What changed in this filing

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Item 1. Financial Statements

2010-08-10 compared with 2010-05-13 · 589 added, 356 removed, 462 unchanged (67% of the section changed)

Financial Statements

UTEK Corporation

INNOVARO, INC.

Consolidated Balance Sheets

7 unchanged sentences

Total current assets

Investments under cost method

Note receivable and accrued interest

12 unchanged sentences

Total liabilities

UTEK stockholders equity:

Innovaro stockholders equity:

Preferred stock, $.01 par value, 1,000,000 shares authorized;

1 unchanged sentence

Common stock, $.01 par value, 29,000,000 shares authorized;

12,286,768 shares issued;

11,797,140 shares

12,530,701 and 12,286,768 shares issued;

12,041,073 and 11,797,140

shares outstanding at June 30, 2010 and December 31, 2009, respectively

Additional paid-in capital

3 unchanged sentences

Accumulated other comprehensive income (loss)

Total UTEK stockholders equity

Total Innovaro stockholders equity

Noncontrolling interest

1 unchanged sentence

See accompanying notes

UTEK Corporation

INNOVARO, INC.

Consolidated Statements of Operations

Ended March 31,

June 30, 2010

June 30, 2009

June 30, 2010

June 30, 2009

Revenue / Income from operations:

6 unchanged sentences

Professional fees

Research and development

Sales and marketing

1 unchanged sentence

Depreciation and amortization

Impairment loss

Other (income) and expense:

8 unchanged sentences

Net loss / Net decrease in net assets from operations

Net loss attributable to the noncontrolling interest

Net loss attributable to UTEK stockholders

Net loss attributable to UTEK stockholders per share / Net decrease in net assets from operations per share:

Basic and diluted

Net loss attributable to noncontrolling interest

Net loss attributable to Innovaro stockholders

Net loss attributable to Innovaro stockholders per share / Net decrease in net assets from operations per share:

Weighted average shares outstanding:

1 unchanged sentence

See accompanying notes

UTEK Corporation

INNOVARO, INC.

Consolidated Statement of Changes in Equity

UTEK Stockholders Equity

Innovaro Stockholders Equity

Comprehensive

Income (loss)

Noncontrolling

Comprehensive

Income (Loss)

Noncontrolling

Balances at December 31, 2009

6 unchanged sentences

Comprehensive loss

Investment in Verdant Ventures Advisors, LLC

Stock-based compensation expense

Balances at March 31, 2010

Balances at June 30, 2010

See accompanying notes

UTEK Corporation

INNOVARO, INC.

Consolidated Statements of Cash Flows

March 31, 2009

June 30, 2010

June 30, 2009

Operating Activities:

Net loss attributable to UTEK stockholders / Net decrease in net assets from operations

Adjustments to reconcile net loss attributable to UTEK stockholders / net decrease in net assets from operations to net cash

Net loss attributable to Innovaro stockholders / Net decrease in net assets from operations

Adjustments to reconcile net loss attributable to Innovaro stockholders / net decrease in net assets from operations to net cash

flows from operating activities:

1 unchanged sentence

Loss on sale of investments from investment company activity

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

Proceeds from sale of equity investments from investment company activity

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

Goodwill and intangible asset impairment

Net loss attributable to noncontrolling interest

4 unchanged sentences

Stock-based compensation

Severance compensation paid for in escrowed shares

Deferred income taxes

7 unchanged sentences

Capital expenditures

Cash paid in connection with Strategos acquisition

Proceeds from sale of available-for-sale securities

9 unchanged sentences

See accompanying notes

UTEK Corporation

INNOVARO, INC.

Consolidated Statements of Cash Flows (continued)

Three Months Ended

Six Months Ended June 30,

Supplemental Disclosures of Non-Cash Investing and Financing Activities

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

The Company issued stock in connection with an investment in UTEK Real Estate Holdings, Inc.

176,470 shares of UTEK common stock

The Company issued stock in connection with an investment in

UTEK Real Estate Holdings, Inc.

176,470 shares of Innovaro common stock

240,964 shares of NeoStem, Inc.

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

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

months ended June 30, 2009

Unrealized gain (loss) from available-for-sale securities

2 unchanged sentences

Increase to additional paid-in capital

The Company issued 243,933 shares of common stock in connection with its investment in Verdant Ventures Advisors,

Supplemental Disclosures of Cash Flow Information

2 unchanged sentences

See accompanying notes

UTEK Corporation

INNOVARO, INC.

Notes to Consolidated Financial Statements

1 unchanged sentence

Interim Financial Information

The financial information for UTEK Corporation (the Company, we, us or UTEK) as of March 31, 2010 and

2009 and for the three month periods then ended is unaudited, but includes all adjustments (consisting only of normal recurring accruals), which, in the opinion of management are necessary in order to make the consolidated financial statements not

misleading at such dates and for those periods.

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

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

These consolidated financial statements should be read in conjunction with

the consolidated audited financial statements and related notes included in the Companys Annual Report on Form 10-K for the year ended December 31, 2009.

Operating results for the three months ended March 31, 2010 are not necessarily

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

The financial information for Innovaro, Inc.

(the Company, we, us or Innovaro) as of June 30, 2010

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

statements not misleading at such dates and for those periods.

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

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

These consolidated financial statements should be read in

conjunction with the consolidated audited financial statements and related notes included in the Companys Annual Report on Form 10-K for the year ended December 31, 2009.

Operating results for the six months ended June 30, 2010 are

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

Basis of Presentation

8 unchanged sentences

Act and Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) Topic 946 Financial ServicesInvestment Companies .

Operating Company Accounting, as we refer to it, is defined as accounting

in accordance with GAAP other than for investment companies under the 1940 Act and Topic 946.

Presentation of Financial Statements

The Company made the following adjustments in order to present two periods of financial statements together for which the periods

include two different methods of accounting.

Operating Company Accounting, as we refer to it, is defined as

accounting in accordance with GAAP other than for investment companies under the 1940 Act and Topic 946.

Presentation of Financial

The Company made the following adjustments in order to present two periods of financial statements together for which the

periods include two different methods of accounting.

Changes made to the accompanying consolidated statements of operations include the following:

1 unchanged sentence

in accordance with the accounting in effect during the respective periods.

Operations for the three months ended March 31, 2010 are presented in operating company format and operations for the three months ended March 31, 2009 are

presented in investment company format.

The statement of operations for the three months ended March 31, 2010 is presented in operating company format.

Certain operating company balances

are not applicable to an investment company and are not included for the three months ended March 31, 2009.

Operations for the three and six months ended June 30, 2010 are presented in operating company format and operations for the three and six months ended June 30,

2009 are presented in investment company format.

The statements of operations for the three and six months ended June 30, 2010 are presented in operating company format.

Certain operating company

balances are not applicable to an investment company and are not included for the three and six months ended June 30, 2009.

These include other (income) expense and interest expense, net.

UTEK Real Estates results of operations are consolidated with those of UTEK for the three months ended March 31, 2010 and intercompany

transactions, including intercompany borrowings and rent, are eliminated in consolidation.

At March 31, 2009, UTEK Real Estate was included as one of the Companys portfolio companies and its results of operations are not consolidated into

those of UTEK for the three months ended March 31, 2009.

Certain balances reported under Investment Company Accounting are not applicable to an operating company and are not included for the three months

ended March 31, 2010.

UTEK Real Estate Holdings, Inc.s results of operations are consolidated with those of Innovaro for the three and six months ended June 30,

2010 and intercompany transactions, including intercompany borrowings and rent, are eliminated in consolidation.

At June 30, 2009, UTEK Real Estate Holdings, Inc.

was included as one of the Companys portfolio companies and its results of

operations are not consolidated into those of Innovaro for the three and six months ended June 30, 2009.

Certain balances reported under Investment Company Accounting are not applicable to an operating company and are not included for the three and six

months ended June 30, 2010.

These include investment income, net realized gains (losses) on investments and net change in unrealized appreciation (depreciation) of investments.

During the three months ended March 31, 2010, income and losses from

these sources are classified as follows:

During the three and six months ended June 30, 2010, income

and losses from these sources are classified as follows:

Investment income is included in other (income) expense or interest expense, net, depending on its source.

3 unchanged sentences

Other changes include the following:

Other comprehensive income is not applicable to investments companies, and therefore, any related disclosures are applicable only for the three months

ended March 31, 2010.

Other comprehensive income (loss) is not applicable to investments companies, and therefore, any related disclosures are applicable only for the three

and six months ended June 30, 2010.

The Consolidated Schedule of Investments, Consolidated Statement of Changes in Net Assets and Financial Highlights are not presented as they are

2 unchanged sentences

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

These services are primarily provided throughout the United

States and the United Kingdom.

On March 16, 2010, the Company began doing business as Innovaro and changed its ticker symbol to NYSE

INV. The Companys proxy statement for the 2010 Annual Meeting of Shareholders includes a proposal to amend the Companys certificate of incorporation to change the Companys name to Innovaro, Inc.

These services are primarily provided internationally from

our offices in the United States and the United Kingdom.

On March 16, 2010, the Company began doing business as Innovaro and changed its

ticker symbol to NYSE Amex:

INV. On July 8, 2010, the Companys shareholders voted to amend the Companys certificate of incorporation to change the Companys name to Innovaro, Inc.

The name change became effective on

July 12, 2010.

Principles of Consolidation

consolidated financial statements include the accounts of UTEK and its wholly owned subsidiaries:

The consolidated financial statements include the accounts of Innovaro and its wholly owned subsidiaries:

Innovaro Europe, Ltd.

(formerly UTEK Europe, Ltd.) and UTEK Real Estate Holdings, Inc.

(formerly UTEK Europe,

Ltd.) and UTEK Real Estate Holdings, Inc.

(as of October 1, 2009).

All intercompany transactions and

balances are eliminated in consolidation.

The Company is reporting as an investment company for the three months ended March 31, 2009.

As an investment company, portfolio investments are held for the purpose of deriving investment income and future capital gains.

The operating results of the Companys portfolio companies, including UTEK Real Estate Holdings, Inc., are not

consolidated with the Companys financial statements for the three months ended March 31, 2009.

The Company is reporting as an

operating company for the three months ended March 31, 2010.

All intercompany transactions and balances are eliminated in consolidation.

The Company is reporting as an investment company for the three and six months ended June 30, 2009.

As an investment company, portfolio investments

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

The operating results of the Companys portfolio companies, including UTEK Real Estate Holdings, Inc., are not consolidated with the Companys financial

statements for the three and six months ended June 30, 2009.

The Company is reporting as an operating company for the three and six

months ended June 30, 2010.

As such, the Company is required to consolidate UTEK Real Estate Holdings, Inc.

and its subsidiaries:

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

and Cortez 114, LLC (collectively UTEK Real Estate).

The results of operations of UTEK Real Estate have been included in the Companys operations for the three months ended March 31, 2010.

In addition, the assets and

liabilities of UTEK Real Estate have been included in the Companys financial position as of March 31, 2010 and December 31, 2009.

As of March 31, 2010, none of the Companys other equity investments qualify for

consolidation in accordance with GAAP.

Ybor City Group, Inc., 22nd Street of Ybor City, Inc., ABM of Tampa Bay, Inc., and Cortez 114, LLC (collectively

UTEK Real Estate).

The results of operations of UTEK Real Estate have been included in the Companys operations for the three and six months ended June 30, 2010.

In addition, the assets and liabilities of UTEK Real Estate have

been included in the Companys financial position as of June 30, 2010 and December 31, 2009.

As of June 30, 2010, none of the Companys other equity investments qualify for consolidation in accordance with GAAP.

Accounts Receivable

The allowance for doubtful accounts was approximately $7,000 and $83,000 as of March 31, 2010 and December 31, 2009, respectively.

The allowance for

doubtful accounts was approximately $9,000 and $83,000 as of June 30, 2010 and December 31, 2009, respectively.

In accordance with ASC Topic 350 Intangibles Goodwill and Other , management performs interim assessments of

goodwill if impairment indicators are present.

One such indicator is an adverse change in the business climate.

Subsequent to June 30, 2010, the Companys stock price declined significantly.

A decline in stock price may be an indicator of

an adverse change in business climate.

In addition, a decline in stock price affects the Companys market capitalization and may affect fair value measurements for the Companys reporting units.

Subsequent to June 30, 2010, management considered the incremental decline in our stock price from $3.80 at June 30, 2010 to $1.67 at

July 28, 2010.

At this time, the evaluation period for the decline in stock price is limited.

As such, management cannot conclude that this decline, although severe, will be other than short-term in nature.

Absent a sustained decline in stock

price, the severity of the decline did not trigger a review for impairment outside of the Companys next scheduled annual impairment evaluation date of December 31, 2010.

However, if the decline in the Companys stock price does not reverse or the decline is significantly further extended, material write-downs or

impairment charges may be required in the future.

It is reasonably possible that management may be required to conduct an interim goodwill impairment evaluation during the remainder of 2010, which could result in a material impairment of goodwill.

The magnitude and timing of those charges would be dependent on the severity and duration of the decline and cannot be determined at this time.

Any material non-cash impairment charges related to goodwill or other intangible assets would have a

material adverse effect on the Companys operating results.

Revenue Recognition

Beginning in March

2010, the Company reorganized into three new lines of business, all working under the Innovaro brand:

Strategic Services driven by Strategos, an advanced innovation consultancy;

Technology Marketplaces online platforms, partnering

services, global licensing and technology transfer services;

and Insights & Research futures and trends, research, information services and IP consulting.

Beginning in March 2010, the Company reorganized into three new lines of business, all working under the Innovaro brand:

Strategic Services driven

by Strategos, an advanced innovation consultancy;

Technology Marketplaces online platforms, partnering services, global licensing and technology transfer services;

and Insights & Research futures and trends, research,

information services and IP consulting.

Strategic Services

The Company has

revenues from fixed fee contracts for the sale of strategic consulting services.

These revenues 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.

The Company bills clients for services and expenses incurred in accordance with the terms of the client engagement agreement.

Revenues from strategic consulting services are also provided on a time-and-expense 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.

The Company has revenues from fixed fee contracts for the sale of strategic consulting services.

These revenues 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.

The Company bills clients for services and expenses incurred in

accordance with the terms of the client engagement agreement.

Revenues from strategic consulting services are also provided on a

time-and-expense 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

Technology Marketplaces

26 unchanged sentences

Client prepayments and retainers are classified as deferred revenue and recognized over future periods as earned.

Page 10 of 34

Direct Costs of Revenue

Direct costs of

revenue consist of direct costs related to the Companys strategic services, technology marketplaces and insights & research segments.

Direct costs of revenue include salaries and related taxes, bonuses and commissions, certain outside

services, business development costs, royalties and other direct project costs.

Direct costs of revenue consist of direct costs related to the Companys strategic services, technology marketplaces and insights & research

Direct costs of revenue include salaries and related taxes, bonuses and commissions, certain outside services, business development costs, royalties and other direct project costs.

Research and Development

In accordance with ASC Subtopic 985-20 Costs of Software to Be Sold, Leased, or Marketed , the Company expenses all costs incurred to establish the

technological feasibility of a computer product to be sold, leased, or otherwise marketed as research and development costs.

The Company charged $198,000 in research and development costs to expense for the three months ended March 31, 2010.

In accordance

with ASC Subtopic 985-20 Costs of Software to Be Sold, Leased, or Marketed , the Company expenses all costs incurred to establish the technological feasibility of a computer product to be sold, leased, or otherwise marketed as research and

development costs.

Research and development costs incurred to date have been expensed in the accompanying statement of operations as the Companys innovation management platform has not reached technological feasibility.

Reclassifications

connection with the change in the Companys business segments, certain reclassifications have been made to the 2009 balances to conform to the 2010 financial statement presentation.

Reclassifications were made to revenue to conform to the

Companys new line of business segments.

In addition, reclassifications were made to expenses to move direct costs associated with these business lines into direct costs of revenue.

Page 10 of 28

In connection with

the change in the Companys business segments, certain reclassifications have been made to the 2009 balances to conform to the 2010 financial statement presentation.

Reclassifications were made to revenue to conform to the Companys new

line of business segments.

Reclassifications were also made to expenses to move direct costs associated with these business lines into direct costs of revenue.

In addition, reclassifications were made to 2010 balances to segregate research and

development costs on the statement of operations.

Earnings per Share (EPS)

5 unchanged sentences

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

Three Months Ended March 31

Three Months Ended June 30

Six Months Ended June 30

Weighted-average outstanding shares of common stock

Dilutive effect of stock options and warrants

Dilutive effect of stock options

Common stock and common stock equivalents

5 unchanged sentences

payable, accrued expenses, long-term debt and the derivative liability.

With the exception of investments under cost method discussed below and fair value measurements discussed in Note 3, the carrying amount of the Companys financial

With the exception of investments under cost method discussed in Note 2 and fair value measurements discussed in Note 4, the carrying amounts of the Companys financial

instruments approximate their fair values.

2 unchanged sentences

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

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

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

2010 and December 31, 2009.

The Company has not experienced any losses on such accounts.

The Company had two major customers during the

three months ended March 31, 2010 and two major customers during the three months ended March 31, 2009, all of which were customers of the strategic services line of business.

Major customers, those generating greater than 10% of total

revenue, accounted for approximately 29% and 27% of the Companys revenue during the three months ended March 31, 2010 and 2009, respectively.

In addition, two customers accounted for approximately 33% of accounts receivable at

March 31, 2010.

The Company had one major customer during the

three and six months ended June 30, 2009, three major customers during the three months ended June 30, 2010 and one major customer during the six months ended June 30, 2010, all of which were customers of the strategic services line

Major customers, those generating greater than 10% of total revenue, accounted for approximately 38% and 10% of the Companys revenue during the three months ended June 30, 2010 and 2009,

Page 11 of 34

respectively.

Major customers accounted for approximately 13% and 11% of the Companys revenue during the six months ended June 30, 2010 and 2009, respectively.

In addition, two

customers accounted for approximately 28% of accounts receivable at June 30, 2010.

Investments under Cost Method

1 unchanged sentence

under cost method in accordance with ASC Subtopic 325-20 Cost Method Investments .

The Company evaluated investments of $394,000 accounted for under the cost method for impairment as of March 31, 2010.

The Company determined that the fair

value of these investments exceeded the carrying amount of these investments.

It was not practicable to estimate the fair value of the remaining $194,000 of the Companys investments under cost method and such an estimate was not made because

there were no events or changes in circumstances that may have had a significant adverse effect on the fair value of such investments during the current period.

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Investments under cost method comprising $588,085 have been classified as current assets in accordance with the Companys intent and ability regarding

liquidity of the investments.

The Company estimated that the fair value of these investments exceeded their respective carrying amounts as of June 30, 2010.

Investment in Verdant Ventures Advisors, LLC

On April 14, 2010, the Company entered into a limited liability company agreement to form Verdant Ventures Advisors, LLC (Verdant

Under this agreement, the Company made an investment of 243,933 shares of the Companys common stock worth $1,000,125 in exchange for a 15% ownership in Verdant Ventures.

Verdant Ventures will operate as an independently

managed technology transfer venture fund.

John Micek, one of the Companys directors, is managing partner of Verdant Ventures, as well as a member of two limited liability companies that are also parties to the limited liability company

agreement of Verdant Ventures.

Pursuant to the agreement, the Company is not required to make any additional capital contributions or loans to Verdant Ventures and is not involved in its management.

Verdant Ventures may sell up to one-third of the

Companys contributed shares each year during a three-year period from the date the Company first contributed the shares.

evaluated its investment in Verdant Ventures under ASC Topic 810 Consolidation and concluded that this investment does not meet the requirements for consolidation.

As such, it has been recorded as an investment under cost method in the

accompanying balance sheet as of June 30, 2010.

This investment has been classified as a non-current asset in accordance with the Companys intent and ability regarding liquidity of the investment.

Available-for-Sale Securities

The Company classifies its investments in freely tradable equity securities as available-for-sale in accordance with ASC Topic 320 Investments

Debt and Equity Securities and its intentions regarding these instruments.

A summary of the estimated fair value of available-for-sale securities is as follows as of March 31, 2010.

Company classifies its investments in freely tradable equity securities as available-for-sale in accordance with ASC Topic 320 Investments Debt and Equity Securities and its intentions regarding these instruments.

A summary of the

estimated fair value of available-for-sale securities is as follows as of June 30, 2010.

Unrealized (1)

Equity securities

Available-for-Sale Securities

The total of the unrealized gains and losses of $8,885 is included in operating company equity as a component of accumulated other comprehensive income (loss) in the

consolidated balance sheet.

As of March 31, 2010, four of our eight total available-for-sale securities were in an

unrealized loss position, all of which were for a period of less than twelve months.

Equity securities (available-for-sale)

The net unrealized losses of $(365,600) is included in operating company equity as a component of accumulated other comprehensive income (loss) in the consolidated

balance sheet.

As of June 30, 2010, four of our six total available-for-sale securities were in an unrealized loss

position, all of which were for a period of less than twelve months.

The aggregate fair value of the four available-for-sale securities with unrealized losses was $105,000.

These securities are in micro-cap companies in various

industries and the impairment is significant as it relates to three of the four investments.

These securities are in micro-cap companies in various industries and the

impairment is significant as it relates to three of the four investments.

In all cases, the impairment is deemed to have been caused by general market fluctuations.

Based on third-party valuations, the Company believes these

impairments are not other-than-temporary.

Based on third-party valuations, the Company believes these impairments are not

other-than-temporary.

Accordingly, no impairment loss has been recognized on these securities.

Proceeds from the sale of

available-for-sale securities were approximately $35,000 for the three months ended March 31, 2010.

Gross realized gains were approximately $11,000 as a result of the sale of available-for-sale securities for the three months ended

March 31, 2010.

In addition, the Company recognized a $146,000 loss on certain warrants classified as available-for-sale securities as of March 31, 2010 because the Company determined that the warrants were permanently impaired.

Unrealized gains (losses) on available-for-sale securities for the three months ended March 31, 2010 are shown in the accompanying

statement of equity net of the reclassification adjustment.

Disclosure of the gross amounts of the current period gain and amounts that were reclassified out of accumulated other comprehensive income into earnings are as follows:

Ended March 31,

Unrealized holding gains (losses) arising during the period

reclassification adjustment for losses included in net income

Proceeds from the sale of available-for-sale

securities were approximately $214,000 and $249,000 for the three and six months ended June 30, 2010, respectively.

Gross realized gains were approximately $100,000 and $111,000 as a result of the sale of available-for-sale securities for the

three and six months ended June 30, 2010, respectively.

In addition, the Company recognized a $146,000 loss on certain warrants classified as available-for-sale securities during the six months ended June 30, 2010 because the Company

determined that the warrants were permanently impaired.

These warrants subsequently expired unexercised.

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Unrealized gains (losses) on available-for-sale securities for the six months ended June 30, 2010 are

shown in the accompanying statement of equity net of the reclassification adjustment.

Disclosure of the gross amounts of the current period gain (loss) and amounts that were reclassified out of accumulated other comprehensive income (loss) into

earnings are as follows:

June 30, 2010

Unrealized holding gain (loss) arising during the period

reclassification adjustment for net gains included in net income

Unrealized gain (loss) from available-for-sale securities, net

13 unchanged sentences

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

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Level 3Unobservable inputs for the asset or liability.

Assets measured at fair value on a recurring basis by level within the fair value hierarchy as of March 31, 2010 and December 31, 2009 are as

Fair Value Measurements

March 31, 2010 Using

Assets measured at fair value on a recurring basis by level within the fair value hierarchy as of June 30, 2010 and December 31, 2009 are as

Fair Value Measurements at

June 30, 2010 Using

Fair Value Measurements at

December 31, 2009 Using

5 unchanged sentences

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 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

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

instruments in an active market.

5 unchanged sentences

derivative liability is classified within Level 2 of the fair value hierarchy.

The Company utilizes the Black-Scholes Option Pricing Model to value the derivative liability utilizing observable inputs such as the Companys common stock price,

the exercise price of the warrants, and expected volatility, which is based on historical volatility.

The Black-Scholes model employs the market approach in the determining of the fair value of these derivatives.

The Company utilizes the Black-Scholes Option Pricing Model to value the derivative liability utilizing observable inputs such as the Companys common stock

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price, the exercise price of the warrants, and expected volatility, which is based on historical volatility.

The Black-Scholes model employs the market approach in determining of the fair value

of these derivatives.

See Note 6 for further discussion of the derivative liability.

Severance Liability

retired from his position as the Companys chief executive officer on March 1, 2009 following the conclusion of the term of his employment agreement.

retired from his position as the Companys chief executive officer on March 1, 2009 following the conclusion of the

term of his employment agreement.

The Company entered into a separation agreement with Dr.

April 8, 2009 that modified the payment terms, but not the monetary obligation amount that Dr.

Gross was entitled to receive pursuant to the employment agreement.

Gross on April 8, 2009 that modified the payment terms, but not the monetary obligation amount that Dr.

Gross was entitled to receive pursuant

to the employment agreement.

In connection therewith, the Company issued to Dr.

Gross a $550,000

promissory note that did not bear any interest and was due and payable on March 1, 2010.

Pursuant to the terms of the promissory note, the Company had the option to elect to transfer certain equity interests in one of its subsidiaries, Cortez

114, LLC (Cortez), which owns real estate located in Hernando County, Florida, to Dr.

Gross in lieu of making the $550,000 cash payment upon maturity of the promissory note.

On March 2, 2010, the Company satisfied its remaining severance obligation to Dr.

Gross through the conveyance of a 32% ownership interest in

Gross a $550,000 promissory note that did not bear any interest and was due and payable on March 1, 2010.

Pursuant to the terms of the promissory note, the

Company had the option to elect to transfer certain equity interests in one of its subsidiaries, Cortez 114, LLC (Cortez), which owns real estate located in Hernando County, Florida, to Dr.

Gross in lieu of making the $550,000 cash

payment upon maturity of the promissory note.

On March 2, 2010, the Company satisfied its remaining severance obligation to

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

In connection with this severance payment, the Company paid approximately $320,000 to satisfy the related payroll taxes, which included an income tax gross-up.

9 unchanged sentences

UTEK Real Estate is a co-borrower under the Note.

Page 13 of 28

Pursuant to an Absolute Guaranty of Payment and Performance, this loan is guaranteed by all of the

Companys subsidiaries.

In addition, this guaranty was secured pursuant to a Mortgage and 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.

Pursuant to a February 26, 2010, Substitution of Collateral Agreement and a

Membership Interest Pledge Agreement and Release of Mortgage, the Lenders security interest in the Collateral was released and replaced by a security interest in 68% of the outstanding membership interests of Cortez.

In addition, 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.

At UTEKs request, the Lender subsequently extended the repayment date for the $500,000 pay down to

June 30, 2010.

Pursuant to an Absolute Guaranty of Payment and Performance, this loan is guaranteed by all of the Companys subsidiaries.

In addition, this

guaranty was secured pursuant to a Mortgage and 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

Pursuant to a February 26, 2010, Substitution of Collateral Agreement and a Membership Interest Pledge Agreement and Release of

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

In addition, the Note was amended and restated to provide that Innovaro

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

At Innovaros request, the Lender subsequently extended the repayment date for the $500,000 payment, which was made in accordance with this extension

on July 12, 2010.

In accordance with ASC Topic 815 Derivatives and Hedging , the Company recognized a derivative liability for the

value of the warrants granted in conjunction with the Purchase Agreement.

The Company adjusted the derivative liability to fair value as of March 31, 2010, resulting in a gain on derivative liability of $54,309 for the three months ended

March 31, 2010.

The Company adjusted the derivative liability to fair value as of June 30, 2010, resulting in a gain (loss) on derivative liability of approximately $(12,000) and $42,000

for the three and six months ended June 30, 2010, respectively.

Accumulated Other Comprehensive Income (Loss)

Components comprising the accumulated other comprehensive income (loss) balance for the three months ended March 31, 2010 are as follows:

Components comprising the balance in accumulated other comprehensive income (loss) for the six months ended June 30, 2010 are as follows:

Unrealized gain

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Gain (loss) for the period

Balance at March 31, 2010

Balance at June 30, 2010

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Segment Reporting

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United States

Long-lived assets March 31, 2010

Total assets March 31, 2010

Long-lived assets June 30, 2010

Total assets June 30, 2010

Long-lived assets December 31, 2009

Total assets December 31, 2009

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For the Three Months Ended March 31, 2010

For the Three Months Ended June 30, 2010

United States

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Depreciation and amortization

For the Three Months Ended March 31, 2009

For the Three Months Ended June 30, 2009

United States

1 unchanged sentence

Depreciation and amortization

A summary of revenue and other

financial information by reportable line of business segment is shown below:

For the Three Months Ended March 31, 2010

For the Six Months Ended June 30, 2010

United States

Loss before income taxes

Depreciation and amortization

For the Six Months Ended June 30, 2009

United States

Loss before income taxes

Depreciation and amortization

Page 15 of 34

A summary of revenue and other financial information by reportable line of business segment is shown below:

For the Three Months Ended June 30, 2010

Administrative

Income (loss) before income taxes

For the Three Months Ended March 31, 2009

For the Three Months Ended June 30, 2009

Administrative

Income (loss) before income taxes

For the Six Months Ended June 30, 2010

Administrative

Income (loss) before income taxes

For the Six Months Ended June 30, 2009

Administrative

Income (loss) before income taxes

Subsequent Events

On April 1, 2010, the Company filed a Form S-3 with the SEC to register the offering of its securities.

The Company may offer and sell, from time to

time, in one or more offerings, common stock, preferred stock and warrants for which the aggregate offering price will not exceed $20,000,000.

The Form S-3 became effective on April 16, 2010.

On April 14, 2010, the Company entered into a limited liability company agreement to form Verdant Ventures Advisors, LLC.

Under this agreement, the

Company is obligated to invest $1,000,000 worth of shares of the Companys common stock (equal to 250,627 shares based on the closing market price of the Companys common stock on April 14, 2010).

John Micek, one of the Companys

directors, is a member of two limited liability companies that are also parties to the Verdant Ventures Advisors, LLC agreement.

Securities Offering

July 8, 2010, the Company entered into a definitive securities purchase agreement (the Securities Purchase Agreement) with three institutional investors, pursuant to which the Company agreed to issue to the investors in a registered

offering 1,481,481 shares (the Shares) of the Companys common stock priced at $2.565 per share along with Series A warrants to purchase up to 1,481,481 shares of common stock with an exercise price of $3.43 per share of common

stock and Series B warrants to purchase up to 893,519 shares of common stock with an exercise price of $0.01 per share of common stock.

These securities were offered pursuant to our effective shelf registration statement on Form S3 (File

On July 9, 2010, the Company entered into an amendment to the Securities Purchase Agreement with each of the

investors to increase the exercise price of the Series A warrants to be issued in connection therewith from $3.43 per share to $3.49 per share.

On July 12, 2010, the Company completed the offering contemplated by the Securities Purchase Agreement and raised gross proceeds in connection

therewith of approximately $3.8 million before advisory fees and offering expenses.

The Series A warrants are exercisable for a five-year

period commencing six months after the date of their issuance.

The Series B warrants will become initially exercisable on the 60 day anniversary of the date of their issuance if the market price (calculated in the manner described below) of our

common stock on such anniversary date is less than the $2.565 per share purchase price of our common stock issued to the investors in the offering.

In addition, the number of Series B warrants that will become exercisable will increase on the 120

day anniversary of the date of their issuance if the market price (calculated in the manner

Page 16 of 34

described below) of our common stock on such anniversary date is less than both the $2.565 per share purchase price of our common stock issued to the investors in the offering and the market

price (calculated in the manner described below) on the 60-day anniversary of the date of the issuance of the Series B warrants.

In each such event, the Series B warrants will be exercisable for a number of shares such that the average price per

share of the (i) shares of common stock to be sold to the investors in the offering and (ii) the shares of common stock issuable upon exercise of the Series B warrants equals the greater of (i) the market price (calculated in the

manner described below) of the common stock on the date of calculation and (ii) $1.60.

For purposes of the Series B warrants, the term market price is 90% of the average of the weighted average price of our common stock during the

10 trading days preceding the date of calculation.

In addition, the Company granted each investor in the offering the right of first refusal

to purchase 100% of the shares of the Companys common stock or securities convertible into or exercisable for shares of the Companys common stock to be issued by the Company in certain offerings until the one (1) year anniversary of

the date of the issuance of the Shares.

Thereafter, each investor will have the right of first refusal to purchase 50% of the shares of the Companys common stock or securities convertible into or exercisable for shares of the Companys

common stock to be issued by the Company in certain offerings until the two (2) year anniversary of the date of the issuance of the Shares.

Management is currently evaluating the Securities Purchase Agreement for potential derivatives and possible effects on the Companys financial

Employee Stock Option Plan

On July 8, 2010, the Companys shareholders voted in favor of a proposal to amend the Companys Amended and Restated Employee Stock Option

Plan (the Option Plan) to increase the number of shares authorized for issuance by 600,000 shares.

The maximum number of shares that may be issued through the exercise of options granted under the Option Plan as amended is 2,811,274.

Restricted Stock Plan

July 8, 2010, the Companys shareholders voted in favor of a proposal to adopt the Companys Restricted Stock Plan (the Restricted Stock Plan).

The purpose of the Restricted Stock Plan is to provide selected members of the

Board of Directors, executive officers, key employees, consultants and advisors of the Company with awards consisting of shares of the Companys common stock contingent on their long-term continued employment and/or their relationship with the

The maximum number of shares of common stock that may be issued to participants under the Restricted Stock Plan is 1,500,000.

Page 17 of 34

Managements Discussion and Analysis of Financial Condition and Results of Operations

9 unchanged sentences

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

Recent Developments

2010, we held an annual meeting of stockholders to:

(i) elect nine directors who will serve for one year, or until their successors are elected and qualified;

(ii) ratify the selection of Pender Newkirk & Company LLP to serve

as our registered independent public accounting firm for the year ending December 31, 2010;

(iii) approve an amendment to our amended and restated employee stock option plan to increase the number of shares authorized for issuance;

(iv) approve the adoption of our restricted stock plan;

and (v) approve an amendment to our certificate of incorporation to change our name to Innovaro, Inc.

All matters submitted to a vote of our stockholders at the annual meeting were approved and all director nominees were elected.

However, because Holly

Callen Hamilton, Keith A.

Witter and Kwabena Gyimah-Brempong received a greater number of votes withheld for election as a director than votes for such election, they tendered their respective conditional resignations to our

board of directors on July 8, 2010.

Pursuant to our Corporate Governance Guidelines and Majority Withheld Vote Policy contained therein, directors are expected to tender a conditional offer of resignation to our board of directors following

certification of the stockholder vote at which he or she receives a greater number of votes withheld for his or her election as a director than votes for such election.

The conditional resignation offers were first considered

by the nominating and corporate governance committee of our board of directors (with Messrs.

Witter and Gyimah-Brempong and Ms.

Callen Hamilton abstaining) and then by our full board of directors (also with Messrs.

Witter and Gyimah-Brempong

Callen Hamilton abstaining).

In light of the results at the annual meeting, our board of directors, following the deliberation process outlined in our Corporate Governance Guidelines, determined unanimously to accept the resignations of

Witter and Gyimah-Brempong and Ms.

Callen Hamilton as members of our board of directors.

With the addition of three new Board

members in February 2010, we currently have an appropriate number of independent board members in accordance with NYSE guidelines for a smaller reporting company.

In addition, we believe the current Board members have the business knowledge and

breadth of experience required.

On July 12, 2010, we completed the registered offering of 1,481,481 shares of our common stock priced at

$2.565 per share along with Series A warrants to purchase up to 1,481,481 shares of common stock with an exercise price of $3.43 per share (subsequently amended to $3.49 per share) of common stock and Series B warrants to purchase up to 893,519

shares of common stock with an exercise price of $0.01 per share of common stock.

We raised gross proceeds of approximately $3.8 million before advisory fees and offering expenses in connection with the offering.

The Series A warrants are exercisable for a five-year period commencing six months after the date of their issuance.

The Series B warrants will become

initially exercisable on the 60 day anniversary of the date of their issuance if the market price (calculated in the manner described below) of our common stock on such anniversary date is less than the $2.565 per share purchase price of our common

stock issued to the investors in the offering.

In addition, the number of Series B warrants that will become exercisable will increase on the 120 day anniversary of the date of their issuance if the market price (calculated in the manner described

below) of our common stock on such anniversary date is less than both the $2.565 per share purchase price of our common stock issued to the investors in the offering and the market price (calculated in the manner described below) on the 60-day

anniversary of the date of the issuance of the Series B warrants.

In each such event, the Series B warrants will be exercisable for a number of shares such that the average price per share of the (i) shares of common stock to be sold to the

investors in the offering and (ii) the shares of common stock issuable upon exercise of the Series B warrants equals the greater of (i) the market price (calculated in the manner described below) of the common stock on the date of

calculation and (ii) $1.60.

For purposes of the Series B warrants, the term market price is 90% of the average of the weighted average price of our common stock during the 10 trading days preceding the date of calculation.

In addition, we granted each investor the right of first refusal to purchase 100% of the shares of our common stock or securities convertible

into or exercisable for shares of our common stock to be issued by us in certain offerings until July 12, 2011.

Page 18 of 34

Thereafter, each investor will have the right of first refusal to purchase 50% of the shares of the

Companys common stock or securities convertible into or exercisable for shares of the Companys common stock to be issued by the Company in certain offerings until the July 12, 2012.

Business Overview

The Company provides

services that help clients become stronger innovators, develop compelling strategies to drive and catalyze growth, rapidly source externally developed technologies, create value from their intellectual property (IP) and gain foresight

into marketplace and technology developments that affect their business.

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

In the first quarter of 2010, we began development of a software platform designed to enhance connections between each of our lines of business and

complement existing services.

At this time, management is continuing to evaluate the software platform and its alignment with the overall corporate strategy.

We provide services that help clients become stronger innovators, develop compelling strategies to drive and catalyze growth, rapidly

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

These services are primarily provided throughout the

United States and the United Kingdom.

In the first quarter of 2010, we began development of an innovation management platform designed to

enhance and compliment our innovation services deliverable to clients.

The purpose of the innovation management platform is to enable our clients to access, apply and extract value from a proven innovation approach through an on-demand service.

Management is continuing to evaluate the software platform and its internal resource allocation in conjunction with our overall corporate strategy.

On March 16, 2010, we began doing business as Innovaro and changed our ticker symbol to NYSE Amex:

Our proxy statement for the 2010

Annual Meeting of Shareholders includes a proposal to amend our certificate of incorporation to change the Companys name to Innovaro, Inc.

Beginning in March 2010, we reorganized into three new lines of business, all working under the Innovaro

Strategic Services driven by Strategos, an advanced innovation consultancy;

On July 12, 2010, we

formally changed our name to Innovaro, Inc. In connection with our rebranding as Innovaro in March 2010, we reorganized into three new lines of business, all working under the Innovaro brand:

Strategic Services driven by

Strategos, an advanced innovation consultancy;

Technology Marketplaces online platforms, partnering services, global licensing and technology transfer services;

and Insights & Research

futures and trends, research, information services and IP consulting.

In connection therewith, our business segments have changed beginning with the current reporting period ended March 31, 2010 and this change has required certain

reclassifications to prior period financial information.

and Insights & Research futures and trends, research, information

services and IP consulting.

In connection therewith, our business segments have changed beginning with the reporting period ended March 31, 2010 and this change has required certain reclassifications to prior period financial information.

Strategic Services

20 unchanged sentences

roadmap for our clients to use to uncover opportunities and options to realize latent value.

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Online Marketplaces

3 unchanged sentences

We are tracking at approximately 200,000 unique visitors per month and developing partnerships with external search partners to further drive traffic.

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Innovaro Medical Device Licensing is an online global resource for open innovation, partnering, licensing and business development within the medical

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available assets.

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Our IP analysis coupled with collaborative planning and execution delivers focused results.

model is science-based, the result has a greater probability of high value realization.

Strategies we employ are directly proportional to the return on IP investment and our holistic IP value consists of several phases in order to determine the

right IP for our clients one that employs strategies designed to deliver the desired business goals.

Because our model is

science-based, the result has a greater probability of high value realization.

Strategies we employ are directly proportional to the return on IP investment and our holistic IP value consists of several phases in order to determine the right IP

for our clients one that employs strategies designed to deliver the desired business goals.

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Current Market Conditions

We believe that our financial results for the first quarter of 2010 continued to be negatively impacted by weakened economic conditions.

deterioration in consumer confidence and a general reduction in spending by consumers and businesses have had an adverse effect on our operations as businesses have delayed spending on these types of services.

Recent improvements in demand trends

globally may not continue, and our future financial results and growth could be further harmed or constrained if the recovery was to stall or conditions were to worsen.

We believe that our financial results for the first six months of 2010 continued to be negatively impacted by weakened economic conditions, although to a

lesser extent than during the first six months of 2009.

The deterioration in consumer confidence and a general reduction in spending by consumers and businesses have had an adverse effect on our operations as businesses have delayed spending on

these types of services.

Recent improvements in demand trends globally may not continue, and our future financial results and growth could be further harmed or constrained if the recovery was to stall or conditions were to worsen.

Results of Operations

Income from Operations

Three months ended March 31,

(in thousands, except percentages)

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Total revenue / income from operations

This percentage change is not meaningful given that it relates to the manner in which we reported our operating results during the two reporting periods.

information, see Note 1 to our consolidated financial statements included elsewhere in this Form 10-Q.

Strategic Services

Our strategic services revenue is derived from consulting services we provide to our clients.

Our strategic services revenue decreased by $295,000 for the

three months ended March 31, 2010 in comparison to the three months ended March 31, 2009.

We attribute this decrease to the continued weakened economic conditions, primarily as it relates to the United Kingdom.

Our strategic services revenue increased by

$388,000 for the three months ended June 30, 2010 in comparison to the three months ended June 30, 2009.

Our strategic services revenue increased by $92,000 for the six months ended June 30, 2010 in comparison to the six months ended

June 30, 2009.

Strategic services revenue declined in 2009 as a result of adverse economic conditions.

We attribute the increased revenue in 2010 to a renewed interest in innovation efficiency and new product development, particularly during

the second quarter, in the US and abroad.

Based on current activity, we expect these revenues to increase for the remainder of 2010.

strategic services revenue in recent years has largely been dependent on the efforts of certain key consulting professionals whose employment contracts with us expire in April 2011.

If we are not successful in retaining these consulting

professionals or hiring similarly qualified and skilled consulting professionals to replacement them, then we may not be able to maintain the level of strategic services revenue we have generated in recent years.

For more information relating to

this risk, see Item 1A.

Risk Factors in our Annual Report on Form 10-K for the year ended December 31, 2009.

Our technology marketplaces revenue is a combination of global technology licensing search retainer fees and our online

marketplaces subscription fees.

Our technology marketplaces revenue decreased $169,000 for the three months ended June 30, 2010 in comparison to same period of 2009.

Our technology marketplaces revenue decreased $254,000 for the six months

ended June 30, 2010 in comparison to same period of 2009.

The decreased revenue in 2010 is due to a reduced number of both retainer based and online marketplace customers for our global technology licensing services.

Based on current activity,

we expect these revenues to increase over the first quarter for the remainder of 2010.

Technology Marketplaces

Our technology marketplaces revenue is a combination of global technology licensing search retainer fees and our online marketplaces subscription fees.

Our technology marketplaces revenue decreased $86,000 for the three months ended March 31, 2010 in comparison to same period of 2009, due to a reduced number of retainer based customers for our global technology licensing services.

current activity, we expect these revenues to increase over first quarter for the remainder of 2010.

we expect these revenues to remain flat for the remainder of 2010.

Insights and Research

1 unchanged sentence

Our insights and research

revenue decreased $82,000 for the three months ended March 31, 2010 in comparison to the three months ended March 31, 2009, as a result of a decrease in membership income related to our information services and online futures programs.

Based on current activity, we expect these revenues to remain flat to the first quarter for the remainder of 2010.

Investment Income, net

As an operating company, investment income is recorded as other (income) and expense in the accompanying statement of operations for the

three months ended March 31, 2010.

revenue decreased $51,000 for the three months ended June 30, 2010 in comparison to same period of 2009.

Our insights and research revenue decreased $133,000 for the six months ended June 30, 2010 in comparison to same period of 2009.

decreased revenue in 2010 is primarily a result of a decrease in renewals of our information services subscriptions.

Based on current activity, we expect these revenues to continue to decrease for the remainder of 2010 as compared to 2009.

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Investment Income, net

As an operating company, investment income is recorded as other (income) and expense in the accompanying statement of operations for the three and six

months ended June 30, 2010.

Direct Costs of Revenue

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services and other business development costs related to strategic services.

The most significant portion of direct costs of strategic services is comprised of consulting personnel compensation including bonuses.

The majority of the $841,000

decrease in direct costs of strategic services for the three months ended March 31, 2010 compared to the three months ended March 31, 2009 is related to a decrease in salaries and related payroll taxes.

With the reduction in revenue

related to poor global economic conditions, we reduced the head count of our strategic services employees in the second quarter of 2009 and have only recently begun to increase head count.

Based on current activity, we expect these costs to increase

over the first quarter for the remainder of 2010.

Direct costs of technology marketplaces revenue are comprised of certain salaries and

related taxes, commissions, certain outside services and other direct costs related to online marketplaces.

There were no significant changes in direct costs of technology marketplaces for the three months ended March 31, 2010 compared to the

three months ended March 31, 2009.

Based on current activity, we expect these costs to increase over the first quarter for the remainder of 2010.

Direct costs of insights and research revenue are comprised of certain salaries and related taxes, certain outside services, business development costs

and royalty costs related to information services.

The majority of the $43,000 decrease in direct costs of insights and research for the three months ended March 31, 2010 compared to the three months ended March 31, 2009 is related to a

decrease in salaries and related payroll taxes.

Based on current activity, we expect these costs to remain flat to the first quarter for the remainder of 2010.

Our direct costs of strategic services revenue decreased by $112,000 for the three months ended June 30, 2010 in comparison to the three months ended June 30,

Our direct costs of strategic services revenue decreased by $963,000 for the six months ended June 30, 2010 in comparison to the six months ended June 30, 2009.

The majority of the decrease in direct costs for both the three and six

month periods related to a decrease in salaries and related payroll taxes partially offset by an increase in outside contract services.

With the reduction in revenue related to poor global economic conditions, we reduced the head count of our

strategic services employees in the second quarter of 2009.

As a result of increases in projects during 2010, we have recently begun to increase head count.

We expect these costs to increase for the remainder of 2010 in connection with an increase

in the related revenue.

The increase in strategic services gross profit for both the three and six months ended June 30, 2010 in

comparison to the three and six months ended June 30, 2009 is primarily related to head count.

Although we reduced the number of employees when we lost revenues in 2009, this reduction was completed over a longer period of time than the

decrease in revenues.

This resulted in a significant decrease in the gross profit for the first and second quarters of 2009.

These margins have started to return to normal levels during 2010.

Direct costs of technology marketplaces revenue are comprised of certain salaries and related taxes, commissions, certain outside services and other

direct costs related to online marketplaces.

Our direct costs of technology marketplaces revenue decreased by $82,000 for the three months ended June 30, 2010 in comparison to the three months ended June 30, 2009.

Our direct costs of

technology marketplaces revenue decreased by $101,000 for the six months ended June 30, 2010 in comparison to the six months ended June 30, 2009.

The majority of the decrease in direct costs during 2010 is due to a decrease in salaries as

well as a slight decline in outside services costs.

We expect these costs to remain flat for the remainder of 2010.

Direct costs of insights

and research revenue are comprised of certain salaries and related taxes, certain outside services, business development costs and royalty costs related to information services.

There were no significant changes in direct costs of insights and

research revenue for the three and six months ended June 30, 2010 compared to the three and six months ended June 30, 2009.

We expect these costs to remain flat for the remainder of 2010.

Salaries and Wages

Three months ended March 31,

(In thousands, except percentages)

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The abbreviation ppt denotes percentage points.

Salaries and wages include non-sales employee and officer salaries that are not otherwise allocated to direct costs and related benefits including

bonuses and stock-based compensation.

$246,000 of the decrease in salaries and wages for the three months ended March 31, 2010 compared to the three months ended March 31, 2009 related to the retirement of our former CEO on

March 1, 2009.

The remaining decrease related to reduced stock compensation expense of $97,000 for the first quarter of 2010 compared to the first quarter of 2009 as a result of fewer option grants and an increase in the related forfeiture

rate, partially offset by an increase in new administrative hires of $90,000 in 2010.

We expect salaries and wages to increase over the first

quarter for the remainder of 2010 as a result of new hires.

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Salaries and wages include non-sales employee and officer salaries that are not otherwise allocated to

direct costs, employee related benefits including bonuses, and stock-based compensation.

Salaries and wages decreased $2,461,000 for the three months ended June 30, 2010 compared to the three months ended June 30, 2009.

wages decreased $2,765,000 for the six months ended June 30, 2010 compared to the six months ended June 30, 2009.

Approximately $2.5 million of the decrease in salaries and wages for the three and six months ended June 30, 2010

compared to the three and six months ended June 30, 2009 related to a charge to salaries and wages related to the modification of the acquisition and employment agreements with the division manager of our Social Technologies division.

remaining difference in the six months ended June 30, 2010 compared to the six months ended June 30, 2009 related to the retirement of our former CEO in the first quarter of 2009.

We expect salaries and wages to remain flat for the remainder of 2010.

Professional Fees

Three months ended March 31,

(In thousands, except percentages)

1 unchanged sentence

As a percent of revenue

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

decrease in professional fees for the three months ended March 31, 2010 compared to the three months ended March 31, 2009 relates to a $38,000 decrease in valuation expenses due to the reduced number of investment holdings requiring

valuations in 2010, partially offset by a $13,000 increase in accounting fees.

We expect to have a decrease in professional fees over 2009

for the remainder of 2010 as a result of a reduction in the number of investments requiring quarterly valuations and a reduction in legal and accounting fees related to the change from an investment company to an operating company.

Professional fees include

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

Professional fees decreased $31,000 for the three months ended June 30, 2010 compared to the three months ended June 30, 2009.

Professional fees decreased $53,000 for

the six months ended June 30, 2010 compared to the six months ended June 30, 2009.

The decrease in professional fees for the three and six month periods relates primarily to a decrease in valuation expenses due to the reduced number of

investment holdings requiring valuations in 2010.

We expect to continue to have a decrease in professional fees over 2009 for the remainder

of 2010 as a result of a reduction in the number of investments requiring quarterly valuations and a reduction in legal and accounting fees related to the change from an investment company to an operating company.

Research and Development

(In thousands, except percentages)

Research and development

As a percent of revenue

Research and development

costs include salaries, outside services, travel and other related costs related to the development of our innovation management platform designed to enhance and compliment our innovation services deliverable to clients.

This project commenced in

the first quarter of 2010 and management is continuing to evaluate the software platform and its internal resource allocation in conjunction with our overall corporate strategy.

Sales and Marketing

Three months ended March 31,

(In thousands, except percentages)

3 unchanged sentences

include advertising, marketing, commissions paid to outside service providers, certain travel and other business development expenses.

The increase in sales and marketing expenses relates primarily to an increase in marketing costs of $137,000 for

the three months ended March 31, 2010, which included $46,000 in rebranding costs and $75,000 for partnering with external search partners to market our products on their websites.

We have also participated in and sponsored conferences in the

first quarter of 2010 that we did not participate in during the first quarter of 2009.

We expect sales and marketing expenses to continue to

increase over 2009 for the remainder of 2010 as a result of the push in our marketing efforts in an effort to take advantage of recent improvements in the economy.

Sales and marketing expenses increased $21,000 for the three months ended June 30, 2010 compared to the three

months ended June 30, 2009.

The increase in sales and marketing expenses relates to an increase in marketing costs of $117,000, which included $43,000 in rebranding costs and $75,000 for partnering with external search partners to market our

products on their websites, partially offset by a decrease of $76,000 in sales related travel.

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Sales and marketing expenses increased $149,000 for the six months ended June 30, 2010 compared to the

six months ended June 30, 2009.

The increase in sales and marketing expenses relates to an increase in marketing costs of $254,000, which included $89,000 in rebranding costs and $150,000 for partnering with external search partners to market

our products on their websites, partially offset by a $78,000 decrease in sales related travel.

We expect sales and marketing expenses to

decrease from current levels for the remainder of 2010.

General and Administrative

Three months ended March 31,

(In thousands, except percentages)

1 unchanged sentence

As a percent of revenue

The decrease in general and

administrative expenses for the three months ended March 31, 2010 compared to the three months ended March 31, 2009 relates to a $27,000 reduction in insurance due to having fewer employees;

a $99,000 reduction in rent related to closing

one of our offices in the United Kingdom, closing our Pennsylvania office, and reducing the amount of space leased for our Washington, DC office;

a $30,000 reduction in investment banking related to our having de-listed from the London Stock

Exchange AIM;

a $26,000 reduction in printing costs;

General and administrative

expenses decreased $273,000 for the three months ended June 30, 2010 compared to the three months ended June 30, 2009.

The decrease relates to a $59,000 reduction in insurance due to having fewer employees;

a $109,000 reduction in rent

related to consolidating UTEK Real Estate operations, closing one of our offices in the United Kingdom, closing our Pennsylvania office, and reducing the amount of space leased for our Washington, DC office;

a $121,000 reduction in bad debt expense

due to implementation of a strict collection policy;

and a continued overall company plan to reduce all aspects of overhead.

These decreases were partially offset by a $143,000 increase in outside services related to the research and development of

new products and services.

We expect general and administrative expenses for 2010 to remain flat in comparison to 2009.

administrative expenses decreased $474,000 for the six months ended June 30, 2010 compared to the six months ended June 30, 2009.

The decrease relates to a $84,000 reduction in insurance due to having fewer employees;

a $208,000 reduction

in rent related to UTEK Real Estate operations, closing one of our offices in the United Kingdom, closing our Pennsylvania office, and reducing the amount of space leased for our Washington, DC office;

a $36,000 reduction in investment banking

related to our having de-listed from the London Stock Exchange AIM;

a $123,000 reduction in bad debt expense due to implementation of a strict collection policy;

and a continued overall company plan to reduce all aspects of overhead.

We expect general and administrative expenses to remain flat for the remainder of 2010.

Depreciation and Amortization

Three months ended March 31,

(In thousands, except percentages)

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As a percent of revenue

Amortization expense

decreased by $29,000 for the first quarter of 2010 compared to the first quarter of 2009 resulting primarily from a decrease of $700,000 in definite-lived intangible assets as a result of impairment in the second quarter of 2009.

expense increased by $23,000 for the first quarter of 2010 compared to the first quarter of 2009 resulting primarily from the addition of $4 million in depreciable assets from the consolidation of UTEK Real Estate in the fourth quarter of 2009.

We expect depreciation and amortization expenses for 2010 to remain flat in comparison to 2009.

Depreciation and

amortization expense decreased $19,000 and $26,000, respectively, for the three and six months ended June 30, 2010 compared to the three and six months ended June 30, 2009.

Amortization expense decreased by $44,000 and $73,000 for the

three and six months ended June 30, 2010, respectively, compared to the three and six months ended June 30, 2009 resulting primarily from a decrease of $700,000 in definite-lived intangible assets as a result of impairment in the second

quarter of 2009.

Depreciation expense increased by $25,000 and $47,000 for the three and six months ended June 30, 2010, respectively, compared to the three and six months ended June 30, 2009 resulting primarily from the addition of $4

million in depreciable assets from the consolidation of UTEK Real Estate in the fourth quarter of 2009.

We expect depreciation and

amortization expenses for the remainder of 2010 to remain flat in comparison to 2009.

Impairment Loss

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

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

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

Management concluded that this division had suffered a significant adverse change in the business, which included

a projection of continuing operating and cash flow losses.

We determined that there was impairment of the divisions purchased intangible assets of approximately $1.0 million and impairment of the divisions goodwill of approximately $1.3

million as of June 30, 2009.

Other (Income) Expense

Other (income) expense is a new line item in our statement of operations related to reporting as an operating company.

The net income of $2,074 for the

three months ended March 31, 2010 is comprised of a gain of $54,000 related to adjusting our derivative liability to fair value;

rental income of $61,000;

and miscellaneous income of $22,000;

partially offset by capital losses of $135,000.

The net other income of $154,000

for the three months ended June 30, 2010 is comprised of rental income of $22,000, miscellaneous income of $41,000 and net capital gains of $100,000, partially offset by a loss of $12,000 related to adjusting our derivative liability to fair

The net other income of $156,000 for the six months ended June 30, 2010 is comprised of a gain of $42,000 related to adjusting

our derivative liability to fair value, rental income of $84,000 and miscellaneous income of $62,000, partially offset by capital losses of $35,000.

Interest Expense, Net

Interest expense, net is a new line item in our statement of operations related to reporting as an operating company.

The net interest expense of $135,154

for the three months ended March 31, 2010 is primarily comprised of interest expense on long-term debt of $119,000 and amortization of our debt discount of $46,000, partially offset by interest income on our note receivable of $29,000.

expense, net is a new line item in our statement of operations related to reporting as an operating company.

The net interest expense of $142,000 for the three months ended June 30, 2010 is primarily comprised of interest expense on long-term

debt of $124,000 and amortization of our debt discount of $46,000, partially offset by interest income on our note receivable of $28,000.

net interest expense of $277,000 for the six months ended June 30, 2010 is primarily comprised of interest expense on long-term debt of $243,000 and amortization of our debt discount of $92,000, partially offset by interest income on our note

receivable of $57,000.

Net Realized Gains (Losses) on Investments from Investment Company Accounting

In connection with our plan to de-elect business development company status, we liquidated a significant portion of our investment portfolio during the

first quarter of 2009.

We sold some or all of our shares in a significant number of our portfolio companies for $2.1 million in cash and other assets, which resulted in net realized losses of $37.0 million for the three months ended March 31,

first and second quarters of 2009.

We sold some or all of our shares in a significant number of our portfolio companies for $2.25 million in cash and other assets, which resulted in net realized losses of $37.4 million for the six months ended

June 30, 2009.

Net Change in Unrealized Appreciation (Depreciation) on Investments from Investment Company Accounting

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

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

depreciation on various investments upon their sale during the period of approximately $35.0 million;

3 unchanged sentences

Cash used in operating

activities of $842,000 for the three months ended March 31, 2010 decreased $118,000 from $960,000 in 2009.

Total cash used in operations of $842,000 in the current period is primarily attributable to:

activities of $1.78 million for the six months ended June 30, 2010 decreased approximately $270,000 from $2.05 million for the six months ended June 30, 2009.

Total cash used in operations of $1.78 million in the current period is

primarily attributable to:

$2.8 million net operating loss;

$42,000 gain on derivative liability;

$240,000 increase in accounts receivable related to significant billings in the second quarter of 2010;

$164,000 decrease in deferred revenue;

$320,000 cash payment for payroll taxes, which included an income tax gross-up, paid in conjunction with the settlement of our severance liability;

2 unchanged sentences

$796,000 in non-cash depreciation and amortization;

$135,000 loss on sale and impairment of available-for-sale securities;

$299,000 in non-cash stock-based compensation expense related to vesting options;

$158,000 decrease in accounts receivable primarily related to increased collection efforts.

Cash provided by (used in) investing activities of $5,000 for the three months ended March 31, 2010 increased $8,000 from $(2,500) in 2009.

were no significant investing transactions during the period.

Cash provided by (used in) financing activities of $(101,000) for the three

months ended March 31, 2010 decreased $763,000 from $662,000 in 2009.

Total cash used in financing of $(101,000) is primarily attributable to:

$101,000 in cash paid for long-term debt.

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 of our

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.

$913,000 increase in accounts payable and accrued expenses.

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On February 26, 2010, we entered into a Substitution of Collateral Agreement and a Membership Interest

Pledge Agreement and Release of Mortgage, 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.

In addition, 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 of February 26, 2010.

At our request, the Lender subsequently extended the repayment date for the

$500,000 pay down to June 30, 2010.

Cash provided by (used in) investing activities of $219,000 for the six months ended June 30, 2010

increased $516,000 from $(297,000) for the six months ended June 30, 2009.

Total cash provided by operations of $219,000 in the current period is primarily attributable to:

$249,000 in proceeds from available-for-sale securities.

Cash provided by (used in) financing activities of $6,000 for the six months ended June 30, 2010 increased $150,000 from $(144,000) for the six

months ended June 30, 2009.

Total cash provided by financing of $6,000 is primarily attributable to:

$200,000 in proceeds from borrowings on our line of credit.

Partially offset by:

$194,000 in cash paid for long-term debt.

Changes to Contractual Obligations

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 of our 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,

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.

In addition, the Note was amended and restated to provide that

Innovaro and UTEK Real Estate must pay down $500,000 of the indebtedness to the Lender within 60 days of February 26, 2010.

At our request, the Lender subsequently extended the repayment date for the $500,000 payment, which was made in

accordance with this extension on July 12, 2010.

As of August 10, 2010, the balance on the note was $1,250,000.

During the second

quarter of 2010, the Company borrowed an additional $200,000 on its revolving line of credit.

On July 12, 2010, we completed a registered offering of 1,481,481 shares of our common stock priced at $2.565 per share along with Series A warrants

to purchase up to 1,481,481 shares of common stock with an exercise price of $3.43 per share (subsequently amended to $3.49 per share) of common stock and Series B warrants to purchase up to 893,519 shares of common stock with an exercise price of

$0.01 per share of common stock.

We raised gross proceeds of approximately $3.8 million before advisory fees and offering expenses in connection with the offering.

Capital Expenditures

In the first quarter of 2010, we began development of a software platform designed to enhance connections between each of our lines of business and

complement existing services.

At this time, management is continuing to evaluate the software platform and its alignment with the overall corporate strategy.

Our primary cash

requirements include working capital, capital expenditures and principal and interest payments on indebtedness.

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 March 31, 2010, we had cash and cash equivalents of $1.2 million and investments in certificates of deposit (CDs) of $494,000.

The CDs are pledged to

financial institutions as collateral to support the issuance of our line of credit.

The Company had $200,000 of unused availability under its revolving line of credit at March 31, 2010.

first quarter of 2010, we began development of an innovation management platform designed to enhance and compliment our innovation services deliverable to clients.

Management is continuing to evaluate the software platform and its internal resource

allocation in conjunction with our overall corporate strategy.

Our primary cash requirements include working capital, capital expenditures and principal and interest payments on indebtedness.

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 June 30, 2010, we had cash and cash equivalents of

$559,000 and investments in certificates of deposit of $496,000.

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

We currently intend to fund our capital expenditures and liquidity needs with existing cash and cash equivalent balances, cash generated from 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, including the $500,000 pay down due June 30th, and provide required resources for working capital for the next twelve months.

However, in light of liquidity constraints caused by the $500,000 debt pay down, we may not be able to

continue funding our capital expenditures in the near term.

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 completed in October 2009 as discussed in our Annual Report on Form 10-K for the year ended December 31, 2009 represent what possible additional financing could

look like in the near term.

On April 1, 2010, we filed a Form S-3 with the SEC to register the offering of our securities.

and sell, from time to time, in one or more offerings, common stock, preferred stock and warrants for which the aggregate offering price will not exceed $20,000,000.

The Form S-3 became effective on April 16, 2010.

However, capital markets have been volatile over the last several years, and we cannot assure you that we will be able to raise debt or equity capital on

acceptable terms, if at all, in order to fund our operations.

the potential sales of our investments and proceeds from the sale of our common stock and warrants to purchase shares of our common stock.

We believe that these sources will be sufficient to fund our scheduled debt service and provide required

resources for working capital for the next twelve months.

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Critical Accounting Estimates

6 unchanged sentences

December 31, 2009.

There have been no material changes to our critical accounting estimates during the three months ended March 31, 2010.

Except as described below, there have been no material changes to the critical accounting estimates previously disclosed in our Annual Report on Form 10-K for the year ended December 31, 2009.

Impairment of Goodwill

disclosed in our Annual Report of Form 10-K for the year ended December 31, 2009, we assess goodwill for impairment annually as of the end of the year.

We perform interim assessments of goodwill if impairment indicators are present.

indicator is an adverse change in the business climate.

Subsequent to June 30, 2010, our stock price declined significantly.

A decline in stock price may be an indicator of an adverse change in business climate.

In addition, a decline in stock

price may affect fair value measurements for our reporting units.

We have evaluated the impact of this decline on our reporting units for future periods.

Considering this and certain other factors, we determined that the impact was not significant

enough to warrant a full impairment review at this time.

It is reasonably possible that we may be required to conduct an interim goodwill impairment evaluation during the remainder of 2010, which could result in a material impairment of goodwill.

However, if the decline in our stock price does not reverse or the decline is significantly further extended, material write-downs or

impairment charges may be required in the future.

If the decline in our stock price were to persist or worsen, material impairment charges may be necessary.

The magnitude and timing of those charges would be dependent on the severity and duration of

the decline and cannot be determined at this time.

Any material non-cash impairment charges related to goodwill or other intangible assets would have a material adverse effect on our results of operations and financial condition.

Quantitative and Qualitative Disclosures about Market Risks

1 unchanged sentence

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-Q

Item 1. Financial Statements