for fiscal 2005. However, we expect to be subject to the
federal alternative minimum tax ("AMT"), where we are limited to using 90% of
our NOL against income, and our year-to-date provision is for our estimated AMT
liability. The credit recorded in the third quarter of 2005 was due to a change
in estimate of our full year AMT liability. In the third quarter 2004, we
recorded a provision for AMT liability of $40,000.

      The NOLs are an asset to us since 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. As a result of the income we earned for
the nine months ended April 30, 2005, we reversed $102,000 of the valuation
allowance in the third quarter 2005, representing the amount of the NOL we will
utilize to offset any income tax liability (excluding the AMT liability) on
income earned in the quarter, and recorded a provision for income taxes of the
same amount. The effective tax rate of the provision for the third quarter of
2005 was 31.4%. We estimate that our effective income tax rate for full fiscal
year 2005 will be approximately 36.0%. The difference between the actual rate
and the effective rate for the third quarter of 2005 was due principally to
intraperiod tax allocation.


                                    Page 22
<PAGE>

Results of Operations - Nine Months Ended April 30, 2005 (Nine Months of 2005)
vs. Nine Months Ended April 30, 2004 (Nine Months of 2004)

Summary of Results

      Net income for the nine months of 2005 was $5,285,000, or $0.73 per
diluted share, compared to net income of $3,077,000, or $0.48 per diluted share,
for the nine months of 2004, an improvement of $2,208,000, or $0.25 per diluted
share.

      Revenues

      For the nine months of 2005, total revenues were $11,747,000, compared to
$6,556,000 for the nine months of 2004, an increase of $5,191,000, or 79%.

      Retained royalties for the nine months of 2005 were $9,520,000, which was
$7,917,000, or 494% higher than the $1,603,000 reported in the nine months of
2004. The following compares retained royalties by Technology in the nine months
of 2005 with the nine months of 2004.

<TABLE>
<CAPTION>
                                             For the nine months ended April 30,
                                ---------------------------------------------------------------
                                                                     Increase        % Increase
                                       2005             2004       (Decrease)        (Decrease)
                                -----------      -----------      -----------       -----------
<S>                             <C>              <C>              <C>                     <C>
Homocysteine assay              $ 7,978,660      $   511,024      $ 7,467,636             1,461%
Gallium arsenide                    721,579          199,489          522,090               262%
Ethyol                              469,968          500,000          (30,032)               (6%)
All other Technologies              350,163          392,655          (42,492)              (11%)
                                -----------      -----------      -----------
  Total retained royalties      $ 9,520,370      $ 1,603,168      $ 7,917,202               494%
                                ===========      ===========      ===========
</TABLE>

      The increase in revenues from the homocysteine assay was due principally
to our $5.2 million share of the upfront license fee received in January 2005
from the license we granted to Abbott in December 2004, and upfront license fees
from licenses we granted to DPC, Bayer, Roche, and Axis-Shield. Revenues also
increased from royalties earned to date on those licenses. The increase in
gallium arsenide revenues resulted from 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. The settlement occurred during the third
quarter. Our share of the settlement was $575,000, net of fees paid to a royalty
auditing firm. This settlement accounted for a majority of the revenues for the
nine months of 2005 for this Technology, and without this settlement, royalties
would have decreased due to licenses that expired in the prior year. We are in
negotiations with our client, the University of Illinois at Urbana-Champaign, in
an attempt to recover a portion of the audit fees incurred in pursuit of the
back royalties, but we have not recorded any potential recovery of such costs.
Royalties from sales of Ethyol decreased as a result of timing and a decrease in
sales of Ethyol in the current year compared to the prior year. Royalties from
Ethyol sales are limited to $500,000 per calendar year, and in 2004 we reached
the maximum in the third quarter while in 2005 we will not reach the maximum
until the fourth quarter, when we will record the remaining $30,000. For
revenues from all other technologies, royalties decreased due to expired
licenses.

      Approximately 84% (without the settlement of back royalties, the
percentage would have been 89%) of our retained royalties for the nine months of
2005 was from the homocysteine assay Technology, on which the patent expires in
July 2007. In addition, a significant portion of these homocysteine royalties
were from nonrecurring, upfront license fees. We continue to seek licenses to
new Technologies to mitigate this concentration of revenues, to replace revenues
from expiring licenses and to provide future revenues.


                                    Page 23
<PAGE>

      Royalty settlements and awards of $1,037,000 in the nine months of 2005
were from our share of litigation awards received from LabCorp related to our
successful patent infringement case. On August 5, 2004, the CAFC denied
LabCorp's petition for a rehearing or a rehearing en banc (rehearing by the full
CAFC) of a June 8, 2004 decision affirming a November 2002 decision in favor of
Metabolite Laboratories, Inc. and us (collectively, the "Plaintiffs"). As a
result of this decision, on August 16, 2004, the Plaintiffs received
approximately $6.7 million. Our share of the $6.7 million payment was $921,000,
and we recorded $816,000 in royalty settlements and awards and $105,000 in
interest income during the quarter ended October 31, 2004. 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, 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 $231,000, and we recorded $221,000 in royalty settlements and
awards and $10,000 in interest income during the quarter ended April 30, 2005,
making the year-to-date total received $1,037,000 in royalty settlements and
awards and $115,000 in interest. For further discussion, see the previous
description of this case and Note 3 to the accompanying unaudited condensed
consolidated financial statements.

      In 2004, royalty settlements and awards were from the finalization and
receipt of our portion of the Materna(TM) litigation award.

      Dividends received of $784,000 for the nine months of 2005 were from our
receipt of two dividends from MelanoTan. A special cash dividend was declared
during the third quarter of 2005, and we accrued $104,000, our share of the
dividend. The dividend was received in May 2005.

      In October 2004, MelanoTan paid its shareholders a dividend in the form of
shares of common stock of EpiTan Limited (Australia) ("EpiTan"), MelanoTan's
investee. As a result, we received 1,252,346 shares of EpiTan common stock.
Previously, we licensed our rights to a sunless tanning technology (that may
prevent or lessen skin cancer caused by exposure to the sun) to MelanoTan and
MelanoTan sublicensed the rights to EpiTan (MelanoTan has no operations of its
own). MelanoTan also received shares of EpiTan. EpiTan is in the process of
conducting trials and evaluating the technology for future commercialization.
EpiTan common stock is traded on the Australian Stock Exchange (quoted in
Australian dollars) under the symbol EPT. 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 EpiTan 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 EpiTan stock, since EpiTan has minimal revenues
and has incurred substantial current and accumulated net losses. We recorded the
estimated value of the shares, $679,000, as dividend income and included the
asset in prepaid expenses and other current assets, since we are restricted from
trading the shares. Unrealized market price and foreign exchange gains and
losses relating to the shares are included in other comprehensive income (loss)
in shareholders' interest.


                                    Page 24
<PAGE>

      Settlement with Unilens, net, for the nine months of 2004 was from
installments from Unilens under our October 2003 settlement of an old receivable
from Unilens. During fiscal 2004, due to Unilens' financial condition and the
uncertainty of collecting the installments due from the settlement, we recorded
revenue, net of related expenses, when we received payments from Unilens. At
July 31, 2004, we reviewed Unilens' financial condition and determined that the
entire remaining balance of the receivable was collectible, and recorded the net
present value of the receivable and related settlement income at July 31, 2004.
Thus, in fiscal 2005 we record only minimal interest income related to the
settlement, and no other revenues.

      Interest income in the nine months of 2005 includes interest earned on our
significant invested cash and cash equivalents balances, and $115,000 of
interest earned in connection with the LabCorp litigation awards. For the nine
months of 2004, interest income was due almost exclusively to interest earned
from the Materna litigation awards, as we had little interest earning average
cash balances in 2004.

      Other income represents fees received for consulting services provided by
us to a foreign client to assist the client in commercializing their products
both in the U.S. and abroad.

      Expenses

<TABLE>
<CAPTION>
                                                    For the nine months ended April 30,
                                         ----------------------------------------------------------
                                                                           Increase      % Increase
                                               2005            2004      (Decrease)      (Decrease)
                                         ----------      ----------      ----------      ----------
<S>                                      <C>             <C>             <C>                    <C>
Personnel and other direct
  expenses relating to revenues          $4,288,985      $2,229,881      $2,059,104              92%
General and administrative expenses       1,844,630       1,140,706         703,924              62%
Patent enforcement expenses, net
  of reimbursements                         291,555          68,826         222,729             324%
                                         ----------      ----------      ----------
  Total expenses                         $6,425,170      $3,439,413      $2,985,757              87%
                                         ==========      ==========      ==========
</TABLE>

      Personnel and other direct expenses relating to revenues increased due to
several factors. Personnel expenses for the nine months of 2005 increased
$1,920,000 from the prior year. This was due principally to estimated bonus and
commission accruals that increased $1,387,000 compared to the nine months of
2004. Our personnel expenses also increased because we have more employees, for
certain salary increases, and for a non-cash charge of $98,000 incurred in the
third quarter of 2005 as a result of modifying the terms of certain stock
options previously granted to our former Controller to extend the exercise terms
of the options (there was no such expense in the prior year). In addition, other
direct expenses increased $139,000 due to legal fees incurred in connection with
the back royalty litigation, a one-time charge for technical services to support
licensing a Technology (which costs are partially recoverable from future
licensing revenues, if any), costs related to licensing our homocysteine assay
to others, and other costs to maintain certain technologies. Offsetting these
increases, severance costs decreased $112,500, as we paid severance to a former
officer during the nine months of 2004. There was no severance during the nine
months of 2005.

      In the nine months of 2005, we accrued what we believe is the maximum
amount of expense for commissions (none of the accrual has yet been paid)
pursuant to our ICP Plan. The expense was accrued based on net new business
revenue, and prior to this fiscal year we have not paid any such commissions. In
order to ensure that the expense is calculated in accordance with the ICP Plan
and is reasonable, we have hired an independent, outside compensation consulting
firm to review the ICP Plan and the accrual, and report their results to our
President and the Compensation Committee of our Board of Directors. We expect
the study to be completed by July 31, 2005, the end of our fiscal year. After we
receive the report, we may, or may not, revise the amount of the expense, or
adjust the form of payment of the commission. Any revision will be recorded in
the quarter ended July 31, 2005, and the amount of such revision may be
significant to our results for the quarter and year ended July 31, 2005.


                                    Page 25
<PAGE>

      General and administrative expenses increased due to several factors. We
incurred $367,000 in legal costs related to our defense of a preliminary finding
by OSHA, as explained earlier. (For further discussion, see Note 11 to the
accompanying unaudited condensed consolidated financial statements.) This cost
was offset partially by a reimbursement of $168,000 from our directors' and
officers' liability insurance carrier as settlement of our claim for
reimbursement of amounts incurred in connection with an investigation of CTT by
the SEC. Our insurance carrier also acknowledged that we had met our deductible
under our policy relating to this matter, and confirmed that they will provide
coverage (in accordance with the terms of the policy) for losses incurred in the
SEC civil suit filed in August 2004. Accordingly, we have not recorded any
significant costs in the current fiscal year relating to the SEC investigation
and civil suit, compared to $75,000 of expense last year.

      In the nine months of 2005, we also incurred approximately $160,000 of
costs that we did not incur in the prior year to comply with the internal
control documentation and testing requirements of Section 404 of the
Sarbanes-Oxley Act of 2002. This compliance cost is ongoing. Other increases
included $136,000 in public company expenses, which includes costs relating to
our annual report, proxy, annual meeting, and costs relating to investor
relations, and $93,000 in travel related both to investor relations to present
CTT to current and potential investors across the country and in Europe, and to
review new business opportunities. Directors' fees and expense also increased
$132,000, principally due to a non-cash charge of $73,000 incurred in the third
quarter of 2005 as a result of modifying the terms of certain stock options
previously granted to a former director to extend the exercise term of the
options (there was no such expense in the prior year).

      Patent enforcement expenses, net of reimbursements, increased principally
due to our lawsuits against LabCorp, Abbott, Bayer, BioRad and Axis-Shield to
enforce our homocysteine assay patent rights, and our demand for arbitration of
our dispute with Palatin. The level of patent enforcement expenses relates to
our legal strategy and varies depending on the stage of the litigation. Activity
related to homocysteine assay patent rights was considerably higher in the nine
months of 2005 compared to 2004.

      Provision for income taxes

      As previously described, in prior years we generated significant NOLs,
which were carried forward for income tax purposes. Due to our current year
income before income taxes, we will utilize a portion of our NOLs against our
current year regular federal and state taxable income, effectively eliminating
our regular income tax liabilities for fiscal 2005. However, since we expect to
be subject to the AMT, our year-to-date provision of $37,000 principally is for
our estimated AMT liability. In the nine months of 2004, we recorded a provision
of $40,000 for our estimated AMT liability.

      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. As a result of the income we earned for the nine months of 2005, we
reversed $1,916,000 of the valuation allowance we recorded previously against
the NOL asset, representing the amount of the NOL we will utilize to offset any
income tax liability (excluding the AMT liability) on income earned
year-to-date, and recorded a provision for income taxes of the same amount. The
provision was recorded at an estimated effective combined federal and state tax
rate of 36.0%, which is the rate we expect for the full fiscal year.


                                    Page 26
<PAGE>

Financial Condition and Liquidity

      Our liquidity requirements arise principally from our working capital
needs, including funds needed to find, obtain and license new Technologies, and
to protect and enforce our intellectual property rights, if necessary. We fund
our liquidity requirements with a combination of cash flows from operations,
including legal settlements and awards, and cash on hand. In addition, we have
the ability to fund our requirements through sales of common stock under an
equity financing arrangement (see below). At April 30, 2005, we had no
outstanding debt or credit facility.

      Cash and cash equivalents consist of demand deposits and highly liquid,
interest earning investments with maturities when purchased of three months or
less, including overnight bank deposits and money market funds. We carry cash
equivalents at cost, which approximates fair value.

      At April 30, 2005, cash and cash equivalents were $16,555,000, compared to
$4,310,000 at July 31, 2004. Cash provided by operating activities during the
nine months ended April 30, 2005, was $8,299,000, compared to $2,895,000 during
the same period of the prior year. The increase in cash from operating
activities in the current year compared to the prior year was due principally to
significantly higher net income this year compared to last year, and higher
royalties payable to our clients, due to the higher royalties received and the
timing of the payments, partially offset by higher receivables. Cash provided by
investing activities in the current nine months was $496,000, compared to
$253,000 in the same period of the prior year. In the current year we collected
more cash on our receivable from Unilens. Cash provided by financing activities
in the current year was $3,450,000, from sales of our common stock to Fusion
Capital Fund II, LLC ("Fusion Capital") (see below) and from exercises of stock
options.

      In addition to fluctuations in the amounts of royalties and our clients'
shares of royalty settlements and awards, changes in royalties receivable and
payable reflect our normal cycle of royalty collections and payments, and
fluctuate depending on when royalty receipts and payments are due under our
agreements with clients and customers.

      Funding and capital requirements

Equity Financing

      In February 2004, we entered into an equity financing agreement with
Fusion Capital, pursuant to which we can sell to Fusion Capital up to $5 million
of our common stock, at our option. During the nine months ended April 30, 2005,
we sold $2,518,000 of common stock to Fusion Capital. We will use the proceeds
for general working capital needs. The aggregate proceeds from inception through
April 30, 2005 from sales to Fusion Capital pursuant to the equity financing
agreement are approximately $2,718,000. Although we have the ability to sell up
to $5 million of our common stock to Fusion Capital, we currently estimate that
we will sell $3.5 million of stock in total to Fusion Capital pursuant to the
equity financing agreement. However, this estimate could change at any time. In
addition, we have the option of entering into another equity financing agreement
with Fusion Capital for an additional $5 million upon termination of the current
agreement.

Income taxes

      We currently have the benefit of using a portion of our accumulated NOLs
to eliminate our regular federal and state income tax liabilities for fiscal
2005. We expect that we will be liable to pay only the federal AMT for fiscal
2005. Our approximate 1% rate for the AMT liability is much less than if we had
to pay income taxes at our estimated effective income tax rate of 36.0%. We will
continue to receive this benefit until we have utilized all of our NOLs (federal
and state). We cannot determine when and if we will utilize the benefit of
remainder of our NOLs.


                                    Page 27
<PAGE>

Capital requirements

      We are exploring new business opportunities, including expanding our
marketing capabilities on a more global basis, searching for new sources of
Technologies, and researching potential acquisition candidates in order to grow
our business and increase shareholder value. We expect this trend to continue.

General

      The amounts and timing of our future cash requirements will depend on many
factors, including the results of our operations and marketing efforts, the
results and costs of legal proceedings, and our equity financing. To 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
beyond our control or that we cannot currently anticipate. Although there can be
no assurance that we will be successful in our efforts, we believe that the
combination of our cash on hand, revenues from executing our strategic plan, and
the ability to raise funds from sales of our common stock pursuant to our equity
financing agreement will be sufficient to meet our current and anticipated
operating cash requirements at least through our fiscal year ending July 31,
2006.

      Contingencies

      We are a party to several legal actions and proceedings, both as a
plaintiff and as a defendant, for which we cannot predict the final outcomes.
These matters have been detailed herein and in prior filings with the SEC.
Depending upon the amount and timing, an unfavorable resolution of any or all
matters where we are a defendant and/or our incurrence of significant legal fees
and other costs to defend or prosecute any of these actions and proceedings may
have a material adverse effect on our consolidated financial position, results
of operations or cash flows in a particular period.

Other matters

      We believe that we carry adequate liability insurance, directors' and
officers' insurance, casualty insurance (for owned or leased tangible assets),
and other insurance to cover us against potential claims that occur in the
normal course of our business.

Critical Accounting Estimates

      There have been no significant changes in our accounting estimates
described under the caption "Critical Accounting Estimates," included in Item 7,
"Management's Discussion and Analysis of Financial Condition and Results of
Operations," in our Annual Report on Form 10-K for the year ended July 31, 2004.

      We estimated the fair value of the EpiTan 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 EpiTan stock, since EpiTan has minimal revenues
and has incurred substantial current and accumulated net losses. We recorded the
estimated value of the shares, $679,149, as dividend income and included the
asset in prepaid expenses and other current assets, since we are restricted from
trading the shares.


                                    Page 28
<PAGE>

      The bonus and commission compensation accruals were estimated based on our
performance to date. As previously described, we have hired an independent,
outside compensation consulting firm to review the commission accrual.

Recently Issued Accounting Pronouncements

      In December 2004, the Financial Accounting Standards Board issued
Statement No. 123 (revised 2004), "Share-Based Payment." This Statement
established standards for accounting for transactions in which an entity
exchanges its equity instruments for goods or services, focusing primarily on
employee services exchanged for an award of equity instruments, including stock
options. It requires entities to expense the estimated fair value of employee
stock options and similar awards over the requisite service period (generally
the vesting period). We will adopt the provisions of this statement beginning
August 1, 2005, utilizing the "modified prospective application" (as defined in
the statement), whereby beginning August 1, 2005, we will recognize compensation
expense for the estimated fair value of new awards and of any awards modified,
repurchased or cancelled after June 15, 2005, over their respective requisite
service periods. We also will recognize compensation expense for awards
previously issued and outstanding that vest after August 1, 2005, over their
respective remaining vesting periods. For outstanding but unvested awards at
April 30, 2005, we currently estimate that we will record compensation expense
of approximately $168,000 and $74,000, respectively, in fiscal 2006 and 2007.
Recognizing compensation expense for share-based payments awarded on or after
August 1, 2005, will reduce our net income in the future, but we cannot estimate
the amount of that reduction, which will depend on the number of stock options
awarded, option vesting periods, and other factors used in estimating the fair
value of awards granted in the future.

Related Party Transactions

      We previously disclosed that our board of directors had determined that
when a director's services are outside the normal duties of a director, we
should compensate the director at the rate of $1,000 per day, plus expenses
(which is the same amount that we pay a director for attending a one-day Board
meeting).

      During the three and nine months ended April 30, 2005, we incurred $10,624
and $23,642, respectively, of costs, including expenses, (principally travel,
reported in personnel and other direct expenses relating to revenues) related to
consulting services provided by one of our directors. At April 30, 2005,
accounts payable and accrued other liabilities included $1,031 and $31,250,
respectively, due to related parties.


                                    Page 29
<PAGE>

Item 3. Quantitative and Qualitative Disclosures About Market Risk

      We do not have any significant market risk to the valuation of our assets
other than risks related to our shares of EpiTan common stock. The value of the
stock is subject to market fluctuations in the per share price of EpiTan stock
as well as foreign currency fluctuations, since EpiTan common stock is traded on
the Australian Stock Exchange and the price per share of the stock is quoted in
Australian dollars. We received the shares during the quarter ended October 31,
2004. Since the date of receipt, the market value of the shares has decreased by
$350,659, while the exchange rate has changed in our favor by $125,454, for a
net unrealized loss of $225,203.

Item 4. Controls and Procedures

      (a) Evaluation of Disclosure Controls and Procedures

      Our management, including our Chief Executive Officer and Chief Financial
Officer, evaluated the effectiveness of the design and operation of our
disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e)
and 15d-15(e)) as of April 30, 2005. Our disclosure controls and procedures are
designed to ensure that information required to be disclosed by us in reports
filed under the Securities Exchange Act of 1934 is recorded, processed,
summarized, and reported within the time periods specified in the SEC's rules
and forms. Based on this evaluation, our Chief Executive Officer and Chief
Financial Officer concluded that the disclosure controls and procedures were
effective as of April 30, 2005.

      (b) Changes in Internal Control over Financial Reporting

      There were no significant changes in our internal control over financial
reporting during the quarter ended April 30, 2005, that have materially
affected, or are reasonably likely to materially affect, our internal control
over financial reporting.


                                    Page 30
<PAGE>

                           PART II - OTHER INFORMATION

Item 1. Legal Proceedings

      See Notes 2, 3 and 11 to the accompanying unaudited condensed consolidated
financial statements in Part I of this Quarterly Report on Form 10-Q.

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

      The following table lists sales and issuances of our common stock to
Fusion Capital during the three months ended April 30, 2005, pursuant to the $5
million equity financing arrangement with Fusion Capital as described in Part I,
Item 2, "Management's Discussion and Analysis of Financial Condition and Results
of Operations." We issued all of these securities without registration in
reliance on an exemption under Section 4(2) of the Securities Act of 1933
because we made the offers and sales in private placements.

                          Number of
                        shares sold      Total cash
              Month      and issued        received
      -------------     -----------      ----------

      February 2005              --      $       --
         March 2005           7,034          77,496
         April 2005          95,817       1,027,504
                         ----------      ----------

                            102,851      $1,105,000
                         ==========      ==========

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

      None

Item 6. Exhibits

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

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

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

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

                          [Signature page follows]


                                  Page 31
<PAGE>

                                 SIGNATURES

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


                               COMPETITIVE TECHNOLOGIES, INC.
                               (the registrant)

                               By /s/ Donald J. Freed
                                  ---------------------------------
                               Donald J. Freed
                               President, Chief Executive
Date: June 14, 2005            Officer and Authorized Signer


                               COMPETITIVE TECHNOLOGIES, INC.
                               (the registrant)

                               By /s/ Michael D. Davidson
                                  ---------------------------------
                               Michael D. Davidson
                               Chief Financial Officer, Chief Accounting Officer
Date: June 14, 2005            and Authorized Signer


                                  Page 32
<PAGE>

                             INDEX TO EXHIBITS

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

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

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

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

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


                                  Page 33