The matters discussed in this report contain forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended, and Section 27A of the Securities Act of 1933, as amended that involve risks and uncertainties. All statements other than statements of historical information provided herein may be deemed to be forward-looking statements. Without limiting the foregoing, the words “believes”, “anticipates”, “plans”, “expects” and similar expressions are intended to identify forward-looking statements. Factors that could cause actual results to differ materially from those reflected in the forward-looking statements include, but are not limited to, those discussed in Part II—Item 1A below and elsewhere in this report and the risks discussed in the Company’s Annual Report on Form 10-K filed with the SEC. Readers are cautioned not to place undue reliance on these forward-looking statements, which reflect management’s analysis, judgment, belief or expectation only as of the date hereof. The Company undertakes no obligation to publicly revise these forward-looking statements to reflect events or circumstances that arise after the date hereof.

Overview

ModusLink Global Solutions, Inc. (together with its consolidated subsidiaries, “ModusLink Global Solutions” or the “Company”), through its wholly owned subsidiaries, ModusLink Corporation (“ModusLink”), Open Channel Solutions, Inc. (“OCS”) and ModusLink PTS, Inc. (“PTS”), provides industry-leading end-to-end global supply chain management solutions that help businesses market, sell, distribute and repair their products and services. ModusLink provides supply chain management services to technology-based clients in such markets as computing, software, consumer electronics, storage and communications markets. OCS provides entitlement and e-business management solutions, and PTS provides consumer-electronics service repair and reverse logistics services.

We also invest in emerging, innovative and promising technologies and industries through our venture capital business, @Ventures. During the three months ended October 31, 2008, approximately $2.8 million was invested by @Ventures and $0.5 million of proceeds were received from the acquisition by third parties of certain @Ventures portfolio companies.

Management evaluates operating performance based on net revenue, operating income (loss), and net income (loss), and, across its segments, on the basis of “Non-GAAP operating income (loss),” which is defined as the operating income (loss) excluding net charges related to depreciation, long-lived asset impairment, restructuring, amortization of intangible assets and stock-based compensation. See Note 12 of the notes to the condensed consolidated financial statements for segment information, including a reconciliation of Non-GAAP operating income (loss) to net income (loss).

Our focus during fiscal 2009 remains consistent with fiscal 2008 with regard to continued execution against our strategic plan, and implementation of the following initiatives designed to achieve our goals:

Drive sales growth through a combination of existing client penetration, and targeting new vertical markets. Historically, a significant portion of our revenues from our supply chain business have been generated from clients in the computing and software verticals. These verticals are mature and, as a result, gross margins in these verticals tend to be low. To address this, we have expanded our sales focus to include three new markets, in addition to the computing and software verticals, that we believe can benefit from our supply chain expertise. We believe these verticals, communications, storage devices, and consumer electronics, are experiencing faster growth than our historical markets, and represent opportunities to realize higher gross margins on our services. Companies in these markets often are early in their product life cycles and have significant need for a supply chain partner who will be an extension to their business models.

Increase the value delivered to clients through service expansion. During fiscal year 2009 we will continue to focus on and invest in expanding our e-commerce and certain other offerings, which we believe will increase the overall value of the supply chain solutions we deliver to our existing clients and to new clients. We expect these solutions will continue to enhance our gross margins and drive greater profitability. Further, we believe that the addition of new services to existing clients will strengthen our relationship with these clients, and further integrate us with their business.

Drive operational efficiencies throughout our organization. As a result of the acquisition of Modus Media, Inc. in August 2004, the Company has been running multiple information technology systems at a significant cost. Our strategy is to operate an integrated supply chain system infrastructure that extends from front-end order management through distribution and returns management. This end-to-end solution will enable clients to link supply and demand in real time, improve visibility and performance throughout the supply chain, and provide real-time access to information for greater collaboration and making informed business decisions. We believe our clients will benefit greatly from a global integrated business solution while we reduce our operating costs. A program that we expect will drive further operational efficiencies in the future is continued application of our lean sigma continuous improvement program. We believe this initiative will yield improved process standardization and operating efficiency gains, as well as lower our operating costs.

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We believe that successful execution of these initiatives will enable us to improve our financial performance. We have developed financial operating metric goals which are dependent on the successful implementation of these initiatives and annual revenue growth on a percentage basis of high single to low double digits. These goals are to generate gross margins which along with an appropriate level of selling, general and administrative costs will result in an operating income margin range of 5% to 7%. From time to time we publicly state our progress against these goals and current expectation of when we believe we will attain these goals and begin operating at these levels. Among the key factors that will influence our performance against these goals are successful execution and implementation of our strategic initiatives, global economic conditions, especially in the technology sector, demand for our clients’ products, and demand for outsourcing services.

For the three months ended October 31, 2008, the Company reported net revenue of $291.4 million, an operating loss of $10.8 million, loss from continuing operations before income taxes of $14.7 million, a net loss of $18.6 million and a gross margin percentage of 9.6%. We currently conduct business in The Netherlands, Hungary, France, Ireland, the Czech Republic, Singapore, Taiwan, China, Malaysia, Japan, Australia and Mexico in addition to our United States operations. At October 31, 2008, we had cash and cash equivalents, available-for-sale securities and short-term investments of $121.3 million, and working capital of $216.3 million.

As a large portion of our revenue comes from outsourcing services provided to clients such as hardware manufacturers, software publishers, telecommunications carriers, broadband and wireless service providers and consumer electronics companies, our operating performance could be adversely affected by declines in the overall performance of the technology sector and the continued economic decline affecting the world economy in calendar 2008. The market for our supply chain management products and services is very competitive. We also face pressure from our clients to continually realize efficiency gains in order to help our clients maintain their gross margins and profitability. Increased competition and client demands for efficiency improvements may result in price reductions, reduced gross margins and, in some cases, loss of market share. As a result of these competitive and client pressures, the gross margins in our business are low. During the three months ended October 31, 2008, our gross margin percentage was 9.6%. Increased competition arising from industry consolidation and/or low demand for our clients’ products and services may hinder our ability to maintain or improve our gross margins, profitability and cash flows. We must continue to focus on margin improvement, through implementation of our strategic initiatives, cost reductions and asset and employee productivity gains in order to improve the profitability of our business and maintain our competitive position. We are reacting to margin and pricing pressures in several ways, including efforts to target new vertical markets, expand our service offerings and to lower our infrastructure costs. We seek to lower our cost to service clients by moving work to lower-cost venues, establishing facilities closer to our clients to gain efficiencies, and other actions designed to improve the productivity of our operations.

Historically, a limited number of key clients have accounted for a significant percentage of our revenue. For the three months ended October 31, 2008, sales to Hewlett-Packard and SanDisk Corporation, accounted for approximately 23% and 11%, respectively, of our consolidated net revenue. During the three months ended October 31, 2007, sales to Hewlett-Packard, Advanced Micro Devices and SanDisk Corporation, accounted for approximately 27% 14%, and 11% respectively, of our net revenue. We expect to continue to derive the vast majority of our operating revenue from sales to a small number of key clients. We currently do not have any agreements which obligate any client to buy a minimum amount of products or services from us or designate us as an exclusive service provider. Consequently, our sales are subject to demand variability by our clients. The level and timing of orders placed by our clients vary for a variety of reasons, including seasonal buying by end-users, the introduction of new technologies and general economic conditions.

In December 2008 the Company announced that it was taking certain cost cutting actions as a result of the general economic decline. These actions include the elimination of approximately 450 to 500 jobs, and may include the closing of certain facilities. In the quarter ended October 31, 2008, the Company recorded a restructuring charge of $6.8 million for severance-related expenses. The Company expects to take additional restructuring actions in the remainder of fiscal year 2009 which will result in future restructuring charges in the range of approximately $5.0 million to $10.2 million.

Basis of Presentation

The Company reports three operating segments, Americas, Asia and Europe. In addition to its three operating segments, the Company reports an Other category. The Other category represents corporate expenses consisting primarily of costs associated with certain corporate administrative functions such as legal and finance which are not fully allocated to the Company’s subsidiary companies, administration costs related to the Company’s venture capital business and any residual results of operations from previously divested operations.

In accordance with U.S. GAAP, all significant intercompany transactions and balances have been eliminated in consolidation. Accordingly, segment results reported by the Company exclude the effect of transactions between the Company and its subsidiaries and between the Company’s subsidiaries.

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Results of Operations

Net revenue increased by approximately $16.7 million during the three months ended October 31, 2008, as compared to the same period in the prior year. This $16.7 million increase was primarily a result of the inclusion of revenue from OCS and PTS of $16.4 million and a $5.6 million favorable impact of foreign currency translation, offset by an overall $1.6 million decline associated with other client programs and $3.7 million of revenue being deferred as a result of certain client transactions not meeting all of the required revenue recognition criteria at the end of the quarter ended October 31, 2008.

During the three months ended October 31, 2008, the net revenue in the Americas region increased by $12.2 million which resulted primarily from the inclusion of revenue from OCS and PTS of $15.9 million, offset by a $1.0 million decline in client order volumes and $2.7 million of revenue deferral. Within the Asia region, the net revenue decrease of approximately $2.3 million resulted primarily from a $3.3 million decrease in order volumes and $0.4 million revenue deferral, offset by the inclusion of revenue from OCS of $0.5 million and $0.8 million positive impact of foreign currency translation. Within the Europe region, revenue was positively impacted by increased revenue of approximately $6.8 million. This increase resulted primarily from a $4.8 million positive impact of foreign currency translation and $2.6 million of new business and an increase in order volumes, offset by $0.6 million of revenue deferral.

A significant portion of our client base operates in the technology sector, which is intensely competitive and very volatile. Our clients’ order volumes vary from quarter to quarter for a variety of reasons, including market acceptance of their new product introductions and overall demand for their products. This business environment, and our mode of transacting business with our clients, does not lend itself to precise measurement of the amount and timing of future order volumes, and as a result, future consolidated and segment sales volumes and revenues could vary significantly from period to period. We sell primarily on a purchase order basis, rather than pursuant to contracts with minimum purchase requirements. These purchase orders are generally for quantities necessary to support near-term demand for our clients’ products.

Cost of Revenue:

Cost of revenue consists primarily of expenses related to the cost of materials purchased for sale or distribution as well as costs for salaries and benefits and contract labor, consulting, fulfillment and shipping, and applicable facilities. Cost of revenue increased by approximately $27.7 million for the three months ended October 31, 2008, as compared to the three months ended October 31, 2007. Gross margins for the first quarter of fiscal 2009 were 9.6% as compared to 14.2% in the prior year quarter. This decrease is primarily attributable to a change in the mix of business and associated costs, start-up costs related to new client engagements, decreased capacity utilization due to lower volumes and deferred revenue in the quarter.

For the three months ended October 31, 2008, the Company’s gross margin percentages within the Americas, Asia and Europe regions were 1.6%, 24.3% and 5.4%, as compared to 12.1%, 25.6% and 6.4%, respectively, for the same period of the

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prior year. The 1,050 basis-point decline in gross margin within the Americas region reflected higher costs including startup costs associated with new client engagements, decreased capacity utilization due to lower volumes, in conjunction with lower volumes from higher margin base business, and deferred revenue in the quarter. Within the Asia region, the 130 basis-point decline in gross margin can be primarily attributed to lower volumes from the base business in conjunction with higher volumes from the lower margin new business, and deferred revenue in the quarter. Within the Europe region, the 100 basis-point decline in gross margin was primarily due to higher costs associated with new client engagements and new programs for existing customers, and deferred revenue in the quarter.

As a result of the lower overall cost of delivering the Company’s products and services in the Asia region, particularly China, and the increasing demand for supply chain management services in that region, we expect gross margin levels in Asia to continue to exceed those earned in the Americas and Europe regions. However, we expect that there will continue to be pressure on gross margin levels in Asia as the market, particularly China, matures.

Selling, general and administrative expenses consist primarily of compensation and employee-related costs, sales commissions and incentive plans, information technology expenses, travel expenses, facilities costs, consulting fees, fees for professional services, depreciation expense and marketing expenses. Selling, general and administrative expenses during the three months ended October 31, 2008 increased by approximately $3.5 million compared to the three month period ended October 31, 2007, primarily as a result of the inclusion of $2.7 million of selling, general and administrative expenses for OCS and PTS, $1.4 million of higher selling and marketing costs and $1.5 million of bad debt expense. These increases were partially offset by a $1.9 million decline in ERP implementation costs.

The intangible asset amortization relates to certain amortizable intangible assets acquired by the Company in connection with its acquisition of Modus Media, Inc., OCS and PTS. These intangible assets are being amortized over lives ranging from 1 to 10 years.

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During the three months ended October 31, 2008, the Company recorded net restructuring charges of approximately $6.4 million as compared to a net restructuring charge of $1.6 million in the same period of the prior fiscal year. During the first quarter of fiscal year 2009, our management approved a plan for a workforce reduction of approximately 500 employees (the “Q1 Plan”). As a result of the Q1 Plan, we recognized a $6.8 million pre-tax restructuring charge related to severance payments for the workforce reduction. All actions related to the Q1 Plan will be completed by the end of the fourth quarter of fiscal year 2009. We estimate that all payments related to the Q1 Plan for workforce reductions will be completed by the end of the fiscal year 2010. The restructuring charge for the Q1 Plan was offset by $0.4 million in reductions to estimates for previously recorded employee related expenses and facilities lease obligations primarily based on changes to the underlying assumptions.

Interest Income/Expense:

During the three months ended October 31, 2008, interest income decreased $2.2 million to $0.8 million from $3.0 million for the three months ended October 31, 2007. The decrease in interest income was the result of lower average interest rates and lower average cash, cash equivalents and short-term investment balances during the current period compared to the same period in the prior fiscal year.

Interest expense totaled approximately $0.2 and $0.6 million for the three months ended October 31, 2008 and 2007, respectively. In both periods, interest expense of approximately $0.2 million related to the Company’s stadium obligation, and the remaining interest expense for the three months ended October 31, 2007 related primarily to outstanding borrowings on a revolving bank credit facility.

Other Losses, net:

During the three months ended October 31, 2008, other losses, net included a net loss of approximately $3.9 million. During the three months ended October 31, 2008, the Company recorded foreign currency transaction losses of approximately $3.4 million and a $1.0 million impairment of an investment, which were partially offset by approximately $0.5 million of gains on the sale of investments. The $0.5 million gain was the result of an adjustment to a previously recorded gain on the acquisitions by a third party of Avamar Technologies, Inc., due to the satisfaction of conditions leading to the release of funds held in escrow. Avamar Technologies, Inc. was an @Ventures portfolio company that was acquired by a third party in a previous reporting period.

During the three months ended October 31, 2007, other losses, net included a net loss of approximately $0.4 million. During the three months ended October 31, 2007, the Company recorded foreign currency transaction losses of approximately $2.1 million which was partially offset by approximately $1.7 million of gains on the sale of investments. Approximately $0.2 million of the gain was a result of the acquisition by a third party of Virtual Ink, Inc., an @Ventures portfolio company. Additionally, during the three months ended October 31, 2007, gains of approximately $1.3 million and $0.1 million, respectively, were recorded to adjust previously recorded gains on the acquisitions by third parties of Molecular, Inc. and Alibris, Inc., due to the satisfaction of conditions leading to the release of funds held in escrow. Molecular, Inc. and Alibris, Inc. were also @Ventures portfolio companies that were acquired by third parties in previous reporting periods.

Equity in Income (Losses) of Affiliates, net:

Equity in income (losses) of affiliates, net, resulted from the Company’s minority ownership in certain investments that are accounted for under the equity method. Under the equity method of accounting, the Company’s proportionate share of each affiliate’s operating income (losses) is included in equity in income (losses) of affiliates. Equity in income (losses) of affiliates decreased to a loss of approximately $0.5 million for the three months ended October 31, 2008 from income of $0.2 million for the same period in the prior fiscal year, primarily as a result of a decrease in net income recognized by certain affiliate companies.

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Income Tax Expense:

During the three months ended October 31, 2008, the Company recorded income tax expense of approximately $4.0 million, as compared to income tax expense of $2.1 million for the same period in the prior fiscal year. For the three months ended October 31, 2008, the Company was profitable in certain jurisdictions where the Company operates, resulting in an income tax expense using the enacted tax rates in those jurisdictions.

The Company provides income tax expense related to federal, state, and foreign income taxes. For the three months ended October 31, 2008 and 2007, the Company’s U.S. taxable income, and the taxable income for certain foreign locations, was offset by net operating loss carryovers from prior years. The Company continues to maintain a full valuation allowance against its deferred tax asset in the U.S. and certain of its foreign subsidiaries due to the uncertainty of realizing such benefits.

Liquidity and Capital Resources

Historically, the Company has financed its operations and met its capital requirements primarily through funds generated from operations, the issuance of its securities, the sale of our interests in subsidiaries, returns generated by our venture capital business and borrowings from lending institutions. As of October 31, 2008, the Company’s primary sources of liquidity consisted of cash and cash equivalents and short-term investments of $121.3 million. In addition, ModusLink has a revolving credit agreement (the “Loan Agreement”) with a bank syndicate. The Loan Agreement is a one-year $45.0 million revolving credit facility, with a scheduled maturity of October 31, 2009. Advances under the Loan Agreement may be in the form of loans or letters of credit. At October 31, 2008, there were no borrowings outstanding under the Loan Agreement. Interest on the revolving credit facility is based on Prime or the London Interbank Offered Rate “LIBOR” plus an applicable margin (ranging from 1.25%—2.25%). The Loan Agreement is secured by the assets of ModusLink and includes certain restrictive financial covenants, which include balance sheet leverage, liquidity and profitability measures and restrictions that limit the ability of ModusLink, among other things, to merge, or acquire or sell assets without prior approval from the lenders. As of October 31, 2008, ModusLink was not in compliance with one of the financial covenants in the Loan Agreement. No amounts were outstanding under the Loan Agreement as of October 31, 2008, and ModusLink subsequently sought and received a waiver of the covenant default from the lenders. This waiver included the requirement that borrowings under the revolving credit facility of the Loan Agreement be approved by the bank until such time as the financial covenants are modified to reflect the current economic conditions. In the event the covenants are not modified to the satisfaction of the lenders in their sole discretion by January 31, 2009, then an Event of Default under the Loan Agreement will exist. ModusLink does not expect to require borrowings under the facility prior to such modification, however there can be no assurance that such a need may not arise, or that the covenant will be modified. In addition, ModusLink maintains credit facilities of approximately $3.4 million and $0.9 million with Japanese and Taiwanese banks, respectively. No amounts were outstanding under these facilities at October 31, 2008. The Company’s working capital at October 31, 2008 was approximately $216.3 million.

Net cash used for operating activities of continuing operations was $21.8 million for the three months ended October 31, 2008, compared to net cash used by operating activities of continuing operations of $5.8 million for the three months ended October 31, 2007. Cash used for operating activities of continuing operations represents net income (loss) as adjusted for non-cash items and changes in working capital. The cash used for operating activities of continuing operations for the three months ended October 31, 2008 was primarily driven by increases in accounts receivable and inventories of approximately $25.7 million and $22.4 million, respectively, with a corresponding increase in accounts payable, accrued restructuring and accrued expenses of $16.5 million, primarily related to seasonality based demand and ramp up of new business. During the three months ended October 31, 2007, net cash flow from operating activities included increases in accounts receivable and inventories of $21.3 million and $8.5 million, respectively with a corresponding increase in accounts payable, accrued restructuring and accrued expenses of $14.8 million, largely related to seasonality based demand.

We believe that our cash flows related to operating activities of continuing operations is dependent on several factors, including increased profitability, effective customer credit and inventory management practices, and optimization of the credit terms of certain vendors of the Company. Our cash flows from operations are dependent on several additional external factors including the overall performance of the technology sector, the market for outsourcing services and consumer demand for our clients’ products, as discussed above in the “Overview” section.

Investing activities of continuing operations used cash of $6.4 million for the three months ended October 31, 2008 and provided cash of $44.7 million for the three months ended October 31, 2007. The $6.4 million of cash used by investing activities during the three months ended October 31, 2008 resulted from $4.1 million of capital expenditures and $2.8 million of investments in affiliates. The $44.7 million of cash provided by investing activities during the three months ended October 31, 2007 resulted from approximately $54.1 million from the redemption of short-term investments, which was partially offset by $6.7 million of capital expenditures and $4.5 million of investments in affiliates. As of October 31, 2008, the Company had $35.8 million of investments in affiliates, which may be a potential source of future liquidity. However, the Company does not anticipate being dependent on liquidity from these investments to fund either its short-term or long-term operating activities.

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Financing activities from continuing operations used cash of $3.4 million for the three months ended October 31, 2008. The $3.4 million of cash used for financing activities of continuing operations primarily relates to $3.3 million of costs incurred as a result of the repurchase of common stock during the first quarter (see Note 19 of the notes to the condensed consolidated financial statements). Financing activities from continuing operations used cash of approximately $8.3 million for the three months ended October 31, 2007. The $8.3 million of cash used for financing activities from continuing operations primarily relates to $8.3 million of costs incurred as a result of the repurchase of common stock during the three months ended October 31, 2007. The Company is not dependent on liquidity from its financing activities to fund either its short-term or long-term operating activities; however, we have utilized our revolving line of credit to meet operating requirements in the past.

Cash used for discontinued operations totaled $0.6 million for both the three months ended October 31, 2008 and 2007, respectively.

Given our cash resources as of October 31, 2008, the Company believes that it has sufficient working capital and liquidity to support its operations, as well as to continue to make investments through its venture capital business over the next fiscal year and for the foreseeable future. However, should additional capital be needed to fund any future cash needs, investments or acquisition activities, the Company may seek to raise additional capital through offerings of the Company’s stock, or through debt financing. There can be no assurance, however, that the Company will be able to raise additional capital on terms that are favorable to the Company, or at all.

In light of the current economic condition, we are more closely monitoring the aging of individual client receivable balances and associated credit risk in an effort to mitigate our exposure to bad debt.

Off-Balance Sheet Financing Arrangements

The Company does not have any off-balance sheet financing arrangements.

Contractual Obligations

A summary of the Company’s contractual obligations is included in the Company’s Annual Report on Form 10-K for the fiscal year ended July 31, 2008. The gross liability for unrecognized tax benefits as of October 31, 2008 and 2007 was $6.0 million and $6.3 million, respectively, including approximately $52,000 and $17,000, respectively of accrued interest and penalties. The Company is unable to reasonably estimate the amount or timing of payments for the liability.

The Company applies the disclosure provisions of Financial Accounting Standards Board (“FASB”) Interpretation (“FIN”) No. 45, “Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including Guarantees of Indebtedness of Others”, an Interpretation of SFAS No. 5, “Accounting for Contingencies” (“SFAS No. 5”), SFAS No. 57, “Related Party Disclosures”, and SFAS No. 107, “Disclosures about Fair Value of Financial Instruments” and Rescission of FIN No. 34, “Disclosure of Indirect Guarantees of Indebtedness of Others,” to our agreements that contain guarantee or indemnification clauses. These disclosure provisions expand those required by SFAS No. 5 by requiring that guarantors disclose certain types of guarantees, even if the likelihood of requiring the guarantor’s performance is remote. The following is a description of arrangements in which the Company is a guarantor.

From time to time the Company provides guarantees of payment to vendors doing business with certain of the Company’s subsidiaries or former subsidiaries. These guarantees require that in the event that the subsidiary cannot satisfy its obligations with certain of its vendors, the Company will be required to settle the obligation. Additionally, from time to time, the Company agrees to provide indemnification to its clients in the ordinary course of business. Typically, the Company agrees to indemnify its clients for losses caused by the Company. As of October 31, 2008, the Company had no recorded liabilities with respect to these arrangements.

In 1999, a subsidiary of the Company entered into a facility lease with a term ending in November 2006. The Company issued a guaranty in connection with this lease. The Company divested of its interest in the subsidiary in 2002. During the quarter ended October 31, 2006, the Company became aware that this lease had been amended to extend the lease term through November 2016 with cumulative base rent of approximately $16.0 million. The Company has notified the former subsidiary that it disputes that it has any ongoing liability under this guaranty and hence has not recorded any reserves for this arrangement as of October 31, 2008.

The Company is also a party to litigation from time to time, which it considers routine and incidental to its business. Management does not expect the results of such routine and incidental matters to have a material adverse effect on the Company’s business, results of operations or financial condition.

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Critical Accounting Policies

The preparation of our quarterly financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements and reported amounts of revenues and expenses during the reporting period. On an ongoing basis, we evaluate our estimates, including those related to revenue recognition, stock-based compensation expense, inventories, investments, income taxes, restructuring, impairment of long-lived assets, goodwill and other intangible assets, contingencies and litigation. Of the accounting estimates we routinely make relating to our critical accounting policies, those estimates made in the process of: preparing investment valuations; determining discounted cash flows for purposes of evaluating goodwill and intangible assets for impairment; determining future lease assumptions related to restructured facility lease obligations; and establishing income tax liabilities are the estimates most likely to have a material impact on our financial position and the results of operations. Some accounting policies may have a significant impact on amounts reported in these financial statements. A description of our critical accounting policies is contained in our Annual Report on Form 10-K for the fiscal year ended July 31, 2008 in the “Critical Accounting Policies” section of Management’s Discussion and Analysis of Financial Condition and Results of Operations.

New Accounting Pronouncements

In November 2008, the SEC issued for comment a proposed roadmap regarding the potential use by U.S. issuers of financial statements prepared in accordance with International Financial Reporting Standards (“IFRS”). IFRS is a comprehensive series of accounting standards published by the International Accounting Standards Board. Under the proposed roadmap, we could be required in fiscal 2015 to prepare financial statements in accordance with IFRS, and the SEC will make a determination in 2011 regarding the mandatory adoption of IFRS. We are currently assessing the impact that this potential change would have on our consolidated financial statements, and we will continue to monitor the development of the potential implementation of IFRS.

In May 2008, the FASB issued SFAS No. 162, “The Hierarchy of Generally Accepted Accounting Principles” (“SFAS No. 162”), which 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 U.S. GAAP. SFAS No. 162 is effective for the Company 60 days following the SEC’s approval of the Public Company Accounting Oversight Board (PCAOB) amendments to AU Section 411, “The Meaning of Present Fairly in Conformity with Generally Accepted Accounting Principles.” The adoption of this SFAS No. 162 is not expected to have a material impact on our results of operations or financial position.