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Item 8. Financial Statements and Supplementary Data

2011-03-30 compared with 2010-03-22 · 896 added, 1288 removed, 413 unchanged (84% of the section changed)

Financial Statements and Supplementary Data

UTEK CORPORATION

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND

INNOVARO, INC.

INDEX TO CONSOLIDATED FINANCIAL

STATEMENTS AND SCHEDULES

Report of Independent Registered Public Accounting Firm

Report of Management on Internal Control over Financial Reporting

Report of Independent Registered Public Accounting Firm on Internal Control over Financial Reporting

Consolidated Balance Sheet as of December

31, 2009 and Consolidated Statement of Assets and Liabilities as of December 31, 2008

Consolidated Statements of Operations and Comprehensive Income (Loss) for the three months ended December 31,

2009, the nine months ended September 30, 2009, and the years ended December 31, 2008 and 2007

Consolidated Statements of Stockholders Equity (Deficit) and Comprehensive Income (Loss) for the years

ended December 31, 2009, 2008 and 2007

Consolidated Statements of Cash Flows for the three months ended December

31, 2009, the nine months ended September 30, 2009, and the years ended December 31, 2008 and 2007

Consolidated Statements of Changes in Net Assets for the nine months ended September

30, 2009 and the years ended December 31, 2008 and 2007

Consolidated Schedule of Investments for the year ended December 31, 2008

Report of Independent Registered Public Accounting Firm on Internal Control over Financial

Consolidated Balance Sheets as of December 31, 2010 and 2009

Consolidated Statements of Operations for the Year Ended December

31, 2010, the Three Months Ended December 31, 2009 and the Nine Months Ended September 30, 2009

Consolidated Statements of Changes in Equity for the Year Ended December

31, 2010, the Three Months Ended December 31, 2009, and the Nine Months Ended September 30, 2009

Consolidated Statements of Cash Flows for the Year Ended December

31, 2010, the Three Months Ended December 31, 2009 and the Nine Months Ended September 30, 2009

Notes to Consolidated Financial Statements

1 unchanged sentence

Board of Directors

Corporation and Subsidiaries

and Subsidiaries

Tampa, Florida

We have audited the accompanying consolidated balance sheet of UTEK Corporation and subsidiaries (the Company) as of December 31, 2009 and the related consolidated statements of

operations and comprehensive income (loss), and cash flows for the three months ended December 31, 2009 and the nine months ended September 30, 2009, and the statement of changes in net assets for the nine months ended September 30,

We have audited the accompanying consolidated statement of stockholders equity and comprehensive income (loss) for the year ended December 31, 2009.

We have also audited the accompanying consolidated statement of assets and

liabilities of the Company including the schedule of investments as of December 31, 2008 and the related consolidated statements of operations, cash flows and changes in net assets for the two years ended December 31, 2008 and 2007.

consolidated financial statements are the responsibility of the Companys management.

We have audited the accompanying consolidated balance sheets of Innovaro, Inc.

and subsidiaries (the Company) as of December 31, 2010 and 2009 and the related consolidated statements of

operations, changes in equity and cash flows for the year ended December 31, 2010, the three months ended December 31, 2009 and the nine months ended September 30, 2009.

These consolidated financial statements are the responsibility

of the Companys management.

Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States).

Those standards

require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement.

An audit includes examining, on a test basis, evidence supporting the amounts and

disclosures in the consolidated financial statements.

Those standards require that we plan and perform the audits to obtain reasonable

assurance about whether the consolidated financial statements are free of material misstatement.

For the year ended December 31, 2010, the Company is not required to have, nor were we engaged to perform, an audit of its internal control over

financial reporting.

Our audit for the year ended December 31, 2010 included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose

of expressing an opinion on the effectiveness of the Companys internal control over financial reporting.

Accordingly, we express no such opinion.

An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in

the consolidated financial statements.

An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall consolidated financial statement presentation.

believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements and

schedule of investments referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2009 and 2008 and the results of its operations and cash flows for the three month period ended

December 31, 2009, the nine month period ended September 30, 2009, and the two years ended December 31, 2008 and 2007 in conformity with accounting principles generally accepted in the United States of America.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the Companys

internal control over financial reporting as of December 31, 2009, based on criteria established in Internal ControlIntegrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated

March 22, 2010 expressed an unqualified opinion thereon.

Effective October 1, 2009, the Company filed a

notification with the Securities and Exchange Commission withdrawing its election to be regulated as a business development company pursuant to the Investment Company Act of 1940, as more fully discussed in Note 1 to the consolidated financial

We believe that our

audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above

present fairly, in all material respects, the financial position of the Company as of December 31, 2010 and 2009 and the results of its operations and cash flows for the year ended December 31, 2010, the three month period ended

December 31, 2009 and the nine month period ended September 30, 2009 in conformity with accounting principles generally accepted in the United States of America.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the Companys internal control over financial reporting as of

December 31, 2009, based on criteria established in Internal ControlIntegrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report date March 22, 2010 expressed an unqualified

opinion thereon.

/s/ P ENDER N EWKIRK &

3 unchanged sentences

March 30, 2011

REPORT OF MANAGEMENT ON INTERNAL CONTROL OVER FINANCIAL

UTEK Corporation

Management of the Company is responsible for establishing and maintaining adequate internal control over financial reporting as such term is defined in Rule 13a-15(f) under the Securities Exchange Act of

1934 (Exchange Act).

The Companys internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of the consolidated financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements and even when determined to be effective, can only provide reasonable assurance with respect to financial statement preparation

and presentation.

Management assessed the effectiveness of the Companys internal control over financial reporting as of

December 31, 2009.

In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO), in Internal ControlIntegrated Framework.

Based on our assessment,

management believes that the Company maintained effective internal control over financial reporting as of December 31, 2009.

Our internal control over financial reporting as of December 31, 2009 has been audited by Pender Newkirk & Company LLP, an independent registered public accounting firm, as stated in their report which is included herein.

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM ON

1 unchanged sentence

Board of Directors

UTEK Corporation and Subsidiaries

Innovaro, Inc.

and Subsidiaries

Tampa, Florida

We have audited the internal control over financial reporting of UTEK Corporation and Subsidiaries (the Company) as of

December 31, 2009, based on criteria established in Internal ControlIntegrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (the COSO criteria).

The Companys management is responsible for

maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting.

Our responsibility is to express an opinion on the Companys internal control over

financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company

Accounting Oversight Board (United States).

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects.

audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk,

and performing such other procedures as we considered necessary in the circumstances.

We have audited the internal control over financial reporting of Innovaro, Inc.

(formerly UTEK Corporation) and Subsidiaries (the

Company) as of December 31, 2009, based on criteria established in Internal ControlIntegrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (the COSO criteria).

The Companys

management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting.

Our responsibility is to express an opinion on the Companys

internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the

Public Company Accounting Oversight Board (United States).

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material

Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the

assessed risk, and performing such other procedures as we considered necessary in the circumstances.

We believe that our audit provides a reasonable basis for our opinion.

8 unchanged sentences

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.

Also, projections of

any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Also, projections

of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In our opinion the Company maintained effective internal control over financial reporting as of December 31, 2009, in all material

1 unchanged sentence

We also have audited, in accordance with the standards of the Public Company Accounting

Oversight Board (United States), the consolidated balance sheet of the Company as of December 31, 2009 and the related statements of operations and comprehensive income (loss), and cash flows for the three months ended December 31, 2009

and the nine months ended September 30, 2009, and the statement of changes in net assets for the nine months ended September 30, 2009.

We have audited the statement of stockholders equity and comprehensive income (loss) for the year

ended December 31, 2009.

In addition, we have audited the consolidated statement of assets and liabilities including the schedule of investments as of December 31, 2008 and the related statements of operations, cash flows and changes in

net assets for each of the two years ended December 31, 2008 and 2007 and our report dated March 22, 2010 expressed an unqualified opinion thereon.

Oversight Board (United States), the consolidated balance sheet of the Company as of December 31, 2009 and the related statements of operations and cash flows for the three months ended December 31, 2009 and the nine months ended

September 30, 2009, and the statement of changes in net assets for the nine months ended September 30, 2009.

We have audited the statement of changes in equity for the year ended December 31, 2009 and our report dated March 22,

2010 expressed an unqualified opinion thereon.

/s/ P ENDER N EWKIRK &

3 unchanged sentences

March 22, 2010

UTEK Corporation

Consolidated Balance Sheet (2009)/ Consolidated Statement of Assets and Liabilities (2008)

Innovaro, Inc.

Consolidated Balance Sheets

Current assets:

Cash and cash equivalents

Certificates of deposit

Accounts receivable, net

Non-affiliate investments (cost:

2008 - $36,994,463)

Affiliate investments (cost:

2008 - $38,559,629)

Control investments (cost:

2008 - $10,637,748)

Certificates of deposit (cost:

2008 - $291,581)

Available-for-sale securities

Investments under cost method

Total investments

Cost method investments

Prepaid expenses and other assets

Total current assets

Cost method investments

Equity method investments

Note receivable and accrued interest

4 unchanged sentences

Accrued expenses

Accrued severance liability

Accrued severance payable

Deferred revenue

Current maturities of long-term debt

Derivative liability

Total current liabilities

Long-term debt, less current maturities

Derivative liabilities

Deferred tax liability

Total liabilities

STOCKHOLDERS EQUITY/ COMPOSITION OF NET ASSETS:

Commitments and contingencies (Note 19)

Innovaro stockholders equity:

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

5 unchanged sentences

Additional paid-in capital

Accumulated income (loss) under Investment Company Accounting:

Accumulated net operating income

Net realized loss on investments, net of income taxes

Net unrealized depreciation of investments, net of deferred income taxes

Foreign currency translation adjustment

Total accumulated loss under Investment Company Accounting

2 unchanged sentences

Accumulated other comprehensive income (loss)

Total stockholders equity/ Net assets

Total liabilities and stockholders equity

Net asset value per share

Total Innovaro stockholders equity

Noncontrolling interest

Total liabilities and equity

See accompanying notes

UTEK Corporation

Consolidated Statements of Operations and Comprehensive Income (Loss)

Investment Company Accounting

Ended Dec 31,

Ended Sept 30,

Innovaro, Inc.

Consolidated Statements of Operations

Revenue / Income from operations:

Innovation consulting services

Sale of technology rights

Subscription and other services

Strategic services

Technology services

Investment income, net

Direct costs of innovation consulting services

Acquisition of technology rights

Direct costs of revenueStrategic services

Direct costs of revenueTechnology services

Salaries and wages

Professional fees

Research and development

Sales and marketing

5 unchanged sentences

Interest expense, net

(Loss) income before income taxes

Loss before income taxes

Provision for income taxes

Net (loss) income from operations

Net loss from operations

Net realized and unrealized gains (losses) from investment company activity:

Net realized losses on investments, net of income tax benefit

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

Net realized losses on investments

Net change in unrealized appreciation (depreciation) of investments

Net loss / Net decrease in net assets from operations

Other comprehensive gain (loss):

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

Cumulative translation adjustment

Comprehensive income (loss)

Net loss/ Net decrease in net assets from operations per share:

Basic and diluted

Weighted average shares:

Net loss attributable to noncontrolling interest

Net loss attributable to Innovaro stockholders

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

Weighted average shares outstanding:

Basic and diluted

Dividend declared or paid per share:

See accompanying notes

UTEK Corporation

Consolidated Statement of Stockholders Equity (Deficit) and Comprehensive Income (Loss)

Consolidated Statement of Changes in Equity

Innovaro Stockholders Equity

Investment Company Accounting

1 unchanged sentence

Net Operating

Net Unrealized

Depreciation of

of investments

Comprehensive

2 unchanged sentences

Income (Loss)

Shares Issued

Paid-In Capital

Balances at January 1, 2007

Employee stock options exercised

Stock-based compensation expense

Cumulative translation adjustment

Change in net assets

Balances at December 31, 2007

Employee stock options exercised

Stock-based compensation expense

Acquisition of Pharmalicensing, Ltd.

Acquisition of Strategos

Acquisition of Innovaro Ltd.

Acquisition of Social Technologies Group, Inc.

Earnout accruals for all companies

Cumulative translation adjustment

Change in net assets

Noncontrolling

Balances at December 31, 2008

7 unchanged sentences

Adoption of Operating Company Accounting on Oct 1, 2009

Comprehensive loss:

Other comprehensive income (loss):

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

Foreign currency translation adjustments

Other comprehensive gain (loss)

Comprehensive loss

Stock-based compensation expense

Earnout accruals and escrow adjustments

UTEK Corporation

Consolidated Statement of Changes in Equity (continued)

Innovaro Stockholders Equity

Investment Company Accounting

Operating Company Accounting

Comprehensive

Income (Loss)

Comprehensive

Income (Loss)

Noncontrolling

Balances at December 31, 2009

Settlement of severance liability for 32% interest in Cortez 114, LLC

Comprehensive loss:

Other comprehensive income (loss):

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

Cumulative translation adjustment

Other comprehensive gain (loss)

Comprehensive income (loss)

Net income (loss)

Foreign currency translation adjustments

Other comprehensive loss

Comprehensive loss

Investment in Verdant Ventures Advisors, LLC

Private offering of equity securities, net of offering costs of $593,440

Warrants issued as direct offering costs in connection with private equity securities offering

Issuance of shares upon exercise of warrants

Earnout accruals and escrow adjustments

Stock-based compensation expense

Balances at December 31, 2010

See accompanying notes

UTEK Corporation

Innovaro, Inc.

Consolidated Statements of Cash Flows

Investment Company Accounting

Ended Dec 31,

Ended Sept 30,

Operating Company

Operating Activities:

Net loss/ Net decrease in net assets from operations

Adjustments to reconcile net loss/ net decrease in net assets from operations to net cash flows from operating

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

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

flows from operating activities:

Change in net unrealized appreciation (depreciation) of investments from investment company activity

2 unchanged sentences

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

Net repayment from (investment in) UTEK Real Estate

Net loss attributable to noncontrolling interest

Depreciation and amortization

Amortization of debt discount from investor warrants

Goodwill and intangible asset impairment

Loss on sale of available-for-sale securities

Goodwill, intangible asset and fixed asset impairment

Loss on sale and impairment of investments

Loss on disposal of fixed assets

Loss on derivative liability

(Gain) loss on derivative liability

Bad debt expense

Stock-based compensation

Severance compensation paid out in escrowed shares

Compensation paid out in escrowed shares

Deferred income taxes

Investment securities received in connection with the sale of technology rights

Consulting and other services rendered in exchange for investment securities

Changes in operating assets and liabilities:

8 unchanged sentences

Proceeds from sale of available-for-sale securities

Proceeds from redemption of certificates of deposit

Net cash flows from investing activities

Financing Activities:

Net increase in line of credit

Proceeds from exercise of stock options

Proceeds from debt financing

Distributions to stockholders

Payments on notes payable and other debt

Net (repayments) proceeds on bank line of credit

Proceeds from related party debt

Payments on debt

Gross proceeds from registered equity securities offering

Offering costs paid from registered equity securities offering

Net cash flows from financing activities

4 unchanged sentences

See accompanying notes

UTEK Corporation

Innovaro, Inc.

Consolidated Statements of Cash Flows (continued)

Ended Dec 31,

Supplemental Disclosures of Non-Cash Investing and Financing Activities

The Company issued 153,967 shares of common stock to purchase Pharmalicensing Limited.

In conjunction with the acquisition,

liabilities were assumed as follows:

Fair value of assets acquired

Fair value of common stock issued

Liabilities assumed

The Company issued 502,970 shares of common stock to purchase Carmi, Inc., a 100% owned subsidiary of Strategos, LLC.

conjunction with the acquisition, liabilities were assumed as follows:

Fair value of assets acquired

Fair value of common stock issued

contingent liability incurred

Liabilities assumed

The Company issued 345,857 shares of common stock to purchase Innovaro Limited.

In conjunction with the acquisition, liabilities

were assumed as follows:

Fair value of assets acquired

Fair value of common stock issued

Foreign currency translation adjustment

Liabilities assumed

The Company issued 499,014 shares of common stock to purchase Social Technologies Group, Inc.

In conjunction with the

acquisition, liabilities were assumed as follows:

Fair value of assets acquired

Fair value of common stock issued

Liabilities assumed

The Company issued 58,338, 85,950 and 335,801 shares of common stock in connection with certain acquisition earnout contingencies

Investment securities received for unearned global technology licensing services (net)

Sept 30, 2009

The Company issued 23,484, 58,338 and 85,950 shares of common stock in connection with certain acquisition earnout

contingencies

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

The Company received 100,000 shares in Technology Capital Services, LLC in connection with the sale of certain

UTEK Corporation

Consolidated Statements of Cash Flows (continued)

Ended Dec 31,

The Company received 375,000 shares in Oxygen Biotherapeutics, Inc.

11 unchanged sentences

Derivative liability recorded upon issuance of investor warrants

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

The Company transferred certain equity interests in a subsidiary to satisfy a severance obligation resulting in the

Noncontrolling interest

Increase in additional paid-in capital

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

Warrants issued as direct offering costs in connection with registered equity securities offering

Cash paid for taxes

Cash paid for interest

UTEK Corporation

Consolidated Statements of Changes in Net Assets

Changes in net assets from operations:

Net (loss) income from operations

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

Change in net unrealized appreciation (depreciation) of

investments, net of related deferred taxes

Net decrease in net assets from operations

Distributions to Stockholders (Paid or Declared):

From net income from operations(2)

Capital stock transactions:

Proceeds from the exercise of stock options

Issuance of stock options for compensation

Severance compensation paid for in escrowed shares

Common stock issued in acquisition of Pharmalicensing Ltd.

Common stock issued in acquisition of Strategos

Common stock issued in acquisition of Innovaro, Ltd.

Common stock issued in acquisition of Social Technologies Group, Inc.

Escrow shares earnout

Investment in UTEK Real Estate Holdings, Inc

Net increase in net assets from stock transactions

Foreign currency translation adjustment

Net decrease in net assets

Net assets at beginning of period

Net assets at end of period

Information is presented for the nine months ended September 30 of the current year because the Company ceased operating as an investment company on

October 1, 2009.

As an operating company, measurement of certain items included in this table is not applicable or appropriate.

Therefore, certain items included in this table agree to financial statements included in the Companys

September 30, 2009 quarterly report on Form 10-Q as opposed to financial statements included in this annual report on Form 10-K.

See Note 1 for further discussion of the Companys change from an investment company to an operating

Distributions to shareholders as noted in the Consolidated Statement of Cash Flows for the year ended December 31, 2007 was accrued at December 31, 2006;

therefore, it is not reflected as a distribution to shareholders for purposes of this schedule.

accompanying notes

UTEK Corporation

Consolidated Schedule of Investments December 31, 2008

Non-Affiliate Investments(1)

MiMedx Group, Inc.

(MiMedx, Inc.)

Connective tissue technology

Advanced Medical Isotope Corporation (8)

Medical isotope processes

Series A Convertible Preferred Stock

Cyberlux Corporation

LED lighting solutions

Series C Convertible Preferred Stock

Advanced Refractive Technologies, Inc.

Ophthalmic technologies

Series D Convertible Preferred Stock

Series C Convertible Preferred Stock

Series B Convertible Preferred Stock

Oxygen Biotherapeutics, Inc.(Synthetic Blood Intnl, Inc)

Biotechnology products

CSMG Technologies, Inc.

Environmental and medical technologies

Platina Energy Group Inc.

Oil and gas exploration and production

Series F Convertible Preferred Stock

Bacterin International, Inc.

(privately held)

Bioactive coatings for medical devices

Metamorphix Global, Inc.

(privately held)

Design and manufacture of countertops

Turbine Truck Engines, Inc.

Heavy-duty highway truck engines

Codima, Inc.(KKS Venture Management/ Rheologics)

Study of blood viscosity

Island Gas Resources Plc.

(KP Renewables Plc) (5)

Renewable energy

Convertible Debenture, due 5/10/07

Convertible Debenture, due 9/30/06

In Veritas Medical Diagnostics, Inc.

Medical devices designs and testing

Laserlock Technologies, Inc.

Security solutions for the gaming industry

The Renewable Corp.

(Industrial Biotechnology Corp.)

Provider of renewable resources

Tradequest International, Inc.

Provider of voice over internet protocol

Applied Wellness Corporation (New Life Scientific, Inc.)

Pharmaceutical biotechnologies

EFuel EFN Corp.

(Preservation Sciences, Inc.)

Internet sites host

UBA Technology, Inc .

Software development

Series A Convertible Preferred Stock

Trio Industries Group, Inc .

Protective powder coating

Total Investments in Non-Affiliates

Affiliate Investments(2)

World Energy Solutions, Inc.(7)

Energy saving technologies

Series B Convertible Preferred

Series C Convertible Preferred Stock

MATECH Corporation (Material Technologies, Inc.)

Metal fatigue detection

Series E Convertible Preferred Stock

CytoDyn, Inc.

Novel therapeutic agents

Series A Convertible Preferred Stock

Emission & Power Solutions, Inc.

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

Reductional environmental emissions

NeoStem, Inc.

Stem cell banking services

MachineTalker, Inc.

Intelligent wireless security networks

Avalon Oil and Gas, Inc.

Oil and gas producers

USTelematics, Inc.

Broadband telecommunication for moving vehicles

American Soil Technologies , Inc.

Fertilizer innovation

Cargo Connection Logistics Holdings, Inc.

World trade logistics

NetFabric Holdings, Inc.

Information technology services

DME Interactive Holdings, Inc.

Multi-media entertainment

Pathway One Plc (5)

Sales and development licenses

Tesla Vision Corporation (Manakoa Services Corp.) (8)

Compliance analysis and monitoring

Series B Convertible Preferred Stock

Broadband wireless

Stealth MediaLabs, Inc.(9)

Software products

NutriPure Beverages, Inc.

(Liberty Diversified Holdings, Inc.)

Printing and packaging

Series D Convertible Preferred Stock

RIM Semiconductor Company(7)

Data transmission technology

Total Investments in Affiliates

Control Investments(3)

UTEK Real Estate Holdings, Inc.

(privately held)

Real estate development

Klegg Electronics, Inc.

Manufacturer/distributor for retail electronic products

Total Investments in Control Investments

Certificates of Deposit(4)

Sun Amern BK Boca Raton FL CD, maturity 1/29/09, interest rate @ 2.60%

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

SunTrust Bank CD, maturity 9/12/09, interest rate @ 4.21%

Total Investments in Certificates of Deposit

TOTAL INVESTMENTS

Cash and other assets, less liabilities

Net assets at December 31, 2008

Notes to Schedule of Investments:

Except where otherwise noted, all of the Companys investments listed above are in common stock of companies that are publicly quoted on the OTC

Bulletin Board or listed on the NYSE Amex or other similar markets.

The above investments, with the exception of the U.S.

Treasuries and certificates of deposits, are non-income producing.

Equity investments that have

not paid dividends within the last twelve months are considered non-income producing.

The value of all securities for which there is no readily available market value is determined in good faith by the Board of Directors.

In making its

determination, the Board of Directors has considered

valuation appraisals provided by an independent valuation service provider.

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

As of December 31, 2008, all of the securities that the Company owns are subject to legal restrictions on resale.

As a result, the Companys

ability to sell or otherwise transfer the securities it holds in its portfolio is limited.

Non-affiliate investments are generally defined under the Investment Company Act of 1940 as companies in which the Company owns less than 5% of the voting securities.

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

voting securities.

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

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

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

(UREHI), which holds four investments:

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

and Ybor City Group, Inc.

UREHI holds 150

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

and Ybor City Group, Inc.

The Company invests excess cash in a number of certificates of deposit.

These short-term investments normally have three-month to one-year maturities and do not qualify

as cash or cash equivalents.

company or the companys principal place of business is outside the U.S.

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

During the period ended December 31, 2008, the Company reclassified this investment from Control investments to Affiliate investments based on the criteria in

notes (2) and (3).

Advanced Medical Isotope Corporation and Tesla Vision Corporation are related through common management.

Stealth MediaLabs, Inc.

and USTelematics, Inc.

are related through common management.

See accompanying notes

UTEK CORPORATION

INNOVARO, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Withdrawal of the Companys Election to be Treated as a Business Development Company under the Investment Company Act of 1940

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, the Company filed a notification on Form N-54C with the Securities and Exchange Commission (SEC)

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

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, the Company filed a notification on Form N-54C with the Securities and Exchange Commission

(SEC) withdrawing its election to be regulated as a BDC under the 1940 Act.

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

Based on the Companys current business focus and the fact that the equity interests it holds have constituted a declining amount of its assets over the last couple of years, the Company determined

that it no longer met the requirements to be regulated as a BDC under the 1940 Act.

In this regard, the Companys current business focus is to provide consulting and technology transfer services to companies in exchange for cash as opposed to

equity interests.

Thus, because of the Companys current business focus of providing consulting and technology transfer services to companies in exchange for cash as opposed to equity interests, as well as the fact that the Company no longer

holds the requisite level of investment securities (as this term is defined in the 1940 Act) to permit it to be an investment company under the 1940 Act and, as a result, be regulated as a BDC, the Company is operating, and

intends to continue to operate, as an operating company rather than an investment company.

Accordingly, and after careful

consideration of the requirements applicable to BDCs under the 1940 Act, the cost of compliance with the provisions of the 1940 Act and a thorough assessment of the Companys current business model, the Companys Board of Directors

determined that the Company should withdraw its election to be regulated as a BDC under the 1940 Act.

Under its current

business model, the Company intends at all times to conduct its activities in such a way that it will not be deemed an investment company subject to regulation under the 1940 Act.

Thus, the Company will not hold itself out as being

engaged primarily in the business of investing, reinvesting or trading in securities.

In addition, the Company intends to conduct its business in a manner so that it will at no time own or propose to acquire investment securities having a value

exceeding 40% of the Companys total assets at any one time.

As a result of our de-election from BDC status, we make

reference to both Investment Company Accounting and Operating Company Accounting throughout these consolidated financial statements.

Based on the Companys current business focus and the fact that the equity interests it holds have constituted a declining amount of

its assets over the last couple of years, the Company determined that it no longer met the requirements to be regulated as a BDC under the 1940 Act.

In this regard, the Companys current business focus is to provide strategic consulting and

technology services to companies in exchange for cash as opposed to equity interests.

Thus, because of the Companys current business focus of providing strategic consulting and technology services to companies in exchange for cash as opposed

to equity interests, as well as the fact that the Company no longer holds the requisite level of investment securities (as this term is defined in the 1940 Act) to permit it to be an investment company under the 1940 Act and,

as a result, be regulated as a BDC, the Company is operating, and intends to continue to operate, as an operating company rather than an investment company.

Accordingly, and after careful consideration of the requirements applicable to BDCs under the 1940 Act, the cost of compliance with the provisions of the 1940 Act and a thorough assessment of the

Companys current business model, the Companys Board of Directors determined that the Company should withdraw its election to be regulated as a BDC under the 1940 Act.

Under its current business model, the Company intends at all times to conduct its activities in such a way that it will not be deemed an

investment company subject to regulation under the 1940 Act.

Thus, the Company will not hold itself out as being engaged primarily in the business of investing, reinvesting or trading in securities.

In addition, the Company intends to

conduct its business in a manner so that it will at no time own or propose to acquire investment securities having a value exceeding 40% of the Companys total assets at any one time.

As a result of our de-election from BDC status, we make reference to both Investment Company Accounting and Operating Company Accounting

throughout these consolidated financial statements.

Investment Company Accounting, as we refer to it, is defined as accounting in accordance with U.S.

accepted accounting principles (US GAAP) for investment companies under the 1940 Act.

Operating Company Accounting, as we refer to it, is defined as accounting in accordance with US GAAP other than for investment companies under the

generally accepted accounting principles (GAAP) for investment companies under the

Operating Company Accounting, as we refer to it, is defined as accounting in accordance with GAAP other than for investment companies under the 1940 Act.

As an operating company, the Company is required to consolidate UTEK Real Estate Holdings, Inc.

subsidiaries:

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

Under Investment Company Accounting, the fair value of UTEK Real Estate was included in the

Companys portfolio investments and the operating results of these companies were not consolidated with those of the Company.

The assets, liabilities and results of operations of UTEK Real Estate have been included in the Companys

consolidated financial statements from October 1, 2009.

As of October 1, 2009, none of the Companys other investments are greater than 20% of the outstanding equity interests of any individual company, and accordingly, consolidation

is not required for these investments.

The change in reporting did not have a material affect on the Companys net loss

from operations, net loss or related per share amounts for the three months ended December 31, 2009.

Conversion from Investment Company Presentation to Operating Company Presentation

and its subsidiaries:

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

Cortez 114, LLC (collectively UTEK Real Estate).

Under Investment Company Accounting, the fair value of UTEK Real Estate was included in the Companys portfolio investments and the operating results of these companies were not

consolidated with those of the Company.

The assets, liabilities and results of operations of UTEK Real Estate have been included in the Companys consolidated financial statements from October 1, 2009.

As of October 1, 2009, none of

the Companys other investments were greater than 20% of the outstanding equity interests of any individual company, and accordingly, consolidation was not required for these investments.

The change in reporting did not have a material affect on the Companys net loss from

operations, net loss or related per share amounts for the three months ended December 31, 2009.

Conversion from Investment Company

Presentation to Operating Company Presentation

ASC Topic 250, Accounting Changes and Error Corrections

UTEK was required to make the accounting change at the time that it no longer met the requirements of the 1940 Act and filed its Form N-54C with the SEC withdrawing its election to be treated as a BDC

under the 1940 Act.

The Company has applied the change as of October 1, 2009, which is the first date that it was no longer appropriate for the Company to use Investment Company Accounting.

The Companys change in financial statement presentation from fair value Investment Company Accounting to Operating Company Accounting

has been accounted for as the initial adoption of or modification of an accounting principle resulting from a change in events or transactions as contemplated by Financial Accounting Standards Board (FASB) Accounting Standards

Codification (ASC) 250-10-45-1.

The Company was required to make the accounting change at the time that it no longer met the requirements of the 1940 Act and filed its

Form N-54C with the SEC withdrawing its election to be treated as a BDC under the 1940 Act.

The Company has applied the change as of October 1, 2009, which is the first date that it was no longer appropriate for the Company to use Investment

Company Accounting.

The Companys change in financial statement presentation from fair value Investment Company

Accounting to Operating Company Accounting has been accounted for as the initial adoption of or modification of an accounting principle resulting from a change in events or transactions as contemplated by Financial Accounting Standards Board

(FASB) Accounting Standards Codification (ASC) 250-10-45-1.

The Companys change to Operating Company Accounting is clearly different in substance from that previously occurring under Investment Company Accounting.

This is not considered to be a change in

accounting principle.

is not considered to be a change in accounting principle.

In accordance with this view, the Company applied the adoption of accounting as an operating company prospectively beginning October 1, 2009.

ASC Topic 946, Investment Companies

As there was limited authoritative

guidance on accounting for the transition from a BDC to an operating company, the Company reviewed the guidance in ASC Topic 946 Financial ServicesInvestment Companies .

The Company relied on the guidance in Topic 946, a significant

portion of which has been delayed indefinitely.

The guidance that has been delayed is not US GAAP and is considered nonauthoritative.

The initial determination of whether UTEK was an investment company within the scope of Topic 946 was made upon formation of the Company.

Reconsideration of the provisions of Topic 946 by the

Companys Board of Directors during 2009 resulted in the determination that continuation as a BDC was inappropriate.

ASC 946-10-15-5 (delayed) dictates companies that no longer meet the conditions of an investment company should discontinue

application of Topic 946 and report the change in status prospectively by accounting for its investments in conformity with applicable US GAAP other than Investment Company Accounting, beginning as of the date of the change using fair value in

conformity with Investment Company Accounting at the date of the change as the carrying amount of investments at the date of the change.

In accordance with this guidance, the Company reported a change in status and began reporting as an operating

company as of October 1, 2009.

In addition, the fair value of the Companys investments as of September 30, 2009 became their cost basis under Operating Company Accounting beginning on October 1, 2009.

As there was limited authoritative guidance on accounting for the transition from a BDC to an operating company, the Company reviewed the guidance in ASC Topic 946 Financial ServicesInvestment

The Company relied on the guidance in Topic 946, a significant portion of which has been delayed indefinitely.

The guidance that has been delayed is not GAAP and is considered nonauthoritative.

The initial determination of whether the Company was an investment company within the scope of Topic 946 was made upon formation of the

Reconsideration of the provisions of Topic 946 by the Companys Board of Directors during 2009 resulted in the determination that continuation as a BDC was inappropriate.

ASC 946-10-15-5 (delayed) dictates companies that no longer meet

the conditions of an investment company should discontinue application of Topic 946 and report the change in status prospectively by accounting for its investments in conformity with applicable GAAP other than Investment Company Accounting,

beginning as of the date of the change using fair value in conformity with Investment Company Accounting at the date of the change as the carrying amount of investments at the date of the change.

In accordance with this guidance, the Company

reported a change in status and began reporting as an operating company as of October 1, 2009.

In addition, the fair value of the Companys investments as of September 30, 2009 became their cost basis under Operating Company

Accounting beginning on October 1, 2009.

Presentation of Financial Statements

The Company made the following adjustments in order to present two years of financial statements together for which the years include two different methods of accounting.

Changes made to the accompanying

consolidated balance sheet / consolidated statement of assets and liabilities include the following:

The balance sheet was reformatted as of December 31, 2009 to a classified balance sheet presentation in accordance with Operating Company

The investment in UTEK Real Estate Holdings, Inc., which was included as a portfolio investment under Investment Company Accounting, was eliminated and

this companys balance sheet is consolidated with UTEK as of the date of change of October 1, 2009 pursuant to Operating Company Accounting.

Investments are now presented as certificates of deposit and either available-for-sale securities or investments under cost method in accordance with

ASC Topic 320 InvestmentsDebt and Equity Securities and ASC Topic 325 InvestmentsOther .

The stockholders equity presentation has separate classification for earnings accounts under Investment Company Accounting and Operating Company

Accumulated income (loss) under Investment Company Accounting includes earnings through September 30, 2009.

Accumulated income (deficit) under Operating Company Accounting includes earnings incurred subsequent to the date of change

of October 1, 2009.

Changes made to the accompanying consolidated statements of operations include the

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

different methods of accounting.

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

Operations for the year ended December 31, 2009 were segregated into two columns in the consolidated statements of operations to properly report

2 unchanged sentences

in operating company format.

The statement of operations was reformatted for the three months ended December 31, 2009 to conform to an operating company presentation.

balances are not applicable to an investment company and are not included prior to the date of change of October 1, 2009.

The consolidated statement of operations was reformatted for the three months ended December 31, 2009 to conform to an operating company

presentation.

Certain balances are not applicable to an

investment company and are not included prior to the date of change of October 1, 2009.

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

In addition, this statement includes the statement of

comprehensive income (loss) for the three months ended December 31, 2009.

UTEK Real Estates results of operations are consolidated with those of UTEK as of the date of change of October 1, 2009.

UTEK Real Estates results of operations are consolidated with those of the Company as of the date of change of October 1, 2009.

transactions, including intercompany borrowings and rent, are eliminated in consolidation for the three months ended December 31, 2009.

11 unchanged sentences

Other changes include the following:

The Consolidated Statements of Changes in Net Assets and the Schedule of Investments in and Advances to Affiliates, as well as Selected Per Share Data

and Ratios under Investment Company Accounting included in Note 16, are included only through September 30, 2009 as they are requirements under Investment Company Accounting.

Therefore, certain balances as shown will agree to the Companys

quarterly report on Form 10-Q for the nine months ended September 30, 2009 as opposed to the current financial statements included in this annual report on Form 10-K.

The Consolidated Schedule of Investments is presented only for the year ended December 31, 2008.

The consolidated statement of stockholders equity (deficit) is included for the years ended December 31, 2009, 2008 and 2007.

this statement includes the statement of comprehensive income (loss) for the three months ended December 31, 2009.

The stockholders equity presentation has separate classification for earnings accounts under Investment Company Accounting and Operating Company

Total accumulated loss under Investment Company Accounting includes earnings through September 30, 2009.

Accumulated deficit under Operating Company Accounting includes earnings incurred subsequent to the date of change of

October 1, 2009.

The Consolidated Schedule of Investments, Consolidated Statements of Changes in Net Assets and the Schedule of Investments in and Advances to

Affiliates, as well as Selected Per Share Data and Ratios are not included as they are requirements under Investment Company Accounting.

The consolidated statements of changes in equity are included for the year ended December 31, 2010, the three months ended December 31, 2009

and the nine months ended September 30, 2009.

In addition, this statement includes the statement of comprehensive income (loss) for the year ended December 31, 2010 and the three months ended December 31, 2009.

Cash flows for the year ended December 31, 2009 were segregated into two columns in the consolidated statements of cash flows to properly report

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

The nine months ended September 30, 2009 are presented in investment company format and the three months ended December 31, 2009 are presented in operating

company format.

Consolidation of UTEK Real Estate

UTEK Real Estate has been consolidated into the Companys balance sheet as of December 31, 2009.

The following reflects the

components of UTEK Real Estates carrying value as of October 1, 2009:

Accounts receivable

Cost method investments

Other tangible assets

Accounts payable and accrued expenses

Total carrying value

Cash flows for the nine months ended September 30, 2009 are presented in investment company format and cash flows for the three months ended December 31,

2009 are presented in operating company format.

Nature of Business and Significant Accounting Policies

operations in 1997 and were originally incorporated under the laws of the State of Florida, and subsequently under the laws of the State of Delaware in July 1999.

The Company provides services that help clients become

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

affect their business.

These services are primarily provided throughout the United States (U.S.) and the United Kingdom (UK).

Innovation Consulting Services

The Company provides strategic innovation consulting services to clients to

help them become more efficient by finding new avenues for growth, fighting commoditization, improving return on investment, transforming the organization, and removing barriers to innovation.

Business value is delivered to our clients through

working with a team of seasoned and experienced professionals capable of unlocking an organizations capacity for strategy and innovation.

In addition, the Company provides services to clients that build the capacity for foresight, including monitoring trends, researching topics of interest, forecasting alternative scenarios, developing

technology roadmaps, creating growth platforms and embedding futures thinking within the organization.

The Company also offers innovative futures programs that provide clients with up-to-the-minute knowledge, expert insight, high-level learning

experiences, and opportunities to network with experts and peers.

Sale of Technology Rights

UTEKs services enable companies to acquire externally developed technologies from universities, university incubators, federal labs,

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

A sale of technology rights refers to the process by which these technologies are licensed to companies

for potential commercial development and use.

UTEKs goal is to provide its clients an opportunity to acquire and commercialize innovative technologies primarily developed external to their business.

Subscription and Other Services

Online Licensing Platform

The Companys online licensing services

division provides the following subscription-based website services:

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

development worldwide.

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

We are tracking at over 200,000 visitors per month and developing partnerships with sites such as Patents.com to drive further traffic.

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

device industry.

Medical Device Licensing benefits from the Pharmalicensing traffic and partnerships as well as establishing some of its own with member associations around the globe to further its reach and exposure.

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

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

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

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

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

TekScout provides a platform for

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

Global Technology Licensing

The Companys global technology licensing service enables clients to enhance their new product pipeline through the

acquisition of proprietary technologies primarily from universities, medical centers, federal research laboratories, select corporations, and university incubator programs.

Another component of the Companys global technology licensing division is our patent analytic service designed to help our clients

create marketplace value from their intellectual property (IP).

The Company helps clients identify the strengths and weaknesses of their own IP as well as that of companies in the same or adjacent industries.

Additionally, by

identifying gaps and opportunities in the IP landscape, the Company assists clients with developing IP acquisition, disposition, and management strategies.

We commenced operations in 1997 and were originally incorporated under the laws of the State of Florida, and subsequently under the laws of the State of Delaware in July 1999.

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

intellectual property (IP) and gain foresight into marketplace and technology developments that affect their business.

These services are provided internationally from our offices in

the United States and the United Kingdom.

As of March 16, 2010, we began doing business as Innovaro and changed our ticker

symbol to NYSE Amex:

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

The name change became effective on

July 12, 2010.

Principles of Consolidation

The consolidated financial statements include

the accounts of UTEK and its wholly owned subsidiaries:

UTEK Europe, Ltd.

(Europe), UTEK ip , Ltd.

(Israel) and UTEK Real Estate Holdings, Inc.

UTEK ip , Ltd.

was dissolved in 2008 and all operations of that subsidiary are currently being

serviced by UTEK.

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

and Carmi, Inc.

(Strategos) still exist, but their operations have been assumed by UTEK and UTEK Europe, Ltd.

All intercompany transactions and balances are

eliminated in consolidation.

As an investment company, portfolio investments are held for the purpose of deriving investment

income and future capital gains.

The operating results of the Companys portfolio companies, including UTEK Real Estate Holdings, Inc., are not consolidated in the Companys financial statements through September 30, 2009.

Effective October 1, 2009, the Company is reporting as an operating company.

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

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

Innovaro Europe, Ltd.

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

October 1, 2009).

All intercompany transactions and balances are eliminated in consolidation.

The Company is reporting

as an investment company for the nine months ended September 30, 2009.

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

The operating results of the Companys

portfolio companies, including UTEK Real Estate Holdings, Inc., are not consolidated with the Companys financial statements through September 30, 2009.

The Company is reporting as an operating company for the year ended December 31, 2010 and the three months ended December 31, 2009.

As such, the Company is required to consolidate UTEK Real

Estate Holdings, Inc.

and its subsidiaries:

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

liabilities and results of operations of UTEK Real Estate have been included in the Companys consolidated financial statements from October 1, 2009.

As of October 1, 2009, none of the Companys other investments are greater than

20% of the outstanding equity interests of any individual company, and accordingly, equity investment accounting is not warranted for these investments.

Reclassifications

Certain reclassifications have been made to the 2008 and

2007 balances to conform to the 2009 financial statement presentation.

The results of operations of UTEK Real Estate have been

included in the Companys operations for the year ended December 31, 2010 and the three months ended December 31, 2009.

In addition, the assets and liabilities of UTEK Real Estate have been included in the Companys financial

position as of December 31, 2010 and 2009.

Business Combinations

The Company determines and allocates 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 the Company to use significant estimates and assumptions, including fair value estimates, as of the

business combination date.

While the Company uses its 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, its estimates and assumptions are inherently uncertain and subject to refinement.

As a result, during the purchase price allocation

period, which is generally one year from the business combination date, the Company records adjustments to the assets acquired and liabilities assumed based on additional information received, with the corresponding offset to goodwill.

there are contingencies based on earnings (commonly referred to as earnouts) included in some of the Companys 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 the Companys 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.

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.

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.

Under Investment Company Accounting

Through September 30, 2009, the

Company operated as a non-diversified, closed-end management investment company that had elected to be treated as a BDC under the 1940 Act and accounted for investments in accordance with Investment Company Accounting.

Pursuant to the requirements of the 1940 Act, UTEKs Board of Directors was responsible for determining, in good faith, the fair value

of the Companys securities and assets for which market quotations are not readily available.

In making its determination, the Board of Directors considered valuation appraisals provided by an independent valuation firm.

Our equity interests in portfolio companies for which there is no liquid public market are

valued using quoted market prices for identical or similar instruments in active markets.

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 the public market price on the balance sheet date.

These securities are generally thinly traded and/or carry discounts from the public market value for

certain restrictions on resale.

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

quantitative and qualitative factors.

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

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

Without a readily available market value, the value of the portfolio of equity securities may differ significantly

from the values that would be placed on the portfolio if there existed a ready market for such equity securities, and the differences could be material.

Approximately 60% and 28% of the Companys investments owned at September 30, 2009 and

December 31, 2008, respectively, were stated at fair value as determined by the Board of Directors, in the absence of readily available fair values.

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

Under Operating Company Accounting

The Company began reporting as an operating company on October 1, 2009.

In connection therewith, the Company modified the accounting treatment for it investments to conform to US GAAP for

operating companies.

See Note 1 for further discussion of the Companys withdrawal of its election to be treated as an investment company under the 1940 Act and the effects on the Companys financial statements.

The Company determines and allocates 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 ASC Topic 805 Business Combinations .

The purchase price allocation process requires the Company to use significant estimates and assumptions, including fair value

estimates, as of the business combination date.

While the Company uses its 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, its estimates and assumptions are inherently uncertain and subject to refinement.

During the purchase price allocation

period (one year from the business combination date), the Company records 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 the Companys 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 the Companys operating results in the period in which the adjustment is determined.

Cash and Cash Equivalents

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

acquisition to be cash equivalents.

Accounts Receivable

The Company accounts for accounts receivable in accordance with ASC Topic 310 Receivables .

In accordance therewith, the allowance for doubtful accounts is deducted from the accounts receivable

The Company provides an allowance for losses on trade receivables based on a review of the current status of

existing receivables and managements evaluation of periodic aging of accounts.

The Company charges off accounts receivable against the allowance for losses when an account is deemed to be uncollectible.

The Company determines the allowance

based on historical bad debt experience, current receivables aging, expected future write-offs, as well as an assessment of specific identifiable customer accounts considered at risk or uncollectible.

It is not the Companys policy to accrue

interest on past due receivables.

The expense associated with the allowance for doubtful accounts is recognized as general and administrative expense in the consolidated statements of operations.

The provision for doubtful accounts and notes was

approximately $15,000 and $83,000 as of December 31, 2010 and 2009, respectively.

In addition, bad debt expense was approximately $(34,000) and $44,000 for the years ended December 31, 2010 and 2009, respectively.

Accounts receivable also includes recoverable contract costs and, where applicable, accrued profit related to long-term contracts that

have been inventoried until the customer is billed.

Contract costs consist primarily of labor and travel expenses.

See Note 3 for further discussion.

Certificates of Deposit

Certificates of deposit are short term investments that are carried at their fair values.

These certificates of deposit collateralize the Companys line of credit as of December 31, 2009.

Certificates of deposit are short term investments

that are carried at their fair values.

Available-for-Sale Securities

As of October 1, 2009, the Company classifies all investments in freely tradable equity securities as available-for-sale in accordance with US GAAP and our intentions regarding these instruments.

Investments in equity securities

of public companies continue to be accounted for using the fair value method as long as there is a market in the stock that provides readily determinable fair values for these securities.

These investments are adjusted to fair value at the end of

each quarter, as determined using the assistance of an independent valuation firm.

Unrealized gains and losses are reported in operating company equity as a component of accumulated other comprehensive income (loss) in the consolidated balance

Realized gains and losses from the sale of available-for-sale securities are determined on the FIFO method of accounting and are included as a component of other (income) expense in the consolidated statement of operations.

Should management determine that an available-for-sale security has an other-than-temporary decline in fair value, the Company would

recognize the investment loss in the consolidated statement of operations.

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

InvestmentsDebt and Equity Securities and our intentions regarding these instruments.

Investments in equity securities of public companies continue to be accounted for using the fair value method as long as there is a market in the

stock that provides readily determinable fair values for these securities.

These investments are adjusted to fair value at the end of each quarter.

Unrealized gains and losses are reported in operating company equity as a component of accumulated

other comprehensive income (loss) in the consolidated balance sheets.

Realized gains and losses from the sale of available-for-sale securities are determined on the first-in first-out (FIFO) method of accounting and are included as a

component of other (income) expense in the consolidated statements of operations for the year ended December 31, 2010 and the three months ended December 31, 2009.

Should management determine that an available-for-sale security has an other-than-temporary decline in fair value, the Company recognizes the investment loss in the consolidated statement of operations.

Available-for-sale securities were evaluated for other-than-temporary impairment at December 31, 2010.

See Note 4 for further discussion.

Investments under Cost Method

As of October 1, 2009, the Company classifies all investments in non-marketable equity securities in which we do not have a controlling

financial interest, constituting 20% interest in the company, or significant influence as investments under cost method in accordance with US GAAP.

Pursuant to US GAAP, the fair value of the Companys non-marketable equity securities at

September 30, 2009 became the new cost basis of the investments under cost method on October 1, 2009.

securities classified as investments under cost method will remain at cost basis unless there is impairment.

The Company must determine whether a decline in fair value below the cost basis is other than temporary.

If the decline in fair value is

judged to be other than temporary, the cost basis of the individual security will be written down to fair value as a new cost basis and the amount of the impairment will be included in earnings as a realized loss.

The new cost basis cannot be

adjusted upwards for subsequent recoveries in fair value.

Investments under cost method were considered for impairment at December 31, 2009.

As of December 31, 2009, the Company determined that the fair value of approximately $418,000 of

the Companys investments under cost method exceeded the carrying amount of these investments.

It was not practicable to estimate the fair value of the remaining $170,000 of the Companys investments under cost method and such an estimate

was not made because there were no events or circumstances that could have had a significant adverse effect on the fair value of such investments during 2009.

Realized gains and losses from the sale of investments under cost method are determined on the FIFO method of accounting and are included as a component of other (income) expense in the consolidated

statement of operations.

Cash and Cash Equivalents

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

Accounts Receivable

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

The Company charges off accounts receivable against the

allowance for losses when an account is deemed to be uncollectible.

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

The provision for doubtful accounts and notes was approximately $83,000 and $124,000 as of

December 31, 2009 and 2008, respectively.

Cost Method Investments

The Company classifies its investments in equity securities of noncontrolled entities that do not have readily determinable fair values as

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

Cost method investments were reclassified to non-current assets during 2010 in accordance with the Companys intent and ability regarding liquidity

of the investments.

Individual securities classified as cost method investments remain at cost basis unless there is a

permanent impairment.

The Company determines whether a decline in fair value below the cost basis is other than temporary.

If the decline in fair value is judged to be other-than-temporary, the cost basis of the individual

security will be written down to fair value as a new cost basis and the amount of the impairment will be included in earnings as a realized loss.

The new cost basis cannot be adjusted upwards for

subsequent recoveries in fair value.

Realized gains and losses from the sale or impairment of cost method investments are determined on the FIFO method of accounting and are included as a component of other (income) expense in the consolidated

statements of operations for the year ended December 31, 2010 and the three months ended December 31, 2009.

method investments were considered for impairment at December 31, 2010.

The Company determined that two of its cost method investments had suffered a decline in fair value below that of their respective carrying amounts and this decline was

determined to be other-than-temporary.

The Company recognized a loss on impairment of its cost method investments of approximately $468,000 for the year ended December 31, 2010.

Equity Method Investments

The Company evaluated its investment in Verdant

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

This investment has been recorded as an equity method investment in the consolidated balance sheet as of

December 31, 2010.

Management changed the classification of this investment from the cost method to the equity method in the current period as a result of having obtained new information.

Any adjustments made to the accompanying financial

statements as a result of this change in classification were immaterial.

The Companys share of Verdant Ventures net loss was $(25,856) for the year ended December 31, 2010, which is included as a component of other (income) expense in

the consolidated statements of operations.

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

See Note 5 for a more detailed discussion of the

Verdant Ventures transaction.

Note Receivable

The Company holds a $1,500,000 note receivable from a privately held company.

The note was received in exchange for the sale of certain of

the Companys investments in January 2009.

The note bears interest at 7% per annum and does not require the payment of such interest or the principal amount of the note until maturity of the note on December 31, 2012.

recorded $96,000 of accrued interest income on the note for the year ended December 31, 2009.

The note was received in exchange for the sale of certain of the Companys investments in January 2009.

The note bears

interest at 7% per annum and does not require the payment of such interest or the principal amount of the note until maturity of the note on December 31, 2012.

The Company recorded $104,000 and $96,000 of accrued interest income on the

note for the years ended December 31, 2010 and 2009, respectively.

The note is collateralized by a security interest in certain property located in Pasco County, Florida.

are stated at cost, less accumulated depreciation.

Fixed assets are stated at cost less accumulated

depreciation.

Depreciation is recorded using the straight-line method over the estimated useful lives of the respective assets of between 3 and 39.5 years.

Leasehold improvements are amortized over the shorter of

the estimated useful life of the assets or lease term.

Leasehold improvements are amortized over the shorter of the estimated useful life of the

assets or the lease term.

The carrying amount of all long-lived assets is evaluated periodically to determine if adjustment to the depreciation and amortization period or the unamortized balance is warranted.

believes that no impairment of fixed assets exists at December 31, 2009 and 2008.

Maintenance and repairs are charged to operations when incurred.

Betterments and renewals

are capitalized.

When fixed assets are sold or otherwise disposed of, the asset account and related accumulated depreciation account are relieved, and any gain or loss is included as a component of other (income) expense in the consolidated

statement of operations.

The Company believes that no unrecorded

impairment of fixed assets exists at December 31, 2010.

See Note 7 for impairment discussion.

Maintenance and repairs

are charged to operations when incurred.

Betterments and renewals are capitalized.

When fixed assets are sold or otherwise disposed of, the asset account and related accumulated depreciation account are relieved, and any gain or loss is included as

a component of other (income) expense in the consolidated statements of operations.

Goodwill and Intangible Assets

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

Intangible assets represent the cost of trade marks,

trade names, websites, customer lists, non-compete agreements, and proprietary processes and software obtained in connection with certain of the Companys acquisitions.

In accordance with US GAAP, goodwill and intangible assets determined

to have indefinite lives are not subject to amortization.

Goodwill represents the excess of the purchase price over the fair value of the assets acquired in connection with certain of the

Companys acquisitions.

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

acquisitions.

In accordance with ASC Topic 350 IntangiblesGoodwill and Other , goodwill and intangible assets determined to have indefinite lives are not subject to amortization.

Goodwill and indefinite-lived intangible assets are reviewed for impairment by applying a fair value based test on an annual basis or more frequently if circumstances indicate a potential

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

See Note 8 for impairment discussion.

Impairment of Long-lived Assets

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

Impairment testing is required more often than

annually if an event or circumstance indicates that an impairment, or decline in value, may have occurred.

Impairment testing is required more often than annually if an event or circumstance indicates that an impairment, or decline in

value, may have occurred.

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

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

If the fair value of a reporting unit exceeds its net book value, long-lived assets are

considered not to be impaired.

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

The Company conducts its

annual impairment test using balances as of December 31.

The Company conducts its annual impairment test using balances as of December 31, unless there are

triggering events earlier in the year.

Derivative Liability

US GAAP requires bifurcation of embedded derivative instruments and measure of their fair value for accounting purposes.

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.

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.

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.

ASC Topic 815 Derivatives and Hedging requires bifurcation of embedded derivative instruments and measurements of their fair value for accounting purposes.

In addition, freestanding derivative

instruments such as certain warrants are also derivative liabilities.

The Company estimates the fair value of these instruments using the Black-Scholes option pricing model.

As discussed in Notes 10 and 12, the Company has certain derivative

warrants with a variable exercise price.

The Company considered the use of a Binomial model, but determined that the probability of the exercise price adjusting downward was remote.

Derivative liabilities are recorded at fair value at inception and

then are adjusted to reflect fair value at the end of each reporting period, with any increase or decrease in the fair value being recorded in as a component of other (income) expense in the consolidated statements of operations.

Foreign Currency Translation

The functional currency of the Companys UK operations is that countrys local currency.

The Company translates

the assets and liabilities of its UK subsidiary into U.S.

The functional currency of the Companys United Kingdom (UK) operations is that countrys local currency.

The Company translates the assets and liabilities of its UK subsidiary into

Dollars at the exchange rates in effect at the end of each reporting period.

Revenues and expenses of the Companys UK operations are translated into U.S.

Dollars using weighted average

exchange rates during the period.

Through September 30, 2009, the effects of foreign currency translation adjustments are reported as a component of investment company equity in the consolidated statement of assets and liabilities.

October 1, 2009, the translation adjustments are included in operating company equity as a component of accumulated other comprehensive income (loss) in the consolidated balance sheet.

Foreign currency transaction gains and losses are included

in other (income) expense in the consolidated statement of operations as of October 1, 2009 and are immaterial for all periods presented.

Dollars using weighted average exchange rates during the period.

September 30, 2009, the effects of foreign currency translation adjustments were reported as a component of investment company equity.

Beginning October 1, 2009, the translation adjustments are included in operating company equity as a

component of accumulated other comprehensive income (loss) in the consolidated balance sheets.

Foreign currency transaction gains and losses are included in other (income) expense in the consolidated statements of operations for the year ended

December 31, 2010 and the three months ended December 31, 2009 and are immaterial for these periods.

Revenue Recognition

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.

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

Related to the Companys Social Technologies division, the Company has certain other consulting revenue that is derived from the sale of services in technology foresight, forecasting, scenario

playing, vision, creativity and leadership, as well as the sale of services to provide for the design, development and implementation of custom software applications.

Vendor specific objective evidence is not available to allocate among the

respective deliverables in contracts with multiple 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.

The Company reorganized into two new lines of business, all working under the Innovaro brand:

Servicesdriven by Strategos, an advanced innovation consultancy;

and Technology Servicesonline platforms, partnering services, global licensing, technology transfer services, futures and trends, research, information services and IP

Strategic Services

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

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

estimated contract costs.

Prior to the commencement of a client engagement, the Company and the client agree on fees for services based upon the scope of the project, staffing requirements and the level of client involvement.

revenues are comprised of professional fees for services rendered to clients and exclude applicable taxes.

The Company bills clients for services and expenses incurred in accordance with the

terms of the client engagement agreement.

Differences between the timing of billings and the recognition of revenue are

recognized as either unbilled services (included as a component of accounts receivable) or deferred revenue in the consolidated balance sheets.

Client prepayments and retainers are classified as deferred revenue and recognized in future periods when

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

Time-and-expense billing

arrangements generally require the client to pay based on the number of hours worked by our consulting professionals at agreed-upon rates.

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

Technology Services

Revenues from the sale of subscriptions to the Companys online marketplaces, information services websites and online futures

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

Global technology licensing services are performed pursuant to service agreements in which the Company provides consulting services by identifying and evaluating technology licensing opportunities for

These agreements are typically cancelable with thirty days notice.

The Company has certain consulting revenue that

is derived from the sale of research services in intellectual property insight, technology foresight, forecasting, scenario playing, vision, creativity and leadership, as well as the sale of services to provide for the design, development and

implementation of custom software applications.

Vendor specific objective evidence is not available to allocate among the respective deliverables in contracts with multiple deliverables.

Accordingly, the Company recognizes revenue for these

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

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

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

Purchase orders, signed contracts, or electronic confirmations

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

Purchase orders, signed contracts, or electronic

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

Delivery of the products or services must have occurred.

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

Innovation consulting membership services consist of Futures Consortium and Futures Interactive management

products that allow clients access to information, research, databases and workshops that provide information on trends in different technologies and industries.

Revenues are recognized on a contractual basis, generally on an annual

These fees are generally collected in advance of the membership period and the revenue is recognized ratably over the respective months, as services are provided.

Differences between the timing of billings and the recognition of revenue are recognized as either unbilled services (included as a

component of prepaid expenses and other assets) or deferred revenue in the consolidated balance sheets.

Differences between the timing of billings and the recognition of revenue are recognized as either unbilled

services (included as a component of accounts receivable) or deferred revenue in the consolidated balance sheets.

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

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

The Company recognizes revenue from the sale of technology rights upon the exchange of the securities of its newly formed

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

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

Historically,

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

Subscription and Other Services

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.

Global technology licensing

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

These agreements are typically cancelable with thirty days notice.

Revenue from global technology licensing

agreements in which unregistered shares of common stock are received before they are earned are deferred and recognized over the term of each agreement.

For global technology licensing agreements in which the stock is received ratably over the

agreement, revenue is recognized as earned.

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

At December 31, 2009 and 2008, the Company did not have any global technology

licensing agreements for which payment was to be received in stock.

Direct Costs Related to Revenue

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.

Acquisition of technology rights costs consist of the direct costs associated with 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 Company does not report direct costs associated

with its subscription and other services revenue as these costs have not been quantified.

Direct Costs of Revenue

Direct costs of revenue consist of direct costs related to the Companys strategic services and technology services segments.

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

Research and Development

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

be sold, leased, or otherwise marketed as research and development costs.

Research and development costs incurred to date have been expensed in the accompanying statements of operations as the Companys innovation management software platform

has not reached technological feasibility.

Stock-Based Compensation

At December 31, 2010, the Company had two stock-based equity compensation plans, which are described more fully in Note 14.

The Company accounts 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 respective grant date fair values estimated in accordance with US GAAP.

The Company accounts for stock option grants in accordance with ASC Topic 718 CompensationStock Compensation .

Stock-based compensation cost recognized during the years ended December 31, 2010 and 2009 includes compensation cost for all share-based payments granted subsequent to January 1, 2006, based on their respective grant date fair values

estimated in accordance with Topic 718.

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

The Company uses the Black-Scholes option pricing

model to estimate fair value of stock option grants at the grant date.

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.

The expected 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.

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

the grant date.

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

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

Certain guidance located within ASC Topic 740, Income Taxes , clarifies the accounting for uncertainty in income taxes recognized in

an enterprises financial statements.

Certain guidance located within ASC Topic 740, Income Taxes , clarifies the accounting for uncertainty in income taxes recognized

in an enterprises financial statements.

Topic 740 provides guidance on the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return.

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The Company had no uncertain tax positions for the years ended December 31, 2010 and 2009.

The Company does not have any income tax benefit related to its net loss from operations in 2009, nor does it have a deferred tax asset

related to its net operating loss carryforward, because of a 100% valuation allowance.

The Company does have an income tax benefit from the reversal of a deferred tax liability related to the impairment of an indefinite-lived intangible asset and

from foreign tax for the year ended December 31, 2009.

Net Realized Gains or Losses and Net Change in Unrealized Appreciation or

Depreciation from Investment Company Activity

Realized gains or losses are measured by the difference between the net

The Company does not have any income tax benefit related to its net loss from operations in 2010 and 2009, nor does it have a deferred

tax asset related to its net operating loss carryforward, because of a 100% valuation allowance.

The Company does have an income tax benefit from the reversal of a deferred tax liability related to the impairment and amortization of certain

indefinite-lived intangible assets for the years ended December 31, 2010 and 2009.

Net Realized Gains or Losses and Net Change in Unrealized Appreciation or Depreciation from Investment

Company Activity

Realized gains or losses through September 30, 2009 were 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 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.

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.

Reclassifications

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

Reclassifications were made to revenue to conform to the

Companys new line of business segments.

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

In addition, the Company reclassified its derivative liabilities to a

non-current asset for both years ended December 31, 2010 and 2009 as management determined this treatment to be more appropriate given the nature of the liability.

There was no effect on net loss or earnings per share from these

reclassifications for all periods presented.

Earnings per Share (EPS)

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

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

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

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

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

Ended Dec 31,

Ended Sept 30,

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

Companys dilutive potential common shares consist of outstanding stock options and warrants.

Components of basic and

diluted per share data are as follows:

Sept 30, 2009

Weighted average outstanding shares of common stock

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anti-dilutive, primarily as a result of the net loss/ net decrease in net assets from operations during the period.

Dividends to Shareholders

Dividends to shareholders are recorded on the date of declaration.

Financial Instruments and Concentrations of Credit Risk

The Companys financial instruments consist of investments, certificates of deposit, cash and cash equivalents, accounts receivable, accounts payable, accrued expenses, long-term debt and the

derivative liability.

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

The fair value of certificates

of deposit is recorded based upon their market value.

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

The fair value of the derivative liability is determined as further described in Note 7.

The estimated fair

value of the Companys long-term debt at December 31, 2009 is not materially different from the carrying value of $6.3 million.

Financial instruments with significant credit risk include investments, certificates of deposit and cash and cash equivalents.

The Company invests its cash and cash equivalents and certificates of deposit

with high credit quality financial institutions.

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

The Company has not experienced any losses on such accounts.

The Company had one major customer during the year ended December 31, 2009, two major customers during the year ended December 31,

2008 and three major customers during the year ended December 31, 2007.

Major customers, those generating greater than 10% of total income from operations, accounted for approximately 10%, 27% and 43% of the Companys revenue during the

years ended December 31, 2009, 2008 and 2007, respectively.

In addition, one customer accounted for approximately 17% of accounts receivable at December 31, 2009.

The Companys financial instruments consist of investments, certificates of deposit, cash and cash equivalents, accounts receivable, accounts payable, accrued expenses, long-term debt and derivative

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

The estimated fair value of the

Companys long-term debt at December 31, 2010 and 2009 is not materially different from its carrying values of $5.8 million and $6.3 million, respectively.

The fair value of certificates of deposit, available-for-sale securities and

derivative liabilities are determined as described in Note 6.

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

The Company maintains its cash and cash equivalents with high credit quality financial institutions in the United States and, at times, balances may exceed federally insured limits.

The Company hasnt experienced any losses related

to these balances.

All of the non-interest bearing cash balances were insured at December 31, 2010 due to a temporary federal program in affect from December 31, 2010 through December 31, 2012.

Under the program, there is no limit to

the amount of insurance for eligible accounts.

Beginning in 2013, insurance will revert to $250,000 per depositor at each financial institution, and the non-interest bearing cash balances may again exceed federally insured limits.

December 31, 2010, the Company did not hold any amounts in interest-bearing accounts.

The Company had two major

customers during the year ended December 31, 2010 and one major customer during the year ended December 31, 2009.

Major customers, those generating greater than 10% of total revenue, accounted for approximately 28% and 10% of the

Companys revenue during the years ended December 31, 2010 and 2009, respectively.

Major customers relate to the strategic services business segment for both years ended December 31, 2010 and 2009.

In addition, two customers accounted for

approximately 52% of accounts receivable at December 31, 2010.

Use of Estimates

The preparation of the Companys consolidated

financial statements in conformity with US GAAP requires management to make estimates and assumptions that could affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the

financial statements and the reported amounts of revenue and expenses during the reporting period.

The most significant estimates relate to revenue recognition, the fair value of certain investments, stock-based compensation, the carrying values of

goodwill, intangible assets and the derivative liability, and the purchase price allocation process for business combinations.

The preparation of the Companys consolidated financial statements in conformity with ASC Topic 275 Risks and Uncertainties

requires management to make estimates and assumptions that could affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue

and expenses during the reporting period.

The Companys most significant estimates relate to revenue recognition, the valuation and impairment of certain investments, stock-based compensation, the valuation and impairment of goodwill and

intangible assets, and the derivative liabilities.

Actual results could differ from those estimates.

Recently Issued Accounting Pronouncements

In October 2008, the FASB amended ASC Topic 820, Fair Value Measurements and Disclosures .

Topic 820 provides an illustrative

example of how to determine the fair value of a financial asset in an inactive market.

Topic 820 does not change the fair value measurement principles set forth in the original literature.

Since adopting Topic 820 in January 2008, UTEKs

practices for determining the fair value of its investment portfolio have been, and continue to be, consistent with the guidance provided in the example in Topic 820 and Topic 825, Financial Instruments .

Therefore, UTEKs adoption of

Topics 820 and 825 did not affect its practices for determining the fair value of its investments and did not have a material effect on its consolidated financial statements.

In April 2009, the FASB amended ASC Topic 805, Business Combinations .

Topic 805 establishes a model to account for certain

pre-acquisition contingencies.

Under Topic 805, an acquirer is required to recognize at fair value an asset acquired or a liability assumed in a business combination that arises from a contingency if the acquisition-date fair value of that asset or

liability can be determined during the measurement period.

If the acquisition-date fair value cannot be determined, then the acquirer should follow the recognition criteria in ASC Topic 450, Contingencies , and ASC Topic 450-20, Loss

Contingencies .

Topic 805 was effective for the Company beginning January 1, 2009, and will apply prospectively to business combinations completed subsequent to that date.

The impact of the adoption of Topic 805 will depend on the nature of

acquisitions completed after the date of adoption.

In June 2009, the FASB issued ASC Topic 105, Generally Accepted

Accounting Principles .

The FASB Accounting Standards Codification (the Codification) became the source of authoritative US GAAP recognized by the FASB to be applied by nongovernmental entities.

All of the Codifications

content carries the same level of authority, and the US GAAP hierarchy will be modified to include only two levels:

authoritative and nonauthoritative.

Topic 105 was effective for the Company as of July 1, 2009 and did not have a material

effect on its consolidated financial statements.

In June 2009, the FASB issued a new accounting standard which provides

amendments to previous guidance on the consolidation of variable interest entities.

This standard clarifies the characteristics that identify a variable interest entity (VIE) and changes how a reporting entity identifies a primary

beneficiary that would consolidate the VIE from a quantitative risk and rewards calculation to a qualitative approach based on which variable interest holder has controlling financial interest and the ability to direct the most significant

activities that impact the VIEs economic performance.

This standard requires the primary beneficiary assessment to be performed on a continuous basis.

It also requires additional disclosures about an entitys involvement with a

VIE, restrictions on the VIEs assets and liabilities that are included in the reporting entitys consolidated balance sheet, significant risk exposures due to the entitys involvement with the VIE, and how its involvement with a VIE

impacts the reporting entitys consolidated financial statements.

The standard was effective for the Company as of January 1, 2010 and did not have a material effect on its consolidated financial statements.

In August 2009, the FASB issued ASU 2009-05 (previously exposed for comments as proposed FSP FAS 157-f) to provide guidance on measuring the

fair value of liabilities under ASC Topic 820 Fair Value Measurements and Disclosures .

ASU 2009-05 clarifies that the quoted price for the identical liability, when traded as an asset in an active market, is also a Level 1 measurement for

that liability when no adjustment to the quoted price is required.

In the absence of a Level 1 measurement, an entity must use certain valuation techniques to estimate fair value.

ASU 2009-05 was effective for the Company on October 1, 2009 and

did not have a material effect on its consolidated financial statements.

In October 2009, the 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

This update is effective for the Company beginning January 1, 2011 and is not expected to have a material impact on the Companys consolidated financial statements.

On April 17, 2008, UTEK purchased all of the shares of Carmi, Inc., a 100% owned subsidiary of Strategos, LLC,

wherein Carmi, Inc.

became a subsidiary of UTEK.

is being dissolved and all operations are included as a unit of UTEK, which is doing business as and is referred to as Strategos throughout these financial statements.

financial results of Strategos have been included in the Companys consolidated financial statements from April 17, 2008.

The total purchase price for Strategos was $11.4 million, which consisted of 1,094,084 shares of UTEK unregistered common stock.

Strategos stockholders were entitled to 502,970 shares of UTEK unregistered common stock valued at

approximately $6,041,000 as of the acquisition date.

In addition, Strategos stockholders received an additional 329,670 and 261,444 shares of UTEK unregistered common stock in 2008 and 2009, respectively, pursuant to having met specific revenue

targets for those years.

In allocating the purchase price based on estimated fair values, the Company recorded approximately $5.8 million of goodwill, $6.4 million of identifiable intangible assets and $(787,000) of net tangible assets.

Social Technologies

October 10, 2008, UTEK purchased 100% of Social Technologies Group, Inc.

(Social Technologies).

The financial results of Social Technologies have been included in the Companys consolidated financial statements from

October 10, 2008.

The total purchase price for Social Technologies was $5.2 million, which consisted of 512,420 shares

of UTEK unregistered common stock.

Social Technologies stockholders were entitled to 499,014 shares of UTEK unregistered common stock valued at approximately $5,088,000 as of the acquisition date.

In addition, Social Technologies stockholders

received an additional 13,406 shares of UTEK unregistered common stock in 2009 pursuant to having met specific revenue targets for that year.

In allocating the purchase price based on estimated fair values, we recorded approximately $5.7 million of

goodwill, $2.2 million of identifiable intangible assets and $(2.7 million) of net tangible assets.

Pharmalicensing

On December 20, 2007, the Company entered into a stock purchase agreement with Partnering Intelligence Limited and Bridgehead

International Limited to acquire Pharmalicensing Limited (Pharmalicensing).

The transaction closed and became effective on January 3, 2008, at which time the Company issued 153,967 shares of unregistered UTEK common stock, valued at

$2.15 million, to Partnering Intelligence in consideration for all of the shares of Pharmalicensing owned by Partnering Intelligence.

In allocating the purchase price based on estimated fair values, we recorded approximately $1.5 million of

goodwill, $858,000 of identifiable intangible assets and $(235,000) of net tangible assets.

The financial results of Pharmalicensing have been included in the Companys consolidated financial statements from January 3, 2008.

On July 3, 2008, the Company entered into a stock purchase agreement to acquire 100% of Innovaro Limited (Innovaro), a company incorporated in the United Kingdom and Wales.

The financial

results of Innovaro have been included in the Companys consolidated financial statements from July 3, 2008.

total purchase price for Innovaro was $3.8 million, which consisted of 356,962 shares of UTEK unregistered common stock.

Innovaro stockholders were entitled to 345,857 shares of UTEK unregistered common stock valued at approximately $3,664,000 as of

the acquisition date.

In addition, Innovaro stockholders received an additional 6,131 and 4,974 shares of UTEK unregistered common stock in 2008 and 2009, respectively, pursuant to having met specific revenue targets for those years.

In allocating

the purchase price based on estimated fair values, we recorded approximately $1.7 million of goodwill, $3.0 million of identifiable intangible assets and $(915,000) of net tangible assets.

Unaudited Pro Forma Financial Information

The unaudited financial information in the table below summarizes the combined results of operations of Strategos, Social Technologies, Innovaro and Pharmalicensing acquired during fiscal 2008, on a pro

forma basis, as though the companies had been combined as of the beginning of fiscal 2007.

The pro forma financial information is presented for informational purposes only and is not indicative of the results of operations that would have been

achieved if the acquisitions had taken place at the beginning of each of the periods presented.

The pro forma financial information for all periods presented also includes the business combination accounting effects on the historical companies

operating results including the amortization expenses from acquired intangible assets, stock-based compensation charges for stock awards to acquired employees, and related tax effects as though the companies had been combined as of the beginning of

The unaudited pro forma financial information for the year ended December 31, 2008 combines the historical

results of UTEK for the year ended December 31, 2008 and the historical results of Strategos, Social Technologies, Innovaro and Pharmalicensing for the year ended December 31, 2008, and the pro forma adjustments discussed above.

unaudited pro forma financial information for the year ended December 31, 2007 combines the historical results of UTEK for the year ended December 31, 2007 and the historical results of Strategos, Social Technologies, Innovaro and

Pharmalicensing for the year ended December 31, 2007, and the pro forma adjustments discussed above.

Year Ended Dec 31,

Income from operations

Net decrease in net assets from operations

Basic and diluted net decrease in net assets from operations per share

Under Investment Company Accounting

Through September 30, 2009, the Company was operating as an investment company under the 1940 Act and accounted for investments in accordance with Investment Company Accounting.

Investments at December 31, 2008 were valued at fair value as determined by the Board of Directors, with the assistance of appraisals

provided by an independent valuation service provider, in the absence of readily available market values.

The values assigned to these securities were based upon available information and may not reflect amounts that ultimately have been or may be

Accordingly, the fair values included in the accompanying schedule of investments as of December 31, 2008 may differ from the values that would have been used had a ready market existed for these securities and such differences could

In connection with the Companys plan to de-elect BDC status, the Company liquidated a

significant portion of its investment portfolio during 2009.

The Company sold some or all of its shares in a significant number of its investments for $3.1 million in cash and other assets, which included $1.1 million in cash, $218,000 in common

stock, $201,000 in an additional investment in UTEK Real Estate Holdings, Inc., and a $1.5 million note receivable.

In connection therewith, the Company recognized 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, for the nine months ended September 30, 2009.

Under Operating Company Accounting

The Company began reporting as an

operating company on October 1, 2009.

In connection therewith, the Company modified the accounting treatment for it investments to conform to US GAAP for operating companies.

See Note 1 for further discussion of the Companys

withdrawal of its election to be treated as an investment company under the 1940 Act and the effects on the Companys financial statements.

Recently Issued Accounting

Pronouncements

In April 2010, the FASB issued new guidance that establishes a revenue recognition model for

contingent consideration that is payable upon the achievement of an uncertain future event, referred to as a milestone.

The scope of this guidance is limited to research and development arrangements and requires an entity to record the milestones

payment in its entirety in the period received if the milestone meets all necessary criteria to be considered substantive.

This guidance is effective for fiscal years and interim periods beginning June 15, 2010 and is not expected to have a

material impact on the Companys consolidated financial statements.

In December 2010, the FASB issued amended

guidance to clarify the acquisition date that should be used for reporting pro-forma financial information for business combinations.

If comparative financial statements are presented, the pro-forma revenue and earnings of the combined entity for

the comparable prior reporting period should be reported as though the acquisition date for all business combinations that occurred during the current year had been completed as of the beginning of the comparable prior annual reporting period.

amendments in this guidance are effective prospectively for business combinations for which the acquisition date is on or after January 1, 2011.

There will be no impact in the Companys operations or financial condition as the amendments

relate only to additional disclosures.

In December 2010, the FASB issued amendments to the guidance on goodwill

impairment testing.

The amendments modify Step 1 of the goodwill impairment test for reporting units with zero or negative carrying amounts.

For those reporting units, an entity is required to perform Step 2 of the goodwill impairment test if it is

more likely than not that a goodwill impairment exists.

In making that determination, an entity should consider whether there are any adverse qualitative factors indicating that impairment may exist.

The amendments are effective for fiscal years and

interim periods beginning January 1, 2011 and are not expected to have a material impact on the Companys consolidated financial statements.

Accounts Receivable

Accounts receivable consist of the following at December 31, 2010 and 2009:

Trade accounts receivable

allowance for doubtful accounts

Contracts in process

Unbilled client costs

Total accounts receivable

Contracts in process consist of the following at December 31, 2010 and 2009:

Contract costs and estimated profits on uncompleted contracts

Less advances and progress payments

Total contracts in process

Contracts in process of $(32,939) are included in deferred revenue as of December 31, 2009.

Available-for-Sale Securities

As of October 1, 2009, the Company classifies its investments in

freely tradable equity securities as available-for-sale in accordance with US GAAP and its intentions regarding these instruments.

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

The Company classifies its investments in freely tradable equity securities as available-for-sale in accordance with ASC Topic 320 InvestmentsDebt and Equity Securities and its intentions

regarding these instruments.

A summary of the estimated fair value of available-for-sale securities is as follows as of December 31, 2010 and 2009.

Unrealized(1)

Equity securities

Available-for-Sale Securities

The total of the unrealized gains and losses of $(70,946) is included in operating company equity as a component of accumulated other comprehensive income (loss) in the

consolidated balance sheet.

As of December 31, 2009, five of our nine total available-for-sale securities

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

These securities are in micro-cap companies in various industries and the impairment is significant as it relates to three of the five investments.

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

Based on third-party valuations, the Company believes these impairments are not other-than-temporary.

Accordingly, no impairment loss has been recognized on

these securities.

Proceeds from the sale of available-for-sale securities for the three months ended December 31, 2009

were approximately $453,000.

Gross realized gains (losses) were approximately $20,000 for the three months ended December 31, 2009.

Fair Value Hierarchy

The Company values substantially all of its investments at fair value as determined in

good faith by the Board of Directors in accordance with the Companys valuation policy, the provisions of the 1940 Act and US GAAP through September 30, 2009.

Subsequent to October 1, 2009, the Company values its investments in

certificates of deposits and available-for-sale securities and its derivative liability at fair value in accordance with US GAAP.

US GAAP establishes a fair value hierarchy that encourages and is based on the use of observable inputs, but

allows for unobservable inputs when observable inputs do not exist.

When there are multiple inputs for determining the fair value of an investment, the Company classifies the investment in the fair value hierarchy based on the lowest level input

that is significant to the fair value measurement.

As of December 31, 2010

As of December 31, 2009

The net unrealized gain (loss) is included in operating company equity as a component of accumulated other comprehensive income (loss) in the consolidated balance

Proceeds from the sale of available-for-sale securities were approximately $342,000 and $453,000 for

the year ended December 31, 2010 and the three months ended December 31, 2009, respectively.

As of December 31, 2010, one of our five total available-for-sale securities was in an unrealized loss position.

Gross realized gain (loss)

as a result of the sale of available-for-sale securities was approximately $79,000 and $20,000 for the year ended December 31, 2010 and the three months ended December 31, 2009, respectively.

The Company recognized a loss from the impairment of certain available-for-sale securities of approximately $520,000 for the year ended

December 31, 2010.

$146,000 of the loss related to certain warrants classified as available-for-sale securities that the Company determined were permanently impaired and subsequently expired unexercised.

The remaining $374,000 loss related to

three securities that had significant unrealized losses that were written off in the third quarter of 2010 as a result of managements determination that these losses were other-than-temporary.

The realized loss is included as a component of

other (income) expense in the consolidated statement of operations for the year ended December 31, 2010.

Unrealized gain (loss) on available-for-sale securities for the year ended December 31,

2010 and the three months ended December 31, 2009 are shown in the accompanying statement of changes in equity net of the reclassification adjustment.

Disclosure of the gross amounts of the current period gain (loss) and amounts that were

reclassified out of accumulated other comprehensive income (loss) into earnings are as follows:

Unrealized holding gain (loss) arising during the period

reclassification adjustment for net gains included in net income

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

Equity Method Investments

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

Under this agreement, the Company made an

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

The Company accounts for Verdant Ventures under the equity method of accounting due to the capital account

structure of the investee.

Verdant Ventures operates as an independently managed technology transfer venture fund.

John Micek, one of the Companys directors, is managing partner of Verdant Ventures, as well as a member of two limited liability

companies that are also parties to the limited liability company agreement of Verdant Ventures.

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

its management.

Verdant Ventures may sell up to one-third of the Companys contributed shares each year during a three-year period from the date the Company first contributed the shares.

As a result of the substantial decline in our stock price during 2010, the Company recorded an impairment loss to its investment in

Verdant Ventures of approximately $671,000.

This realized loss is included as a component of other (income) expense in the consolidated statement of operations for the year ended December 31, 2010.

Fair Value Measurements

The Company performs fair value measurements in accordance with the guidance provided by ASC Topic 820 Fair Value Measurements and Disclosures .

Topic 820 defines fair value as the price that would

be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.

When determining the fair value measurements for assets and liabilities required to be recorded at fair

value, management considers the principal or most advantageous market in which the Company would transact and considers assumptions that market participants would use when pricing the asset or liability, such as inherent risk, transfer restrictions,

and risk of nonperformance.

Topic 820 establishes a fair value hierarchy that encourages and is based on the use of

observable inputs, but allows for unobservable inputs when observable inputs do not exist.

When there are multiple inputs for determining the fair value of an investment, the Company classifies the investment in the fair value hierarchy based on the

lowest level input that is significant to the fair value measurement.

Inputs are classified into one of three categories:

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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.

Assets measured at fair value on a recurring basis by level within the fair value hierarchy at December 31, 2009 and 2008, were as

Fair Value Measurements at Reporting Date Using

Quoted Prices in Active

Markets for Identical

Assets (Level 1)

Significant Other

Observable Inputs

Unobservable Inputs

Certificates of deposit at

Available-for-sale securities at 12/31/09

Derivative liability at

Total investments at

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.

Level 3Unobservable inputs for the asset or liability.

Assets measured at fair value on a recurring basis by level within the fair value hierarchy

as of December 31, 2010 and December 31, 2009 are as follows:

Fair Value Measurements at

December 31, 2010 Using

Fair Value Measurements at

December 31, 2009 Using

Certificates of deposit

Available-for-sale securities

Derivative liabilities

Total liabilities

The Companys investments in certificates of deposit and available-for-sale securities are classified

within Level 2 of the fair value hierarchy.

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

The determined values

are generally discounted to account for the illiquid nature of the investment and minority ownership positions.

The value of our equity interests in public companies for which market quotations are readily available are 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 an independent valuation firm in determining these values.

The Companys derivative liability is

classified within Level 2 of the fair value hierarchy.

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

warrants, and expected volatility, which is based on historical volatility.

The Company utilizes the market approach in determining the fair value

of these securities.

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

Company utilizes the Black-Scholes Option Pricing Model to value the derivative liabilities utilizing observable inputs such as the Companys common stock price, the exercise price of the warrants, and expected volatility, which is based on

historical volatility.

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

The Company recorded impairment of approximately $1,438,000 to certain of its land, building and building improvements during 2010.

commercial real estate market for certain 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 amount of the impairment was determined based on third party valuations of the respective property.

This impairment expense is included as a component of impairment loss in the consolidated statement of operations for the year ended

December 31, 2010.

Fixed assets consist of the following:

Computer Equipment

Furniture and Fixtures

Computer Equipment

Leasehold Improvements

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Goodwill and Intangible Assets

In accordance with US GAAP, goodwill is not subject to amortization.

Goodwill and indefinite-lived assets are reviewed for impairment by

applying a fair value based test on an annual basis or more frequently if circumstances indicate impairment may have occurred.

The Company assesses goodwill for impairment by comparing the carrying value of its reporting units to their respective

fair values and reviewing the Companys market value of invested capital.

Management engages an independent valuation firm to assist in its impairment assessment reviews.

The Company determines the fair value of its reporting units primarily by

comparing the reporting unit to similar business ownership interests that have been sold.

The Company also uses comparative price-to-book multiples and other factors to corroborate the reasonableness of the conclusion.

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 division (innovation consulting segment).

Therefore, 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.

As a 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 the annual impairment analysis completed with the assistance of an independent valuation firm, the Company determined that no additional impairment exists at December 31, 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.

This impairment loss is included in the Companys consolidated statement of operations for the year ended December 31, 2007.

In accordance with ASC Topic 350 IntangiblesGoodwill and Other , goodwill is not subject to amortization.

indefinite-lived assets are reviewed for impairment by applying a fair value based test on an annual basis or more frequently if circumstances indicate impairment may have occurred.

The Company assesses goodwill for impairment by comparing the

carrying values of its reporting units to their respective fair values and reviewing the Companys market value of invested capital.

Management engages an independent valuation firm as needed to assist in its impairment assessment reviews.

Company determines the fair value of its reporting units primarily by comparing the reporting unit to similar business ownership interests that have been sold.

The Company also uses comparative price-to-book multiples and other factors to

corroborate the reasonableness of the conclusion.

In accordance with Topic 350, management performs interim assessments of

goodwill if impairment indicators are present.

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

The Companys stock price declined significantly subsequent to June 30, 2010.

A decline in stock price may be an indicator of

an adverse change in business climate.

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

At the end of the third quarter of 2010, management concluded that the decline in the Companys stock price was other than

This conclusion, coupled with the severity of the decline, triggered a review for impairment outside of the Companys next scheduled annual impairment evaluation date of December 31, 2010.

Due to the reduction in the

Companys market capitalization, third party valuation reports were performed to determine the fair value of the respective reporting units.

As a result of the 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 their carrying values by approximately $10.3 million.

The Company recognized goodwill impairment of approximately $9.4 million and intangible assets impairment of approximately

The $10.3 million impairment expense is included as a component of impairment loss in the consolidated statement of operations for the year ended December 31, 2010.

The Company determined that no additional impairment exists at

December 31, 2010.

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.

As a 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, which triggered an interim impairment test as of June 30, 2009.

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 year ended December 31, 2009.

The following table presents goodwill and intangible assets as of December 31, 2010 and

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Total intangible assets, net

The changes to the net carrying value of goodwill by

product segment for the years ended December 31, 2009 and 2008 are as follows:

The changes to the net carrying value of goodwill by business segment for the years ended December 31,

2010 and 2009 are as follows:

Balance as of December 31, 2008

5 unchanged sentences

Balance as of December 31, 2010

The changes to the net carrying value of intangible assets by product segment for the years

The changes to the net carrying value of intangible assets by business segment for the years

ended December 31, 2010 and 2009 are as follows:

Balance as of December 31, 2008

Increases due to acquisitions and earnouts

Translation adjustment

Balance as of December 31, 2009

Increases due to acquisitions and earnouts

Translation adjustment

4 unchanged sentences

The estimated aggregate future amortization expense related to the Companys intangible assets with finite lives is as follows:

For the years

ending December 31,

For the years ending December 31,

Severance Liability

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

The Company entered

into a separation agreement with Dr.

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

Gross was entitled to receive pursuant to the employment agreement.

In connection therewith,

the Company issued to Dr.

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

Pursuant to the terms of the promissory note, the Company had the option to elect to transfer certain

equity interests in one of its subsidiaries, Cortez 114, LLC (Cortez), which owns real estate located in Hernando County, Florida, to Dr.

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

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

Gross through the conveyance of a

32% ownership interest in Cortez.

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

This transaction was accounted for in accordance with ASC Topic 810 Consolidation .

The Company recognized a noncontrolling

interest in the amount of $532,132, as determined by the carrying value of Companys investment in Cortez.

The Company also recorded $17,868 as additional paid-in capital for the

excess of the liability reduction of $550,000 over the adjustment to the carrying amount of the noncontrolling interest.

In addition, the Company has recognized 32% of the profit or loss from

Cortez as net income or loss attributable to noncontrolling interest in the consolidated statement of operations for the year ended December 31, 2010.

Long-term Debt

The Company had the following long-term debt at December 31, 2009:

The Company had the following long-term debt at

December 31, 2010 and 2009:

$3,000,000 note payable, bank, due in monthly installments of $20,436 including principal and interest at 6.50% through

8 unchanged sentences

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

$450,000 bank revolving line of credit, due in monthly installments of interest at 5.25%;

$450,000 bank revolving line of credit, due in monthly installments of interest of 5.25%;

collateralized by certificates of

$200,000 short term related party promissory note, due in full by February 27, 2011 including interest at 3.50% plus 3.0

Capital leases on computer equipment, due in monthly installments of up to $1,635 expiring through July 2010, imputed interest

rates of between 9.5% and 16.3%

Insurance financing, due in monthly installments of $9,711 including principal and interest at 5.83% through September

Insurance financing, due in monthly installments of $11,376 and $9,711 including principal and interest at 5.44% and 5.83%

through July 2010 and September 2009, respectively

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

4 unchanged sentences

Non current portion

Payments required for the next five years on the

long-term debt balance as of December 31, 2009 are as follows:

Subsequent to December 31, 2010, this related party note was paid in full.

Payments required for the next five years on the long-term debt balance as of

December 31, 2010 are as follows:

For the years ending December 31,

Less imputed interest on capital lease obligations

Amortization expense related to capitalized leases was approximately $27,000 and $4,000 for the years ended

December 31, 2009 and 2008, respectively.

Accumulated depreciation related to computer equipment under capital lease obligations was approximately $32,000 and $7,000 at December 31, 2009 and 2008, respectively.

This depreciation

expense relates to approximately $140,000 of equipment purchased under capital lease agreements, of which $125,000 is still under capital lease at December 31, 2009.

Note and Warrant Purchase Agreement

On October 22, 2009, the Company entered into a Note and Warrant Purchase Agreement (the Purchase Agreement) with Gators

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

On October 22, 2009, the Company entered into a Note and Warrant Purchase Agreement (the Purchase Agreement) with Gators Lender, LLC (the Lender), pursuant to which the

Company borrowed $1,750,000 from the Lender.

In connection with this transaction, the Company issued a Promissory Note (the Note) to the Lender in the principal amount of $1,750,000.

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

Pursuant to an Absolute Guaranty of Payment and Performance,

this loan is guaranteed by all of the Companys subsidiaries, including newly formed subsidiaries.

In addition, this guaranty was secured pursuant to a Mortgage and Security Agreement encumbering vacant real property located in Hernando County,

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

Pursuant to a February 26, 2010, Substitution of Collateral Agreement and a Membership Interest Pledge Agreement and Release of Mortgage, the Lenders security interest in the Collateral was released and replaced by a security

interest in 68 Units, constituting 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.

Interest is payable on the outstanding principal amount of the Note at an annual rate of 8.00%.

Interest is payable 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 may be repaid earlier at the

discretion of the Company, subject to certain prepayment penalties.

The Note also includes customary event of default provisions, including the failure to make timely payments, material misrepresentations, change of control of the Company, defaults

on other obligations in excess of $100,000, the grant of a senior security interest on the property securing this loan, the liquidation of the Company, bankruptcy and certain judicial judgments.

As additional consideration for this loan, the Company also entered into a Warrant Agreement with the Lender to allow the Lender to purchase

up to 437,500 shares of the Companys common stock at any time until October 22, 2014 at an exercise price of $4.48 per share.

The exercise price is subject to certain conditions and adjustments that make the exercise price variable prior

to the issuance of the Companys common stock pursuant to the Warrant Agreement.

The Company determined that the

embedded feature (ratchet down of exercise price) in the warrants is not indexed to the Companys own stock due to the variability in the exercise price of the warrants and, therefore, is an embedded derivative financial liability, which

requires bifurcation and to be separately accounted for pursuant to US GAAP.

The Company uses the Black-Scholes option pricing model to estimate the fair value of the derivative instrument, for which we employed certain assumptions as follows:

expected dividend yield is based on the current historical yield of 0%.

The expected volatility is based on historical volatility for a period equal to the expected life of the warrants of 39%.

The risk-free interest rate is based on the US Treasury

yield curve in effect of 2.39% at Oct 22, 2009 and 2.69% at Dec 31, 2009.

The expected term of the warrants is based on the contractual term of the warrants and expectations of the warrants holders behavior of 5 years from inception.

model also uses the current market price of the Companys common stock and the exercise price of the warrants in the fair value calculation.

The Company determined the value of the derivative instrument to be $554,972 upon issuance of the warrants and recorded a debt discount and offsetting derivative liability.

The debt discount is being

amortized over the life of the debt, which is three years.

The Company recorded interest expense of $35,478 related to the amortization of debt discount for the three months ended December 31, 2009.

The derivative liability is required to be

revalued to fair value at the end of each quarter and the value is adjusted accordingly.

The Company recorded a loss on derivative liability of $110,000 for the three months ended December 31, 2009 in connection with adjusting the derivative

liability to fair value.

The following shows the components comprising the carrying value of this note at

December 31, 2009:

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

subsidiaries, including newly formed subsidiaries.

In addition, this guaranty was secured pursuant to a Mortgage and Security Agreement encumbering vacant real property located in Hernando County, Florida (the Collateral), which is owned

by Cortez 114, LLC (Cortez), a subsidiary of UTEK Real Estate.

Pursuant to a February 26, 2010, Substitution

of Collateral Agreement and a Membership Interest Pledge Agreement and Release of Mortgage, the Lenders security interest in the Collateral was released and replaced by a security interest in 68 Units, constituting 68% of the outstanding

membership interests of Cortez.

The Note was amended and restated to provide that the Company and UTEK Real Estate must pay down $500,000 of the indebtedness to the Lender within 60 days.

At Innovaros request, the Lender subsequently extended

the repayment date for the $500,000 payment, which was made in accordance with this extension on July 12, 2010.

is payable on the outstanding principal amount of the Note on a quarterly basis, in arrears, at an annual rate of 8.00%.

The entire principal amount outstanding and all accrued interest is payable in full on October 22, 2012.

principal amount outstanding may be repaid earlier at the discretion of the Company, subject to certain prepayment penalties.

The Note also includes customary event of default provisions, including the failure to make timely payments, material

misrepresentations, change of control of the Company, defaults on other obligations in excess of $100,000, the grant of a senior security interest on the property securing this loan, the liquidation of the Company, bankruptcy and certain judicial

As additional consideration for this loan, the Company also entered into a Warrant Agreement with the Lender to

allow the Lender to purchase up to 437,500 shares of the Companys common stock at any time until October 22, 2014 at an exercise price of $4.48 per share.

The exercise price is subject to certain conditions and adjustments that make the

exercise price variable prior to the issuance of the Companys common stock pursuant to the Warrant Agreement.

The exercise price of the warrants was subsequently adjusted down to $0.01.

The Company determined that the embedded feature (ratchet down of exercise price) in the

warrants is not indexed to the Companys own stock due to the variability in the exercise price of the warrants and, therefore, is an embedded derivative financial liability, which requires bifurcation and to be separately accounted for

pursuant to ASC Topic 815 Derivatives and Hedging .

The Company uses the Black-Scholes option pricing model to estimate the fair value of the derivative instrument, for which we employed the following assumptions at inception and for the years

ended December 31, 2010 and 2009:

Expected dividend yield

Expected volatility

Risk-free interest rate

Expected life of options

determined the initial value of the derivative instrument to be $554,972 upon issuance of the warrants and recorded a debt discount and offsetting derivative liability.

The debt discount is being amortized over the life of the debt, which is three

The Company recorded interest expense of $280,558 and $35,478 related to the amortization of debt discount for the years ended December 31, 2010 and 2009.

In accordance with Topic 815, the derivative liability is required to be adjusted

to fair value at the end of each reporting period.

The Company recognized a gain (loss) related to this derivative of approximately $44,000 and $(110,000) for the years ended December 31, 2010 and 2009, respectively.

The derivative gain is

included as a component of other (income) expense in the consolidated statements of operations.

The following shows the

components comprising the carrying value of this note:

Original issue price of note

Principal payments

Original issue discount

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Carrying value of note

Deferred income tax assets and liabilities are determined based upon differences between financial reporting and tax basis of assets and liabilities and are measured using the enacted tax rates and laws

that will be in effect when the differences are expected to reverse.

Accumulated Other Comprehensive Income (Loss)

Components comprising the balance in accumulated other comprehensive income (loss) for the three months ended December 31, 2009 and

the year ended December 31, 2010 are as follows:

Unrealized gain

available-for-

sale securities

comprehensive

income (loss)

Balance at September 30, 2009

Gain (loss) for the period

Balance at December 31, 2009

Gain (loss) for the period

Balance at December 31, 2010

Securities Offering

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

agreed to issue to the investors in a registered offering 1,481,481 shares (the Shares) of the Companys common stock priced at $2.565 per share along with Series A warrants to purchase up to 1,481,481 shares of common stock with an

exercise price of $3.43 per share of common stock and Series B warrants to purchase up to 893,519 shares of common stock with an exercise price of $0.01 per share of common stock.

These securities were offered pursuant to our effective shelf

registration statement on Form S3 (File No.

On July 9, 2010, the Company entered into an

amendment to the Securities Purchase Agreement with each of the investors to increase the exercise price of the Series A warrants to be issued in connection therewith from $3.43 per share to $3.49 per share.

The Series A warrants are exercisable for

a five-year period commencing nine months after the date of their issuance.

The exercise price of the Series A warrants is subject to certain conditions and adjustments that make the exercise price variable pursuant to the Series A warrant

The exercise price can only adjust downward if the Company issues any securities outside of the Companys plans described in Notes 14 and 17.

On July 12, 2010, the Company completed the offering contemplated by the Securities Purchase Agreement and raised gross proceeds in connection therewith of approximately $3.8 million before advisory

fees and offering expenses.

The Series B warrants are exercisable for a five-year period commencing on the 120 day

anniversary of the date of their issuance.

The Company determined that the Series B warrants are a component of equity and have been included in the cash proceeds of the securities offering as such.

All of the 893,519 Series B warrants were

exercised as of December 31, 2010.

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

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

anniversary of the date of the issuance of the Shares.

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

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

The Company determined that the embedded feature (ratchet down of exercise price) in the Series A warrants is not indexed to the Companys own stock due to the variability in the exercise price of

the Series A warrants and, therefore, is an embedded derivative financial liability, which requires bifurcation and to be separately accounted for pursuant to ASC Topic 815 Derivatives and Hedging .

The Company uses the Black-Scholes option

pricing model to estimate the fair value of the derivative instrument, for which we employed the following assumptions at inception and for the year ended December 31, 2010:

Expected dividend yield

Expected volatility

Risk-free interest rate

Expected life of options

In accordance with

Topic 815, the Company recognized a derivative liability for the value of the Series A warrants granted in conjunction with the Securities Purchase Agreement.

The Company determined the value of the derivative instrument to be $661,236 upon issuance

of the Series A warrants and recorded a derivative

liability which offsets additional paid-in capital.

In accordance with Topic 815, the derivative liability is required to be adjusted to fair value at the end of each reporting period.

Company recognized a gain related to this derivative of approximately $143,000 for the year ended December 31, 2010.

The derivative gain is included as a component of other (income) expense in the consolidated statement of operations.

Deferred income tax assets and liabilities are determined based upon differences between financial reporting and the tax basis of assets and liabilities and are measured using the enacted tax rates and

laws that will be in effect when the differences are expected to reverse.

The components of the income tax provision on

operations, excluding income tax expense (benefit) on realized gains (losses) and unrealized appreciation (depreciation) of investments are as follows:

operations, excluding income tax expense (benefit) on realized gains (losses) and unrealized appreciation (depreciation) of investments for 2009 are as follows:

Year Ended December 31,

Provision for income taxes

A reconciliation of the differences between the

effective income tax rate and the statutory federal tax rate follows:

A reconciliation of the differences between the effective income tax rate and the statutory federal tax rate

Year Ended December 31,

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Stock options

Amortization of intangible assets

Impairment and amortization of intangible assets

Change in valuation allowance

Provision for income taxes

Related to the Companys status as an investment

company during the nine months ended September 30, 2009, the Company has changes in unrealized losses and realized losses on investments totaling $64,658,725 and $(69,399,078), respectively.

Additionally, related to the Companys status as

an operating company from October 1, 2009 through December 31, 2009, the Company has unrealized losses on available-for-sale securities

and foreign currency translation adjustments of $70,946 and $(697,682), respectively.

These amounts are included as a component of stockholders equity in the respective periods.

Accordingly, these amounts as tax-effected are included in the Companys valuation allowance, but would not be reflected in the change in the valuation allowance in the accompanying reconciliation of the effective rate to the statutory rate for

Significant components of the Companys deferred tax assets and liabilities as of December 31, 2009 are as

The Company has unrealized gains on available-for-sale securities of $199,986 and foreign currency

translation adjustments of $(227,673) for the year ended December 31, 2010.

These amounts are included as a component of equity in 2010.

Accordingly, these amounts as tax-effected are included in the Companys valuation allowance, but

would not be reflected in the change in the valuation allowance in the accompanying reconciliation of the effective rate to the statutory rate for 2010.

Significant components of the Companys deferred tax assets and liabilities are as

Accrued expenses

Revenue recognition

Subtotal current deferred tax asset

Subtotal current deferred tax asset (liability)

Net operating loss carryforward

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Intangible assets

Subtotal non-current deferred tax asset

Subtotal non-current deferred tax asset (liability)

Total deferred tax asset

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Net deferred tax liability

Significant components of the Companys deferred tax assets and liabilities as of December 31,

2008 are as follows:

Net operating loss carryforward

Intangible assets

valuation allowance

Net deferred tax liability

US GAAP requires a valuation allowance to reduce the deferred tax assets reported if, based on the

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

During 2008, management determined that it was more likely than not that net operating loss carryforwards in UTEK would

not be utilized in the future.

Accordingly, a valuation allowance of $15.8 million and $11.2 million and was recorded for 2009 and 2008, respectively.

The Company is currently subject to examination by federal and state taxing authorities for 2007 and

subsequent years.

The change in valuation allowance does not correspond to the change reported in the statutory rate reconciliation due to the adjustments to the deferred tax balances related to prior periods.

ASC Topic 740 Income Taxes requires a valuation allowance to reduce the deferred tax assets reported if, based on the weight of

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

The Companys management previously determined that it was more likely than not that the Companys net operating loss and

capital loss carryforwards would not be utilized in the future.

Accordingly, a valuation allowance of $20.3 million and $15.8 million was recorded for 2010 and 2009, respectively.

At December 31, 2010, the Company had available U.S.

net operating loss carryforwards of approximately $30,011,000, which expire as follows:

net operating loss carryforwards of approximately $28,370,000, which expire as

2021-$753,000;

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2028-$5,423,000;

2029-$7,343,000;

and 2030-$3,854,000.

The Company has available U.S.

capital loss carryforwards of approximately $18,753,000,

which expire as follows:

2012-$381,000;

2013-$860,000;

2014-$16,669,000;

and 2015-$843,000.

Stock-Based Compensation

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1999 (the 1999 Plan) and a non-qualified stock option plan in February 2000 (the 2000 Plan).

Under the terms of the 1999 Plan, as amended, the Company is authorized to

issue options to purchase up to 2,211,274 shares of the Companys common stock.

The options are intended to be incentive stock options within the meaning of Section 422 of the Internal

Revenue Code (the Code), however, options may be issued under the 1999 Plan, as amended, that do not qualify for incentive treatment under the Code.

Under the terms of the 2000 Plan, the Company is authorized to issue options to purchase

up to 315,000 shares of the Companys common stock.

Under the 2000 Plan, as amended, the Company may only issue options that do not qualify for incentive treatment under Section 422 of the Code.

Options, under both plans, are granted at

the fair market value of the stock on the date of grant, except in the case of a more than 10% shareholder for which grants are exercisable at 110% of fair market value of the stock on the date of grant.

Options generally become fully vested three

to four years from the date of grant and expire five to seven years from the date of grant.

At December 31, 2009, the Company had 1,194,837 shares available for future stock option grants under existing plans.

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 respective grant date fair values estimated in

accordance with US GAAP.

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

The Company estimates forfeitures, both at the grant date as well as throughout the requisite service period, based on

the Companys historical experience and future expectations.

In accordance with US GAAP, the Company is required to

estimate at the grant date the number of share options for which the requisite service is expected to be rendered.

The Company estimated that 80% of the requisite service of its stock options issued from 2006 through 2008 would be rendered.

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

The revision to the forfeiture rate was accounted for as a change in estimate and its cumulative effect of $65,000, a reduction in stock-based

compensation, was recognized in the second quarter of 2009.

In connection with this revision, stock-based compensation for prospective periods will also be reduced by $794,000 over the next 2.75 years.

The Company uses the Black-Scholes option pricing model to estimate the fair value of stock-based awards on the date of grant.

assumptions employed in the calculation of the fair value of share-based compensation expense were calculated as follows for all years presented:

Under the terms of the 1999 Plan, as amended, the Company is authorized to issue options to purchase up to 2,811,274 shares of the

Companys common stock.

The options are intended to be incentive stock options within the meaning of Section 422 of the Internal Revenue Code (the Code), however, options may be issued under the 1999 Plan, as amended, that do

not qualify for incentive treatment under the Code.

Under the terms of the 2000 Plan, as amended, the Company is authorized to issue options to purchase up to 315,000 shares of the Companys common stock.

The Company may only issue options

under the 2000 Plan that do not qualify for incentive treatment under Section 422 of the Code.

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

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

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

December 31, 2010, the Company had 1,226,320 shares available for future stock option grants under existing plans.

Stock-based compensation cost recognized during the years ended December 31, 2010 and

2009 includes compensation cost for all share-based payments granted subsequent to January 1, 2006, based on their respective grant date fair values estimated in accordance with ASC Topic 718 CompensationStock Compensation .

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

The Company estimates forfeitures, both at the grant date as well as throughout the requisite service period, based on the Companys historical

experience and future expectations.

Topic 718 requires management to estimate, at the grant date, the number of stock options

for which the requisite service is expected to be rendered.

The Company applies a forfeiture rate to account for the number of stock options for which the requisite service period is not expected to be rendered.

The Company applied a 20% forfeiture

rate to stock options issued from 2006 through 2008, and applied a forfeiture rate of between 20% and 40% to stock options issued from 2009 through 2010.

Management revised its estimate of the forfeiture rate of its options in 2009 and again in 2010

to account for significant variances between the estimated forfeitures and the actual forfeitures.

The revision to the forfeiture rate is accounted for as a change in estimate in accordance with ASC Topic 250 Accounting Changes and Error

Corrections and the cumulative effect of approximately $178,000 and $78,000, a reduction in stock-based compensation, was recognized for the years ended December 31, 2010 and 2009, respectively.

In addition, the revision to the forfeiture

rate caused an additional reduction in stock-based compensation of approximately $587,000 and $376,000 for the years ended December 31, 2010 and 2009, respectively.

The change in estimate resulted in a beneficial effect of $0.06 and $0.04 per

share on the Companys net loss per share for the years ended December 31, 2010 and 2009, respectively.

In connection with these revisions, stock-based compensation for prospective periods will be reduced by approximately $829,000 over the

next 3 years.

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

date of grant.

The assumptions employed in the calculation of the fair value of share-based compensation expense were calculated as follows for all years presented:

Expected dividend yieldbased on the Companys historical dividend yield.

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Risk-free interest ratebased on the US Treasury yield curve in effect at the time of grant.

Expected life of options 2008 and 2009:

based on the Companys historical life of options exercised, giving consideration to the

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

calculated using the simplified method as prescribed by US GAAP, where the expected life is equal to the sum of the vesting period and the

contractual term divided by two.

The following table summarizes the assumptions used to estimate the fair

value of stock options granted during the years ended December 31, 2009, 2008 and 2007.

Expected life of optionsbased on the Companys historical life of options exercised, giving consideration to the contractual terms of the

grants, vesting schedules and expectations of future employee behavior.

The following table summarizes the

assumptions used to estimate the fair value of stock options granted during the years ended December 31, 2010 and 2009:

Expected dividend yield

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Expected life of options

3.75-3.88 years

Weighted average grant date fair value

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

$543,000 for the years ended December 31, 2009, 2008 and 2007, respectively.

The Company did not

have any cash proceeds from the exercise of stock options for the years ended December 31, 2010 and 2009.

Total compensation cost related to stock options was approximately $288,000 and $577,000 for the years ended December 31, 2010 and

2009, respectively.

The tax benefits from the exercise of common stock options and from the recognition of compensation costs were not significant during 2009, 2008 or 2007.

At December 31, 2009, there was approximately $1,473,000 of unrecognized

compensation cost related to stock options which is expected to be recognized over a weighted average period of 2.6 years.

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

Contractual Life

Options OutstandingDecember 31, 2006

Forfeited/cancelled/expired

At December 31, 2010, there was approximately $677,000 of unrecognized compensation cost related to stock options, which is expected to be recognized over a weighted average period of 2.5 years.

The following table represents stock option activity as of and for the two years ended

December 31, 2010:

Options OutstandingDecember 31, 2008

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Options ExercisableDecember 31, 2010

The total grant date fair value of options vested

during the years ended December 31, 2009, 2008 and 2007 was approximately $544,000, $547,000 and $434,000, respectively.

The following table summarizes information about outstanding and exercisable stock options at December 31, 2009:

The total grant date fair value of options vested during the years ended December 31, 2010 and 2009 was

approximately $622,000 and $544,000, respectively.

The following table summarizes information about outstanding and

exercisable stock options as of December 31, 2010:

Outstanding Options

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$18.40 - $22.04

Other (Income) Expense

Components comprising the balance in other (income) expense for the year ended December 31, 2010 and three months ended December 31, 2009 are as follows:

Gain on sale of investments

Impairment of investments

Share in loss of equity method investment

Derivative (gain) loss

Rental income

Other (income) expense

Employee Benefit Plan

The Company previously offered the UTEK Corporation Simple IRA Plan (the IRA Plan) to employees of the Company and its

subsidiaries.

The IRA Plan allows employees who satisfy the service requirements of the

IRA Plan to contribute pre-tax wages to the IRA Plan, subject to legal limits, $10,500 in 2008 with catch up deferrals of an additional $2,000 for participants age 50 and older.

Company matched 100% of the first 3% of wages contributed by employees.

The Companys matching contributions vest immediately and were approximately $171,000 and $74,000 for the years ended December 31, 2008 and 2007, respectively.

On February 1, 2009, the Company adopted the UTEK Corporation 401k Plan (the 401k Plan).

The 401k Plan

replaced the IRA Plan for employees of the Company and its subsidiaries.

The 401k Plan allows employees who satisfy the service requirements of the 401k Plan, which include being 21 years of age and having three months of service, to contribute

pre-tax wages to the 401k Plan, subject to legal limits.

The 401k Plan allows employees who satisfy the service requirements of the 401k Plan, which

include being 21 years of age and having three months of service, to contribute pre-tax wages to the 401k Plan, subject to legal limits.

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

The Companys contributions vest immediately and were approximately $170,000

during the year ended December 31, 2009.

The Companys contributions vest immediately and were approximately $161,000 and $170,000 for the years ended December 31, 2010 and 2009, respectively.

Restricted Stock Plan

On July 8, 2010, the Companys

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

The purpose of the Restricted Stock Plan is to provide selected members of the Board of Directors, executive

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

The maximum number of

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

Segment Reporting

The Companys principal area of activity is providing technology transfer services and supporting innovation consulting services.

Company has three reportable geographical operating segments:

United Kingdom, Israel and the United States.

The United Kingdom segment includes the Companys wholly owned subsidiary UTEK-Europe, Ltd., the Israel segment includes the

Companys wholly owned subsidiary UTEK ip , Ltd., and the United States (U.S.) segment includes UTEK Corporation.

UTEK ip was closed down in the second quarter of 2008 and all operations of that segment are currently

being serviced by the US segment.

ASC Topic 280 Segment Reporting establishes standards for reporting information about operating segments.

segments are defined as components of an enterprise about which separate financial information is available that is evaluated regularly by the chief operating decision maker, or decision making group, in deciding how to allocate resources and in

assessing performance.

The Company is organized geographically and by line of business.

The line of business management structure is the primary basis for which the allocation of resources and financial results are assessed.

From time to time, the Company will reorganize its internal organizational structure to better align its service offerings.

reorganized into two new lines of business, all working under the Innovaro brand:

Strategic Servicesdriven by Strategos, an advanced innovation consultancy and Technology Servicesonline platforms, partnering services, global licensing,

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

As a result, business segment information for the year ended December 31, 2009 has been restated to reflect the new business segments.

The Company has two reportable geographical operating segments:

United Kingdom and the United States.

The United Kingdom segment includes

the Companys wholly owned subsidiary Innovaro Europe, Ltd.

and the United States segment includes Innovaro, Inc.

and UTEK Real Estate.

A summary of revenue and other financial information by reportable geographical operating

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United States

Revenue / Income from operations

Income (loss) before income taxes

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Depreciation and amortization

For the year ended December 31, 2007

United Kingdom

United States

Revenue / Income from operations

Income (loss) before income taxes

Depreciation and amortization

The Company dissolved UTEK ip , which resulted in a gain for the Israel segment and an offsetting loss for the US segment of approximately $753,000 in 2008.

Company dissolved UTEK ip with the transfer of operations to the US segment.

The Company recognized a $2.4 million impairment loss for the U.S.

segment during 2009.

During 2008, the Company changed the way it classifies and records its revenues and certain

expenses to provide additional information for management.

As a result of the Companys new products and services from the acquisitions of Pharmalicensing, Strategos, Social Technologies and Innovaro, the Company now has product segments for

which certain information can be reported.

These reportable product segments include:

technology transfer business;

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

services comprised of the Companys online licensing services business;

and all other services comprised of global technology licensing and other services.

The administrative and other column represents miscellaneous and other income items and

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

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

Accordingly, information is not available for

long-lived assets or total assets.

A summary of revenue and other financial information by reportable product segment is

The Company recognized a $2.9 million impairment loss for the United Kingdom segment during 2010.

The Company recognized a $8.9 million impairment loss for the United States segment during 2010.

The Company recognized a $2.4 million impairment loss for the United States segment during 2009.

The Company also has business segments for which certain information can be reported.

These reportable business segments include

Strategic Services and Technology Services.

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

Management does not

analyze assets for decision making purposes as it relates to the segments below.

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

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

For the Year Ended December 31, 2010

Administrative

Revenue / Income from operations

Income (loss) before income taxes

Loss before income taxes

For the Year Ended December 31, 2009

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Income (loss) before income taxes

The Company recognized a $4.9 million impairment loss for the strategic services segment during 2010.

The Company recognized a $5.5 million impairment loss for the technology services segment during 2010.

The Company recognized a $2.4 million impairment loss for the strategic services segment during 2009.

Commitments and Contingencies

Employment Agreements and Severance Liability

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

We entered into a

separation agreement with Dr.

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

Gross was entitled to receive pursuant to the employment agreement.

In connection therewith, the

Company issued to Dr.

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

Pursuant to the terms of the promissory note, the Company had the option to elect to transfer certain equity

interests in one of its subsidiaries, Cortez 114, LLC (Cortez), which owns real estate located in Hernando County, Florida, to Dr.

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

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

Gross through the conveyance of a 32%

ownership interest in Cortez.

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

The Company has various other employment agreements with its executive officers and certain other employees, some of which were entered into in connection with the acquisitions made by the Company during

Obligations under these employment agreements total $2,546,000 and $1,568,000 for the years ending December 31, 2010 and 2011, respectively.

In addition, certain agreements provide for discretionary bonuses and severance packages.

are also 25,000 stock options issuable in 2010 under these agreements.

Employment Contracts

The Companys strategic services business in

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

If the Company is not successful in retaining these consulting professionals or hiring

similarly qualified and skilled consulting professionals to replacement them, then the Company may not be able to maintain the level of strategic services revenue it has generated in recent years.

The Company has various other employment agreements with certain of its executive officers and other employees, some of which were

entered into in connection with the acquisitions made by the Company during 2008.

Obligations under these employment agreements total $643,000 for the year ending December 31, 2011.

In addition, certain agreements provide for discretionary

bonuses and severance packages.

The Company has a Strategos Bonus Plan for qualifying Strategos division employees.

1 unchanged sentence

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.

The Company recognized bonus expense of approximately $330,000 and $5.9 million in connection with the Strategos Bonus Plan during the years ended December 31, 2009 and 2008, respectively.

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

The award pool is determined from

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

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

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

connection with this bonus plan.

There was no bonus in connection with the Innovaro Bonus Plan during the years ended December 31, 2009 and 2008.

The Company has a Social Technologies Bonus Plan for qualifying Social Technologies division employees.

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

extent required to permit Social Technologies to maintain sufficient operating cash.

The Company recognized bonus expense of $225,000 and $0 in connection with the Social Technologies Bonus Plan for the years ended December 31, 2009 and 2008,

respectively.

Awards are to be paid out by December 15 th , but not later than December 31 st , of each year and are accrued on a quarterly basis.

Approximately 85% to 90% of Strategos 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.

Company is currently in the process of modifying the Strategos Bonus Plan.

Operating Leases

The Company leases its office facilities and certain equipment for various terms under long-term, non-cancelable operating lease agreements.

The leases expire at various dates through 2013 and provide for

various renewal options.

The Company leases its office facilities and certain equipment for various terms under long-term, non-cancelable operating lease

The leases expire at various dates through 2013 and provide for various renewal options.

In the normal course of business, it is expected that these leases will be renewed or replaced by leases on other properties.

The leases provide for increases in future minimum annual rental payments.

Lease expense charged

to operations was approximately $442,000, $526,000 and $317,000 for the years ended December 31, 2009, 2008 and 2007, respectively.

The leases provide for

increases in future minimum annual rental payments.

Lease expense charged to operations was approximately $473,000 and $442,000 for the years ended December 31, 2010 and 2009, respectively.

The Company leases the office space for its corporate headquarters from Ybor City Group, Inc., a subsidiary of UTEK Real Estate.

In connection with the consolidation of UTEK Real Estate as of

October 1, 2009, the rent expense associated with this lease is eliminated as an intercompany transaction.

The following

is a schedule by year of future minimum rental payments required under the operating lease agreements:

connection with the consolidation of UTEK Real Estate as of October 1, 2009, the rent expense associated with this lease is eliminated as an intercompany transaction.

The following is a schedule by year of future minimum rental payments required under the operating lease agreements:

Related Party Transactions

During the years ended December 31, 2007 and 2006, the Company loaned funds for operations and real estate improvements to certain

subsidiaries of UTEK Real Estate.

The entire balance of approximately $2 million was repaid to the Company during 2008.

Company leases space for its corporate headquarters from Ybor City Group, Inc., a subsidiary of UTEK Real Estate.

The Company paid rent of approximately $269,000, $344,000 and $258,000 to Ybor City Group, Inc.

during the nine months ended

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

In connection with the consolidation of UTEK Real Estate as of October 1, 2009, UTEK

Real Estate and Ybor City Group, Inc.

are no longer related party entities and disclosure of intercompany transactions in not applicable.

Subsequent Events

As of March 16, 2010, we began doing business as Innovaro and changed our ticker

symbol to NYSE Amex:

Our proxy statement for the 2010 Annual Meeting of Shareholders will include a proposal to amend our articles of incorporation to change the corporate name to Innovaro, Inc.

Beginning in March 2010, the Company

will reorganize into three primary business groups, all working under the Innovaro brand:

Strategic Services driven by Strategos, an advanced innovation consultancy;

Technology Marketplaces online platforms, partnering services, global

licensing and technology transfer services;

Insights & Research futures and trends, research, information services and more.

In connection therewith, our business segments will change beginning with our quarterly reporting period

ending March 31, 2010 and this change will require certain reclassifications to prior period financial information.

Quarterly Financial Data (Unaudited)

Fiscal year 2009

Revenue / Income from operations

Net loss from operations

Net loss/ Net decrease in net assets from operations

Net loss per share/ net decrease in net assets from operations per share:

Basic and diluted

Fiscal year 2008

Revenue / Income from operations

Net loss from operations

Net decrease in net assets from operations

Net decrease in net assets from operations per share:

Basic and diluted

Fiscal year 2007

Revenue / Income from operations

Net income (loss) from operations

Net decrease in net assets from operations

Net decrease in net assets from operations per share:

Basic and diluted

Income from operations for the three months ended March 31, 2009 as shown here varies from the amount previously reported on the Companys March 31, 2009

quarterly report on Form 10-Q of $2,763,721 by $14,294 because of the subsequent reclassification of gains and losses from the disposal of fixed assets out of investment income.

Net loss from operations and net decrease in net assets from operations for the three months ended June 30, 2009 includes an impairment loss of $2.4 million and

severance compensation of $2.5 million.

Net loss from operations and net decrease in net assets from operations for the three months ended March 31, 2008 includes severance compensation of $1.3 million.

Selected Per Share Data and Ratios under Investment Company Accounting

Year Ended December 31

Per share information:(2)

Net asset value, beginning of period

Net income (loss) from operations(2)

Net change in realized and unrealized appreciation/depreciation on investments (after taxes)(3)

Total from investment operations

Foreign currency translation adjustment(2)

Distributions to shareholders(2)

Net increase from stock transactions(2)

Net asset value, end of period

Per share market value, end of period

Investment return, based on market price at end of period(4)

Ratios/supplemental data:

Net assets, end of period

Ratio of expenses to average net assets

Ratio of net income (loss) from operations to average net assets

Diluted weighted average number of shares outstanding during the period

Information is presented for the nine months ended September 30 of the current year because the Company ceased operating as an investment company on

October 1, 2009.

As an operating company, measurement of certain items included in this table is not applicable or appropriate.

Therefore, certain items included in this table agree to financial statements included in the Companys

September 30, 2009 quarterly report on Form 10-Q as opposed to financial statements included in this annual report on Form 10-K.

See Note 1 for further discussion of the Companys change in status from an investment company to operating

Calculated based on diluted weighted average number of shares outstanding during the year.

Calculated as a balancing amount necessary to reconcile the change in net asset value per share with the other per share information presented.

This amount may not

agree with the aggregate gains and losses for the period because the difference in the net asset value at the beginning and end of year does not inherently equal the per share changes of the line items disclosed.

Calculated as the change in market price during the period divided by the market price at the end of the period.

During December 2010, the Company borrowed $200,000 for operations from one of its directors, Mark Berset, under a promissory note.

This 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.

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

1 unchanged sentence

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

What changed 10-K

Item 8. Financial Statements and Supplementary Data