**Table
            of Contents**





**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 THESECURITIES
                EXCHANGE ACT OF 1934
              for
                the quarterly period ended October 31,
                2006





OR





o
            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)


*www.competitivetech.net*





Delaware
            
            36-2664428(State
                or other jurisdiction of incorporation or organization)
            
            (I.R.S.
                Employer Identification No.)777
                Commerce Drive, Suite 100Fairfield,
                Connecticut
            
            06825(Address
                of principal executive offices)
            
            (Zip
                code)





(203)
      368-6044


(Registrant's
      telephone number, including area code)





N/A


(Former
      name, former address and former fiscal year, if changed since last
      report)





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





Indicate
      by check mark whether the registrant is a large accelerated filer, an
      accelerated filer, or a non-accelerated filer. See definition of “accelerated
      filer and large accelerated filer” in Rule 12b-2 of the Exchange
      Act).




Large
      accelerated filer o
      Accelerated filer o
      Non-accelerated filer x





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




The
      number of shares of the registrant’s common stock outstanding as of December 11,
      2006 was 8,009,380 shares.





**Table
        of Contents**




**COMPETITIVE
      TECHNOLOGIES, INC.**





**INDEX
      TO QUARTERLY REPORT ON FORM 10-Q**




**PART
                I. FINANCIAL INFORMATION**
            **Page
                No.**Item
                1.
            Condensed
                Consolidated Financial Statements
                (Unaudited)Condensed
                Consolidated Balance Sheets at October 31, 2006, and
                July 31, 2006
            3Condensed
                Consolidated Statements of Operations for the three
                months ended October 31, 2006 and 2005
            4Condensed
                Consolidated Statement of Comprehensive Loss and
                Changes in Shareholders’ Interest for the three months ended October 31,
                2006
            5Condensed
                Consolidated Statements of Cash Flows for the three
                months ended October 31, 2006 and 2005
            6Notes
                to Condensed Consolidated Financial
                Statements
            7
                -
                11Item
                2.
            Management's
                Discussion and Analysis of Financial Condition
                and Results of Operations
            12
                - 17Item
                3.
            Quantitative
                and Qualitative Disclosures About Market
                Risk
            18Item
                4.
            Controls
                and Procedures
            18**PART
                II. OTHER INFORMATION**Item
                1.
            Legal
                Proceedings
            19Item
                1A.
            Risk
                factors
            19Item
                2.
            Unregistered
                Sales of Equity Securities and Use of
                Proceeds
            19Item
                4.
            Submission
                of Matters to a Vote of Security
                Holders
            19Item
                6.
            Exhibits
            19Signatures
            
            20




Page
          2
 **Table
          of Contents**




**PART
      I.  FINANCIAL INFORMATION**





**Item
      1.**  **Condensed
      Consolidated Financial Statements**





COMPETITIVE
      TECHNOLOGIES, INC.


Condensed
      Consolidated Balance Sheets




**October
                  31,**
              
              July
                  31,**2006**
              
              2006**(Unaudited)**
              
              ***ASSETS**Current
                  assets:Cash
                  and cash equivalents
              
              **$**
              **12,318,942**
              
              $
              12,909,311Receivables
              
              
              **3,688,825**
              
              
              3,831,501Equity
                  securities
              
              
              **386,580**
              
              
              327,420Prepaid
                  expenses and other current assets
              
              
              **314,406**
              
              
              416,262Total
                  current assets
              
              
              **16,708,753**
              
              
              17,484,494Equity
                  securities
              
              
              **676,804**
              
              
              499,141Prepaid
                  royalties
              
              
              **264,924**
              
              
              264,947Property
                  and equipment, net
              
              
              **313,596**
              
              
              148,845Intangible
                  assets, net
              
              
              **14,699**
              
              
              19,474TOTAL
                  ASSETS
              
              **$**
              **17,978,776**
              
              $
              18,416,901**LIABILITIES
                  AND SHAREHOLDERS' INTEREST**Current
                  liabilities:Accounts
                  payable
              
              **$**
              **823,178**
              
              $
              584,833Accrued
                  expenses and other liabilities
              
              
              **3,323,193**
              
              
              3,377,868Total
                  current liabilities
              
              
              **4,146,371**
              
              
              3,962,701Deferred
                  rent
              
              
              **70,319**
              
              
              **—**Commitments
                  and contingencies
              
              
              **—**
              
              
              **—**Shareholders'
                  interest:5%
                  preferred stock, $25 par value, 35,920shares
                  authorized, 2,427 shares issued and outstanding
              
              
              **60,675**
              
              
              60,675Common
                  stock, $.01 par value, 20,000,000shares
                  authorized, 8,009,380 and 7,956,534shares
                  issued, respectively
              
              
              **80,093**
              
              
              79,565Capital
                  in excess of par value
              
              
              **34,222,772**
              
              
              34,030,075Accumulated
                  deficit
              
              
              **(20,543,560**
              **)**
              
              (19,421,398
              )Accumulated
                  other comprehensive loss
              
              
              **(57,894**
              **)**
              
              (294,717
              )Total
                  shareholders' interest
              
              
              **13,762,086**
              
              
              14,454,200TOTAL
                  LIABILITIES AND SHAREHOLDERS' INTEREST
              
              **$**
              **17,978,776**
              
              $
              18,416,901
  *See
                  accompanying notes***
                  Balances were derived from the July 31, 2006 audited balance
                  sheet.*




Page
          3
 **Table
          of Contents**


PART
      I. FINANCIAL INFORMATION (Continued)





COMPETITIVE
      TECHNOLOGIES, INC.


Condensed
      Consolidated Statements of Operations


(Unaudited)




Three
                  months endedOctober
                  31,**2006**
              
              2005**Revenues**Retained
                  royalties
              
              **$**
              **730,204**
              
              $
              1,237,480Investment
                  income
              
              
              **164,972**
              
              
              126,841Other
                  income
              
              
              **—**
              
              
              2,000**895,176**
              
              
              1,366,321**Expenses**Personnel
                  and other direct expensesrelating
                  to revenues
              
              
              **1,057,008**
              
              
              889,182General
                  and administrative expenses
              
              
              **743,934**
              
              
              769,609Patent
                  enforcement expenses, net ofreimbursements
              
              
              **216,396**
              
              
              40,535**2,017,338**
              
              
              1,699,326Loss
                  before income taxes
              
              
              **(1,122,162**
              **)**
              
              (333,005
              )Benefit
                  for income taxes
              
              
              **—**
              
              
              **—****Net
                  loss**
              
              **$**
              **(1,122,162**
              **)**
              $
              (333,005
              )Basic
                  and diluted net loss per common share
              
              **$**
              **(0.14**
              **)**
              $
              (0.04
              )Basic
                  and diluted weighted
                  average number of commonshares
                  outstanding
              
              
              **7,988,701**
              
              
              7,410,416*See
                  accompanying notes*




Page
          4
 **Table
          of Contents**




PART
      I. FINANCIAL INFORMATION (Continued)





COMPETITIVE
      TECHNOLOGIES, INC.


Condensed
      Consolidated Statement of Comprehensive Loss and Changes in
      Shareholders' Interest


For
      the
      three months ended October 31, 2006


(Unaudited)


**Accumulated****Preferred
                      Stock**
                
                **Common
                      Stock**
                
                **Capital**
                
                
                
                **Other**
                
                **Total****Shares**
                
                
                
                **Shares**
                
                
                
                **in
                    Excess of**
                
                **Accumulated**
                
                **Comprehensive**
                
                **Shareholders'****Outstanding**
                
                **Amount**
                
                **Outstanding**
                
                **Amount**
                
                **Par
                    Value**
                
                **Deficit**
                
                **Loss**
                
                **Interest**Balances
                    at July 31, 2006
                
                
                2,427
                
                $
                60,675
                
                
                7,956,534
                
                $
                79,565
                
                $
                34,030,075
                
                $
                (19,421,398
                )
                $
                (294,717
                )
                $
                14,454,200Comprehensive
                    loss:Net
                    loss
                
                
                —
                
                
                —
                
                
                —
                
                
                —
                
                
                —
                
                
                (1,122,162
                )
                
                —
                
                
                (1,122,162
                )Unrealized
                    increase in market price of securities
                
                
                —
                
                
                —
                
                
                —
                
                
                —
                
                
                —
                
                
                —
                
                
                235,717
                
                
                235,717Foreign
                    currency translation adjustments on securities
                
                
                —
                
                
                —
                
                
                —
                
                
                —
                
                
                —
                
                
                —
                
                
                1,106
                
                
                1,106Comprehensive
                    loss
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                (885,339
                )Compensation
                    expense from stock option grants
                
                
                —
                
                
                —
                
                
                —
                
                
                —
                
                
                68,245
                
                
                —
                
                
                —
                
                
                68,245Stock
                    issued under 401(k) Plan
                
                
                —
                
                
                —
                
                
                52,846
                
                
                528
                
                
                124,452
                
                
                —
                
                
                —
                
                
                124,980**Balances
                    at October 31, 2006**
                
                
                **2,427**
                
                **$**
                **60,675**
                
                
                **8,009,380**
                
                **$**
                **80,093**
                
                **$**
                **34,222,772**
                
                **$**
                (20,543,560
                )
                **$**
                (57,894
                )
                **$**
                **13,762,086**


*See
        accompanying notes*


Page
          5
 **Table
          of Contents**




PART
      I. FINANCIAL INFORMATION (Continued)





COMPETITIVE
      TECHNOLOGIES, INC.


Condensed
      Consolidated Statements of Cash Flows


(Unaudited)




Three
                  months endedOctober
                  31,**2006**
              
              2005**Cash
                  flows from operating activities:**Net
                  loss
              
              **$**
              **(1,122,162**
              **)**
              $
              (333,005
              )Noncash
                  and other expensesincluded
                  in net loss:Depreciation
                  and amortization
              
              
              **20,449**
              
              
              9,896Share-based
                  compensation - stock options
              
              
              **68,245**
              
              
              50,287Stock
                  compensation accrued
              
              
              **50,000**
              
              
              43,750(Increase)
                  decrease in assets:Receivables
              
              
              **142,676**
              
              
              (713,716
              )Prepaid
                  expenses and other current assets
              
              
              **101,856**
              
              
              (196,196
              )Increase
                  (decrease) in liabilities:Accounts
                  payable, accrued expensesand
                  other liabilities, and deferred rent
              
              
              **328,992**
              
              
              (238,964
              )Net
                  cash used in operating activities
              
              
              **(409,944**
              **)**
              
              (1,377,948
              )**Cash
                  flows from investing activities:**Purchases
                  of property and equipment
              
              
              **(180,425**
              **)**
              
              (17,660
              )Net
                  cash used in investing activities
              
              
              **(180,425**
              **)**
              
              (17,660
              )**Cash
                  flows from financing activities:**Proceeds
                  from exercises of stock options
              
              
              **—**
              
              
              15,290Proceeds
                  from sales of common stock
              
              
              **—**
              
              
              782,456Net
                  cash provided by financing activities
              
              
              **—**
              
              
              797,746Net
                  decrease in cash and cash equivalents
              
              
              **(590,369**
              **)**
              
              (597,862
              )Cash
                  and cash equivalents at beginning of period
              
              
              **12,909,311**
              
              
              14,279,547Cash
                  and cash equivalents at end of period
              
              **$**
              **12,318,942**
              
              $
              13,681,685*See
                  accompanying notes*


Page
            6
 **Table
            of Contents**




PART
      I.
      FINANCIAL INFORMATION (Continued)





COMPETITIVE
      TECHNOLOGIES, INC.





Notes
      to Condensed Consolidated Financial Statements


(Unaudited)




1.
            Basis
                of Presentation





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





Competitive
      Technologies, Inc. (“CTT”), and its wholly owned and majority owned subsidiaries
      (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 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 condensed consolidated financial statements
      include the accounts of CTT and its subsidiaries. Intercompany accounts and
      transactions have been eliminated in consolidation. Certain prior year amounts
      have been reclassified to conform to the current year’s
      presentation.




We
      believe that we have made all adjustments, primarily normal and recurring
      adjustments, which are necessary to present the unaudited condensed consolidated
      financial statements fairly in conformity with accounting principles generally
      accepted in the United States of America. The results for the three months
      ended
      October 31, 2006, are not necessarily indicative of the results that can be
      expected for the full fiscal year ending July 31, 2007.





You
      should read the interim unaudited condensed 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, 2006.




2.
            Net
                Loss Per Common Share





At
      October 31, 2006 and 2005, respectively, all 1,097,973 and 931,973 outstanding
      common stock options were excluded from the computation of diluted net
      loss
      per common share, because
      they were anti-dilutive.  Page
            7
 **Table
            of Contents**




3.
            Comprehensive
                Loss and Accumulated Other Comprehensive
                Loss





Comprehensive
      loss consists of the following:




Three
                  months endedOctober
                  31,**2006**
              
              2005Net
                  loss
              
              **$**
              **(1,122,162**
              **)**
              $
              (267,383
              )Unrealized increase
                  (decrease) in market price of securities
              
              
              **235,717**
              
              
              (142,544
              )Foreign
                  currency translation adjustments on securities
              
              
              **1,106**
              
              
              (99,541
              )Unrealized
                  gain from reversal of sale restriction discount
              
              
              **—**
              
              
              206,420Comprehensive
                  loss
              
              **$**
              **(885,339**
              **)**
              $
              (303,048
              )


Accumulated
      other comprehensive loss consists of the following:




**October
                  31,**
              
              July
                  31,**2006**
              
              2006Accumulated
                  net unrealized holding loss on equity securities
              
              **$**
              **(335,323**
              **)**
              $
              (571,040
              )Accumulated
                  unrealized foreign currency translation gain
              
              
              **45,305**
              
              
              44,199Accumulated
                  unrealized gain from reversal of sale restriction discount
              
              
              **232,124**
              
              
              232,124Accumulated
                  other comprehensive loss
              
              **$**
              **(57,894**
              **)**
              $
              (294,717
              )




4.
            Receivables





Receivables
      consist of the following:




**October
                  31,**
              
              July
                  31,**2006**
              
              2006Royalties
              
              **$**
              **3,037,867**
              
              $
              3,307,482Receivable
                  from insurance carrier
              
              
              **456,232**
              
              
              354,832Other
              
              
              **194,726**
              
              
              169,187Receivables
              
              **$**
              **3,688,825**
              
              $
              3,831,501





The
      fluctuations in royalties and receivables from insurance carrier are due
      principally to timing differences in billing receivables and the receipt of
      cash.  Page
            8
 **Table
            of Contents**




5.
            Accrued
                Expenses and Other Liabilities





Accrued
      expenses and other liabilities consist of the following:




**October
                  31,**
              
              July
                  31,**2006**
              
              2006Accrued
                  royalties payable
              
              **$**
              **2,929,733**
              
              $
              2,460,950Accrued
                  compensation
              
              
              **181,846**
              
              
              533,431Accrued
                  professional fees
              
              
              **104,466**
              
              
              251,514Accrued
                  other
              
              
              **107,148**
              
              
              131,973Accrued
                  expenses and other liabilities
              
              **$**
              **3,323,193**
              
              $
              3,377,868





6.
            Contingencies




*Carolina
      Liquid Chemistries Corporation, et al.*




On
      August
      29, 2005, we filed a complaint against Carolina Liquid Chemistries Corporation
      (“Carolina Liquid”), in the United States District Court for the District of
      Colorado, alleging patent infringement of our patent covering homocysteine
      assays, and seeking monetary damages, punitive damages, attorneys’ fees, court
      costs and other remuneration at the option of the court. Carolina Liquid was
      served on September 1, 2005. Subsequently, as we were aware that other
      infringers allegedly existed, we amended our complaint to add as defendants
      Catch, Inc. (“Catch”), and the Diazyme Laboratories Division of General Atomics
      (“Diazyme”). On
      September 6, 2006, Diazyme filed for declaratory judgment in the Southern
      District of California for a change in venue and a declaration of
      non-infringement and invalidity. On
      September 12, 2006, the District Court in Colorado ruled that both Catch and
      Diazyme be added as defendants to the Carolina Liquid case. Further action
      in
      this case is pending. On October 23, 2006, Diazyme requested the United States
      Patent and Trademark Office (the
      “USPTO”), to
      re-evaluate the validity of our patent. W e
      do not
      expect an adverse finding by the USPTO, but the completion of such action may
      delay the ultimate resolution of the case.




*Employment
      matters - former President and Chief Executive Officer*




On August
      10, 2005, we received notice that John B. Nano, our former President and
      Chief Executive Officer (“CEO”), had filed a complaint in the Superior Court in the
      Judicial District of Stamford, Connecticut seeking the pre-judgment remedy
      of
      attachment. In his complaint Mr. Nano sought to attach our bank accounts in
      the
      amount of $1.4 million to preserve his ability to collect should he succeed
      on
      his claims that CTT allegedly breached his employment contract because it denied
      him certain severance benefits when it terminated him on June 14, 2005. Mr.
      Nano
      also claimed, in the alternative, that CTT violated a proposed but unexecuted
      and undelivered separation agreement and general release which it sought to
      negotiate with him at the time of his departure. Mr. Nano claimed in his
      complaint that CTT withdrew the proposed agreement after he communicated his
      acceptance to the Chairman of our Board of Directors. CTT opposed Mr. Nano’s
      application for a prejudgment remedy, has denied and is vigorously defending
      the
      allegations in the suit, and has filed a complaint against Mr. Nano (see below).
      Hearings on the motion were held in November 2005.




On
      September 14, 2005, we announced that we had received notice that Mr. Nano
      also
      had filed a complaint with the Occupational Safety and Health Administration
      (“OSHA”), alleging a violation by CTT of Section
      806 of the Corporate and Criminal Fraud Accountability Act of 2002, 18 U.S.C.
      1514A (the
“Sarbanes-Oxley Act”) in connection with the termination of his employment. We
      believed that the complaint was totally without merit, and filed an answer
      to
      the OSHA inquiry on October 3, 2005.  Page
            9
 **Table
            of Contents**


On
      December 7, 2005, we filed a complaint in the Superior Court in the Judicial
      District of Stamford, Connecticut against Mr. Nano for monetary and punitive
      damages, alleging breach of contract, breach of fiduciary duty, statutory theft
      of confidential information, and other claims, including a request for an
      injunction preventing Mr. Nano from competing with CTT with products and
      business contacts originally coming to Mr. Nano’s attention through his
      employment at CTT. Further action on this matter is pending.




On
      March
      2, 2006, Mr. Nano notified OSHA that he was withdrawing his complaint, reserving
      his right to file the action in U.S. District Court. On May 26, 2006, Mr. Nano
      filed a complaint in the United States District Court of Connecticut in New
      Haven, Connecticut, alleging that CTT violated Section
      806 of the Sarbanes-Oxley
      Act in connection with the termination of his employment. In his complaint
      Mr.
      Nano seeks monetary damages, punitive damages, attorneys’ fees, and costs and
      other remuneration at the option of the court. We believe that the complaint
      is
      totally without merit, and intend to defend it vigorously.




On
      November 13, 2006, Mr. Nano amended his complaint in the United States District
      Court of Connecticut in New Haven, Connecticut, to include all claims previously
      filed in the state court action, including his request for a pre-judgment remedy
      of attachment of $1.4 million. Then on November 16, 2006, Mr. Nano withdrew
      his
      original complaint from the Connecticut state court. Further action in all
      these
      matters is pending, but we currently expect the hearing on the pre-judgment
      remedy of attachment to be heard during the first calendar quarter of
      2007.




*Employment
      matters - other*




On
      September 29, 2006, we received a demand letter from an attorney representing
      two of our officers (neither of whom is our Chief Executive or Financial
      Officer), demanding approximately $300,000 in total for commission payments
      alleged to be due them for  fiscal year 2006 under our prior annual
      incentive compensation plan, which was terminated in November 2005. These
      individuals received commission payments in fiscal year  2005 related to
      new homocysteine licenses granted in  fiscal year 2005, and are claiming
      that the company is obligated, and they were promised that the payments would
      continue for a period of two (2) years thereafter. It also is claimed in the
      letter that these individuals anticipate that they would be entitled to at
      least
      an aggregate additional $350,000 in commission payments in fiscal year 2007.
      We
      have put these individuals on administrative leave with pay while we review
      and
      address the matter, and we expect to vigorously defend any litigation that
      may
      arise from this matter. We cannot estimate the total amount of costs we may
      incur relating to this matter, but the costs may be significant, although a
      portion of the costs of any litigation may be covered by insurance.




*Securities
      and Exchange Commission*




On
      August
      11, 2004, the Securities and Exchange Commission (“SEC”), filed a civil suit in
      the United States District Court for the District of Connecticut, naming
      Competitive Technologies, Inc., our former President and CEO in 2001, and six
      individual brokers, alleging that from at least July 1998 to June 2001, the
      defendants were involved in a scheme to manipulate the price of our stock.
      The
      case relates to our 1998 stock repurchase program under which we repurchased
      shares of our common stock from time to time during the period from October
      28,
      1998 to March 22, 2001. CTT was named as a defendant in the suit due to the
      alleged conduct of our former CEO, whose conduct in connection with the stock
      repurchase program was imputed to CTT as a matter of law. Relating to CTT,
      the
      SEC seeks a permanent injunction prohibiting us from further violations of
      the
      Securities Exchange Act of 1934, and a  Page
            10
 **Table
            of Contents**


civil
      penalty pursuant to Section 21(d)(3) of the Securities Exchange Act of 1934
      (this section provides for maximum penalties of $550,000 for a corporate entity
      and $110,000 per individual). On September 24, 2004, we responded to this civil
      suit, and filed a motion to dismiss the suit. On October 15, 2004, the SEC
      filed
      a motion opposing our motion to dismiss the suit. On July 21, 2005, our motion
      to dismiss the suit was denied. On April 10, 2006, we filed a separate motion
      for summary judgment to dismiss the case, and on June 15, 2006, the SEC filed
      a
      motion opposing our motion for summary judgment. On November 6, 2006, the court
      denied our motion for summary judgment. On November 17, 2006, we filed a motion
      for reconsideration requesting the court to re-examine the dismissal of our
      motion for summary judgment. Further action in this case is pending. If our
      appeal of the denial of our motion for summary judgment in our favor is not
      successful, we expect that the case will go to a jury trial starting sometime
      in  calendar 2007.




We
      previously filed suit against our directors’ and officers’
      insurance carrier
      to obtain reimbursement of our costs to defend us and our directors and
      officers. As part of an October 2004 settlement, our insurance carrier
      acknowledged that the deductible under our insurance policy had been satisfied
      relating to the SEC’s civil suit. As a result, defense costs incurred in 2005
      and thereafter have been covered by our  insurance carrier, and we have not
      incurred any significant costs related to this matter since 2004. However,
      we
      cannot be certain that all future costs, including potential fines and
      penalties, will be covered by our insurance carrier.




*Laboratory
      Corporation of America Holdings d/b/a LabCorp (“LabCorp”)*




On
      June
      22, 2006, the United States Supreme Court ruled that the writ of certiorari
      previously granted to LabCorp had been improvidently granted, thus dismissing
      the writ and ending LabCorp’s appeal of this homocysteine assay infringement
      case originally filed on May 4, 1999 in the United States District Court for
      the
      District of Colorado. On September 21, 2006, the district court ruled on the
      remaining outstanding motions and claims related to this case, and as result
      of
      the ruling, the case effectively ended with no further awards granted. We did
      not receive any awards from this case in 2007 or 2006. As a result of this
      decision, the validity of our homocysteine patent was upheld.




*Other*




We
      also
      may be a party to other legal actions and proceedings for which we cannot
      predict the final outcomes. Since we are unable to estimate the legal expenses
      or the loss we may incur, or the possible damages we may recover in these
      actions, if any, we have not accrued any potential gain or loss in our financial
      statements. We record expenses in connection with these actions as they are
      incurred.




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


Page
            11
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            of Contents**




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





Forward-Looking
      Statements





Statements
      about our future expectations, including development 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 and if
      used
      in this Form 10-Q, the words “may,” “will,” “should,” “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 our ability to obtain rights to market technologies,
      market acceptance of and competition for our licensed technologies, growth
      strategies and strategic plans, operating performance and financing of our
      operations, industry trends, and other risks and uncertainties inherent in
      our
      business, including those set forth in Item 1A under the caption “Risk Factors,”
in our most recent Annual Report on Form 10-K for the year ended July 31, 2006,
      filed with the Securities and Exchange Commission (“SEC”) on October 30, 2006,
      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. We provide technology
      transfer, selling and licensing services focused on the technology needs of
      our
      customers, matching those requirements with commercially viable technology
      solutions, bridging the gap between market demand and raw innovation. We develop
      relationships with universities, companies, inventors and patent or intellectual
      property holders to obtain the rights or a license to their intellectual
      property, principally patents and inventions (collectively, the “Technology”),
      and they become our “Clients,” for whom we find markets to sell or further
      develop their Technology. We also develop relationships with those who have
      a
      need or use for Technologies, and they become our customers, usually through
      a
      license or sublicense. We identify and commercialize innovative Technologies
      in
      life and physical sciences, electronics, and nano science developed by
      universities, companies and inventors. Our goal is to maximize the value of
      intellectual assets for the benefit of our Clients, customers and
      shareholders.




We
      earn
      revenues primarily from licensing our Clients’ and our own Technologies to our
      customers (licensees). Our customers pay us royalties based on their usage
      of
      the Technology, and we share the fees with our Clients. In the normal course
      of
      our business, revenues will fluctuate from quarter to quarter (and year to
      year), due to normal fluctuations in revenues of our customers, the receipt
      of
      differing magnitudes of revenues from upfront license fees (received at the
      time
      certain licenses are granted), the granting of new licenses, the expiration
      of
      existing licenses, and/or the expiration or economic obsolescence of patents
      underlying licenses. As explained below, we had a concentration of revenues
      from
      a single source.




The
      following discussion and analysis provides information that we believe is
      relevant to an assessment and understanding of our financial condition and
      results of operations. This discussion and analysis should be read in
      conjunction with our Condensed Consolidated Financial Statements and the Notes
      thereto.  Page
            12
 **Table
            of Contents**


Reliance
      on one revenue source





For
      both
      the three months ended October 31, 2006 and 2005, we had a significant
      concentration of revenues from our homocysteine assay Technology. The patent
      for
      this Technology expires in early July 2007, and we will not receive any revenues
      from this Technology for sales made after that date. Revenues from our
      homocysteine assay Technology decreased compared to last year due to upfront
      license fees received in the prior year that did not occur in the current year,
      and a decrease in the number of tests performed reported by two of our
      licensees. We believe that we have licenses with the most significant
      distributors and laboratories in the United States that sell and/or perform
      tests used to measure homocysteine levels. We perform audits of our licensees
      to
      make sure we are capturing all available revenues. However, we also believe
      that
      part of the decrease in the number of tests reported may be due to suspected
      infringers who are selling homocysteine tests without a license.




We
      filed
      a patent infringement complaint against three suspected infringers but we
      believe that progress on this case may be subject to delaying tactics by the
      defendants, as well as the normal extended period of time it takes for such
      cases to work their way through the court system. In addition, in response
      to
      the patent enforcement action we filed, one of the defendants has requested
      the
      United States Patent and Trademark Office (the “USPTO”), to re-evaluate the
      validity of our patent. While we do not expect an adverse finding by the USPTO,
      such actions could further delay the ultimate resolution of the case, and
      negatively impact our reported financial results through decreased revenues
      and
      increased legal costs. For further information see Part II, Item 1., “Legal
      Proceedings”.




Presentation





We
      rounded all amounts in this Item 2 to the nearest thousand dollars, so 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 October 31, 2006 (“first quarter
      2007”) vs.
      three months ended October 31, 2005 (“first quarter
      2006” )





Summary
      of Results





We
      incurred a net loss for the first quarter 2007 of $1,122,000, or $0.14 per
      share, compared to a net loss of $333,000 or $0.04 per share, for the first
      quarter 2006, an increased net loss of $789,000, or $0.10 per share. As
      explained in detail below, the increase in the net loss is due to a $471,000
      decrease in revenues, and a $318,000 increase in expenses.





Revenues





In
      the
      first quarter 2007, total revenues were $895,000, compared to $1,366,000 for
      the
      first quarter 2006, a decrease of $471,000, or 34%.  Page
            13
 **Table
            of Contents**


*Retained
      royalties* for the
      first quarter 2007 were $730,000, which was $507,000, or 41% less than the
      $1,237,000 of retained royalties reported in the first quarter 2006. The
      following compares retained royalty revenues by Technology in the first quarter
      2007 with the first quarter 2006.




*For
                  the three months ended October 31,*Increase
              
              %
                  Increase**2006**
              
              2005
              
              (Decrease)
              
              (Decrease)Homocysteine
                  assay
              
              **$**
              **575,000**
              
              $
              1,080,000
              
              $
              (505,000
              )
              
              (47
              )%All
                  other Technologies
              
              
              **155,000**
              
              
              157,000
              
              
              (2,000
              )
              
              (1
              )%**Total
                  retained royalties**
              
              **$**
              **730,000**
              
              $
              1,237,000
              
              $
              (507,000
              )
              
              (41
              )%




Royalty
      revenues from our homocysteine technology decreased $505,000 in the first
      quarter 2007 compared to the first quarter 2006. Of the $1,080,000 of revenues
      received in the first quarter 2006 from our homocysteine assay, $224,000 was
      from upfront fees received in accordance with the terms of previously granted
      licenses. While the receipt of upfront fees is common, the magnitude of such
      fees has and will fluctuate, sometimes significantly from period to period,
      and
      we did not record any upfront fees in the first quarter 2007 ***.***  ****** Without
      the upfront fees, revenues for this Technology for the first quarter 2006 were
      $856,000, compared to $575,000 in the current year quarter, which is a $281,000,
      or 33% decrease. The decrease is due principally to fewer tests performed by
      two
      of our larger licensees. In addition, as explained above, we believe that
      infringers have negatively impacted the amount of revenues we are receiving
      relating to our homocysteine Technology.




Approximately
      79% of our retained royalties for the first quarter 2007 was from the
      homocysteine assay Technology. As explained above, the patent on this Technology
      expires in early July 2007, and we will not receive any revenues from this
      Technology for sales made after that date. 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.




*Investment
      income* includes
      dividends and interest earned on our invested cash. Investment income was
      $165,000 in the first quarter 2007, which was an increase of $38,000, or 30%
      over the $127,000 reported for the first quarter 2006. The increase was due
      to
      significantly higher rates of return earned on the invested cash in the current
      period compared to the same period of the prior year.  Page
            14
 **Table
            of Contents**


Expenses




*For
                  the three months ended October 31,*Increase
              
              %
                  Increase**2006**
              
              2005
              
              (Decrease)
              
              (Decrease)Personnel
                  and other direct expensesrelating
                  to revenues
              
              **$**
              **1,057,000**
              
              $
              889,000
              
              $
              168,000
              
              
              19
              %General
                  and administrative expenses
              
              
              **744,000**
              
              
              770,000
              
              
              (26,000
              )
              
              (3
              )%Patent
                  enforcement expenses, netof
                  reimbursements
              
              
              **216,000**
              
              
              40,000
              
              
              176,000
              
              
              440
              %**Total
                  expenses**
              
              **$**
              **2,017,000**
              
              $
              1,699,000
              
              $
              318,000
              
              
              19
              %




*Personnel
      and other direct expenses relating to revenues* increased a net $168,000 in the first quarter 2007, compared to the first
      quarter 2006, due to a combination of several factors. Personnel expenses
      increased a net $256,000 in the first quarter 2007, compared to the prior year,
      principally due to the addition of new business development and business
      development support employees during the prior year, and employee relocation
      costs. The additional staff allowed us to significantly increase our business
      development activities, including more thoroughly evaluating the revenue
      generating potential of new Technologies prior to acceptance. We believe that
      this ability will result in better Technologies being added to our portfolio
      and
      greater future recurring revenues. As a result of hiring new employees, we
      curtailed our use of paid consultants significantly, and consequently consulting
      expenses in the first quarter of 2007 decreased $115,000 compared to the prior
      year. Other direct expenses relating to revenues increased a net $26,000 as
      increased costs to audit our homocysteine licensees and increased foreign patent
      legal expenses were offset partially by a decrease in domestic patent legal
      expenses.




*General
      and administrative expenses* decreased a net $26,000 in the first quarter 2007, compared to the first quarter
      2006, as a result of a combination of several factors, though principally the
      result of a net decrease in corporate legal and litigation related expenses.
      Overall legal and litigation expenses decreased a net $63,000, due to a decrease
      aggregating to $218,000 as a result of decreased activity in the first quarter
      2007 related to litigation with our former President and Chief Executive
      Officer, and costs relating to our defense of a whistleblower complaint filed
      by
      a former employee (that subsequently was dismissed), offset in part by an
      aggregate $155,000 increase in legal expenses incurred in the first quarter
      2007, related to various other personnel related matters.




*Patent
      enforcement expenses, net of reimbursements* ,
      increased a net $176,000 in the first quarter 2007, compared to the first
      quarter 2006. The increase resulted from increased activity in the current
      year
      quarter related to a homocysteine patent infringement lawsuit initiated at
      the
      beginning of the prior fiscal year (see Part II, Item 1., “Legal Proceedings”),
      and also increased costs related to the arbitration with Palatin Technologies,
      Inc. The level of patent enforcement expenses relates to our legal strategies
      and varies depending on the stage and activity relating to the
      litigation.




Benefit
      for income taxes





We
      did
      not record a net benefit for income taxes in the first quarter 2007 or 2006,
      since the benefit was offset by an equal increase in the valuation
      allowance.


Page
            15
 **Table
            of Contents**




Financial
      Condition and Liquidity





Our
      liquidity requirements arise principally from our working capital needs,
      including funds needed to find, obtain and license new Technologies, to protect
      and enforce our intellectual property rights, if necessary, and to execute
      our
      strategic plan to grow our business. We fund our liquidity requirements
      principally from our cash on hand, and also cash flows from operations, if
      any.
      At October 31, 2006, 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
      October 31, 2006, cash and cash equivalents were $12,319,000, compared to
      $12,909,000 at July 31, 2006. Cash used in operating activities during the
      first
      quarter 2007 was $410,000, compared to cash used of $1,378,000 during the first
      quarter 2006. The difference in cash used in the first quarter 2007 compared
      to
      the first quarter 2006 was due principally to timing of receipt of revenues,
      collections of receivables and payments of accounts payable. Cash used in
      investing activities during the first quarter 2007 was $180,000, compared to
      $18,000 during the first quarter 2006. The increase in the current year related
      to the purchase of furniture and fixtures for our new office space, which we
      moved into in August 2006. Cash provided by financing activities during the
      first quarter 2006 was $798,000, principally due to sales of our common stock
      pursuant to an equity financing arrangement that terminated in the prior year.
      There was no cash provided by or used in financing activities during the first
      quarter 2007.




Changes
      in royalties receivable and payable reflect our normal cycle of royalty
      collections and payments, and fluctuate depending on income received and the
      date on which royalty receipts and payments are due to be paid out
      under our agreements with Clients and customers.




*Funding
      and capital requirements*





Capital
      requirements




We
      previously announced that part of our strategic plan was to reach $10
      million in annual recurring revenues over the next few years, achieve long-term
      profitability and increase shareholder value. To accomplish our goals, we have
      increased our efforts and are investing funds to explore new business
      opportunities, including expanding our marketing capabilities on a more global
      basis, searching for new sources of Technologies, licensing those Technologies,
      offering a broader range of services, and researching potential acquisition
      candidates or other strategic relationships. To accomplish our revenue goals,
      we
      have added more personnel to our business development team and added other
      personnel to support our expanding global business development activities.
      These
      activities require greater amounts of capital than we used previously. We expect
      this trend to continue.




In
      December 2006 a dissident group filed a proxy statement with the SEC contesting
      our board of directors’ proxy solicitation with respect to the election of
      directors. While we cannot estimate the total at this time, we expect that
      the
      costs to contest this group will be significant, and will be incurred during
      the
      quarter ended January 31, 2007.




In
      August
      2006 we moved to a new office. The new office space we moved into is larger
      than
      our previous office to accommodate our additional staff and provide for more
      efficient operations. Since the new space is larger than the prior space, our
      annual rent expense in 2007 and beyond will be approximately $100,000 - $125,000
      more than we incurred in 2006.




Page
            16
 **Table
            of Contents**




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





*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
      and
      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,
      2006.


Page
            17
 **Table
            of Contents**




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





We
      do not
      have significant market risk to the valuation of our assets other than risks
      related to our equity security holdings of Palatin Technologies, Inc. (“Palatin”)and
      Clinuvel Pharmaceuticals Limited (“Clinuvel”).
      The
      value of the Palatin stock is included in current assets in equity securities,
      while the value of the Clinuvel ( shares is included in noncurrent assets
      in equity securities, since our current intention is to hold the Clinuvel shares
      as a long term investment. The value of both assets is subject to market
      fluctuations in the per share price of the stock as well as foreign currency
      fluctuations relating to the Clinuvel shares, since Clinuvel common stock is
      traded on the Australian Stock Exchange, and the price per share of the stock
      is
      quoted in Australian dollars. We currently consider unrealized fluctuations
      in
      the fair value of both the Palatin and Clinuval shares to be temporary, and
      therefore have recorded changes in the fair values as part of other
      comprehensive loss, which is included as a component of equity. During the
      three
      months ended October 31, 2006, the following changes in fair value occurred
      with
      respect to the Palatin and Clinuvel shares:




*For
                  the three months ended October 31, 2006*Palatin
              
              Clinuvel
              
              TotalUnrealized
                  increase in marketprice
                  of securities
              
              $
              59,160
              
              $
              176,557
              
              $
              235,717Foreign
                  currency translation adjustmentson
                  securities
              
              
              —
              
              
              1,106
              
              
              1,106Other
                  comprehensive income
              
              $
              59,160
              
              $
              177,663
              
              $
              236,823


**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 the Securities Exchange Act of 1934
      (the
“Exchange Act”), Rules 13a-15(e) and 15d-15(e)), as of October 31, 2006 .
      Our
      disclosure controls and procedures are designed to ensure that information
      required to be disclosed by us in reports filed under the Exchange Act is
      recorded, processed, summarized, and reported as specified in the SEC’s rules
      and forms. Based on this evaluation, our Chief Executive Officer and Chief
      Financial Officer concluded that our disclosure controls and procedures were
      effective as of October 31 ,
      2006 .





(b) Changes
      in Internal Control over Financial Reporting





There
      were no changes in our internal control over financial reporting during the
      quarter ended October 31 ,
      2006 ,
      that
      have materially affected, or are reasonably likely to materially affect, our
      internal control over financial reporting.


Page
            18
 **Table
            of Contents**




**PART
      II - OTHER INFORMATION**





**Item
      1.** **Legal
      Proceedings**





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








**Item
      1A.** **Risk
      Factors**





There
      have been no material changes with respect to the risk factors disclosed in
      our
      Annual Report on Form 10-K for the fiscal year ended July 31, 2006.








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





None








**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).





Page
            19
 **Table
            of Contents**




**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/ D. J. Freed, Ph.D.


Donald
      J.
      Freed


President,
      Chief Executive Officer
      and Authorized Signer


Date: 
      December 14, 2006




COMPETITIVE
      TECHNOLOGIES, INC.


(the
      registrant)






By: 
      /s/ Michael D. Davidson


Michael
      D. Davidson


Senior
      Vice President, Chief Financial Officer,


Chief
      Accounting Officer and
      Authorized Signer




Date: 
      December 14, 2006


Page
            20
 **Table
            of Contents**




INDEX
      TO
      EXHIBITS




Exhibit
              No.
            Description  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).




Page
        21