What changed in this filing

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Item 5. Market for Registrant’s Common Equity

2010-03-22 compared with 2009-03-10 · 688 added, 540 removed, 175 unchanged (88% of the section changed)

Market for Registrants Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

Our shares of common stock trade on the NYSE Alternext US and the AIM market of the London Stock Exchange under the symbol UTK.

Computershare

Trust Company, Inc., 350 Indiana Street, Suite 800, Golden, CO 80401;

Our shares of common stock trade on the NYSE Amex under the symbol UTK though March 15, 2010.

As of March 16, 2010,

we began doing business as Innovaro and changed our ticker symbol to NYSE Amex:

Computershare Trust Company, Inc., 350 Indiana Street, Suite 800, Golden, CO 80401;

303-262-0600, serves as transfer agent for our common stock.

had approximately 3,000 stockholders of record at February 13, 2009.

The net asset value per share of our common stock at December 31, 2008 was $3.57.

We had approximately 3,000 stockholders of record at March 15, 2010.

Price Range of Common Stock and Dividends

The following table reflects the high and low closing prices for our common stock

as reported on the NYSE Alternext US and the cash dividends declared per common share for the period indicated:

The following table reflects the high and low closing prices for our common stock as reported on the NYSE Amex and the cash dividends declared per common share for the periods indicated:

Fiscal year 2009

8 unchanged sentences

Fourth quarter

Our Board of Directors has sole discretion in determining whether to declare and pay cash

dividends in the future.

The declaration of cash dividends will depend on our profitability, financial condition, cash requirements, future prospects and other factors deemed relevant by our Board of Directors.

Our ability to pay cash dividends in

the future could be limited or prohibited by regulatory requirements and the terms of financing agreements that we may enter into or by the terms of any preferred stock that we may authorize and issue.

Board of Directors has sole discretion in determining whether to declare and pay cash dividends in the future.

The declaration of cash dividends will depend on our profitability, financial condition, cash requirements, future prospects and other

factors deemed relevant by our Board of Directors.

Our ability to pay cash dividends in the future could be limited or prohibited by regulatory requirements and the terms of financing agreements that we may enter into or by the terms of any

preferred stock that we may authorize and issue.

Securities Authorized for Issuance under Equity Compensation Plans

The information required by this item appears under Item 12.

Security Ownership of Certain Beneficial Owners and Management and

Related Stockholder Matters included elsewhere in this Annual Report on Form 10-K.

Performance Graph

The following graph shows a

comparison of the five-year cumulative total return, assuming the reinvestment of dividends, on our common stock with that of the Russell Microcap Index, the Companys sale of technology rights peer group including British Technology Group plc,

Competitive Technologies, Inc., IP Group plc, and Sagentia Group AG, and the Companys innovation consulting services peer group including Forrester Research, Inc., Gartner, Inc., Huron Consulting Group, Inc.

and Diamond Management and

Technology Consultants Inc.

The graph assumes $100 was invested on December 31, 2003 in our common stock, the Russell Microcap Index companies, and the companies in both of the peer groups.

Note that historical stock price performance is not

necessarily indicative of future stock price performance.

The following graph shows a comparison of the five-year cumulative total return, assuming the reinvestment of dividends, on our common stock with that of the Russell Microcap Index, our sale of technology

rights peer group (Peer Group Technology) including British Technology Group plc, Competitive Technologies, Inc., IP Group plc, and Sagentia Group AG, and our innovation consulting services peer group (Peer Group Consulting)

including Forrester Research, Inc., Gartner, Inc., Huron Consulting Group, Inc.

and Diamond Management and Technology Consultants Inc.

The graph assumes $100 was invested on December 31, 2004 in our common stock, the Russell Microcap Index

companies, and the companies in both of the peer groups.

Note that historical stock price performance is not necessarily indicative of future stock price performance.

COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN

AMONG UTEK, RUSSELL MICROCAP INDEX AND THE COMPANYS PEER GROUPS

AMONG UTEK, RUSSELL MICROCAP

INDEX AND UTEKS PEER GROUPS

Selected Financial Data

following table presents our selected consolidated financial and other data and has been derived from our audited financial statements for the years ended December 31, 2008, 2007, 2006, 2005 and 2004.

The information below should be read in

conjunction with Item 7.

Managements Discussion and Analysis of Financial Condition and Results of Operations and our consolidated financial statements and the notes thereto, each of which is included in another section of this

annual report on Form 10-K.

The following table presents our selected consolidated financial and other data and has been derived from our audited financial statements for the three months ended December 31, 2009, nine months

ended September 30, 2009, and the years ended December 31, 2008, 2007, 2006 and 2005.

The information below should be read in conjunction with Item 7.

Managements Discussion and Analysis of Financial Condition and Results of

Operations and our consolidated financial statements and the notes thereto, each of which is included in another section of this annual report on Form 10-K.

Investment Company Accounting

Ended Dec 31,

Year Ended December 31,

Consolidated Statement of Operations Data:

Income from operations

Net income (loss) from operations

Net income (loss) from operations per diluted common share

Revenue / Income from operations

Net (loss) income from operations

Net (loss) income from operations per diluted common share

Weighted average shares:

1 unchanged sentence

Balance Sheet Data:

Long-term obligations

Long-term debt

Net asset value per share

Managements Discussion and Analysis of Financial Condition and Results of Operations

Financial data for the year ended December 31, 2009 has been segregated into two sections to conform to the financial statement presentation in our consolidated

financial statements, which is included in another section of this annual report on Form 10-K.

Financial data for the nine months ended September 30, 2009 reflect our operations as an investment company and financial data for the three months

ended December 31, 2009 reflect our operations as an operating company.

See Note 1 to the consolidated financial statements, which are included in another section of this annual report on Form 10-K, for further discussion of UTEKs change

in status from an investment company to operating company.

Balance sheet data as of December 31, 2009 includes approximately $8.9 million in total assets and $4.2 million in long-term debt of our newly consolidated

subsidiary, UTEK Real Estate Holdings, Inc.

See Note 1 to the consolidated financial statements, which are included in another section of this annual report on Form 10-K, for further discussion of the circumstances relating to the consolidation of

UTEK Real Estate Holdings, Inc.

with those of UTEK.

Managements Discussion and Analysis

of Financial Condition and Results of Operations

Special Note Regarding Forward-Looking Statements

The following discussion should be read in conjunction with our consolidated financial statements and the notes thereto included elsewhere in this annual report on Form 10-K.

This annual report on Form 10-K contains

forward-looking statements regarding the plans and objectives of management for future operations.

These forward-looking statements may involve known and unknown risks, uncertainties and other factors which may cause our actual results, performance

or achievements to be materially different from future results, performance or achievements expressed or implied by any forward-looking statements.

Forward-looking statements, which involve assumptions and describe our future plans, strategies and

expectations, are generally identifiable by use of the words may, will, should, expect, anticipate, estimate, believe, intend or project or

the negative of these words or other variations on these words or comparable terminology.

These forward-looking statements are based on assumptions that may be incorrect, and we cannot assure you that the projections included in these

forward-looking statements will come to pass.

Our actual results could differ materially from those expressed or implied by the forward-looking statements as a result of various factors.

Executive Summary

Our total assets were $45.9 million and our net assets were $38.9 million at December 31, 2008, compared to $45.2 million and $43.7 million at

December 31, 2007, respectively.

Net asset value per share was $3.57 at December 31, 2008 and $4.85 at December 31, 2007.

At the end of fiscal year 2008, we had $839,765 long-term debt outstanding and $3.9 million in cash and cash

Income from operations for fiscal year 2008 totaled approximately $20.2 million, as compared to $20.3 million in 2007.

income (loss) from operations for fiscal year 2008 totaled approximately $(8.4) million as compared to $3.8 million in 2007.

Net realized losses on investments, net of deferred tax effect, totaled approximately $4.2 million in 2008 as compared to

$1.4 million in 2007.

In this regard, we received gross proceeds of $2.3 million in 2008 and $1.9 million in 2007 in connection with the sale of the securities we received in connection with our technology acquisition alliance agreements and

technology transfers.

Net change in unrealized depreciation of investments, net of deferred tax benefit, was $12.2 million in 2008 as compared to $10.8 million in 2007.

The following discussion should be read in conjunction with our consolidated financial statements and the notes thereto included elsewhere

in this annual report on Form 10-K.

This annual report on Form 10-K contains forward-looking statements regarding the plans and objectives of management for future operations.

These forward-looking statements may involve known and unknown

risks, uncertainties and other factors which may cause our actual results, performance or achievements to be materially different from future results, performance or achievements expressed or implied by any forward-looking statements.

Forward-looking statements, which involve assumptions and describe our future plans, strategies and expectations, are generally identifiable by use of the words may, will, should, expect,

anticipate, estimate, believe, intend or project or the negative of these words or other variations on these words or comparable terminology.

These forward-looking statements are based on

assumptions that may be incorrect, and we cannot assure you that the projections included in these forward-looking statements will come to pass.

Our actual results could differ materially from those expressed or implied by the forward-looking

statements as a result of various factors.

For comparability purposes, the revenues and expenses for the nine months ended September 30, 2009 under Investment Company Accounting and for the three months ended December 31, 2009 under

Operating Company Accounting are presented combined for the year ended December 31, 2009 throughout managements discussion and analysis.

Management believes this presentation to be more meaningful to the reader as there has been no

significant change in our revenue streams as a result of our change in status.

In addition, we refer to income from

operations, which is revenue under investment company presentation, simply as revenue throughout this and certain other sections of this annual report on Form 10-K in order to eliminate confusion.

Financial Condition

Our total assets were $40.3 million at December 31, 2009, compared to $45.9 million at December 31, 2008.

At the end of fiscal year 2009, we had $6.3 million in long-term debt outstanding, $2.1 million in cash and cash equivalents

and $492,000 of investments in certificates of deposit.

Revenue totaled approximately $10.8 million for fiscal year 2009

compared to $20.2 million for fiscal year 2008.

Net loss from operations totaled approximately $10.0 million for both fiscal years ended 2009 and 2008.

Net realized losses on investments, net of any related deferred tax effect, totaled approximately

$49.6 million in 2009 as compared to $4.2 million in 2008.

In this regard, we received gross proceeds of $3.1 million in 2009 and $2.3 million in 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 year ended December 31, 2009 included $1.1 million in cash, $218,000 in common stock, $201,000 in an additional investment

in UTEK Real Estate Holdings, Inc., and $1.5 million in a note receivable.

Net change in unrealized appreciation (depreciation) of investments, net of any related deferred tax benefit, was $44.3 million in 2009 as compared to $(12.2) million in

The unrealized appreciation of $44.3 million in 2009 is related to the reversal of previously recorded unrealized depreciation upon the sale of certain investments for a realized loss of 49.6 million.

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 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 2008 could adversely affect our financial position.

Portfolio Activity

The following is a list of

significant changes in our portfolio during the year ended December 31, 2008:

The sale of some or all of our shares in Broadcast International, Inc., CSMG Technologies, Inc., Ecosphere Technologies, Inc., MATECH Corp, Advanced Medical Isotope

and various other portfolio companies for approximately $2.3 million, which resulted in realized losses of $4.2 million (net of income tax effect);

The completion of 7 technology transfers valued at approximately $4.6 million (one technology transfer was completed for $125,000 in cash);

A net unrealized loss of $12.2 million (net of income tax effect) in the fair value of our investments.

Our most significant portfolio investments at December 31, 2008 were in UTEK Real Estate Holdings, Inc., Advanced Medical Isotope Corporation, World

Energy Solutions, Inc., Cyberlux Corporation and Mimedx Group, Inc.

These five investments total $9.6 million in fair value and represent 80% of our investments, excluding U.S.

Treasuries and certificates of deposit, and 21% of total assets at

December 31, 2008.

Our capital investments made in our newly formed companies during the year ended December 31, 2008 totaled

$1.8 million.

Of the total capital invested in our newly formed companies during the year ended December 31, 2008, $455,000 was expended on license and consulting fees and $1.3 million was spent to assist our clients in commercializing their

new technology.

All of these items are reflected in the accompanying consolidated statement of operations as acquisition of technology rights.

The net unrealized depreciation for the year ended December 31, 2008 was primarily due to a reduction in value of the following eight investments in our portfolio:

MATECH Corp, Rim Semiconductor Company, Advanced Refractive

Technologies, Inc., Broadcast International, Inc., Cyberlux Corporation, Emission & Power Supply, Inc., Tesla Vision Corporation and World Energy Solutions, Inc.;

partially offset by the appreciation related to the recognition of unrealized

losses of Ecosystem Corporation (formerly GS Energy Corporation) and The Renewable Corporation.

Because we had previously recorded an unrealized depreciation of $3.3 million in the fair value of our investment in Ecosystem Corporation and The

Renewable Corporation, we had to make an accounting entry to reverse such unrealized depreciation when we sold such investment and recognized a realized loss of $3.3 million.

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

The current portfolio

is comprised of holdings in approximately 40 companies.

Many of these positions are with 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 cash outlay spent in connection with technology acquisition alliance agreements and/or acquiring and transferring technology to them.

The value of our investments can fluctuate due to factors that are specific to each investment (e.g., inability to obtain additional capital, inability to execute business model, termination of 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.

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.

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.

Moreover, the deterioration in the equity markets has had a significant impact on the cash proceeds that we have been able to obtain upon the sale of

our investments.

In addition, the deterioration in consumer confidence and a general reduction in spending by consumers and business have had an adverse effect on our innovation consulting services operations as businesses have delayed spending on

these types of services.

Although the market and economic conditions have recently improved, we can provide no assurance that we will not be negatively impacted by these market and economic conditions.

Investment Portfolio Activity

Until September 30, 2009, the Company was a non-diversified, closed-end management investment company that had elected to be treated as a business development company (BDC) under the

Investment Company Act of 1940 (1940 Act).

On October 1, 2009, because we no longer met the requirements, the Company filed a notification on Form N-54C with the SEC withdrawing its election to be regulated as a BDC under the 1940

As such, the Company began reporting as an operating company as of October 1, 2009.

In connection with our plan to

de-elect BDC status, we liquidated a significant portion of our investment portfolio during 2009.

We sold some or all of our shares in a significant number of our portfolio companies for $3.1 million in cash and other assets, which resulted in

realized losses of $49.6 million and unrealized appreciation of $44.3 million, which is primarily related to the reversal of previously recorded unrealized depreciation upon the sale of these investments.

Conversion from Investment Company Presentation to Operating Company Presentation

The withdrawal of the Companys election to be regulated as a BDC under the 1940 Act resulted in a significant change in the

Companys method of accounting.

Investment company financial statement presentation and accounting utilizes the value method of accounting used by investment companies, which requires investment companies to value their investments at market

value as opposed to historical cost, and recognize income related to unrealized gains and losses in the current period.

As an operating company, the required financial statement presentation and accounting for investments held is either fair value

or historical cost methods of accounting, depending on the classification of the investment and the Companys intent with respect to the period of time it intends to hold the investment.

In addition, the financial accounts of majority-owned entities were not consolidated with those of the Company under Investment Company

rather, investments in those entities were reflected in the Companys balance sheet at fair value.

As an operating company, the Company is required to consolidate the accounts of majority-owned entities in which we have a

controlling financial interest with those of the Company.

In this regard, the accounts of UTEK Real Estate Holdings, Inc., which was previously reflected as an investment in the Companys balance sheet at fair value, have been consolidated with

the accounts of the Company from October 1, 2009.

The consolidation of UTEK Real Estate Holdings, Inc.

had a significant effect on the Companys balance sheet as of December 31, 2009, as it added approximately $500,000 in investments,

$8.0 million in land and buildings and $4.2 million in related long-term debt.

The consolidation did not have a material effect on the Companys results of operations for the three months ended December 31, 2009.

For a detailed discussion of the impact of the withdrawal of the Companys election to be regulated as a BDC under the 1940 Act on its

method of accounting and a discussion of how the Company accounts for investments as an operating company, see Notes 1 and 2 to the consolidated financial statements contained elsewhere in this annual report on Form 10-K.

Results of Operations

Summary of Results for Years Ended December 31, 2009, 2008 and 2007

Income from Operations (Revenue)

Revenue / Income from Operations

(in thousands, except percentages)

3 unchanged sentences

Investment income, net

Income from operations

Innovation Consulting Services

As a result of our acquisition of three innovation consulting services companies (i.e.

Strategos, Innovaro and Social Technologies Group) in 2008, our innovation consulting revenue increased to $11.1 million for the

year ended December 31, 2008, versus $-0- for the years ended December 31, 2007 and 2006.

In subsequent periods, it is our intention to pursue additional strategic acquisitions, which will continue to increase the innovation consulting

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

Innovation consulting services revenue includes income from strategic innovation consulting and foresight and trend research.

consulting services revenue decreased $3.6 million for the year ended December 31, 2009 compared to the year ended December 31, 2008.

Throughout 2009, we had the innovation consulting income of three divisions, which were acquired

intermittently during 2008.

We recognized revenue for all three divisions for the entire year of 2009 versus having recognized revenue for these divisions for only a portion of 2008.

However, the revenue of all of our acquired innovation consulting

companies suffered significantly throughout 2009 due to the adverse economic conditions.

During economic cycles in which companies are experiencing financial difficulties or uncertainty, companies generally cancel or delay spending on consulting

type services.

As a result of our acquisition of Strategos, Innovaro and Social Technologies in 2008, our innovation

consulting revenue increased to $11.1 million for the year ended December 31, 2008, versus $-0- for the year ended December 31, 2007.

Sale of Technology Rights

Sale of technology rights income strictly relates to the revenue generated from completed technology transfers.

We completed seven technology transfers

during the year ended December 31, 2008 compared to the sixteen and twenty-nine technology transfers completed during the years ended December 31, 2007 and 2006, respectively.

Overall equity market conditions have generally forced

micro-capitalization stock prices down, making it more difficult for some of our clients to issue a reasonable amount of stock with sufficient value in exchange for these technologies.

In addition, the Company is pursuing technology transfers on a

more selective basis to mitigate the risk of declining stock prices with respect to the stock consideration we receive in connection with our technology transfers.

This has resulted in a decrease in the number of executed technology transfers.

technology transfers had an average value of $669,000, $1.0 million and $1.8 million for the years ended December 31, 2008, 2007 and 2006, respectively.

With the exception of $125,000 in 2008 and $200,000 in 2007, all income from the sale of

technology rights for the years ended December 31, 2008, 2007 and 2006 was received in the form of equity securities.

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.

Management expects

that our 2009 revenues from the sale of technology rights will decrease from 2008 revenues.

Sale of technology rights income strictly relates to the revenue generated from

completed technology transfers.

Sale of technology rights revenue decreased during 2009 as a result of our not having completed any technology transfers during the year ended December 31, 2009 compared to having completed seven technology

transfers during the year ended December 31, 2008.

To mitigate the risk of declining stock prices with respect to the stock consideration we have historically received in connection with our technology transfers, we currently intend to complete

all technology transfers for cash as opposed to stock.

In addition, our client focus is now more heavily weighted towards larger capitalization companies, which has caused a significant slowdown in the process to complete a technology transfer given

the more measured decision making process with respect to executing a technology transfer by these companies.

technology rights revenue decreased during 2008 as a result of our having completed seven technology transfers during the year ended December 31, 2008 compared to having completed sixteen technology transfers during the year ended

December 31, 2007.

The technology transfers had an average value of $669,000 and $1.0 million for the years ended December 31, 2008 and 2007, respectively.

With the exception of $125,000 in 2008 and $200,000 in 2007, all income from the

sale of technology rights for the years ended December 31, 2008 and 2007 was received in the form of equity securities.

Overall equity market conditions generally forced micro-capitalization stock prices down during 2008, making it more

difficult for some of our clients to issue a reasonable amount of stock with sufficient value in exchange for these technologies.

In addition, we were pursuing technology transfers on a more selective basis to mitigate the risk of declining stock

prices with respect to the stock consideration we received in connection with our technology transfers.

These circumstances resulted in a decrease in the number of executed technology transfers during 2008.

As a result of the change from completing technology transfers in exchange for cash as

opposed to stock consideration, and the change in focus toward a large capitalization client, we expect our revenues from the sale of technology rights in the near-term will continue to be significantly lower than our historical revenues from such

transactions.

Subscription and Other Services

Our subscription and other services revenue was $4.0 million for the year ended December 30, 2008 versus $3.3 million and $5.0 million for the years

ended December 31, 2007 and 2006, respectively.

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 $1.0 million for the year ended

Our subscription and other services revenue was $3.2 million for the year ended December 31, 2009 versus $4.0 million and $3.3 million for the years ended December 31, 2008 and 2007,

respectively.

Our subscription and other services revenue includes online licensing services income from our website subscriptions, global technology licensing income (including patent analytic fees), and income from various other services.

Our online licensing services division had website subscription income of approximately $1.9 million for the year ended

December 31, 2009 as compared to $2.1 million for the year ended December 31, 2008.

The decrease in 2008 resulted primarily from a decrease in the number of technology acquisition alliances signed.

The number of new agreements added in

2008 was thirty-two as compared to eighty new agreements in 2007.

During 2008, we did implement a price increase, but due to the lowered number of alliances, the income was still lower than in 2007.

All agreements signed during 2008 were for payment

Our global technologies licensing income was approximately $1.3 million for the year ended December 31, 2007 as compared to

$2.8 million for the year ended December 31, 2006.

We increased the number of new technology acquisition alliances from forty-four in 2006 to eighty in 2007;

however, in January 2007, we reduced the price of our technology acquisition alliance

services and changed the payment terms from primarily stock to primarily cash.

This was done to enhance client diversification and reduce the cost of handling small equity stakes and resulted in a decrease in income from 2006 to 2007.

Of the eighty

alliances formed in 2007, three agreements called for payment in stock and the remaining agreements called for monthly fees to be paid in cash.

Our information services division had website subscription income of $2.1 million in 2008 as compared to $1.3 million for each of 2007 and 2006.

The increase is attributable to the acquisition of Pharmalicensing in January 2008, which

accounted for $760,000 in subscription revenues for the year ended December 31, 2008.

We have been able to keep this income source relatively stable from 2008 to 2009 due to a new product sold through Pharmalicensing called Partnering

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

introductions and coordinate initial contact/conference calls.

Our online licensing services division had website

subscription income of approximately $2.1 million for the year ended December 31, 2008 as compared to $1.3 million for the year ended December 31, 2007.

The increase was attributable to the acquisition of Pharmalicensing in January 2008,

which accounted for $760,000 in subscription revenues for the year ended December 31, 2008.

Our global technology

licensing income was approximately $800,000 for the year ended December 31, 2009 as compared to $1.3 million for the year ended December 31, 2008.

The decrease in 2009 resulted primarily from a decrease in the number of global technology

licensing agreements signed and the number of patent analytics projects, which was driven by poor economic conditions.

We have recently increased the price of our services and are concentrating on providing improved services to a few select clients.

Our global technology licensing income was approximately $1.3 million for the year ended December 31, 2008 as compared

to $1.9 million for the year ended December 31, 2007.

The decrease in 2008 resulted primarily from a decrease in the number of global technology licensing agreements signed and the number of patent analytics projects, which was by driven poor

economic conditions.

The number of new agreements added in 2008 was thirty-two as compared to eighty new agreements in 2007.

During 2008, we did implement a price increase, but due to the lowered number of alliances, the income was still lower than

Our other services generated $490,000 in income during 2009 compared to $533,000 in 2008 and $148,000 in 2007.

Income from other services for the year ended 2008 increased by $494,000 related to Strategos software and licensing income.

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

Investment income decreased in 2007 and 2008 due to lower cash and cash equivalent balances and reduced available interest

Interest income is expected to continue to decline in 2009 as a result of these same factors.

change from year to year is primarily related to Strategos software and licensing income, which became a new revenue stream during 2008.

Investment Income, net

Investment income decreased in 2009 and 2008 due to lower cash and cash equivalent

balances and reduced market interest rates in the lower interest rate environment.

Beginning on October 1, 2009, we changed from Investment Company Accounting to Operating Company Accounting, which resulted in investment income for the fourth

quarter of 2009 being recorded as other income and expense in the statement of operations.

This did not have a significant impact on the change in investment income from 2008 to 2009.

Direct Costs of Innovation Consulting Services

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The abbreviation ppt throughout this section 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.

expense line item was created in 2008 as a result of the acquisitions of Strategos, Innovaro and Social Technologies Group.

significant portion of direct costs of innovation consulting services is comprised of consulting personnel compensation including bonuses.

Bonuses comprised $5.9 million of direct costs of innovation consulting services for the year ended

December 31, 2008.

The bonus plans currently in place allow for a pre-determined compensation committee to review each employees performance throughout the year in order to best determine bonus amounts to be distributed.

Often, the range

of bonuses available to be distributed is pre-specified in each professionals employment agreement.

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 required to permit Strategos to maintain sufficient operating cash.

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 2008 as a result of the acquisitions of Strategos, Innovaro and Social Technologies and the addition of our innovation consulting services

The most significant portion of direct costs of innovation consulting services is comprised of consulting personnel

compensation including bonuses.

Direct costs decreased by $3.8 million from the year ended December 31, 2008 to the year ended December 31, 2009.

This change is related to a decrease in bonuses of $5.3 million, partially offset by an

increase in Strategos and Social Technologies division salaries of $690,000 and $782,000, respectively.

Bonuses comprised $565,000 of direct costs of innovation consulting services for the year ended December 31, 2009 as compared to $5.9

million of for the year ended December 31, 2008.

The decrease in bonuses paid is directly related to the significant decrease in revenue.

We have 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.

In 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 basis.

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

with this bonus plan.

We have 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.

We have a Social Technologies Bonus Plan for qualifying Social Technologies division

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.

Direct Costs of Subscription and Other Services

The Company does not report direct costs associated with its subscription and other services revenue as these costs have not been quantified.

Direct costs of subscription and other services are primarily

related to salaries and related expenses of employees who have multiple roles within the organization.

Acquisition of Technology Rights

2 unchanged sentences

As a percent of sale of technology rights

Acquisition of technology rights costs consist of the direct costs associated with our technology

transfers, which include cash to further accelerate commercialization efforts, license fees to acquire new technologies, consulting fees with the inventor of the technologies, and sponsored research fees with the university or research facility

transferring the technologies.

The overall decrease in acquisition of technology rights from the year ended December 31, 2007 to the year ended December 31, 2008 was due to our completing nine less technology transfers in 2008 than in

The average cost per technology transfer remained fairly consistent from 2007 to 2008, but the percentage of sale of technology rights revenue increased to 38% in 2008 as a result of the lower average revenue per technology transfer.

result of the decrease in the average value of technology transfers from $1.0 million in 2007 to $669,000 in 2008.

The overall decrease in

acquisition of technology rights from the year ended December 31, 2006 to the year ended December 31, 2007 was due to the reduced number of technology transfers completed and reduced costs per transaction for 2007 as compared to 2006.

completed thirteen less technology transfers during 2007 than in 2006.

The average cost per technology transfer decreased approximately $207,000 or 47% during the year ended December 31, 2007.

Acquisition of technology rights costs consist of the direct costs associated with our

technology transfers, which include cash to further accelerate commercialization efforts, license fees to acquire new technologies, consulting fees with the inventor of the technologies, and sponsored research fees with the university or research

facility transferring the technologies.

The overall decrease in acquisition of technology rights from the year ended December 31, 2008 to the year ended December 31, 2009 was due to the Company not having completed any technology transfers

during 2009 compared to having completed seven technology transfers during 2008.

To mitigate the risk of declining stock prices with respect to the stock consideration we have historically received in connection with our technology transfers, we

currently intend to complete all technology transfers for cash as opposed to stock.

In addition, our client focus is now more heavily weighted towards larger capitalization companies, which has caused a significant slowdown in the process to

complete a technology transfer given the more measured decision making process with respect to executing a technology transfer by these companies.

The overall decrease in acquisition of technology rights from the year ended December 31, 2007 to the year ended December 31, 2008 was due to our having completed nine less technology transfers

in 2008 than in 2007.

This is a result of the decrease in the average value of technology transfers from $1.0 million in 2007 to $669,000 in 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 decrease in 2009 in conjunction with 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 following table provides certain information relating to the costs of the acquisition of technology rights we incurred in connection with our

technology transfers during the year ended December 31, 2008:

In the future, we plan to focus on completing technology transfers in exchange for cash remuneration.

The following table provides certain information relating to the costs of the acquisition of technology rights we incurred in connection

with our technology transfers during the year ended December 31, 2008:

Client Acquiring Newly Formed Company

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H-Hybrid Technologies, Inc.

The following table provides certain information relating to costs of the acquisition of technology

rights we incurred in connection with our technology transfers during the year ended December 31, 2007:

The following table provides certain information relating to costs of the acquisition of

technology rights we incurred in connection with our technology transfers during the year ended December 31, 2007:

Client Acquiring Newly Formed Company

32 unchanged sentences

Micro Wireless Technologies, Inc.

The following table provides certain information relating to the costs of the acquisition of technology

rights we incurred in connection with our technology transfers during the year ended December 31, 2006:

Client Acquiring Newly Formed Company

Newly Formed Company

Fuel FX International, Inc.

Emissions Detection Technologies, Inc.

Broadcast International, Inc.

Video Processing Technologies, Inc.

Strategic Wireless Solutions, Inc

Trio Industries Group, Inc.

Ultra Fine Coating Systems, Inc.

American Soil Technologies, Inc.

Advanced Fertilizer Technologies, Inc.

Advanced Refractive Technologies, Inc.

Ocular Therapeutics, Inc.

Trio Industries Group, Inc.

Natural Adhesive Technologies, Inc.

Advanced Refractive Technologies, Inc.

Advanced Glaucoma Technologies, Inc.

UBA Technology, Inc.

Intellitouch Technologies, Inc.

Industrial Biotechnology Corporation

Bio-Repellant Technologies, Inc.

Kwikpower International Plc

Hydrocarbon Synthesis

Technologies, Inc.

Kwikpower International Plc

Advanced BioEnergy Technologies, Inc.

Trio Industries Group, Inc.

Advanced Powder Coating Technologies, Inc.

Kwikpower International Plc

Advanced Biofuel Technologies, Inc.

Xethanol Corporation

Advanced Biomass Gasification Technologies, Inc.

Klegg Electronics, Inc.

Smart Speaker Technologies, Inc.

Avalon Oil & Gas, Inc.

Ultrasonic Mitigation Technologies, Inc.

DME Interactive Holdings, Inc.

Multimedia Control Technologies, Inc.

CytoDyn, Inc.

Advanced Influenza Technologies, Inc.

NetFabric Holdings, Inc

Intrusion Detection Technologies, Inc.

Material Technologies, Inc.

Materials Monitoring Technologies, Inc.

Industrial Biotechnology Corporation

Advanced Pheromone

Technologies, Inc.

Liberty Diversified Holdings, Inc.

Innovative Packaging Technologies, Inc.

Advanced Medical Isotope Corp.

Neu-Hope Technologies, Inc.

World Energy Solutions, Inc.

Pure Air Technologies, Inc.

Klegg Electronics, Inc.

Universal Wireless Technologies, Inc.

Avalon Oil & Gas, Inc.

IntelliWell Technologies, Inc.

Cyberlux Corporation

SPE Technologies, Inc.

Cargo Connection Logistics Holding, Inc.

Nuclear Material Detection Technologies, Inc.

Salaries and Wages

1 unchanged sentence

Salaries and wages

As a percent of income from operations

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

and stock-based compensation.

Salaries and wages increased $983,000 during the year ended December 31, 2008 compared to the year ended December 31, 2007 as a result of the addition of Pharmalicensing employees to the payroll of

$425,000, additional salaries related to new management for the TekScout website of $125,000, increased officer salaries of $293,000 and an increase in stock-based compensation expense of $167,000 resulting from additional option grants.

Salaries and wages increased $88,000 during the year ended December 31, 2007 as compared to 2006 due primarily to an increase in officers

compensation of $108,000 related to the COO and CFO, as well as an increase in the stock-based compensation expense of $108,000 resulting from additional option grants, partially offset by a reduction in other salaries.

We expect salaries and wages to decrease during 2009 as a result of a reduced employee count and officer salary reductions.

However, the salaries and

wages could increase if we acquire any companies that have a significant amount of employee costs.

As a percent of revenue

wages include non-sales employee and officer salaries and related benefits including bonuses and stock-based compensation.

Salaries and wages decreased by $859,000 for the year ended December 31, 2009 compared to the year ended

December 31, 2008.

During the year ended December 30, 2009, we had a $2.55 million charge to salaries and wages related to the modification of the acquisition and employment agreements with the 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 in salaries and wages of approximately $1.75 million in 2009 relates to the reduction in employees of

$1,270,000, the retirement of our CEO of $284,000 and a decrease in stock compensation expense of $203,000 resulting primarily from significant option forfeitures.

Salaries and wages increased $2.6 million during the year ended December 31, 2008 compared to the year ended December 31, 2007 as a result of the accrual of our former CEOs severance

liability of $1.65 million, the addition of Pharmalicensing employees to the payroll of $425,000, additional salaries related to new management for the TekScout website of $125,000, increased officer salaries of $293,000 and an increase in

stock-based compensation expense of $167,000 resulting from additional option grants.

We expect salaries and wages to

increase for the year ending December 31, 2010 as a result of new hires.

Professional Fees

1 unchanged sentence

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 of $101,000 for the year ended December 31, 2008 compared to the year ended December 31, 2007 relates to a significant decrease in legal fees, partially offset by an increase in the accounting fees.

Company incurred legal fees related to its registration statement filing and responses to SEC comment letters in 2007, which were not incurred in 2008.

Professional fees decreased by $443,000 for the year ended December 31, 2009 compared to the year ended December 31, 2008.

incurred legal fees related to specific projects in 2008 that were not incurred in 2009, which resulted in a decrease in legal fees of $198,000.

Our valuation expenses decreased $124,000 due to a reduced number of investment holdings in 2009.

accounting fees decreased $120,000 related to having four acquisition audits in 2008 that we did not have in 2009.

decrease in professional fees of $102,000 for the year ended December 31, 2008 compared to the year ended December 31, 2007 relates to a significant decrease in legal fees, partially offset by an increase in the accounting fees.

incurred legal fees related to our registration statement filing and responses to SEC comment letters in 2007, which were not incurred in 2008.

This resulted in a decrease in legal fees of $316,000 in 2008.

The accounting fees increased

$206,000 related to acquisition audits performed due to filing requirements.

The increase in professional fees for the year ended

December 31, 2007 compared to the year ended December 31, 2006 relates to an increase in legal fees of $185,000, partially offset by a decrease in the quarterly valuation fees of $97,000.

The Company incurred legal fees related to its

registration statement filing and responses to SEC comment letters in 2007 and 2006 as well as a related SEC matter in 2007.

have a decrease in professional fees for the year ended December 31, 2008 from an anticipated reduction in the number of investments requiring quarterly valuations.

Our accounting fees increased $206,000

during 2008 related to acquisition audits performed due to filing requirements.

We expect to have a decrease in professional

fees for the year ending December 31, 2010 from an anticipated reduction in the number of investments requiring quarterly valuations and a reduction in legal fees related to the change from a BDC to an operating company.

Sales and Marketing

1 unchanged sentence

Sales and marketing

As a percent of income from operations

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.

Commissions decreased $103,000 for the year ended December 31, 2008 compared to the year ended December 31, 2007 as a result of reduced

Sales related travel and entertainment costs increased $194,000 during 2008 as a result of increased travel to clients in an attempt to boost sales and the addition of travel costs of our acquired companies.

As a percent of revenue

marketing expenses include advertising, marketing, salaries and commissions paid to sales personnel, commissions paid to outside service providers, travel and other selling expenses.

Sales and marketing expenses decreased by $615,000 for the year

ended December 31, 2009 compared to the year ended December 31, 2008.

Sales salaries decreased $81,000 as a result of downsizing the number of employees in all areas of the company, including sales staff.

Commissions decreased $376,000 as

a result of reduced sales and reduced sales staff.

Sales related travel and entertainment costs decreased $42,000 and marketing costs decreased $109,000 in connection with managements effort to curb costs.

Sales and marketing expenses increased by $286,000 for the year ended December 31, 2008 compared to the year ended December 31,

Commissions decreased $103,000 primarily as a result of reduced technology transfer sales.

Sales related travel and entertainment costs increased $194,000 as a result of increased travel to clients in an attempt to boost sales and the addition

of sales travel costs of our acquired companies.

Marketing costs increased $81,000 due to the addition of marketing costs of our acquired companies and $19,000 for marketing our new TekScout website.

salaries increased $62,000 related to new employees from our acquired companies.

Sales and marketing expenses decreased from 2006 to 2007.

Commissions decreased $395,000 for the year ended December 31, 2007 compared to the year ended December 31, 2006 as a result of using less outside service providers for the purpose of selling technology acquisition alliance agreements.

Salaries, wages and commissions paid to sales-related employees decreased $750,000 for the year ended December 31, 2007 compared to the year ended December 31, 2006 due to lower commissions related to the completion of thirteen fewer

technology transfers.

In addition, we implemented certain changes in our sales and marketing division in an effort to increase sales leads, and eventually sales, without incurring substantial additional costs.

We expect sales and marketing expenses to remain fairly consistent from 2008 to 2009 as a result of additional costs related to our new consulting

division, which will be partially offset by an effort to reduce marketing costs.

Sales salaries increased $62,000 related to new

employees from our acquired companies.

We expect sales and marketing expenses to increase for the year ending

December 31, 2010 as a result of a push in our marketing efforts.

General and Administrative

1 unchanged sentence

General and administrative

As a percent of income from operations

The increase in general and administrative costs for the year ended December 31, 2008

compared to the year ended December 31, 2007 is a direct result of the four acquisitions made in 2008.

We had significant increases in insurance of $255,000, rent of $179,000, outside services of $180,000 and investment banking of $61,000, all

of which were directly related to the acquisitions.

As a percent of revenue

administrative expenses decreased by $1.0 million for the year ended December 31, 2009 compared to the year ended December 31, 2008.

We experienced a $297,000 reduction in investor relations, investment banking and public relations fees by

eliminating our outside providers, a $156,000 reduction in payroll taxes and insurance and other payroll related expenses due to a decrease in payroll, and a $198,000 reduction in outside consulting costs related to four acquisitions during 2008, in

addition to other reductions resulting from an overall plan to reduce all aspects of overhead.

General and administrative

expenses increased by $1.1 million for the year ended December 31, 2008 compared to the year ended December 31, 2007 as a direct result of the four acquisitions made in 2008.

We had significant increases in insurance of $255,000, rent of

$179,000, outside services of $180,000 and investment banking of $61,000, all of which were directly related to the acquisitions.

The remainder of the increase primarily relates to employee costs as a result of these acquisitions.

The increase was partially offset by a decrease in bad debt expense of $128,000 and a decrease

in public relations costs of $54,000 because we stopped using an outside firm for this service.

The decrease in general and administrative

costs for the year ended December 31, 2007 compared to the year ended December 31, 2006 is largely due to charitable contributions, SEC filing costs and employee related costs.

Charitable contributions decreased due to a non-recurring gift

of 5.1 million common shares of HydroFlo, Inc.

valued at $663,000 in 2006.

Employee recruitment costs decreased $125,000 in 2007 because these were one-time costs incurred by the accounting department during 2006.

SEC filing costs decreased

$170,000 in 2007 as a result of the registration statement filings in 2006.

Employee related costs decreased $110,000 due to the reduction in total compensation related to the completion of thirteen fewer technology transfers.

We expect to have a decrease in general and administrative expenses for the year ended December 31, 2009 as a result of overhead cuts made effective

However, we may continue to acquire companies in the future which could increase these expenses.

The increase was

partially offset by a decrease in bad debt expense of $128,000 and a decrease in public relations costs of $54,000 because we stopped using an outside firm for this service.

We expect general and administrative expenses for the year ending December 31, 2010 to remain flat to 2009.

Amortization and Depreciation

1 unchanged sentence

Amortization and depreciation

As a percent of income from operations

The increase in amortization and depreciation expense for the year ended December 31, 2008 compared

to the years ended December 31, 2007 and 2006 was a direct result of the four acquisitions in 2008.

We acquired $12.4 million in intangible assets and $350,000 in fixed assets during 2008 in connection with these acquisitions, which

significantly increased our annual amortization and depreciation expense.

Goodwill Impairment

As a percent of revenue

in amortization and depreciation expense for the years ended December 31, 2009 and 2008 was a direct result of four business acquisitions we made in 2008.

We acquired $12.4 million in intangible assets and $350,000 in fixed assets during 2008

in connection with these acquisitions, which significantly increased our annual amortization and depreciation expense.

expect amortization and depreciation for the year ending December 31, 2010 to increase in relation to that of 2009 as a result of the addition $4.0 million in depreciable assets from the consolidation of UTEK Real Estate, partially offset by a

decrease of $700,000 in definite-lived intangible asset as a result of impairment.

Impairment Loss

(in thousands, except percentages)

Goodwill impairment

As a percent of income from operations

Management conducts an annual impairment analysis at the end of each year.

No impairments were

incurred in 2008.

The Company determined there was an impairment of the goodwill related to the Pharma Transfer, Ltd.

acquisition and an

impairment of the goodwill related to the Knowledge Express acquisition in 2007.

As a result, the Company recorded a partial impairment of the related goodwill during 2007.

These write-downs resulted in an impairment charge of approximately $159,000

($99,000 after tax) for the United Kingdom segment and $51,000 ($32,000 after tax) for the United States segment during 2007.

during 2006 to make significant changes in strategy for UTEK ip , Ltd., primarily switching the focus of operations in Israel from software to technology transfer.

These changes were other-than-temporary;

therefore our management determined

there was an impairment of the original purchase goodwill.

We recorded a total impairment of the goodwill for UTEK ip (Israel segment) in 2006.

This resulted in a write-down of approximately $235,000 ($147,000 after tax) for the year ended

December 31, 2006.

Net Realized Gains or Losses on Investments

Impairment loss

As a percent of revenue

Our long-lived assets are tested for impairment on at least an annual basis.

testing is required more often than annually if an event or circumstance indicates that an impairment, or decline in value, may have occurred.

No impairments were incurred in 2008, but we incurred impairments during both 2009 and 2007 as discussed

In 2009, our Social Technologies division had significant declines in revenues related to their futures and foresight

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 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 suffered a significant adverse change in the business, which includes a projection of continuing

operating and cash flow losses.

We 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 during 2009.

In connection with our annual impairment analysis in 2007, we determined there was impairment of the goodwill related to the Pharma

Transfer, Ltd.

and Knowledge Express acquisitions.

As a result, we recorded a partial impairment of the related goodwill during 2007.

These write-downs resulted in an impairment charge of approximately $159,000 ($99,000 after tax) for the United

Kingdom segment and $51,000 ($32,000 after tax) for the United States segment during 2007.

Other (income) expense

Other (income) expense is a new line item in our statement of operations beginning on October 1, 2009 in connection with our conversion

to Operating Company Accounting.

The net expense of $69,731 for the three months ended December 31, 2009 is primarily comprised of $110,000 loss on derivative liability relating to revaluing certain of our outstanding warrants to purchase UTEK

common stock.

This loss is partially offset by rental income of $40,000 and capital gains from the sale of marketable securities of $20,000.

Interest Expense

Interest expense, net is a new line item in our statement of operations beginning on

October 1, 2009 in connection with our conversion to Operating Company Accounting.

The net expense of $85,467 for the three months ended December 31, 2009 is primarily comprised of interest expense on long-term debt, primarily related to

mortgages held by UTEK Real Estate, partially offset by interest income on our note receivable.

Net Realized Gains or Losses on

Investments (from investment company activity)

(in thousands, except percentages)

Realized gains/ (losses)

Net realized losses on investments, net of income tax effect, amounted to $4,232,138 for the year

ended December 31, 2008 and were related to sales as follows:

In connection

with our plan to de-elect BDC status, we liquidated a significant portion of our investment portfolio during 2009.

We sold some or all of our shares in a significant number of our portfolio companies for $3.1 million in cash and other assets, which

resulted in realized losses of $49.6 million and unrealized appreciation of $44.3 million, which is primarily related to the reversal of previously recorded unrealized depreciation upon the sale of these investments.

Net realized losses on investments amounted to $49,591,193 for the nine months ended

September 30, 2009 and were related to sales as follows:

Portfolio Company

Advanced Medical Isotope Corporationpreferred shares

Advanced Refractive Technologies, Inc.common and preferred shares

American Soil Technologies, Inc.

Avalon Oil and Gas, Inc.

Cyberlux Corporationcommon and preferred shares

CytoDyn, Inc.

Eclips Energy Technologies, Inc.

Island Gas Resources Plc

Stealth MediaLabs, Inc.

Klegg Electronics, Inc.

Rim Semiconductor Company

MATECH Corporation

NutriPure Beverages, Inc.common shares

Tesla Vision Corporationcommon and preferred shares

The Renewable Corporation

Trio Industries Group, Inc.

UBA Technology, Inc.common and preferred shares

All other investments sold

Net realized losses on investments, net of income tax effect, amounted to $4,232,138 for the year ended

December 31, 2008 and were related to sales as follows:

Advanced Medical Isotope Corporation

7 unchanged sentences

All other investments sold

Net realized losses on investments, net of income tax effect, amounted to $1,447,380 for the year ended

December 31, 2007 and were related to sales as follows:

Net realized losses on investments, net of income tax effect, amounted to $1,447,380 for the

year ended December 31, 2007 and were related to sales as follows:

Portfolio Company

6 unchanged sentences

All other investments sold

Net realized gains on investments, net of income tax effect, amounted to $903,181 for the year

ended December 31, 2006 and were related to sales as follows:

Portfolio Company

Z Trim Holdings

Xethanol Corporation

E Med Future, Inc.

NutraCea International Corporation

SheerVision Inc.

Intra-Asia Entertainment Corporation

All other investments sold(1)

We elected to abandon our right, title and interest in and to 400,000 shares common stock of HydroFlo, Inc.

See Note 2 of Notes to Consolidated Financial Statements under

Financial Statements and Supplementary Data.

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.

Net Changes in Unrealized Appreciation or Depreciation on Investments

We determine the value of each investment in our portfolio on a quarterly basis and changes in value result in unrealized appreciation or depreciation

being recognized.

At December 31, 2008, approximately 26% of our total assets represented investments recorded at fair value.

Value, as defined in Section 2(a)(41) of the 1940 Act, is (i) the market price for those securities for

which a market quotation is readily available and (ii) for all other securities and assets, fair value is as determined in good faith by the Board of Directors.

Although many of the securities we hold in our portfolio are quoted on the OTC

Bulletin Board or listed on the New York Stock Exchange, our Board of Directors is required to determine the fair value of such securities if the validity of the market quotations appears to be questionable, or if the number of quotations is such as

to indicate that there is a thin market in the security.

The fair value of these securities is frequently less than the market quotations for such securities.

Because there is typically no readily available market value for the investments in our

portfolio, we value substantially all of our investments at fair value as determined in good faith by the Board of Directors.

In making its determination, our Board of Directors considers valuation appraisals provided by independent valuation

service providers.

Because of the inherent uncertainty of determining the fair value of investments that

do not have a readily available market value, the fair 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.

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 2010.

Net Changes in Unrealized Appreciation or Depreciation on Investments (from investment company activity)

As a BDC, we were required to determine the value of each investment in our portfolio on a quarterly basis and changes in value result in

unrealized appreciation or depreciation being recognized.

Value, as defined in Section 2(a)(41) of the 1940 Act, is (i) the market price for those securities for which a market quotation is readily available and (ii) for all other

securities and assets, fair value is as determined in good faith by the Board of Directors.

Because there is typically no readily available market value for the investments in our portfolio, we valued substantially all of our investments at fair

value as determined in good faith by the Board of Directors.

In making its determination, our Board of Directors considered valuation appraisals provided by independent valuation service providers.

Because of the inherent uncertainty of determining

the fair value of investments that do not have a readily available market value, the fair 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.

(in thousands, except percentages)

Sept 30, 2009

Unrealized appreciation/ (depreciation)

Net change in unrealized depreciation on investments, net of income tax effect, amounted to

$12,217,977 for the year ended December 31, 2008 and was related to our investments as follows:

negative equity market conditions and a weakened U.S.

economy have resulted in significant decreases in market prices for a significant portion of our portfolio companies.

This resulted in significant unrealized depreciation on many of our

investments during 2008 and 2007.

A significant amount of the accumulation of these losses has been realized during 2009 in connection with the sale or exchange of the majority of these investments.

In addition, we recorded a valuation allowance against our deferred tax asset during 2008.

A portion of the valuation allowance ($5.7

million) was charged as an expense against the change in unrealized depreciation of investments for the year ended December 31, 2008.

The valuation allowance was recorded as a result of managements determination that it was more

likely than not that our net operating loss carryforwards would not be utilized in the future.

In connection with our plan to

de-elect BDC status, we liquidated a significant portion of our investment portfolio during 2009.

We sold some or all of our shares in a significant number of our portfolio companies for $3.1 million in cash and other assets, which resulted in

Net change in unrealized appreciation (depreciation) on investments amounted to $44,292,068

for the nine months ended September 30, 2009 and was related to our investments as follows:

Portfolio Company

1 unchanged sentence

(Depreciation)

Effect of recognition of realized gains (losses)

Eclips Energy Technologies, Inc.

All other investments

Net change in unrealized appreciation (depreciation)

on investments, net of income tax effect, amounted to $(12,217,977) for the year ended December 31, 2008 and was related to our investments as follows:

Portfolio Company

Net Unrealized

(Depreciation)

Effect of recognition of realized gains (losses)

Advanced Refractive Technologies, Inc.

Broadcast International, Inc.

Cyberlux Corporation

Emission & Power Supply, Inc.

EcoSystem Corporation (GS Energy Corporation)

The Renewable Corporation (Industrial Biotechnology Corp.)

Tesla Vision Corporation

7 unchanged sentences

Deferred tax valuation allowance

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.

This has resulted in significant unrealized depreciation on many of our investments for the year ended December 31, 2008.

In addition, we recorded a valuation allowance

against our deferred tax asset during 2008.

A portion of the valuation allowance ($5.7 million) was charged as an expense against the change in unrealized depreciation of investments for the year ended December 31, 2008.

The valuation

allowance was recorded as a result of managements determination that it was more likely than not that our net operating loss carryforwards would not be utilized in the future.

Because we had previously recorded an unrealized depreciation

of $3.3 million in the fair value of our investment in Ecosystem Corporation (formerly GS Energy Corporation) and The Renewable Corporation, we had to make an accounting entry to reverse such unrealized depreciation when we sold such investment

and recognized a realized loss of $3.3 million.

Net unrealized depreciation on investments, net of income tax effect, amounted to $10,806,048 for the

year ended December 31, 2007 and was related to our investments as follows:

Net unrealized appreciation (depreciation) on investments, net of income tax effect, amounted to

$(10,806,048) for the year ended December 31, 2007 and was related to our investments as follows:

Portfolio Company

1 unchanged sentence

(Depreciation)

Effect of recognition of realized gains (losses)

Advanced Refractive Technologies, Inc.

American Soil Technologies, Inc.

Broadcast International, Inc.

CytoDyn, Inc.

1 unchanged sentence

Emission & Power Supply, Inc.

Health Sciences Group, Inc.

Klegg Electronics, Inc.

3 unchanged sentences

All other investments

The net unrealized depreciation for the year ended December 31, 2007 was primarily due to the

write down of five investments in our portfolio, including Advanced Refractive Technologies, Inc., Klegg Electronics, Inc., Manakoa Services Corporation, Industrial Biotechnology Corporation and World Energy Solutions, Inc.

Net unrealized depreciation on investments, net of income tax effect, amounted to $25,758,186 for the year ended December 31, 2006 and was related

to our investments as follows:

Portfolio Company

Net Unrealized

(Depreciation)

Health Sciences Group, Inc.

Xethanol Corporation

Material Technologies, Inc.

Industrial Biotechnology Corporation

KP Renewables, Plc

Advanced Refractive Technologies, Inc.

Fuel FX International, Inc.

Trio Industries Group, Inc.

UBA Technology, Inc.

CytoDyn, Inc.

Avalon Oil and Gas, Inc.

Liberty Diversified Holdings, Inc.

All other investments

The net unrealized depreciation for the year ended December 31, 2006 was mostly due to the

significant write down of five of our portfolio investments:

Industrial Biotechnology Corporation, Trio Industries Group, Inc., KP Renewables, Plc., UBA Technology, Inc., and CytoDyn, Inc.

While these unrealized losses were significant, reduction in values and failures among small cap companies is not unexpected and may occur in the future.

The current portfolio is comprised of holdings in more than 40 companies.

Many of these positions are with 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 cash outlay spent in connection with technology

acquisition alliance agreements and/or acquiring and transferring technology to them.

While these unrealized losses were significant, reduction in values and failures among small

cap companies is not unexpected and may occur in the future.

Changes in unrealized appreciation or depreciation can vary substantially due to a variety of factors and may not be indicative of future performance.

Other Matters

Deferred taxes are provided on the asset and liability method whereby deferred tax assets are recognized for deductible

temporary differences and operating loss and tax credit carry forwards and deferred tax liabilities are recognized for taxable temporary differences.

Temporary differences are the differences between the reported amounts of assets and liabilities

and their tax bases.

Future tax benefits for net operating loss carryforwards are recognized to the extent that realization of these benefits is considered more likely than not.

Deferred tax assets are reduced by a valuation allowance when, in the

opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized.

For federal and state income tax purposes, we are taxed at regular corporate rates on ordinary income and recognize gains on distributions of appreciated property.

As an investment company, we were not entitled to the special tax treatment

available to BDCs that elect to be treated as regulated investment companies under the Internal Revenue Code because, among other reasons, we did not distribute at least 90% of investment company taxable income as required by the

Internal Revenue Code for such treatment.

We do not have any income tax benefit related to the net loss from operations in

2009, nor do we have a deferred tax asset related to our net operating loss carryforward, because of a 100% valuation allowance.

We do 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 year ended December 31, 2009.

Liquidity and Capital Resources

December 31, 2008, we had cash and cash equivalents of $3.9 million.

We also had investments in certificates of deposit (CDs) of $292,000.

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.

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 technology acquisition alliance and other consulting 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 year ended December 31, 2008 were $15.5 million received in connection with operations, $2.0 million received from the repayment of

our loan receivable from UTEK Real Estate Holdings, Inc., $2.3 million in proceeds generated from the sale of shares of our portfolio companies and $190,000 in proceeds from the exercise of stock options.

A portion of our income from operations consists of the sale of technology rights and income from technology acquisition alliances in exchange for equity

securities rather than cash.

In the year ended December 31, 2008, 23% of our income from operations was paid in the form of equity securities.

Of the $20.1 million in income from operations for the year ended December 31, 2008, $15.5

million was received in the form of cash.

During the year ended December 31, 2008, we used approximately $1.8 million to fund our technology transfer transactions and approximately $23.0 million for operating expenses.

Looking forward to 2009,

we expect that our cash generating operations and operating expenses will both increase as a result of our acquisitions.

We expect our cash outflow for technology transfer transactions will be scaled to available cash.

During 2008, we acquired $813,000 in cash in connection with our acquisitions.

In addition, we acquired a certain amount of debt in connection with the

acquisition of Social Technologies Group in 2008, of which a balance of $839,765 remained at December 31, 2008.

In May 2008, we

obtained a $1,000,000 line of credit with the Bank of Tampa.

The advances on the line of credit accrue interest (payable monthly) at prime (3.25% as of December 31, 2008).

The principal and any unpaid interest are due upon demand.

collateralized with commercial real estate owned by UTEK Real Estate Holdings, Inc.

As of December 31, 2008, we had not used the credit line.

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

We believe that these sources will be sufficient to meet working capital needs, capital requirements, and current commitments for at least 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.

However, additional funds may not be available on favorable terms to us, if at all.

Cash used in operating activities of $3.7 million in 2009 increased $1.4 million from $2.3 million in 2008.

This total cash used in operations of $3.7 million is primarily attributable to:

$9.96 million net operating loss;

$944,000 related to severance compensation paid to our former CEO in cash;

$1.55 million decrease in deferred revenue related to recognition of certain jobs coupled with a lower overall revenue level.

Partially offset by:

$682,000 in cash proceeds received from the sale of investments from investment company activity;

$1.6 million in non-cash depreciation and amortization related to the intangible assets and fixed assets acquired in 2008;

$2.4 million in non-cash goodwill and intangible asset impairment related to the Social Technologies division that was purchased in 2008;

$2.5 million in non-cash severance compensation paid for in escrowed shares of our common stock;

$577,000 in non-cash stock compensation expense related to the options issued;

$1.2 million decrease in accounts receivable related to reduced revenue levels as a result of the economic downturn coupled with increased collection

Cash provided by investing activities of $169,000 in 2009 decreased $620,000 from $789,000

This total cash provided by investing of $169,000 is primarily attributable to:

$453,000 in cash proceeds received from the sale of investments from operating company activity,

Partially offset by:

$292,000 in cash paid out in connection with Strategos 2008 tax liability resulting from the acquisition.

Cash provided by financing activities of $1.7 million in 2009 increased $1.55 million from $178,000 in 2008.

This total cash provided by

financing of $1.7 million is primarily attributable to:

$1.75 million in cash received from debt financing.

As of October 1, 2009, the financial results of

UTEK Real Estate have been consolidated with those of UTEK.

UTEK Real Estate has a $3 million bank note payable due in monthly installments of $20,436 including principal and interest at 6.50% through April 1, 2013 with a balloon payment due on

In addition, UTEK Real Estate has a $1.5 million note payable due in monthly installments of interest at 5.25% with principal due in full on October 1, 2015.

These loans were entered into in connection with the purchases of

land and building that serves as our company headquarters and certain other undeveloped land located in Hillsborough County, Florida.

These loans are collateralized by the property related to the purchases.

On October 22, 2009, we entered into a Promissory Note (the Note) with Gators Lender, LLC (the Lender),

pursuant to which we borrowed $1,750,000 from the Lender.

Interest is payable at an annual rate of 8% on a quarterly basis, in arrears, beginning April 15, 2010.

The entire principal amount outstanding and all accrued interest is payable in

full no later than October 22, 2012.

UTEK Real Estate is a co-borrower under the Note and the loan is guaranteed by all subsidiaries.

In addition, the guaranty was secured pursuant to a security agreement encumbering vacant real property

located in Hernando County, Florida (the Collateral), which is owned by Cortez 114, LLC (Cortez), a subsidiary of UTEK Real Estate.

On February 26, 2010, we entered into a Substitution of Collateral Agreement and a Membership Interest Pledge Agreement and Release of Mortgage (the Modification Agreements), pursuant to

which the Lenders security interest in the Collateral was released and replaced by a security interest in 68% of the outstanding membership interests of Cortez.

The Note was amended and restated to provide that UTEK and UTEK Real Estate

must pay down $500,000 of the indebtedness to the Lender within 60 days.

As additional consideration for this loan, we also

entered into a Warrant Agreement with the Lender to allow the Lender to purchase up to 437,500 shares of UTEKs common stock at an exercise price of $4.48 until October 22, 2014.

The exercise price is subject to certain conditions and

adjustments that make the exercise price variable.

Our primary cash requirements include working capital, principal and interest payments on indebtedness, and funding bonuses and severance

Our primary sources of funds are cash received from customers in connection with operations, proceeds from the sale of our investments, debt financing and availability under our $450,000 revolving line of credit.

At December 31,

2009, we had cash and cash equivalents of $2.1 million and investments in certificates of deposit (CDs) of $492,000.

The CDs are pledged to financial institutions as collateral to support the issuance of our line of credit.

had $200,000 of unused availability under its revolving line of credit at December 31, 2009.

Subsequent to December 31, 2009, we satisfied our remaining severance obligation to our

former CEO through the conveyance of a 32% ownership interest in Cortez.

Cortez owns vacant real property located in Hernando County, Florida that previously served as Collateral to the Note discussed in Borrowings above.

Modification Agreement was entered into in connection with our satisfaction of this severance obligation.

In connection with this severance payment, we paid approximately $320,000 to satisfy the related payroll taxes.

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, the potential sales of our investments and unused availability under our revolving line of credit.

As a result of our progress in significantly reducing our overhead expenses, we

believe that these sources will be sufficient to fund our scheduled debt service, bonus and severance obligations, and provide required resources for working capital for the next twelve months.

We may seek to raise additional funds through public or private debt or equity financing for long-term liquidity.

Financing terms from our

recent debt financing discussed under Borrowings represent what possible additional financing could look like in the near term.

Off-Balance Sheet Arrangements

We have no off-balance sheet arrangements that have or are materially

likely to have a current or future material effect on our financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.

Contractual Obligations

The following table reflects a summary of our contractual obligations and other commercial commitments as of December 31, 2008:

The following table reflects a summary of our

significant contractual obligations and other commercial commitments as of December 31, 2009 and the effect such obligations are expected to have on our liquidity and cash flow in future periods:

Contractual Obligations

Payments due by December 31,

due more than

Notes payable

Payments due by Period

Lines of credit

Long-term debt

Estimated interest payments(1)

Capital lease obligations

Operating lease obligations

Estimated interest payments for long-term debt were calculated based on applicable rates and payment dates.

Management expects to settle such interest payments with

cash flows from operating activities or short-term borrowings.

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

We consider the following accounting policies and related estimates to be critical:

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.

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.

Our valuation process is intended to provide a consistent basis for determining the fair value of our portfolio

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 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.

The preparation of financial statements in conformity with US GAAP requires management to make assessments, estimates and assumptions

that affect the amounts reported in the financial statements.

Critical accounting estimates are those that require managements most difficult, complex, or subjective judgments and have the most potential to impact our financial position and

operating results.

We consider the following accounting policies and related estimates to be critical with regard to our status as an investment company and as an operating company:

Revenue RecognitionApplicable under Both Investment Company Accounting and Operating Company Accounting

Innovation Consulting Services

Related to the Companys Strategos

division, revenues on fixed fee contracts are recognized on a pro rata basis based upon costs incurred to date compared to total estimated contract costs.

Prior to the commencement of a client engagement, the Company and the client agree on fees for

services based upon the scope of the project, staffing requirements and the level of client involvement.

Total revenues are comprised of professional fees for services rendered to clients plus reimbursement of out-of-pocket expenses and exclude

applicable taxes.

Service revenue recognition inherently involves a degree of estimation.

Examples of important estimates in

this area include determining the level of effort required to execute the project, calculating costs incurred and assessing our progress toward project completion on an ongoing basis.

These estimates can materially affect our revenues and earnings

and require us to make judgments about matters that are uncertain.

We utilize a number of management processes to monitor project performance and revenue recognition including periodic reviews of the progress of each project against the budget and

staff and resource usage.

From time to time, as part of our normal management process, circumstances are identified that require us to revise our estimates of the timing of revenues to be realized on a project.

To the extent that a revised estimate

affects revenue previously recognized, we record the full effect of the revision in the period when the underlying facts become known.

Related to the Companys Social Technologies division, the Company has certain other consulting revenue for which vendor specific objective evidence is not available to allocate among the respective deliverables.

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, we require evidence of an agreement with the

customer, delivery of the product or services, a fixed fee arrangement, collectability must be reasonably assured and receipt is probable.

Collectability is determined on a customer-by-customer basis.

Time-and-expense billing arrangements generally require the client to pay based on the number of hours worked by our consulting

professionals at agreed-upon rates.

Time-and-expense revenues are billed and recognized as incurred.

Sale of Technology Rights

A sale of technology rights refers to the process by which externally developed technologies are licensed to client

companies for potential development and use.

Historically, we primarily received illiquid securities in our client companies in connection with the sale of technology rights.

The securities received were generally subject to restrictions on resale

and generally were thinly traded or had no established market.

Revenue for the sale of technology rights was based on the fair value of the securities received on the date of completion of the sale contract.

The valuation of these securities at fair

value is further discussed in the following section Valuation Methodology for Portfolio InvestmentsApplicable under Investment Company Accounting.

Subscription and Other Services

Revenue from the sale of subscriptions to the Companys websites generally is received in the form of cash and initially is deferred and

subsequently recognized ratably over the term of the subscription, which is typically one year.

Valuation Methodology for Portfolio

InvestmentsApplicable under Investment Company Accounting

Historically, we primarily received illiquid

securities in connection with both our global technology licensing agreements and technology transfers.

The securities received were 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.

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 the standards in ASC Topic 820 Fair Value Measurements and Disclosures on a prospective

basis in the first quarter of 2008.

These standards require 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.

Market participants are defined as buyers and sellers in the principal or most advantageous market that are independent, knowledgeable, and willing and able to transact.

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.

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.

The fair value of our investments at December 31, 2008 and December 31, 2007 was determined by our Board of Directors.

At December 31,

2008 and December 31, 2007, 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.

Net Realized Gains/Losses and Net Change in Unrealized Appreciation/Depreciation

Realized gains or losses are measured by the difference between the net proceeds from the repayment or sale and the original cost basis of the investment without regard 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 recognized upon the receipt of such

Net change in unrealized appreciation or depreciation reflects the change in portfolio investment values during the reporting

period, including the reversal of previously recorded unrealized appreciation or depreciation when gains or losses are realized.

We account for stock option grants in accordance with the provisions of Statement of Financial Accounting Standards

123(R), Share-Based Payment .

Under the modified prospective approach of SFAS 123(R), compensation cost recognized during the years ended December 31, 2008 and 2007 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 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

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.

In accordance with the standards, we have considered our

principal market, or the market in which we exit our portfolio investments with the greatest volume and level of activity.

All portfolio investments recorded at fair value are categorized based upon the level of judgment associated with the inputs used to measure their fair value.

Hierarchical levels related to the amount of subjectivity associated with

the inputs to fair valuation of these assets, are as follows:

Level 1Unadjusted quoted prices in active markets for identical assets or liabilities.

Level 2Quoted prices in active markets for similar assets or liabilities, or quoted prices for identical or similar assets or liabilities in

markets that are not active, or inputs other than quoted prices that are observable for the asset or liability.

Level 3Unobservable inputs for the asset of liability.

Investment in our portfolio companies are classified within Level 2 of the fair value hierarchy as of December 31, 2008.

interests in portfolio companies for which there is no liquid public market are valued using quoted market prices for identical or similar instruments in markets that are not active.

The determined values are generally discounted to account for the

illiquid nature of the investment and minority ownership positions.

The value of our equity interests in portfolio companies for which market quotations are readily available is based on quoted market prices for similar instruments in an active

These securities are generally thinly traded and/or carry discounts from the public market value for certain restrictions on resale.

The fair value of our investments at December 31, 2008 was determined by our Board of Directors.

At December 31, 2008, we received valuation assistance from an independent valuation firm on our

entire portfolio of investments.

As an investment company, our Board of Directors is ultimately responsible for valuing our investments in good faith.

Net Realized Gains or Losses and Net Change in Unrealized Appreciation or Depreciation for Portfolio

InvestmentsApplicable under Investment Company Accounting

Realized gains or losses are measured by the

difference between the net proceeds from the repayment or sale and the original cost basis of the investment without regard to unrealized appreciation or depreciation previously recognized.

The original cost basis of the securities received in

connection with our global technology licensing agreements and technology transfers is equal to the amount of revenue recognized upon the receipt of such securities.

Net change in unrealized appreciation or depreciation of investments through

September 30, 2009 reflects the change in portfolio investment values during the reporting period, including the reversal of previously recorded unrealized appreciation or depreciation when gains or losses are realized.

Valuation Methodology for Available-for-Sale SecuritiesApplicable under Operating Company Accounting

All investments recorded at fair value are categorized based upon the level of judgment associated with the inputs used to measure their fair

Hierarchical levels related to the amount of subjectivity associated with the inputs to fair valuation of these assets, are as follows:

Level 1Unadjusted quoted prices in active markets for identical assets or liabilities.

Level 2Quoted prices in active markets for similar assets or liabilities, or quoted prices for identical or similar assets or liabilities in

markets that are not active, or inputs other than quoted prices that are observable for the asset or liability.

Level 3Unobservable inputs for the asset of liability.

The Companys investments are classified within Level 2 of the fair value hierarchy.

Our equity interests in companies for which there

is no liquid public market are valued using quoted market prices for identical or similar instruments in markets that are not active.

The determined values are generally discounted to account for the illiquid nature of the investment and minority

ownership positions.

The value of our equity interests in public companies for which market quotations are readily available is based on quoted market prices for similar instruments in an active market.

These securities are generally thinly traded

and/or carry discounts from the public market value for certain restrictions on resale.

The Company utilizes the assistance of a third-party valuation firm in determining these values.

Stock-Based CompensationApplicable under Both Investment Company Accounting and Operating Company Accounting

We account for stock option grants in accordance with US GAAP.

Stock-based compensation cost recognized during the years ended

December 31, 2009, 2008 and 2007 includes compensation cost for all share-based payments granted prior to, but not yet vested as of January 1, 2006 and compensation cost for all share-based payments granted subsequent to January 1,

2006, based on their relative grant date fair values estimated in accordance with US GAAP.

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

Determination of the fair values of stock option grants at the grant date requires judgment, including estimating the expected term of the

relevant grants and the expected volatility of the Companys stock.

Additionally, management must estimate the amount of stock option grants that are expected to be forfeited.

The expected term of options granted represents the period of time

that the options are expected to be outstanding and is based on historical experience of similar grants, giving consideration to the contractual terms of the grants, vesting schedules and expectations of future employee behavior.

volatility is based upon our historical market price at consistent points in a period equal to the expected life of the options.

Expected forfeitures are based on historical experience and expectations of future employee behavior.

Purchase Price Allocation Process for Business CombinationsApplicable under Both Investment

Company Accounting and Operating Company Accounting

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 US GAAP for 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

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 based on additional information received, 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 entered into during 2008.

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 new US GAAP for business combinations, which requires a number of changes, including changes in the way assets and liabilities are recognized as a result of

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 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.

This new US GAAP requires that more assets and liabilities assumed be measured at fair value as of the acquisition date and that liabilities related to contingent consideration 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 this new US GAAP for

business combinations will depend on the nature of acquisitions completed after the date of adoption.

Carrying Values of Goodwill and

Intangible AssetsApplicable under Both Investment Company Accounting and Operating Company Accounting

represents the excess of the aggregate consideration paid for an acquisition over the fair value of the net tangible and intangible assets acquired.

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 these acquisitions.

Intangible assets with finite lives are amortized on a straight-line basis over their estimated useful lives, which range from

5 to 12 years.

In accordance with US GAAP, goodwill and intangible assets determined to have indefinite lives are not subject to amortization but are tested for impairment annually, or more frequently if events or changes in circumstances

indicate a potential impairment may have occurred.

Circumstances that may indicate impairment include qualitative factors such as an adverse change in the business climate, loss of key personnel, and unanticipated competition.

Additionally,

management considers quantitative factors such as current estimates of the future profitability of the Companys reporting units, the current stock price, and the Companys market capitalization compared to its book value.

In conducting

its impairment test, the Company compares the fair value of each of its reporting units to the related book value.

If the fair value of a reporting unit exceeds its net book value, long-lived assets are considered not to be impaired.

If the net book

value of a reporting unit exceeds it fair value, an impairment loss is measured and recognized.

The Company conducts its impairment test using balances as of December 31.

The Company accounts for long-lived assets, including intangibles that are amortized, in accordance with US GAAP, which requires that

all long-lived assets be reviewed for impairment whenever events or circumstances indicate that the carrying amount of an asset may not be recoverable.

If indicators of impairment are present, reviews are performed to determine whether the carrying

value of an asset to be held and used is

Such reviews involve a comparison of the carrying amount of an asset to future net undiscounted cash flows expected to be generated by the asset over its remaining useful life.

comparison indicates that there is impairment, the impaired asset is written down to its fair value.

The impairment to be recognized as a non-cash charge to earnings is measured by the amount by which the carrying amount of the asset exceeds the

fair value of the asset.

Assets to be disposed are reported at the lower of the carrying amount or fair value, less cost to dispose.

As a result of significant declines in revenues related to its futures and foresight projects, management determined that there was possible goodwill and intangible asset impairment for our Social Technologies reporting unit.

interim impairment testing was performed as of June 30, 2009.

The state of the economy early in 2009 contributed to potential Social Technologies clients focusing on short-term survival rather than long-term foresight planning.

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

Management concluded that this division suffered a significant adverse change in the

business, which included a projection of continuing operating and cash flow losses.

The Company determined that there was impairment of this divisions purchased intangible assets of $1.0 million and impairment of the divisions goodwill

of $1.3 million.

This impairment loss is included in the Companys consolidated statement of operations for the nine months ended September 30, 2009.

Based on our annual impairment analysis completed with the assistance of our independent

valuation firm, we determined that no additional impairment exists at December 31, 2009.

Derivative LiabilityApplicable

under Operating Company Accounting

US GAAP requires bifurcation of embedded derivative instruments and measure of

their fair value for accounting purposes.

In addition, freestanding derivative instruments such as certain warrants are also derivative liabilities.

We estimate the fair value of these instruments using the Black-Scholes option pricing model, which

takes into account a variety of factors that require judgment, including estimating the expected term of the warrants and the expected volatility of the Companys stock price.

The expected term of the warrants represents the period of time that

they are expected to be outstanding and is based on the contractual term of the warrants and expectations of the warrants holders behavior.

The expected volatility is based upon our historical market price at consistent points in a period

equal to the expected life of the warrants.

Derivative liabilities are recorded at fair value at inception and then are adjusted to reflect fair value at the end of each quarter, with any increase or decrease in the fair value being recorded in

results of operations as a component of other (income) expense.

At December 31, 2009, we had a derivative instrument

related to our issuance of a Note and Warrant Purchase Agreement as further discussed in Note 7 to the consolidated financial statements contained elsewhere in this annual report on Form 10-K.

The warrants have features that make their exercise

price variable.

We used the Black-Scholes model to determine the fair value of these warrants at inception, which resulted in a derivative liability of approximately $555,000.

We used the Black-Scholes model to determine the fair value of the

warrants again as of December 31, 2009, which resulted in a derivative liability of approximately $665,000.

The increase in the fair value of the derivative liability from inception is primarily related to the increase in the market price of

our stock during the period.

Recently Issued Accounting Pronouncements

In March 2008, the FASB issued SFAS No.

161, Disclosures about Derivative Instruments and Hedging Activities .

161 requires additional disclosures related to the use of derivative instruments, the accounting for derivatives and the financial statement impact of derivatives.

161 is effective for fiscal years beginning after

November 15, 2008.

The adoption of SFAS No.

161 will not impact the Companys consolidated financial statements.

April 2008, the FASB issued FASB Staff Position (FSP) FAS 142-3, Determination of the Useful Life of Intangible Assets.

FSP FAS 142-3 amends the factors that should be considered in developing renewal or extension assumptions used to

determine the useful life of a recognized intangible asset under FASB Statement No.

142, Goodwill and Other Intangible Assets.

FSP FAS 142-3 is effective for fiscal years beginning after December 15, 2008 and early adoption is

The adoption of this statement will not have a material effect on the Companys financial statements.

In May 2008, the

FASB issued SFAS No.

162, The Hierarchy of Generally Accepted Accounting Principles .

162 identifies the sources of accounting principles and the framework for selecting the principles to be used in the preparation of

financial statements of nongovernmental entities that are presented in conformity with generally accepted accounting principles in the United States.

It is effective 60 days following the SECs approval of the Public Company Accounting

Oversight Board amendments to AU Section 411, The Meaning of Present Fairly in Conformity With Generally Accepted Accounting Principles .

The adoption of this statement will not have a material effect on the Companys financial

In October 2009, the Financial Accounting Standards Board (FASB) issued an update to existing guidance on revenue recognition for

arrangements with multiple deliverables.

This update will allow companies to allocate consideration received for qualified separate deliverables using estimated selling price for both delivered and undelivered items when vendor-specific

objective evidence or third-party evidence is unavailable.

Additional disclosures discussing the nature of multiple element arrangements, the types of deliverables under the arrangements, the general timing of their delivery, and significant

factors and estimates used to determine estimated selling prices are required.

We will adopt this update for new revenue arrangements entered into or materially modified beginning January 1, 2011.

The adoption of this update is not

expected to have a material impact on our consolidated financial statements.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 5. Market for Registrant’s Common Equity