What changed in this filing

/stocks — the workspaceLOADING

Item 5. Market for Registrant’s Common Equity

2011-03-30 compared with 2010-03-22 · 541 added, 795 removed, 68 unchanged (95% of the section changed)

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

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

As of March 16, 2010,

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

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

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

Through March 15, 2010, our shares of common stock traded on the NYSE Amex under the symbol UTK. As of March 16,

2010, we began doing business as Innovaro and changed our ticker symbol on the NYSE Amex to INV. Computershare Trust Company, Inc., 350 Indiana Street, Suite 800, Golden, CO 80401;

303-262-0600, serves as transfer agent for our

common stock.

We had approximately 3,000 stockholders of record at March 1, 2011.

Price Range of Common Stock and Dividends

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

The following table reflects the high and low closing prices for our common stock as reported on the NYSE Amex and the

cash dividends declared per common share for the periods indicated:

Fiscal year 2010

8 unchanged sentences

Fourth quarter

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

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

factors deemed relevant by our Board of Directors.

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

preferred stock that we may authorize and issue.

Securities Authorized for Issuance under Equity Compensation Plans

The information required by this item appears under Item 12.

Security Ownership of Certain Beneficial Owners and Management and

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

Performance Graph

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

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

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

and Diamond Management and Technology Consultants Inc.

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

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

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

COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN

AMONG UTEK, RUSSELL MICROCAP

INDEX AND UTEKS PEER GROUPS

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

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

deemed relevant by our Board of Directors.

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

authorize and issue.

Selected Financial Data

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

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

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

Managements Discussion and Analysis of Financial Condition and Results of

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

Investment Company Accounting

Ended Dec 31,

Year Ended December 31,

Consolidated Statement of Operations Data:

Revenue / Income from operations

Net (loss) income from operations

Net (loss) income from operations per diluted common share

Weighted average shares:

Cash dividends declared per common share

Balance Sheet Data:

Long-term debt

Net asset value per share

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

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

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

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

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

in status from an investment company to operating company.

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

subsidiary, UTEK Real Estate Holdings, Inc.

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

UTEK Real Estate Holdings, Inc.

with those of UTEK.

Managements Discussion and Analysis

of Financial Condition and Results of Operations

Special Note Regarding Forward-Looking Statements

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

in this annual report on Form 10-K.

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

These forward-looking statements may involve known and unknown

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

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

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

These forward-looking statements are based on

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

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

statements as a result of various factors.

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

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

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

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

In addition, we refer to income from

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

Not applicable.

Managements Discussion and Analysis of Financial Condition and Results of Operations

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 and gain foresight into marketplace

and technology developments that affect their business.

These services are provided to clients located in countries throughout the world.

We have two business segments:

Strategic Services and Technology Services.

strategic services segment helps clients achieve and sustain industry leadership through innovation, developing game-changing strategies for growth, and implementing these strategies through capability development, opportunity management and

organizational excellence.

We also help our clients programmatically develop a core competence for innovation.

In addition, we assist clients apply innovation tools and techniques to create and act on breakthrough strategies and profitable

growth platforms and opportunities.

We work closely with our clients to jointly structure and execute a tailored journey that is right for their situation.

We combine the business acumen of seasoned executives, the learning focus of a leadership

development expert and the creativity of an innovation specialist to get our clients on the path to sustainable and profitable growth.

These services include:

Strategic innovation consulting

Business model and product development consulting

Identify and develop new segments and markets

Create and act on game-changing strategies

Our technology services segment offers expansive networks, experts in scouting, partner sourcing and licensing expertise, and world leading online marketplaces.

We also provide an important foundation to

successful licensingunderstanding the true potential value of our clients IP and IP portfolio.

We access that value and build a roadmap for our clients use, and uncover opportunities and options to realize any latent value.

We have an online information service, purpose-built for those who need it most-technology transfer, business development,

intellectual property, competitive intelligence, and marketing professionals across the physical and life sciences

provide the insight and intelligence our clients require, applied to their markets today and into the future.

From current market research to predictive intelligence, we help our clients find insights at the intersections affecting their business.

Our research identifies and explains key consumer trendsincluding emerging trends not covered by other sourcesand delivers insights about how these trends will shape the future operating environment.

These services include:

Futures scenario development and planning

Custom and syndicated research

Online information services

IP consulting

IP and market landscape analysis

Technology search

In- and out-licensing

Online marketplaces

Partner search and profiling

Strategies to Drive Our Growth into the Future

We remain focused on

growing our business with the objectives of improving our financial results and generating returns for our shareholders.

We continue to focus on delivering strong financial performance in both the near term and the long term.

We have identified the

following four key challenges and related strategic business imperatives that we believe will enable us to drive growth into the future.

Continue to develop our innovation management software platform

Our first imperative is to continue to develop our innovation management software platform.

We announced the controlled release of the first phase of our software product in December 2010, for which we

have subsequently begun testing in 2011.

We anticipate the controlled release of two additional phases of the software product during 2011, thereby expanding the product capability further into the innovation cycle process.

The full-scale release of

the complete product is dependent on the results of our testing procedures, which is dependent on the use of third-party consultants.

Over time, we expect the software product component of our business to grow at a greater rate than the growth in our current business segments until it represents an important component of our overall

revenue stream.

A key component of our strategy is to embrace both software and information offerings from other firms

through an open innovation approach.

Using this approach, our clients that have already begun to utilize other software and information services will be able to incorporate our offerings to suit their requirements to most effectively drive

Build and expand our current consulting and technology services business

Our second imperative is to sustainably and profitably grow our current consulting and technology services businesses worldwide.

recently hired a Senior Vice President of Sales who brings with him twenty years of global experience in technology sales at the enterprise and executive sales management level.

As the Senior Vice President of Sales at Innovaro, he will establish

sales and engagement models while continuing to build upon our core pillars of business.

He will also take on identical responsibilities as we move into the future with our software product offering.

Cherish our Innovaro associates

Our third imperative is to cherish our Innovaro associates.

Our continued growth requires us to hire, retain and develop our leadership bench.

We are fortunate to employ, worldwide, a truly remarkable set

of associates.

The market becomes more competitive every day and innovation is the key to success.

It is people who hold that key and to be a good employer is one of the most important strategic decisions a company has to make.

Achieve operational excellence

Our fourth and final imperative is the sum total of the other three.

Our continued success requires that we do everything we can to position ourselves to achieve operational excellence in each of the

areas mentioned above.

By focusing on the four key challenges and related strategic business imperatives discussed above, we believe we can achieve this goal.

Financial Condition

Our total assets were $24.7 million at December 31, 2010 compared to $40.3 million at December 31, 2009.

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

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

Revenue totaled approximately $10.8 million for fiscal year 2009

compared to $20.2 million for fiscal year 2008.

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

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

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

In this regard, we received gross proceeds of $3.1 million in 2009 and $2.3 million in 2008 in connection with the sale of the securities we received in connection with our global technology

licensing agreements and technology transfers.

Proceeds received in connection with the sale of our investments for the year ended December 31, 2009 included $1.1 million in cash, $218,000 in common stock, $201,000 in an additional investment

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

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

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

At December 31, 2010, we had $263,000 in cash and cash equivalents, $2.0 million in

accounts receivable, $1.5 million in accounts payable and accrued expenses and $5.8 million in long-term debt outstanding.

At December 31, 2009, we had $2.1 million in cash and cash equivalents, $492,000 in certificates of deposit, $1.5 million

in accounts receivable, $917,000 in accounts payable and accrued expenses and $6.3 million in long-term debt outstanding.

cash balance as of December 31, 2010 was significantly lower than our historical cash position.

The cash balance decreased significantly in the fourth quarter of 2010 as a result of the Company having to pay bonuses to employees of its

strategic services business segment in accordance with the terms of the Strategos Bonus Plan.

We have subsequently rebuilt our cash position to approximately $700,000 as of the date of this filing.

See the Liquidity section for further discussion.

Current Market Conditions

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

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

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

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

This reduced confidence and uncertainty could further

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

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

our investments.

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

these types of services.

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

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

Since mid-2007, global credit and other financial markets have suffered substantial

stress, volatility, illiquidity and disruption.

These forces reached unprecedented levels in late 2008, resulting in the bankruptcy or acquisition of, or government assistance to, several major domestic and international financial institutions.

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

This reduced confidence and uncertainty could further exacerbate the overall market disruptions and risks to

businesses in need of capital, including us.

Moreover, the deterioration in the equity markets has had a negative impact on the cash proceeds that we have been able to obtain upon the sale of our investments and has resulted in our having to

recognize certain impairment losses related to decreases in the fair value of our assets.

In addition, the deterioration in consumer confidence and a general reduction in spending by consumers and business have had an adverse effect on certain of

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.

Investment Portfolio Activity

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

Investment Company Act of 1940 (1940 Act).

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

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

In connection with our plan to

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

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

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

Until September 30, 2009, we were a non-diversified, closed-end management investment company that had elected to be treated as a

business development company (BDC) under the Investment Company Act of 1940 (1940 Act).

On October 1, 2009, because we no longer met the requirements, we filed a notification on Form N-54C with the SEC withdrawing

our election to be regulated as a BDC under the 1940 Act.

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

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

We sold some or all of our shares in a significant number of our portfolio

companies for $3.1 million in cash and other assets, which resulted in realized losses of $49.6 million and unrealized appreciation of $44.3 million, which is primarily related to the reversal of previously recorded unrealized depreciation upon the

sale of these investments.

Conversion from Investment Company Presentation to Operating Company Presentation

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

Companys method of accounting.

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

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

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

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

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

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

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

controlling financial interest with those of the Company.

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

the accounts of the Company from October 1, 2009.

The consolidation of UTEK Real Estate Holdings, Inc.

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

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

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

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

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

Results of Operations

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

The withdrawal of our election to be regulated as a BDC under the 1940 Act resulted in a significant change in our method of accounting.

and recognize income related to unrealized gains and

losses in the current period.

As an operating company, the required financial statement presentation and accounting for investments held is either fair value or historical cost methods of

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

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

rather, investments in those entities were reflected in our balance

sheet at fair value.

As an operating company, we are required to consolidate the accounts of majority-owned entities in which we have a controlling financial interest with our accounts.

In this regard, the accounts of UTEK Real Estate Holdings,

Inc., which was previously reflected as an investment at fair value in our balance sheet, have been consolidated with our accounts from October 1, 2009.

For a detailed discussion of the impact of the withdrawal of our election to be regulated as a BDC under the 1940 Act on our method of accounting and a discussion of how we account for investments as an

operating company, see Notes 1 and 2 to the Consolidated Financial Statements contained elsewhere in this Annual Report on Form 10-K.

Results of Operations for the Years Ended December 31, 2010 and 2009

For comparability purposes, the revenues and expenses for the nine months ended September 30, 2009 under investment company accounting and for the three months ended December 31, 2009 under

operating company accounting are presented combined for the year ended December 31, 2009 in this section.

Management believes this presentation is more meaningful to readers as there was no significant change in revenue streams as a result of

our change in status from an investment company to an operating company.

Revenue / Income from Operations

(in thousands, except percentages)

Innovation consulting services

Sale of technology rights

Subscription and other services

Strategic services

Technology services

Investment income, net

Innovation Consulting Services

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

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

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

intermittently during 2008.

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

However, the revenue of all of our acquired innovation consulting

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

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

type services.

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

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

Sale of Technology Rights

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

completed technology transfers.

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

transfers during the year ended December 31, 2008.

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

all technology transfers for cash as opposed to stock.

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

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

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

December 31, 2007.

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

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

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

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

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

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

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

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

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

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

transactions.

Subscription and Other Services

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

respectively.

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

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

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

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

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

introductions and coordinate initial contact/conference calls.

Our online licensing services division had website

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

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

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

Our global technology

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

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

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

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

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

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

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

economic conditions.

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

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

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

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

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

For more information, see Note 1 to our consolidated financial statements included elsewhere in this annual report on Form 10-K.

Strategic Services

Our strategic services revenue is derived from

consulting services we provide to our clients.

Our strategic services revenue increased by $2.9 million for the year ended December 31, 2010 in comparison to the year ended December 31, 2009.

This increase is the result of the Company

having a significant number of new contracts in the second half of 2010.

We attribute the increased revenue in 2010 to a renewed interest in innovation efficiency and new product development in the U.S.

Our 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 timely hiring of similarly qualified and skilled consulting professionals to replace them, then we may not be able to maintain

the level of strategic services revenue we have generated in recent years.

We expect 2011 strategic services revenue to remain consistent with 2010 levels, unless all

or a substantial portion of the employment contracts described above are not renewed.

Technology Services

Our technology services revenue is a combination of global technology partnering search retainer fees, our online subscription fees,

online information services revenue, foresight and trend research revenue and IP consulting revenue.

Our technology services revenue decreased by $571,000 for the year ended December 31, 2010 in comparison to the year ended December 31,

The decreased revenue in 2010 is primarily a result of a reduction of $433,000 in monthly fees for our global technology partnering services and a reduction of $464,000 in online marketplace fees, partially offset by a $300,000 increase in IP

consulting revenue.

We expect 2011 technology services revenue to remain consistent with 2010 levels.

Investment Income, net

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

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

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

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

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

Direct Costs of Innovation Consulting Services

Beginning on October 1, 2009, we changed from Investment Company Accounting to Operating Company Accounting.

As an operating company,

investment income is recorded as other (income) and expense in the accompanying statements of operations for the year ended December 31, 2010 and the three months ended December 31, 2009.

Direct Costs of

(in thousands, except percentages)

Direct costs of innovation consulting services

As a percent of innovation consulting services

The abbreviation ppt throughout this section denotes percentage points.

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

direct project costs related to innovation consulting services revenue.

This expense line item was created in 2008 as a result of the acquisitions of Strategos, Innovaro and Social Technologies and the addition of our innovation consulting services

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

compensation including bonuses.

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

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

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

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

million of for the year ended December 31, 2008.

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

We have a Strategos Bonus Plan for qualifying Strategos division employees.

Direct costs of revenuestrategic services

Direct costs of revenuetechnology services

Total direct costs of revenue

Direct Costs of RevenueStrategic Services

Direct costs of strategic services revenue are comprised of certain salaries and related taxes, bonuses, certain outside services and

other business development costs related to strategic services.

Our direct costs of strategic services revenue increased by $2.9 million for the year ended December 31, 2010 in comparison to the year ended December 31, 2009.

of the increase in direct costs of strategic services related to the year-end bonus pool and an increase in the use of outside contractors.

The Strategos Bonus Plan is for qualifying Strategos division employees.

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

Strategos to maintain sufficient operating cash.

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

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

We have an Innovaro Bonus Plan for qualifying Innovaro division employees.

The award pool is determined from eligible

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

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

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

connection with this bonus plan.

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

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

Direct Costs of Subscription and Other Services

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

Direct costs of subscription and other services are primarily

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

Acquisition of Technology Rights

(in thousands, except percentages)

Acquisition of technology rights

As a percent of sale of technology rights

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

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

facility transferring the technologies.

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

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

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

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

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

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

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

in 2008 than in 2007.

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

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

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

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

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

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

Client Acquiring Newly Formed Company

Newly Formed Company

Rim Semiconductor Company

Broadband Distance Systems, Inc.

Rim Semiconductor Company

Multi-Carrier Communications, Inc.

Platina Energy Group, Inc.

Enhanced Oil Recovery, Inc.

World Energy Group, Inc.

Advanced Alternative Energy, Inc.

CSMG Technologies, Inc.

Carbon Capture Technologies, Inc.

World Energy Solutions, Inc.

H-Hybrid Technologies, Inc.

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

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

Client Acquiring Newly Formed Company

Newly Formed Company

Manakoa Services Corporation

Infinite Identification Technologies, Inc.

Cyberlux Corporation

Hybrid Lighting Technologies, Inc.

CytoDyn, Inc.

Advanced Genetic Technologies, Inc.

Material Technologies, Inc.

Stress Analysis Technologies, Inc.

Liberty Diversified Holdings, Inc.

Sero Tonin Solutions, Inc.

Metamorphix Global, Inc.

Flex Crete Technologies, Inc.

Klegg Electronics, Inc.

Tempo Control Technologies, Inc.

Avalon Oil & Gas, Inc.

Leak Location Technologies, Inc.

Material Technologies, Inc.

Damage Assessment Technologies, Inc.

Klegg Electronics, Inc.

Klegg Network Storage Technologies, Inc.

Material Technologies, Inc.

Non-Destructive Assessment Technologies, Inc.

Pathway One Plc

WebMed Technologies, Inc.

MachineTalker, Inc.

Wideband Detection Technologies, Inc.

World Energy Solutions, Inc.

Hydrogen Safe Technologies, Inc.

NeoStem, Inc.

Stem Cell Technologies, Inc.

MachineTalker, Inc.

Micro Wireless Technologies, Inc.

Awards are to be paid out by December 15 th , but no later than December 31 st , of each year and are accrued on a quarterly basis.

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

The Company recognized bonus

expense of approximately $3.3 million and $1.7 million in connection with the Strategos Bonus Plan during the years ended December 31, 2010 and 2009, respectively.

The strategic services gross profit margin decreased to 14% for the year ended December 31, 2010 as compared to 18% for the year ended December 31, 2009.

This decrease relates to our foresight

and trend research division.

This division had significantly more consulting projects in 2009 than in 2010, the loss of which caused a reduction in our overall profit margin.

We expect 2011 costs of strategic services to remain consistent with 2010 levels.

Direct Costs of RevenueTechnology Services

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

costs of technology services revenue decreased by $486,000 for the year ended December 31, 2010 in comparison to the year ended December 31, 2009.

The majority of the decrease in direct costs of technology services during 2010 is related

to a decrease in salaries and commissions due to staff cuts and a reduction in sales.

The technology services gross profit

margin increased to 55% for the year ended December 31, 2010 as compared to 49% for the year ended December 31, 2009.

This increase is the result of a decrease in salaries related to having fewer employees in exchange for the utilization

of outside contractors on an as needed basis.

We expect 2011 costs of technology services to remain consistent with 2010

Salaries and Wages

2 unchanged sentences

As a percent of revenue

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

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

December 31, 2008.

During the year ended December 30, 2009, we had a $2.55 million charge to salaries and wages related to the modification of the acquisition and employment agreements with the manager of our Social Technologies division

versus having had a $1.65 million charge for our CEOs severance liability in the corresponding period of 2008.

The offsetting decrease in salaries and wages of approximately $1.75 million in 2009 relates to the reduction in employees of

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

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

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

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

We expect salaries and wages to

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

The abbreviation ppt throughout this section denotes percentage points.

Salaries and wages include non-sales employee and officer salaries that are not otherwise allocated to direct costs of revenue, employee

related benefits including bonuses, and stock-based compensation.

Salaries and wages decreased by $2.6 million for the year ended December 31, 2010 compared to the year ended December 31, 2009.

Decreases in salaries in wages during

2010 related to 1) the modification of the acquisition and employment agreements with the division manager of our former Social Technologies division resulting in a $2.5 million charge to salaries and wages in 2009;

2) the retirement of our former

CEO in 2009 resulting in a decrease in salaries of $300,000 in 2010;

and 3) a change in estimate related to stock options resulting in a decrease of $289,000 in stock-based compensation in 2010.

These decreases were partially offset by increases of

$244,000 in severance pay, related to another former CEO in August of 2010, and $152,000 in other salaries.

salaries and wages to decrease in 2011 due to a reduced number of employees over that of 2010.

Professional Fees

2 unchanged sentences

As a percent of revenue

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

Professional fees

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

Professional fees decreased by $205,000 for the year ended December 31, 2010 compared to the year ended December 31, 2009.

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

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

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

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

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

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

Our accounting fees increased $206,000

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

We expect to have a decrease in professional

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

Valuation expenses were reduced by

$73,000 because our investments required fewer valuations in 2010.

Accounting fees were reduced by $77,000 as a result of our having changed to a smaller reporting company in 2010.

As a smaller reporting company, we are not required to have an audit

of our internal

controls over financial reporting.

Legal fees were reduced by $55,000 because of 2009 employment issues, restricted stock plan preparation and other legal matters that were not repeated in 2010.

We expect our professional fees for 2011 to remain relatively consistent with 2010.

Research and Development

in thousands, except percentages)

Research and development

As a percent of revenue

development costs include salaries, outside services, travel and other costs related to the development of our innovation management software platform, which is designed to enhance and complement our innovation services offerings to clients.

release of phase one of the software is dependent on the results of our testing, but is tentatively scheduled for the end of the second quarter of 2011.

During the first quarter of 2011, phase one of the software will have reached technological

feasibility and additional costs will be capitalized.

Management has subsequently begun testing and marketing the software platform in 2011.

We expect to incur additional research and development expenses of approximately $900,000 to commercialize all phases of the platform.

Sales and Marketing

2 unchanged sentences

As a percent of revenue

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

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

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

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

Commissions decreased $376,000 as

a result of reduced sales and reduced sales staff.

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

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

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

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

of sales travel costs of our acquired companies.

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

Sales salaries increased $62,000 related to new

employees from our acquired companies.

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

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

General and Administrative

Sales and marketing

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

Sales and marketing expenses increased by $89,000 for the year ended December 31, 2010 compared to

the year ended December 31, 2009.

During 2010, we incurred $91,000 in name change costs and $105,000 in costs of partnering with external search partners to market our products on their websites.

These additional costs were offset by a decrease

in sales related travel expenses of $129,000 in 2010.

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

December 31, 2011 because we will not have rebranding costs or partnering costs, the latter of which have been discontinued.

and Administrative

(in thousands, except percentages)

1 unchanged sentence

As a percent of revenue

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

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

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

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

General and administrative

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

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

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

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

The increase was

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

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

administrative expenses decreased by $502,000 for the year ended December 31, 2010 compared to the year ended December 31, 2009.

The decrease relates to a $111,000 reduction in insurance and payroll taxes due to having fewer employees;

$283,000 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;

reduction in investment banking

related to our having delisted from the Aim market of the London Stock Exchange;

a $78,000 reduction in bad debt expense due to implementation of a strict collection policy and the collections of

such amount by us;

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

partially offset by an increase of $170,000 for outside services which includes consulting services of $65,000 and payments to our interim CEO of $99,000.

We expect 2011 general and administrative expenses to remain consistent with 2010 levels.

Amortization and Depreciation

2 unchanged sentences

As a percent of revenue

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

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

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

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

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

Depreciation and

amortization expense decreased by $89,000 for the year ended December 31, 2010 compared to the year ended December 31, 2009.

Amortization expense decreased $150,000 as a result of the impairment of certain definite-lived intangible assets

in the second quarter of 2009 and the third quarter of 2010.

Depreciation expense increased $61,000 as a result of the addition of $4 million in depreciable assets from the consolidation of UTEK Real Estate in the fourth quarter of 2009.

We expect amortization and depreciation for the year ending December 31, 2011 to decrease from 2010 as a result of impairment to

certain of these assets in 2010.

Impairment Loss

1 unchanged sentence

Impairment loss

As a percent of revenue

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

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

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

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

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

As a result, management terminated the majority of the

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

Management concluded that this division suffered a significant adverse change in the business, which includes a projection of continuing

operating and cash flow losses.

We determined that there was impairment of the divisions purchased intangible assets of $1.0 million and impairment of the divisions goodwill of $1.3 million during 2009.

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

Transfer, Ltd.

and Knowledge Express acquisitions.

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

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

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

Our stock price declined

significantly subsequent to June 30, 2010.

Management considered the fact that a decline in stock price may be an indicator of an adverse change in business climate.

In addition, a decline in stock price affects market capitalization and may

affect fair value measurements for our reporting units.

At the end of the third quarter of 2010, management concluded that

the decline in our stock price was other than short-term in nature.

This conclusion, coupled with the severity of the decline, triggered a review for impairment outside of our next scheduled annual impairment evaluation date of December 31,

Due to the reduction in our market capitalization, third party valuations were obtained to assist in the determination of the fair value of the respective reporting units.

As a result of a reduction in the fair value of the reporting units,

management determined that the implied fair value of its goodwill and intangible assets was less than its carrying values by approximately $10.3 million.

We recognized goodwill impairment of approximately $9.4 million and intangible assets

impairment of approximately $971,000 in 2010.

We also recorded impairment of approximately $1,438,000 to certain of our land,

building and building improvements during 2010.

The commercial real estate market for such property has taken a significant downturn that is not expected to reverse in the near future.

As a result, management determined that the decrease in the fair

value of the property was other-than-temporary.

The impairment loss was determined based on third party valuations of the respective property.

In 2009, the then existing Social Technologies division of Innovaro had a significant decrease in revenues related to its futures and foresight projects.

The state of the economy during 2009 contributed

to potential Social

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

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

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

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

recognized impairment of the divisions purchased intangible assets of approximately $1.0 million and impairment of the divisions goodwill of approximately $1.3 million in 2009.

Other (Income) Expense

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

to Operating Company Accounting.

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

common stock.

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

Interest Expense

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

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

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

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

Net Realized Gains or Losses on

Investments (from investment company activity)

(in thousands, except percentages)

Realized gains/ (losses)

In connection

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

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

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

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

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

Portfolio Company

Advanced Medical Isotope Corporationpreferred shares

Advanced Refractive Technologies, Inc.common and preferred shares

American Soil Technologies, Inc.

Avalon Oil and Gas, Inc.

Cyberlux Corporationcommon and preferred shares

CytoDyn, Inc.

Eclips Energy Technologies, Inc.

Island Gas Resources Plc

Stealth MediaLabs, Inc.

Klegg Electronics, Inc.

Rim Semiconductor Company

MATECH Corporation

NutriPure Beverages, Inc.common shares

Tesla Vision Corporationcommon and preferred shares

The Renewable Corporation

Trio Industries Group, Inc.

UBA Technology, Inc.common and preferred shares

All other investments sold

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

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

Advanced Medical Isotope Corporation

Avalon Oil and Gas, Inc.

Broadcast International, Inc.

EcoSystem Corporation

eLinear, Inc.

The Renewable Corporation

MATECH Corporation

Pathway One PLC

All other investments sold

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

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

Portfolio Company

Shumate Industries, Inc.

Health Sciences Group, Inc.

Swiss Medica, Inc.

Xethanol Corporation

Broadcast International, Inc.

Power3 Medical Products, Inc.

All other investments sold

Net realized gains and losses can vary substantially due to a variety of factors and may not be indicative

of future performance.

As a result of the uncertainty surrounding the future values of our investments, we are unable to make any projections or estimates regarding realized gains or losses expected in 2010.

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

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

unrealized appreciation or depreciation being recognized.

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

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

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

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

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

Because of the inherent uncertainty of determining

the fair value of investments that do not have a readily available market value, the fair value of our investments determined in good faith by the Board of Directors may differ significantly from the values that would have been used had a ready

market existed for the investments, and the differences could be material.

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 other expense of $1.15 million for the year ended December 31, 2010 is comprised of a net loss on the sale and impairment of investments of

$1.6 million, partially offset by a gain of $186,000 related to adjusting our derivative liabilities to fair value and rental income of $178,000 from the consolidation of UTEK Real Estate.

Other (income) expense may continue to increase or decrease significantly as the value of our derivative liability increases or decreases

in connection with a change in our stock price.

For more information on the derivative liability, see the Notes 10 and 12 to the Consolidated Financial Statements located elsewhere in this Annual Report on Form 10-K.

Interest Expense, Net

(in thousands, except percentages)

Sept 30, 2009

Unrealized appreciation/ (depreciation)

negative equity market conditions and a weakened U.S.

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

This resulted in significant unrealized depreciation on many of our

investments during 2008 and 2007.

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

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

A portion of the valuation allowance ($5.7

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

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

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

In connection with our plan to

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

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

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

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

Portfolio Company

Net Unrealized

(Depreciation)

Effect of recognition of realized gains (losses)

Eclips Energy Technologies, Inc.

All other investments

Net change in unrealized appreciation (depreciation)

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

Portfolio Company

Net Unrealized

(Depreciation)

Effect of recognition of realized gains (losses)

Advanced Refractive Technologies, Inc.

Cyberlux Corporation

Emission & Power Supply, Inc.

Tesla Vision Corporation

MachineTalker, Inc.

MATECH Corporation

MiMedx Group, Inc.

Platina Energy Group, Inc.

RIM Semiconductor Company

World Energy Solutions, Inc.

All other investments

Deferred tax valuation allowance

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

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

Portfolio Company

Net Unrealized

(Depreciation)

Effect of recognition of realized gains (losses)

Advanced Refractive Technologies, Inc.

American Soil Technologies, Inc.

CytoDyn, Inc.

Industrial Biotechnology Corporation

Emission & Power Supply, Inc.

Klegg Electronics, Inc.

Manakoa Services Corporation

vidShadow, Inc.

World Energy Solutions, Inc.

All other investments

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

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

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

Other Matters

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

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

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

and their tax bases.

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

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

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

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

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

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

Internal Revenue Code for such treatment.

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

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

We do have an income tax benefit from the reversal of a deferred tax liability related to the impairment of an

indefinite-lived intangible asset and from foreign tax for the year ended December 31, 2009.

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 $621,000 for the year ended December 31, 2010 is primarily comprised of interest expense on long-term debt of $453,000 and

amortization of our debt discount of $281,000, partially offset by interest income on our note receivable of $112,000.

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

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

We sold some or all of our shares in a significant number of our portfolio

sale of these investments.

Income Tax Matters

Deferred taxes are provided on the asset and liability method whereby deferred tax assets are recognized for deductible temporary differences and operating loss and tax credit carry forwards and deferred

tax liabilities are recognized for taxable temporary differences.

Temporary differences are the differences between the reported amounts of assets and liabilities and their tax bases.

Future tax benefits for net operating loss carryforwards are

recognized to the extent that realization of these benefits is considered more likely than not.

Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is

more likely than not that some portion or all of the deferred tax assets will not be realized.

For federal and state income tax purposes, we

are taxed at regular corporate rates on ordinary income and recognize gains on distributions of appreciated property.

As an investment company, we were not entitled to the special tax treatment available to BDCs that elect to be treated as regulated

investment companies under the Internal Revenue Code because, among other reasons, we did not distribute at least 90% of investment company taxable income as required by the Internal Revenue Code for such treatment.

We do not have any income tax benefit related to the net loss from operations in 2010 or 2009, nor do we have a deferred tax asset related to our net

operating loss carryforward, because of a 100% valuation allowance.

We do have an income tax benefit from the reversal of a deferred tax liability related to the impairment and amortization of an indefinite-lived intangible asset of approximately

$56,000 and $275,000 for the years ended December 31, 2010 and 2009, respectively.

Liquidity and Capital Resources

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

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

used in operating activities of $4.9 million for the year ended December 31, 2010 increased approximately $1.2 million from cash used in operating activities of $3.7 million for the year ended December 31, 2009.

Total cash used in

operations of $4.9 million in the current period is primarily attributable to:

$19.1 million net operating loss;

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

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

$529,000 increase in accounts receivable related to significant billings in the last half of 2010;

$646,000 decrease in deferred revenue.

Partially offset by:

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

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

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

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

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

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

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

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

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

$11.8 million in non-cash impairment charges;

$1.6 million in non-cash losses on investments;

$1.8 million in non-cash depreciation and amortization;

$288,000 in non-cash stock-based compensation expense related to vesting options;

$255,000 increase in accounts payable and accrued expenses.

Cash provided by investing activities of $754,000 for the year ended December 31, 2010 increased $585,000 from $169,000 for the year ended December 31, 2009.

Total cash provided by investing

activities of $754,000 in the current period is primarily attributable to:

$342,000 in proceeds from the sale of available-for-sale securities;

$492,000 in proceeds from the redemption of certificates of deposit.

Partially offset by:

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

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

This total cash provided by

financing of $1.7 million is primarily attributable to:

$1.75 million in cash received from debt financing.

As of October 1, 2009, the financial results of

UTEK Real Estate have been consolidated with those of UTEK.

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

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

These loans were entered into in connection with the purchases of

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

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

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

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

$80,000 in capital expenditures.

Cash provided by financing activities of $2.3 million for the year ended December 31,

2010 increased $591,000 from $1.7 million for the year ended December 31, 2009.

Total cash provided by financing of $2.3 million is primarily attributable to:

$3.8 million in gross proceeds from a registered equity securities offering;

$200,000 in related party proceeds.

Partially offset by:

$593,000 in offering costs from a registered equity securities offering;

$250,000 in cash payments on the line of credit;

$845,000 in cash payments on debt.

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.

Research and Development Expenditures

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

As of December 31,

2010, we have invested $1.2 million in this software platform.

Management has begun testing and marketing the software platform in 2011.

We expect to incur additional software platform costs of approximately $900,000 to commercialize all phases of

the platform during 2011.

As of October 1, 2009, the financial results of UTEK Real Estate have been consolidated with those of Innovaro.

UTEK Real Estate has a $3 million bank note payable due in monthly installments of

$20,436 including principal and interest at 6.50% through April 1, 2013 with a balloon payment due on May 1, 2013.

As of December 31, 2010, the amount outstanding on this note was approximately $2.9 million.

In addition, UTEK Real

Estate has a $1.5 million note payable due in monthly installments of interest at 7.00% with principal due in full on October 1, 2015.

As of December 31, 2010, the amount outstanding on this note was approximately $1.25 million.

loans were entered into in connection with the purchases of land and building that serves as our company headquarters and certain other undeveloped land located in Hillsborough County, Florida.

These loans are collateralized by the property related

to the purchases.

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

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

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

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

full no later than October 22, 2012.

The entire principal amount outstanding and all accrued

interest is payable in full no later than October 22, 2013.

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

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

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

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

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

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

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

As additional consideration for this loan, we also

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

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

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

On February 26, 2010, we entered into a Substitution of Collateral

Agreement and a Membership Interest Pledge Agreement and Release of Mortgage (the Modification Agreements), pursuant to which the Lenders security interest in the Collateral was released

and replaced by a security interest in 68% of the outstanding membership interests of Cortez.

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

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

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 December 31,

2010, the face amount outstanding on the Note was approximately $1.25 million.

As additional consideration for the Note, we

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

The exercise price is subject to certain conditions and

adjustments that make the exercise price variable.

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

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

At December 31,

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

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

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

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

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

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

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

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

We currently intend to fund our capital expenditures and liquidity needs with existing cash and cash equivalent balances, our investments in

certificates of deposit, as well as with cash generated by operations, the potential sales of our investments and unused availability under our revolving line of credit.

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

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

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

Financing terms from our

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

During December 2010, the Company borrowed $200,000 for operations from

one of its Directors under a promissory note.

The note was subsequently repaid in full on February 21, 2011 including interest at 3.5% and 3.0 points.

This transaction is not necessarily indicative of amounts, terms and conditions that the

Company may have received with unrelated third parties.

Cash and Accounts Receivable Balances

Our cash balance as of December 31, 2010 was significantly lower than our historical cash position.

balance decreased significantly in the fourth quarter of 2010 as a result of the Company having to pay bonuses to employees in its strategic services business segment in accordance with the terms of the Strategos Bonus Plan.

These bonuses are based

on adjusted earnings of the strategic services business segment without taking into account any working capital requirements of the business segment and are required to be paid by December 15 th , but no later than December 31 st , of each year with respect to such year.

Accounts receivable related

to the strategic services business segment due within 30 days of December 31, 2010 were included in the amounts eligible to be paid as bonuses under the terms of the Strategos Bonus Plan.

As a result, we were required to pay bonuses to these

employees prior to our collection of the related amounts of accounts receivable, which significantly lowered the Companys cash balance as of December 31, 2010.

We have subsequently rebuilt our cash position to approximately $700,000 as of the date of this filing.

Our accounts receivable balance as of December 31, 2010 was significantly higher than our historical accounts receivable balance.

The increase in our accounts receivable balance during the third and

fourth quarters of 2010 is a result of a significant increase in revenue.

Revenue increased because the Company had a significant number of new contracts in the second half of 2010.

Revenue for the third and fourth quarters of 2010 increased 58%

over revenue for the first and second quarters of 2010.

It is not unusual for our accounts receivables balance to sustain an elevated balance during periods of increased revenues.

Of the outstanding receivables balance of $2.0 million at December 31, 2010, only 14%, or $279,000, was overdue.

As of the date of

this filing, we have collected all but $26,000 of the total accounts receivable balance outstanding at December 31, 2010.

primary cash requirements include working capital, research and development expenditures, principal and interest payments on indebtedness, and employee bonuses.

Our primary sources of funds are cash received from customers in connection with

operations and proceeds from the sale of our investments.

At December 31, 2010, we had cash and cash equivalents of $263,000 and accounts receivable of $2.0 million.

We had $316,000 in working capital as of December 31, 2010.

We currently intend to fund our research and development expenditures and liquidity needs with existing cash and cash equivalent

balances, cash generated from operations, collections of our existing receivables and the potential sales of our investments.

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.

As of December 31, 2010, our strategic services business segment had $6.0 million of

contracts in progress, of which $3.5 million had been billed, leaving $2.5 million to be billed in 2011.

As of the date of this filing, this business has already secured an additional $4.5 million in contracts to be fulfilled before the end of 2011.

In addition, we are in the process of modifying the aforementioned Strategos Bonus Plan to be more reflective of cash collected.

In addition to the confirmed revenue stream for 2011, we have significantly cut our costs in each of the expense categories listed below:

Salaries and Wages:

$1.2 million reduction;

Sales and Marketing:

$200,000 reduction in non-repetitive costs related to name change and partner search fees;

General and Administrative:

$350,000 reduction in employee related costs such as health insurance, payroll taxes and retirement funding;

expenses related to certain terminated employees;

and investor relations costs.

We expect these reductions

in costs, coupled with the expected revenue for 2011, to be sufficient to fund our working capital for the next twelve months.

Should we face a restricted cash flow scenario during 2011, we have the capability to delay all cash intensive activities,

including our research and development expenditures, and look to reduce costs further.

Off-Balance Sheet Arrangements

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

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

Contractual Obligations

The following table reflects a summary of our

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

Contractual Obligations

Payments due by Period

Lines of credit

Long-term debt

Estimated interest payments(1)

Capital lease obligations

Operating lease obligations

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

Management expects to settle such interest payments with

cash flows from operating activities or short-term borrowings.

We have no off-balance sheet arrangements that have or are materially likely to have a current or future material

effect on our financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.

Critical Accounting Estimates

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

that affect the amounts reported in the financial statements.

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

operating results.

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

Revenue RecognitionApplicable under Both Investment Company Accounting and Operating Company Accounting

Innovation Consulting Services

Related to the Companys Strategos

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

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

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

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

applicable taxes.

Service revenue recognition inherently involves a degree of estimation.

Examples of important estimates in

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

These estimates can materially affect our revenues and earnings

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

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

staff and resource usage.

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

To the extent that a revised estimate

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

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

Accordingly, the

Company recognizes consulting services revenue at the point when all the deliverables associated with the consulting contract have been provided to the customer.

Before the Company recognizes revenue, we require evidence of an agreement with the

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

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

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

professionals at agreed-upon rates.

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

Sale of Technology Rights

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

companies for potential development and use.

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

The securities received were generally subject to restrictions on resale

and generally were thinly traded or had no established market.

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

The valuation of these securities at fair

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

Subscription and Other Services

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

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

Valuation Methodology for Portfolio

InvestmentsApplicable under Investment Company Accounting

Historically, we primarily received illiquid

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

The securities received were generally subject to restrictions on resale and generally are thinly traded or have no established market.

We determine fair value to be the amount for which an investment could be exchanged in an orderly disposition over a

reasonable period of time between willing parties other than in a forced or liquidation sale.

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

We record unrealized

depreciation on investments when we believe that an investment has become impaired, including where realization of an equity security is doubtful.

We record unrealized appreciation if we believe that the underlying portfolio company has appreciated

in value and, therefore, our equity security has also appreciated in value.

Upon the sale of our investments, the values that are ultimately realized may be different from the presently determined fair values of such securities.

This difference

could be material.

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

basis in the first quarter of 2008.

These standards require us to assume that the portfolio investment is to be sold in the principal market to market participants, or in the absence of a principal market, the most advantageous market, which may be

a hypothetical market.

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

In accordance with the standards, we have considered our

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

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

Hierarchical levels related to the amount of subjectivity associated with

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

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

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

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

Level 3Unobservable inputs for the asset of liability.

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

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

The determined values are generally discounted to account for the

illiquid nature of the investment and minority ownership positions.

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

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

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

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

entire portfolio of investments.

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

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

InvestmentsApplicable under Investment Company Accounting

Realized gains or losses are measured by the

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

The original cost basis of the securities received in

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

Net change in unrealized appreciation or depreciation of investments through

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

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

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

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

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

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

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

Level 3Unobservable inputs for the asset of liability.

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

Our equity interests in companies for which there

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

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

ownership positions.

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

These securities are generally thinly traded

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

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

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

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

Stock-based compensation cost recognized during the years ended

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

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

The preparation of financial statements in conformity with US Generally Accepted Accounting Principles (GAAP) requires management to make assessments, estimates and assumptions that affect the

amounts reported in the financial statements.

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

We consider the following accounting policies and related estimates to be critical as they require the most subjective judgment or involve uncertainty that could have a material impact on our financial statements.

Revenue Recognition

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.

The determination of estimated contract costs is critical to the determination of revenue recognition in any given period.

If costs incurred to date are compared to total estimated contract costs that have not been updated

for the most recent information, material variances in revenue recognition can occur.

As a result, management evaluates the accuracy of estimated contract costs for each in-process job in light of available information regarding job status at the

end of each reporting period.

In addition, management prepares an analysis to determine the accuracy of our estimated total contract costs on closed jobs.

We have historically been able to estimate total contract costs with the required accuracy to

produce materially correct revenue results.

Valuation and Impairment of Investments

Our investments include cost method investments, available-for-sale securities, and equity method investments.

The assessment of the fair

value of certain of our cost method and equity method investments can

be difficult and subjective due in part to our having only limited information on these investments.

In addition, determination of permanent impairment for available-for-sale securities can be

difficult and subjective due in part to limited trading activity of certain of these equity instruments.

We conduct periodic

reviews to identify and evaluate each investment that has an unrealized loss, in accordance with the meaning of other-than-temporary impairment and its application to certain investments, as required under current accounting standards.

An unrealized

loss exists when the current fair value of an individual security is less than its amortized cost basis.

Unrealized losses on available-for-sale securities that are determined to be temporary are recorded in accumulated other comprehensive loss.

For available-for-sale equity securities with unrealized losses, management performs an analysis to assess whether the

securitys decline in fair value would be deemed to be other-than-temporary.

This can be difficult as many of our holdings have limited trading activity and prices can fluctuate significantly.

Fluctuations in price are generally determined to

be temporary unless the price level is maintained for an extended period of time.

Significant declines in a securitys fair value are determined to be other-than-temporary when the decline is maintained over several reporting periods.

decline in stock price is deemed to be other-than-temporary, the unrealized loss included in accumulated other comprehensive loss is reversed and recorded as a capital loss in the statement of operations.

Our cost method investments and equity method investments are in small, privately held companies.

These investments are not publicly

traded, and, therefore, because no established market for these securities exists, the estimate of the fair value of our investments requires significant judgment.

Investments that are accounted for using the cost method are valued at cost unless an

other-than-temporary impairment in their value occurs or the investment is liquidated.

For investments that are accounted for using the equity method, we record our share of the investees operating results each period.

We review the fair value

of our investments on a regular basis to evaluate whether an other-than-temporary impairment in the investment has occurred.

We record impairment charges when we believe that an investment has experienced a decline in value that is

other-than-temporary.

Future adverse changes in market conditions or poor operating results of underlying investments could result in losses or an inability to recover the carrying value of the investments that may not be reflected in an

investments current carrying value, thereby possibly requiring an impairment charge in the future.

Stock-Based Compensation

Stock-based compensation cost for share-based payments are based on their relative grant date fair values estimated in

accordance with current accounting standards.

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

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

relevant grants and the expected volatility of the Companys stock.

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

The expected term of options granted represents the period of time

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

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

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

Purchase Price Allocation Process for Business CombinationsApplicable under Both Investment

Company Accounting and Operating Company Accounting

We determine and allocate the purchase price of an acquired

company to the tangible and intangible assets acquired and liabilities assumed as of the business combination date in accordance with US GAAP for business combinations.

The purchase price allocation process requires us to use significant

estimates and assumptions, including fair value estimates, as of the business combination date.

While we use our best

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

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

the corresponding offset to goodwill.

In addition, there are contingencies based on earnings (commonly referred to as earnouts) included in some of our purchase agreements entered into during 2008.

The earnout is recorded as it is earned over the

contingency period, which is generally one to three years from the business combination date.

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

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

In January 2009, the Company adopted new US GAAP for business combinations, which requires a number of changes, including changes in the way assets and liabilities are recognized as a result of

business combinations.

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

subsequent reporting period.

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

The impact of the adoption of this new US GAAP for

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

Carrying Values of Goodwill and

Intangible AssetsApplicable under Both Investment Company Accounting and Operating Company Accounting

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

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

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

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

5 to 12 years.

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

indicate a potential impairment may have occurred.

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

Additionally,

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

In conducting

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

The determination of the fair value of stock-based compensation requires significant judgment and

the use of estimates, particularly surrounding assumptions such as stock price volatility, expected option lives and forfeiture rates.

These estimates involve inherent uncertainties and the application of management judgment.

As a result, if

circumstances change and we use different assumptions, our stock-based compensation expense could be materially different in the future.

The expected term of options granted represents the period of time that the options are expected to be outstanding and is based on historical experience of similar grants, giving consideration to the

contractual terms of the grants, vesting schedules and expectations of future employee behavior.

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

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

We are required to estimate future forfeitures of stock-based awards for recognition of compensation expense.

We will record additional expense if the

actual forfeitures are lower than estimated and will record a recovery of prior recognized expense if the actual forfeitures are higher than estimated.

The actual expense recognized over the vesting period will only be for those awards that vest.

our actual forfeiture rate or performance outcomes are materially different from our estimate, the actual stock-based compensation expense could be significantly different from what we have recorded in the current period.

Valuation and Impairment of Goodwill and Intangible Assets

Goodwill represents the excess of the aggregate consideration paid for an acquisition over the fair value of the net tangible and

intangible assets acquired.

Intangible assets represent the cost of trade marks, trade names, websites, customer lists, non-compete agreements, and proprietary processes and software obtained in connection with certain of these acquisitions.

Intangible assets with finite lives are amortized on a straight-line basis over their estimated useful lives, which range from 5 to 12 years.

In accordance with current accounting standards, goodwill and intangible assets determined to have

indefinite lives are not subject to amortization but are tested for impairment annually, or more frequently if events or changes in circumstances indicate a potential impairment may have occurred.

Circumstances that may indicate impairment include

qualitative factors such as an adverse change in the business climate, loss of key personnel, and unanticipated competition.

Additionally, management considers quantitative factors such as current estimates of the future profitability of the

Companys reporting units, the current stock price, and the Companys market capitalization compared to its book value.

The consideration of qualitative and quantitative factors when considering circumstances that may indicate impairment

requires the application of management judgment.

As a result, managements determinations with regard to current circumstances affecting the Company could have a significant affect the recognition of impairment charges.

If management determines that an impairment test is necessary, it must determine the fair value of the respective reporting units.

determination of the fair value of reporting units requires significant judgment.

Management typically enlists the assistance of a third-party valuation firm in determining fair value of reporting units for use in its impairment analysis.

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

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

If the net book

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

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

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

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

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

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

value of an asset to be held and used is

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

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

Management considers both qualitative and quantitative factors when considering circumstances that

may indicate impairment.

This consideration requires significant management judgment and could have a significant affect of the recognition of impairment charges.

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

the carrying value of an asset to be held and used is impaired.

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

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

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

fair value of the asset.

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

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

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

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

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

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

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

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

of $1.3 million.

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

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

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

Derivative LiabilityApplicable

under Operating Company Accounting

US GAAP requires bifurcation of embedded derivative instruments and measure of

their fair value for accounting purposes.

determination of future cash flows involves inherent uncertainties and the application of management judgment regarding the future operations of the Company.

If the comparison indicates that there is impairment, the impaired asset is written down to

its fair value.

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

Assets to be disposed are reported at the lower of the carrying

amount or fair value, less cost to dispose.

Valuation of Derivative Liabilities

ASC Topic 815 Derivatives and Hedging requires bifurcation of embedded derivative instruments and measure of their fair value for

accounting purposes.

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

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

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

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

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

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

equal to the expected life of the warrants.

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

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

At December 31, 2009, we had a derivative instrument

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

The warrants have features that make their exercise

price variable.

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

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

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

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

our stock during the period.

Derivative liabilities are recorded at fair value at inception and then are adjusted to reflect fair value at the end of

each quarter, with any increase or decrease in the fair value being recorded in results of operations as a component of other (income) expense.

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

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

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

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

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

These estimates involve inherent

uncertainties and the application of management judgment.

As a result, if circumstances change and we use different assumptions, our derivative liability and the related gain or loss could be materially different in the future.

Recently Issued Accounting Pronouncements

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

arrangements with multiple deliverables.

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

objective evidence or third-party evidence is unavailable.

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

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

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

The adoption of this update is not

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

Information concerning recently issued accounting pronouncements is set forth in Note 2 of our Notes to Consolidated Financial Statements under Item 8.

Financial Statements and Supplementary

Data and is incorporated herein by reference.

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

What changed 10-K

Item 5. Market for Registrant’s Common Equity