What changed in this filing

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Item 1. Financial Statements

2012-04-11 compared with 2009-05-07 · 796 added, 1806 removed, 116 unchanged (96% of the section changed)

Financial Statements

UTEK Corporation

Consolidated Statements of Assets and Liabilities

INNOVARO, INC.

Consolidated Balance Sheets

September 30,

Non-affiliate investments (cost:

2008 - $37,619,164;

2007 - $31,588,337)

Affiliate investments (cost:

2008 - $37,312,344;

2007 - $43,779,616)

Controlled investments (cost:

2008 - $12,430,248;

2007 - $17,231,458)

Treasuries and certificates of deposit (cost:

2008 - $3,203,990;

2007 - $1,498,346)

Total investments

Current assets:

Cash and cash equivalents

Accounts receivable, net of allowance for bad debt (2008 - $176,000;

2007 - $36,000)

Accounts receivable, net

Contracts in process

Available-for-sale securities

Prepaid expenses and other assets

Total current assets

Cost method investments

Equity method investments

Note receivable and accrued interest

Fixed assets, net

Intangible assets, net

Deferred tax asset

Current liabilities:

Accounts payable

Accrued expenses

Accrued severance liability

Accrued bonus

Deferred revenue

Current maturities of long-term debt

Total current liabilities

Long-term debt, less current maturities

Derivative liabilities

Deferred tax liability

Total liabilities

Commitments and Contingencies

Composition of net assets:

Innovaro stockholders equity:

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

2 unchanged sentences

15,161,274 and 14,631,950 shares issued;

10,378,083 and 9,011,276 shares

outstanding at September 30, 2008 and December 31, 2007, respectively

15,041,274 and 14,585,261

shares outstanding at September 30, 2011 and December 31, 2010, respectively

Additional paid-in capital

Accumulated income:

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

Net asset value per share

Accumulated deficit

Accumulated other comprehensive income

Total Innovaro stockholders equity

Noncontrolling interest

Total liabilities and equity

See accompanying notes

UTEK Corporation

INNOVARO, INC.

Consolidated Statements of Operations

1 unchanged sentence

Nine Months Ended Sept.

Income from operations:

Innovation consulting services

Sale of technology rights

Subscription and other services

Investment income, net

Direct costs of innovation consulting services

Acquisition of technology rights

Strategic services

Technology services

Direct costs of revenue Strategic services

Direct costs of revenue Technology services

Salaries and wages

Professional fees

Research and development

Sales and marketing

General and administrative

Goodwill impairment

Income (loss) before income taxes

Provision for income tax expense (benefit)

Net (loss) income from operations

Net realized and unrealized gains (losses):

Net realized loss on investments, net of income tax benefit

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

Net decrease in net assets from operations

Net decrease in net assets from operations per share:

Weighted average shares:

Depreciation and amortization

Impairment loss

Other (income) and expense:

Other (income) expense

Interest expense, net

Loss before income taxes

Provision for income tax benefit

Net loss attributable to the noncontrolling interest

Net loss attributable to Innovaro stockholders

Net loss attributable to Innovaro stockholders per share:

Basic and diluted

Weighted average shares outstanding:

Basic and diluted

See accompanying notes

UTEK Corporation

INNOVARO, INC.

Consolidated Statements of Cash Flows

Nine Months Ended Sept 30

Nine Months Ended September 30,

Operating Activities:

Net decrease in net assets from operations

Adjustments to reconcile net decrease in net assets from operations to net cash flows from operating activities:

Change in net unrealized depreciation of investments

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

Proceeds received on sale of equity investments

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

Net loss attributable to Innovaro stockholders

Adjustments to reconcile net loss attributable to Innovaro stockholders to net cash flows from operating

Goodwill and intangible asset impairment

Fixed asset impairment

Net loss attributable to noncontrolling interest

Depreciation and amortization

Goodwill impairment

Loss on sale of investments

Loss on disposal of fixed assets

Bad debt expense

Amortization of debt discount from investor warrants

Loss on sale and impairment of available-for-sale securities

Loss (gain) on derivative liabilities

Stock-based compensation

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:

Accounts receivable

Accounts receivable and contracts in process

Prepaid expenses and other assets

Deferred revenue

Accrued expenses

Accounts payable, accrued expenses and accrued bonus

Net cash flows from operating activities

Investing Activities:

Cash received in connection with acquisitions

Purchases of fixed assets

Capital expenditures

Capitalization of software development costs

Proceeds from sale of available-for-sale securities

Proceeds from redemption of certificates of deposit

Net cash flows from investing activities

Financing Activities:

Distributions to stockholders

Proceeds from exercise of stock options

Net repayments on bank line of credit

Payments on long-term debt

Gross proceeds from private equity securities offering

Offering costs paid from private equity securities offering

Net cash flows from financing activities

Foreign currency translation adjustment

Increase (decrease) in cash and cash equivalents

Cash and cash equivalents at beginning of year

Effect of foreign exchange rates

Increase in cash and cash equivalents

Cash and cash equivalents at beginning of period

Cash and cash equivalents at end of period

See accompanying notes

UTEK Corporation

INNOVARO, INC.

Consolidated Statements of Cash Flows (continued)

Ended Sept 30

Supplemental Disclosures of Non-Cash Investing 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 Strategos.

In conjunction with the acquisition, liabilities were assumed as

Fair value of assets acquired

Fair value of common stock issued

contingent liability incurred

Liabilities assumed

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

In conjunction with the acquisition, liabilities were assumed

Fair value of assets acquired

Fair value of common stock issued

Foreign currency translation adjustment

Liabilities assumed

The Company issued 329,670 shares of common stock in connection with the Strategos earnout contingency as of September 30,

The Company issued 3,328 shares of common stock in connection with the Innovaro earnout contingency as of September 30,

Investment securities received for unearned services

See accompanying notes

UTEK Corporation

Consolidated Statements of Changes in Net Assets

Nine Months Ended Sept 30

Changes in net assets from operations:

Net income (loss) from operations

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

Change in net unrealized depreciation of investments, net of related deferred taxes

Net decrease in net assets from operations

Distributions to stockholders:

From net income from operations (1)

Capital stock transactions:

Proceeds from the exercise of stock options

Stock-based compensation

Acquisition of Pharmalicensing Ltd.

Acquisition of Strategos

Acquisition of Innovaro, Ltd.

Strategos earnout

Innovaro earnout

Net increase in net assets from stock transactions

Foreign currency translation adjustment

Net decrease in net assets

Net assets at beginning of year

Net assets at end of period

Distributions to stockholders as noted in the Consolidated Statement of Cash Flows for the nine months ended September 30, 2007 was included in net income from operations for a

prior period;

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

See accompanying notes

UTEK Corporation

Financial Highlights

Nine Months Ended Sept 30

PER SHARE INFORMATION

Net asset value, beginning of period

Net income (loss) from operations (1)

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

Foreign currency translation adjustment (1)

Net increase from stock transactions (1)

Distributions to stockholders from net income from operations

Net asset value, end of period

Per share market value, end of period

Investment return, based on market price at end of period

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

Calculated based on diluted weighted average number of shares outstanding during the period.

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 period inherently does not equal the per share changes of the line items disclosed.

Distributions to stockholders as noted in the Consolidated Statement of Cash Flows for the nine months ended September 30, 2007 was accrued at December 31, 2006;

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

See accompanying notes

UTEK Corporation

Consolidated Schedule of Investments

September 30, 2008

Non-Affiliate Investments (1)

Advanced Medical Isotope Corporation (9)

Medical isotope processes

Series A Convertible Preferred Stock

MiMedx Group, Inc.

(MiMedx, Inc.)

Connective tissue technology

Cyberlux Corporation (7)

LED lighting solutions

Series C Convertible Preferred Stock

Platina Energy Group Inc.

Oil and gas exploration and production

Series F Convertible Preferred Stock

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

Biotechnology products

Advanced Refractive

Technologies, Inc.

Ophthalmic technologies

Series D Convertible Preferred Stock

Series C Convertible Preferred Stock

Series B Convertible Preferred Stock

CSMG Technologies, Inc.

Environmental and medical technologies

Bacterin International, Inc.

(privately held)

Bioactive coatings for medical devices

Metamorphix Global, Inc.

(privately held) (10)

Design and manufacture of countertops

Turbine Truck Engines, Inc.

Heavy-duty highway truck engines

Codima, Inc.(KKS Venture Management/ Rheologics)

Study of blood viscosity

Laserlock Technologies, Inc.

Security solutions for the gaming industry

GammaCan International, Inc.

Anti-cancer immunotherapy

Xethanol Corporation (10)

Bioethanol and derivative products

In Veritas Medical Diagnostics, Inc.

Medical devices designs and testing

Industrial Biotechnology Corporation

Provider of renewable resources

Quest Minerals & Mining Corporation

Coal and mineral mining

Tradequest International, Inc.

Provider of voice over internet protocol

BP International, Inc.

Shade structures

Applied Wellness Corporation (New Life Scientific, Inc.)

Pharmaceutical biotechnologies

EFuel EFN Corp.

(Preservation Sciences, Inc.)

Internet sites host

AdAl Group, Inc.

extruded products manufacturer

EFT BioTech Holdings, Inc.

(HumWare Media Corp.)

Media advertising

UBA Technology, Inc .

Software development

Series A Convertible Preferred Stock

Trio Industries Group, Inc .

Protective powder coating

KP Renewables Plc (Kwikpower International Plc)

(5)Renewable energy

Convertible Debenture, due 5/10/07

Convertible Debenture, due 9/30/06

eLinear, Inc.

Telecommunication security provider

Total Investments in Non-Affiliates

Affiliate Investments (2)

World Energy Solutions, Inc.

Energy saving technologies

Series C Convertible Preferred Stock

CytoDyn, Inc.

therapeutic agents

Series A Convertible Preferred Stock

MachineTalker, Inc.

Intelligent wireless security networks

NeoStem, Inc.

banking services

MATECH Corporation (Material Technologies, Inc.)

Metal fatigue detection

Series E Convertible Preferred Stock

American Soil Technologies , Inc.

Fertilizer innovation

Avalon Oil and Gas, Inc.

and gas producers

USTelematics, Inc.

Broadband telecommunication for moving vehicles

Emission & Power Solutions, Inc.

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

Reductional environmental emissions

DME Interactive Holdings, Inc.

Multi-media entertainment

Cargo Connection Logistics Holdings, Inc.

World trade logistics

NetFabric Holdings, Inc.

Information technology services

Pathway One Plc (5)

Sales and development licenses

Page 10 of 46

Manakoa Services Corporation (9)

Compliance analysis and monitoring

Series B Convertible Preferred Stock

Stealth MediaLabs, Inc.

Software products

NutriPure Beverages, Inc.

(Liberty Diversified Holdings, Inc.)

Printing and packaging

Series D Convertible Preferred Stock

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

RIM Semiconductor Company

Data transmission technology

Total Investments in Control Investments

Treasuries and Certificates of Deposit (4)

Certificates of Deposit:

Wright Express Finl Svcs Corp CD, maturity 10/7/08, interest rate 2.90%

Sovereign Bank Dallas TX CD, maturity 10/14/08, interest rate @ 3.00%

Home Svgs Bank of America Little Falls MN CD, maturity 10/15/08, interest rate @ 2.95%

FirstBank PR Santurce CD, maturity 10/20/08, interest rate @ 3.00%

Doral Bank Catano PR CD, maturity 10/29/08, interest rate @ 3.55%

Fidelity Bank Wichita KS CD, maturity 10/30/08, interest rate @ 3.00%

Pacific Comm Bank LA CD, maturity 10/30/08, interest rate @ 3.05%

Beal Bank SSB Plano TX CD, maturity 11/12/08, interest rate @ 2.90%

GE Money Bank Dep CTF CD, maturity 11/13/08, interest rate @ 3.00%

New South Fed Svgs Bank CD, maturity 11/14/08, interest rate @ 2.95%

Standard Bank & Trust Co CD, maturity 11/14/08, interest rate @ 3.00%

Crescent Bank CD, maturity 11/17/08, interest rate @ 3.00%

Merchants Bank CD, maturity 11/17/08, interest rate @ 2.85%

EuroBank Hato Rey PR CD, maturity 11/18/08, interest rate @ 3.00%

First Chicago Bank & Trust ILL CD, maturity 11/18/08, interest rate @ 3.00%

Bank Union CD, maturity 11/21/08, interest rate @ 3.00%

Page 11 of 46

Signature Bank of Arkansas CD, maturity 11/21/08, interest rate @ 3.00%

National City BK Cleveland OH CTF CD, maturity 11/28/08, interest rate @ 2.30%

SCB BK Shelbyville IND CD, maturity 11/28/08, interest rate @ 2.30%

Sterling BK & TR Southfield MI CD, maturity 11/28/08, interest rate @ 2.40%

Eagle Natl BK Miami FL CTF Dep act CD, maturity 8/29/08, interest rate @ 2.40%

GE Capital Finl Inc CD, maturity 12/4/08, interest rate @ 3.00%

Israel Disc BK New York NY CD, maturity 12/5/08, interest rate @ 2.30%

First Cmnty Bank CD, maturity 12/8/08, interest rate @ 3.00%

AmTrust Bank Cleveland OH CD, maturity 12/12/08, interest rate @ 3.05%

State Bank India Chicago ILL CD, maturity 12/12/08, interest rate @ 3.10%

First State Bank of Blakely CD, maturity 12/16/08, interest rate @ 3.05%

Liberty Bank Inc CD, maturity 12/16/08, interest rate @ 3.00%

Nevada Sec Bank CD, maturity 12/22/08, interest rate @ 3.05%

Cornerstone BK Atlanta GA CD, maturity 12/29/08, interest rate @ 2.40%

MBank Manitisque MI CD, maturity 12/29/08, interest rate @ 2.50%

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

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

Total Certificates of Deposit

Total Investments in U.S.

Treasuries and CDs

TOTAL INVESTMENTS

Cash and other assets, less liabilities

Net assets at September 30, 2008

Page 12 of 46

Notes to Schedule of Investments:

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

the American Stock Exchange 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 3 to the Notes to the Consolidated Financial Statements.)

As of September 30, 2008, all of the securities that we own are subject to legal restrictions on resale.

As a result, our ability to sell or otherwise transfer

the securities we hold in our 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

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 such 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 equity interests of the total equity interests outstanding

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

and Ybor City Group, Inc.

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

Treasury Bills and 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 September 30, 2008, the Company reclassified this investment from Affiliate investments to Non-affiliate investments based on the criteria in notes

During the period ended September 30, 2008, the Company reclassified this investment from Control investments to Affiliate investments based on the criteria in notes

Advanced Medical Isotope Corporation and Manakoa Services Company are related through common management.

Xethanol Corporation and Metamorphix Global are related through common management.

Stealth MediaLabs, Inc.

and USTelematics, Inc.

are related through common management.

See accompanying notes

Page 13 of 46

UTEK Corporation

Consolidated Schedule of Investments

December 31, 2007

Non-Affiliate Investments (1)

Advanced Medical Isotope Corporation (12)

Medical isotope processes

Preferred Stock

Broadcast International, Inc.

Telecommunications

Advanced Refractive Technologies, Inc.

Ophthalmic technologies

Series D Preferred Stock

Series C Preferred Stock

Series B Preferred Stock

(privately held)

Connective tissue technology

Synthetic Blood International, Inc.

Biotechnology products

Bacterin International, Inc.

(privately held)

Bioactive coatings for medical devices

Metamorphix Global, Inc.

(privately held) (13)

Design and manufacture of countertops

GammaCan International, Inc.

Anti-cancer immunotherapy

Ecosphere Technologies, Inc.

Defense, homeland security and global ship repair

Turbine Truck Engines, Inc.

Heavy-duty highway truck engines

Protocall Technologies, Inc.

On-demand software and entertainment

Magnitude Information Systems, Inc.

Computer ergonomics

TenthGate, Inc.

Healthcare related products and services

Starcom, Inc.

Communications services and products

Xethanol Corporation (13)

Bioethanol and derivative products

MM2 Group, Inc.

consulting for nutraceuticals

Laserlock Technologies, Inc.

Security solutions for the gaming industry

SolarBrook Water and Power Corp.

(HydroFlo, Inc.)

Treatment and purification of water

BP International, Inc.

In Veritas Medical Diagnostics, Inc.

Medical devices designs and testing

KKS Venture Management, Inc (Rheologics, Inc.)

Study of blood viscosity

Quest Minerals & Mining Corporation

Coal and mineral mining

Page 14 of 46

New Life Scientific, Inc.

Pharmaceutical biotechnologies

aeroTelesis, Inc.

and wireless bandwidth utilization

Tradequest International, Inc.

Provider of voice over internet protocol

5G Wireless Communications, Inc.

Broadband wireless

Preservation Sciences, Inc.

Green technologies and development

AdAl Group, Inc.

extruded products manufacturer

Modern Technology Corporation

Technology development and acquisition company

EFT BioTech Holdings, Inc.

(HumWare Media Corp.)

Media advertising

UBA Technology, Inc.

Series A Convertible Preferred Stock

Trio Industries Group, Inc.

Protective powder coating

KP Renewables Plc (Kwikpower International Plc) (5)

Renewable energy

Convertible Debenture, due 5/10/07

Convertible Debenture, due 9/30/06

eLinear, Inc.

Telecommunication security provider

Total Investments in Non-Affiliates

Affiliate Investments (2)

Material Technologies, Inc.

Metal fatigue detection

Series E Convertible Preferred Stock

Cyberlux Corporation (9)

LED lighting solutions

Series C Preferred Stock

Emission & Power Solutions, Inc.

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

Reductional environmental emissions

Series B Preferred Stock

Avalon Oil and Gas, Inc.

and gas producers

Manakoa Services Corporation (12)

Compliance analysis and monitoring

Series B Preferred Stock

Pathway One Plc (5) (9)

and development licenses

MachineTalker, Inc.

Intelligent wireless security networks

Page 15 of 46

USTelematics, Inc.

Broadband telecommunication for moving vehicles

NeoStem, Inc.

banking services

CytoDyn, Inc.

stage biotechnology company

Series A Preferred Stock

American Soil Technologies , Inc.

Fertilizer innovation

vidShadow.com, Inc.

(DME Interactive Holdings, Inc.)

Multi-media entertainment

Cargo Connection Logistics Holdings, Inc.

World trade logistics

NetFabric Holdings, Inc.

Information technology services

GS Energy Corporation (INSEQ Corp.)

Waste minimization

Industrial Biotechnology Corporation (10)

Manufactures and markets flavors and fragrances

Stealth MediaLabs, Inc.

Software products

Liberty Diversified Holdings, Inc.

Printing and packaging

Series B Preferred Stock

Total Investments in Affiliates

Control Investments (3)

UTEK Real Estate Holdings, Inc.

(privately held)

Real estate development

World Energy Solutions, Inc.

Energy saving technologies

UTEK Real Estate Holdings, Inc.

(privately held)

(Demand note, interest rate @ 5%)

Klegg Electronics, Inc.

Manufacturer/distributor for retail electronic products

Total Investments in Control Investments

Treasuries and Certificates of Deposit (4)

United States Treasury Bill, maturity 2/07/08, interest rate @ 3.06%

Certificates of Deposit:

State Bank India CD, maturity 2/22/08, interest rate @ 5.15%

Indymac Bank FSB CD, maturity 2/25/08, interest rate @ 5.2%

Page 16 of 46

First Natl Bank Arizona CD, maturity 2/27/08, interest rate @ 5.15%

Charter Bank West CD, maturity 2/29/08, interest rate @ 5.1%

Discover Bank CD, maturity 2/29/08, interest rate @ 5.15%

Lehman Coml Bank CD, maturity 2/29/08, interest rate @ 5.15%

Sterling Savings Bank CD, maturity 3/24/08, interest rate @ 5.1%

Capmark Bank CD, maturity 5/22/08, interest rate @ 5.15%

Firstcity Bank CD, maturity 5/22/08, interest rate @ 5.1%

Provident Bank CD, maturity 5/27/08, interest rate @ 5.1%

Total Certificates of Deposit

Total Investments in U.S.

Treasuries and CDs

TOTAL INVESTMENTS

Cash and other assets, less liabilities

Net assets at December 31, 2007

Notes to Schedule of Investments:

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

the American Stock Exchange or other similar markets.

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

Treasuries and certificates of deposits and a demand note issued by UTEK Real Estate Holdings, Inc., 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 3 to the Notes to the Consolidated Financial Statements.)

As of December 31, 2007, all of the securities that we own are subject to legal restrictions on resale.

As a result, our ability to sell or otherwise transfer

the securities we hold in our 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

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 such 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 equity interests of the total equity interests outstanding

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

and Ybor City Group, Inc.

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

Treasury Bills and certificates of deposit.

These short-term investments normally have three month to one year maturities and do

not qualify as cash or cash equivalents.

Page 17 of 46

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

Investment consists of a loan receivable with subsidiaries of UTEK Real Estate Holdings, Inc.

Investment consists of warrants to purchase 1,500,000 shares of Synthetic Blood International, Inc.

common stock.

During the period ended December 31, 2007, the Company reclassified this investment from Affiliate investments to Non-affiliate investments based on the criteria in notes

During the period ended December 31, 2007, the Company reclassified this investment from Non-affiliate investments to Affiliate investments based on the criteria in notes

During the period ended December 31, 2007, the Company reclassified this investment from Control investments to Affiliate investments based on the criteria in notes

During the period ended December 31, 2007, the Company reclassified this investment from Affiliate investments to Control investments based on the criteria in notes

Advanced Medical Isotope Corporation and Manakoa Services Company are related through common management.

Xethanol Corporation and Metamorphix Global are related through common management.

Stealth MediaLabs, Inc.

and USTelematics, Inc.

are related through common management.

Nine Months Ended September 30,

Supplemental Disclosures of Non-Cash Investing and Financing Activities

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

Derivative liability extinguished in connection with exercise of investor warrants

The Company issued 23,484 shares of common stock in connection with certain acquisition earnout contingencies

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

Noncontrolling interest

Increase to 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 private equity securities offering

Supplemental Disclosures of Cash Flow Information

Cash paid for taxes

Cash paid for interest

See accompanying notes

Page 18 of 46

UTEK Corporation

INNOVARO, INC.

Notes to Consolidated Financial Statements

Three and Nine Months Ended

September 30, 2008 and 2007

Nature of Business and Significant Accounting Policies

Basis of Presentation

Interim Financial Information

The financial information for UTEK Corporation (the "Company", we, us or UTEK) as of September 30, 2008 and 2007 and for the

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

misleading at such dates and for those periods.

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

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

These consolidated financial statements should be read in conjunction with

the consolidated audited financial statements and related notes included in the Companys Form 10-K for the year ended December 31, 2007.

Operating results for the three and nine months ended September 30, 2008 are not necessarily

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

The Company provides services that enable clients to utilize externally developed technologies and create value from their intellectual property.

The Company has built a large subscription-based database of

intellectual properties available for immediate license, which when combined with its global network of universities, research laboratories and companies, provides clients with access to external technologies.

In addition, the Company offers a

comprehensive suite of services for businesses seeking to accelerate growth and reduce costs through the development of enhanced innovation capabilities.

The Company also provides foresight as to the direction of customer and industry trends so

clients businesses can evolve accordingly.

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

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

Innovation Consulting

The Company provides strategic innovation consulting services to clients to help them become more efficient innovators.

The process involves our

clients working with a handful of seasoned and experienced professionals capable of unlocking an organization's capacity for strategy and innovation.

Technology Transfers

To effectuate a technology transfer, we will typically create a newly formed company to acquire a new technology from

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

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

be sold for cash or other assets.

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

We have not acquired, and do not

currently intend to acquire a new technology from a university, medical center and federal research laboratory in connection with our innovation process without the prior agreement of our client to subsequently acquire such new technology from us.

Subscription and Other Services

Acquisition Alliance

The Companys technology acquisition alliance agreements are designed to help our customers enhance their new product pipeline

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

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

services we provide.

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

Page 19 of 46

Patent Analytic Services

UTEK Intellectual Capital Consulting, a division of the Company, uses a team of on-call scientists and industry experts to provide technical and business knowledge to help our clients identify, assess, protect and leverage their

intellectual property assets (IP).

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

This division also identifies gaps in competitors IP portfolios that reveal

opportunities to pursue for our clients.

Online Exchanges and Databases

UTEK Information Services is a division that operates a group of subscription-based websites.

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

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

TechEx is an online searchable database for life science discoveries.

Knowledge Express is a searchable database of valuable 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.

Pharmalicensing is a biopharmaceutical innovation resource designed for professionals involved with 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.

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

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

Principles of

Consolidation

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

laws of the State of Delaware in July 1999.

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

UTEK-Europe, Ltd.

(Europe), UTEK ip , Ltd.

(Israel) and Innovaro, Ltd.

intercompany transactions and balances are eliminated in consolidation.

Portfolio investments are held for the purpose of deriving investment income and

future capital gains.

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

The financial information for Innovaro, Inc.

(the Company, we, us or Innovaro) as of September 30, 2011 and for the three and nine month periods ended

September 30, 2011 and 2010 is unaudited, but includes all adjustments (consisting only of normal recurring accruals), which, in the opinion of management are necessary in order to make the consolidated financial statements not misleading at

such dates and for those periods.

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

therefore, do not include all information and notes required by GAAP for complete consolidated financial statements.

These consolidated financial statements should be read in conjunction with the consolidated audited financial statements and related

notes included in the Companys Annual Report on Form 10-K for the year ended December 31, 2010.

Operating results for the nine months ended September 30, 2011 are not necessarily indicative of the results that may be expected for the

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.

Innovaro is The Innovation Solutions Company.

The focus of the business is to help clients innovate and grow.

Innovaro offers a comprehensive set of services and software to assure the success of any

innovation project, regardless of the size or intent.

The Companys unique combination of consulting services provide innovation expertise, its new LaunchPad software product provides an integrated innovation environment, and technology

services provide any business with the innovation support they need to drive success.

These services are provided internationally from offices in the United States and the United Kingdom.

Principles of Consolidation

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.

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).

All intercompany transactions and balances are eliminated in consolidation.

Reclassifications

Certain reclassifications have been made to the nine months ended September 30, 2008 balances and the three and nine

months ended September 30, 2007 balances to conform to the three months ended September 30, 2008 financial statement presentation.

We determine and allocate the purchase price of an acquired company to the tangible and intangible assets acquired and liabilities assumed

as of the business combination date in accordance with Financial Accounting Standards Board (FASB) Statement No.

141, Business Combinations .

The purchase price allocation process requires us to use significant estimates and assumptions,

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

While we use our best estimates and assumptions as a part of the purchase price

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

As a result, during the purchase price allocation

period, which is generally one year from the business combination date, we record adjustments to the assets acquired and liabilities assumed, with the corresponding offset to goodwill.

In addition, there are contingencies based on earnings included

in some of our purchase agreements.

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

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

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

Page 20 of 46

Goodwill Impairment

The Company determined that there was an impairment of the goodwill related to the Pharma Transfer acquisition in the first quarter of 2007.

The Company recorded a partial impairment of the goodwill for the United States segment in 2007.

This resulted in a write-down of approximately $33,000, $21,000 after tax, which is an operating expense in the consolidated statements of operations for the nine months ended September 30, 2007.

There were no indicators during the nine months

ended September 30, 2008 that required any impairment to goodwill.

Revenue Recognition

Innovation Consulting Services

The Company recognizes certain

strategic consulting revenues in accordance with Statement of Position 81-1, Accounting for Performance of Construction-Type and Certain Production-Type Contracts .

Accordingly, revenues on fixed fee contracts are recognized under the

percentage-of-completion methods of accounting, whereby contract revenues are recognized on a pro rata basis based upon costs incurred to date compared to total estimated contract costs.

In cases where losses are estimated to be incurred upon

completion of contracts, the full provision for such losses is charged to operations when they become known.

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

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

Certain other

consulting revenues are billed on an hourly basis 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 our newly formed companies for securities in the portfolio

company that acquires such newly formed company and the technology held by such newly formed company.

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

In most cases, the consideration received for the rights is

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.

Technology acquisition alliance services are performed pursuant to service

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

These agreements are typically cancelable with thirty days

Revenue from technology acquisition alliance agreements in which unregistered shares of common stock are received before they are earned are

deferred and recognized over the term of each agreement.

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

The common stock received as payment is recorded as

income based on the fair value of the consideration received.

At September 30, 2008, the Company did not have any technology acquisition alliance agreements for which payment was to be received in stock.

During the third quarter of 2008, management

determined that it was more likely than not that net operating loss carryforwards in UTEK would not be utilized in the future and, accordingly, a valuation allowance of $9.3 million was recorded against the related deferred tax asset.

of the valuation allowance ($4.5 million) was recorded as part of the provision for income tax expense and a similar portion ($4.8 million) is included in the change in unrealized depreciation of investments.

The valuation allowance resulted in

a significant additional decrease to our net decrease in net assets from operations and per share values.

Net realized losses on investments in the

accompanying consolidated statements of operations are net of income tax benefits of $(166,102) and $(2,263,822) for the three and nine months ended September 30, 2008, respectively, and $(333,016) and $(1,019,780) for the three and nine months

ended September 30, 2007, respectively.

Change in unrealized appreciation (depreciation) of investments in the accompanying consolidated statements of operations are net of deferred tax expense (benefit) of $(1,048,012) and $(3,490,087) for the

three and nine months ended September 30, 2008, respectively, and $138,616 and $(4,098,150) for the three and nine months ended September 30, 2007, respectively.

In addition, a portion of the aforementioned valuation allowance of ($4.8

million) was included in the change in unrealized depreciation for the three and nine months ended September 30, 2008.

reclassifications have been made to the 2010 balances to conform to the 2011 financial statement presentation.

In particular, reclassifications were made to the revenue line items in the consolidated statements of operations for the three and nine

months ended September 30, 2010 to conform to the Companys new business segments.

Reclassifications were also made to the expense line items in the consolidated statements of operations for the three and nine months ended

September 30, 2010 to move the direct costs associated with these business lines into two separately captioned line items:

direct costs of revenue strategic services and direct costs of revenue technology services.

In addition, reclassifications were made to the equity section of the December 31, 2010 consolidated balance sheet to conform to the

September 30, 2011 presentation.

Reclassifications were made to combine the total accumulated loss under investment company accounting of $(52,073,915) with the accumulated deficit under operating company accounting of $(19,755,429) into one

accumulated deficit line item with a balance of $(71,829,344) as of December 31, 2010.

Restatement of Consolidated Financial Statements

The financial statements as of and for the three and nine months ended September 30, 2011 have been restated to correct the accounting

treatment previously recorded for certain warrants.

The Company has determined that it should not have recorded a derivative liability related to certain warrants as well as unrealized gain and loss for the changes in the value of the warrants.

further review of the warrant agreement, the Company determined that the exercise price associated with the warrants was not subject to adjustment, and accordingly, removal of the variable feature embedded in the warrant exercise price eliminated

the need to record a derivative liability.

The correction of the derivative liability and unrealized gain or loss included in other (income)

and expense as illustrated below, includes an out-of-period adjustment of approximately $518,000 related to the overstatement of the derivative liability and overstatement of other expense during 2010, which was not material to the 2010 consolidated

financial statements.

In addition, the Company determined that the out-of-period adjustment related to 2010 was not material to the annual results for 2011.

The following schedule illustrates the effects on the consolidated financial statements of the reversal of the derivative liability resulting from the above restatement:

As Previously

Consolidated Balance Sheet As of September 30,

Derivative liabilities

Total liabilities

Accumulated deficit

Total Innovaro stockholders equity

Consolidated Statement of Operations

For the Three Months Ended September 30,

Other (income) expense

Total other expenses - net

Net loss before income taxes

Net loss attributable to Innovaro stockholders

Net loss attributable to Innovaro stockholders per share:

Basic and diluted

Consolidated Statement of Operations

For the Nine Months Ended September 30,

Other (income) expense

Total other expenses - net

Net loss before income taxes

Net loss attributable to Innovaro stockholders

Net loss attributable to Innovaro stockholders per share:

Basic and diluted

Significant Accounting Policies

Accounts Receivable

The Company records 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 a component of general and administrative expense in the consolidated statements of operations.

allowance for doubtful accounts and notes was approximately $14,000 and $15,000 as of September 30, 2011 and December 31, 2010, respectively.

Cost Method Investments

Cost method investments were not evaluated for impairment as of

September 30, 2011.

The Company does not estimate the fair value of a cost method investment, before its annual impairment evaluation date of December 31, if there are no identified events or changes in circumstances that may have a

significant adverse effect on the fair value because it is not practicable to estimate fair value on a quarterly basis.

Development Costs

Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) Subtopic

985-20 Costs of Software to Be Sold, Leased or Marketed , requires companies to expense all software development costs incurred until technological feasibility has been established, at which time those costs are capitalized until the product

is available for general release to customers.

In addition, costs incurred to enhance existing software products or after the general release of the product are required to be expensed as incurred as research and development costs.

In accordance with ASC Subtopic 985-20, the Company has expensed all costs incurred to establish the technological feasibility of Version 1.0 of the

Innovaro LaunchPad software (LaunchPad) as research and development costs.

As of June 29, 2011, LaunchPad Version 1.0 reached technological feasibility with the introduction of a working model.

The Company is now incurring costs

related to the refinement of Version 1.0, which will be capitalized until the product is available for general release to market.

The Company capitalized $185,000 in software development costs for each of the three and nine months ended

September 30, 2011.

The Company has begun development of the next components of LaunchPad with Version 2.0.

Costs related to the

development of this and other versions of the software will continue to be expensed until they too reach technological feasibility.

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.

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.

Page 21 of 46

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

Three Months Ended

Nine Months Ended

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 potential dilutive effect of outstanding stock options, warrants and unvested shares of restricted stock.

Components of basic and diluted

per share data are as follows:

September 30,

Weighted-average outstanding shares of common stock

Dilutive effect of stock options

Dilutive effect of stock options, warrants and unvested shares of restricted stock

Common stock and common stock equivalents

Shares excluded from calculation of diluted EPS (1)

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

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

These shares attributable to outstanding stock options, warrants and unvested restricted stock were excluded from the calculation of diluted EPS

because their inclusion would have been anti-dilutive, primarily as a result of having incurred a net loss during the periods presented.

Financial Instruments and Concentrations of Credit Risk

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

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

receivable, accounts payable and accrued expenses.

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.

fair value of U.S.

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

The fair value of all other investments is determined by the Board of Directors as further discussed in Note 3.

The Companys financial

instruments consist of investments, cash and cash equivalents, accounts receivable, accounts payable, accrued expenses, long-term debt and derivative liabilities.

The fair value of accounts receivable, accounts payable and certain accrued expenses

approximate their carrying amounts in the financial statements due to the short-term nature of such instruments.

The estimated fair value of the Companys long-term debt as of September 30, 2011 and December 31, 2010 is not materially

different from its carrying values at such dates.

The fair value of 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 equivalents.

The Company invests its cash and cash equivalents and its U.S.

Treasuries and certificates of deposit with high credit quality financial institutions.

Certain cash and cash equivalents were in excess of FDIC insurance limits at September 30, 2008.

The Company has not experienced any losses on such

The Company had five major customers during the three months ended September 30 2008, four major customers during the nine months ended

September 30, 2008, two major customers during the three months ended September 30, 2007 and four major customers during the nine months ended September 30, 2007.

Major customers, those generating greater than 10% of total income from

operations, accounted for approximately 80% and 75% of the Companys sales during the three months ended September 30, 2008 and 2007, respectively.

Major customers accounted for approximately 66% and 59% of the Companys sales during

the nine months ended September 30, 2008 and 2007, respectively.

Major customers accounted for approximately 55% of accounts receivable at September 30, 2008.

The Companys most significant portfolio investments at September 30, 2008 were in UTEK Real Estate Holdings, Inc., Advanced Medical Isotope Corporation, World Energy Solutions, Inc., MiMedx Group, Inc.

Cyberlux Corporation.

These five investments totaled $10.8 million in fair value and represented 75% of our investments excluding our investments in U.S.

Treasuries and certificates of deposits and 28% of net assets at September 30, 2008.

Use of Estimates

The preparation of the

Companys consolidated financial statements in conformity with accounting principles generally accepted in the United States of America 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 the fair value of the

investments and the purchase price allocation process for business combinations.

Actual results could differ from those estimates.

Recent Accounting

Pronouncements

Effective January 1, 2008, the Company adopted Statement of Financial Accounting Standards (SFAS) No.

Value Measurements as it relates to financial assets and liabilities recognized or disclosed on a recurring basis.

The effective date of this Statement for non-financial assets and liabilities that are not recognized or disclosed on a recurring

basis has been delayed to fiscal years beginning after November 15, 2008.

157 defines fair value, establishes a framework for measuring fair value in accordance with generally accepted accounting principles, and expands

disclosures about fair value measurements.

The adoption of the effective portion of SFAS No.

157 expanded the Companys disclosures regarding the fair value measurements of its investments.

Effective January 1, 2008, the Company adopted SFAS No.

159, The Fair Value Option for Financial Assets and Financial Liabilities including an

amendment of FASB Statement No.

159 expands the use of fair value measurement by permitting entities to choose to measure many financial instruments and certain other items at fair value that are not currently required to be

measured at fair value.

The Companys most significant financial instruments are its investments, which are currently carried at fair value.

The Company has not adopted the fair value provisions of SFAS No.

159 for any of its other

financial assets or liabilities, and therefore, there is no effect on our results of operations or financial position.

Page 22 of 46

In March 2008, the FASB issued SFAS No.

161, Disclosures about Derivative Instruments and Hedging

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

161 is effective for fiscal years

beginning after November 15, 2008.

The adoption of SFAS No.

161 will not impact the Companys consolidated financial statements.

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

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

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

142, Goodwill and Other Intangible Assets.

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

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

In May 2008, the FASB

issued SFAS No.

162, The Hierarchy of Generally Accepted Accounting Principles.

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

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

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

Oversight Board amendments to AU Section 411, The Meaning of Present Fairly in Conformity With Generally Accepted Accounting Principles. The adoption of this statement is not expected to have a material effect on the Companys

financial statements.

Restatement of Consolidated Financial Statements

The financial statements as of and for the three and nine months ended September 30, 2008 have been restated to correct the accounting treatment previously accorded the following transaction.

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

5, Accounting for Contingencies, we should have accrued and reported

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

Pursuant to the terms of the

employment agreement, Dr.

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

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

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

grossed-up to cover any tax liability.

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

Gross had been employed by us for 10.5 years.

Given that the payment obligation was certain to be paid at some point in the future (i.e.,

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

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

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

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

a subsequent extension to the term thereof.

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

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

Gross was entitled to receive pursuant to the employment agreement.

The following schedule illustrates the effects on the account classifications

resulting from the above restatements:

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 has not experienced any losses related to these balances.

The Company had four major customers during each of the three months ended September 30, 2011 and 2010 and two major customers during

each of the nine months ended September 30, 2011 and 2010, all of which were customers of the strategic services line of business.

Major customers, those generating greater than 10% of total revenue, accounted for approximately 80% and 62% of

the Companys revenue during the three months ended September 30, 2011 and 2010, respectively.

Major customers accounted for approximately 54% and 26% of the Companys revenue during the nine months ended September 30, 2011 and

2010, respectively.

In addition, two customers accounted for approximately 65% of accounts receivable as of September 30, 2011.

The preparation of the Companys consolidated financial statements in conformity with 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 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

valuation of derivative liabilities.

Actual results could differ from these estimates.

Recently Issued Accounting Pronouncements

In May 2011, the FASB issued Accounting Standards Update (ASU) 2011-04 Amendments to Achieve Common Fair Value Measurement

and Disclosure Requirements in U.S.

GAAP and IFRSs .

The ASU expands ASC Topic 820s existing disclosure requirements for fair value measurements and makes other amendments that could change how the fair value measurement guidance in ASC

Topic 820 is applied.

The ASU is effective for the Company with the reporting period beginning January 1, 2012.

The adoption of this ASU is not expected to have a significant impact on the Companys financial statements or disclosures.

In June 2011, the FASB issued ASU 2011-05 Presentation of Comprehensive Income , which revises the manner in which entities present

comprehensive income in their financial statements.

The new guidance requires entities to report components of comprehensive income in either (1) a continuous statement of comprehensive income or (2) two separate but consecutive

The ASU is effective for the Company with the reporting period beginning January 1, 2012.

The adoption of this ASU will change the way the Company presents comprehensive income in its financial statements.

In September 2011, the FASB issued ASU 2011-08 Testing Goodwill for Impairment.

Under the revised guidance, entities testing goodwill for

impairment have the option of performing a qualitative assessment before calculating the fair value of a reporting unit in step 1 of the goodwill impairment test.

If entities determine, on the basis of qualitative factors, that the fair value of the

reporting unit is more likely than not greater than the carrying amount, a quantitative calculation is not needed.

The ASU is effective for the Companys annual and interim goodwill impairment tests performed with the reporting period beginning

January 1, 2012 with early adoption permitted.

The adoption of this ASU is not expected to have a significant impact on the Companys financial statements.

Accounts Receivable

Accounts receivable consist of the following as of September 30, 2011 and December 31, 2010:

September 30,

Trade accounts receivable

Allowance for doubtful accounts

Unbilled client costs

Total accounts receivable

Contracts in Process

Contracts in process consist of the following as of September 30, 2011 and December 31, 2010:

September 30,

Contract costs and estimated earnings on uncompleted contracts

advances and progress payments

Total contracts in process

Components of contracts in process consist of the following as of September 30, 2011 and December 31, 2010:

September 30,

Billings in excess of costs and estimated earnings on uncompleted contracts

Costs and estimated earnings in excess of billings on uncompleted contracts

Total contracts in process

Available-for-Sale Securities

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

Investments Debt and Equity Securities and its intentions regarding these instruments.

A summary of the estimated fair value of available-for-sale securities as of September 30, 2011 and December 31, 2010 is presented below.

Unrealized (1)

As of September 30, 2011

Net assets, as previously reported

Adjustment to accrue severance liability

Net assets, as restated

Net asset value per share, as previously reported

Net asset value per share, as Restated

For the three and nine months ended September 30, 2008:

Net decrease in net assets from operations, as previously reported

Adjustment to reverse tax benefit of severance liability

Adjustment to accrue severance liability

Net decrease in net assets from operations, as restated

Net decrease in net assets from operations per share, as previously reported

Net decrease in net assets from operations per share, as restated

Stock-Based Compensation

The Company had two stock-based equity compensation plans at September 30, 2008.

See Note 8 of our consolidated financial statements included in the Companys Form 10-K for the year ended December 31,

In June 2008, the Companys stockholders approved an amendment to the Companys Amended and Restated Employee Stock Option Plan to increase the number of shares of common stock authorized for issuance under the Plan by 600,000

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

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

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

During the three and nine months ended September 30, 2008, respectively, we granted 88,500 and 312,500 options to purchase shares of common stock.

During the three and nine months ended September 30, 2007, respectively, we granted 22,500

and 204,500 options to purchase shares of common stock.

At September 30, 2008, there were 2,300,000 shares authorized for issuance and the Company had 840,563 shares available for future stock option grants under existing plans.

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

123(R), Share-Based Payment .

Under the modified prospective

approach of SFAS 123(R), compensation cost recognized during the nine months ended September 30, 2008 and 2007 includes compensation cost for all share-based payments granted prior to, but not yet vested as of January 1, 2006, based on the

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

the provisions of SFAS 123(R).

The Company recorded approximately $202,000 and $167,000 for the three months ended September 30, 2008 and 2007,

respectively, and $560,000 and $443,000 for the nine months ended September 30, 2008 and 2007, respectively, in compensation expense related to share-based payments pursuant to SFAS 123(R).

Stock-based compensation expense is included in

salaries and wages in the accompanying consolidated statements of operations.

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

value of stock-based awards on the date of grant.

The assumptions employed in the calculation of the fair value of stock-based compensation expense for the three and nine months ended September 30, 2008 and 2007 were determined as follows:

Expected dividend yield based on the Companys historical dividend yield.

Expected volatility based on the Companys historical market price at consistent points in a period equal to the expected life of the options.

Risk-free interest rate based on the U.S.

Treasury yield curve in effect at the time of grant.

Expected life of options 2008:

based on the Companys historical life of options exercised;

calculated using the simplified method as prescribed

in Staff Accounting Bulletin No.

107, where the expected life is equal to the sum of the vesting period and the contractual term divided by two.

As of December 31, 2010

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

As of September 30, 2011, none of our five available-for-sale securities were in an unrealized loss position.

Company had no sales of available-for-sale securities during the three and nine months ended September 30, 2011.

Proceeds from the sale of available-for-sale securities were approximately $63,000 and $312,000 for the three and nine months ended

September 30, 2010, respectively.

The Company recognized an impairment loss of $201 on available-for-sale securities during the nine months ended September 30, 2011.

Gross realized gain (loss) as a result of the sale of available-for-sale

securities was approximately $(57,000) and $54,000 for the three and nine months ended September 30, 2010, respectively.

In addition, the Company recognized an impairment loss to available-for-sale securities of approximately $146,000 during

the nine months ended September 30, 2010.

The realized gain (loss) related to available-for-sale securities is included as a component of other (income) expense in the consolidated statements of operations.

Fair Value Measurements

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

and Disclosures .

ASC 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.

ASC 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:

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

Page 10 of 30

The weighted-average input assumptions used and resulting fair values were as follows during the nine months ended

September 30, 2008 and 2007.

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

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

Level 3Unobservable inputs for the asset or liability.

Assets and liabilities measured at fair value on a recurring basis by level within the fair value hierarchy as of September 30, 2011 and December 31, 2010 are as follows:

Fair Value Measurements

September 30, 2011 (1)

Fair Value Measurements at

December 31, 2010 (1)

Using Level 2

Available-for-sale securities

Derivative liabilities

Total liabilities

The Company did not have any assets or liabilities measured at fair value using Level 1 or Level 3 of the fair value hierarchy as of September 30,

2011 or December 31, 2010.

The Companys investments in available-for-sale securities are classified within Level

2 of the fair value hierarchy.

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

The determined values are

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

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

similar instruments in an active market.

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

The Company utilizes the market approach in determining the fair value of

these securities.

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

The Company utilizes

the Black-Scholes 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.

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

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

Derivative Liabilities

In accordance with FASB ASC Topic 815 Derivatives and Hedging , the Company has recorded derivative liabilities for certain stock

warrants with variable exercise prices.

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 as

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

The Company recognized a gain (loss) related to the adjustment of these derivatives to fair value of approximately $ - 0 - and $776,000 for the three months ended

September 30, 2011 and 2010, respectively, and $(150,825) and $818,000 for the nine months ended September 30, 2011 and 2010, respectively.

The Company uses the Black-Scholes Model to estimate the fair value of the derivative instrument.

The Company employed the following assumptions for the Black-Scholes Model at December 31, 2010:

Expected dividend yield

2 unchanged sentences

Expected life

Grant date fair value

Net cash proceeds from the exercise of stock options were approximately $190,000 and $523,000 for the nine months

ended September 30, 2008 and 2007, respectively.

At September 30, 2008, there was approximately $2,057,000 of unrecognized compensation cost related to share-based payments, which is expected to be recognized over a weighted-average period

of 3.0 years.

The following table represents stock option activity as of and for the nine months ended September 30, 2008:

Options Outstanding - January 1, 2008

Forfeited/expired/cancelled

Options Outstanding - September 30, 2008

Outstanding Exercisable - September 30, 2008

The total grant date fair value of options vested during the nine months ended September 30, 2008 and 2007

was $352,000 and $283,000, respectively.

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

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

With respect to equity securities in privatelyowned companies,

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

When an external event such as a purchase

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

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

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

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

These factors may include, but are not limited to, type of securities, nature of business, marketability, market price of unrestricted

securities of the same issue (if any), comparative valuation of securities of publicly traded companies in the same or similar industries, current financial conditions and operating results, sales and earnings growth, operating revenues, competitive

conditions and current and prospective conditions in the overall stock market.

Without a readily available market value, the value of our portfolio of

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

Substantially all of the Companys investments owned at

September 30, 2008 and December 31, 2007 are stated at fair value as determined by the Board of Directors, in the absence of readily available fair values.

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

its investments.

3.8 - 5.0 years

Page 11 of 30

Shares of stock received by portfolio companies in exchange for both strategic alliance services and technology transfer

transactions are recorded at fair value on the day that the transactions are executed.

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

The certificates are received subsequent to the transaction date.

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 and the provisions of the Investment Company Act of 1940 and SFAS No.

157 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.

Inputs are classified into one of three categories:

Level 1Quoted prices (unadjusted) in active markets for identical assets

Level 2Inputs other than quoted prices that are observable to the market participant for the asset or quoted prices in a market that is not active

Level 3Unobservable inputs

When there are

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

Assets measured at fair value on a recurring basis by level within the fair value hierarchy at September 30, 2008, were as follows:

Fair Value Measurements at Reporting Date Using

Fair Value at

Quoted Prices in

Active Markets

for Identical

Assets (Level 1)

Inputs (Level 2)

Inputs (Level 3)

In May 2008, the Company received repayment of its entire loan receivable held with certain subsidiaries of UTEK

Real Estate Holdings, Inc.

This loan receivable was previously included in the Companys investment portfolio at December 31, 2007.

This repayment resulted in additional cash inflows of $2 million during the nine months ended

Warrant Exercise

Effective April 6, 2011, 437,500 of the Companys $0.01 fully vested common stock warrants were exercised.

The derivative liability related to the warrants was adjusted to fair value of

approximately $1.3 million on the date of exercise.

The derivative liability related to the warrants was effectively extinguished through the adjustment of the $1.3 million from derivative liabilities to additional paid-in capital at the above

exercise date.

Accumulated Other Comprehensive Income

Components comprising accumulated other comprehensive income as of and for the nine months ended September 30, 2011 are as follows:

Unrealized gain

available-for-

sale securities

Foreign currency

comprehensive

Balances at December 31, 2010

Gain (loss) for the period

Balances at September 30, 2011

Other (Income) Expense

Components comprising other (income) expense for the three and nine months ended September 30, 2011 and 2010 are as follows:

September 30,

Technology Transfers

our technology transfers are generally completed as set forth in our technology acquisition alliance service agreements with our clients.

During the nine months ended September 30, 2008, the Company completed the following seven technology

Name of Company Acquiring

the Newly Formed Company

Newly Formed Company

Consideration

Unregistered Shares or

RIM Semiconductor Company

Broadband Distance Systems, Inc.

RIM Semiconductor Company

Multi-Carrier Communications, Inc.

Platina Energy Group Inc.

Enhanced Oil Recovery Technologies, Inc.

92,000 preferred

World Energy Solutions, Inc.

Advanced Alternative Energy, Inc.

100,000 preferred

CSMG Technologies, Inc.

Carbon Capture Technologies, Inc.

World Energy Solutions, Inc.

H-Hybrid Technologies, Inc.

100,000 preferred

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

Represents the valuation price per share at the date of acquisition.

Represents a technology transfer assistance fee we received for assisting Artilium Plc with an acquisition.

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

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

Preferred B shares convertible into common shares based on a value of $3,750,000.

Page 25 of 46

During the nine months ended September 30, 2007, the Company completed the following fourteen technology transfers:

Name of Company Acquiring the Newly

Formed Company

Newly Formed Company

Consideration

Unregistered Shares or

Manakoa Services Corporation

Infinite Identification Technologies, Inc.

95,000 preferred

Cyberlux Corporation

Hybrid Lighting Technologies, Inc.

50,000 preferred

26,500,000 common

CytoDyn, Inc.

Advanced Genetic Technologies, Inc.

100,000 preferred

Material Technologies, Inc.

Stress Analysis Technologies, Inc.

47,500 preferred

Liberty Diversified Holdings, Inc.

Sero Tonin Solutions, Inc.

63,981 preferred

Metamorphix Global, Inc.

Flex Crete Technologies, Inc.

Klegg Electronics, Inc.

Tempo Control Technologies, Inc.

Avalon Oil & Gas, Inc.

Leak Location Technologies, Inc.

Material Technologies, Inc.

Damage Assessment Technologies, Inc.

Klegg Electronics, Inc.

Klegg Network Storage Technologies, Inc.

Material Technologies, Inc.

Non-Destructive Assessment Technologies, Inc.

Pathway One Plc

WebMed Technologies, Inc.

MachineTalker, Inc.

Wideband Detection Technologies, Inc.

World Energy Solutions, Inc.

Hydrogen Safe Technologies, Inc.

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

Represents the valuation price per share at the date of acquisition.

Preferred A shares convertible into common shares based on a value of $3.8 million.

Preferred C shares convertible into common shares based on a value of $768,500.

Preferred A shares convertible into common shares based on a value of $1.3 million.

Preferred E shares convertible into common shares based on a value of $926,250.

Preferred D shares convertible into common shares based on a value of $638,000.

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.

was dissolved and is now an operating

unit of UTEK and is doing business as and is referred to as Strategos throughout this Form 10-Q.

We acquired Strategos primarily to expand our strategic innovation consulting services.

We have included the financial results of Strategos

from the date of acquisition in our consolidated financial statements as of September 30, 2008.

Preliminary Purchase Price

Strategos was acquired for potentially 1,248,960 shares of UTEK unregistered common stock valued at $15 million as of such date.

Under the terms of the acquisition

agreement, 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 are eligible to receive an additional 745,990

shares of UTEK unregistered common stock, which are being held in escrow, pursuant to meeting specific revenue targets for 2008 and 2009 (contingency shares).

The Company recorded a contingent liability of approximately $1,952,000 with

respect to the contingency shares, which reflected the amount of the fair value of the assets acquired in excess of the cost.

When the contingency is resolved and the consideration is issued or becomes issuable, any excess of the fair value of the

contingent consideration issued or issuable over the amount that was recognized as if it was a liability will be recognized as an additional cost of the acquisition.

As of September 30, 2008, 329,670 contingency shares, with a value of

approximately $3,959,000, were issued and earned and were recognized as an additional cost of the acquisition.

This also resulted in a reduction of the contingent liability balance to zero.

Page 26 of 46

Preliminary Purchase Price Allocation

Pursuant to our business combinations accounting policy, the total purchase price for Strategos was allocated to the net tangible assets and intangible assets acquired based upon their estimated fair values as of

April 17, 2008, as set forth below.

The excess of the net tangible assets and intangible assets acquired over the purchase price resulted in a contingent liability.

The preliminary allocation of the purchase price was based upon the preliminary

purchase price, which is subject to change based on the earnout of the contingency shares through December 2009.

Our preliminary purchase price allocation as of September 30, 2008 is as follows:

Cash and cash equivalents

Accounts receivable

Other tangible assets

Intangible assets

Accounts payable and other liabilities

Deferred revenues

Deferred tax liability

Total preliminary purchase price

Intangible Assets

The following table sets forth the preliminary components of intangible assets associated with the Strategos acquisition:

Trade names/trademarks/websites

Proprietary processes/know-how

DiscoverySpace software platform

Non-compete agreements

Customer list

Total intangible assets

Other 2008 Acquisitions

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 $2,150,000, to Partnering Intelligence in consideration

for all of the shares of Pharmalicensing owned by Partnering Intelligence.

The value of the shares was based on the average ten-day closing price prior to execution of the stock purchase agreement.

The shares acquired represent 100% of the issued

and outstanding shares of Pharmalicensing.

The Company acquired the shares of Pharmalicensing through its subsidiary UTEK Europe, Ltd.

Transfer of the 153,967 shares of UTEK common stock is restricted for twelve months following the completion of

the transaction.

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.

Innovaro was acquired for potentially 691,714 shares of UTEK unregistered common stock valued at $7.4 million as of such date.

The number of shares is based on the average twenty-day closing

price prior to execution of the stock purchase agreement.

Under the terms of the agreement, Innovaro stockholders received one half, or 345,857, of the UTEK shares worth $3.7 million at closing.

Transfer of the 345,857 UTEK unregistered shares is

restricted for at least 12 months following the close of the transaction.

The remaining UTEK shares are held in escrow, to be released in three installments, 12, 24 and 36 months after closing.

Delivery of the escrowed shares to Innovaro is

dependent on the achievement of specific revenue targets for the three years following the closing.

If such targets are not met, a portion of the escrowed shares will be returned to UTEK.

The cost of these contingent shares will be accounted for as

an additional element of the purchase price when and if the shares are earned.

A summary of these acquisitions are as follows:

Pharmalicensing

Tangible assets acquired

Intangible assets acquired

Goodwill acquired

September 30,

Loss (gain) on sale and impairment of investments

Loss (gain) on derivative liabilities

Rental income

Other (income) expense

Comprehensive Income (Loss)

Comprehensive income (loss) for the nine months ended September 30, 2011 and 2010 is as follows:

Nine Months Ended September 30,

Net loss attributable to Innovaro stockholders

Other comprehensive income (loss):

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

Foreign currency translation adjustment

Accounts payable and other liabilities assumed

Total preliminary purchase price

Page 27 of 46

We have included the financial results of Pharmalicensing and Innovaro from their respective dates of acquisition in our

consolidated financial statements as of September 30, 2008.

Unaudited Pro Forma Financial Information

The unaudited financial information in the table below summarizes the combined results of operations of Strategos, 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 depreciation and amortization expenses from acquired fixed assets and intangible assets, respectively, and related tax effects as though the companies had been combined as of the beginning of fiscal

The unaudited pro forma financial information for the nine months ended September 30, 2008 combines the historical results of UTEK for the nine

months ended September 30, 2008 and the historical results of Strategos, Innovaro and Pharmalicensing for the nine months ended September 30, 2008, and the pro forma adjustments discussed above.

The unaudited pro forma financial

information for the nine months ended September 30, 2007 combines the historical results of UTEK for the nine months ended September 30, 2007 and the historical results of Strategos, Innovaro and Pharmalicensing for the nine months ended

September 30, 2007, and the pro forma adjustments discussed above.

Nine Months Ended Sept 30,

Total income from operations

Net decrease in net assets from operations

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

Intangible Assets and Goodwill

The changes in intangible assets for the nine months ended September 30, 2008 were as follows:

Sept 30, 2008

Trade names/trademarks/websites

Proprietary processes/know-how

Software platform

Non-compete agreements

Customer list

Currency exchange

Accumulated amortization

The weighted average useful life for $831,598 of the trade names/trademarks/websites is 5.9 years and the remaining $2,278,748 has a weighted average useful life that is indefinite.

Indefinite lived intangible assets are not amortized for GAAP purposes.

Total amortization expense related to our intangible assets was

approximately $545,000 and $51,000 for the nine months ended September 30, 2008 and 2007, respectively.

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

For the twelve months ending September 30,

Page 28 of 46

The changes in the carrying amount of goodwill, which is generally not deductible for tax purposes, by reporting unit for

the nine months ended September 30, 2008 were as follows:

Sept 30, 2008

Knowledge Express purchase

Pharma-Transfer purchase

EKMS purchase

UTEK-Europe purchase

Pharmalicensing purchase

Strategos purchase & earnout

Innovaro purchase & earnout

Currency exchange

Stockholders Equity

Transactions in common stock for the nine months ended September 30, 2008, were as follows:

Balance at December 31, 2007

Employee stock options exercised

Share-based compensation expense

Acquisition of Pharmalicensing

Acquisition of Strategos

Acquisition of Innovaro

Strategos earnout accrual

Innovaro earnout accrual

Balance at September 30, 2008

See Note 3 for further information on share-based compensation expense and employee stock options exercised.

See Note 5 for further information on acquisitions and the earnout accrual.

Commitments and Contingencies

Employment Agreements

On March 10, 2008, UTEK entered into a one

year employment agreement, effective January 1, 2008, with its Chief Executive Officer, Clifford M.

Under the terms of the employment agreement, Dr.

Gross will receive a base salary of $550,000 per year and for each annual

period thereafter.

In addition to his base salary, Dr.

Gross will be entitled to:

A reasonable automobile allowance to cover the cost of leasing, insuring and maintaining a vehicle for the duration of the employment agreement, and

Participate in UTEKs executive officer health insurance program.

UTEK will pay all of the premiums related to Dr.

Gross participation in such

The employment agreement provides that if (i) Dr.

Gross is terminated or requested or forced to resign during the

term of the employment agreement, (ii) the employment agreement is not renewed at the end of its term by either party or (iii) UTEK terminates Dr.

Grosss employment for cause or in any way that is a breach of the employment

agreement, then Dr.

Gross shall receive a severance payment equal to the number of years Dr.

Gross has worked for the Company times $100,000 per year, grossed-up to cover any tax liability on such severance payment.

addition, all stock options held by Dr.

Gross accelerate and become immediately vested, and we will be obligated to file a registration statement with the SEC to register any of our unregistered securities held by Dr.

Other comprehensive income (loss)

Comprehensive loss

Page 12 of 30

The employment agreement also provides that in the event of a change of control, Dr.

Gross will be

entitled to receive a one-time bonus equal to twice his annual salary, grossed-up to cover any tax liability on such bonus.

In addition, all stock options held by Dr.

Gross accelerate and become immediately vested upon a change of

control, and the Company will be obligated to file a registration statement with the SEC to register any of its unregistered securities held by Dr.

A change of control occurs, as defined in the employment agreement, when:

(i) a person or group becomes the beneficial owner of more than 30% of our outstanding securities;

(ii) at any time that the board nominated slate of directors is not elected;

(iii) the Company consummates a merger in which it is not

the surviving entity;

or (iv) substantially all of the Companys assets are sold or the stockholders approve the Companys dissolution or liquidation.

The employment agreement obligates the Company to nominate Dr.

Gross to serve as a member of our Board of Directors during the term of the employment agreement.

In consideration of the benefits provided under the employment agreement, Dr.

Gross has agreed to protect UTEKs confidential or secret information and, during

the period of employment and one year thereafter, to not compete with UTEK.

Strategos Bonus Plan

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

Strategos division employees.

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

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

The Company accrued approximately $4.8 million in connection with the Strategos Bonus Plan as of September 30, 2008.

Innovaro Bonus

In connection with the acquisition of Innovaro, the Company implemented the Innovaro Bonus

Plan for qualifying Innovaro division employees.

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

Awards are to be paid out by

June 30 th of each year and are accrued on a quarterly basis.

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

with this bonus plan.

There was no accrual in connection with the Innovaro Bonus Plan as of September 30, 2008.

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

Some of these

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

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

operations and financial position.

In May 2008, we obtained a $1,000,000 line of credit with the Bank of Tampa.

The advances on the line of credit accrue

interest (payable monthly) at prime (5.00% as of September 30, 2008).

The principal and any unpaid interest are due upon demand.

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

borrowings on this line at September 30, 2008.

Segment Reporting

The Companys principal area of activity is providing technology transfer services and supporting innovation consulting services.

The Company has three reportable operating segments:

United Kingdom, Israel and

the United States.

The United Kingdom segment includes our wholly owned subsidiary UTEK-Europe, Ltd.

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

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

Page 30 of 46

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

United States

Long-lived assets September 30, 2008

Total assets September 30, 2008

Long-lived assets December 31, 2007

Total assets December 31, 2007

FASB 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.

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

0000000000000,

For the Three Months Ended September 30, 2011

United States

Income from operations (revenues)

Income (loss) before income taxes

Loss before income taxes

Depreciation and amortization

1 unchanged sentence

United States

Income from operations (revenues)

Income (loss) before income taxes

Loss before income taxes

Depreciation and amortization

For the Nine months ended September 30, 2008 (Restated)

000000000000,,

For the Nine Months Ended September 30, 2011

United States

Income from operations (revenues)

Income (loss) before income taxes

Loss before income taxes

Depreciation and amortization

1 unchanged sentence

United States

Income from operations (revenues)

Income (loss) before income taxes

Loss before income taxes

Depreciation and amortization

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

approximately $753,000.

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

During the nine months ended September 30, 2007, the United States segment recorded goodwill impairment for Pharma Transfer of $33,030, which is included in that segments

loss for the period.

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

additional information for management.

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

Consequently, the Company has new

product segments for which certain information can be reported.

These new product segments include:

technology transfer business;

innovation consulting comprised of the consulting portion of Strategos and Innovaro businesses;

subscription services

comprised of the Companys information services business;

and all other services comprised of Intellectual Capital Consulting, technology alliance services, and the TekScout business.

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.

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

Loss before income

taxes for the United Kingdom segment included impairment charges of approximately $2.9 million for each of the three and nine months ended September 30, 2010.

Loss before income taxes for the United States segment included impairment charges of approximately $8.7 million for each of the three and nine months

ended September 30, 2010.

From time to time, the Company will reorganize its internal organizational structure to

better align its service offerings.

In 2011, we reorganized into two new lines of business:

Strategic Services and Technology Services.

As a result, line of business segment information for the three and nine months ended September 30, 2010 has

been restated to reflect these new segments.

Page 13 of 30

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

For the Three Months Ended September 30, 2008

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

0000000000000,

For the Three Months Ended September 30, 2011 (Restated)

Administrative

Income from operations (revenue)

Income (loss) before income taxes

For the Three Months Ended September 30, 2010

Administrative

Loss before income taxes

For the Nine Months Ended September 30, 2011 (Restated)

Administrative

Income from operations (revenue)

Income (loss) before income taxes

Related Party Transactions

During the nine months ended September 30, 2008 and 2007, we loaned funds for operations and real estate improvements of approximately $0 and $721,000, respectively, to certain subsidiaries of UTEK Real Estate

Holdings, Inc., one of UTEKs portfolio companies.

The entire outstanding loan balance of approximately $2 million was repaid to the Company in May 2008.

In addition, we paid rent of approximately $255,000 and $193,000 to Ybor City Group, Inc.,

a subsidiary of UTEK Real Estate Holdings, Inc., during the nine months ended September 30, 2008 and 2007, respectively.

Subsequent Events

On October 10, 2008, pursuant to a stock exchange agreement the Company purchased 100% of Social Technologies Group, Inc.

a company incorporated in Virginia.

STG was acquired for potentially 998,027 shares of UTEK unregistered common stock valued at approximately $10.2 million as of such date.

The number of shares is based on the average ten-day closing price prior to

execution of the stock exchange agreement.

Under the terms of the agreement, STG stockholders received one half, or 499,013 of the UTEK shares worth approximately $5.1 million at closing.

Transfer of the 499,013 UTEK unregistered shares is

restricted for at least 12 months following the close of the transaction.

The remaining UTEK shares are held in escrow, to be released in three installments, 12, 24 and 36 months after closing.

Delivery of the escrowed shares to STG is dependent on

the achievement of specific revenue targets for the three years following the closing.

If such targets are not met, a portion of the escrowed shares will be returned to UTEK.

The cost of these contingent shares will be accounted for as an additional

element of the purchase price when and if the shares are earned.

In connection with this acquisition, the Company assumed a $600,000 bank note that is payable over a four-year term.

The Company disclosed herein all information regarding this acquisition that was practicable as of the date of this filing given the time constraints.

Administrative00,

For the Nine Months Ended September 30, 2010

Administrative

Loss before income taxes

Loss before income taxes for the strategic services segment included impairment charges of approximately $4.9 million for each of the three and nine

months ended September 30, 2010.

Loss before income taxes for the technology services segment included impairment charges of approximately $5.5 million for each of the three and nine

months ended September 30, 2010.

Loss before income taxes for administrative and other included impairment charges of approximately $1.3 million for each of the three and nine months

ended September 30, 2010.

Stock Compensation Plans

In June 2011, the Companys stockholders approved an amendment and restatement of the Companys three existing equity

compensation plans as one plan, the Innovaro, Inc.

Equity Compensation Plan (the Equity Compensation Plan).

The maximum number of shares available for issuance under the Equity Compensation Plan is 4,626,274, which is the total number of

shares available under the existing Non-Qualified Option Plan, Employee Option Plan and Restricted Stock Plan.

The options and restricted stock previously granted under the three existing equity compensation plans are counted in determining the

shares that remain available for issuance under the Equity Compensation Plan.

The Compensation Committee of the Companys Board of Directors determines those officers, employees, directors and consultants of the Company who are eligible to

participate in the Equity Compensation Plan.

Page 14 of 30

Managements Discussion and Analysis of Financial Condition and Results of Operations

Special Note Regarding Forward-Looking Statements

The following discussion should be read in conjunction with

our consolidated financial statements and the notes thereto included elsewhere in this Form 10-Q/A.

This Form 10-Q/A contains forward-looking statements regarding the plans and objectives of management for future operations.

These forward-looking

statements may involve known and unknown risks, uncertainties and other factors which may cause our actual results, performance or achievements to be materially different from future results, performance or achievements expressed or implied by any

forward-looking statements.

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

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

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

projections included in these forward-looking statements will come to pass.

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

The following discussion should be read in conjunction with our consolidated financial statements and the notes thereto included elsewhere in this Form 10-Q/A.

This Form 10-Q/A contains forward-looking

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

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

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

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

generally identifiable by use of the words "may," "will," "should," "expect," "anticipate," "estimate," "believe," "intend" or "project" or the negative of these words or other variations on these words or comparable terminology.

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

Our actual results could differ materially from those expressed

or implied by the forward-looking statements as a result of various factors.

Business Overview

Innovaro is The Innovation Solutions Company.

The focus of our business is to help clients innovate and grow.

Innovaro offers a comprehensive set of

services and software to assure the success of any innovation project, regardless of the size or intent.

Our unique combination of consulting services provide innovation expertise, our new LaunchPad software product provides an integrated innovation

environment, and technology services provide any business with the innovation support they need to drive success.

These services are provided internationally from our offices in the United States and the United Kingdom.

People are the key to providing innovation expertise though our consulting services.

Our people have defined and refined our methodology for over 15

years with more than 250 clients in over 750 engagements, which has created a proven effective process to get a company through the innovation cycle.

This process has served to develop our Leading Edge Innovation Practices (LEIPs)

contained within our methodology.

We provide strategic services to enable our clients to become more efficient by finding new avenues to

grow, fighting commoditization, improving return on investment, transforming the organization, and removing barriers to innovation.

Business value is delivered to clients through working with a team of seasoned and experienced professionals capable

of unlocking an organizations capacity by:

Identifying and developing new segments and markets;

Creating and acting on game-changing strategies;

Building an enterprise-wide capability for innovation;

Accelerating and improving new product development processes;

Assessing a companys innovation capability.

Our technology services business provides information to assist clients in gaining insights and making decisions.

We offer expansive networks, experts in scouting, partner sourcing and licensing

expertise, and world leading online marketplaces.

We also provide an important foundation to successful licensingunderstanding the true potential value of our clients intellectual property IP and IP portfolio.

We access that

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

We have an online

information service, purpose-built for those who need it mosttechnology transfer, business development, intellectual property, competitive intelligence, and marketing professionals across the physical and life sciences.

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

From current market research to

predictive intelligence, we help our clients find insights at the intersections affecting their business.

Our research identifies and explains key consumer trendsincluding emerging trends not covered by other sourcesand delivers insights

about how these trends will shape the future operating environment.

Our LaunchPad software product provides an integrated innovation

environment which embodies our LEIPs to offer a process that is repeatable, reliable and scalable.

LaunchPad helps innovation teams by making their jobs better, faster and easier.

Page 15 of 30

Recent Business Developments

In 2008, the Company continued to enhance its ability to provide comprehensive innovation consulting

services for clients.

To enhance our ability to provide these services, the Company has acquired four companies since January 2008 and has launched the TekScout division.

We believe that collectively, these efforts have increased the Companys

ability to service its clients.

In subsequent periods it is our intention to pursue additional strategic acquisitions to further enhance our innovation capabilities, the number of clients we can service and our geographic representation.

In January 2008, the Company acquired Pharmalicensing.com, a biopharmaceutical open innovation resource designed for professionals involved with partnering,

licensing, and business development worldwide.

In April 2008, the Company acquired Carmi, Inc., a 100% owned subsidiary of Strategos, LLC, a strategic innovation consulting firm that provides consulting services, primarily to large companies.

July 2008, the Company acquired Innovaro Limited, a European innovation consulting and insight firm.

In October 2008, the Company acquired Social Technologies Group, Inc., an innovation consulting and insight firm.

Executive Summary

Our total assets were $47.3 million and

our net assets were $37.2 million at September 30, 2008, compared to $45.2 million and $43.7 million at December 31, 2007, respectively.

Net asset value per share was $3.58 at September 30, 2008 and $4.85 at December 31, 2007.

September 30, 2008, we had no long-term debt outstanding, $5.6 million in cash and cash equivalents and $3.2 million of investments in U.S.

Treasuries and certificates of deposit.

Income from operations for the nine months ended September 30, 2008 totaled approximately $15.7 million, as compared to $18.0 million for the nine months ended September 30, 2007.

Net income (loss) from

operations for the nine months ended September 30, 2008 totaled approximately $(8.1 million) as compared to $4.4 million for the same period of 2007.

Net realized losses on investments, net of deferred tax effect, totaled approximately $(3.8

million) for the nine months ended September 30, 2008 as compared to $(1.7 million) for the same period of 2007.

In this regard, we received gross proceeds of $1.9 million for the nine months ended September 30, 2008 and $1.2 million for

the same period of 2007 in connection with the sale of the securities we received in connection with our technology acquisition alliance agreements and technology transfers.

Net change in unrealized depreciation of investments, net of deferred tax

benefit, was $(10.6 million) for the nine months ended September 30, 2008 as compared to $(6.8 million) for the same period of 2007.

financial condition is dependent on a number of factors including our ability to effectuate technology transfers and the performance of the equity investments that we receive in connection with these transfers.

Substantially all of our investments

are in development stage and start-up companies and thinly traded public companies.

These businesses are thinly capitalized, unproven, small companies that lack management depth, are dependent on new, commercially unproven technologies and have no

or a limited history of operations.

Current Market Conditions

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

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

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

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

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

Moreover, the deterioration in the equity markets has

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

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

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

Technology Transfers and Technology Acquisition Alliances

For the nine months ended September 30, 2008, we had a similar number of active technology acquisition alliance clients over September 30,

2007, but due to the longer time required to close technology transfers with our expanding client base of larger client companies, the number of completed technology transfers decreased.

The following provides additional information regarding our

technology acquisition alliance and technology transfer activities:

As of September 30, 2008, we had 50 active technology acquisition alliance agreements as compared to 53 active technology acquisition alliances at

September 30, 2007;

Innovaro LaunchPad

We are continuing the development of our innovation management software platform, Innovaro LaunchPad (LaunchPad), which is designed to enhance and complement our innovation service offerings

Previously in 2011, we introduced a working model of Version 1.0 of the LaunchPad software to certain customers.

We will continue to incur costs related to the refinement of Version 1.0 while proceeding with the development of

the next components of LaunchPad with Version 2.0.

The next components of LaunchPad are designed to take the outputs from the current product and extend them further into the organizations product delivery process.

Recent Developments

2011, our Board of the Directors increased its size from four to five directors and, upon the recommendation of the Nominating and Corporate Governance Committee, elected Asa Lanum as a new director.

In addition, our Board of

Directors appointed Mr.

Lanum, who has served as our interim Chief Executive Officer since August 2010, as our permanent Chief Executive Officer.

In connection with such appointment, we agreed to pay Mr.

Lanum an annual base salary of

$325,000 and awarded him options to purchase 250,000 shares of the Companys common stock.

Effective April 22, 2011, Peter C.

Skarzynski resigned from his position as Managing Director of the strategic services division.

In accordance with the terms of his employment agreement, Mr.

Skarzynski remains bound by a covenant regarding the protection of our confidential

information and a one-year covenant not to solicit our clients or employees.

Skarzynski continues to act as a consultant for us.

April 22, 2011, we appointed Gary Getz as Managing Director of the strategic services division.

Getz has held a management position at Innovaro since its acquisition of Strategos in 2008, and held a management position at Strategos

since that companys founding.

In June 2011, our stockholders approved an amendment and restatement of our three existing equity

compensation plans as one plan, the Innovaro, Inc.

Equity Compensation Plan (the Equity Compensation Plan).

The maximum number of shares available for issuance under the Equity Compensation Plan is 4,626,274, which is the total number of

shares available under the existing Non-Qualified Option Plan, Employee Option Plan and Restricted Stock Plan.

The options and restricted stock previously granted under the three existing equity compensation plans are counted in determining the

shares that remain available for issuance under the Equity Compensation Plan.

The Compensation Committee of the Companys Board of Directors determines those officers, employees, directors and consultants who are eligible to participate in the

Equity Compensation Plan.

The amendment and restatement of the three existing plans as the Equity Compensation Plan did not increase the number of shares of common stock authorized for issuance as stock-based incentive compensation, but gives the

Compensation Committee greater flexibility to make grants of non-qualified options, incentive stock options or restricted stock as it deems appropriate, since one maximum limit will apply to all three types of stock-based incentive compensation.

Financial Condition

total assets were $24.1 million as of September 30, 2011 and $24.7 million as of December 31, 2010.

As of September 30, 2011, we had $1.5 million in cash and cash equivalents, $1.2 million in accounts receivable and contracts in

process, $3.7 million in accounts payable, accrued expenses and accrued bonus and $5.4 million in total debt outstanding.

As of December 31, 2010, we had $263,000 in cash and cash equivalents, $2.0 million in accounts receivable and contracts

in process, $1.5 million in accounts payable and accrued expenses and $5.8 million in total debt outstanding.

As of September 30, 2011, we had a working capital deficit of $1.4 million and an accumulated deficit of $74.6 million.

Page 16 of 30

During the nine months ended September 30, 2008, we completed 7 technology transfers valued at approximately $4.7 million as compared to 14 technology

transfers valued at approximately $14.8 million in the same period of 2007.

Portfolio Activity

The following is a list of significant changes in our portfolio during the nine months ended September 30, 2008:

The sale of some or all of our shares in Broadcast International, Inc., Ecosystem Corporation, Industrial Biotechnology Corporation, Material Technologies, Inc.,

Avalon Oil and Gas, Inc.

and various other portfolio companies for approximately $1.9 million, which resulted in realized losses of $3.8 million (net of income tax effect);

The completion of 7 technology transfers for stock valued at approximately $4.6 million and $125,000 in cash;

Net unrealized depreciation of $5.8 million (net of income tax effect) in the fair value of our investments.

Our most significant portfolio investments at September 30, 2008 were in UTEK Real Estate Holdings, Inc., Advanced Medical Isotope Corporation, World Energy

Solutions, Inc., MiMedx Group, Inc.

and Cyberlux Corporation.

These five investments totaled $10.8 million in fair value and represented 75% of our investments excluding our investments in U.S.

Treasuries and certificates of deposits and 29% of net

assets at September 30, 2008.

Our capital investments made in our newly formed companies during the nine months ended September 30, 2008

totaled $1.8 million.

Of the total capital invested in our newly formed companies during the nine months ended September 30, 2008, $500,000 was expended on license and consulting fees and $1.3 million was to assist our clients in

commercializing their new technology.

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

The net unrealized depreciation for the nine months ended September 30, 2008 was primarily due to a reduction in value of the following investments in our portfolio:

Advanced Refractive Technologies, Inc.,

Cyberlux Corporation, Material Technologies, Inc., Emission & Power Solutions, Inc., Manakoa Services Corp., Pathway One PLC, RIM Semiconductor Company and World Energy Solutions, Inc.;

partially offset by the reversal of unrealized

depreciation on various investments upon their sale during the period.

While these unrealized losses were significant, failures among small cap companies

are not unexpected and may occur in the future.

The current portfolio is comprised of fifty holdings.

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

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

The value of our investments can

fluctuate due to factors that are specific to each investment (e.g., inability of these companies to obtain additional capital, to execute their business model, or termination or obsolescence of their technology licenses, etc.) or to general

marketplace factors.

Moreover, in the event that the United States economy enters into a prolonged recession, it is possible that these companies could be negatively impacted, which could ultimately lead to greater difficulty in our ability to sell

our equity investments in such companies at acceptable levels, or at all.

Results of Operations

Income from Operations (Revenue)

September 30,

Nine months ended

September 30,

(in thousands, except percentages)

Innovation Consulting Services

Sale of Technology Rights

Subscription and Other Services

Other Income, net

Income from Operations

Innovation Consulting Services

As a result of our acquisitions of innovation consulting services companies in 2008, our innovation consulting revenue increased to $5.1 million and $7.7 million for the three and nine months ended September 30,

2008, respectively, versus $-0- for each of the three and nine months ended September 30, 2007.

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

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

Strategic services

Technology services

Total revenue

Strategic Services

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

Our strategic services revenue decreased by $438,000 for the three months ended September 30, 2011 in

comparison to the three months ended September 30, 2010.

The decrease is the result of this division having a 40% decline in the value of contracts in process during the three months ended September 30, 2011 in comparison to the same

period of 2010.

However, certain of the current year contracts have required the work of a specialist consultant who bills out at a significantly higher rate than that of the other consultants, which partially offset the decrease in revenue by

approximately $225,000 for the three months ended September 30, 2011 over the same period of 2010.

Our strategic services revenue

increased by $3.8 million for the nine months ended September 30, 2011 in comparison to the nine months ended September 30, 2010.

The increase is the result of this division having a significant number of new contracts with a higher

average value during the nine months ended September 30, 2011 in comparison to the same period of 2010.

We attribute the increased contract level in 2011 to a renewed interest in innovation efficiency and new product development in the U.S.

In addition, certain of the current year contracts have required the work of a specialist consultant who bills out at a significantly higher rate than that of the other consultants, which contributed to an increase in revenue of

approximately $574,000 for nine months ended September 30, 2011 over the same period of 2010.

An increase in billable expenses related to overseas travel and lodging contributed to an increase in revenue of approximately $714,000 for the nine

months ended September 30, 2011 over the same period of 2010.

Our strategic services revenue in recent years has largely been dependent

on the efforts of certain key consulting professionals whose employment contracts with us expired in April 2011.

We were able to retain the majority of these consulting professionals under new employment contracts or consulting contracts in order to

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

We expect that our strategic services revenue will

decrease from that of the three months ended September 30, 2011 for the remainder of 2011.

Technology Services

Our technology services revenue is derived from a combination of global technology licensing services, online marketplace fees, foresight and trend

research revenue and intellectual property (IP) consulting revenue.

Our technology services revenue decreased by $348,000 for the three months ended September 30, 2011 in comparison to the three months ended September 30, 2010.

The decreased revenue is primarily a result of a reduction of $27,000 in monthly fees for our global technology licensing services, a reduction of $26,000 in online marketplace fees, and a reduction of $342,000 in foresight and trend research

revenue, partially offset by an increase of $44,000 in intellectual property consulting revenue.

Our technology services revenue decreased by

$828,000 for the nine months ended September 30, 2011 in comparison to the nine months ended September 30, 2010.

The decreased revenue is primarily a result of a reduction of $75,000 in monthly fees for our global technology licensing

services, a reduction of $110,000 in online marketplace fees, a reduction of $530,000 in foresight and trend research revenue, and a reduction of $103,000 in intellectual property consulting revenue.

The decreased revenue throughout this division

for the three and nine months ended September 30, 2011 in comparison to the same periods of 2010 results from a reduction in the number of personnel selling and fulfilling projects, as well as budget cuts for a large group of our customers.

This has had a significant, direct impact on new sales and renewals for this line of business.

We expect that our technology services revenue

will remain consistent with that of the three months ended September 30, 2011 for the remainder of 2011.

Page 17 of 30

Sale of Technology Rights

Sale of technology rights revenue for the three months ended September 30, 2008 decreased as a result of our having completed one technology transfer during the three months ended September 30, 2008 as compared to completing three

technology transfers during the three months ended September 30, 2007.

Sale of technology rights revenue decreased for the nine months ended September 30, 2008 as a result of having completed seven technology transfers in 2008 versus

fourteen in 2007.

In addition, the average revenue per technology transfer decreased 23% and 37%, respectively, for the three and nine months ended September 30, 2008 versus 2007.

Overall equity market conditions have generally forced

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

To mitigate the risk of declining stock prices with respect to

the stock consideration we receive in connection with our technology transfers, the Company is pursuing technology transfers on a more selective basis.

Subscriptions and Other Services

Our subscriptions and other services revenue was $1.0 million for the three months ended

September 30, 2008 versus $647,000 for the three months ended September 30, 2007.

Similarly, our subscriptions and other services revenue was $3.0 million for the nine months ended September 30, 2008 versus $2.7 million for the nine

months ended September 30, 2007.

The increase is partially attributable to the acquisition of Pharmalicensing in January 2008, which contributed $185,000 and $565,000 to subscription revenues for the three and nine months ended

September 30, 2008, respectively.

In addition, the acquisition of Strategos in April 2008 contributed $193,000 and $374,000 to other services revenues for the three and nine months ended September 30, 2008, respectively.

increases of $104,000 and $283,000, respectively, in information services revenue for the three and nine months ended September 30, 2008 versus 2007.

We had net decreases of $95,000 and $943,000, respectively, in all other related revenues for

the three and nine months ended September 30, 2008 versus 2007.

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

Investment Income, net

Investment income increased marginally in for

the three months ended September 30, 2008 as compared to the same period of 2007.

However, there was an overall decrease for the nine months ended September 30, 2008 over 2007 due to a decrease in the cash and cash equivalents balances in

the beginning of 2008 as well as lower interest rates.

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

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

Direct Costs of Innovation Consulting Services

Direct Costs of Revenue

(in thousands, except percentages)

September 30,

(In thousands, except percentages)

Direct costs of innovation consulting services

As a percent of innovation consulting services

The abbreviation ppt denotes percentage points.

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

This expense line item was created in 2008 as a result

of the acquisition of Strategos and Innovaro.

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

These bonuses comprised $2.7 million and $4.8 million of direct costs of innovation consulting services for the three and nine months ended September 30, 2008, respectively.

The Company had $4.8 million in accrued bonuses included in accrued

expenses in the consolidated statement of assets and liabilities as of September 30, 2008.

A significant portion of this accrual is expected to be paid out from available cash and short-term investments during the fourth quarter of 2008.

Page 35 of 46

Acquisition of Technology Rights

September 30,

(In thousands, except percentages)

Acquisition of technology rights

As a percent of sale of technology rights

Acquisition of technology rights costs consist of the direct costs associated with our technology transfers, which

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

technologies.

The acquisition of technology rights costs as a percentage of sale of technology rights revenue increased by 11 and 17 percentage points, respectively, for the three and nine months ended September 30, 2008 versus 2007.

equity market conditions have had a significant impact on our revenue to cost ratio.

Stock prices for our micro-capitalization clients have decreased, making it more difficult for some of our clients to issue stock with sufficient value in exchange

for technologies.

Consequently, the costs we have incurred relative to the declining value of stock we have been able to receive in connection with technology transfers has resulted in an increase in the acquisition of technology rights costs as a

percentage of technology rights revenue.

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

In an effort to

curb costs associated with technology transfers, our plan is to focus for the remainder of 2008 on technology transfers for cash remuneration and equity transfers which do not require significant amounts of upfront cash costs.

The following tables provide certain information related to the acquisition of technology rights expenses we incurred in connection with our technology transfers during

the three and nine months ended September 30, 2008:

Name of Company Acquiring the

Newly Formed Company

World Energy Solutions, Inc.

H-Hybrid Technologies, Inc.

Total for three months ended September 30, 2008

CSMG Technologies, Inc.

Carbon Capture Technologies, Inc.

World Energy Solutions, Inc.

Advanced Alternative Energy, Inc.

Platina Energy Group Inc.

Enhanced Oil Recovery Technologies, Inc.

RIM Semiconductor Company

Multi-Carrier Communications, Inc.

RIM Semiconductor Company

Broadband Distance Systems, Inc.

Total for nine months ended September 30, 2008

The following tables provide certain information related to the acquisition of technology rights expenses we

incurred in connection with our technology transfers during the three and nine months ended September 30, 2007:

Name of Company Acquiring the Newly Formed Company

Newly Formed Company

World Energy Solutions, Inc.

Hydrogen Safe Technologies, Inc.

MachineTalker, Inc.

Wideband Detection Technologies, Inc.

Pathway One Plc

WebMed Technologies, Inc.

Total for three months ended September 30, 2007

Material Technologies, Inc.

Non-Destructive Assessment Technologies, Inc.

Klegg Electronics, Inc.

Klegg Network Storage Technologies, Inc.

Direct costs of revenue - strategic services

Direct costs of revenue - technology services

Direct Costs of Revenue - Strategic Services

Direct costs of revenue - strategic services are comprised of salaries and related taxes, bonuses, certain outside services and other business development costs related to our strategic services business.

The most significant portion of direct costs of revenue - strategic services is comprised of consulting personnel compensation, which includes bonuses.

Direct costs of revenue - strategic services included a bonus accrual of $805,000 and $2.3

million for the three and nine months ended September 30, 2011, respectively.

In comparison, direct costs of revenue - strategic services included a bonus accrual of $1.8 million for each of the three and nine months ended September 30,

In connection with the expiration of the employment contracts for the management team of the strategic services division in the second

quarter of 2011, we have retained certain of these former professionals as consultants.

The pay rate these consultants receive is higher than the pay rate of most other consultants we use due to their experience and relationship with the customers.

In addition, certain of the contracts have required the work of a specialist consultant whose cost is much higher than that of the other consultants.

We also needed to hire more consultants during 2011 as a result of the high number of contracts in

process and a reduction in the number of employees.

Direct costs of revenue - strategic services decreased by $369,000 for the three months

ended September 30, 2011 in comparison to the three months ended September 30, 2010.

The decrease is primarily related to a $1.0 million decrease in the bonus accrual and a $250,000 decrease in salaries, partially offset by an $859,000

increase in outside consultant expenditures as discussed above.

The gross margin for the strategic services business decreased to 5% for the

three months ended September 30, 2011 in comparison to 6% for the three months ended September 30, 2010.

This gross margin level for the three months ended September 30, 2011 and 2010 is a direct result of the bonus accrual during

these periods.

Direct costs of revenue - strategic services increased by $3.6 million for the nine months ended September 30, 2011 in

comparison to the nine months ended September 30, 2010.

The increase is primarily related to a $533,000 increase in the bonus accrual, a $2.5 million increase in outside consultant expenditures as discussed above, and a $714,000 increase in

overseas travel and lodging, partially offset by a $135,000 decrease in salaries.

The gross margin for the strategic services business

decreased to 15% for the nine months ended September 30, 2011 in comparison to 21% for the nine months ended September 30, 2010.

The decrease is primarily related to the bonus accrual and utilization of consultants at higher than normal

We expect that our direct costs of revenue - strategic services will decrease from that of the three months ended September 30,

2011 for the remainder of 2011.

Direct Costs of Revenue - Technology Services

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

of revenue - technology services decreased by $61,000 for the three months ended September 30, 2011 in comparison to the three months ended September 30, 2010.

In addition, direct costs of revenue - technology services decreased by

$237,000 for the nine months ended September 30, 2011 in comparison to the nine months ended September 30, 2010.

The decreases primarily relate to a reduction in sales and project management personnel, as well as the reduced utilization of

outside contractors, related to the decline in revenue.

The gross margin for the technology services business decreased to 42% for the three

months ended September 30, 2011 in comparison to 58% for the three months ended September 30, 2010.

In addition, the gross margin for the technology services

Page 18 of 30

Material Technologies, Inc.

Damage Assessment Technologies, Inc.

Avalon Oil & Gas, Inc.

Leak Location Technologies, Inc.

Klegg Electronics, Inc.

Tempo Control Technologies, Inc.

Metamorphix Global, Inc.

Flex Crete Technologies, Inc.

Liberty Diversified Holdings, Inc.

Sero Tonin Solutions, Inc.

Material Technologies, Inc.

Stress Analysis Technologies, Inc.

CytoDyn, Inc.

Advanced Genetic Technologies, Inc.

Cyberlux Corporation

Hybrid Lighting Technologies, Inc.

Manakoa Services Corporation

Infinite Identification Technologies, Inc.

Total for nine months ended September 30, 2007

business decreased to 43% for the nine months ended September 30, 2011 in comparison to 52% for the nine months ended September 30, 2010.

These decreases are related to the

aforementioned reduction in sales personnel and certain customer budgets having had a more negative impact on new sales and renewals for this business as compared to the impact on the direct costs of revenue for this business.

We expect that our direct costs of revenue - technology services will remain consistent with that of the three months ended September 30, 2011 for

the remainder of 2011.

Salaries and Wages

September 30,

Nine months ended

September 30,

(In thousands, except percentages)

1 unchanged sentence

As a percent of revenue

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

stock-based compensation.

Of the $252,000 increase in salaries and wages during the three months ended September 30, 2008, $132,000 related to the addition of Pharmalicensing employees to the payroll in connection with the acquisition, $50,000

related to a bonus to our chief operating officer, and $48,000 related to additional salaries for our new TekScout online exchange.

and wages increased $2.5 million during the nine months ended September 30, 2008 as a result of the accrual of our CEOs severance liability of $1.65 million, the addition of Pharmalicensing employees to the payroll of $316,000, additional

salaries related to our new TekScout online exchange of $125,000, increased officer salaries of $258,000 and an increase in stock-based compensation expense of $117,000 resulting from additional option grants.

We expect salaries and wages to continue to increase during the remainder of 2008 as a result of our intention to pursue additional strategic acquisitions.

The abbreviation ppt denotes percentage points.

Salaries and wages include non-sales employee and officer salaries and related benefits, including bonuses and stock-based compensation that are not otherwise allocated to direct costs of

Salaries and wages decreased by $211,000 for the three months ended September 30, 2011 in comparison to the three months ended September 30, 2010.

The decrease relates to a $209,000 reduction in officers salaries as a

result of severance expense related to our former CEO in the third quarter of 2010 and a $130,000 reduction in administrative staff, partially offset by an increase of $226,000 in stock compensation expense that resulted from a change in estimate

related to stock options in the third quarter of 2010.

Salaries and wages decreased by $870,000 for the nine months ended September 30,

2011 in comparison to the nine months ended September 30, 2010.

The decrease relates to a $342,000 reduction in officers salaries as a result of a CEO change and a $407,000 reduction in administrative staff, partially offset by an

increase of $194,000 in stock compensation expense that resulted from a change in estimate related to stock options in the third quarter of 2010.

We expect that our salaries and wages will remain consistent with that of the three months ended September 30, 2011 for the remainder of 2011.

Professional Fees

September 30,

(In thousands, except percentages)

2 unchanged sentences

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

The decrease in

professional fees relates to a decrease in legal fees of $258,000 and $301,000, respectively, for the three and nine months ended September 30, 2008, partially offset by modest increases in accounting and valuation fees.

Sales and Marketing

September 30,

Professional fees

decreased by $40,000 for the three months ended September 30, 2011 in comparison to the three months ended September 30, 2010.

The majority of the decrease is related to a $53,000 reduction in accounting fees as a result of our having

become a smaller reporting company (a designation under the federal securities laws that impacts the level of our disclosure requirement thereunder) during 2010.

As a smaller reporting company, we are subject to a more streamlined reporting regime

than the reporting regime for larger companies, including the elimination of the requirement to have our auditors audit our internal control over financial reporting.

Professional fees decreased by $223,000 for the nine months ended September 30, 2011 in comparison to the nine months ended September 30, 2010.

Valuation expenses were reduced by $38,000 because

our investments no longer require outside valuations on a quarterly basis.

Accounting fees were reduced by $132,000 as a result of our having become a smaller reporting company during 2010.

Legal fees were reduced by $52,000 because of costs

incurred during the nine months ended September 30, 2010 related to the preparation of our restricted stock plan and the settlement of a severance liability related to our former CEO that were not repeated during the nine months ended

September 30, 2011.

Page 19 of 30

We expect that our professional fees will remain consistent with that of the three months ended

September 30, 2011 for the remainder of 2011.

Research and Development

(In thousands, except percentages)

Research and development

As a percent of revenue

Research and development costs include salaries, outside services, travel and other costs related to the development of

our LaunchPad software platform, which is designed to enhance and complement our innovation services offerings to clients.

Research and development costs decreased by $270,000 and $187,000 for the three and nine months ended September 30, 2011

in comparison to the three and nine months ended September 30, 2010, respectively.

The decreases are primarily related to the capitalization of $185,000 in software costs in the third quarter of 2011 rather than the allocation of such costs to

research and development expense.

In addition, we scaled back the amount of resources allocated to the development of LaunchPad to approximately $200,000 in the third quarter of 2011.

In accordance with accounting guidance, we expense all costs incurred to establish the technological feasibility of our LaunchPad software platform as research and development expenses.

Having established

a working model of LaunchPad Version 1.0, all costs related to the refinement of this product will be capitalized until general release of the product to customers.

We will continue to incur costs related to the refinement of Version 1.0 while

proceeding with the development of the next components of LaunchPad with Version 2.0.

The costs related to the development of Version 2.0 will be expensed as research and development until we have completed a working model.

We expect to incur an

additional $150,000 in product development of Version 2.0 and refinement of Version 1.0 during the fourth quarter of 2011.

Since a portion of these costs will be capitalized, we expect that research and development expense will remain relatively

consistent with that of the three months ended September 30, 2011 for the remainder of 2011.

Sales and Marketing

(In thousands, except percentages)

Sales and marketing

As a percent of revenue

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

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

Sales and marketing expenses increased

Sales and marketing expenses include advertising, marketing, commissions paid to outside service providers, certain

travel and other business development expenses.

Sales and marketing expenses increased by $95,000 for the three months ended September 30, 2011 in comparison to the three months ended September 30, 2010.

The increase relates primarily to

$86,000 in marketing costs incurred during the three months ended September 30, 2011 in connection with an increase in marketing efforts.

In addition, we received a $45,000 credit against previously paid marketing costs during the three months

ended September 30, 2010, which reduced the expense in that period.

Sales and marketing expenses decreased by $229,000 for the nine

months ended September 30, 2011 in comparison to the nine months ended September 30, 2010.

The decrease relates primarily to certain marketing costs incurred during the nine months ended September 30, 2010, including $89,000 in

rebranding costs and $150,000 for partnering with external search partners, which were not repeated during the nine months ended September 30, 2011.

This decrease in costs was partially offset by $86,000 in marketing costs incurred during the

nine months ended September 30, 2011 in connection with an increase in marketing efforts.

We expect that our sales and marketing costs

for the remainder of 2011 will remain consistent with that of the three months ended September 30, 2011.

Page 20 of 30

$204,000 for the three months ended September 30, 2008 as compared to 2007.

The increase was a result of the increased costs related to the three

acquisitions described elsewhere in this Form 10-Q of $97,000 and additional sales conferences costing $60,000.

Sales and marketing expenses increased

$348,000 for nine months ended September 30, 2008 as compared to 2007.

The increase was a result of the increased costs related to the three acquisitions described elsewhere in this Form 10-Q of $155,000 and additional sales managers added to

the business development and technology licensing sales divisions of $230,000.

This increase was partially offset by a decrease in commissions earned of $80,000 due to the decrease in related revenue for the nine months ended September 30,

We expect sales and marketing costs to continue to increase during the remainder of 2008 as a result of our intention to pursue additional strategic

acquisitions and the creation of new sales management positions to strengthen the senior management team and enhance the potential for Company development.

General and Administrative

September 30,

(In thousands, except percentages)

1 unchanged sentence

As a percent of revenue

General and administrative costs increased $805,000 for the three months ended September 30, 2008 as compared

The increase was a result of the costs related to the 2008 acquisitions described elsewhere in this Form 10-Q of $39,000;

outside services of $102,000;

the amortization of the intangible assets acquired of $308,000;

additional employee

costs including benefits and taxes of $226,000;

and rent of $55,000.

General and administrative costs increased $1.3 million for the nine months ended

September 30, 2008 as compared to 2007.

The increase was a result of the costs related to the 2008 acquisitions described elsewhere in this Form 10-Q of $90,000;

outside services of $108,000;

the amortization of the intangible assets acquired

additional employee costs including benefits and taxes of $407,000;

and rent of $155,000.

We expect to have an increase in general and

administrative expenses for the year ended December 31, 2008 as a result of our acquisitions.

Goodwill Impairment

The Company determined that there was an impairment of the goodwill related to the Pharma Transfer acquisition in the first quarter of 2007.

The Company recorded a

partial impairment of the goodwill in 2007.

This resulted in a write-down of approximately $33,000, $21,000 after tax, which is an operating expense in the consolidated statements of operations for the nine months ended September 30, 2007.

There were no indicators during the nine months ended September 30, 2008 that required any impairment to goodwill.

Net Realized Gains (Losses)

on Investments

September 30,

General and administrative expenses decreased by $86,000 for the three months ended September 30, 2011 in comparison

to the three months ended September 30, 2010.

The decrease relates to a $17,000 reduction in insurance and other employee related costs due to having fewer employees;

a $28,000 reduction in investor relations costs;

a $56,000 decrease in

outside services as a result of having hired our CEO in the second quarter of 2011 as opposed to paying him as a consultant;

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

partially offset by a $28,000 increase in

real estate taxes.

General and administrative expenses decreased by $235,000 for the nine months ended September 30, 2011 in comparison

to the nine months ended September 30, 2010.

The decrease relates to a $148,000 reduction in insurance and other employee related costs due to having fewer employees;

a $31,000 reduction in printing costs related to the proxy and annual report;

a $46,000 reduction in investor relations costs;

an $81,000 decrease in outside services as a result of having hired our CEO in the second quarter of 2011 as opposed to paying him as a consultant;

as well as a continued overall company plan to

reduce all aspects of overhead;

partially offset by a $38,000 increase in real estate taxes and a $25,000 increase related to moving and relocation expenses for our new CEO and Senior VP of Sales.

We expect that our general and administrative costs will remain consistent with that of the three months ended September 30, 2011 for the remainder

Depreciation and Amortization

(In thousands, except percentages)

Realized gains/ (losses)

Page 38 of 46

Net realized losses on investments, net of income tax effect, amounted to $275,303 for the three months ended

September 30, 2008 and were related to sales as follows:

American Soil Technologies, Inc.

CSMG Technologies, Inc.

Ecosphere Technologies Inc

Gammacan International, Inc.

Material Technologies, Inc.

Net Fabric Corporation

TGI Solar Power Group, Inc (Tenth Gate International, Inc.)

Net realized losses on investments, net of income tax effect, amounted to $551,958 for the three months ended

September 30, 2007 and were related to sales as follows:

American Soil Technologies, Inc.

Broadcast International, Inc.

Health Sciences Group, Inc.

Power3 Medical Products, Inc.

Rival Technologies, Inc.

Swiss Medica, Inc.

XELR8 Holdings, Inc.

World Energy Solutions, Inc.

Net realized losses on investments, net of income tax effect, amounted to $3,752,177 for the nine months ended

September 30, 2008 and were related to sales as follows:

5G Wireless Communications, Inc.

aeroTelesis, Inc.

American Soil Technologies, Inc.

Avalon Oil and Gas, Inc.

Broadcast International, Inc.

Cargo Connection Logistics Holdings, Inc.

CSMG Technologies, Inc.

Cyberlux Corporation

Ecosphere Technologies Inc

EcoSystem Corporation

Gammacan International, Inc.

Industrial Biotechnology Corporation

Material Technologies, Inc.

Magnitude Information Systems, Inc.

MM2 Group Inc.

Modern Technology Corporation

Net Fabric Corporation

Protocall Technologies, Inc.

SolarBrook Water and Power Corp.

TGI Solar Power Group, Inc.

(Tenth Gate International, Inc.)

US Starcom Inc.

Page 39 of 46

Net realized losses on investments, net of income tax effect, amounted to $1,690,238 for the nine months ended

September 30, 2007 and were related to sales as follows:

Advanced Refractive Technologies, Inc.

American Soil Technologies, Inc.

Shumate Industries, Inc.

Health Sciences Group, Inc.

Swiss Medica, Inc.

Xethanol Corporation

Broadcast International, Inc.

Rival Technologies, Inc.

Power3 Medical Products, Inc.

XELR8 Holdings, Inc.

World Energy Solutions, Inc.

Manakoa Services Corporation

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

future performance.

As a result of the uncertainty surrounding the future values of our investments, we are unable to make any projections or estimates regarding realized gains or losses expected in 2008.

Net Change in Unrealized Appreciation or Depreciation on Investments

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

Value, as defined in Section 2(a)(41) of the 1940 Act, is

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

Although many of the securities

we hold in our portfolio are quoted on the OTC Bulletin Board or listed on the American Stock Exchange, our Board of Directors is required to determine the fair value of such securities if the validity of the market quotations appears to be

questionable, or if the number of quotations is such as to indicate that there is a thin market in the security.

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

Because there is typically no

readily available market value for the investments in our portfolio (other than U.S.

Treasuries and certificates of deposit), we value substantially all of our investments at fair value as determined in good faith by the Board of Directors.

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

Because of the inherent uncertainty of determining the fair value of investments that do not have a readily

available market value, the fair value of our investments determined in good faith by the Board of Directors may differ significantly from the values that would have been used had a ready market existed for the investments, and the differences could

September 30,

Depreciation and amortization

As a percent of revenue

Depreciation and amortization decreased by $91,000 for the three months ended September 30, 2011 in comparison to

the three months ended September 30, 2010.

Amortization expense decreased by $77,000 as a result of impairment charges related to our intangible assets that were incurred in 2010.

Depreciation expense decreased by $14,000 as a result of

impairment charges related to our fixed assets that were incurred in 2010.

Depreciation and amortization decreased by $208,000 for the nine

months ended September 30, 2011 in comparison to the nine months ended September 30, 2010.

Amortization expense decreased by $172,000 as a result of impairment charges related to our intangible assets that were incurred in 2010.

Depreciation expense decreased by $36,000 as a result of impairment charges related to our fixed assets that were incurred in 2010.

that our depreciation and amortization will remain consistent with that of the three months ended September 30, 2011 for the remainder of 2011.

Impairment Loss

(In thousands, except percentages)

Unrealized appreciation/ (depreciation)

Overall negative equity market conditions and a weakening U.S.

economy have resulted in significant decreases in

market prices for some of our portfolio companies.

This has resulted in significant unrealized depreciation on many of our investments during the current period.

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

the third quarter of 2008.

A portion of the valuation allowance ($4.8 million) was charged as an expense against the change in unrealized depreciation of investments for the three and nine months ended September 30, 2008.

The valuation

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

Impairment loss

Page 21 of 30

Net change in unrealized appreciation (depreciation) on investments, net of income tax effect, amounted to $(6,541,649)

for the three months ended September 30, 2008 and was related to our investments as follows:

Net unrealized

(Depreciation)

Cyberlux Corporation

Oxygen Biotherapeutic

World Energy Solutions, Inc.

Advanced Refractive Technologies, Inc.

MachineTalker

Effect of recognition of gains/losses

All other investments

Deferred tax asset valuation allowance

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

$229,749 or the three months ended September 30, 2007 and was related to our investments as follows:

Net Unrealized

(Depreciation)

Material Technologies, Inc.

Klegg Electronics, Inc.

USTelematics, Inc.

Advanced Refractive Technologies, Inc.

All other investments

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

$(10,589,276) for the nine months ended September 30, 2008 and was related to our investments as follows:

Net Unrealized

(Depreciation)

Advanced Refractive Technologies, Inc.

Cyberlux Corporation

Emission & Power Solutions, Inc.

Material Technologies, Inc.

Manakoa Services Corporation

Pathway One Plc

RIM Semiconductor Company

World Energy Solutions

Effect of recognition of gains/losses

All other investments

Deferred tax valuation allowance

At the end of the third quarter of 2010, management concluded that the significant decline in our stock

price subsequent to June 30, 2010 was other than short-term in nature.

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

December 31, 2010.

A decline in stock price may be an indicator of an adverse change in business climate and it affects market capitalization and may affect fair value measurements for reporting units.

Due to the reduction in our market

capitalization, third party valuations were obtained to assist in the determination of fair value for our reporting units.

As a result of a reduction in fair value of our reporting units, management determined that the implied fair value of our

goodwill and intangible assets was less than their respective carrying values by approximately $10.3 million.

We recognized impairment of approximately $9.4 million to our goodwill and impairment of approximately $971,000 to our intangible assets in

the three and nine months ended September 30, 2010.

We also recorded impairment of approximately $1.3 million to our fixed assets during

the three and nine months ended September 31, 2010.

The commercial real estate market for certain of our properties had taken a significant downturn that was not expected to reverse in the near future.

As a result, management determined that

the decrease in fair value of the property was other-than-temporary.

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

We did not have any events occur during the nine months ended September 30, 2011 that would trigger a review for impairment outside of our next scheduled annual impairment evaluation date of

December 31, 2011.

Other (Income) Expense

(In thousands, except percentages)

Other (income) expense

Other (income) expense includes rental income, gains and losses related to adjusting our derivative liabilities to fair

value each reporting period, capital gains and losses and other miscellaneous income.

Other (income) expense changed by $(368,000) for the three months ended September 30, 2011 in comparison to the three months ended September 30, 2010.

The variance is primarily attributable to a $44,000 increase in rental income and a $1.1 million decrease in net capital loss, partially offset by a $776,000 decrease in net gain on adjustment of our derivative liabilities.

Other (income) expense changed by $(256,000) for the nine months ended September 30, 2011 in comparison to the nine months ended September 30,

The variance is attributable to a $968,000 increase in net gain on adjustment of our derivative liabilities, partially offset by a $98,000 increase in rental income and a $1.1 million decrease in net capital loss.

Other (income) expense may continue to fluctuate significantly as the value of our derivative liability increases or decreases in connection with changes

in our stock price.

Interest Expense, Net

(In thousands, except percentages)

Interest expense, net

Interest expense, net decreased by $129,000 for the three months ended September 30, 2011 in comparison to the three

months ended September 30, 2010.

The decrease is primarily attributable to lower interest expense from the amortization of our debt discount of $122,000.

Interest expense, net decreased by $182,000 for the nine months ended September 30, 2011 in comparison to the nine months ended September 30, 2010.

The decrease is primarily attributable to

lower interest expense on long-term debt of $42,000 and lower interest expense from the amortization of our debt discount of $148,000.

Page 22 of 30

Net change in unrealized appreciation (depreciation) on investments, net of income tax effect, amounted to $(6,792,496)

for the nine months ended September 30, 2007 and was related to our investments as follows:

Net unrealized

(Depreciation)

Advanced Refractive Technologies, Inc.

American Soil Technologies, Inc.

vidShadow, Inc.

Klegg Electronics, Inc.

Industrial Biotechnology Corporation

Emission & Power Supply, Inc.

Material Technologies, Inc.

Manakoa Services Corporation

Cytodyn, Inc.

All other investments

Liquidity and Capital Resources

At September 30, 2008, we had cash and cash equivalents of $5.6 million.

We also had investments in U.S.

Treasuries and certificates of deposit (CDs) of $3.2 million.

We typically invest our excess cash in U.S.

Treasuries and CDs, which normally have three-month to one-year maturities.

These investments do not qualify as cash equivalents.

In prior years, we had

financed substantially all of our operations through the issuance of equity securities and, to a lesser extent, sales of investments, cash received in connection with the provision of technology acquisition alliance and other consulting services and

the use of funds from our investments in U.S.

Treasuries and certificates of deposit.

Our primary sources of liquidity and capital for the nine months ended September 30, 2008 were $10.0 million received in connection with consulting

operations, $2.0 million received from the repayment of our loan receivable from UTEK Real Estate Holdings, Inc., $1.9 million in proceeds generated from the sale of shares of our portfolio companies and $190,000 in proceeds from the exercise of

stock options.

A portion of our income from operations consists of the sale of technology rights and consulting income from technology acquisition

alliances in exchange for equity securities rather than cash.

In the nine months ended September 30, 2008, 30% of our income from operations was paid in the form of equity securities.

Of the $15.7 million in income from operations in the nine

months ended September 30, 2008, $11.0 million was received in the form of cash.

During the nine months ended September 30, 2008, we used approximately $1.8 million to fund our technology transfer transactions and approximately $15.7

million for operating expenses.

Looking forward to the rest of 2008, we expect that our cash generating operations and operating expenses will both increase as a result of our acquisitions.

We expect our cash outflow for technology transfer

transactions will be scaled to available cash.

During 2008, we acquired $749,000 in cash in connection with our acquisitions.

A substantial portion of

this cash was invested in certificates of deposit.

In May 2008, we obtained a $1,000,000 line of credit with the Bank of Tampa.

The advances on the line

of credit accrue interest (payable monthly) at prime (5% as of September 30, 2008).

The principal and any unpaid interest are due upon demand.

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

September 30, 2008, we had no long-term debt outstanding.

We currently intend to fund our capital expenditures and liquidity needs with existing cash

and cash equivalent balances, our investments in U.S.

Treasuries and certificates of deposit, as well as with cash generated by operations and the sales of our investments.

We believe that these sources will be sufficient to meet working capital

needs, capital requirements, and current commitments for at least the next twelve months.

However, our capital requirements will depend on many factors, the most important factor is our sales of technology rights.

In addition, the sale of our

investments is dependent on market price, which is unpredictable.

We may need to scale the number of sales of technology rights to available cash resources in the near term.

In addition, we may seek to raise additional funds through public or

private debt or equity financing for long-term liquidity.

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

Cash flows from operating activities of $2,031,000 for the nine months

ended September 30, 2011 increased $4,891,000 from $(2,860,000) for the nine months ended September 30, 2010.

Total cash flows from operations of $2,031,000 in this period are primarily attributable to:

$1.1 million in non-cash depreciation and amortization;

$151,000 non-cash loss on derivative liabilities;

$408,000 in non-cash stock-based compensation expense related to vesting options and restricted stock;

$775,000 decrease in accounts receivable and contracts in process;

$219,000 decrease in prepaid expenses and other assets;

$2.2 million increase in accounts payable, accrued expenses and accrued bonus;

partially offset by a $2.8 million net loss.

Cash flows from investing activities of $(220,000) for the nine months ended September 30, 2011 decreased $985,000 from $765,000 for the nine months

ended September 30, 2010.

Total cash flows from investing activities of $(220,000) in this period are primarily related to the capitalization of software development costs.

Cash flows from financing activities of $(525,000) for the nine months ended September 30, 2011 decreased $2,690,000 from $2,165,000 for the nine months ended September 30, 2010.

flows from financing activities of $(525,000) in this period are related to principal payments on long-term debt.

Software Development

We are continuing the development of our LaunchPad software, which is designed to enhance and complement our innovation service

offerings to clients.

We will continue to incur costs related to the refinement of Version 1.0 while proceeding with the development of the next components of LaunchPad with Version 2.0.

As of September 30, 2011, we had invested $2.1

million in this software platform.

We expect to incur approximately $150,000 in additional expenditures for product development of Version 2.0 and refinement of Version 1.0 during the fourth quarter of 2011.

Our primary cash

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

Our primary sources of funds are cash received from customers in connection with operations and, to a

lesser extent, proceeds from the sale from time to time of our investments.

As of September 30, 2011, we had $1.5 million in cash and cash equivalents, $1.2 million in accounts receivable and contracts in process, $510,000 in investments, and a

working capital deficit of $1.4 million.

We currently intend to fund our liquidity needs, including our software development costs, with

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

We expect that our recent reductions in costs, coupled with our expected revenue, will be

sufficient to fund our scheduled debt service payments of $109,000 and our operating requirements for the next twelve months.

However, we are also exploring opportunities for obtaining a credit facility with certain financial institutions.

face a more restricted cash flow scenario than projected during the next twelve months, we have the capability to delay all cash intensive activities, including our software development costs, and will look to reduce costs further.

However, if such

measures prove inadequate, we could face liquidity problems and might be required to reduce or delay planned capital expenditures and other initiatives, sell assets, restructure or refinance our debt or seek additional equity capital, and we may be

unable to take any of these actions on satisfactory terms or in a timely manner.

Further, any of these actions may not be sufficient to allow us to service our debt obligations or may have an adverse impact on our business.

Our failure to generate

sufficient cash from our operations could have a material adverse effect on us.

Page 23 of 30

Critical Accounting Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the amounts reported in the financial

Critical accounting estimates are those that are both important to the presentation of our financial condition and results of operations and require managements most difficult, complex, or subjective judgments.

We consider the

following accounting policies and related estimates to be critical:

Valuation Methodology

Currently, we primarily receive cash in connection with our technology acquisition alliance agreements and illiquid securities in connection with our technology

Historically, we primarily received illiquid securities in connection with both our technology acquisition alliance agreements and technology transfers.

The securities received are generally subject to restrictions on resale and generally

are thinly traded or have no established market.

We estimate fair value to be the amount for which an investment could be exchanged in an orderly

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

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

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

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

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

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

difference could be material.

We adopted SFAS 157 on a prospective basis in the first quarter of 2008.

SFAS 157 requires us to assume that the portfolio

investment is to be sold in the principal market to market participants, or in the absence of a principal market, the most advantageous market, which may be a hypothetical market.

Market participants are defined as buyers and sellers in the

principal or most advantageous market that are independent, knowledgeable, and willing and able to transact.

In accordance with SFAS 157, we have considered our principal market, or the market in which we exit our portfolio investments with the

greatest volume and level of activity.

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

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

When an external event such as a purchase transaction, public offering, or subsequent

equity sale occurs, the pricing indicated by the external event is used to corroborate our valuation.

The determined values are generally discounted to account for restrictions on resale and minority ownership positions.

The value of our equity

interests in public companies for which market quotations are readily available is based on the public market price on the balance sheet date.

Securities that carry certain restrictions on resale are typically valued at a discount from the public

market value of the security.

The fair value of our investments at September 30, 2008 and December 31, 2007 was determined by our Board of

At September 30, 2008 and December 31, 2007, we received valuation assistance from our independent valuation firm, Klaris, Thomson & Schroeder, Inc., on our entire portfolio of investments for which market quotations

were not available.

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

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

to unrealized appreciation or depreciation previously recognized.

The original cost basis of the securities we receive in connection with our technology acquisition alliance agreements and technology transfers is equal to the amount of revenue we

recognized upon the receipt of such securities.

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

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

Stock-Based Compensation

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

Standards (SFAS) No.

123(R), Share-Based Payment .

Under the modified prospective approach of SFAS 123(R), compensation cost recognized during the nine months ended September 30, 2008 and 2007 includes compensation cost

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

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

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We use the Black-Scholes option pricing model to estimate the fair value of stock-based awards on the date of grant,

using assumptions for volatility, expected term, risk-free interest rate and dividend yield.

We have used one grouping for the assumptions as our option grants are primarily basic with similar characteristics.

The expected term of options granted is

based upon our historical term of options exercised.

Historical data was used to estimate option exercises and employee terminations.

Estimated volatility is based upon our historical market price at consistent points in a period equal to the

expected life of the options.

The risk-free interest rate is based on the U.S.

Treasury yield curve in effect at the time of grant and the dividend yield is based on the historical dividend yield.

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (GAAP) requires management to make assessments, estimates

and assumptions that affect the amounts reported in the financial statements.

We evaluate the accounting policies and estimates used to prepare the financial statements on an ongoing basis.

Critical accounting estimates are those that

require managements most difficult, complex, or subjective judgments and have the most potential to impact our financial position and operating results.

For a detailed discussion of our critical accounting estimates, see our Annual Report on

Form 10-K for the year ended December 31, 2010.

Recently Issued Accounting Pronouncements

In March 2008, the

Financial Accounting Standards Board issued SFAS No.

161, Disclosures about Derivative Instruments and Hedging Activities .

161 requires additional disclosures related to the use of derivative instruments, the accounting for

derivatives and the financial statement impact of derivatives.

161 is effective for fiscal years beginning after November 15, 2008.

The adoption of SFAS No.

161 will not have an impact on the Companys

consolidated financial statements.

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

Intangible Assets.

FSP FAS 142-3 amends the factors that should be considered in developing renewal or extension assumptions used to determine the useful life of a recognized intangible asset under FASB Statement No.

142, Goodwill

and Other Intangible Assets.

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

The adoption of this statement is not expected to have a material effect on the Companys

financial statements.

In May 2008, the FASB issued SFAS No.

162, The Hierarchy of Generally Accepted Accounting Principles.

162 identifies the sources of accounting principles and the framework for selecting the principles to be used in the preparation of financial statements of nongovernmental entities that are presented in conformity with generally accepted

accounting principles in the United States.

It is effective 60 days following the SECs approval of the Public Company Accounting Oversight Board amendments to AU Section 411, The Meaning of Present Fairly in Conformity With

Generally Accepted Accounting Principles.

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

In May 2011, the Financial Accounting Standards Board (FASB) issued new guidance that expands existing disclosure requirements for fair value

measurements and makes other amendments that could change how the fair value measurement guidance is applied.

The guidance is effective for us with the reporting period beginning in January 1, 2012.

The adoption of this guidance is not expected

to have an impact on our operations.

In June 2011, the FASB issued new guidance that revises the manner in which entities present

comprehensive income in their financial statements.

The new guidance requires entities to report components of comprehensive income in either (1) a continuous statement of comprehensive income or (2) two separate but consecutive

The guidance is effective for us with the reporting period beginning in January 1, 2012.

The adoption of this guidance will change the way we present comprehensive income in our financial statements.

In September 2011, the FASB issued new guidance for goodwill impairment testing .

Under the revised guidance, entities testing goodwill for

impairment have the option of performing a qualitative assessment before calculating the fair value of a reporting unit in step 1 of the goodwill impairment test.

If entities determine, on the basis of qualitative factors, that the fair value of the

reporting unit is more likely than not greater than the carrying amount, a quantitative calculation is not needed.

The guidance is effective for us with the reporting period beginning in January 1, 2012 with early adoption permitted.

adoption of this guidance is not expected to have an impact on our operations.

Quantitative and Qualitative Disclosures about Market Risks

has been no material change in the quantitative and qualitative disclosures about market risk since December 31, 2007.

Not applicable.

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

What changed 10-Q/A

Item 1. Financial Statements