What changed in this filing

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Item 1. Financial Statements

2009-08-10 compared with 2009-05-08 · 953 added, 709 removed, 764 unchanged (69% of the section changed)

34 unchanged sentences

11,560,357 and 10,879,900 shares

outstanding at March 31, 2009 and December 31, 2008, respectively

outstanding at June 30, 2009 and December 31, 2008, respectively

Additional paid-in capital

8 unchanged sentences

Consolidated Statements of Operations

Three Months Ended March 31

Three Months Ended June 30

Six Months Ended June 30

Income from operations:

9 unchanged sentences

General and administrative

Amortization and depreciation

Depreciation and amortization

Impairment loss

Loss before income taxes

3 unchanged sentences

Net realized loss on investments, net of related income tax benefit

Net change in unrealized appreciation (depreciation) of investments, net of related deferred tax benefit

Change in unrealized appreciation (depreciation) of investments, net of related deferred tax expense (benefit)

Net decrease in net assets from operations

1 unchanged sentence

Weighted average shares:

Dividend declared per share:

See accompanying notes

1 unchanged sentence

Consolidated Statements of Cash Flows

Three months ended March 31

Six Months Ended June 30

Operating Activities:

4 unchanged sentences

Net proceeds from sale (purchases) of short-term investments

Proceeds received on sale of equity investments

Net repayment from (investment in) UTEK Real Estate Holdings, Inc.

Proceeds received from sale of equity investments

Net repayment from UTEK Real Estate Holdings, Inc.

Goodwill and intangible asset impairment

Depreciation and amortization

2 unchanged sentences

Stock-based compensation

Severance compensation paid for in escrowed shares

Deferred income taxes

Investment securities received in connection with the sale of technology rights

Investment securities received in connection with the sale of

technology rights

Consulting and other services rendered in exchange for investment securities

6 unchanged sentences

Investing Activities:

Purchases of fixed assets

Cash received (paid) in connection with Strategos acquisition

Capital expenditures

Net cash flows from investing activities

Financing Activities:

Proceeds from borrowings on bank line of credit

Payments on notes payable and other debt

8 unchanged sentences

Consolidated Statements of Cash Flows (continued)

Three months ended March 31

Six Months Ended June 30

Supplemental Disclosures of Non-Cash Investing and Financing Activities

5 unchanged sentences

Liabilities assumed

The Company issued 502,970 shares of common stock to purchase Strategos.

In conjunction with the acquisition, liabilities were assumed as

Fair value of assets acquired

Fair value of common stock issued

contingent liability incurred

Liabilities assumed

The Company received a note in connection with the sale of certain investments

2 unchanged sentences

240,964 shares of NeoStem, Inc common stock

The Company issued 15,262 shares of common stock in connection with certain acquisition earnout contingencies

Three months ended March 31

The Company issued 18,380 and 137,046 shares of common stock in connection with certain acquisition earnout contingencies during the six

months ended June 30, 2009 and 2008, respectively

Investment securities earned for unearned services

Six Months ended June 30

Cash paid for taxes

3 unchanged sentences

Consolidated Statements of Changes in Net Assets

Three months ended March 31

Six Months Ended June 30

Changes in net assets from operations:

1 unchanged sentence

Net realized loss on sale of investments, net of related income taxes

Change in net unrealized appreciation (depreciation) of investments, net of related deferred taxes

Change in unrealized appreciation (depreciation) of investments, net of related deferred taxes

Net decrease in net assets from operations

4 unchanged sentences

Stock-based compensation

Severance compensation paid for in escrowed shares

Acquisition of Pharmalicensing Ltd.

Investment in UTEK Real Estate Holdings

Acquisition of Strategos

Escrow shares earnout

Investment in UTEK Real Estate Holdings

Net increase in net assets from stock transactions

6 unchanged sentences

Financial Highlights

Three Months Ended March 31

Six Months Ended June 30

PER SHARE INFORMATION

1 unchanged sentence

Net loss from operations (1)

Net change in realized gains (losses) and unrealized appreciation (depreciation) on investments, (after taxes) (2)

Net change in realized gains (losses) and unrealized appreciation (depreciation) on investments, (after related taxes) (2)

Foreign currency translation adjustment (1)

7 unchanged sentences

Ratio of expenses to average net assets

Ratio of net income from operations to average net assets

Ratio of net loss from operations to average net assets

Diluted weighted average number of shares outstanding during the period

6 unchanged sentences

Consolidated Schedule of Investments

March 31, 2009

June 30, 2009

Non-Affiliate Investments (1)

Greenwood Hudson Portfolio, LLC (privately held) (note receivable due on Dec 31, 2012, interest at 7%)

Greenwood Hudson Portfolio, LLC (privately held) (note receivable due 12/31/12, interest at 7%)

Cyberlux Corporation

3 unchanged sentences

Metal fatigue detection

Series E Convertible Preferred Stock

CytoDyn, Inc.

Novel therapeutic agents

Series A Convertible Preferred Stock

MiMedx Group, Inc.

5 unchanged sentences

Bioactive coatings for medical devices

Platina Energy Group Inc.

Oil and gas exploration and production

Series F Convertible Preferred Stock

NeoStem, Inc.

3 unchanged sentences

Design and manufacture of countertops

Platina Energy Group Inc.

Oil and gas exploration and production

Series F Convertible Preferred Stock

In Veritas Medical Diagnostics, Inc.

Medical devices designs and testing

Island Gas Resources Plc.

3 unchanged sentences

Convertible Debenture, due 9/30/06

In Veritas Medical Diagnostics, Inc.

Medical devices designs and testing

The Renewable Corp.

3 unchanged sentences

Affiliate Investments (2)

EClips Energy Technologies, Inc.

(World Energy Solutions, Inc.)

Energy saving technologies

Series B Convertible Preferred Stock

Series C Convertible Preferred Stock

CytoDyn, Inc.

Novel therapeutic agents

MachineTalker, Inc.

Intelligent wireless security networks

Klegg Electronics, Inc.

Manufacturer/distributor for retail electronic products

Emission & Power Solutions, Inc.

(Fuel FX International, Inc .) (privately held)

Reductional environmental emissions

Reductional environmental

Klegg Electronics, Inc.

Manufacturer/distributor for retail electronic products

Pathway One Plc (5)

6 unchanged sentences

Real estate development

Eclips Energy Technologies, Inc.

(World Energy Solutions, Inc.)

Energy saving technologies

Total Investments in Control Investments

1 unchanged sentence

Certificates of Deposit:

Doral BK Catano P R CD, maturity 6/29/09, interest rate @ 3.55%

Bank of America CD, maturity 11/19/09, interest rate @ 1.2%

6 unchanged sentences

Cash and other assets, less liabilities

Net assets at March 31, 2009

Net assets at June 30, 2009

Notes to Schedule of Investments:

8 unchanged sentences

(See Note 4 to the Notes to the Consolidated Financial Statements.)

As of March 31, 2009, all of the securities that we own are subject to legal restrictions on resale.

As of June 30, 2009, all of the securities that we own are subject to legal restrictions on resale.

As a result, our ability to sell or otherwise transfer the

3 unchanged sentences

Control investments are generally defined under the Investment Company Act of 1940 as companies in which the Company owns more than 25% of the voting securities or

where the Company holds one or more seats on the companys

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Board of Directors.

where the Company holds one or more seats on the companys Board of Directors.

We own 100% of UTEK Real Estate Holdings, Inc.

(UREHI), which holds five investments:

Rosbon LLC, ABM of Tampa Bay, Inc., 22

nd Street of Ybor City, Inc., Ybor City Group, Inc.

Rosbon LLC, ABM of Tampa Bay, Inc., 22 nd Street of Ybor City, Inc., Ybor City Group, Inc.

and Cortez 114, LLC.

UREHI holds 150 membership interests of the total membership interests

outstanding of Rosbon LLC and all of the outstanding shares of capital stock of ABM of Tampa Bay, Inc., 22 nd Street of Ybor City, Inc., Ybor City

Group, Inc and Cortez 114, LLC.

UREHI holds 150 of the

total membership interests outstanding of Rosbon LLC and all of the outstanding shares of capital stock of ABM of Tampa Bay, Inc., 22 nd Street of Ybor City, Inc., Ybor City Group, Inc and Cortez 114, LLC.

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The Company invests excess cash in a number of U.S.

4 unchanged sentences

Investment consists of warrants to purchase 1,500,000 shares of Oxygen Biotherapeutics, Inc., formerly Synthetic Blood International, Inc., common stock.

Investment consists of a loan receivable with Greenwood Hudson Portfolio, LLC, a company that purchased certain of our investments.

Investment consists of a loan receivable from Greenwood Hudson Portfolio, LLC, a company that purchased certain of our investments.

See accompanying notes

54 unchanged sentences

Internet sites host

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UBA Technology, Inc.

Software development

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Series A Convertible Preferred Stock

15 unchanged sentences

(Fuel FX International, Inc .) (privately held)

Reductional environmental emissions

Reductional environmental

NeoStem, Inc.

22 unchanged sentences

Software products

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NutriPure Beverages, Inc.

5 unchanged sentences

Total Investments in Affiliates

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Control Investments (3)

32 unchanged sentences

Affiliate investments are generally defined under the Investment Company Act of 1940 as companies in which the Company owns at least 5% but not more than 25% of the voting

Control investments are generally defined under the Investment Company Act of 1940 as companies in which the Company

owns more than 25% of the voting securities or where the Company holds one or more seats on the companys Board of Directors.

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Control investments are generally defined under the Investment Company Act of 1940 as companies in which the Company owns more than 25% of the voting securities or

where the Company holds one or more seats on the companys Board of Directors.

We own 100% of UTEK Real Estate Holdings, Inc.

(UREHI), which holds four investments:

Rosbon LLC, ABM of

Tampa Bay, Inc., 22 nd Street of Ybor City, Inc.

Rosbon LLC, ABM of Tampa Bay, Inc., 22 nd Street of Ybor City, Inc.

and Ybor City Group, Inc.

UREHI holds 150 membership interests of the total membership interests

outstanding of Rosbon LLC and all of the outstanding shares of capital stock of ABM of Tampa Bay, Inc., 22 nd Street of Ybor City, Inc.

and Ybor City

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UREHI holds 150 of the total membership

interests outstanding of Rosbon LLC and all of the outstanding shares of capital stock of ABM of Tampa Bay, Inc., 22 nd Street of Ybor City, Inc.

and Ybor City Group, Inc.

The Company invests excess cash in a number of U.S.

13 unchanged sentences

Notes to Consolidated Financial Statements

Three months ended March 31,

Six Months Ended June 30,

2009 and 2008

Nature of Business and Significant Accounting Policies

Financial Information

The financial information for UTEK Corporation (the Company, we, us or UTEK) as

of March 31, 2009 and 2008 and for the three month periods then ended is unaudited, but includes all adjustments (consisting only of normal recurring accruals), which, in the opinion of management are necessary in order to make the consolidated

financial statements not misleading at such dates and for those periods.

These consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial

information and, therefore, do not include all information and notes required by accounting principles generally accepted in the United States of America for complete consolidated financial statements.

These consolidated financial statements should

be read in conjunction with the consolidated audited financial statements and related notes included in the Companys Form 10-K/A for the year ended December 31, 2008.

Operating results for the three months ended March 31, 2009 are

not necessarily indicative of the results that may be expected for the entire year.

The Company provides services that help clients become stronger innovators, develop compelling strategies to drive growth, rapidly source externally developed

technologies, create value from their intellectual property and gain foresight into marketplace and technology developments that affect their business.

Interim Financial Information

The financial information for UTEK Corporation (the Company, we, us or UTEK) as of June 30, 2009 and 2008 and for the

three and six month periods then ended is unaudited, but includes all adjustments (consisting only of normal recurring accruals), which, in the opinion of management are necessary in order to make the consolidated financial statements not misleading

at such dates and for those periods.

These consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and, therefore, do not

include all information and notes required by accounting principles generally accepted in the United States of America for complete consolidated financial statements.

These consolidated financial statements should be read in conjunction with the

consolidated audited financial statements and related notes included in the Companys Form 10-K/A for the year ended December 31, 2008.

Operating results for the three and six months ended June 30, 2009 are not necessarily indicative

of the results that may be expected for the entire year.

The Company provides services that help clients become stronger innovators, develop compelling strategies to drive growth, rapidly source externally developed technologies, create value from their intellectual

property and gain foresight into marketplace and technology developments that affect their business.

These services are primarily provided throughout the United States and the United Kingdom.

The Company is a non-diversified, closed-end management investment company that has elected to be treated as a business development company

(BDC) under the Investment Company Act of 1940 (1940 Act).

The Company is a non-diversified, closed-end management investment company that has elected to be treated as a business development company (BDC) under the

Investment Company Act of 1940 (1940 Act).

On July 16, 2009, the stockholders voted in favor of a proposal to authorize the Board of

Directors to withdraw the Companys election to be treated as a business development company (BDC) under the 1940 Act.

We will not consider de-election of the BDC until the Company has a plan to divest itself of its equity interests

in the portfolio companies in which it holds a more than 20% ownership.

Because we have equity interests equaling more than 20% ownership in these portfolio companies, we would be required to use the equity method of accounting to consolidate the

financial accounts of these portfolio companies with those of the Company after we withdraw our election to be regulated as a BDC.

However, because the Company does not control these portfolio companies, the Company will not be able to dictate the

timing of their provision of financial information to the Company for inclusion in its financial statements, which may result in the late filing of the Companys annual reports on Form 10-K and quarterly reports on Form 10-Q with the SEC.

Therefore, the Company began liquidating a portion of its investment portfolio during 2009.

Innovation Consulting

8 unchanged sentences

Sale of Technology Rights

To effectuate a technology transfer, we have historically created a newly formed company to acquire a new

technology from a university, medical center, corporation or federal research laboratory and then sell this newly formed company to our client for securities or cash.

It is our plan that any shares we receive in these exchanges will, in the course

of our business, be sold for cash or other assets.

A benefit of effectuating technology transfers in exchange for shares is that such transactions do not result in a current taxable event for us for income tax purposes.

We have not acquired, and do

not currently intend to acquire a new technology from a university, medical center, corporation and federal research laboratory in connection with our technology transfer process without the prior agreement of our client to subsequently acquire such

new technology from us.

Subscription and Other Services

Global Technology Licensing

The Companys global technology licensing division is designed to help our clients enhance their new product

pipeline through the acquisition of proprietary technologies primarily from universities, medical centers, corporations and federal research laboratories.

The Company may receive cash or unregistered shares of common stock from companies as payment

for the services we provide.

Technology transfers are completed according to the terms set forth in these agreements with our client companies.

Our services enable companies to acquire externally developed technologies from universities, university

incubators, federal labs, medical centers, and corporate research laboratories worldwide to augment their internal research and development (R&D) efforts.

A sale of technology rights refers to the process by which new technologies,

developed in universities, government research facilities, corporate R&D labs or similar research settings, are licensed to companies for potential commercial development and use.

Our goal is to provide our clients an opportunity to acquire and

commercialize innovative technologies primarily developed external to their business.

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Patent Analytic Services

The Companys patent analytic services division uses a team of on-call scientists and industry experts to provide technical and business knowledge to help our clients identify, assess, protect and leverage their intellectual property

assets (IP).

This division helps clients identify the strengths and weaknesses of corporate IP and competitors IP.

This division also identifies gaps in competitors IP portfolios that reveal opportunities to pursue for our

Information Services Website Subscriptions

The Companys subscription-based website services include the following:

Subscription and Other Services

Online Licensing Platform

The Companys online licensing services division provides the following subscription-based

website services:

Pharmalicensing is a biopharmaceutical innovation resource designed for life science professionals involved with partnering, licensing and business

1 unchanged sentence

Pharmalicensing affords clients the ability to in-license and out-license intellectual property and also provides partnering services, business development reports, industry news and a jobs source for candidates and employers.

Pharma Transfer provides a source of research and business development opportunities for the international pharmaceutical market encompassing all areas of

pipeline development, from early-stage discovery, through pre-clinical and clinical trials, to registered products that are all available for co-development or licensing.

Pharma Transfer provides a source of research and business development opportunities for the international pharmaceutical market encompassing all

areas of pipeline development, from early-stage discovery, through pre-clinical and clinical trials, to registered products that are all available for co-development or licensing.

TechEx is an online searchable database for life and physical science discoveries.

Knowledge Express is a searchable database of information for licensing professionals, which provides our clients with comprehensive coverage of licensing

agreements, corporate profiles, clinical trials, deals, drug pipelines, drug sales, licensable technologies, patents and royalty rates.

TekScout enables companies to outsource unfinished research and development (R&D) projects to scientists from around the world.

provides a platform for companies to supplement internal R&D and resources to accelerate product development.

Principles of

Consolidation

UTEK Corporation commenced operations in 1997, originally incorporated under the laws of the State of Florida and subsequently under the

laws of the State of Delaware in July 1999.

Knowledge Express is a searchable database of information for licensing professionals, which provides our clients with comprehensive coverage of

licensing agreements, corporate profiles, clinical trials, deals, drug pipelines, drug sales, licensable technologies, patents and royalty rates.

TekScout enables companies to outsource unfinished R&D projects to scientists from around the world.

TekScout provides a platform for companies to

supplement internal R&D and resources to accelerate product development.

Global Technology Licensing

The Companys global technology licensing division is designed to help our clients enhance their new product pipeline through the acquisition or licensing of

proprietary technologies primarily from universities, medical centers, corporations and federal research laboratories.

The Company may receive cash or unregistered shares of common stock from companies as payment for the services we

Technology transfers are completed according to the terms set forth in these agreements with our client companies.

Patent Analytic Services

The Companys patent analytic services division uses a team of on-call scientists and industry experts to provide technical and business knowledge to

help our clients identify, assess, protect and leverage their intellectual property assets (IP).

This division helps clients identify the strengths and weaknesses of their IP and competitors IP.

This division also identifies gaps

in competitors IP portfolios that reveal opportunities to pursue for our clients.

Principles of Consolidation

UTEK Corporation commenced operations in 1997, originally incorporated under the laws of the State of Florida and subsequently under the laws of the State of Delaware in

The consolidated financial statements include the accounts of UTEK Corporation and its wholly owned subsidiaries;

UTEK Europe, Ltd.

(Europe) and UTEKip, Ltd.

UTEKip was closed down in 2008 and

all operations of that subsidiary are currently being serviced by UTEK, although the legal entity has not yet been dissolved.

(Europe) and UTEK ip , Ltd.

UTEK ip was closed down in 2008 and all operations of

that subsidiary are currently being serviced by UTEK, although the legal entity has not yet been dissolved.

In addition, the legal entities for Innovaro, Ltd., Pharmalicensing, Ltd., Carmi, Inc.

(Strategos), and Social

Technologies, Group, Inc.

(Strategos), and Social Technologies, Group, Inc.

still exist, but their operations have been assimilated by UTEK and UTEK Europe.

1 unchanged sentence

Portfolio investments are held for the purpose of deriving investment income and future capital gains.

The financial results of the Companys portfolio companies are not consolidated in the Companys

financial statements.

The financial results of the Companys portfolio companies are not consolidated in the Companys financial statements.

Reclassifications

reclassifications have been made to the three months ended March 31, 2008 balances to conform to the three months ended March 31, 2009 financial statement presentation.

Certain reclassifications have been

made to the three and six months ended June 30, 2008 balances to conform to the three and six months ended June 30, 2009 financial statement presentation.

Business Combinations

For acquisitions prior to 2009, we determine and allocate the purchase price of an acquired

company to the tangible and intangible assets acquired and liabilities assumed as of the business combination date in accordance with Financial Accounting Standards Board (FASB) Statement No.

company to the tangible and intangible assets acquired and liabilities assumed as of the business combination date in accordance with Statement of Financial Accounting Standards (SFAS) No.

141, Business Combinations .

price allocation process requires us to use significant estimates and assumptions, including fair value estimates, as of the business combination date.

While we use our best estimates and assumptions as a part of the purchase price allocation process to accurately value assets acquired and liabilities assumed at the business combination date, our estimates and assumptions are inherently

uncertain and subject to refinement.

As a result, during the purchase price allocation period, which is generally one year from the business combination date, we record adjustments to the assets acquired and liabilities assumed, with the

corresponding offset to goodwill.

In addition, there are contingencies based on earnings included in some of our purchase agreements.

The earnout is recorded as it is earned over the contingency period, which is generally one to three years from the

business combination date.

purchase price allocation process requires us to use significant estimates and assumptions, including fair value estimates, as of the business combination date.

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exception of unresolved income tax matters or the earnout of contingent consideration, subsequent to the purchase price allocation period any adjustment to

assets acquired or liabilities assumed is included in our operating results in the period in which the adjustment is determined.

In January 2009, the

Company adopted Statement of Financial Accounting Standards (SFAS) No.

While we use our best estimates and assumptions as a part of the purchase price allocation process to accurately value

assets acquired and liabilities assumed at the business combination date, our estimates and assumptions are inherently uncertain and subject to refinement.

As a result, during the purchase price allocation period, which is generally one year from

the business combination date, we record adjustments to the assets acquired and liabilities assumed, with the corresponding offset to goodwill.

In addition, there are contingencies based on earnings (commonly referred to as earnouts) included in

some of our purchase agreements.

The earnout is recorded as it is earned over the contingency period, which is generally one to three years from the business combination date.

With the exception of unresolved income tax matters or the earnout of

contingent consideration, subsequent to the purchase price allocation period any adjustment to assets acquired or liabilities assumed is included in our operating results in the period in which the adjustment is determined.

In January 2009, the Company adopted SFAS No.

141(R), Business Combinations , which replaces SFAS No.

The statement retains the fundamental requirements in SFAS No.

acquisition method of accounting (previously referred to as the purchase method of accounting) be used for all business combinations, but requires a number of changes, including changes in the way assets and liabilities are recognized as a result of

business combinations.

141(R) requires that more assets and liabilities assumed will be measured at fair value as of the acquisition date and that liabilities related to contingent consideration will be remeasured at fair value in each

subsequent reporting period.

The statement retains the fundamental

requirements in SFAS No.

141 that the acquisition method of accounting (previously referred to as the purchase method of accounting) be used for all business combinations, but requires a number of changes, including changes in the way assets

and liabilities are recognized as a result of business combinations.

141(R) requires that more assets and liabilities assumed will be measured at fair value as of the acquisition date and that liabilities related to contingent

consideration will be re-measured at fair value in each subsequent reporting period.

It also requires the capitalization of in-process research and development at fair value and requires the expensing of acquisition-related costs as incurred.

The impact of the adoption of SFAS No.

141(R) will depend

on the nature of acquisitions completed after the date of adoption.

Cash and Cash Equivalents

The Company considers all highly liquid, fixed income investments with maturities of three months or less at the time of acquisition to be cash equivalents.

impact of the adoption of SFAS No.

141(R) will depend on the nature of acquisitions completed after the date of adoption.

Cash and Cash

The Company considers all highly liquid, fixed income investments with maturities of three months or less at the time of acquisition to be

cash equivalents.

Accounts Receivable

The Company provides an allowance for losses

on trade receivables based on a review of the current status of existing receivables and managements evaluation of periodic aging of accounts.

The Company charges off accounts receivable against the allowance for losses when an account is

deemed to be uncollectible.

provides an allowance for losses on trade receivables based on a review of the current status of existing receivables and managements evaluation of periodic aging of accounts.

The Company charges off accounts receivable against the allowance

for losses when an account is deemed to be uncollectible.

It is not the Companys policy to accrue interest on past due receivables.

The provision for doubtful accounts and notes was approximately $84,000 and $120,000 as of March 31, 2009 and 2008, respectively.

The provision for doubtful accounts and notes was approximately $148,000 and $137,000 as of June 30, 2009

and 2008, respectively.

Goodwill and Intangible Assets

Goodwill represents

the excess of the purchase price over the fair value of the assets acquired in connection with the Companys acquisitions.

Intangible assets represent the cost of trade marks, trade names, websites, customer lists, non-compete agreements, and

proprietary processes and software obtained in connection with certain of the Companys acquisitions.

The Company adheres to the Statement of Financial Accounting Standards No.

Goodwill represents the excess of the purchase price over the fair value of the assets acquired in connection with the Companys acquisitions.

Intangible assets represent the cost of trade marks, trade names, websites, customer lists,

non-compete agreements, and proprietary processes and software obtained in connection with certain of the Companys acquisitions.

The Company adheres to the SFAS No.

142, Goodwill and Other Intangible Assets .

goodwill is not being amortized but is subject to annual impairment tests.

Accordingly, goodwill

is not being amortized but is subject to annual impairment tests.

Intangible assets with finite lives are amortized over their estimated useful lives.

of June 30, 2009, the Social Technologies division of UTEK had significant declines in revenues related to their futures and foresight projects.

The state of the economy during 2009 contributed to potential Social Technologies clients

focusing on short-term survival rather than long-term foresight planning.

As a result, management has terminated the majority of the divisions employees in favor of an independent, network based approach in an effort to reduce overhead.

Management concluded that this division has suffered a significant adverse change in the business, which includes a projection of continuing operating and cash flow losses.

In accordance with SFAS No.

142 and SFAS No.

144, Accounting

for the Impairment or Disposal of Long-lived Assets , the Company determined that there was impairment of the divisions purchased intangible assets of $1.0 million and impairment of the divisions goodwill of $1.3 million as of

June 30, 2009.

Revenue Recognition

Innovation Consulting Services

Related to the Companys acquisition of Strategos in 2008, the Company recognizes certain strategic consulting revenues in accordance with Statement of Position 81-1, Accounting for Performance of

Construction-Type and Certain Production-Type Contracts .

Accordingly, revenues on fixed fee contracts are recognized under the percentage-of-completion methods of accounting, whereby contract revenues are recognized on a pro rata basis based

upon costs incurred to date compared to total estimated contract costs.

In cases where losses are estimated to be incurred upon completion of contracts, the full provision for such losses is charged to operations when they become known.

some of the Companys contracts provide for substantial contingent fees if future performance milestones are successfully met.

Contingent fees are recorded based on the Companys estimate of the likelihood of reaching future performance

Related to the Companys acquisition of Social Technologies Group, Inc.

in 2008, the Company has certain other consulting revenue that is

Consulting Services

Related to the Companys Strategos division, the Company recognizes certain strategic consulting revenues in accordance with

Statement of Position 81-1, Accounting for Performance of Construction-Type and Certain Production-Type Contracts .

Accordingly, revenues on fixed fee contracts are recognized under the percentage-of-completion method of accounting, whereby

contract revenues are recognized on a pro rata basis based upon costs incurred to date compared to total estimated contract costs.

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In cases where losses are estimated to be incurred upon completion of contracts, the full provision for such losses is charged to operations when they become

In addition, some of the Companys contracts provide for substantial contingent fees if future performance milestones are successfully met.

Contingent fees are recorded based on the Companys estimate of the likelihood of reaching

future performance milestones.

Related to the Companys Social Technologies division, the Company has certain other consulting revenue that is

derived from the sale of services in technology foresight, forecasting, scenario playing, vision, creativity and leadership, as well as the sale of services to provide for the design, development and implementation of custom software applications.

Consulting services revenue is recognized when all the deliverables associated with the consulting contract have been provided to the customer.

Vendor specific objective evidence is not available to allocate among the respective deliverables.

Accordingly, the Company recognizes revenue at the point when all the deliverables have been provided to the customer.

Before the Company recognizes

revenue, the following criteria must be met:

Accordingly, the Company recognizes consulting services revenue at the point when all the deliverables associated with the consulting contract have

been provided to the customer.

Before the Company recognizes revenue, the following criteria must be met:

Evidence of a financial arrangement or agreement must exist between the Company and its customer.

1 unchanged sentence

examples of items accepted by the Company to meet this criterion.

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Delivery of the products or services must have occurred.

16 unchanged sentences

The Company recognizes revenue from the sale of technology rights upon the exchange of the

securities of our newly formed companies for securities in the portfolio company that acquires such newly formed company and the technology held by such newly formed company.

The Company records revenue based on the fair value of the consideration

In most cases, the consideration received for the rights is unregistered shares of common or preferred stock of the portfolio company.

securities of our newly formed companies for cash or securities in the portfolio company that acquires such newly formed company and the technology held by such newly formed company.

The Company records revenue based on the fair value of the

consideration received.

Historically, the consideration received for the rights has been unregistered shares of common or preferred stock of the portfolio company.

Subscription and Other Services

1 unchanged sentence

cash and initially is deferred and subsequently recognized ratably over the term of the subscription, which is typically one year.

Technology acquisition

alliance services are performed pursuant to service agreements in which UTEK provides consulting services by identifying and evaluating technology acquisition opportunities in exchange for unregistered shares of the portfolio company or cash.

Global technology

licensing services are performed pursuant to service agreements in which UTEK provides consulting services by identifying and evaluating technology licensing opportunities in exchange for unregistered shares of the portfolio company or cash.

agreements are typically cancelable with thirty days notice.

Revenue from technology acquisition alliance agreements in which unregistered shares of

common stock are received before they are earned are deferred and recognized over the term of each agreement.

For technology acquisition alliance agreements in which the stock is received ratably over the agreement, revenue is recognized as earned.

The common stock received as payment is recorded as income based on the fair value of the consideration received.

At March 31, 2009, the Company did not have any technology acquisition alliance agreements for which payment was to be received in

Net realized losses on

investments in the accompanying consolidated statements of operations are net of income tax expense (benefit) of $-0- and $(76,000) for the three months ended March 31, 2009 and 2008, respectively.

Change in unrealized appreciation

(depreciation) of investments in the accompanying consolidated statements of operations is net of deferred tax expense (benefit) of $-0- and $(2.7 million) for the three months ended March 31, 2009 and 2008, respectively.

The Company did not

have any income tax benefit or deferred income tax benefit in 2009 because of a 100% valuation allowance.

Revenue from global technology licensing agreements in which unregistered shares of common

stock are received before they are earned are deferred and recognized over the term of each agreement.

For global technology licensing agreements in which the stock is received ratably over the agreement, revenue is recognized as earned.

stock received as payment is recorded as income based on the fair value of the consideration received.

At June 30, 2009, the Company did not have any global technology licensing agreements for which payment was to be received in stock.

The Company does not have any income tax

benefit or deferred income tax benefit related to its net loss from operations in 2009, nor does it have a deferred tax asset related to its net operating loss carryforward, because of a 100% valuation allowance.

The Company does have an income tax

benefit from the reversal of a deferred tax liability related to the impairment of an indefinite-lived intangible asset and from foreign tax for the three and six months ended June 30, 2009.

Page 19 of 44

Earnings per Share (EPS)

Basic earnings per share is computed on the basis of the weighted-average number of shares of common stock outstanding during the period.

Diluted earnings per share is

computed on the basis of the weighted-average number of shares of common stock outstanding plus the effect of dilutive potential common shares outstanding during the period using the treasury stock method.

The Companys dilutive potential

common shares consist of outstanding stock options.

Diluted earnings per share is computed on the basis of the weighted-average number of shares of common

stock outstanding plus the effect of dilutive potential common shares outstanding during the period using the treasury stock method.

The Companys dilutive potential common shares consist of outstanding stock options.

Components of basic and diluted earnings per share are as follows:

Three months ended March 31

Three Months Ended June 30

Six Months Ended June 30

Weighted-average outstanding shares of common stock

2 unchanged sentences

Shares excluded from calculation of diluted EPS (1)

(1) These shares attributable to outstanding stock options were excluded from the calculation of diluted EPS because their inclusion would have been anti-dilutive, primarily as a result of

the net decrease in net assets from operations during the period.

Page 19 of 42

These shares attributable to outstanding stock options were excluded from the calculation of diluted EPS because their inclusion would have been anti-dilutive, primarily as a result

of the net decrease in net assets from operations during the period.

Financial Instruments and Concentrations of Credit Risk

The Companys financial instruments consist of investments, U.S.

Treasuries and certificates of deposit, cash and cash equivalents, accounts receivable, accounts

payable and accrued expenses.

Treasuries and certificates of deposit, cash and cash equivalents, accounts

receivable, accounts payable and accrued expenses.

The fair value of trade accounts receivable and payable and certain accrued expenses approximate their carrying amounts in the financial statements due to the short maturity of such instruments.

The fair value of

certificates of deposit is recorded based upon their market value.

fair value of U.S.

Treasuries and certificates of deposit is recorded based upon their market value.

The fair value of all other investments is determined by the Board of Directors as further discussed in Note 4.

Financial instruments with significant credit risk include investments and cash and cash equivalents.

The Company invests its cash and cash equivalents and certificates of deposit with high credit quality financial

institutions.

Certain cash and cash equivalents were in excess of FDIC insurance limits at March 31, 2009.

The Company invests its cash and cash equivalents and certificates

of deposit with high credit quality financial institutions.

Certain cash and cash equivalents were in excess of FDIC insurance limits at June 30, 2009.

The Company has not experienced any losses on such accounts.

The Company had two major customers during the three months ended March 31, 2009 and two major customers during the three months ended March 31, 2008.

Major customers, those generating greater than 10% of

total income from operations, accounted for approximately 27% and 71% of the Companys revenue during the three months ended March 31, 2009 and 2008, respectively.

The Companys most significant portfolio investments at March 31, 2009 were in UTEK Real Estate Holdings, Inc., Eclips Energy Technologies, Inc., Greenwood Hudson Portfolio, LLC and Cyberlux Corporation.

The Company had one major customer during each of the three and six months ended June 30, 2009 and three major customers during each of the three and six months

ended June 30, 2008.

Major customers, those generating greater than 10% of total income from operations, accounted for approximately 10% and 51% of the Companys revenue during the three months ended June 30, 2009 and 2008,

respectively.

Major customers accounted for approximately 11% and 42% of the Companys revenue during the six months ended June 30, 2009 and 2008, respectively.

The Companys most significant portfolio investments at June 30, 2009 were in UTEK Real Estate Holdings, Inc., Eclips Energy Technologies, Inc., Greenwood Hudson Portfolio, LLC and Cyberlux Corporation.

These four investments totaled $7.85 million in fair value and represented 86% of our investments, excluding our investments in U.S.

Treasuries and certificates of deposits, and 21% of total assets at March 31, 2009.

Treasuries and certificates of deposits, and 21% of total assets at June 30, 2009.

Use of Estimates

5 unchanged sentences

Actual results could differ from those estimates.

Subsequent Events

The Company evaluated subsequent events through the time of filing this Quarterly Report on Form 10-Q on August 10, 2009.

Page 20 of 44

Recent Accounting Pronouncements

In October 2008, the FASB issued FSP No.

157-3, Determining the Fair Value of a Financial Asset When the Market for That Asset is Not Active (FSP

FSP 157-3 provides an illustrative example of how to determine the fair value of a financial asset in an inactive market.

The FSP does not change the fair value measurement principles set forth in SFAS 157.

Since adopting SFAS 157 in

In October 2008, the Financial Accounting Standards Board (FASB) issued FSP No.

FAS 157-3, Determining the Fair Value of a Financial Asset When the Market for That Asset is Not Active .

157-3 provides an illustrative example of how to determine the fair value of a financial asset in an inactive market.

The FSP does not change the fair value measurement principles set forth in SFAS No.

Since adopting SFAS No.

January 2008, UTEKs practices for determining the fair value of its investment portfolio have been, and continue to be, consistent with the guidance provided in the example in FSP 157-3.

Therefore, UTEKs adoption of FSP 157-3 did not

affect its practices for determining the fair value of its investment portfolio and does not have a material effect on its financial position or results of operations.

affect its practices for determining the fair value of its investment portfolio and did not have a material effect on its consolidated financial statements.

In April 2009, the FASB issued FSP No.

FAS 157-4, Determining Fair Value When the Volume and Level of Activity for the Asset or Liability Have Significantly Decreased and Identifying Transactions That Are Not

Orderly (FSP 157-4) and FSP No.

FAS 107-1 and APB 28-1, Interim Disclosures About Fair Value of Financial Instruments (FSP 107-1) .

Both FSPs are effective for reporting periods ending on or after

June 15, 2009, although early adoption will be permitted under some conditions and can be applied for periods ending on or after March 15, 2009.

Since adopting SFAS 157 in January 2008, UTEKs practices for determining fair value and

for disclosures about the fair value of its investment portfolio have been, and continue to be, consistent with the guidance provided in FSP 157-4 and FSP 107-1.

Therefore, UTEKs adoption of both FSP 157-4 and FSP 107-1 will not have a

material effect on its financial position or results of operations.

In April 2009, the FASB issued FSP FAS 141(R)-1 which amends SFAS No.

establishing a model to account for certain pre-acquisition contingencies.

Under the FSP, an acquirer is required to recognize at fair value an asset acquired or a liability assumed in a business combination that arises from a contingency if the

acquisition-date fair value of that asset or liability can be determined during the measurement period.

FAS 157-4, Determining Fair Value When the Volume and Level of Activity for the Asset or Liability Have Significantly Decreased and Identifying Transactions That Are Not Orderly , and FSP No.

107-1 and APB 28-1, Interim Disclosures About Fair Value of Financial Instruments.

Both FSPs were effective for the Company beginning with our Quarterly Report on Form 10-Q for the three and six months ended June 30, 2009.

Since adopting

SFAS 157 in January 2008, UTEKs practices for determining fair value and for disclosures about the fair value of its investment portfolio have been, and continue to be, consistent with the guidance provided in FSP 157-4 and FSP 107-1.

Therefore, UTEKs adoption of both FSP 157-4 and FSP 107-1 did not have a material effect on our consolidated financial statements

In April 2009, the

FASB issued FSP No.

FAS 141(R)-1, Accounting for Assets Acquired and Liabilities Assumed in a Business Combination That Arise from Contingencies .

FSP 141(R)-1 amends SFAS No.

141(R) by establishing a model to account for certain

pre-acquisition contingencies.

Under the FSP, an acquirer is required to recognize at fair value an asset acquired or a liability assumed in a business combination that arises from a contingency if the acquisition-date fair value of that asset or

liability can be determined during the measurement period.

If the acquisition-date fair value cannot be determined, then the acquirer should follow the recognition criteria in SFAS No.

Accounting for Contingencies , and FASB Interpretation No.

5, Accounting for Contingencies , and FASB

Interpretation No.

14, Reasonable Estimation of the Amount of a Loss an interpretation of FASB Statement No.

141(R) and FSP FAS 141(R)-1 were effective for the

Company beginning January 1, 2009, and will apply prospectively to business combinations completed subsequent to that date.

The impact of the adoption of FSP FAS 141(R)-1 will depend on the nature of acquisitions completed after the date of

Page 20 of 42

141(R) and FSP 141(R)-1 were effective for the Company beginning January 1, 2009, and will

apply prospectively to business combinations completed subsequent to that date.

The impact of the adoption of FSP 141(R)-1 will depend on the nature of acquisitions completed after the date of adoption.

In May 2009, the FASB issued SFAS No.

165, Subsequent Events .

165 establishes authoritative accounting and disclosure guidance for recognized

and non-recognized subsequent events that occur after the balance sheet date but before the financial statements are issued.

165 also requires disclosure of the date through which an entity has evaluated subsequent events and the basis

for that date.

165 was effective for the Company beginning with our Quarterly Report on Form 10-Q for the three and six months ended June 30, 2009 and had no impact on our consolidated financial statements.

In June 2009, the FASB issued SFAS No.

167, Amendments to FASB Interpretation No.

46(R) , which amends the consolidation guidance that applies to a

variable interest entity (VIE).

167, among other things, requires a qualitative rather than a quantitative analysis to determine the primary beneficiary of a VIE;

requires continuous assessments of whether an enterprise is

the primary beneficiary of the VIE;

enhances disclosures about an enterprises involvement with a VIE;

and amends certain guidance for determining whether an entity is a VIE.

167 will be effective for the Company on

January 1, 2010 and will not have a material effect on our consolidated financial statements.

In June 2009, the FASB issued SFAS No.

FASB Accounting Standards Codification and the Hierarchy of Generally Accepted Accounting Standardsa Replacement of FASB Statement No.

The FASB Accounting Standards Codification (the Codification) will become the

source of authoritative U.S.

GAAP recognized by the FASB to be applied by nongovernmental entities.

Once the Codification is in effect, all of its content will carry the same level of authority and the GAAP hierarchy will be modified to include only

two levels of GAAP:

authoritative and nonauthoritative.

168 will be effective for the Company on July 1, 2009 and will not have a material effect on our consolidated financial statements.

Restatement of Prior Financial Information

The financial

statements as of December 31, 2008 and March 31, 2008, and for the three months ended March 31, 2008, have been restated to correct the accounting treatment previously accorded the following transaction.

The Company determined that pursuant to Statement of Financial Accounting Standards No.

5, Accounting for Contingencies, we should have accrued and

reported as a liability in our 2008 financial statements a payment obligation which arose in connection with our entry into an employment agreement on March 1, 2008 with our then chief executive officer, Clifford M.

Pursuant to the

terms of the employment agreement, Dr.

statements as of December 31, 2008, and for the six months ended June 30, 2008, have been restated to correct the accounting treatment previously accorded the following transaction.

The Company determined that pursuant to SFAS No.

5, Accounting for Contingencies , we should have accrued and reported as a liability in our 2008 financial

statements a payment obligation which arose in connection with our entry into an employment agreement on March 1, 2008 with our then chief executive officer, Clifford M.

Pursuant to the terms of the employment agreement,

Gross was entitled to receive a payment, at the end of the term of the agreement or if Dr.

Gross was terminated for any reason, equal to the number of years Dr.

Gross had worked

for us times $100,000 per year, grossed-up to cover any tax liability.

Gross had worked for us times $100,000 per year,

grossed-up to

Page 21 of 44

cover any tax liability.

At the time of our entry into the employment agreement, Dr.

Gross had been employed by us for 10.5 years.

Given that the payment obligation was certain

to be paid at some point in the future (i.e., when the employment agreement was not renewed at some future date) and the amount of the payment obligation was determinable at the time of entry into the employment agreement, we should have accrued and

reported such payment obligation as a liability in our financial statements for the quarter ended March 31, 2008 as well as in our subsequent interim and annual financial statements for 2008.

As previously disclosed in our Form 10-K for the year ended December 31, 2008, Dr.

Given that the

payment obligation was certain to be paid at some point in the future (i.e., when the employment agreement was not renewed at some future date) and the amount of the payment obligation was determinable at the time of entry into the employment

agreement, we should have accrued and reported such payment obligation as a liability in our financial statements for the quarter ended March 31, 2008 as well as in our subsequent interim and annual financial statements for 2008.

As previously disclosed in our Form 10-K/A for the year ended December 31, 2008, Dr.

Gross retired from his position as our chief executive officer on

5 unchanged sentences

The following schedule illustrates the effects on the account classifications resulting from the above restatements:

December 31, 2008 and March 31, 2008:

December 31, 2008:

Net assets, as previously reported

Adjustment to accrue severance liability, net of tax at Mar 31, 2008

Adjustment to accrue severance liability

Net assets, as restated

1 unchanged sentence

Net asset value per share, as restated

For the three months ended March 31, 2008:

For the six months ended June 30, 2008:

Net decrease in net assets from operations, as previously reported

4 unchanged sentences

Stock-Based Compensation

The Company had two stock-based equity

compensation plans at March 31, 2009.

The Company had two stock-based equity compensation plans at June 30, 2009.

See Note 11 of our consolidated financial statements included in the Companys Form 10-K/A for the year ended December 31,

Options under both plans are granted at the fair market value of the stock on the date of grant, except in the case of a more than 10% stockholder, for which grants are exercisable at 110% of fair market value of the

stock on the date of grant.

Options under both plans are granted at the fair market value of the stock on the date of grant, except in the case of a more than 10% stockholder,

for which grants are exercisable at 110% of fair market value of the stock on the date of grant.

Options generally become fully vested three to four years from the date of grant and expire five to seven years from the date of grant.

During the three months ended March 31, 2009 and 2008, respectively, we granted

-0- and 27,000 options to purchase shares of common stock.

At March 31, 2009, there were 2,300,000 shares authorized for issuance and the Company had 1,384,813 shares available for future stock option grants under existing plans.

Page 21 of 42

The Company accounts for stock option grants in accordance with the provisions of SFAS No.

123(R), Share-Based

Under the modified prospective approach of SFAS 123(R), compensation cost recognized during the three months ended March 31, 2009 and 2008 includes compensation cost for all share-based payments granted prior to, but not yet vested

as of January 1, 2006, based on the grant date fair value estimated in accordance with the original provisions of SFAS 123, and compensation cost for all share-based payments granted subsequent to January 1, 2006, based on the grant date

fair value estimated in accordance with the provisions of SFAS 123(R).

During the three

and six months ended June 30, 2009, respectively, we granted 225,000 and 225,000 options to purchase shares of common stock.

During the three and six months ended June 30, 2008, respectively, we granted 197,000 and 224,000 options to

purchase shares of common stock.

At June 30, 2009, there were 2,300,000 shares authorized for issuance and the Company had 1,269,313 shares available for future stock option grants under existing plans.

Subsequent to June 30, 2009, the

number of shares authorized for issuance was increased by 226,274 shares by stockholder vote.

The Company accounts for stock option grants in accordance

with the provisions of SFAS No.

123(R), Share-Based Payment .

Under the modified prospective approach of SFAS 123(R), compensation cost recognized during the six months ended June 30, 2009 and 2008 includes compensation cost for all

share-based payments granted prior to, but not yet vested as of January 1, 2006, based on the grant date fair value estimated in accordance with the original provisions of SFAS 123, and compensation cost for all share-based payments granted

subsequent to January 1, 2006, based on the grant date fair value estimated in accordance with the provisions of SFAS 123(R).

The Company recognizes compensation expense on a straight-line basis over the requisite service period.

The Company estimates forfeitures, both at the grant date as well as

throughout the requisite service period, based on the Companys historical experience and future expectations.

The Company recorded approximately

$245,000 and $172,000 for the three months ended March 31, 2009 and 2008, respectively, in compensation expense related to share-based payments pursuant to SFAS 123(R).

Stock-based compensation expense is included in salaries and wages in the

accompanying consolidated statements of operations.

The Company uses the Black-Scholes option pricing model to estimate the fair value of stock-based

awards on the date of grant.

The assumptions employed in the calculation of the fair value of stock-based compensation expense for the three months ended March 31, 2009 and 2008 were determined as follows:

estimates forfeitures, both at the grant date as well as throughout the requisite service period, based on the Companys historical experience and future expectations.

SFAS 123(R) requires an entity to estimate at the grant date the number of share options for which the requisite service is expected to be rendered.

The Company estimated that 80% of the requisite service of its stock

options issued from 2006 through 2008 would be rendered.

Management revised its estimate of the forfeiture rate of these options in the second quarter of 2009.

The revision to the forfeiture rate is accounted for as a change in estimate and its

cumulative effect of $65,000, a reduction in stock-based compensation, is recognized in the current period.

In addition, stock-based compensation for prospective periods will also be reduced by $865,000 over the next 3.5 years.

Page 22 of 44

The Company recorded approximately $145,000 and $186,000 for the three months ended June 30, 2009 and 2008,

respectively, and $390,000 and $358,000 for the six months ended June 30, 2009 and 2008, respectively, in compensation expense related to share-based payments pursuant to SFAS 123(R).

Stock-based compensation expense is included in salaries and

wages in the accompanying consolidated statements of operations.

The Company uses the Black-Scholes option pricing model to estimate the fair value of

stock-based awards on the date of grant.

The assumptions employed in the calculation of the fair value of stock-based compensation expense for the six months ended June 30, 2009 and 2008 were determined as follows:

Expected dividend yield based on the Companys historical dividend yield.

3 unchanged sentences

Expected life of options based on the Companys historical life of options exercised.

The weighted-average input assumptions used and resulting fair values were as follows during the three months ended March 31, 2008.

There were no option issuances

during the three months ended March 31, 2009.

The weighted-average input assumptions used and resulting fair values were as follows during the six months ended June 30, 2009 and 2008.

Expected dividend yield

3 unchanged sentences

Grant date fair value

Net cash proceeds from the exercise of stock options were approximately $0 and $113,000 for the three months ended

March 31, 2009 and 2008, respectively.

At March 31, 2009, there was approximately $2,180,000 of unrecognized compensation cost related to share-based payments, which is expected to be recognized over a weighted-average period of 2.8 years.

The following table represents stock option activity as of and for the three months ended March 31, 2009:

Net cash proceeds from the exercise of stock options were approximately $0 and $190,000 for the six months ended

June 30, 2009 and 2008, respectively.

At June 30, 2009, there was approximately $1,458,000 of unrecognized compensation cost related to share-based payments, which is expected to be recognized over a weighted-average period of 2.9 years.

The following table represents stock option activity as of and for the six months ended June 30, 2009:

Contractual Life

1 unchanged sentence

Forfeited/expired/cancelled

Options Outstanding March 31, 2009

Outstanding Exercisable March 31, 2009

The total grant date fair value of options vested during the three months ended March 31, 2009 and 2008 was

Options Outstanding June 30, 2009

Outstanding Exercisable June 30, 2009

The total grant date fair value of options vested during the six months ended June 30, 2009 and 2008 was

$355,000 and $220,000, respectively.

Pursuant to the requirements of the 1940 Act, our

Board of Directors is responsible for determining, in good faith, the fair value of our securities and assets for which market quotations are not readily available.

In making its determination, the Board of Directors has utilized valuation

appraisals provided by an independent valuation service provider for each equity stake in our

Pursuant to the requirements of the 1940 Act, our Board of Directors is responsible for determining, in good faith, the fair value of our securities and assets for which market quotations are not readily available.

In making its

determination, the Board of Directors has utilized valuation appraisals provided by an independent valuation service provider for each equity stake in our portfolio.

With respect to equity securities in privatelyowned companies, each

investment is valued using industry valuation benchmarks, and then the value is assigned a discount reflecting the illiquid nature of the investment, as well as our minority, non-control position.

When an external event such as a purchase

transaction, public offering, or subsequent equity sale occurs, the pricing indicated by the external event is used to corroborate our private equity valuation.

Equity securities in public companies that carry certain restrictions on resale are

generally valued at a discount from the market value of the securities as quoted on the national securities exchange or the OTC Bulletin Board.

Page 23 of 44

With respect to equity securities in privatelyowned companies, each investment is valued using industry valuation benchmarks, and then the

value is assigned a discount reflecting the illiquid nature of the investment, as well as our minority, non-control position.

When an external event such as a purchase transaction, public offering, or subsequent equity sale occurs, the pricing

indicated by the external event is used to corroborate our private equity valuation.

Equity securities in public companies that carry certain restrictions on resale are generally valued at a discount from the market value of the securities as quoted

on the national securities exchange or the OTC Bulletin Board.

The Board of Directors bases its determination upon, among other things, applicable

quantitative and qualitative factors.

These factors may include, but are not limited to, type of securities, nature of business, marketability, market price of unrestricted securities of the same issue (if any), comparative valuation of securities

of publicly traded companies in the same or similar industries, current financial conditions and operating results, sales and earnings growth, operating revenues, competitive conditions and current and prospective conditions in the overall stock

Without a readily available market value, the value of our portfolio of securities may differ significantly from the values that would be placed

on the portfolio if there existed a ready market for such securities, and the differences could be material.

Substantially all of the Companys investments owned at March 31, 2009 and December 31, 2008 are stated at fair value as

determined by the Board of Directors, in the absence of readily available fair values.

The Board of Directors bases its determination upon, among other things, applicable quantitative and qualitative factors.

same or similar industries, current financial conditions and operating results, sales and earnings growth, operating revenues, competitive conditions and current and prospective conditions in the overall stock market.

Without a readily available market value, the value of our portfolio of securities may differ significantly from the values that would be placed on the portfolio if

there existed a ready market for such securities, and the differences could be material.

Substantially all of the Companys investments owned at June 30, 2009 and December 31, 2008 are stated at fair value as determined by the Board

of Directors, in the absence of readily available fair values.

The Company uses the first-in, first-out (FIFO) method of accounting for sales of its investments.

Shares of stock received by portfolio companies in exchange for both strategic alliance services and technology transfer transactions are recorded at fair value on the day that the transactions are executed.

value of such shares is recorded as revenue in our statements of operations and as the cost of such shares in our statements of assets and liabilities.

The fair value of such shares is

recorded as revenue in our statements of operations and as the cost of such shares in our statements of assets and liabilities.

The certificates are received subsequent to the transaction date.

9 unchanged sentences

multiple inputs for determining the fair value of an investment, the Company classifies the investment in total based on the lowest level input that is significant to the fair value measurement.

Assets measured at fair value on a recurring basis by level within the fair value hierarchy at March 31, 2009, were as follows:

Fair Value Measurements at Reporting Date Using

Assets measured at fair value on a recurring basis by level within the fair value hierarchy at June 30, 2009, were as follows:

Fair Value at

Fair Value Measurements at Reporting Date Using

Quoted Prices in

4 unchanged sentences

Inputs (Level 3)

Technology acquisition alliances:

During the three months ended March 31, 2009, the Company entered into 2 technology acquisition alliance agreements.

The income recognized from all technology acquisition alliance agreements for the three months

ended March 31, 2009 was approximately $274,000.

At March 31, 2009, the Company had 24 active technology acquisition alliance clients.

Global Technology Licensing:

During the six months ended June 30, 2009, the Company entered into two global technology licensing agreements.

The income recognized from all global technology licensing agreements for the three and six months

ended June 30, 2009 was approximately $190,000 and $399,000, respectively.

The income recognized from all global technology licensing agreements for the three and six months ended June 30, 2008 was approximately $251,000 and $511,000,

respectively.

Technology Transfers

All of our technology transfers are generally completed as set forth in our technology acquisition alliance service

agreements with our clients.

The Company did not complete any technology transfers during the three months ended March 31, 2009.

technology transfers are generally completed as set forth in our global technology licensing service agreements with our clients.

The Company did not complete any technology transfers during the six months ended June 30, 2009.

Page 24 of 44

During the three months ended March 31, 2008, the Company completed the following four technology transfers:

During the six months ended June 30, 2008, the Company completed the following six technology transfers:

Name of Company Acquiring

10 unchanged sentences

92,000 preferred

World Energy Solutions, Inc.

Advanced Alternative Energy, Inc.

100,000 preferred

CSMG Technologies, Inc.

Carbon Capture Technologies, Inc.

Unless otherwise noted, the Company received unregistered shares of common stock of the company acquiring the Companys newly formed company.

2 unchanged sentences

Preferred F shares convertible into common shares based on a value of $1,324,800.

Preferred B shares convertible into common shares based on a value of $3,500,000.

Notes Payable and Other Debt

The Company had the following notes

payable and other debt at March 31, 2009:

$1,000,000 bank line of credit, due in monthly installments of interest at 4.00% at March 31, 2009;

with principle due on

$600,000 note payable, bank, due in monthly installments of $14,420 including principal and interest at 7.09% through November

Capital leases on computer equipment, due in monthly installments of $6,053 expiring through July 2010, imputed interest rates of between 7.0%

$75,000 bank credit card financing, due in monthly installments of interest at 11.99%

$50,000 bank credit card financing, due in monthly installments of interest at 7.74%

$25,000 bank credit card financing, due in monthly installments of interest at 7.0%

The above debt has no covenants or guarantees and is collateralized by certain of the Companys assets

including commercial real estate owned by UTEK Real Estate Holdings, Inc., one of the Companys portfolio companies.

Payments required for the next

five years on the notes payable and other debt balance as of March 31, 2009 are as follows:

For the years ending March 31,

Less imputed interest on capital lease obligations

The Company repaid its $750,000 draw on its $1 million secured line of credit during the second quarter of

This line of credit was not renewed by the bank as of June 8, 2009.

Stockholders Equity

On June 4, 2009, UTEK and Tom Conger entered into an Amendment to the Stock Exchange Agreement and Escrow and Lock-up Agreement and an Amendment to Tom Congers

Employment Agreement (collectively, the Amendments).

Pursuant to the Amendments, Mr.

Conger will tender his resignation after just one year, on October 10, 2009, at which time he becomes entitled to receive the full amount of

the remaining 485,607 Escrowed Shares related to the acquisition of Social Technologies in 2008.

In connection therewith, the Company recorded severance compensation expense of $2,544,580 as of June 30, 2009.

These shares are not available for

sale, transfer or assignment by Mr.

Conger until October 10, 2011.

Commitments and Contingencies

In connection with the acquisition of Strategos, the Company implemented the Strategos Bonus Plan for qualifying Strategos division employees.

The award pool is

determined from eligible earnings and aggregate revenues and is limited to the extent

Page 24 of 42

required to permit Strategos to maintain sufficient operating cash.

Awards are to be paid out by December 15 th of each year and are accrued on a quarterly basis.

The Company has a Strategos Bonus

Plan for qualifying Strategos division employees.

The award pool is determined from eligible earnings and aggregate revenues and is limited to the extent required to permit Strategos to maintain sufficient operating cash.

Awards are to be paid out

by December 15 th of each year and are accrued on a quarterly basis.

Approximately 85% to 90% of Strategos net income will be paid out in connection with this bonus plan.

There was no bonus accrual

in connection with the Strategos Bonus Plan for the three months ended March 31, 2009.

connection with the acquisition of Innovaro, the Company implemented the Innovaro Bonus Plan for qualifying Innovaro division employees.

The award pool is determined from eligible earnings and aggregate revenues and is limited to the extent required

to permit Innovaro to maintain sufficient operating cash.

Awards are to be paid out by June 30 th of each year and are accrued on a quarterly

Approximately 75% to 85% of Innovaro net income will be paid out in connection with this bonus plan.

There was no bonus accrual in connection with the Innovaro Bonus Plan for the three months ended March 31, 2009.

From time to time, some of the Companys portfolio

companies may receive correspondence or other notices of alleged breach of a license agreement.

There was no bonus accrual in connection with the Strategos Bonus Plan for the six months ended June 30, 2009.

The Company has an Innovaro Bonus Plan for qualifying Innovaro division employees.

The award pool is determined from eligible earnings and aggregate

revenues and is limited to the extent required to permit Innovaro to maintain sufficient operating cash.

Awards are to be paid out by June 30 th of each year and are accrued on a quarterly basis.

Approximately 75% to 85% of Innovaro net income will be paid out in connection

with this bonus plan.

There was no bonus accrual in connection with the Innovaro Bonus Plan for the six months ended June 30, 2009.

The Company has a

Social Technologies Bonus Plan for qualifying Social Technologies division employees.

The award pool is determined from eligible earnings and aggregate revenues and is limited to the extent required to permit Social Technologies to maintain

sufficient operating cash.

The Company accrued $225,000 in connection with the Social Technologies Bonus Plan for the six months ended June 30, 2009.

From time to time, some of the Companys portfolio companies may receive correspondence or other notices of alleged breach of a

license agreement.

Some of these correspondences and notices provide for a period of time in which to cure the alleged breach.

The failure of the Companys portfolio

companies to cure the alleged breach may have a material adverse impact on the Companys results of operations and financial position.

The failure of the Companys portfolio companies to cure the alleged breach may have a material adverse impact on the

Companys consolidated financial statements.

Page 25 of 44

Segment Reporting

The Companys principal areas of activity

are providing technology transfer services and supporting innovation consulting services.

The Companys principal areas of activity are providing technology transfer services and supporting innovation consulting and subscription services.

The Company previously had three reportable geographic operating segments:

United Kingdom, Israel and the United States.

The United Kingdom segment includes

our wholly owned subsidiary UTEK-Europe, Ltd., the Israel segment includes our wholly owned subsidiary UTEK ip , Ltd., and the United States segment includes UTEK Corporation.

UTEK ip was closed down in the second quarter of 2008 and all

operations of that segment are currently being serviced by the U.S.

A summary of income from operations and other financial information by

reportable geographic operating segment is shown below:

Kingdom, Israel and the United States.

The United Kingdom segment includes our wholly owned subsidiary UTEK-Europe, Ltd., the Israel segment includes our wholly owned subsidiary UTEK ip , Ltd., and the United States segment includes UTEK

UTEK ip was closed down in the second quarter of 2008 and all operations of that segment are currently being serviced by the U.S.

A summary of income from operations and other financial information by reportable geographic operating segment is shown below:

United States

Long-lived assets March 31, 2009

Total assets March 31, 2009

Long-lived assets June 30, 2009

Total assets June 30, 2009

Long-lived assets December 31, 2008

Total assets December 31, 2008

For the Three Months Ended March 31, 2009

For the Three Months Ended June 30, 2009

United States

2 unchanged sentences

Depreciation and amortization

For the Three Months Ended March 31, 2008 (Restated)

For the Three Months Ended June 30, 2008

United States

2 unchanged sentences

Depreciation and amortization

The Company has recently changed the way it classifies and records its revenues and certain expenses to provide

additional information for management.

This change was as a result of the Companys new products and services from the addition of the acquisitions of Pharmalicensing, Strategos, Social Technologies and Innovaro.

Consequently, the Company has

new product segments for which certain information can be reported.

These new product segments include:

For the Six Months Ended June 30, 2009

United States

Income from operations

Loss before income taxes

Depreciation and amortization

For the Six Months Ended June 30, 2008 (Restated)

United States

Income from operations

Loss before income taxes

Depreciation and amortization

During the three and six months ended June 30, 2008, we dissolved UTEK ip , which resulted in a gain for the Israel segment and an offsetting loss for the U.S.

approximately $753,000.

We dissolved UTEK ip with the transfer of operations to the U.S.

During the three and six months ended June 30, 2009, the Company recognized a $2.4 million impairment loss for the United States segment.

The Company has four reportable product segments:

technology transfer business;

innovation consulting comprised of the consulting portion of Social Technologies, Strategos and Innovaro

subscription services comprised of the Companys information services business;

and all other services comprised of patent analytics and technology alliance services.

The administrative and other column represents miscellaneous and

other income items and general and administrative type expenses that are not allocated amongst the different businesses.

Management does not analyze assets for decision making purposes as it relates to the segments below.

Accordingly, information is

not available for long-lived assets or total assets.

innovation consulting comprised of the consulting portion of Social Technologies,

Strategos and Innovaro businesses;

subscription services comprised of the Companys online licensing services business;

and all other consulting services comprised of patent analytics, global technology licensing and other consulting services.

The administrative and other column represents miscellaneous and other income items and general and administrative type expenses that are not allocated amongst the different businesses.

Management does not analyze assets for decision making purposes

as it relates to the segments below.

Accordingly, information is not available for long-lived assets or total assets.

Page 26 of 44

A summary of income from operations and other financial information by product segment is shown below:

For the Three Months Ended March 31, 2009

A summary of income from operations and other financial information by reportable product segment is shown below:

For the Three Months Ended June 30, 2009

Administrative

Income from operations

Income (loss) before income taxes

Loss before income taxes

For the Three Months Ended June 30, 2008

Administrative

Income from operations

Loss before income taxes

For the Six Months Ended June 30, 2009

Administrative

Income from operations

Loss before income taxes

For the Six Months Ended June 30, 2008 (Restated)

Administrative

Income from operations

Loss before income taxes

Employee Benefit Plan

On February 1, 2009, the Company

adopted the UTEK Corporation 401k Plan (the Plan) for employees of the Company and its subsidiaries.

The Plan allows employees who satisfy the service requirements of the Plan, which include being 21 years of age and having three months

of service, to contribute pre-tax wages to the Plan, subject to legal limits.

The Company matches 100% of the first 3%, and 50% of the second 2%, of compensation contributed by employees.

The Companys contributions vest immediately and were

approximately $27,000 during the three months ended March 31, 2009.

Related Party Transactions

The Company paid rent of approximately

$88,000 and $69,000 to Ybor City Group, Inc., a subsidiary of UTEK Real Estate Holdings, Inc., during the three months ended March 31, 2009 and 2008, respectively.

On February 1, 2009, the Company adopted the UTEK Corporation 401k Plan (the Plan) for employees of the Company and its subsidiaries.

The Plan allows employees who satisfy the service requirements of

the Plan, which include being 21 years of age and having three months of service, to contribute pre-tax wages to the Plan, subject to legal limits.

The Company matches 100% of the first 3%, and 50% of the second 2%, of compensation contributed by

The Companys contributions vest immediately and were approximately $66,000 during the six months ended June 30, 2009.

Party Transactions

The Company paid rent of approximately $148,000 and $127,000 to Ybor City Group, Inc., a subsidiary of UTEK Real Estate Holdings,

Inc., during the six months ended June 30, 2009 and 2008, respectively.

In addition, the Company owes Ybor City Group, Inc.

approximately $262,000 as of June 30, 2009, $200,000 of which was borrowed during the current period.

is included in accrued expenses in the consolidated financial statements as of June 30, 2009.

Subsequent Events

On July 16, 2009, the stockholders voted in favor of a proposal to authorize the Board of Directors to withdraw the Companys election to be treated as a

business development company (BDC) under the 1940 Act.

We would not consider de-election of the BDC until the Company has a plan to divest itself of its equity interests in the portfolio companies in which it holds a more than 20%

Because we have equity interests equaling more than 20% ownership in these portfolio companies, we would be required to use the equity method of accounting to consolidate the financial accounts of these portfolio companies with those of

the Company after we withdraw our election to be regulated as a BDC.

However, because the Company does not control these portfolio companies, the Company will not be able to dictate the timing of their provision of financial information to the

Company for inclusion in its financial statements, which may result in the late filing of the Companys annual reports on Form 10-K and quarterly reports on Form 10-Q with the SEC.

Therefore, the Company began liquidating a portion of its

investment portfolio during 2009.

The sale of some or all of our shares in a significant number of our portfolio companies for $2.25 million in cash and other assets resulted in realized losses of $37.4 million and unrealized appreciation of $33.5

primarily related to the reversal of previously recorded unrealized depreciation upon the sale of these investments.

Page 27 of 44

On July 16, 2009, the stockholders voted in favor of a proposal to authorize the Board of Directors to de-list the

Companys common stock from the Alternative Investment Market (AIM) of the London Stock Exchange.

On July 23, 2009, the Board of Directors de-listed the Company from the AIM.

Managements Discussion and Analysis of Financial Condition and Results of Operations

15 unchanged sentences

The Company has restated such financial statements and certain financial information as contained in the Companys Form 10-K/A and Forms 10-Q/A for the aforementioned periods as filed on May 7, 2009.

The Company determined that pursuant to Statement of Financial Accounting Standards No.

5, Accounting for Contingencies, we should have accrued and

Pursuant to the

terms of the employment agreement, Dr.

The Company determined that pursuant to SFAS No.

5, Accounting for Contingencies , we should have accrued and reported as a liability in our 2008 financial

statements a payment obligation which arose in connection with our entry into an employment agreement on March 1, 2008 with our then chief executive officer, Clifford M.

Pursuant to the terms of the employment agreement,

Gross was entitled to receive a payment, at the end of the term of the agreement or if Dr.

Gross is terminated for any reason, equal to the number of years Dr.

Gross had worked

for us times $100,000 per year, grossed-up to cover any tax liability.

Gross had worked for us times $100,000 per year,

grossed-up to cover any tax liability.

At the time of our entry into the employment agreement, Dr.

Gross had been employed by us for 10.5 years.

Given that the payment obligation was certain

reported such payment obligation as a liability in our financial statements for the quarter ended March 31, 2008 as well as in our subsequent interim and annual financial statements for 2008.

Page 26 of 42

As previously disclosed in our Form 10-K for the year ended December 31, 2008, Dr.

Gross retired from his

position as our chief executive officer on March 1, 2009, following the conclusion of the term of the employment agreement, including a subsequent extension to the term thereof.

Moreover, as disclosed in a Form 8-K filed with the SEC on

April 13, 2009, we entered into a separation agreement with Dr.

Gross that modified the payment terms, but not the monetary obligation amount that Dr.

Given that the payment obligation was certain to be paid at some point in the future

(i.e., when the employment agreement was not renewed at some future date) and the amount of the payment obligation was determinable at the time of entry into the employment agreement, we should have accrued and reported such payment obligation as a

liability in our financial statements for the quarter ended March 31, 2008 as well as in our subsequent interim and annual financial statements for 2008.

As previously disclosed in our Form 10-K/A for the year ended December 31, 2008, Dr.

Gross retired from his position as our chief executive officer on March 1, 2009, following the conclusion of the term of the employment

agreement, including a subsequent extension to the term thereof.

Moreover, as disclosed in a Form 8-K filed with the SEC on April 13, 2009, we entered into a separation agreement with Dr.

Gross that modified the payment terms, but not the

monetary obligation amount that Dr.

Gross was entitled to receive pursuant to the employment agreement.

See Note 2 Restatement of Prior Financial Information of the Notes to the Financial Statements included in this Form 10-Q for a detailed discussion of the

effect of this restatement.

Business Developments

During the first quarter of 2009, the Company has been focusing on the continued integration of the four businesses that it

acquired in 2008.

However, the revenues from certain of the Companys divisions have decreased in the current period as a result of the current economic conditions.

In response to these conditions, the Company has made significant efforts to

reduce its overhead costs, which included a reduction in the number of employees throughout the Company.

As previously disclosed in our Definitive Proxy

Statement filed with the SEC on April 30, 2009, the Board of Directors is recommending that stockholders vote in favor of a proposal to authorize the Board of Directors to withdraw the Companys election to be treated as a business development

company (BDC) under the 1940 Act.

We would not consider de-election of the BDC until the Company divests itself of its significant equity interests in the portfolio companies in which it holds a more than 20% ownership.

Because we have

significant equity interests in these portfolio companies, we would be required to use the equity method of accounting to consolidate the financial accounts of these portfolio companies with those of the Company after we withdraw our election to be

regulated as a BDC.

However, because the Company does not control these portfolio companies, the Company will not be able to dictate the timing of their provision of financial information to the Company for inclusion in its financial statements,

which may result in the late filing of the Companys annual reports on Form 10-K and quarterly reports on Form 10-Q with the SEC.

Therefore, the Company began liquidating a portion of its investment portfolio during the first quarter of 2009.

We sold some or all of our shares in a significant number of our portfolio companies for $2.1 million in cash and other assets, which resulted in realized losses of $37.0 million and unrealized appreciation of $35.9 million in the fair value of our

investments during the period.

As previously disclosed in our Form 10-K for the year ended December 31, 2008, the Companys chief executive

officer retired from his position upon the conclusion of the term of his employment agreement on March 1, 2009.

In connection therewith, the Company accrued an additional $143,000 in severance liability in the first quarter of 2009.

See Note 2 Restatement of Prior

Financial Information of the Notes to the Financial Statements included in this Form 10-Q for a detailed discussion of the effect of this restatement.

Recent Business Developments

During 2009, the Company has been focusing on the continued integration of the four businesses that it acquired in 2008.

However, the revenues from certain of the Companys divisions have decreased in the current period as a result of

the current economic conditions.

In response to these conditions, the Company has made significant efforts to reduce its overhead costs, which included a reduction in the number of employees throughout the Company.

As of June 30, 2009, the Social Technologies division of UTEK had significant declines in revenues related to their futures and foresight projects.

The state of the

economy during 2009 contributed to potential Social Technologies clients focusing on short-term

Page 28 of 44

survival rather than long-term foresight planning.

As a result, management has terminated the majority of the divisions employees in favor of an

independent, network based approach in an effort to reduce overhead.

Management concluded that this division has suffered a significant adverse change in the business, which includes a projection of continuing operating and cash flow losses.

Company determined that there was impairment of the divisions purchased intangible assets of $1.0 million and impairment of the divisions goodwill of $1.3 million as of June 30, 2009.

On July 16, 2009, the stockholders voted in favor of a proposal to authorize the Board of Directors to withdraw the Companys election to be treated as a

business development company (BDC) under the 1940 Act.

We would not consider de-election of the BDC until the Company has a plan to divest itself of its equity interests in the portfolio companies in which it holds a more than 20%

the Company after we withdraw our election to be regulated as a BDC.

However, because the Company does not control these portfolio companies, the Company will not be able to dictate the timing of their provision of financial information to the

Company for inclusion in its financial statements, which may result in the late filing of the Companys annual reports on Form 10-K and quarterly reports on Form 10-Q with the SEC.

Therefore, the Company began liquidating a portion of its

investment portfolio during 2009.

million primarily related to the reversal of previously recorded unrealized depreciation upon the sale of these investments.

On July 16, 2009, the

stockholders voted in favor of a proposal to authorize the Board of Directors to de-list the Companys common stock from the Alternative Investment Market (AIM) of the London Stock Exchange.

On July 23, 2009, the Board of

Directors de-listed the Company from the AIM.

As previously disclosed in our Form 10-K/A for the year ended December 31, 2008, the Companys

chief executive officer, Dr.

Gross, retired from his position upon the conclusion of the term of his employment agreement on March 1, 2009.

In connection therewith, the Company accrued an additional $169,000 in severance liability for the

six months ended June 30, 2009.

In addition, the Company paid out $944,000 of this liability to Dr.

Gross during the second quarter of 2009.

Executive Summary

We help clients become stronger

innovators, develop compelling strategies to drive growth, rapidly source externally developed technologies, create value from their intellectual property and gain foresight into marketplace and technology developments that affect their business.

We help clients become stronger innovators, develop compelling strategies to drive growth, rapidly source

externally developed technologies, create value from their intellectual property and gain foresight into marketplace and technology developments that affect their business.

With UTEKs services, companies can:

Identify and develop new product segments and markets;

Fight commoditization of product lines and better understand the technology and emerging marketplace trends;

Grow sales through enhanced innovation capabilities;

Improve ROI by decreasing R&D costs and leveraging external sources of technology.

During 2008, the Company acquired four companies to enhance our ability to provide end-to-end innovation services.

We will continue to seek to acquire

additional innovation services companies that enhance our capabilities or expand the territories in which we operate.

Our total assets were $43.1 million

and our net assets were $34.0 million at March 31, 2009, compared to $45.9 million and $37.2 million at December 31, 2008, respectively.

Net asset value per share was $3.07 at March 31, 2009 and $3.42 at December 31, 2008.

March 31, 2009, we had $1.5 million in debt outstanding, $3.6 million in cash and cash equivalents and $687,000 of investments in U.S.

We will continue to seek to acquire additional innovation services companies that enhance our

capabilities or expand the territories in which we operate.

We are continuing the integration and collaboration between the IP licensing and consulting

divisions of our business.

The underlying strategic goal of the consulting divisions remains to drive long term shareholder value by ultimately increasing the pace of IP licensing for UTEK.

In addition, our consulting divisions are working together to offer new services, which has earned us business that we otherwise might have lost if pursued separately.

All divisions continue to look for more opportunities to work together and secure business where appropriate, including sharing market intelligence and sales activities, experimenting with different approaches for cross-selling the work of other

divisions, and creating sales materials that best explain the emerging end-to-end innovation services offering.

Through the acquisition of

Pharmalicensing, we have the capability to represent our clients on the sell-side IP engagements.

The online part of our business is scalable due to the internets global reach and importantly it leverages the 12 years of experience in UTEK

conducting licensing transactions.

Page 29 of 44

Partnering is an important component in the development of new pharmaceutical products.

A key element for growth on the

Pharmalicensing platform is the newly expanded Partnering Search service.

The Partnering Search service utilizes our own proprietary databases and networks, and identifies appropriate partners based exactly on our clients clearly

stated partnering needs.

Through this service, we not only identify prospective partners, but we will also effectuate a discrete and anonymous introduction between our client and the prospective partner, under confidentiality, whereby they can begin

their own negotiations eventually leading to successful business relationships.

Financial Condition

Our total assets were $37.7 million and our net assets were $30.3 million at June 30, 2009, compared to $45.9 million and $37.2 million at December 31, 2008,

respectively.

Net asset value per share was $2.62 at June 30, 2009 and $3.42 at December 31, 2008.

At June 30, 2009, we had $695,000 in debt outstanding, $1.5 million in cash and cash equivalents and $589,000 of investments in U.S.

Treasuries and certificates of deposit.

Income from operations for the three months ended March 31, 2009 totaled approximately $2.8 million, as compared to $3.7 million for the three months ended March 31, 2008.

Net loss from operations for the

three months ended March 31, 2009 totaled approximately $2.1 million as compared to $1.7 million for the same period of 2008.

Net realized losses on investments totaled approximately $37.0 million for the three months ended March 31, 2009

as compared to $126,000, net of deferred tax effect, for the same period of 2008.

In this regard, we received gross proceeds of cash and other assets of $2.1 million for the three months ended March 31, 2009 and $1.5 million in cash for the

same period of 2008 in connection with the sale of the securities we received in connection with our technology acquisition alliance agreements and technology transfers.

Proceeds received in connection with the sale of our investments for the three

months ended March 31, 2009 included $400,000 in cash, $200,000 in an additional investment in UTEK Real Estate Holdings, Inc., and $1.5 million in a note receivable from a company to which we sold certain of our investments.

Net change in

unrealized appreciation (depreciation) of investments was $34.1 million for the three months ended March 31, 2009 as compared to $(4.6 million), net of deferred tax benefit, for the same period of 2008.

The net change in unrealized appreciation

of $34.1 million for the three months ended March 31, 2009 was primarily related to the reversal of previously recorded unrealized depreciation upon the sale of investments for a realized loss.

Our financial condition is dependent on a number of factors including our ability to effectuate technology transfers and the performance of the equity investments that

we receive in connection with these transfers.

Income from operations for the six months ended June 30, 2009 totaled approximately $5.4 million, as compared

to $8.6 million for the six months ended June 30, 2008.

Of the $8.6 million in income from operations for the six months ended June 30, 2008, $3.9 was in the form of unregistered shares of common stock as opposed to cash proceeds.

income for the six months ended June 30, 2009 was received in cash.

Net loss from operations for the six months ended June 30, 2009 totaled approximately $8.3 million as compared to $2.2 million for the same period of 2008.

losses on investments totaled approximately $37.4 million for the six months ended June 30, 2009 as compared to $3.5 million, net of deferred tax effect, for the same period of 2008.

In this regard, we received gross proceeds of cash and other

assets of $2.25 million for the six months ended June 30, 2009 and $1.7 million in cash for the same period of 2008 in connection with the sale of the securities we received in connection with our global technology licensing agreements and

technology transfers.

Proceeds received in connection with the sale of our investments for the six months ended June 30, 2009 included $550,000 in cash, $200,000 in an additional investment in UTEK Real Estate Holdings, Inc., and $1.5 million

in a note receivable from a company to which we sold certain of our investments.

Net change in unrealized appreciation (depreciation) of investments was $33.5 million for the six months ended June 30, 2009 as compared to $(4.0 million), net of

deferred tax benefit, for the same period of 2008.

The net change in unrealized appreciation of $33.5 million for the six months ended June 30, 2009 was primarily related to the reversal of previously recorded unrealized depreciation upon the

sale of investments for a realized loss.

Our financial condition is dependent on a number of factors including our ability to effectuate technology

transfers and the performance of the equity investments that we have received in connection with these transfers.

Substantially all of our investments are in development stage and start-up companies and thinly traded public companies.

These businesses are thinly capitalized, unproven, small companies that lack

management depth, are dependent on new, commercially unproven technologies and have no or a limited history of operations.

Page 27 of 42

Many of these

businesses are thinly capitalized, unproven, small companies that lack management depth, are dependent on new, commercially unproven technologies and may have no or a limited history of operations.

Current Market Conditions

Since mid-2007, global credit and other financial markets have suffered substantial stress, volatility, illiquidity and disruption.

These forces reached unprecedented levels in late 2008, resulting in the bankruptcy

or acquisition of, or government assistance to, several major domestic and international financial institutions.

These events have significantly diminished overall confidence in the financial markets and caused increasing global economic

This reduced confidence and uncertainty could further exacerbate the overall market disruptions and risks to businesses in need of capital, including us and our portfolio companies.

Moreover, the deterioration in the equity markets has

had a significant impact on the valuations of our investments and the cash proceeds that we have been able to obtain upon the sale of our investments.

A further worsening of this situation or a prolonged period without improvement from the levels at

the end of the third quarter of 2008 could adversely affect our financial position.

Since mid-2007, global credit and

other financial markets have suffered substantial stress, volatility, illiquidity and disruption.

These forces reached unprecedented levels in late 2008, resulting in the bankruptcy or acquisition of, or government assistance to, several major

domestic and international financial institutions.

These events have significantly diminished overall confidence in the financial markets and caused increasing global economic uncertainty.

This reduced confidence and uncertainty could further

exacerbate the overall market disruptions and risks to businesses in need of capital, including us and our portfolio companies.

Moreover, the deterioration in the equity markets has had a significant impact on the valuations of our investments and

the cash proceeds that we have been able to obtain upon the sale of our investments.

A further worsening of this situation or a prolonged period without improvement from the levels at the end of the third quarter of 2008 could adversely affect our

financial position.

Portfolio Activity

The following is a list of significant changes in our portfolio during the three months ended March 31, 2009:

following is a list of significant changes in our portfolio during the six months ended June 30, 2009:

The sale of some or all of our shares in a significant number of our portfolio companies for approximately $2.25 million in cash and other assets, which resulted in

realized losses of $37.4 million, and

Net unrealized appreciation of $34.1 million in the fair value of our investments.

Our most significant portfolio investments at March 31, 2009 were in UTEK Real Estate Holdings, Inc., EClips Energy Technologies, Inc., Greenwood Hudson Portfolio, LLC and Cyberlux Corporation.

investments totaled $8.9 million at fair value and represented 87% of our investments, excluding our investments in U.S.

Treasuries and certificates of deposits, and 21% of total assets at March 31, 2009.

The net unrealized appreciation of $34.1 million for the three months ended March 31, 2009 was primarily due to the reversal of unrealized depreciation on various

investments upon their sale during the period of approximately $35.9 million;

Net unrealized appreciation of $33.5 million, which is primarily related to the reversal of previously recorded unrealized depreciation upon the sale of these

The Companys most significant portfolio investments at June 30, 2009 were in UTEK Real Estate Holdings, Inc.,

Eclips Energy Technologies, Inc., Greenwood Hudson Portfolio, LLC and Cyberlux Corporation.

These four investments totaled $7.85 million in fair value and represented 86% of our investments, excluding our investments in U.S.

Treasuries and

certificates of deposits, and 21% of total assets at June 30, 2009.

Page 30 of 44

The net unrealized appreciation of $33.5 million for the six months ended June 30, 2009 was primarily due to the

reversal of unrealized depreciation on various investments upon their sale during the period of approximately $35 million;

partially offset by a reduction in value of the investment in MiMedx Group, Inc.

1 unchanged sentence

While the realized and unrealized losses can be significant, failures among small cap companies are not unexpected and may occur in the future.

The current portfolio is comprised of 19 holdings.

Many of these

positions are in small capitalization companies, which over time may have high failure rates due to a variety of factors.

For clients that fail, UTEK may lose the entire amount of its capital spent acquiring and transferring the technology to them.

The value of our investments can fluctuate due to factors that are specific to each investment (e.g., inability of these companies to obtain additional

capital, to execute their business model, or termination or obsolescence of their technology licenses, etc.) or to general marketplace factors.

Moreover, in the event that the United States economy remains in a prolonged recession, it is possible

that these companies could be negatively impacted, which could ultimately lead to greater difficulty in our ability to sell our equity investments in such companies at acceptable levels, or at all.

The current portfolio is

comprised of 20 holdings.

Many of these positions are in small capitalization companies, which over time may have high failure rates due to a variety of factors.

For clients that fail, UTEK may lose the entire amount of its capital spent acquiring

and transferring the technology to them.

The value of our investments can fluctuate due to factors that are specific to each investment (e.g., inability

of these companies to obtain additional capital, to execute their business model, or termination or obsolescence of their technology licenses, etc.) or to general marketplace factors.

Moreover, in the event that the United States economy remains in

a prolonged recession, it is possible that these companies could be negatively impacted, which could ultimately lead to greater difficulty in our ability to sell our equity investments in such companies at acceptable levels, or at all.

Results of Operations

Income from Operations (Revenue)

Three months ended March 31,

(in thousands, except percentages)

2 unchanged sentences

Subscription and Other Services

Investment income, net

Other Income, net

Income from Operations

Innovation Consulting Services

Our innovation consulting revenue increased $1.9 million for the three months ended March 31, 2009 in comparison to same period in 2008 as a result of our acquisitions of innovation consulting services companies

Our consulting revenues for the first quarter of 2009 have been adversely affected by the current economic conditions.

Based on current activity, we expect these revenues to increase beginning in the third or fourth quarter of 2009.

Innovation consulting services revenue decreased $779,000 in the three months ended June 30, 2009 compared to the three months ended June 30, 2008.

During the second quarter of 2009, we had the innovation

consulting income of two more divisions, acquired in 2008, than we did in the second quarter of 2008.

Unfortunately, the revenue of all of the acquired innovation consulting companies has suffered significantly due to the current adverse economic

Innovation consulting services revenue increased $1.1 million in the six months ended June 30, 2009 compared to the six months ended

June 30, 2008.

This is a result of our acquisitions of three innovation consulting services companies in 2008.

During the six months ended June 30, 2009, the Company had the innovation consulting income of three divisions, which were

acquired in 2008.

During the six months ended June 30, 2008, we only had the innovation consulting income of one of these divisions for only a portion of the period.

Nevertheless, the income of that one division was significantly higher in 2008

as a result of the current adverse economic conditions.

Based on current activity, we expect innovation consulting services revenue to increase from

current levels in the third and fourth quarters of 2009.

In subsequent periods, it is our intention to pursue additional strategic acquisitions, which, if successful, should further increase the innovation consulting services revenue and enhance our

ability to better service the innovation needs of our clients.

Sale of Technology Rights

Sale of technology rights revenue decreased as a result of our not completing any technology transfers during the three or six months ended June 30, 2009 as compared

to having completed two technology transfers during the three months ended June 30, 2008 and six technology transfers during the six months ended June 30, 2008.

To mitigate the risk of declining stock prices with respect to the stock consideration we receive in connection with our technology transfers, we believe that going forward most technology transfers will be completed

for cash as opposed to stock.

As a result, management continues to expect that our 2009 revenues from the sale of technology rights will be significantly lower than our 2008 revenues from such transactions.

Page 31 of 44

In subsequent periods, it is our intention to pursue additional strategic acquisitions which if successful will continue

to increase the innovation consulting services revenue and enhance our ability to better service the innovation needs of our clients.

Technology Rights

Sale of technology rights revenue decreased as a result of our not completing any technology transfers during the three months ended

March 31, 2009 as compared to having completed four technology transfers during the three months ended March 31, 2008.

To mitigate the risk of

declining stock prices with respect to the stock consideration we receive in connection with our technology transfers, we believe that going forward most technology transfers will be completed for cash as opposed to stock.

As a result, management

continues to expect that our 2009 revenues from the sale of technology rights will decrease from our 2008 revenues from such transactions.

and Other Services

Our subscription and other services revenue was $814,000 for the three months ended March 31, 2009 versus $869,000 for the

three months ended March 31, 2008.

Included in this income category are our global technologies licensing income from our technology acquisition alliance fees, our information services website subscription income, our patent analytic fees and

various other services.

Our global technologies licensing income was approximately $274,000 for the three months ended March 31, 2009 as compared to

$260,000 for the three months ended March 31, 2008.

The number of new agreements added in the first three months of 2009 was two as compared to fourteen new agreements added in the first three months of 2008.

Our information services division had website subscription income of approximately $540,000 for the three months ended March 31, 2009 as compared to $529,000 for

the three months ended March 31, 2008.

The increase is attributable to a new product sold through Pharmalicensing called Partnering Search through which we use our partnering experts to search for partners on behalf of the customers as

well as provide a fully qualified list of target companies, instructions on how to contact target companies, make introductions and coordinate initial contact/conference calls.

Our other services including patent analytics generated $-0- for the three months ended March 31, 2009 as compared to $80,000 for the three months ended March 31, 2008.

It is our intention to grow our subscription and other services revenue internally as well as with additional strategic acquisitions during 2009.

Subscription and Other Services

Our subscription and other services revenue includes our online licensing services income from our website subscriptions, our global technologies licensing income, our patent analytic fees and various other service

Our online licensing services division had website subscription income of approximately $555,000 and $540,000 for the three months ended

June 30, 2009 and 2008, respectively, and $1.1 million for each of the six months ended June 30, 2009 and June 30, 2008.

During this adverse economic time, we have been able to keep this income source neutral due to a new product sold

through Pharmalicensing called Partnering Search.

Through this program, we use our partnering experts to search for partners on behalf of the customers as well as provide a fully qualified list of target companies, instructions on how to

contact target companies, make introductions and coordinate initial contact/conference calls.

Our global technology licensing income was approximately

$190,000 for the three months ended June 30, 2009 compared to $251,000 for the three months ended June 30, 2008, and $399,000 for the six months ended June 30, 2009 compared to $511,000 for the six months ended June 30, 2008.

decrease in global technology licensing revenue in 2009 is a result of a decrease in the number of new agreements.

We signed two new agreements during the first six months of 2009 compared to having signed fourteen new agreements during the first

six months of 2008.

We have increased the price of our services significantly and are concentrating on a few select clients.

Our patent analytic services

income was $0 for each of the three and six months ended June 30, 2009 compared to $116,000 and $146,000 for the three and six months ended June 30, 2008, respectively.

Other services income was $86,000 for the three months ended

June 30, 2009 compared to $186,000 for the three months ended June 30, 2008, and $152,000 for the six months ended June 30, 2009 compared to $210,000 for the six months ended June 30, 2008.

We are expecting a significant

improvement in our patent analytic services revenue for the remainder of 2009.

We expect to continue to see growth in the online licensing services

revenue and patent analytic services revenue throughout the remainder of 2009.

The remainder of the subscription and other services revenue streams are expected to continue to decline.

Investment Income, net

Investment income decreased by $54,000 for

the three months ended March 31, 2009, as compared to the same period of 2008, as a result of a decrease in the cash and cash equivalents balances, as well as lower interest rates during the first quarter of 2009.

Investment income decreased by $22,000 and $76,000 for the three and six months ended

June 30, 2009 compared to the three and six months ended June 30, 2008, respectively, as a result of a decrease in the cash and cash equivalents balances, as well as lower interest rates during 2009.

We expect the decrease in investment

income to continue throughout the remainder of 2009.

Our income from operations can vary substantially on a quarterly basis due to a variety of factors.

Therefore, quarterly income from operations should not be annualized

to predict expected annual results and may not be indicative of future performance.

Therefore, quarterly income from operations should not be annualized to predict expected annual results and may not be indicative of future performance.

Direct Costs of Innovation Consulting Services

Three months ended March 31,

(In thousands, except percentages)

2 unchanged sentences

The abbreviation ppt denotes percentage points.

Direct costs of innovation consulting services are comprised of salaries and related taxes, bonuses, certain

outside services and other direct project costs related to innovation consulting services revenue.

This expense line item was created in the second quarter of 2008 as a result of the acquisitions of Strategos, and subsequently Innovaro and Social

Technologies Group;

of innovation consulting services are comprised of salaries and related taxes, bonuses, certain outside services and other direct project costs related to innovation consulting services revenue.

This expense line item was created in the second

quarter of 2008 as a result of the acquisitions of Strategos, and subsequently Innovaro and Social Technologies Group;

therefore there was $2.3 million of innovation consulting services expense in each of the three and six months ended June 30,

Direct costs of innovation consulting services decreased $909,000 in the three months ended June 30, 2009 compared to the three months ended

June 30, 2008 as a direct result of the innovations consulting income being adversely affected by the downturn in the economy.

With less projects being completed, we have taken steps to reduce direct costs, including reductions in staff and the

use of outside consultants, as well as reduced hours for certain remaining staff.

We expect these cost reductions to increase the margins for our consulting services division during the remainder of 2009.

Page 32 of 44

there is no innovation consulting services expense in the first quarter of 2008 as compared to $2.0 million in the first quarter of 2009.

During the first

quarter of 2009, the innovations consulting income was adversely affected by the downturn in the economy.

We have taken steps to reduce costs, including reductions in staff, as well as reduced hours for certain remaining staff.

We expect these cost

reductions to increase the margins for our consulting services division during the remainder of 2009.

Direct costs of innovation consulting services increased $1.1 million in the six months ended June 30, 2009 compared

to the six months ended June 30, 2008 as a result of the acquisitions of Strategos, and subsequently Innovaro and Social Technologies Group, because there were no direct costs of innovation consulting in the first quarter of 2008.

Acquisition of Technology Rights

Three months ended March 31,

(In thousands, except percentages)

4 unchanged sentences

technologies.

The overall decrease in acquisition of technology rights from the three months ended March 31, 2008 to the three months ended March 31, 2009 was due to the Company not completing any technology transfers in the first quarter

of 2009 compared to having completed four technology transfers in the first quarter of 2008.

Acquisition of technology rights costs are directly related

to sale of technology rights revenue.

We expect that the acquisition of technology rights costs will continue to decrease in 2009 in conjunction with a decrease in this revenue.

In addition, we plan to focus on technology transfers for cash

remuneration or equity transfers that do not require significant amounts of upfront cash costs.

The overall decrease in acquisition of technology rights from the three and six months ended June 30, 2008 to the three and six months ended June 30, 2009 was due to the Company not having completed any technology transfers

during the first six months of 2009 compared to having completed two and six technology transfers during the three and six months ended June 30, 2008, respectively.

Acquisition of technology rights costs are directly related to sale of technology rights revenue.

We expect that the acquisition of technology rights costs will continue to decrease in 2009 as compared to 2008 in

conjunction with a decrease in the related revenue.

In addition, we plan to focus on technology transfers for cash remuneration or equity transfers that do not require significant amounts of upfront cash costs.

Salaries and Wages

Three months ended March 31,

(In thousands, except percentages)

Salaries and wages

As a percent of income from operations

Salaries and wages include non-sales employees and officer salaries and related benefits including bonuses and

As a percent of revenue

Salaries and wages include non-sales employee and officer salaries and related benefits including bonuses and

stock-based compensation.

Salaries and wages decreased by $1.9 million primarily due to the accrual of our CEOs severance liability of $1.65 million during the three months ended March 31, 2008.

The remaining decrease relates to a

significant reduction in employees and the retirement of our CEO during the three months ended March 31, 2009.

We expect that salaries and wages for 2009 will continue to decrease or remain flat in comparison to 2008.

Salaries and wages increased by $2.1 million for the three months ended June 30, 2009 compared to the three months ended June 30, 2008.

This increase is primarily due a $2.5 million charge to salaries and wages

related to the modification of the acquisition and employment agreements with the division manager of our Social Technologies division.

Upon the termination of his employment in October 2009, the former owner of Social Technologies will receive

485,607 shares of UTEK common stock that are currently in escrow.

The offsetting decrease relates to a significant reduction in employees and the retirement of our CEO.

Salaries and wages increased by $218,000 for the six months ended June 30, 2009 compared to the six months ended June 30, 2008.

During the six months ended June 30, 2009, we had a $2.5 million charge to

salaries and wages related to the modification of the acquisition and employment agreements with the division manager of our Social Technologies division versus having had a $1.65 million charge for our CEOs severance liability in the

corresponding period of 2008.

The offsetting decrease during 2009 for the difference in the accruals relates to the reduction in employees and the retirement of our CEO.

We expect that salaries and wages will decrease throughout the remainder of 2009 as a result of the significant reduction in employees and elimination of certain management.

Page 33 of 44

Professional Fees

Three months ended March 31,

(In thousands, except percentages)

Professional fees

As a percent of income from operations

As a percent of revenue

Professional fees include accounting fees, legal fees and valuation expenses for our investments.

The decrease in

professional fees for the three months ended March 31, 2009 compared to the three months ended March 31, 2008 relates to a $63,000 decrease in legal fees related to an acquisition made in the first quarter of 2008, which was not repeated in

2009, as well as a $15,000 decrease in valuation expenses due to the reduced number of investment holdings in 2009.

Page 30 of 42

fees decreased by $53,000 for the three months ended June 30, 2009 compared to the three months ended June 30, 2008.

This is a result of a $32,000 decrease in legal fees related to an acquisition made in the second quarter of 2008, which

was not repeated in 2009, as well as a $39,000 decrease in valuation expenses due to the reduced number of investment holdings in 2009.

Professional fees

decreased by $138,000 for the six months ended June 30, 2009 compared to the six months ended June 30, 2008.

This is a result of a $95,000 decrease in legal fees related to two acquisitions made in the first six months of 2008, which were

not repeated in 2009, as well as a $54,000 decrease in valuation expenses due to the reduced number of investment holdings in 2009.

We expect that

professional fees will remain constant for the remainder of 2009 as a result of the aforementioned reduction in costs.

Sales and Marketing

Three months ended March 31,

(In thousands, except percentages)

Sales and marketing

As a percent of income from operations

As a percent of revenue

Sales and marketing expenses include advertising, marketing, salaries and commissions paid to sales personnel,

commissions paid to outside service providers, travel and other selling expenses.

The decrease in sales and marketing expenses relates primarily to a reduction in sales salaries of $167,000 for the three months ended March 31, 2009 as compared

to the same period of 2008.

This reduction is a result of downsizing the number of employees in all areas of the company including sales staff.

Sales and marketing expenses decreased by $45,000 for the three months ended June 30, 2009 compared to the three months ended June 30, 2008.

This is a result

of a reduction in sales salaries, partially offset by additional marketing and travel costs incurred through an effort to reach out to new customers.

Sales and marketing expenses decreased by $235,000 for the six months ended June 30, 2009 compared to the six months ended June 30, 2008.

This is primarily related to a reduction in sales salaries, which is a result of downsizing

the number of employees in all areas of the company, including sales staff.

We expect that sales and marketing expenses will decrease throughout the

remainder of 2009 as a result of the reduction in sales salaries.

General and Administrative

Three months ended March 31,

(In thousands, except percentages)

General and administrative

As a percent of income from operations

The increase in general and administrative costs for the three months ended March 31, 2009 compared to the

three months ended March 31, 2008 is a direct result of the acquisitions made in 2008.

During the first quarter of 2009, there were increases in insurance of $53,000 and in rent of $50,000 which relates directly to the additional offices of the

acquisition companies.

These increases were partially offset by an overall company plan to reduce all aspects of overhead.

We expect that general and

administrative expenses for the remainder of 2009 will remain consistent with the first quarter of 2009.

As a percent of revenue

General and administrative expenses decreased by $38,000 for the three months ended June 30, 2009 compared to

the three months ended June 30, 2008.

We experienced an $82,000 reduction in investor relations fees from eliminating our outside provider, a $69,000 reduction in payroll taxes related to a decrease in payroll, and a $23,000 reduction in

outside consulting costs related to the Strategos acquisition in the second quarter of 2008, in addition to other reductions resulting from an overall Company plan to reduce all aspects of overhead.

These reductions were partially offset by a

$68,000 increase in rent, insurance and interest costs from the companies acquired in 2008, a $22,000 increase in retirement costs and a $106,000 increase in bad debt in the current period.

Page 34 of 44

General and administrative expenses increased by $18,000 for the six months ended June 30, 2009 compared to the six

months ended June 30, 2008.

We experienced a $188,000 increase in rent, insurance and interest costs from the companies acquired in 2008, a $38,000 increase in retirement costs and a $72,000 increase in bad debt in the current period.

increases were partially offset by an $121,000 reduction in investor relations and public relations fees from eliminating our outside providers, a $61,000 reduction in payroll taxes related to a decrease in payroll, and a $78,000 reduction in

outside consulting costs related to two acquisitions during the first six months of 2008, in addition to other reductions resulting from an overall Company plan to reduce all aspects of overhead.

We expect that general and administrative expenses will remain constant for the remainder of 2009 as a result of our cost reduction plan.

We continue to explore avenues

to cut costs in this adverse economic environment.

Depreciation and Amortization

Three months ended March 31,

(In thousands, except percentages)

Depreciation and amortization

As a percent of income from operations

The increase in amortization and depreciation expense for the three months ended March 31, 2009 compared to

the same period of 2008 was a direct result of the four business acquisitions made during 2008.

We acquired $12.4 million in intangible assets and $350,000 in fixed assets during 2008 in connection with these acquisitions, which will significantly

increase our quarterly amortization and depreciation expense throughout 2009 and in subsequent years.

As a percent of revenue

The increase in depreciation and amortization expense for the three and six months ended June 30, 2009

compared to the same periods of 2008 was a direct result of the four business acquisitions made during 2008.

We acquired $12.4 million in intangible assets and $350,000 in fixed assets during 2008 in connection with these acquisitions, which will

significantly increase our quarterly depreciation and amortization expense throughout 2009 and in subsequent years.

Impairment Loss

(In thousands, except percentages)

Impairment loss

As a percent of revenue

As of June 30, 2009, the Social Technologies division of UTEK had significant declines in revenues related to

their futures and foresight projects.

The state of the economy during 2009 contributed to potential Social Technologies clients focusing on short-term survival rather than long-term foresight planning.

As a result, management has terminated

the majority of the divisions employees in favor of an independent, network based approach in an effort to reduce overhead.

Management concluded that this division has suffered a significant adverse change in the business, which includes a

projection of continuing operating and cash flow losses.

The Company determined that there was impairment of the divisions purchased intangible assets of $1.0 million and impairment of the divisions goodwill of $1.3 million as of

June 30, 2009.

Net Realized Gains (Losses) on Investments

Three months ended March 31,

(In thousands, except percentages)

Realized gains/ (losses)

Page 35 of 44

Net realized losses on investments amounted to $416,995 for the three months ended June 30, 2009 and were related to

sales as follows:

Portfolio Company

Eclips Energy Technologies, Inc.

(World Energy Solutions)

MiMedx Group, Inc.

Net realized losses on investments, net of income tax effect, amounted to $3,350,772 for the three months ended

March 31, 2009 and were related to sales as follows:

June 30, 2008 and were related to sales as follows:

Portfolio Company

aeroTelesis, Inc.

American Soil Technologies, Inc.

Avalon Oil and Gas, Inc.

Broadcast International, Inc.

Cargo Connection Logistics Holdings, Inc.

Cyberlux Corporation

Ecosphere Technologies Inc

EcoSystem Corporation

Industrial Biotechnology Corporation

Material Technologies, Inc.

Magnitude Information Systems, Inc

MM2 Group Inc.

Net Fabric Corporation

Protocall Technologies, Inc.

Tenth Gate International, Inc.

US Starcom Inc.

Net realized losses on investments amounted to $37,435,130 for the six months ended June 30, 2009 and were

related to sales as follows:

Portfolio Company

Advanced Medical Isotope Corporation preferred shares

5 unchanged sentences

Eclips Energy Technologies, Inc.

(World Energy Solutions)

Tesla Vision Corporation preferred shares

13 unchanged sentences

Page 36 of 44

Net realized losses on investments, net of income tax effect, amounted to $126,102 for the three months ended

March 31, 2008 and were related to sales as follows:

Net realized losses on investments, net of income tax effect, amounted to $3,476,874 for the six months ended

June 30, 2008 and were related to sales as follows:

Portfolio Company

5G Wireless Communications, Inc.

aeroTelesis, Inc.

American Soil Technologies, Inc.

Material Technologies, Inc.

Avalon Oil and Gas, Inc.

Broadcast International, Inc.

Industrial Biotechnology Corporation

Cargo Connection Logistics Holdings, Inc.

Cyberlux Corporation

SolarBrook Water and Power Corp.

TenthGate, Inc.

5G Wireless Communications, Inc.

Modern Technology Corporation

Ecosphere Technologies Inc

EcoSystem Corporation

Avalon Oil and Gas, Inc.

Industrial Biotechnology Corporation

Magnitude Information Systems, Inc.

Material Technologies, Inc.

MM2 Group Inc.

Modern Technology Corporation

Net Fabric Corporation

Protocall Technologies, Inc.

SolarBrook Water and Power Corp.

Tenth Gate International, Inc.

US Starcom Inc.

Net realized gains and losses can vary substantially due to a variety of factors and may not be indicative of

future performance.

As a result of the uncertainty surrounding the future values of our investments, we are unable to make any projections or estimates regarding realized gains or losses expected in 2009.

As a result of the uncertainty surrounding the future values of our investments, we are unable to make any projections or estimates regarding realized gains or losses expected for the remainder of 2009.

Net Change in Unrealized Appreciation or Depreciation on Investments

13 unchanged sentences

value of our investments determined in good faith by the Board of Directors may differ significantly from the values that would have been used had a ready market existed for the investments, and the differences could be material.

Three months ended March 31,

(In thousands, except percentages)

1 unchanged sentence

Page 37 of 44

Net change in unrealized appreciation on investments amounted to $34,095,220 for the three months ended March 31,

2009 and was related to our investments as follows:

Net change in unrealized appreciation (depreciation) on investments amounted to $(571,307) for the three months ended

June 30, 2009 and was related to our investments as follows:

Portfolio Company

1 unchanged sentence

(Depreciation)

Cyberlux Corporation

MiMedx Group, Inc.

Eclips Energy Technologies, Inc.

(World Energy Solutions)

All other investments

Net change in unrealized appreciation (depreciation) on investments, net of income tax effect, amounted to

$503,149 for the three months ended June 30, 2008 and was related to our investments as follows:

Portfolio Company

Net unrealized

(Depreciation)

Emission & Power Solutions, Inc.

RIM Semiconductor Company

World Energy Solutions, Inc.

Advanced Refractive Technologies, Inc.

preferred shares

Industrial Biotechnology Corporation

EcoSystem Corporation (GS Energy Corporation)

MiMedx Group, Inc.

All other investments

Net change in unrealized appreciation (depreciation) on investments amounted to $33,523,913 for the six months

ended June 30, 2009 and was related to our investments as follows:

Portfolio Company

Net Unrealized

(Depreciation)

Advanced Refractive Technologies, Inc.

common & preferred

American Soil technologies, Inc.

Avalon Oil and Gas, Inc.

Cargo Connection Logistics Holdings, Inc

Cytodyn, Inc.

DME Interactive Holdings, Inc.

Eclips Energy Technologies, Inc.

(World Energy Solutions)

Tesla Vision Corporation

9 unchanged sentences

All other investments

Net change in unrealized depreciation on investments, net of income tax effect, amounted to $4,550,776 for the

three months ended March 31, 2008 and was related to our investments as follows:

The net unrealized appreciation of $33.5 million for the six months ended June 30, 2009 was primarily due to

the reversal of unrealized depreciation on various investments upon their sale during the period of approximately $35.0 million;

partially offset by a reduction in value of the investment in MiMedx Group, Inc.

of $1.5 million.

Page 38 of 44

Net change in unrealized appreciation (depreciation) on investments, net of income tax effect, amounted to $(4,047,627)

for the six months ended June 30, 2008 and was related to our investments as follows:

Portfolio Company

1 unchanged sentence

(Depreciation)

Avalon Oil & Gas, Inc.

Advanced Refractive Technologies, Inc.

Broadcast International, Inc.

Cyberlux Corporation

Emission & Power Solutions, Inc.

Industrial Biotechnology Corporation

MachineTalker, Inc.

Manakoa Services Corporation

EcoSystem Corporation (GS Energy Corporation)

MiMedx Group, Inc.

Material Technologies, Inc.

Manakoa Services Corporation

Pathway One Plc

RIM Semiconductor Company

Synthetic Blood International, Inc.

Oxygen Biotherapeutics, Inc.

World Energy Solutions

All other investments

The net unrealized appreciation of $34.1 million for the three months ended March 31, 2009 was primarily due

to the reversal of unrealized depreciation on various investments upon their sale during the period of approximately $35.9 million;

partially offset by a reduction in value of the investment in Mimedx Group, Inc.

of $1.8 million.

Overall negative equity market conditions and a weakening U.S.

economy have resulted in significant decreases in market prices for some of our portfolio companies.

has resulted in significant unrealized depreciation on many of our investments during the past year.

economy have resulted in significant decreases in

market prices for some of our portfolio companies.

This has resulted in significant unrealized depreciation on many of our investments during the past year.

Liquidity and Capital Resources

At March 31, 2009, we had cash and cash equivalents of $3.6 million.

We also had investments in certificates of deposit (CDs) of $687,000.

We typically invest our

excess cash in U.S.

At June 30, 2009, we had cash and cash equivalents of $1.5 million.

We also had investments in

certificates of deposit (CDs) of $589,000.

We typically invest our excess cash in U.S.

Treasuries and CDs, which normally have three-month to one-year maturities.

These investments do not qualify as cash equivalents.

Page 33 of 42

In prior years, we had financed substantially all of our operations through the issuance of equity securities and, to a

lesser extent, sales of investments, cash received in connection with the provision of innovation services and the use of funds from our investments in U.S.

Treasuries and certificates of deposit.

Our primary sources of liquidity and capital for the

three months ended March 31, 2009 were $3.4 million received in connection with operations, $400,000 in cash proceeds generated from the sale of shares of our portfolio companies and $750,000 in financing received from a bank credit line with

The Bank of Tampa.

A portion of our income from operations in prior periods consisted of the sale of technology rights and income from technology

acquisition alliances in exchange for equity securities rather than cash.

In the three months ended March 31, 2009, no part of our income from operations was paid in the form of equity securities.

During the three months ended March 31,

2009, we used approximately $1.0 million for operating expenses.

In May 2008, we obtained a $1,000,000 line of credit with the Bank of Tampa.

on the line of credit accrue interest (payable monthly) at prime or a floor of 4.0% (4.0% as of March 31, 2009).

The principal and any unpaid interest are due upon demand.

This line is collateralized with commercial real estate owned by UTEK

Real Estate Holdings, Inc.

We drew down $750,000 on the credit line during the three months ended March 31, 2009.

We currently intend to fund our

capital expenditures and liquidity needs with existing cash and cash equivalent balances, our investments in certificates of deposit, as well as with cash generated by operations and the sales of our investments.

We believe that these sources will

be sufficient to meet working capital needs, capital requirements, and current commitments for the next twelve months.

We have already made significant progress in reducing our overhead expenses for the company.

In addition, we may seek to raise

additional funds through public or private debt or equity financing for long-term liquidity.

Our primary sources of liquidity and capital for the six months ended June 30, 2009 were $6.2 million received in connection with operations and $550,000 in cash

proceeds generated from the sale of shares of our portfolio companies.

During the six months ended June 30, 2009, we experienced a decrease in cash and cash equivalents of approximately $2.5 million.

This amount included one-time payments of

$944,000 to our former CEO for a severance liability and $292,000 for Strategos 2008 tax liability resulting from the acquisition.

This results in approximately $1.2 million of our cash burn having been utilized for operating expenses.

We had significant non-cash expenses contributing to our operating losses during the six months ended June 30, 2009.

These included $2.5 million in

severance compensation cost for the manager of our Social Technologies division, $822,000 in amortization and depreciation costs and $2.4 million in goodwill and intangible asset impairment charges related to the Social Technologies division.

addition, we have significantly reduced our operating expenses since the first quarter of 2009.

As a result, ongoing corporate operating expenses have actually been reduced by approximately $3.0 million for the six months ended June 30, 2009

compared to the same period of 2008.

Therefore, we are expecting an improvement in operating results during the third and fourth quarters of 2009.

currently intend to fund our capital expenditures and liquidity needs with existing cash and cash equivalent balances, our investments in certificates of deposit, as well as with cash generated by operations and the potential sales of our

investments, including real estate.

As a result of our progress in significantly reducing our overhead expenses, we believe that these sources will be sufficient to meet working capital needs, capital requirements, and current commitments for the

next twelve months.

In addition, we may seek to raise additional funds through public or private debt or equity financing for long-term liquidity.

However, additional funds may not be available on favorable terms to us, if at all.

Critical Accounting Estimates

The preparation of financial statements in conformity with accounting principles

generally accepted in the United States of America requires management to make estimates and assumptions that affect the amounts reported in the financial statements.

Critical accounting estimates are those that are both important to the

presentation of our financial condition and results of operations and require managements most difficult, complex, or subjective judgments.

We consider the following accounting policies and related estimates to be critical:

The preparation of financial

statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the amounts reported in the financial statements.

Critical accounting estimates

are those that are both important to the presentation of our financial condition and results of operations and require managements most difficult, complex, or subjective judgments.

We consider the following accounting policies and related

estimates to be critical:

Page 39 of 44

Valuation Methodology

Currently, we primarily receive cash in

connection with our technology acquisition alliance agreements and illiquid securities in connection with our technology transfers.

Historically, we primarily received illiquid securities in connection with both our technology acquisition alliance

agreements and technology transfers.

Currently, we primarily receive cash in connection with our global technology licensing agreements and illiquid securities in connection with our technology transfers.

Historically, we primarily received illiquid securities in connection

with both our global technology licensing agreements and technology transfers.

The securities received are generally subject to restrictions on resale and generally are thinly traded or have no established market.

We determine fair value to be the amount for which an investment could be exchanged in an orderly disposition over a reasonable period of time between willing parties other than in a forced or liquidation sale.

valuation process is intended to provide a consistent basis for determining the fair value of our portfolio investments.

We record unrealized depreciation on investments when we believe that an investment has become impaired, including where

realization of an equity security is doubtful.

We record unrealized appreciation if we believe that the underlying portfolio company has appreciated in value and, therefore, our equity security has also appreciated in value.

Upon the sale of our

investments, the values that are ultimately realized may be different from the presently determined fair values of such securities.

We determine fair value to be the amount for which an investment could be exchanged in an orderly disposition over a reasonable period of time between willing parties

other than in a forced or liquidation sale.

Our valuation process is intended to provide a consistent basis for determining the fair value of our portfolio investments.

We record unrealized depreciation on investments when we believe that an

investment has become impaired, including where realization of an equity security is doubtful.

We record unrealized appreciation if we believe that the underlying portfolio company has appreciated in value and, therefore, our equity security has

also appreciated in value.

Upon the sale of our investments, the values that are ultimately realized may be different from the presently determined fair values of such securities.

This difference could be material.

We adopted Statement of Financial Accounting Standards No.

157, Fair Value Measurements (SFAS 157) on a prospective basis in the first quarter of 2008.

SFAS 157 requires us to assume that the

We adopted SFAS No.

157, Fair Value Measurements on a prospective basis in the first quarter of 2008.

157 requires us to assume that the

portfolio investment is to be sold in the principal market to market participants, or in the absence of a principal market, the most advantageous market, which may be a hypothetical market.

1 unchanged sentence

the principal or most advantageous market that are independent, knowledgeable, and willing and able to transact.

In accordance with SFAS 157, we have considered our principal market, or the market in which we exit our portfolio investments with the

greatest volume and level of activity.

Our equity interests in portfolio companies for which there is no liquid public market are valued using industry

valuation benchmarks, and then the value is assigned a discount reflecting the illiquid nature of the investment as well as our minority, non-control position.

When an external event such as a purchase transaction, public offering, or subsequent

equity sale occurs, the pricing indicated by the external event is used to corroborate our valuation.

In accordance with SFAS No.

157, we have considered our principal market, or the market in which we exit our portfolio investments

with the greatest volume and level of activity.

Our equity interests in portfolio companies for which there is no liquid public market are valued using

industry valuation benchmarks, and then the value is assigned a discount reflecting the illiquid nature of the investment as well as our minority, non-control position.

When an external event such as a purchase transaction, public offering, or

subsequent equity sale occurs, the pricing indicated by the external event is used to corroborate our valuation.

The determined values are generally discounted to account for restrictions on resale and minority ownership positions.

The value of our equity

interests in public companies for which market quotations are readily available is based on the public market price on the balance sheet date.

Securities that carry certain restrictions on resale are typically valued at a discount from the public

market value of the security.

Page 34 of 42

The fair value of our investments at March 31, 2009 and December 31, 2008 was determined by our Board of

At March 31, 2009 and December 31, 2008, we received valuation assistance from our independent valuation firm, Klaris, Thomson & Schroeder, Inc., on our entire portfolio of investments for which market quotations were

The value of our

equity interests in public companies for which market quotations are readily available is based on the public market price on the balance sheet date.

Securities that carry certain restrictions on resale are typically valued at a discount from the

public market value of the security.

The fair value of our investments at June 30, 2009 and December 31, 2008 was determined by our Board of

At June 30, 2009 and December 31, 2008, we received valuation assistance from our independent valuation firm, Klaris, Thomson & Schroeder, Inc., on our entire portfolio of investments for which market quotations were

not available.

2 unchanged sentences

to unrealized appreciation or depreciation previously recognized.

The original cost basis of the securities we receive in connection with our technology acquisition alliance agreements and technology transfers is equal to the amount of revenue we

The original cost basis of the securities we receive in connection with our global technology licensing agreements and technology transfers is equal to the amount of revenue we

recognized upon the receipt of such securities.

2 unchanged sentences

Stock-Based Compensation

We account for stock option grants in accordance with the provisions of Statement of Financial Accounting

Standards (SFAS) No.

123(R), Share-Based Payment.

Under the modified prospective approach of SFAS 123(R), compensation cost recognized during the three months ended March 31, 2009 and 2008 includes compensation cost for all

subsequent to January 1, 2006, based on the grant date fair value estimated in accordance with the provisions of SFAS 123(R).

Black-Scholes option pricing model to estimate the fair value of stock-based awards on the date of grant, using assumptions for volatility, expected term, risk-free interest rate and dividend yield.

We have used one grouping for the assumptions as

our option grants are primarily basic with similar characteristics.

We account for stock option grants in accordance with the provisions of SFAS No.

123(R), Share-Based

Under the modified prospective approach of SFAS No.

123(R), compensation cost recognized during the six months ended June 30, 2009 and 2008 includes compensation cost for all share-based payments granted prior to, but not yet

vested as of January 1, 2006, based on the grant date fair value estimated in accordance with the original provisions of SFAS No.

123, and compensation cost for all share-based payments granted subsequent to January 1, 2006, based on

the grant date fair value estimated in accordance with the provisions of SFAS No.

We use the Black-Scholes option pricing model to estimate

the fair value of stock-based awards on the date of grant, using assumptions for volatility, expected term, risk-free interest rate and dividend yield.

We have used one grouping for the assumptions as our option grants are primarily basic with

similar characteristics.

The expected term of options granted is based upon our historical term of options exercised.

Historical data was used to estimate option exercises and employee terminations.

Estimated volatility is based upon our historical market price at consistent points in a period equal to the expected life of the options.

The risk-free interest rate is based on the U.S.

Treasury yield curve in effect at the time of grant and the

dividend yield is based on the historical dividend yield.

Purchase Price Allocation Process for Business Combinations

For acquisitions prior to 2009, we determine and allocate the purchase price of an acquired company to the tangible and intangible assets acquired and liabilities assumed

as of the business combination date in accordance with Financial Accounting Standards Board (FASB) Statement No.

Page 40 of 44

volatility is based upon our historical market price at consistent points in a period equal to the expected life of the options.

The risk-free interest rate

is based on the U.S.

Treasury yield curve in effect at the time of grant and the dividend yield is based on the historical dividend yield.

Price Allocation Process for Business Combinations

For acquisitions prior to 2009, we determine and allocate the purchase price of an acquired company

to the tangible and intangible assets acquired and liabilities assumed as of the business combination date in accordance with SFAS No.

141, Business Combinations .

The purchase price allocation process requires us to use significant estimates and assumptions,

including fair value estimates, as of the business combination date.

While we use our best estimates and assumptions as a part of the purchase price

allocation process to accurately value assets acquired and liabilities assumed at the business combination date, our estimates and assumptions are inherently uncertain and subject to refinement.

As a result, during the purchase price allocation

period, which is generally one year from the business combination date, we record adjustments to the assets acquired and liabilities assumed, with the corresponding offset to goodwill.

In addition, there are contingencies based on earnings included

in some of our purchase agreements.

The purchase price allocation process requires us to use significant

estimates and assumptions, including fair value estimates, as of the business combination date.

While we use our best estimates and assumptions as a part

of the purchase price allocation process to accurately value assets acquired and liabilities assumed at the business combination date, our estimates and assumptions are inherently uncertain and subject to refinement.

As a result, during the purchase

price allocation period, which is generally one year from the business combination date, we record adjustments to the assets acquired and liabilities assumed, with the corresponding offset to goodwill.

In addition, there are contingencies based on

earnings included in some of our purchase agreements.

The earnout is recorded as it is earned over the contingency period, which is generally one to three years from the business combination date.

With the exception of unresolved income tax matters or the earnout of

In January 2009, the Company adopted Statement of Financial Accounting Standards (SFAS) No.

141(R), Business Combinations , which replaces SFAS

The statement retains the fundamental requirements in SFAS No.

141 that the acquisition method of accounting (previously referred to as the purchase method of accounting) be used for all business combinations, but requires a

number of changes, including changes in the way assets and liabilities are recognized as a result of business combinations.

141(R) requires that more assets and liabilities assumed will be measured at fair value as of the acquisition

date and that liabilities related to contingent consideration will be remeasured at fair value in each subsequent reporting period.

It also requires the capitalization of in-process research and development at fair value and requires the expensing

of acquisition-related costs as incurred.

With the exception of unresolved income tax matters

or the earnout of contingent consideration, subsequent to the purchase price allocation period any adjustment to assets acquired or liabilities assumed is included in our operating results in the period in which the adjustment is determined.

In January 2009, the Company adopted SFAS No.

141(R), Business Combinations , which replaces SFAS No.

The statement retains the

fundamental requirements in SFAS No.

way assets and liabilities are recognized as a result of business combinations.

141(R) requires that more assets and liabilities assumed will be measured at fair value as of the acquisition date and that liabilities related to

contingent consideration will be remeasured at fair value in each subsequent reporting period.

It also requires the capitalization of in-process research and development at fair value and requires the expensing of acquisition-related costs as

The impact of the adoption of SFAS No.

141(R) will depend on the nature of acquisitions completed after the date of adoption.

Page 35 of 42

Recently Issued Accounting Pronouncements

In October 2008, the FASB issued FSP No.

157-3, Determining the Fair Value of a Financial Asset When the Market for That Asset is Not Active (FSP 157-3).

FSP 157-3 provides an illustrative

example of how to determine the fair value of a financial asset in an inactive market.

The FSP does not change the fair value measurement principles set forth in SFAS 157.

Since adopting SFAS 157 in January 2008, UTEKs practices for

determining the fair value of its investment portfolio have been, and continues to be, consistent with the guidance provided in the example in FSP 157-3.

Therefore, UTEKs adoption of FSP 157-3 did not affect its practices for determining the

fair value of its investment portfolio and does not have a material effect on its financial position or results of operations.

In April 2009, the FASB

issued FSP No.

FAS 157-4, Determining Fair Value When the Volume and Level of Activity for the Asset or Liability Have Significantly Decreased and Identifying Transactions That Are Not Orderly (FSP 157-4) and FSP No.

FAS 107-1 and

APB 28-1, Interim Disclosures About Fair Value of Financial Instruments (FSP 107-1) .

Both FSPs are effective for reporting periods ending on or after June 15, 2009, although early adoption will be permitted under some

conditions and can be applied for periods ending on or after March 15, 2009.

Since adopting SFAS 157 in January 2008, UTEKs practices for determining fair value and for disclosures about the fair value of its investment portfolio have

been, and continue to be, consistent with the guidance provided in FSP 157-4 and FSP 107-1.

Therefore, UTEKs adoption of both FSP 157-4 and FSP 107-1 will not have a material effect on its financial position or results of operations.

In April 2009, the FASB issued FSP FAS 141(R)-1 which amends SFAS No.

141(R) by establishing a model to account for certain pre-acquisition

contingencies.

determined during the measurement period.

If the acquisition-date fair value cannot be determined, then the acquirer should follow the recognition criteria in SFAS No.

5, Accounting for Contingencies , and FASB Interpretation No.

Reasonable Estimation of the Amount of a Loss an interpretation of FASB Statement No.

141(R) and FSP FAS 141(R)-1 were effective for the Company beginning January 1, 2009, and will apply prospectively to business

combinations completed subsequent to that date.

The impact of the adoption of FSP FAS 141(R)-1 will depend on the nature of acquisitions completed after the date of adoption.

Issued Accounting Pronouncements

In June 2009, the FASB issued SFAS No.

167 Amendments to FASB Interpretation No.

46(R) , which amends

the consolidation guidance that applies to a variable interest entity (VIE).

167, among other things, requires a qualitative rather than a quantitative analysis to determine the primary beneficiary of a VIE;

continuous assessments of whether an enterprise is the primary beneficiary of the VIE;

enhances disclosures about an enterprises involvement with a VIE;

and amends certain guidance for determining whether an entity is a VIE.

will be effective for the Company on January 1, 2010 and will not have a material effect on our consolidated financial statements.

In June 2009, the

FASB issued SFAS No.

168, The FASB Accounting Standards Codification and the Hierarchy of Generally Accepted Accounting Standardsa Replacement of FASB Statement No.

The FASB Accounting Standards Codification (the

Codification) will become the source of authoritative U.S.

GAAP recognized by the FASB to be applied by nongovernmental entities.

Once the Codification is in effect, all of its content will carry the same level of authority and the GAAP

hierarchy will be modified to include only two levels of GAAP:

authoritative and nonauthoritative.

168 will be effective for the Company on July 1, 2009 and will not have a material effect on our consolidated financial statements.

Quantitative and Qualitative Disclosures about Market Risks

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What changed 10-Q

Item 1. Financial Statements